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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-K/A

(Amendment No. 1)



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|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



For the fiscal year ended January 2, 2005



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from to



Commission File Number 000-21507



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POWERWAVE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 11-2723423                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



1801 E. St. Andrew
Place, Santa Ana, CA 92705

(Address of principal executive offices, zip code)



Registrants telephone number, including area code: (714) 466-1000



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



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Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $.0001



Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ̈



Indicate by check mark whether the Registrant is an accelerated filer as defined in Rule 12b-2 of the Securities Exchange Act of 1934.    Yes  x    No ̈



As of July 4, 2004, the aggregate market value of the voting stock of the Registrant held by non-affiliates of the
Registrant was $705,737,403 computed using the closing price of $7.28 per share of Common Stock on July 2, 2004, the last trading day of the second quarter, as reported by Nasdaq, based on the assumption that directors and officers and more than 10%
stockholders are affiliates. As of February 28, 2005 the number of outstanding shares of Common Stock, par value $.0001 per share, of the Registrant was 99,619,488.



Documents Incorporated By Reference



None.



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POWERWAVE TECHNOLOGIES, INC.

INDEX



|                 |  |          |  |                                                                                                |  |   
|---------------- |  | -------- |  | ---------------------------------------------------------------------------------------------- |  | --
|EXPLANATORY NOTE |  | 3       
|                 |  |         
|PART II          |  |          |  | 4                                                                                             
|                 |  |          | 
|                 |  | ITEM 8.  |  | Financial Statements and Supplementary Data                                                    |  | 4 
|                 |  |          |  | Report of Independent Registered Public Accounting Firm                                        |  | 4 
|                 |  |          |  | Consolidated Balance Sheets                                                                    |  | 5 
|                 |  |          |  | Consolidated Statements of Operations                                                          |  | 6 
|                 |  |          |  | Consolidated Statements of Comprehensive Operations                                            |  | 7 
|                 |  |          |  | Consolidated Statements of Shareholders Equity                                                |  | 8 
|                 |  |          |  | Consolidated Statements of Cash Flows                                                          |  | 9 
|                 |  |          |  | Notes to Consolidated Financial Statements                                                     |  | 11
|                 |  |          |  | Quarterly Financial Data (Unaudited)                                                           |  | 34
|                 |  |         
|PART III         |  |          |  | 35                                                                                            
|                 |  |          | 
|                 |  | ITEM 10. |  | Directors and Executive Officers of the Registrant                                             |  | 35
|                 |  |          | 
|                 |  | ITEM 11. |  | Executive Compensation                                                                         |  | 37
|                 |  |          | 
|                 |  | ITEM 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 46
|                 |  |          | 
|                 |  | ITEM 13. |  | Certain Relationships and Related Transactions                                                 |  | 47
|                 |  |          | 
|                 |  | ITEM 14. |  | Principal Accounting Fees and Services                                                         |  | 47
|                 |  |         
|PART IV          |  |          |  | 48                                                                                            
|                 |  |          | 
|                 |  | ITEM 15. |  | Exhibits, Financial Statement Schedules                                                        |  | 48
|                 |  |         
|SIGNATURES       |  |          |  | 49                                                                                            



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EXPLANATORY NOTE



Powerwave
Technologies Inc. (the Company) is filing this Amendment No. 1 on Form 10-K/A to include the information required by Part III of Form 10-K and to correct certain portions of Part II of Form 10-K described below:



| |  |  | In Consolidated Balance Sheets under Part II, Item 8, Financial Statements and Supplementary Data, there was a typographical error relating to the number of
authorized shares of Common Stock. The number of shares of authorized Common Stock reported was 135,000,000 and such number should be 250,000,000.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In Note 9. Restructuring and Impairment Charges of the Notes to Consolidated Financial Statements under Part II, Item 8, Financial Statements and
Supplementary Data, there were typographical errors in the summary of the activity that affected the Companys restructuring and impairment charges and accrued restructuring liability for the year ended January 2, 2005, resulting in
misclassifications of amounts within the lines amounts accrued in purchase accounting, amounts paid/incurred and effect of exchange rates.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The typographical errors had no impact on the consolidated financial statements of the
Company included in Part II, Item 8, Financial Statements and Supplementary Data or any other information in the Companys Form 10-K as originally filed. Set forth below is the corrected version of Part II, Item 8, Financial
Statements and Supplementary Data.



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PART II



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Shareholders of Powerwave Technologies, Inc.:



We have audited the accompanying consolidated balance sheets of Powerwave Technologies, Inc. and subsidiaries (the Company) as of January 2, 2005 and December 28, 2003, and the related consolidated
statements of operations, comprehensive operations, shareholders equity, and cash flows for each of the three years in the period ended January 2, 2005. Our audits also included the financial statement schedules listed in the Index at Item 15.
These financial statements and the financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on the financial statements and the financial statement schedule based on our
audits.



We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Powerwave Technologies, Inc. and subsidiaries at as of January 2, 2005 and December 28, 2003,
and the results of their operations and their cash flows for each of the three years in the period ended January 2, 2005, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.



We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the Companys internal control over financial reporting as of January 2, 2005, based on the criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 10, 2005 expressed an unqualified opinion on managements assessment of the effectiveness of the Companys internal control over financial
reporting and an unqualified opinion on the effectiveness of the Companys internal control over financial reporting.



/s/ DELOITTE & TOUCHE LLP



Costa Mesa, California

March 10, 2005



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POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)



|                                                                                                                                                                                                              |  |                 |           |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | --------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                                                              |  | January 2, 2005 |           |   | December 28,2003 |  
|ASSETS                                                                                                                                                                                                        |  |                 |           |   |                  |   |         |  
|                                                                                                                                                                                                              |  |                
|Current assets:                                                                                                                                                                                               |  |                 |           |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                                                                     |  | $               | 147,451   |   |                  | $ | 179,853 |  
|Restricted cash                                                                                                                                                                                               |  |                 | 6,815     |   |                  |   | 600     |  
|Short-term investments                                                                                                                                                                                        |  |                 | 135,200   |   |                  |   | 80,075  |  
|Accounts receivable, net of allowance for sales returns and doubtful accounts of $6,309 and $2,332 at January 2, 2005 and December 28, 2003,
respectively                                                     |  |                 | 133,060   |   |                  |   | 56,278  |  
|Inventories                                                                                                                                                                                                   |  |                 | 65,819    |   |                  |   | 15,187  |  
|Prepaid expenses and other current assets                                                                                                                                                                     |  |                 | 22,613    |   |                  |   | 6,413   |  
|Deferred tax assets                                                                                                                                                                                           |  |                 | 3,698     |   |                  |   | 6,940   |  
|                                                                                                                                                                                                              |  |                 |           |   |                  |   |         |  
|Total current assets                                                                                                                                                                                          |  |                 | 514,656   |   |                  |   | 345,346 |  
|                                                                                                                                                                                                              |  |                
|Property, plant and equipment, net                                                                                                                                                                            |  |                 | 146,430   |   |                  |   | 67,975  |  
|Intangible assets, net                                                                                                                                                                                        |  |                 | 65,366    |   |                  |   | 190     |  
|Goodwill                                                                                                                                                                                                      |  |                 | 277,223   |   |                  |   | 3,439   |  
|Deferred tax assets                                                                                                                                                                                           |  |                 |          |   |                  |   | 35,990  |  
|Other non-current assets                                                                                                                                                                                      |  |                 | 17,096    |   |                  |   | 13,317  |  
|                                                                                                                                                                                                              |  |                 |           |   |                  |   |         |  
|TOTAL ASSETS                                                                                                                                                                                                  |  | $               | 1,020,771 |   |                  | $ | 466,257 |  
|                                                                                                                                                                                                              |  |                 |           |   |                  |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                                          |  |                 |           |   |                  |   |         |  
|                                                                                                                                                                                                              |  |                
|Current liabilities:                                                                                                                                                                                          |  |                 |           |   |                  |   |         |  
|Accounts payable                                                                                                                                                                                              |  | $               | 79,534    |   |                  | $ | 48,942  |  
|Accrued payroll and employee benefits                                                                                                                                                                         |  |                 | 19,770    |   |                  |   | 3,203   |  
|Accrued income taxes                                                                                                                                                                                          |  |                 | 14,332    |   |                  |   | 2,374   |  
|Accrued restructuring                                                                                                                                                                                         |  |                 | 17,354    |   |                  |   | 20      |  
|Accrued expenses and other current liabilities                                                                                                                                                                |  |                 | 39,534    |   |                  |   | 10,562  |  
|                                                                                                                                                                                                              |  |                 |           |   |                  |   |         |  
|Total current liabilities                                                                                                                                                                                     |  |                 | 170,524   |   |                  |   | 65,101  |  
|                                                                                                                                                                                                              |  |                
|Long-term debt                                                                                                                                                                                                |  |                 | 330,000   |   |                  |   | 130,000 |  
|Deferred tax liabilities                                                                                                                                                                                      |  |                 | 4,344     |   |                  |   |        |  
|Other non-current liabilities                                                                                                                                                                                 |  |                 | 291       |   |                  |   | 119     |  
|                                                                                                                                                                                                              |  |                 |           |   |                  |   |         |  
|Total liabilities                                                                                                                                                                                             |  |                 | 505,159   |   |                  |   | 195,220 |  
|                                                                                                                                                                                                              |  |                 |           |   |                  |   |         |  
|Commitments and contingencies (Notes 14 and 15)                                                                                                                                                               |  |                 |          |   |                  |   |        |  
|                                                                                                                                                                                                              |  |                
|Shareholders equity:                                                                                                                                                                                         |  |                 |           |   |                  |   |         |  
|Preferred stock, $0.0001 par value, 5,000 shares authorized and no shares issued or outstanding                                                                                                               |  |                 |          |   |                  |   |        |  
|Common Stock, $0.0001 par value, 250,000 shares authorized, 99,411 shares issued and outstanding at January 2, 2005; and 135,000 shares
authorized, 63,257 shares issued and outstanding at December 28, 2003 |  |                 | 485,318   |   |                  |   | 225,651 |  
|Accumulated other comprehensive income (loss)                                                                                                                                                                 |  |                 | 57,029    |   |                  |   | (1      | )
|Retained earnings (accumulated deficit)                                                                                                                                                                       |  |                 | (26,735   | ) |                  |   | 45,387  |  
|                                                                                                                                                                                                              |  |                 |           |   |                  |   |         |  
|Total shareholders equity                                                                                                                                                                                    |  |                 | 515,612   |   |                  |   | 271,037 |  
|                                                                                                                                                                                                              |  |                 |           |   |                  |   |         |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                                    |  | $               | 1,020,771 |   |                  | $ | 466,257 |  
|                                                                                                                                                                                                              |  |                 |           |   |                  |   |         |  



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



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POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)



|                                          |  |                    |         |   |                  |   |         |                  |  |   |        
|----------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ------- | ---------------- |  | - | -------
|                                          |  | Fiscal Years Ended
|                                          |  | January 2,2005     |         |   | December 28,2003 |   |         | December 29,2002
|Net sales                                 |  | $                  | 473,914 |   |                  | $ | 239,069 |                  |  | $ | 384,889
|Cost of sales:                            |  |                    |         |   |                  |   |         |                  |  |   |        
|Cost of goods                             |  |                    | 362,872 |   |                  |   | 214,247 |                  |  |   | 320,963
|Intangible asset amortization             |  |                    | 4,615   |   |                  |   | 756     |                  |  |   | 1,144  
|Restructuring and impairment charges      |  |                    | 506     |   |                  |   | 7,851   |                  |  |   |       
|                                          |  |                    |         |   |                  |   |         |                  |  |   |        
|Total cost of sales                       |  |                    | 367,993 |   |                  |   | 222,854 |                  |  |   | 322,107
|                                          |  |                    |         |   |                  |   |         |                  |  |   |        
|Gross profit                              |  |                    | 105,921 |   |                  |   | 16,215  |                  |  |   | 62,782 
|                                          |  |                    |        
|Operating expenses:                       |  |                    |         |   |                  |   |         |                  |  |   |        
|Sales and marketing                       |  |                    | 28,461  |   |                  |   | 11,557  |                  |  |   | 11,384 
|Research and development                  |  |                    | 47,188  |   |                  |   | 38,928  |                  |  |   | 33,087 
|General and administrative                |  |                    | 24,291  |   |                  |   | 13,946  |                  |  |   | 14,401 
|Intangible asset amortization             |  |                    | 7,355   |   |                  |   |        |                  |  |   |       
|In-process research and development       |  |                    | 23,450  |   |                  |   |        |                  |  |   |       
|Restructuring and impairment charges      |  |                    | 2,103   |   |                  |   | 7,608   |                  |  |   |       
|                                          |  |                    |         |   |                  |   |         |                  |  |   |        
|Total operating expenses                  |  |                    | 132,848 |   |                  |   | 72,039  |                  |  |   | 58,872 
|                                          |  |                    |         |   |                  |   |         |                  |  |   |        
|Operating income (loss)                   |  |                    | (26,927 | ) |                  |   | (55,824 | )                |  |   | 3,910  
|Other income, net                         |  |                    | 118     |   |                  |   | 2,394   |                  |  |   | 1,963  
|                                          |  |                    |         |   |                  |   |         |                  |  |   |        
|Income (loss) before income taxes         |  |                    | (26,809 | ) |                  |   | (53,430 | )                |  |   | 5,873  
|Provision for (benefit from) income taxes |  |                    | 45,313  |   |                  |   | (20,571 | )                |  |   | 1,762  
|                                          |  |                    |         |   |                  |   |         |                  |  |   |        
|Net income (loss)                         |  | $                  | (72,122 | ) |                  | $ | (32,859 | )                |  | $ | 4,111  
|                                          |  |                    |         |   |                  |   |         |                  |  |   |        
|Basic earnings (loss) per share           |  | $                  | (0.80   | ) |                  | $ | (0.51   | )                |  | $ | 0.06   
|                                          |  |                    |         |   |                  |   |         |                  |  |   |        
|Diluted earnings (loss) per share         |  | $                  | (0.80   | ) |                  | $ | (0.51   | )                |  | $ | 0.06   
|                                          |  |                    |         |   |                  |   |         |                  |  |   |        
|Basic weighted average common shares      |  |                    | 90,212  |   |                  |   | 64,667  |                  |  |   | 65,485 
|                                          |  |                    |         |   |                  |   |         |                  |  |   |        
|Diluted weighted average common shares    |  |                    | 90,212  |   |                  |   | 64,667  |                  |  |   | 66,230 
|                                          |  |                    |         |   |                  |   |         |                  |  |   |        



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



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POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

(in thousands)



|                                         |  |                    |         |   |                  |   |         |                  |  |   |      
|---------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ------- | ---------------- |  | - | -----
|                                         |  | Fiscal Years Ended
|                                         |  | January 2,2005     |         |   | December 28,2003 |   |         | December 29,2002
|Net income (loss)                        |  | $                  | (72,122 | ) |                  | $ | (32,859 | )                |  | $ | 4,111
|Other comprehensive income (loss):       |  |                    |         |   |                  |   |         |                  |  |   |      
|Foreign currency translation adjustments |  |                    | 57,030  |   |                  |   | (1      | )                |  |   |     
|                                         |  |                    |         |   |                  |   |         |                  |  |   |      
|Comprehensive income (loss)              |  | $                  | (15,092 | ) |                  | $ | (32,860 | )                |  | $ | 4,111
|                                         |  |                    |         |   |                  |   |         |                  |  |   |      



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



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POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

(in thousands)



|                                                                            |  |              |   |  |                                              |         |   |                                      |   |        |                          |  |   |         |   |  |   |         |  
|--------------------------------------------------------------------------- |  | ------------ | - |  | -------------------------------------------- | ------- | - | ------------------------------------ | - | ------ | ------------------------ |  | - | ------- | - |  | - | ------- | -
|                                                                            |  | Common Stock |   |  | Accumulated OtherComprehensive Income (Loss) |         |   | RetainedEarnings(AccumulatedDeficit) |   |        | TotalShareholdersEquity | 
|                                                                            |  | Shares       |   |  | Amount                                       |         |   |                                      |  
|Balance at December 30, 2001                                                |  | 65,081       |   |  | $                                            | 242,100 |   |                                      | $ |       |                          |  | $ | 74,135  |   |  | $ | 316,235 |  
|Issuance of Common Stock related to employee stock-based compensation plans |  | 626          |   |  |                                              | 3,965   |   |                                      |   |       |                          |  |   |        |   |  |   | 3,965   |  
|Tax benefit related to employee stock-based compensation plans              |  |             |   |  |                                              | 1,291   |   |                                      |   |       |                          |  |   |        |   |  |   | 1,291   |  
|Compensation expense related to stock option grants                         |  |             |   |  |                                              | 59      |   |                                      |   |       |                          |  |   |        |   |  |   | 59      |  
|Net income                                                                  |  |             |   |  |                                              |        |   |                                      |   |       |                          |  |   | 4,111   |   |  |   | 4,111   |  
|                                                                            |  |              |   |  |                                              |         |   |                                      |   |        |                          |  |   |         |   |  |   |         |  
|Balance at December 29, 2002                                                |  | 65,707       |   |  |                                              | 247,415 |   |                                      |   |       |                          |  |   | 78,246  |   |  |   | 325,661 |  
|Issuance of Common Stock related to employee stock-based compensation plans |  | 695          |   |  |                                              | 2,625   |   |                                      |   |       |                          |  |   |        |   |  |   | 2,625   |  
|Tax benefit related to employee stock-based compensation plans              |  |             |   |  |                                              | 573     |   |                                      |   |       |                          |  |   |        |   |  |   | 573     |  
|Compensation expense related to stock option grants                         |  |             |   |  |                                              | 38      |   |                                      |   |       |                          |  |   |        |   |  |   | 38      |  
|Repurchases of Common Stock                                                 |  | (3,145       | ) |  |                                              | (25,000 | ) |                                      |   |       |                          |  |   |        |   |  |   | (25,000 | )
|Foreign currency translation adjustments                                    |  |             |   |  |                                              |        |   |                                      |   | (1     | )                        |  |   |        |   |  |   | (1      | )
|Net loss                                                                    |  |             |   |  |                                              |        |   |                                      |   |       |                          |  |   | (32,859 | ) |  |   | (32,859 | )
|                                                                            |  |              |   |  |                                              |         |   |                                      |   |        |                          |  |   |         |   |  |   |         |  
|Balance at December 28, 2003                                                |  | 63,257       |   |  |                                              | 225,651 |   |                                      |   | (1     | )                        |  |   | 45,387  |   |  |   | 271,037 |  
|Issuance of Common Stock for acquisition, net of issuance costs of $255     |  | 40,686       |   |  |                                              | 296,748 |   |                                      |   |       |                          |  |   |        |   |  |   | 296,748 |  
|Issuance of Common Stock related to employee stock-based compensation plans |  | 519          |   |  |                                              | 2,636   |   |                                      |   |       |                          |  |   |        |   |  |   | 2,636   |  
|Tax benefit related to employee stock-based compensation plans              |  |             |   |  |                                              | 283     |   |                                      |   |       |                          |  |   |        |   |  |   | 283     |  
|Repurchases of Common Stock                                                 |  | (5,051       | ) |  |                                              | (40,000 | ) |                                      |   |       |                          |  |   |        |   |  |   | (40,000 | )
|Foreign currency translation adjustments                                    |  |             |   |  |                                              |        |   |                                      |   | 57,030 |                          |  |   |        |   |  |   | 57,030  |  
|Net loss                                                                    |  |             |   |  |                                              |        |   |                                      |   |       |                          |  |   | (72,122 | ) |  |   | (72,122 | )
|                                                                            |  |              |   |  |                                              |         |   |                                      |   |        |                          |  |   |         |   |  |   |         |  
|Balance at January 2, 2005                                                  |  | 99,411       |   |  | $                                            | 485,318 |   |                                      | $ | 57,029 |                          |  | $ | (26,735 | ) |  | $ | 515,612 |  
|                                                                            |  |              |   |  |                                              |         |   |                                      |   |        |                          |  |   |         |   |  |   |         |  



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



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POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                         |  |                    |          |   |                  |   |         |                  |  |   |         |  
|---------------------------------------------------------------------------------------- |  | ------------------ | -------- | - | ---------------- | - | ------- | ---------------- |  | - | ------- | -
|                                                                                         |  | Fiscal Years Ended |         
|                                                                                         |  | January 2,2005     |          |   | December 28,2003 |   |         | December 29,2002 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |                    |          |   |                  |   |         |                  |  |   |         |  
|Net income (loss)                                                                        |  | $                  | (72,122  | ) |                  | $ | (32,859 | )                |  | $ | 4,111   |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                    |          |   |                  |   |         |                  |  |   |         |  
|Depreciation and amortization                                                            |  |                    | 37,555   |   |                  |   | 19,214  |                  |  |   | 22,053  |  
|In-process research and development charge                                               |  |                    | 23,450   |   |                  |   |        |                  |  |   |        |  
|Non-cash restructuring and impairment charges                                            |  |                    | 458      |   |                  |   | 10,909  |                  |  |   |        |  
|Provision for sales returns and doubtful accounts                                        |  |                    | 822      |   |                  |   | 2,004   |                  |  |   | 3,967   |  
|Provision for excess and obsolete inventories                                            |  |                    | 2,249    |   |                  |   | 3,308   |                  |  |   | 5,797   |  
|Deferred income taxes                                                                    |  |                    | 45,748   |   |                  |   | (20,503 | )                |  |   | 11,339  |  
|Tax benefit from stock issuances                                                         |  |                    | 283      |   |                  |   | 573     |                  |  |   | 1,291   |  
|Compensation costs related to stock options                                              |  |                    |         |   |                  |   | 38      |                  |  |   | 59      |  
|Loss (gain) on disposal of property, plant and equipment                                 |  |                    | (92      | ) |                  |   | (24     | )                |  |   | 770     |  
|Gain on sale of assets held for sale                                                     |  |                    | (532     | ) |                  |   |        |                  |  |   |        |  
|Changes in operating assets and liabilities, net of acquisitions:                        |  |                    |          |   |                  |   |         |                  |  |   |         |  
|Accounts receivable                                                                      |  |                    | (129     | ) |                  |   | (5,019  | )                |  |   | 2,502   |  
|Inventories                                                                              |  |                    | (10,084  | ) |                  |   | 10,724  |                  |  |   | (2,193  | )
|Prepaid expenses and other current assets                                                |  |                    | (7,986   | ) |                  |   | 624     |                  |  |   | (3,693  | )
|Accounts payable                                                                         |  |                    | (20,794  | ) |                  |   | 22,099  |                  |  |   | 4,150   |  
|Accrued expenses and other current liabilities                                           |  |                    | (7,785   | ) |                  |   | (643    | )                |  |   | (7,907  | )
|Other non-current assets                                                                 |  |                    | (4,681   | ) |                  |   | (3,574  | )                |  |   | (2,185  | )
|Other non-current liabilities                                                            |  |                    | (102     | ) |                  |   | 35      |                  |  |   | 15      |  
|                                                                                         |  |                    |          |   |                  |   |         |                  |  |   |         |  
|Net cash provided by (used in) operating activities                                      |  |                    | (13,742  | ) |                  |   | 6,906   |                  |  |   | 40,076  |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |                    |          |   |                  |   |         |                  |  |   |         |  
|Purchase of property, plant and equipment                                                |  |                    | (12,693  | ) |                  |   | (3,903  | )                |  |   | (5,062  | )
|Restricted cash                                                                          |  |                    | (25      | ) |                  |   | (310    | )                |  |   | (190    | )
|Short-term investments                                                                   |  |                    | (55,125  | ) |                  |   | (50,075 | )                |  |   | (30,000 | )
|Proceeds from the sale of property, plant and equipment                                  |  |                    | 1,384    |   |                  |   | 1,515   |                  |  |   | 1,198   |  
|Proceeds from sale of assets held for sale                                               |  |                    | 6,382    |   |                  |   |        |                  |  |   |        |  
|Acquisition, net of cash acquired                                                        |  |                    | (88,537  | ) |                  |   | (9,934  | )                |  |   |        |  
|                                                                                         |  |                    |          |   |                  |   |         |                  |  |   |         |  
|Net cash used in investing activities                                                    |  |                    | (148,614 | ) |                  |   | (62,707 | )                |  |   | (34,054 | )
|CASH FLOW FROM FINANCING ACTIVITIES:                                                     |  |                    |          |   |                  |   |         |                  |  |   |         |  
|Proceeds from long-term debt, net of issuance costs                                      |  |                    | 197,956  |   |                  |   | 125,869 |                  |  |   |        |  
|Principal payments on long-term debt                                                     |  |                    | (33,124  | ) |                  |   | (79     | )                |  |   | (819    | )
|Common stock repurchases                                                                 |  |                    | (40,000  | ) |                  |   | (25,000 | )                |  |   |        |  
|Proceeds from the sale of stock under Employee Stock Purchase Plan                       |  |                    | 1,591    |   |                  |   | 1,505   |                  |  |   | 1,941   |  
|Proceeds from exercise of stock options                                                  |  |                    | 1,045    |   |                  |   | 1,120   |                  |  |   | 2,024   |  
|                                                                                         |  |                    |          |   |                  |   |         |                  |  |   |         |  
|Net cash provided by financing activities                                                |  |                    | 127,468  |   |                  |   | 103,415 |                  |  |   | 3,146   |  
|                                                                                         |  |                    |          |   |                  |   |         |                  |  |   |         |  
|EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS                                    |  |                    | 2,486    |   |                  |   |        |                  |  |   |        |  
|                                                                                         |  |                    |          |   |                  |   |         |                  |  |   |         |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     |  |                    | (32,402  | ) |                  |   | 47,614  |                  |  |   | 9,168   |  
|CASH AND CASH EQUIVALENTS, beginning of period                                           |  |                    | 179,853  |   |                  |   | 132,239 |                  |  |   | 123,071 |  
|                                                                                         |  |                    |          |   |                  |   |         |                  |  |   |         |  
|CASH AND CASH EQUIVALENTS, end of period                                                 |  | $                  | 147,451  |   |                  | $ | 179,853 |                  |  | $ | 132,239 |  
|                                                                                         |  |                    |          |   |                  |   |         |                  |  |   |         |  



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



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##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

(in thousands)



|                                    |  |                    |       |                  |   |      |                  |  |   |        |  
|----------------------------------- |  | ------------------ | ----- | ---------------- | - | ---- | ---------------- |  | - | ------ | -
|                                    |  | Fiscal Years Ended |      
|                                    |  | January 2,2005     |       | December 28,2003 |   |      | December 29,2002 | 
|SUPPLEMENTAL CASH FLOW INFORMATION: |  |                    |       |                  |   |      |                  |  |   |        |  
|Cash paid (received) for:           |  |                    |       |                  |   |      |                  |  |   |        |  
|Interest expense                    |  | $                  | 2,149 |                  | $ | 46   |                  |  | $ | 81     |  
|                                    |  |                    |       |                  |   |      |                  |  |   |        |  
|Income taxes                        |  | $                  | 2,666 |                  | $ | (160 | )                |  | $ | (9,662 | )
|                                    |  |                    |       |                  |   |      |                  |  |   |        |  



For supplemental cash
flow information related to the Companys acquisitions, see Note 17. Acquisitions.



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



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##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tabular amounts in thousands, except per share data)



Note 1. Nature of Operations



Powerwave is a global supplier of end-to-end wireless solutions for wireless communications networks. Powerwave designs, manufactures and markets
antennas, boosters, combiners, filters, radio frequency power amplifiers, repeaters, tower-mounted amplifiers and advanced coverage solutions for use in cellular, PCS and 3G networks throughout the world. The Company also manufactures and sells
advanced industrial components, primarily for the automotive and food industries, under contract manufacturing arrangements.



Note 2. Summary of Significant Accounting Policies



Basis of Presentation



The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and
include the accounts of Powerwave Technologies, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in the accompanying consolidated financial statements.



During the second quarter of fiscal 2004, Powerwave completed its acquisition
of LGP Allgon (see Note 17. Acquisitions.) The consolidated financial statements include the operations of LGP Allgon from May 2004 forward.



Reclassifications



Certain prior period amounts have been reclassified to conform to the current period presentation.



Fiscal Year



The Company operates on a 52-53 week fiscal year that ends on the Sunday
closest to December 31. The Companys fiscal quarters generally span 13 weeks, with the exception of a 53-week fiscal year, when an additional week is added during the first quarter to adjust the year to the Sunday closest to December 31.
Fiscal year 2002 ended on December 29, 2002, and fiscal 2003 ended on December 28, 2003. Fiscal year 2004, a 53-week fiscal year, ended on January 2, 2005.



New Accounting Pronouncements



In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards 123R (Revised 2004),
Share-Based Payments(SFAS 123R), which requires that the compensation cost relating to share-based payment transactions be recognized in financial statements based on alternative fair value models. The share-based compensation
cost will be measured based on the fair value of the equity or liability instruments issued. The Company currently discloses pro forma compensation expense quarterly and annually. Upon adoption, the pro forma disclosures previously permitted under
SFAS 123 will no longer be an alternative to financial statement recognition. The provisions of SFAS 123R are effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. The Company is currently
evaluating the method of adoption and the effect that the adoption of SFAS 123R will have on its financial position and results of operations.



In November 2004, the FASB issued Statement of Financial Accounting Standards 151, Inventory Costs  an amendment of ARB No. 43, Chapter 4(SFAS 151). SFAS 151 amends the guidance in ARB No. 43 to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). SFAS 151 requires that these costs be
recognized as current period charges regardless of whether they are abnormal. In addition, SFAS 151 requires that allocation of fixed production overheads to the costs of manufacturing be based on the normal capacity of the production facilities.
The provisions of SFAS 151 are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is currently evaluating the effect that the adoption of this new standard may have on its consolidated financial
position or results of operations.



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##### Table of Contents

Use of Estimates



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



Cash and Cash Equivalents



Cash and cash equivalents generally consist of cash, time deposits, commercial paper, money market funds and other money market instruments with original
maturity dates of three months or less. The Company invests its excess cash in only investment grade money market instruments from companies in a variety of industries and, therefore, believes that it bears minimal principal risk. Such investments
are stated at cost, which approximates fair value.



Short-term Investments



Short-term
investments, which are classified as available for sale, generally consist of auction rate securities with contractual maturities that may range up to 30 years and interest rates that reset at auction intervals ranging from between 28
and 35 days. These auction-rate securities are readily saleable at par value on the auction dates. The carrying value of these securities approximates fair value, therefore there are no unrealized gains or losses recorded. These investments have
been recorded as current assets as they are available for current operations. In prior years, such investments were included in cash equivalents. In 2004, the Company determined such amounts should properly be classified as short-term investments.
As a result, the Company has reclassified $80.1 million in the fiscal 2003 consolidated balance sheet from cash and cash equivalents to short-term investments to conform to the current year presentation. Additionally, the Company made
reclassifications to the prior years statements of cash flows to record the net purchases of auction rate securities of $50.1 million and $30.0 million for fiscal 2003 and 2002, respectively, as an investing activity.



Accounts Receivable



The Company performs ongoing credit evaluations of its customers and
generally does not require collateral. The Company continuously monitors collections and payments from its customers and regularly adjusts credit limits of customers based upon payment history and a customers current credit worthiness, as
judged by the Company. The Company records a provision for estimated credit losses and such losses have been within managements expectations.



Inventories



Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or market. The Company periodically reviews inventory quantities
on hand and records a provision for excess and obsolete inventories based primarily on historical usage, current production requirements and forecasted product demand.



Property, Plant and Equipment



Property, plant and equipment are stated at cost. The Company depreciates or amortizes these assets using the straight-line
method over the estimated useful lives of the various classes of assets, as follows:



|                               |  |                           
|------------------------------ |  | --------------------------
|Machinery and equipment        |  | 2 to 8 years              
|Office furniture and equipment |  | 3 to 5 years              
|Leasehold improvements         |  | Remaining life of lease   
|Property under capital leases  |  | 3 to 5 years              
|Buildings                      |  | 30 years                  
|Building improvements          |  | Remaining life of building



The Company
periodically reviews the recoverability of its long-lived assets using the methodology prescribed in Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company also reviews
these assets for impairment whenever events or changes in circumstances



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##### Table of Contents

indicate that the carrying amount of an asset may not be recoverable. Recoverability of these assets is determined by
comparing the forecasted undiscounted future net cash flows from the operations to which the assets relate, based on managements best estimates using appropriate assumptions and projections at the time, to the carrying amount of the assets. If
the carrying value is determined not to be recoverable from future operating cash flows, the asset is deemed impaired and an impairment loss is recognized equal to the amount by which the carrying amount exceeds the estimated fair value of the
asset.



Goodwill, Intangible Assets and Other Long-Lived
Assets Management



The Company records the assets acquired
and liabilities assumed in business combinations at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill. Because of the expertise required to value intangible assets and in-process research
and development, management typically engages independent valuation specialists to assist in determining those values. Valuation of intangible assets and in-process research and development entails significant estimates and assumptions including,
but not limited to, determining the timing and expected costs to complete development projects, estimating future cash flows from product sales, developing appropriate discount rates, estimating probability rates for the successful completion of
development projects, continuation of customer relationships and renewal of customer contracts, and approximating the useful lives of the intangible assets acquired.



Purchased intangible assets with determinable useful lives are carried at cost less accumulated amortization, and are
amortized using the straight-line method over their estimated useful lives, which generally average five years. The Company reviews the recoverability of the carrying value of identified intangibles and other long-lived assets, including fixed
assets, on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of these assets is determined based upon the forecasted undiscounted future net cash flows
expected to result from the use of such asset and its eventual disposition. Powerwaves estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other
factors. The actual cash flows realized from these assets may vary significantly from our estimates due to increased competition, changes in technology, fluctuations in demand, consolidation of our customers and reductions in average selling prices.
If the carrying value of an asset is determined not to be recoverable from future operating cash flows, the asset is deemed impaired and an impairment loss is recognized to the extent the carrying value exceeds the estimated fair market value of the
asset.



The Company reviews the recoverability of the carrying
value of goodwill on an annual basis or more frequently when an event occurs or circumstances change to indicate that an impairment of goodwill has possibly occurred. The determination of whether any potential impairment of goodwill exists is based
upon a comparison of the fair value of a reporting unit to the accounting value of the underlying net assets of such reporting unit. To determine the fair value of a reporting unit, management reviews the market value of the Companys
outstanding Common Stock based upon its average and closing stock prices, as well as subjective valuations for the reporting unit based on multiples of sales, EBITDA and EBIT, and other valuation metrics. If the fair value of the reporting unit is
less than the accounting value of the underlying net assets, goodwill is deemed impaired and an impairment loss is recorded to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the
fair value of all its underlying identifiable assets and liabilities.



Warranties



Powerwave offers warranties of
various lengths to its customers depending upon the specific product and terms of the customer purchase agreement. Standard warranties require the Company to repair or replace defective product returned to it during such warranty period at no cost
to the customer. The Company records an estimate for standard warranty-related costs based on its actual historical return rates and repair costs at the time of the sale and update such estimate throughout the warranty period. While Powerwaves
warranty costs have historically been within its expectations and the provisions established, there is no guarantee that the Company will continue to experience the same warranty return rates or repair costs that it has in the past. Powerwave also
has contractual commitments to various customers that require it to incur costs to repair an epidemic defect with respect to its products outside of our standard warranty period if such defect were to occur. Any costs related to epidemic defects are
generally recorded at the time the epidemic defect becomes known to the Company and the costs of repair can be reasonably estimated. While the Company has not historically experienced significant costs related to epidemic defects, there is no
guarantee that it will not experience significant costs to repair epidemic defects in the future.



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##### Table of Contents

Stock Based Compensation



Pursuant to Statement of Financial Accounting Standards No. 123, Accounting for Stock Based Compensation (SFAS
123), the Company has elected to continue using the intrinsic value method of accounting for stock based awards granted to employees and directors in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and its related interpretations to account for its stock option and purchase plans. Powerwave only records compensation expense for stock based awards granted with an exercise price below the market value of the Companys stock
at the grant date.



The Black-Scholes option valuation model
prescribed by SFAS 123 was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation methods require the input of highly subjective assumptions including the
expected stock price volatility. Using the Black-Scholes option valuation model, the estimated weighted average fair value of options granted during 2004, 2003, and 2002 were $2.48 per share, $2.54 per share, and $7.07 per share, respectively. Had
compensation cost for the Companys stock option plans and its stock purchase plans been determined based on the estimated fair value at the grant dates for awards under those plans consistent with the fair value method of SFAS 123 utilizing
the Black-Scholes option-pricing model, the Companys net income (loss) and basic and diluted earnings (loss) per share for the years ended January 2, 2005, December 28, 2003 and December 29, 2002, would have approximated the pro forma amounts
indicated below:



|                                                                                       |  |                    |         |   |                  |   |         |                  |  |   |         |  
|-------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ------- | ---------------- |  | - | ------- | -
|                                                                                       |  | Fiscal Years Ended |        
|                                                                                       |  | January 2,2005     |         |   | December 28,2003 |   |         | December 29,2002 | 
|Net income (loss):                                                                     |  |                    |         |   |                  |   |         |                  |  |   |         |  
|As reported                                                                            |  | $                  | (72,122 | ) |                  | $ | (32,859 | )                |  | $ | 4,111   |  
|Deduct: Additional expense per SFAS 123, fair value method, net of related tax effects |  |                    | (4,760  | ) |                  |   | (8,201  | )                |  |   | (12,566 | )
|                                                                                       |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Pro forma                                                                              |  | $                  | (76,882 | ) |                  | $ | (41,060 | )                |  | $ | (8,455  | )
|                                                                                       |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Basic earnings (loss) per share:                                                       |  |                    |         |   |                  |   |         |                  |  |   |         |  
|As reported                                                                            |  | $                  | (0.80   | ) |                  | $ | (0.51   | )                |  | $ | 0.06    |  
|Pro forma                                                                              |  | $                  | (0.85   | ) |                  | $ | (0.63   | )                |  | $ | (0.13   | )
|Diluted earnings (loss) per share:                                                     |  |                    |         |   |                  |   |         |                  |  |   |         |  
|As reported                                                                            |  | $                  | (0.80   | ) |                  | $ | (0.51   | )                |  | $ | 0.06    |  
|Pro forma                                                                              |  | $                  | (0.85   | ) |                  | $ | (0.63   | )                |  | $ | (0.13   | )



The fair value of
options granted under the Companys stock incentive plans during 2004, 2003 and 2002 was estimated on the date of grant using the Black-Scholes option-pricing model utilizing the multiple option approach using the following weighted-average
assumptions:



|                                         |  |                    |   |  |                  |   |  |                  |  
|---------------------------------------- |  | ------------------ | - |  | ---------------- | - |  | ---------------- | -
|                                         |  | Fiscal Years Ended |  
|                                         |  | January 2,2005     |   |  | December 28,2003 |   |  | December 29,2002 |  
|Weighted average risk-free interest rate |  | 2.80               | % |  | 2.00             | % |  | 2.18             | %
|Expected life (in years)                 |  | 5.3                |   |  | 5.2              |   |  | 5.1              |  
|Expected stock volatility                |  | 57                 | % |  | 67               | % |  | 180              | %
|Dividend yield                           |  | None               |   |  | None             |   |  | None             |  



Due to the fact that
the Companys employee stock options have characteristics significantly different from those of traded options and any changes in the subjective input assumptions can materially affect the fair value estimates, management does not believe that
the Black-Scholes model provides a reliable single measure of the fair value of its employee stock options. Therefore, the Company believes that the pro forma net expense per SFAS 123 calculated above is not a reliable measure of the costs of the
Companys stock option plans.



As previously discussed,
the FASB issued SFAS 123R in December 2004, which will require the Company to begin expensing stock options beginning within its third quarter of fiscal year 2005.



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##### Table of Contents

Revenue Recognition



The Company recognizes revenue from product sales at the time of shipment and passage of title. The Company also offers
certain of its customers a right to return within a limited time after delivery. The Company continuously monitors and tracks such returns and records a provision, as a charge to revenues, to reflect the Companys estimate of such returns,
based on historical experience and any notification received by the Company of such a return. Such returns have historically been within managements expectations.



Foreign Currency



In accordance with Statement of Financial Accounting Standards No. 52, Foreign Currency Translation(SFAS 52), some of Powerwaves
international operations use the respective local currencies as their functional currency while other international operations use the U.S. Dollar as their functional currency. Gains and losses from foreign currency transactions are recorded in
other income, net. Revenue and expenses from the Companys international subsidiaries are translated using the monthly average exchange rates in effect for the period in which they occur. The Companys international subsidiaries that have
the U.S. Dollar as their functional currency translate monetary assets and liabilities using current rates of exchange at the balance sheet date and translate non-monetary assets and liabilities using historical rates of exchange. Gains and losses
from remeasurement for such subsidiaries are included in other income, net and have historically not been significant. The Companys international subsidiaries that do not have the U.S. Dollar as their functional currency translate assets and
liabilities at current rates of exchange in effect at the balance sheet date. The resulting gains and losses from translation for such subsidiaries are included as a component of shareholders equity.



Income Taxes



The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109), which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying
amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax
liabilities. A valuation allowance is recorded when it is more likely than not that some or all or any deferred tax assets will not be realized.



Earnings (Loss) Per Share



In accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share(SFAS 128), basic earnings (loss) per share
is based upon the weighted average number of common shares outstanding. Diluted earnings (loss) per share is based upon the weighted average number of common and potential common shares for each period presented. Potential common shares include
stock options using the treasury stock method.



Note 3. Inventories



Net inventories consist of the following:



|                     |  |                |        |                  |   |       
|-------------------- |  | -------------- | ------ | ---------------- | - | ------
|                     |  | January 2,2005 |        | December 28,2003
|Parts and components |  | $              | 32,868 |                  | $ | 5,295 
|Work-in-process      |  |                | 2,183  |                  |   | 722   
|Finished goods       |  |                | 30,768 |                  |   | 9,170 
|                     |  |                |        |                  |   |       
|Total inventories    |  | $              | 65,819 |                  | $ | 15,187
|                     |  |                |        |                  |   |       



Inventories are net of
an allowance for excess and obsolete inventories of approximately $15.7 million and $8.6 million as of January 2, 2005 and December 28, 2003, respectively.



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##### Table of Contents

Note 4. Property, Plant and Equipment



Net property, plant and equipment consist of the following:



|                                                |  |                |          |   |                  |   |         |  
|----------------------------------------------- |  | -------------- | -------- | - | ---------------- | - | ------- | -
|                                                |  | January 2,2005 |          |   | December 28,2003 |  
|Machinery and equipment                         |  | $              | 187,163  |   |                  | $ | 51,464  |  
|Buildings and improvements                      |  |                | 82,348   |   |                  |   | 38,660  |  
|Land                                            |  |                | 24,155   |   |                  |   | 14,838  |  
|Office furniture and equipment                  |  |                | 15,008   |   |                  |   | 12,171  |  
|Leasehold improvements                          |  |                | 1,142    |   |                  |   | 953     |  
|Construction-in-progress                        |  |                |         |   |                  |   |        |  
|                                                |  |                |          |   |                  |   |         |  
|Gross property, plant and equipment             |  |                | 309,816  |   |                  |   | 118,086 |  
|Less: Accumulated depreciation and amortization |  |                | (163,386 | ) |                  |   | (50,111 | )
|                                                |  |                |          |   |                  |   |         |  
|Total property, plant and equipment, net        |  | $              | 146,430  |   |                  | $ | 67,975  |  
|                                                |  |                |          |   |                  |   |         |  



During fiscal 2004 and
2003, Powerwave determined that certain of its equipment had become excess to its production requirements as a result of its restructuring efforts and, therefore, was no longer useful to the Company. This equipment was physically segregated from the
Companys remaining active equipment and sold or disposed of prior to January 2, 2005 and December 28, 2003. The difference between the estimated net selling price for such equipment and its net book value resulted in an impairment charge of
approximately $0.4 million and $3.0 million during fiscal 2004 and 2003, respectively. See Note 9. Restructuring and Impairment Charges for additional information.



Note 5. Goodwill



The changes in the carrying amount of goodwill by reportable operating segment for the years ended January 2, 2005 and December 28, 2003 are as follows:



|                                                             |  |         |         |   |                       |   |        |  |   |         |  
|------------------------------------------------------------ |  | ------- | ------- | - | --------------------- | - | ------ |  | - | ------- | -
|                                                             |  | Telecom |         |   | ContractManufacturing |   | Total  | 
|Balance, December 29, 2002                                   |  | $       | 4,852   |   |                       | $ |       |  | $ | 4,852   |  
|Impairment charge                                            |  |         | (4,852  | ) |                       |   |       |  |   | (4,852  | )
|Goodwill from acquisition of Ericsson Amplifier Technologies |  |         | 3,439   |   |                       |   |       |  |   | 3,439   |  
|                                                             |  |         |         |   |                       |   |        |  |   |         |  
|Balance, December 28, 2003                                   |  |         | 3,439   |   |                       |   |       |  |   | 3,439   |  
|Goodwill from acquisition of LGP Allgon                      |  |         | 218,275 |   |                       |   | 18,980 |  |   | 237,255 |  
|Effect of foreign exchange rate changes                      |  |         | 33,606  |   |                       |   | 2,923  |  |   | 36,529  |  
|                                                             |  |         |         |   |                       |   |        |  |   |         |  
|Balance, January 2, 2005                                     |  | $       | 255,320 |   |                       | $ | 21,903 |  | $ | 277,223 |  
|                                                             |  |         |         |   |                       |   |        |  |   |         |  



During the quarter
ended March 30, 2003, Powerwave determined that it was necessary to test its previously recorded goodwill for impairment as a result of the significant economic downturn effecting demand in the wireless infrastructure industry. Since Powerwave
operated in a single business segment as a single reporting unit at such time, the determination of whether any potential impairment of goodwill existed was based on a comparison of the fair value of the entire Company to the accounting value of its
net assets. In estimating the fair value of the entire Company, Powerwave reviewed the average and closing stock prices for its Common Stock, valuations based on multiples of sales, EBITDA and EBIT, as well as other factors. Based on a comparison of
these valuations to the accounting value of the underlying assets and liabilities, the Company concluded that the entire amount of its recorded goodwill had been impaired and, therefore, recorded a non-cash charge of $4.9 million in operating
expenses during the first quarter of fiscal 2003. The Company did not record any similar impairment charge during fiscal 2004.



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##### Table of Contents

Note 6. Intangible Assets



Intangible assets as of January 2, 2005 and December 28, 2003, respectively, are comprised of the following:



|                        |  |                     |        |                             |   |         |               |  |   |        |  |        
|----------------------- |  | ------------------- | ------ | --------------------------- | - | ------- | ------------- |  | - | ------ |  | -------
|                        |  | January 2, 2005     |        | Wtd. Avg.AmortizationPeriod
|                        |  | GrossCarryingAmount |        | AccumulatedAmortization     |   |         | Net BookValue | 
|Non-amortizing:         |  |                     |        |                             |   |         |               |  |   |        |  |        
|Trademark               |  | $                   | 787    |                             | $ |        |               |  | $ | 787    |  |       
|Amortizing:             |  |                     |        |                             |   |         |               |  |   |        |  |        
|Developed technology    |  |                     | 49,188 |                             |   | (16,933 | )             |  |   | 32,255 |  | 5 years
|Customer-related assets |  |                     | 40,428 |                             |   | (8,104  | )             |  |   | 32,324 |  | 5 years
|                        |  |                     |        |                             |   |         |               |  |   |        |  |        
|                        |  | $                   | 90,403 |                             | $ | (25,037 | )             |  | $ | 65,366 |  |        
|                        |  |                     |        |                             |   |         |               |  |   |        |  |        



|                     |  |                     |        |                             |   |         |               |  |   |     |  |        
|-------------------- |  | ------------------- | ------ | --------------------------- | - | ------- | ------------- |  | - | --- |  | -------
|                     |  | December 28, 2003   |        | Wtd. Avg.AmortizationPeriod
|                     |  | GrossCarryingAmount |        | AccumulatedAmortization     |   |         | Net BookValue | 
|Developed technology |  | $                   | 12,070 |                             | $ | (11,880 | )             |  | $ | 190 |  | 5 years
|                     |  |                     |        |                             |   |         |               |  |   |     |  |        



Future Amortization
expense is expected to be $14.8 million, $13.7 million, $13.2 million, $12.9 million, $8.1 million and $1.9 million in fiscal years 2005, 2006, 2007, 2008, 2009 and 2010, respectively.



Note 7. Other Non-Current Assets



Other non-current assets consist of the following:



|                                       |  |                 |        |                  |   |       
|-------------------------------------- |  | --------------- | ------ | ---------------- | - | ------
|                                       |  | January 2, 2005 |        | December 28,2003
|Buildings held for sale                |  | $               | 4,451  |                  | $ | 5,850 
|Deferred capitalized acquisition costs |  |                 |       |                  |   | 3,607 
|Debt issue costs, net                  |  |                 | 8,957  |                  |   | 3,769 
|Long-term deposits                     |  |                 | 3,459  |                  |   |      
|Long-term prepaid expenses             |  |                 | 229    |                  |   | 91    
|                                       |  |                 |        |                  |   |       
|Total other non-current assets         |  | $               | 17,096 |                  | $ | 13,317
|                                       |  |                 |        |                  |   |       



Note 8. Accrued Expenses and Other
Current Liabilities



Accrued expenses and other current
liabilities consist of the following:



|                                                     |  |                 |        |                  |   |       
|---------------------------------------------------- |  | --------------- | ------ | ---------------- | - | ------
|                                                     |  | January 2, 2005 |        | December 28,2003
|Accrued warranty costs                               |  | $               | 10,164 |                  | $ | 4,829 
|Accrued compulsory share liability (Note 17)         |  |                 | 7,923  |                  |   |      
|Accrued value added tax                              |  |                 | 4,578  |                  |   |      
|Accrued interest expense                             |  |                 | 1,270  |                  |   | 750   
|Accrued sales tax                                    |  |                 | 416    |                  |   | 921   
|Other accrued expenses and other current liabilities |  |                 | 15,183 |                  |   | 4,062 
|                                                     |  |                 |        |                  |   |       
|Total accrued expenses and other current liabilities |  | $               | 39,534 |                  | $ | 10,562
|                                                     |  |                 |        |                  |   |       



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Note 9. Restructuring and Impairment Charges



Integration with LGP Allgon



In connection with Powerwaves acquisition of LGP Allgon during the second quarter of fiscal 2004, the Company formulated and began to implement
its plan to restructure and integrate LGP Allgons operations with Powerwaves operations. As a result, Powerwave recorded a restructuring charge related to its legacy operations of approximately $2.6 million during fiscal 2004 in
accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This amount included approximately $2.2 million in connection with workforce reductions of approximately 118 employees at various Powerwave
operating locations and $0.4 million in connection with certain impaired equipment. Based on the job classification of the impacted employees or the characterization of the underlying assets and lease expenses, approximately $0.5 million of this
restructuring charge was recorded in cost of sales and approximately $2.1 million was recorded in operating expenses. In addition, the Company recognized $22.9 million as liabilities or additional asset fair value adjustments in connection with the
LGP Allgon acquisition for estimated restructuring and integration costs related to the consolidation of LGP Allgon operations, including amounts for future lease obligations on excess facilities, impairment of excess equipment, write-downs of
inventory for discontinued product lines and severance related costs for expected workforce reductions. These estimated costs were included in the allocation of the purchase price and resulted in additional goodwill. Implementation of the
Companys restructuring and integration plan is underway and additional actions are expected pending certain product related decisions and the further assessment of workforce and facility related requirements. Integration activities related to
such plan are currently expected to continue through the second quarter of fiscal 2005.



Outsourcing of Radio Frequency Power Amplifier Production



During fiscal 2003, Powerwave accelerated the restructuring of its manufacturing operations to outsource the majority of its production to contract
manufacturers located in Asia in order to further reduce the Companys operating cost structure and enable it to be more competitive. Additionally, the Company accelerated the timing of technology transitions and new product introductions due
to its transition to outsourced manufacturing and the continued economic downturn that has significantly impacted demand in the wireless infrastructure industry. As a result, the Company recorded approximately $10.6 million of restructuring and
impairment charges during fiscal 2003. These charges included cash restructuring charges of approximately $4.6 million related primarily to severance payments made in connection with a reduction in its work force of approximately 550 employees. The
remaining non-cash impairment charges of approximately $6.0 million related to a $3.0 million write-down of excess manufacturing and test equipment that was disposed of and a $3.0 million write-down of certain product/technology and customer related
intangibles, the value of which was impaired by the technology and product transitions that were implemented during the year. These restructuring and impairment charges were recorded in cost of sales or operating expenses based upon the job
classification of the impacted employees or the character of the underlying assets. Approximately $7.9 million of these restructuring and impairment charges was recorded in cost of sales and approximately $7.6 million was recorded in operating
expenses.



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##### Table of Contents

A summary of the activity that affected the Companys restructuring and impair charges and accrued
restructuring liability for the years ended December 28, 2003 and January 2, 2005 is as follows:



|                                       |  |                     |        |   |                                        |   |        |                                  |  |   |        |   |  |       |        |   |  |   |         |  
|-------------------------------------- |  | ------------------- | ------ | - | -------------------------------------- | - | ------ | -------------------------------- |  | - | ------ | - |  | ----- | ------ | - |  | - | ------- | -
|                                       |  | WorkforceReductions |        |   | FacilityClosures &EquipmentWrite-downs |   |        | Goodwill &Intangible Write-downs |  |   | Other  |   |  | Total |       
|Balance at December 29, 2002           |  | $                   |       |   |                                        | $ |       |                                  |  | $ |       |   |  | $     |       |   |  | $ |        |  
|Amounts expensed                       |  |                     | 4,550  |   |                                        |   | 2,982  |                                  |  |   | 7,927  |   |  |       |       |   |  |   | 15,459  |  
|Amounts paid/incurred                  |  |                     | (4,530 | ) |                                        |   | (2,982 | )                                |  |   | (7,927 | ) |  |       |       |   |  |   | (15,439 | )
|                                       |  |                     |        |   |                                        |   |        |                                  |  |   |        |   |  |       |        |   |  |   |         |  
|Balance at December 28, 2003           |  |                     | 20     |   |                                        |   |       |                                  |  |   |       |   |  |       |       |   |  |   | 20      |  
|Amounts assumed from LGP Allgon        |  |                     | 464    |   |                                        |   | 3,348  |                                  |  |   |       |   |  |       | 863    |   |  |   | 4,675   |  
|Amounts accrued in purchase accounting |  |                     | 14,067 |   |                                        |   | 2,788  |                                  |  |   |       |   |  |       | 1,348  |   |  |   | 18,203  |  
|Amounts expensed                       |  |                     | 2,151  |   |                                        |   | 458    |                                  |  |   |       |   |  |       |       |   |  |   | 2,609   |  
|Amounts paid/incurred                  |  |                     | (5,540 | ) |                                        |   | (4,111 | )                                |  |   |       |   |  |       | (1,679 | ) |  |   | (11,330 | )
|Effect of exchange rates               |  |                     | 1,592  |   |                                        |   | 1,518  |                                  |  |   |       |   |  |       | 67     |   |  |   | 3,177   |  
|                                       |  |                     |        |   |                                        |   |        |                                  |  |   |        |   |  |       |        |   |  |   |         |  
|Balance at January 2, 2005             |  | $                   | 12,754 |   |                                        | $ | 4,001  |                                  |  | $ |       |   |  | $     | 599    |   |  | $ | 17,354  |  
|                                       |  |                     |        |   |                                        |   |        |                                  |  |   |        |   |  |       |        |   |  |   |         |  



The accrued
restructuring liability at January 2, 2005 for workforce reduction is expected to be paid during fiscal year 2005 and the liability for facility closures is expected to be paid over the remaining lease term which ends in 2011.



Note 10. Financing Arrangements and Long-Term Debt



On November 10, 2004, Powerwave completed the private placement of $200.0
million aggregate principal amount of convertible subordinated notes due November 2024 (2024 Convert Notes) to Deutsche Bank Securities, Inc. The 2024 Convert Notes are convertible into the Common Stock of Powerwave at a conversion price
of $11.09 per share and accrue interest at an annual rate of 1.875%. Powerwave may redeem the 2024 Convert Notes beginning on November 21, 2009 until November 20, 2010 and on or after November 21, 2010 until November 20, 2011, if the closing price
of Powerwaves Common Stock is more than $17.74 and $14.42, respectively, for at least 20 trading days within a 30 consecutive trading day period. The notes may be redeemed by Powerwave at any time after November 21, 2011. Holders of the 2024
Convert Notes may require Powerwave to repurchase all or a portion of their notes for cash on November 15, 2011, 2014 and 2019 at 100% of the principal amount of the notes, plus accrued and unpaid interest up to but not including the date of such
repurchase. Holders of the 2024 Convert Notes may also require Powerwave to repurchase all or a portion of their notes in the case of a change in control. In addition, under certain circumstances related to a change in control, the conversion price
of the 2024 Convert Notes may be adjusted downwards, thereby increasing the number of shares issuable upon conversion, if holders of the 2024 Convert Notes elect to convert their notes at a time when the 2024 Convert Notes are not redeemable by the
Company. Powerwave used a portion of the proceeds of the offering to fund the repurchase of $40.0 million of its Common Stock (5,050,505 shares) simultaneously with the issuance of the 2024 Convert Notes. The Company received net cash proceeds of
approximately $154.2 million after the deduction of the amount used for the Common Stock repurchase and debt issuance costs.



On July 18, 2003, Powerwave completed the private placement of $130.0 million aggregate principal amount of 1.25% convertible subordinated notes due July
2008 (2008 Convert Notes). The 2008 Convert Notes are convertible into shares of the Common Stock of Powerwave at a conversion price of $10.49 per share and accrue interest at an annual rate of 1.25% with interest payable semi-annually
on January 15 and July 15. The 2008 Convert Notes are callable by the Company beginning July 22, 2007. Powerwave used a portion of the proceeds of the offering to fund the repurchase of $25.0 million of the Companys Common Stock (3,144,654
shares) simultaneously with the issuance of the 2008 Convert Notes. The Company received net cash proceeds of approximately $100.9 million after the deduction of the amount used for the Common Stock repurchase and debt issuance costs.



Both the 2024 Convert Notes and 2008 Convert Notes are general unsecured
obligations of the Company and are subordinate in right of payment to all of the Companys existing and future senior indebtedness. In addition, the indenture for the notes does not restrict the Company from incurring senior debt or other
indebtedness and does not impose any financial covenants on the Company.



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As part of our acquisition of LGP Allgon, we assumed short-term and long-term debt obligations consisting
primarily of fixed and variable rate bank term loans, and amounts outstanding under bank lines of credit. From the date of acquisition through January 2, 2005, we repaid the entire amount of bank debt assumed in the acquisition which totaled
approximately $33.1 million.



Note 11. 401(k) and Profit-Sharing Plans



The Company sponsors a 401(k) and profit-sharing plan
covering all eligible U.S. employees and provides for a Company match in cash on a portion of participant contributions. The Companys 401(k) and profit sharing plan is managed by Fidelity Investments, and is an employee self-directed plan
which offers a variety of investment choices via mutual funds. Employees may contribute up to 15% of their base salary, subject to IRS maximums. During fiscal 2004, the Company matched 100% of the first 3% of eligible compensation contributed and
50% of the next 2% of eligible compensation contributed. Effective fiscal 2005, the Company matches 100% of the first 5% of eligible compensation contributed. The Companys matching contributions are made in cash and are invested in the same
percentage among the various funds offered as selected by the employee. Employer matching contributions for the years ended January 2, 2005, December 28, 2003 and December 29, 2002 were $0.9 million, $1.0 million, and $1.2 million, respectively.
There were no discretionary profit sharing contributions authorized for the years ended January 2, 2005, December 28, 2003 or December 29, 2002.



Note 12. Employee Stock Purchase Plan



The Companys Employee Stock Purchase Plan (the ESPP) provides that a total of 3,000,000 shares of Common Stock are reserved for issuance
under the plan. The ESPP, which is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code, is implemented utilizing six-month offerings with purchases occurring at six-month intervals. The
ESPP administration is overseen by the Board of Directors. Employees are eligible to participate if they are employed by the Company for at least 20 hours per week and if they have been employed by the Company for at least 90 days. The ESPP permits
eligible employees to purchase Common Stock through payroll deductions, which may not exceed 20% of an employees compensation. The price of Common Stock purchased under the ESPP is 85% of the lower of the fair market value of the Common Stock
at the beginning of each six-month offering period or on the applicable purchase date. Employees may end their participation in an offering at any time during the offering period, and participation ends automatically upon termination of employment.
The Board may at any time amend or terminate the ESPP, except that no such amendment or termination may adversely affect shares previously granted under the ESPP. During fiscal 2004, the fourteenth and fifteenth purchases under the ESPP occurred on
January 30, 2004 and July 30, 2004, respectively. A total of 139,117 shares were purchased in the fourteenth purchase at $6.49 per share and 146,703 shares were purchased in the fifteenth purchase at $4.69 per share. At January 2, 2005, there were
rights to purchase approximately 161,000 shares under the ESPPs sixteenth offering, which will conclude on January 31, 2005. There were 1,342,102 shares available for purchase at January 2, 2005 under the ESPP.



Note 13. Stock Option Plans



The purposes of the Companys stock option plans are to attract and
retain the best available personnel for positions of substantial responsibility with the Company and to provide participants with additional incentives in the form of options to purchase the Companys Common Stock which will encourage them to
acquire a proprietary interest in, and to align their financial interests with those of the Company and its shareholders. All of the Companys stock option plans have been approved by the Companys shareholders.



1995 Stock Option Plan



The Companys 1995 Stock Option Plan (the 1995 Plan), as
amended, permits executive personnel, key employees and non-employee members of the Board of Directors of the Company to participate in ownership of the Company. The 1995 Plan is administered by the Compensation Committee of the Companys Board
of Directors. The 1995 Plan provides for the grant of non-statutory stock options under the applicable provisions of the Internal Revenue Code. The option price per share may not be less than 85% of the fair market value of a share of Common Stock
on the grant date as determined by the Companys Board of Directors. In addition, for any individual possessing 10% or more of the voting power of all classes of stock of the Company, the exercise price may not be less than 110% of the fair
market value of a share of Common Stock on the grant date, as determined by the Companys Board of Directors. Options generally vest at the rate of 25% on the first anniversary of the grant date and 2% per month thereafter. All options expire
no later than ten years after the grant date. Up to 5,815,845 shares of the Companys Common Stock were reserved for issuance under the 1995 Plan. Pursuant to the amended Stockholders Agreement dated as of November 8, 1996, between the
Company and certain of its original



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shareholders, those certain shareholders agreed that once the Company issued 3,285,000 shares of Common Stock under the 1995 Stock Option Plan, any
additional shares issued under that Plan upon an option exercise would be coupled with a redemption from those shareholders of an equal number of shares at a redemption price equaling the option exercise price. The Company and those certain
shareholders have agreed that this share redemption agreement applies only to the exercise of options to purchase a total of 2,530,845 shares of the Companys Common Stock. As of January 2, 2005, a total of 5,569,071 options have been exercised
under the 1995 Plan, of which a total of 2,284,071 shares of Common Stock have been funded from those shareholders party to the amended Stockholders Agreement. The effect of this transaction is to eliminate any dilution from the further
exercise of options under the 1995 Plan. At January 2, 2005, there were 234,556 options outstanding under the 1995 Plan at a weighted average exercise price of $3.58 per share. There were 12,218 shares available for grant under the 1995 Plan at
January 2, 2005 and there were a total of 246,774 shares of Common Stock held in escrow by the Company on behalf of those shareholders party to the Stockholders Agreement to fund all future exercises under the 1995 Plan.



1996 Stock Incentive Plan



The Companys 1996 Stock Incentive Plan (the 1996 Plan), as
amended, provides for the granting of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the Code), non-statutory options and restricted stock grants to directors,
officers, employees and consultants of the Company, except that incentive stock options may not be granted to non-employee directors or consultants. A total of 9,000,000 shares of the Companys Common Stock are reserved for issuance under the
1996 Plan. As of January 2, 2005, all of the options granted under the 1996 Plan have been non-statutory options. The 1996 Plan provides that for non-statutory stock options, the option price per share may not be less than 85% of the fair market
value of a share of Common Stock on the grant date and that the exercise price may not be less than 110% of the fair market value of a share of Common Stock on the grant date for any individual possessing 10% or more of the voting power of all
classes of stock of the Company. Authority to control and manage the 1996 Plan is vested with the Companys Board of Directors, which has sole discretion and authority, consistent with the provisions of the 1996 Plan, to determine the
administration of the 1996 Plan and to determine which eligible participants will receive options, the time when options will be granted, the terms of options granted and the number of shares which will be subject to options granted under the 1996
Plan. Options generally vest at the rate of 25% on the first anniversary of the grant date and the remaining 75% vests in equal monthly installments over the following three years. All options expire no later than ten years after the grant date.As of January 2, 2005, a total of 4,117,549 options had been exercised under the 1996 Plan and there were 4,564,591 options outstanding under the 1996 Plan at a weighted average exercise price of $12.11 per share. There were 317,860 shares
available for grant under the 1996 Plan at January 2, 2005.



1996 Director Stock Option Plan



The
Companys 1996 Director Stock Option Plan (the Director Plan), as amended, provides that a total of 1,200,000 shares of the Companys Common Stock are reserved for issuance under the plan. The Director Plan provides that each
member of the Companys Board of Directors who is not an employee or paid consultant of the Company will automatically be eligible to receive non-statutory options to purchase common stock under the Director Plan. Pursuant to the terms of the
Director Plan, each director elected after December 5, 1996, will be granted an initial option under the Director Plan covering 30,000 shares of Common Stock, that shall vest at the rate of 25% on the first anniversary of the grant date and the
remaining 75% shall vest in equal monthly installments over the following three years. Furthermore, on each anniversary date of December 5, each director who shall have been an eligible participant under the Director Plan for at least six (6) months
shall be granted an annual option under the Director Plan to purchase 10,000 shares of Common Stock that vests 100% on the fourth anniversary date of the grant. The Director Plan provides that the exercise price per share of grants issued under the
Director Plan shall be equal to 100% of the fair market value of a share of Common Stock on the grant date. All options expire no later than five years after the grant date. As of January 2, 2005, a total of 195,000 options had been exercised under
the Director Plan. There were 420,000 options outstanding under the Director Plan as of January 2, 2005 at a weighted average exercise price of $16.93 per share. There were 585,000 shares available for grant under the Director Plan at January 2,
2005.



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2000 Stock Option Plan



The Companys 2000 Stock Option Plan (the 2000 Plan) provides that a total of 2,640,000 shares of the
Companys Common Stock are reserved for issuance under the 2000 Plan. The 2000 Plan provides for the granting of only non-statutory stock options to employees, executive officers and consultants of the Company. The exercise price per share of
Common Stock of the Company covered by each option shall be equal to 100% of the fair market value of the Common Stock on the date that the option is granted. In no event shall any participant under the 2000 Plan be granted options under the 2000
Plan covering more than 300,000 shares in any one calendar year. Authority to control and manage the 2000 Plan is vested with the Companys Board of Directors, which has sole discretion and authority, consistent with the provisions of the 2000
Plan, to determine the administration of the 2000 Plan. The Board of Directors may delegate such responsibilities in whole or in part to a committee consisting of two or more members of the Board of Directors or two or more executive officers of the
Company (the Administrator). All option grants to executive officers of the Company shall be approved by the Board of Directors or the Compensation Committee of the Board of Directors. The Administrator of the 2000 Plan shall have the
authority, consistent with the provisions of the 2000 Plan and the authority granted by the Board of Directors, to determine which eligible participants will receive options, the time when options will be granted, the terms of options granted and
the number of shares which will be subject to options granted under the 2000 Plan. Notwithstanding the foregoing, the Administrator shall not have the authority to amend an Option Agreement to effect a re-pricing of the exercise price of
an option either by (i) lowering the exercise price of a previously granted option or (ii) by canceling a previously granted option and granting a new option, except that changes in the Companys capital structure or a change in control of the
Company pursuant to the terms of the 2000 Plan shall not be considered a re-pricing of such option. Options generally vest at the rate of 25% on the first anniversary of the grant date and the remaining 75% vests in equal monthly installments over
the following three years. All options expire no later than five years after the grant date. As of January 2, 2005, 17,970 shares had been exercised under the 2000 Plan. There were 2,330,967 options outstanding under the 2000 Plan as of January 2,
2005 at a weighted average exercise price of $11.58 per share. There were 291,063 shares available for grant under the 2000 plan at January 2, 2005.



2002 Stock Option Plan



The Companys 2002 Stock Option Plan (the 2002 Plan) was approved by the shareholders of the Company on April 24, 2002. The 2002 Plan
provides that a total of 2,000,000 shares of the Companys Common Stock are reserved for issuance under the 2002 Plan. Employees and consultants or independent advisors who are in the service of the Company or its subsidiaries are eligible to
participate in the 2002 Plan. The Companys executive officers and other highly paid employees are also eligible to participate in the 2002 Plan. The 2002 Plan provides only for the granting of non-statutory stock options. The exercise price
per share of Common Stock of the Company covered by each option shall be equal to 100% of the fair market value of the Common Stock on the date that the option is granted. In no event shall any participant under the 2002 Plan be granted options
under the 2002 plan covering more than 300,000 shares in any one calendar year. All options granted pursuant to the 2002 Plan shall have a maximum term of no more than ten years from the grant date. Authority to control and manage the 2002 Plan is
vested with the Companys Board of Directors, which has sole discretion and authority, consistent with the provisions of the 2002 Plan, to determine the administration of the 2002 Plan. The Board of Directors may delegate such responsibilities
in whole or in part to a committee consisting of two or more members of the Board of Directors or two or more officers of the Company. All option grants to executive officers of the Company shall be approved by the Board of Directors or the
Compensation Committee of the Board of Directors. The Administrator of the 2002 Plan shall have the authority, consistent with the provisions of the 2002 Plan and the authority of the Board of Directors, to determine which eligible participants will
receive options, the time when options will be granted, the terms of options granted and the number of shares which will be subject to options granted under the 2002 Plan. Notwithstanding the foregoing, the Administrator shall not have the authority
to amend an option agreement to effect a re-pricing of the exercise price of such option either by (1) lowering the exercise price of a previously granted option or (2) by canceling a previously granted option and granting a new option
except that changes in the Companys capital structure or a change in control of the Company pursuant to the terms of the 2002 Plan shall not be considered a re-pricing of such option. As of January 2, 2005, 97,101 shares had been exercised
under the 2002 Plan. There were 1,399,137 options outstanding under the 2002 Plan as of January 2, 2005 at a weighted average exercise price of $5.23 per share. There were 503,762 shares available for grant under the 2002 plan at January 2, 2005.



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The following table summarizes activity under the Companys stock plans:



|                             |  |                 |   |  |                              |       |                             |       |                              |   |      
|---------------------------- |  | --------------- | - |  | ---------------------------- | ----- | --------------------------- | ----- | ---------------------------- | - | -----
|                             |  | Number ofShares |   |  | WeightedAverageExercisePrice |       | Number ofOptionsExercisable |       | WeightedAverageExercisePrice
|Balance at December 30, 2001 |  | 8,022           |   |  | $                            | 17.39 |                             | 3,319 |                              | $ | 13.54
|Granted                      |  | 3,033           |   |  | $                            | 8.17  |                             |       |                              |   |      
|Exercised                    |  | (468            | ) |  | $                            | 4.59  |                             |       |                              |   |      
|Canceled                     |  | (988            | ) |  | $                            | 24.21 |                             |       |                              |   |      
|                             |  |                 |   |  |                              |       |                             |       |                              |   |      
|Balance at December 29, 2002 |  | 9,599           |   |  | $                            | 14.40 |                             | 4,545 |                              | $ | 15.61
|Granted                      |  | 1,527           |   |  | $                            | 6.63  |                             |       |                              |   |      
|Exercised                    |  | (317            | ) |  | $                            | 3.96  |                             |       |                              |   |      
|Canceled                     |  | (1,857          | ) |  | $                            | 21.13 |                             |       |                              |   |      
|                             |  |                 |   |  |                              |       |                             |       |                              |   |      
|Balance at December 28, 2003 |  | 8,952           |   |  | $                            | 12.05 |                             | 4,855 |                              | $ | 13.91
|Granted                      |  | 1,603           |   |  | $                            | 7.51  |                             |       |                              |   |      
|Exercised                    |  | (251            | ) |  | $                            | 4.86  |                             |       |                              |   |      
|Canceled                     |  | (1,355          | ) |  | $                            | 14.41 |                             |       |                              |   |      
|                             |  |                 |   |  |                              |       |                             |       |                              |   |      
|Balance at January 2, 2005   |  | 8,949           |   |  | $                            | 10.90 |                             | 5,556 |                              | $ | 13.18
|                             |  |                 |   |  |                              |       |                             |       |                              |   |      



The following table
summarizes information about all stock options outstanding at January 2, 2005 under the 1995 Plan, 1996 Plan, Director Plan, 2000 Plan and 2002 Plan:



|                         |  |                                        |  |                                       |       |                                             |      |                    |       |                                |   |      
|------------------------ |  | -------------------------------------- |  | ------------------------------------- | ----- | ------------------------------------------- | ---- | ------------------ | ----- | ------------------------------ | - | -----
|                         |  | Options Outstanding at January 2, 2005 |  | Options Exercisable atJanuary 2, 2005
|Range of Exercise Prices |  | OptionsOutstanding                     |  | WeightedAverage Exercise Price        |       | Weighted Average Remaining Contractual Life |      | OptionsExercisable |       | WeightedAverage Exercise Price
|$ 0.82 - $ 5.01          |  | 1,863                                  |  | $                                     | 3.98  |                                             | 5.51 |                    | 1,140 |                                | $ | 3.39 
|$ 5.13 - $ 5.41          |  | 1,460                                  |  | $                                     | 5.40  |                                             | 6.83 |                    | 851   |                                | $ | 5.41 
|$ 5.42 - $ 6.75          |  | 1,362                                  |  | $                                     | 6.45  |                                             | 6.08 |                    | 503   |                                | $ | 6.46 
|$ 6.91 - $10.67          |  | 1,309                                  |  | $                                     | 8.64  |                                             | 5.82 |                    | 526   |                                | $ | 10.01
|$10.87 - $14.65          |  | 1,294                                  |  | $                                     | 12.05 |                                             | 4.40 |                    | 1,027 |                                | $ | 12.07
|$15.16 - $33.29          |  | 1,319                                  |  | $                                     | 21.42 |                                             | 3.36 |                    | 1,167 |                                | $ | 21.94
|$33.31 - $67.08          |  | 342                                    |  | $                                     | 53.44 |                                             | 4.45 |                    | 342   |                                | $ | 53.45
|                         |  |                                        |  |                                       |       |                                             |      |                    |       |                                |   |      
|Total                    |  | 8,949                                  |  | $                                     | 10.90 |                                             | 5.34 |                    | 5,556 |                                | $ | 13.18
|                         |  |                                        |  |                                       |       |                                             |      |                    |       |                                |   |      



The Company records
compensation expense for any options granted with an exercise price below the market value of the Companys Common Stock at the date of grant. This compensation expense is calculated as the difference between the market value of the stock and
the option exercise price at the grant date and is amortized over the option vesting period. The Company recorded a total of $0.04 million and $0.06 million as compensation expense during fiscal years 2003 and 2002, respectively. There was no
remaining unamortized compensation expense as of December 28, 2003 and, therefore, no recorded compensation expense in fiscal 2004.



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Note 14. Commitments and Contingencies



Future minimum lease payments required under all operating leases at January 2, 2005 are payable as follows:



|            |  |       |       
|----------- |  | ----- | ------
|Fiscal Year |  | Total
|2005        |  | $     | 4,316 
|2006        |  |       | 3,754 
|2007        |  |       | 2,098 
|2008        |  |       | 1,434 
|2009        |  |       | 1,236 
|Thereafter  |  |       | 967   
|            |  |       |       
|Total       |  | $     | 13,805
|            |  |       |       



Total rent expense was
$3.4 million, $1.9 million and $2.0 million for the years ended January 2, 2005, December 28, 2003 and December 29, 2002, respectively.



Powerwave is subject to various legal proceedings from time to time as part of its business. As of January 2, 2005, Powerwave was not currently party to
any legal proceedings or threatened legal proceedings, the adverse outcome of which, individually or in the aggregate, it believes would have a material adverse effect on its business, financial condition and results of operations.



Note 15. Contractual Guarantees and Indemnities



The Company establishes reserves for future product warranty costs that are
expected to be incurred pursuant to specific warranty provisions with its customers. The Company also has contractual requirements with various customers that could require the Company to incur costs to repair an epidemic defect with respect to its
products outside of the normal warranty period if such defect were to occur. The Companys warranty reserves are generally established at the time of sale and updated throughout the warranty period based upon numerous factors including
historical warranty return rates and expenses over various warranty periods. The Company also accrues additional warranty liabilities for significant and unusual product performance issues at the time such issues are identified and the associated
warranty related costs can be reasonably estimated. A summary of the activity that affected the Companys accrued warranty costs for the years ended December 28, 2003 and January 2, 2005 is as follows:



|                                                         |  |                       |        |  
|-------------------------------------------------------- |  | --------------------- | ------ | -
|Description                                              |  | AccruedWarranty Costs |       
|Balance at December 29, 2002                             |  | $                     | 5,133  |  
|Reductions for warranty costs incurred                   |  |                       | (3,265 | )
|Warranty accrual related to current year sales           |  |                       | 2,771  |  
|Change in estimate related to previous warranty accruals |  |                       | 190    |  
|                                                         |  |                       |        |  
|Balance at December 28, 2003                             |  | $                     | 4,829  |  
|Reserve balances acquired with LGP Allgon                |  |                       | 7,521  |  
|Reductions for warranty costs incurred                   |  |                       | (5,057 | )
|Warranty accrual related to current year sales           |  |                       | 3,071  |  
|Change in estimate related to previous warranty accruals |  |                       | (200   | )
|                                                         |  |                       |        |  
|Balance at January 2, 2005                               |  | $                     | 10,164 |  
|                                                         |  |                       |        |  





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During its normal course of business, the Company makes certain contractual guarantees and indemnities
pursuant to which the Company may be required to make future payments under specific circumstances. Powerwave has not recorded any liability for these contractual guarantees and indemnities in the accompanying consolidated financial statements. A
description of significant contractual guarantees and indemnities existing as of January 2, 2005 is included below:



Intellectual Property Indemnities



The Company indemnifies certain customers and its contract manufacturers against liability arising from third-party claims of intellectual property rights
infringement related to the Companys products. These indemnities appear in development and supply agreements with our customers as well as manufacturing service agreements with our contract manufacturers, are not limited in amount or duration
and generally survive the expiration of the contract. Given that the amount of any potential liabilities related to such indemnities cannot be determined until an infringement claim has been made, Powerwave is unable to determine the maximum amount
of losses that it could incur related to such indemnifications. Historically, any amounts payable pursuant to such intellectual property indemnifications have not had a material effect on the Companys business, financial condition or results
of operations.



Director and Officer Indemnities and
Contractual Guarantees



The Company has entered into
indemnification agreements with its directors and executive officers which require the Company to indemnify such individuals to the fullest extent permitted by Delaware law. The Companys indemnification obligations under such agreements are
not limited in amount or duration. Certain costs incurred in connection with such indemnifications may be recovered under certain circumstances under various insurance policies. Given that the amount of any potential liabilities related to such
indemnities cannot be determined until a lawsuit has been filed against a director or executive officer, the Company is unable to determine the maximum amount of losses that it could incur relating to such indemnifications. Historically, any amounts
payable pursuant to such director and officer indemnifications have not had a material negative effect on the Companys business, financial condition or results of operations.



The Company has also entered into severance and change in control agreements with certain of its executives. These
agreements provide for the payment of specific compensation benefits to such executives upon the termination of their employment with Powerwave.



General Contractual Indemnities/Products Liability



During the normal course of business, the Company enters into contracts with customers where it has agreed to indemnify the other party for personal
injury or property damage caused by the Companys products. The Companys indemnification obligations under such agreements are not limited in duration and are generally not limited in amount. Historically, any amounts payable pursuant to
such contractual indemnities have not had a material negative effect on the Companys business, financial condition or results of operations. The Company maintains product liability insurance as well as errors and omissions insurance which may
provide a source of recovery to the Company in the event of an indemnification claim.



Workers Compensation Insurance Guarantees



The Company has issued a guarantee in the form of a standby letter of credit in the amount of $600,000 as a security for contingent liabilities under certain workers compensation insurance policies. This letter of
credit is supported by a pledge of a cash deposit of $600,000 with the bank that issued the letter of credit. The Companys workers compensation insurance carrier may draw upon the letter of credit if the Company does not fund its required
portion of workers compensation claims.



Other Guarantees
and Indemnities



The Company occasionally issues
guarantees for certain contingent liabilities under various contractual arrangements, including customer contracts, self-insured retentions under certain insurance policies, and governmental value-added tax compliance programs. These guarantees
normally take the form of standby letters of credit issued by the Companys bank, which may be secured by cash deposits or pledges, or performance bonds issued by an insurance company. Historically, any amounts payable pursuant to such
guarantees have not had a material negative effect on Powerwaves business, financial condition or results of operations. In addition, the Company, as part of the agreements to register the convertible notes it issued in November 2004 and July
2003, agreed to indemnify the selling security holders against certain liabilities, including liabilities under the Securities Act of 1933. The Companys indemnification obligations under such agreements are not limited in duration and
generally not limited in amount.



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##### Table of Contents

Note 16. Income Taxes



The components of income (loss) before income taxes and provision (benefit) for income taxes for the fiscal years ended January 2, 2005, December 28, 2003
and December 29, 2002 consists of the following:



|                                           |  |                    |         |   |                  |   |         |                  |  |   |        |  
|------------------------------------------ |  | ------------------ | ------- | - | ---------------- | - | ------- | ---------------- |  | - | ------ | -
|                                           |  | Fiscal Years Ended |        
|                                           |  | January 2,2005     |         |   | December 28,2003 |   |         | December 29,2002 | 
|Income (loss) before income taxes:         |  |                    |         |   |                  |   |         |                  |  |   |        |  
|United States                              |  | $                  | (20,206 | ) |                  | $ | (49,876 | )                |  | $ | 5,745  |  
|Foreign                                    |  |                    | (6,603  | ) |                  |   | (3,554  | )                |  |   | 128    |  
|                                           |  |                    |         |   |                  |   |         |                  |  |   |        |  
|Total                                      |  | $                  | (26,809 | ) |                  | $ | (53,430 | )                |  | $ | 5,873  |  
|                                           |  |                    |         |   |                  |   |         |                  |  |   |        |  
|Provision for (benefit from) income taxes: |  |                    |         |   |                  |   |         |                  |  |   |        |  
|Current:                                   |  |                    |         |   |                  |   |         |                  |  |   |        |  
|Federal                                    |  | $                  | (632    | ) |                  | $ | (179    | )                |  | $ | (9,337 | )
|State                                      |  |                    | (786    | ) |                  |   | 34      |                  |  |   | (240   | )
|Foreign                                    |  |                    | 983     |   |                  |   | 77      |                  |  |   |       |  
|                                           |  |                    |         |   |                  |   |         |                  |  |   |        |  
|Total current provision (benefit)          |  |                    | (435    | ) |                  |   | (68     | )                |  |   | (9,577 | )
|                                           |  |                    |         |   |                  |   |         |                  |  |   |        |  
|Deferred:                                  |  |                    |         |   |                  |   |         |                  |  |   |        |  
|Federal                                    |  |                    | 36,367  |   |                  |   | (17,914 | )                |  |   | 11,008 |  
|State                                      |  |                    | 6,728   |   |                  |   | (2,597  | )                |  |   | 298    |  
|Foreign                                    |  |                    | 2,653   |   |                  |   | 8       |                  |  |   | 33     |  
|                                           |  |                    |         |   |                  |   |         |                  |  |   |        |  
|Total deferred provision (benefit)         |  |                    | 45,748  |   |                  |   | (20,503 | )                |  |   | 11,339 |  
|                                           |  |                    |         |   |                  |   |         |                  |  |   |        |  
|Total                                      |  | $                  | 45,313  |   |                  | $ | (20,571 | )                |  | $ | 1,762  |  
|                                           |  |                    |         |   |                  |   |         |                  |  |   |        |  



The provision
(benefit) for income taxes in the accompanying consolidated financial statements reconciles to the amount computed by applying the federal statutory rate of 35% to income (loss) before income taxes for the fiscal years ended January 2, 2005,
December 28, 2003 and December 29, 2002 as follows:



|                                           |  |                    |        |   |                  |   |         |                  |  |   |        |  
|------------------------------------------ |  | ------------------ | ------ | - | ---------------- | - | ------- | ---------------- |  | - | ------ | -
|                                           |  | Fiscal Years Ended |       
|                                           |  | January 2,2005     |        |   | December 28,2003 |   |         | December 29,2002 | 
|Taxes at federal statutory rate            |  | $                  | (9,384 | ) |                  | $ | (18,700 | )                |  | $ | 2,055  |  
|State taxes, net                           |  |                    | 3,746  |   |                  |   | (1,666  | )                |  |   | (57    | )
|In-process research and development charge |  |                    | 8,208  |   |                  |   |        |                  |  |   |       |  
|Foreign income taxed at different rates    |  |                    | (888   | ) |                  |   | (132    | )                |  |   | (286   | )
|Research and experimentation tax credits   |  |                    | (1,135 | ) |                  |   |        |                  |  |   | (1,052 | )
|Other                                      |  |                    | (5     | ) |                  |   | (73     | )                |  |   | 50     |  
|Change in federal valuation allowance      |  |                    | 44,771 |   |                  |   |        |                  |  |   | 1,052  |  
|                                           |  |                    |        |   |                  |   |         |                  |  |   |        |  
|Provision (benefit) for income taxes       |  | $                  | 45,313 |   |                  | $ | (20,571 | )                |  | $ | 1,762  |  
|                                           |  |                    |        |   |                  |   |         |                  |  |   |        |  



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Deferred income taxes reflect the net tax effects of tax carry-forwards and temporary differences between
the carrying amount of assets and liabilities for tax and financial reporting purposes. The Companys deferred tax assets and liabilities were comprised of the following major components:



|                                      |  |                |         |   |                  |   |        |  
|------------------------------------- |  | -------------- | ------- | - | ---------------- | - | ------ | -
|                                      |  | January 2,2005 |         |   | December 28,2003 |  
|Deferred Tax Assets:                  |  |                |         |   |                  |   |        |  
|Accruals and provisions               |  | $              | 9,022   |   |                  | $ | 4,327  |  
|Amortizable intangible assets         |  |                |        |   |                  |   | 10,827 |  
|Inventory                             |  |                | 2,955   |   |                  |   | 3,951  |  
|Net operating loss carry-forwards     |  |                | 42,895  |   |                  |   | 27,503 |  
|Property, plant and equipment         |  |                | 7,604   |   |                  |   |       |  
|Tax credit carry-forwards             |  |                | 10,475  |   |                  |   | 10,926 |  
|Other                                 |  |                | 82      |   |                  |   | 137    |  
|                                      |  |                |         |   |                  |   |        |  
|Gross deferred tax assets             |  |                | 73,033  |   |                  |   | 57,671 |  
|Less: valuation allowance             |  |                | (63,680 | ) |                  |   | (9,908 | )
|                                      |  |                |         |   |                  |   |        |  
|Net deferred tax assets               |  |                | 9,353   |   |                  |   | 47,763 |  
|                                      |  |                |         |   |                  |   |        |  
|Deferred Tax Liabilities:             |  |                |         |   |                  |   |        |  
|Amortizable intangible assets         |  |                | (8,302  | ) |                  |   |       |  
|Property, plant and equipment         |  |                |        |   |                  |   | (2,496 | )
|State taxes                           |  |                |        |   |                  |   | (2,337 | )
|Unrepatriated foreign earnings        |  |                | (1,697  | ) |                  |   |       |  
|                                      |  |                |         |   |                  |   |        |  
|Gross deferred tax liabilities        |  |                | (9,999  | ) |                  |   | (4,833 | )
|                                      |  |                |         |   |                  |   |        |  
|Net deferred tax assets (liabilities) |  | $              | (646    | ) |                  | $ | 42,930 |  
|                                      |  |                |         |   |                  |   |        |  



As of January 2, 2005,
Powerwave had combined federal and state operating loss carry-forwards of approximately $90.1 million and $97.6 million, respectively, that expire from 2021 to 2024 and foreign operating loss carry-forwards of $18.2 million with no expiration date.
The Company also had federal and California tax credit carry-forwards of $3.6 million and $6.9 million, respectively. The federal tax credits will begin to expire in 2021 and the California tax credits will begin to expire in 2006.



Undistributed earnings of the Companys foreign subsidiaries amounted to
approximately $4.3 million and $0.8 million at January 2, 2005 and December 28, 2003, respectively. The Company has provided for the estimated residual U.S. tax on the portion of these earnings, that may not be indefinitely reinvested. The remaining
earnings are considered to be indefinitely reinvested. Upon distribution of those earnings in the form of dividends or otherwise, some portion of the distribution would be subject to both foreign withholding taxes and U.S. income taxes, less
applicable foreign tax credits. Determination of the amount of U.S. income tax liability that would be incurred is not practicable because of the complexities associated with its hypothetical calculation.



The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income and the actual timing within which the underlying temporary differences become taxable or deductible. During fiscal 2004, the Company recorded a full valuation allowance against its U.S deferred tax assets due to
its cumulative U.S. loss position and uncertainties involved in generating sufficient U.S. taxable income in the future.



As part of the LGP acquisition, the Company assumed a tax liability related to a tax planning strategy for which the related deductions had previously
been disallowed by the Swedish tax authority and the county administrative court. While Powerwave continues to vigorously contest this determination, the estimated liability of approximately $15.2 million has been included on the balance sheet at
January 2, 2005 within accrued income taxes.



Note 17. Acquisitions



LGP Allgon:



On May 3, 2004, the Company completed its exchange offer for the outstanding
shares of LGP Allgon Holding AB (LGP Allgon), a Swedish public company and global provider of wireless infrastructure equipment and coverage solutions to wireless network communications operators and original equipment manufacturers.
Pursuant



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to the terms of the exchange offer, LGP Allgon shareholders were offered 1.1 shares of newly issued Powerwave Common
Stock in exchange for each share of LGP Allgon common stock. In addition, pursuant to the exchange offer, Powerwave offered a cash alternative whereby LGP Allgon shareholders could alternatively elect to exchange their LGP Allgon common stock for a
fixed price of Swedish kronor (SEK) 61.87 in lieu of Powerwave shares. This cash alternative was subject to an aggregate maximum of $125.0 million. The acquisition of LGP Allgon included all of the assets and liabilities, operations and
business of LGP Allgon. Also included were all intellectual property rights to LGP Allgon products as well as in-process research and development activities. The products acquired include a broad range of wireless infrastructure equipment including
antennas, filters, repeaters, tower-mounted amplifiers and advanced coverage solutions. Powerwave believes that the acquisition of LGP Allgon increased the combined companys products offerings within the global wireless infrastructure market
and improved its ability to offer more complete end-to-end solutions for its customers complex network requirements. These factors contributed to a purchase price in excess of the fair value of the net assets acquired, resulting in goodwill of
approximately $237.3 million as of May 3, 2004 which is not deductible for income tax purposes. Goodwill allocated to the telecom and contract manufacturing segments is estimated at $218.3 million and $19.0 million, respectively.



As of January 2, 2005, Powerwave had acquired approximately 98% of LGP
Allgons outstanding common stock in exchange for approximately $96.1 million in cash and 40,685,596 shares of Powerwave Common Stock, valued at $297.0 million based upon the average closing price for the three days before and after the
announcement of the transaction. The Company has initiated compulsory acquisition proceedings under Swedish law to acquire the remaining LGP Allgon shares that were not tendered. The related compulsory share liability at the acquisition date was
estimated at $14.7 million, a portion of which has been paid as of January 2, 2005. To the extent that the actual liability differs from this amount, the difference will be adjusted to goodwill. The Company currently expects to pay approximately
$7.9 million in the future to satisfy the outstanding compulsory share liability. There are approximately 785,948 shares of LGP Allgon common stock outstanding.



The aggregate purchase price of LGP Allgon was comprised of the following:



|                                    |  |   |        
|----------------------------------- |  | - | -------
|Common stock                        |  | $ | 297,005
|Cash                                |  |   | 88,217 
|Compulsory share liability          |  |   | 14,652 
|Transaction costs paid by Powerwave |  |   | 7,678  
|                                    |  |   |        
|Total purchase price                |  | $ | 407,552
|                                    |  |   |        



The Company has
completed a preliminary allocation of the aggregate purchase price to tangible and intangible assets acquired and liabilities assumed upon estimates of fair value determined by management with the assistance of independent valuation specialists. The
estimated fair values of the identifiable intangible assets acquired were determined using the income approach.



In connection with the acquisition, the Company formulated and implemented a plan to restructure and integrate the operations of the combined companies.
Pursuant to such plan, the Company recognized $22.9 million as liabilities or asset write-downs in connection with the acquisition for estimated restructuring and integration costs related to the consolidation of LGP Allgon operations, including
amounts for future lease obligations on excess facilities, impairment of excess equipment, write-downs of inventory for discontinued product lines and severance related costs for expected workforce reductions. These estimated costs were included in
the allocation of the purchase consideration in accordance with SFAS No. 141, Business Combinations and EITF 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination. Implementation of the restructuring and
integration plan is underway and additional actions are expected pending certain product related decisions and the further assessment of workforce and facility related requirements. The restructuring and integration plan is expected to be finalized
by the end of the first quarter of fiscal 2005, at which time any additional charges will be recorded as an adjustment to goodwill. Integration activities related to such plan are currently expected to continue through the second quarter of fiscal
2005. See Note 9. Restructuring and Impairment Charges for additional information on the Companys restructuring and integration plans.



The Companys consolidated financial statements for the year ended January 2, 2005 include a charge of $23.5 million for the write-off of acquired
in-process research and development expenses associated with the acquisition of LGP Allgon. The in-process research and development expenses arose from new product projects that were under development at the date of the acquisition and were expected
to eventually lead to new products but had not yet established technological feasibility and for which no future alternative use was identified. The valuation of the in-process research and development projects was based upon the discounted expected
future net cash flows of the products over the products expected life, reflecting the estimated stage of completion of the projects and the estimate of the costs to complete the projects.



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New product development projects underway at LGP Allgon at the time of the acquisition included, among
others, various antenna projects covering multiple system capabilities and full band functionality, various tower-mounted amplifier projects covering full band capability, various filter projects covering new product platforms, and various repeater
projects covering both EDGE and WCDMA applications. At the date of the acquisition, the Company estimated that the cost to complete these projects aggregated approximately $2.3 million and was expected to be incurred over a one year period. As of
January 2, 2005, the Company believes that the remaining development projects are approximately 90% complete. Uncertainties that could impede the success of converting a development project to a developed technology include the availability of
financial resources to complete the project, failure of the technology to function properly, continued economic feasibility of developed technologies, customer acceptance, customer demand and customer qualification of such new technology, and
general competitive conditions in the industry. There can be no assurance that the in-process research and development projects will be successfully completed and commercially introduced.



The following table summarizes the preliminary allocation of the aggregate purchase price to the fair value of the assets
acquired and liabilities assumed in the LGP Allgon acquisition:



|                                                  |  |   |          |  
|------------------------------------------------- |  | - | -------- | -
|Assets:                                           |  |   |          |  
|Cash                                              |  | $ | 11,744   |  
|Restricted cash                                   |  |   | 5,364    |  
|Accounts receivable                               |  |   | 66,269   |  
|Inventories                                       |  |   | 36,609   |  
|Prepaid assets and other current assets           |  |   | 11,266   |  
|Property, plant and equipment                     |  |   | 81,726   |  
|Identifiable intangible assets                    |  |   | 66,686   |  
|Goodwill                                          |  |   | 237,255  |  
|Other non-current assets                          |  |   | 3,893    |  
|                                                  |  |   |          |  
|Total assets:                                     |  |   | 520,812  |  
|                                                  |  |   |          |  
|Liabilities:                                      |  |   |          |  
|Accounts payable                                  |  |   | (45,668  | )
|Accrued liabilities and other current liabilities |  |   | (60,064  | )
|Income taxes, net                                 |  |   | (3,006   | )
|Debt                                              |  |   | (27,789  | )
|Other non-current liabilities                     |  |   | (183     | )
|                                                  |  |   |          |  
|Total liabilities                                 |  |   | (136,710 | )
|                                                  |  |   |          |  
|In process research and development               |  |   | 23,450   |  
|                                                  |  |   |          |  
|Total purchase price                              |  | $ | 407,552  |  
|                                                  |  |   |          |  



The amount allocated
to identifiable intangible assets consists of the following:



|                                     |  |        |        |                        |                   
|------------------------------------ |  | ------ | ------ | ---------------------- | ------------------
|                                     |  | Amount |        | Weighted Average Life
|Patents and developed technology     |  | $      | 30,970 |                        | 5 years           
|Customer  related assets            |  |        | 35,034 |                        | 5 years           
|Trademarks                           |  |        | 682    |                        | Indefinite - lived
|                                     |  |        |        |                        |                   
|Total identifiable intangible assets |  | $      | 66,686 |                        |                   
|                                     |  |        |        |                        |                   



The following
unaudited pro forma financial information for fiscal years ended January 2, 2005 and December 28, 2003, assumes that the LGP Allgon acquisition had occurred on the first day of each period presented. The pro forma financial information is presented
for information purposes only. The unaudited pro forma financial information excludes the effect of the in-process research and development charge of $23.5 million. Such information is based upon the standalone historical results of each company and
does not reflect the actual results that would have been reported had the acquisition been completed when assumed, nor is it indicative of the future results of operations for the combined enterprise.



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|                       |  |                    |         |   |                  |   |         |  
|---------------------- |  | ------------------ | ------- | - | ---------------- | - | ------- | -
|                       |  | Fiscal Years Ended |        
|Pro forma              |  | January 2,2005     |         |   | December 28,2003 |  
|Net sales              |  | $                  | 583,752 |   |                  | $ | 525,523 |  
|                       |  |                    |         |   |                  |   |         |  
|Net loss               |  | $                  | (54,724 | ) |                  | $ | (63,961 | )
|                       |  |                    |         |   |                  |   |         |  
|Basic loss per share   |  | $                  | (0.53   | ) |                  | $ | (0.61   | )
|                       |  |                    |         |   |                  |   |         |  
|Diluted loss per share |  | $                  | (0.53   | ) |                  | $ | (0.61   | )
|                       |  |                    |         |   |                  |   |         |  



Ericsson Amplifier
Technologies:



On July 10, 2003, the Company completed the
acquisition of certain assets and liabilities of Ericsson Amplifier Technologies, Inc. (AMT) pursuant to an asset purchase agreement. Under the asset purchase agreement, the Company purchased selected assets of AMT, including certain
inventories, equipment and real estate for a cash payment of $9.8 million. The Company also assumed certain warranty obligations of AMT and made offers of employment to a limited number of employees of AMT as part of the purchase. In connection with
the asset purchase, the Company also entered into an agreement to become a supplier of certain 2.1 GHz W-CDMA radio frequency power amplifiers of Ericsson AB. The acquisition was accounted for under the purchase method of accounting and the total
purchase price of approximately $10.4 million, including assumed liabilities of $0.4 million and capitalized acquisition costs of $0.1 million, has been allocated as follows: $1.0 million to equipment, $5.9 million to assets held for sale, $0.1
million to contract intangibles and $3.4 million to goodwill. The results of operations of AMT are included in the consolidated financial statements from the date of acquisition. The pro-forma effect of the acquisition is not material to the
Companys results of operations for fiscal 2003.



Note 18. Other
Income, Net



Other income, net, includes
gains and losses on foreign currency transactions, interest income and interest expense associated with our 1.25% subordinated convertible notes. The components of other income, net are as follows:



|                                  |  |                    |        |   |                  |   |        |                  |  |   |       |  
|--------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------ | ---------------- |  | - | ----- | -
|                                  |  | Fiscal Years Ended |       
|                                  |  | January 2,2005     |        |   | December 28,2003 |   |        | December 29,2002 | 
|Interest income                   |  | $                  | 2,920  |   |                  | $ | 2,425  |                  |  | $ | 2,664 |  
|Interest expense                  |  |                    | (3,861 | ) |                  |   | (1,162 | )                |  |   | (81   | )
|Foreign currency gain (loss), net |  |                    | 394    |   |                  |   | 33     |                  |  |   | (36   | )
|Other income (expense)            |  |                    | 665    |   |                  |   | 1,098  |                  |  |   | (584  | )
|                                  |  |                    |        |   |                  |   |        |                  |  |   |       |  
|Total                             |  | $                  | 118    |   |                  | $ | 2,394  |                  |  | $ | 1,963 |  
|                                  |  |                    |        |   |                  |   |        |                  |  |   |       |  



Note 19. Earnings (Loss) Per Share



In accordance with SFAS 128, basic earnings (loss) per
share is based upon the weighted average number of common shares outstanding. Diluted earnings (loss) per share is based upon the weighted average number of common and potential common shares for each period presented. Potential common shares
include stock options under the treasury stock method and convertible subordinated debt under the if-converted method. Potential common shares of 15,892,536 and 6,033,308 related to the Companys convertible debt and stock option programs have
been excluded from diluted weighted average common shares for the years ended January 2, 2005 and December 28, 2003, respectively, as the effect would be anti-dilutive.



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The following details the calculation of basic and diluted earnings (loss) per share:



|                                       |  |                    |         |   |                  |   |         |                  |  |   |       
|-------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ------- | ---------------- |  | - | ------
|                                       |  | Fiscal Years Ended
|                                       |  | January 2,2005     |         |   | December 28,2003 |   |         | December 29,2002
|Basic:                                 |  |                    |         |   |                  |   |         |                  |  |   |       
|Basic weighted average common shares   |  |                    | 90,212  |   |                  |   | 64,667  |                  |  |   | 65,485
|Net income (loss)                      |  | $                  | (72,122 | ) |                  | $ | (32,859 | )                |  | $ | 4,111 
|                                       |  |                    |         |   |                  |   |         |                  |  |   |       
|Basic earnings (loss) per share        |  | $                  | (0.80   | ) |                  | $ | (0.51   | )                |  | $ | 0.06  
|                                       |  |                    |         |   |                  |   |         |                  |  |   |       
|Diluted:                               |  |                    |         |   |                  |   |         |                  |  |   |       
|Basic weighted average common shares   |  |                    | 90,212  |   |                  |   | 64,667  |                  |  |   | 65,485
|Potential common shares                |  |                    |        |   |                  |   |        |                  |  |   | 745   
|                                       |  |                    |         |   |                  |   |         |                  |  |   |       
|Diluted weighted average common shares |  |                    | 90,212  |   |                  |   | 64,667  |                  |  |   | 66,230
|Net income (loss)                      |  | $                  | (72,122 | ) |                  | $ | (32,859 | )                |  | $ | 4,111 
|                                       |  |                    |         |   |                  |   |         |                  |  |   |       
|Diluted earnings (loss) per share      |  | $                  | (0.80   | ) |                  | $ | (0.51   | )                |  | $ | 0.06  
|                                       |  |                    |         |   |                  |   |         |                  |  |   |       



Note 20. Customer Concentrations



Powerwaves product sales have historically been
concentrated in a small number of customers. During the years ended January 2, 2005, December 28, 2003, and December 29, 2002, sales to customers that accounted for 10% or more of revenues for the year totaled $163.7 million, $171.0 million, and
$294.3 million, respectively. Sales to Nortel Networks Corporation and related entities (Nortel) accounted for approximately 24%, 57%, and 49% of total revenues during such years, respectively. During the years ended January 2, 2005 and
December 28, 2003, one customer in addition to Nortel accounted for approximately 11% and 15% of total revenues, respectively. During the year ended December 29, 2002, two customers in addition to Nortel accounted for approximately 15% and 13% of
total revenues during such period.



As of January 2, 2005,
approximately 27% of total accounts receivable related to two customers that each accounted for 10% or more of Powerwaves total revenue during fiscal 2004. The inability to collect outstanding receivables from the customers or the loss of, or
reduction in, sales to any of these customers could have a material adverse effect on the Companys business, financial condition and results of operations.



Note 21. Supplier Concentrations



Certain of Powerwaves products, as well as components utilized in such products, are available in the short-term only from a single or a limited
number of sources. In addition, in order to take advantage of volume pricing discounts, the Company purchases certain customized components from single-source suppliers as well as finished products from single-source contract manufacturers. The
inability to obtain single-source components or finished products in the amounts needed on a timely basis or at commercially reasonable prices could result in delays in product introductions, interruption in product shipments or increases in product
costs, which could have a material adverse effect on the Companys business, financial condition and results of operations until alternative sources could be developed at a reasonable cost.



Note 22. Segments



The Companys sales are derived primarily from the sale of wireless communications network products and coverage
solutions, including antennas, boosters, combiners, filters, radio frequency power amplifiers, repeaters, tower-mounted amplifiers and advanced coverage solutions for use in cellular, PCS, and 3G wireless communications networks throughout the
world. Powerwave also manufactures and sells advanced industrial components, primarily for the automotive and food industries, under contract manufacturing. These two reportable segments, Wireless Communications and Contract
Manufacturing are regularly evaluated by the Companys executive management in deciding how to allocate resources and in assessing performance. The accounting policies for each reportable segment are the same as those described in
Note 2. Summary of Significant Accounting Policies.



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The following schedule presents an analysis of certain financial information for these two business
segments:



|                              |  |                    |         |   |                   |   |         |                  |  |   |        
|----------------------------- |  | ------------------ | ------- | - | ----------------- | - | ------- | ---------------- |  | - | -------
|                              |  | Fiscal Years Ended
|                              |  | January 2,2005     |         |   | December 28, 2003 |   |         | December 29,2002
|Net sales:                    |  |                    |         |   |                   |   |         |                  |  |   |        
|Wireless communications       |  | $                  | 448,867 |   |                   | $ | 239,069 |                  |  | $ | 384,889
|Contract manufacturing        |  |                    | 25,047  |   |                   |   |        |                  |  |   |       
|                              |  |                    |         |   |                   |   |         |                  |  |   |        
|Total net sales               |  | $                  | 473,914 |   |                   | $ | 239,069 |                  |  | $ | 384,889
|                              |  |                    |         |   |                   |   |         |                  |  |   |        
|Operating income (loss):      |  |                    |         |   |                   |   |         |                  |  |   |        
|Wireless communications       |  | $                  | (28,175 | ) |                   | $ | (55,824 | )                |  | $ | 3,910  
|Contract manufacturing        |  |                    | 1,248   |   |                   |   |        |                  |  |   |       
|                              |  |                    |         |   |                   |   |         |                  |  |   |        
|Total operating income (loss) |  | $                  | (26,927 | ) |                   | $ | (55,824 | )                |  | $ | 3,910  
|                              |  |                    |         |   |                   |   |         |                  |  |   |        



|                        |  |                |           |                   |   |        
|----------------------- |  | -------------- | --------- | ----------------- | - | -------
|                        |  | January 2,2005 |           | December 28, 2003
|Total assets:           |  |                |           |                   |   |        
|Wireless communications |  | $              | 982,519   |                   | $ | 466,257
|Contract manufacturing  |  |                | 38,252    |                   |   |       
|                        |  |                |           |                   |   |        
|Total assets            |  | $              | 1,020,771 |                   | $ | 466,257
|                        |  |                |           |                   |   |        



The following table
presents a further analysis of Powerwaves sales within the wireless communications business segment, based upon product group:



|                                      |  |                    |         |  |                   |   |  |                   |         |  |       |   |  |   |         |  |       |  
|------------------------------------- |  | ------------------ | ------- |  | ----------------- | - |  | ----------------- | ------- |  | ----- | - |  | - | ------- |  | ----- | -
|                                      |  | Fiscal Years Ended |        
|Wireless Communications Product Group |  | January 2, 2005    |         |  | December 28, 2003 |   |  | December 29, 2002 |        
|Antenna systems                       |  | $                  | 110,991 |  | 24.7              | % |  | $                 |        |  |      | % |  | $ |        |  |      | %
|Base station subsystems               |  |                    | 277,521 |  | 61.8              | % |  |                   | 239,069 |  | 100.0 | % |  |   | 384,889 |  | 100.0 | %
|Coverage solutions                    |  |                    | 60,355  |  | 13.5              | % |  |                   |        |  |      | % |  |   |        |  |      | %
|                                      |  |                    |         |  |                   |   |  |                   |         |  |       |   |  |   |         |  |       |  
|Total net segment sales               |  | $                  | 448,867 |  | 100.0             | % |  | $                 | 239,069 |  | 100.0 | % |  | $ | 384,889 |  | 100.0 | %
|                                      |  |                    |         |  |                   |   |  |                   |         |  |       |   |  |   |         |  |       |  



Antenna systems
consist of base station antennas and tower-mounted amplifiers. Base station subsystems consist of products that are installed into or around the base station of wireless networks and include products such as boosters, combiners, filters and radio
frequency power amplifiers. Coverage solutions consist primarily of repeaters and advanced coverage solutions.



The following schedule presents an analysis of Powerwaves net sales based upon the geographic area to which a product was shipped:



|                               |  |                    |         |                  |   |                  |  |   |        
|------------------------------ |  | ------------------ | ------- | ---------------- | - | ---------------- |  | - | -------
|                               |  | Fiscal Years Ended
|Geographic Area                |  | January 2,2005     |         | December 28,2003 |   | December 29,2002
|North America                  |  | $                  | 137,517 |                  | $ | 128,350          |  | $ | 257,009
|Asia                           |  |                    | 61,895  |                  |   | 31,974           |  |   | 37,460 
|Europe and other international |  |                    | 274,502 |                  |   | 78,745           |  |   | 90,420 
|                               |  |                    |         |                  |   |                  |  |   |        
|Total net sales                |  | $                  | 473,914 |                  | $ | 239,069          |  | $ | 384,889
|                               |  |                    |         |                  |   |                  |  |   |        



North American sales
include sales to the United States, Canada and Mexico. Asian sales include sales to China, South Korea and other locations in Asia. Europe and Other International sales include sales to Europe and all other foreign countries. Sales to Canada were
$22.9 million, $63.8 million, and $128.7 million during the years ended January 2, 2005, December 28, 2003, and December 29, 2002, respectively. Sales to Finland were $22.8 million, $35.4 million, and $57.2 million during the years ended January 2,
2005, December 28, 2003, and December 29, 2002, respectively. Sales to France were $49.8 million, $41.4 million, and $32.0 million during the years ended January 2, 2005, December 28, 2003, and December 29, 2002, respectively.



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The following table reflects the geographic area of Powerwaves long-lived assets:



|                             |  |                    |         |                  |   |        
|---------------------------- |  | ------------------ | ------- | ---------------- | - | -------
|                             |  | Fiscal Years Ended
|Geographic Area              |  | January 2,2005     |         | December 28,2003
|United States                |  | $                  | 75,487  |                  | $ | 120,911
|Europe, primarily Sweden     |  |                    | 426,686 |                  |   |       
|Asia and other international |  |                    | 3,942   |                  |   |       
|                             |  |                    |         |                  |   |        
|Total                        |  | $                  | 506,115 |                  | $ | 120,911
|                             |  |                    |         |                  |   |        



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##### Table of Contents

QUARTERLY FINANCIAL DATA (UNAUDITED)

(in thousands, except per share data)



|                                       |  |                |         |   |                 |   |         |                   |  |   |                   |   |  |   |         |     
|-------------------------------------- |  | -------------- | ------- | - | --------------- | - | ------- | ----------------- |  | - | ----------------- | - |  | - | ------- | ----
|                                       |  | Quarters Ended |        
|                                       |  | April 4,2004   |         |   | July 4, 2004(1) |   |         | October 3,2004(1) |  |   | January 2,2005(1) |  
|Fiscal 2004:                           |  |                |         |   |                 |   |         |                   |  |   |                   |   |  |   |         |     
|Net sales                              |  | $              | 63,224  |   |                 | $ | 115,981 |                   |  | $ | 138,291           |   |  | $ | 156,418 |     
|Gross profit                           |  | $              | 10,774  |   |                 | $ | 22,276  |                   |  | $ | 34,747            |   |  | $ | 38,124  |     
|Operating income (loss)                |  | $              | (5,657  | ) |                 | $ | (30,190 | )(2)              |  | $ | 3,435             |   |  | $ | 5,485   |     
|Net income (loss)                      |  | $              | (3,263  | ) |                 | $ | (30,162 | )(2)              |  | $ | 2,799             |   |  | $ | (41,496 | )(3)
|                                       |  |                |         |  
|Basic earnings (loss) per share        |  | $              | (0.05   | ) |                 | $ | (0.33   | )                 |  | $ | 0.03              |   |  | $ | (0.41   | )   
|Diluted earnings (loss) per share      |  | $              | (0.05   | ) |                 | $ | (0.33   | )                 |  | $ | 0.03              |   |  | $ | (0.41   | )   
|Basic weighted average common shares   |  |                | 63,393  |   |                 |   | 91,664  |                   |  |   | 104,343           |   |  |   | 101,448 |     
|Diluted weighted average common shares |  |                | 63,393  |   |                 |   | 91,664  |                   |  |   | 104,837           |   |  |   | 101,448 |     
|                                       | 
|                                       |  | Quarters Ended |        
|                                       |  | March 30,2003  |         |   | June 29, 2003   |   |         | September 28,2003 |  |   | December 28,2003  |  
|Fiscal 2003:                           |  |                |         |   |                 |   |         |                   |  |   |                   |   |  |   |         |     
|Net sales                              |  | $              | 52,154  |   |                 | $ | 51,509  |                   |  | $ | 63,158            |   |  | $ | 72,248  |     
|Gross profit                           |  | $              | 3,785   |   |                 | $ | (7,121  | )                 |  | $ | 6,409             |   |  | $ | 13,142  |     
|Operating loss                         |  | $              | (17,264 | ) |                 | $ | (25,060 | )                 |  | $ | (10,819           | ) |  | $ | (2,681  | )   
|Net loss                               |  | $              | (10,568 | ) |                 | $ | (15,237 | )                 |  | $ | (5,666            | ) |  | $ | (1,388  | )   
|                                       |  |                |         |  
|Basic loss per share                   |  | $              | (0.16   | ) |                 | $ | (0.23   | )                 |  | $ | (0.09             | ) |  | $ | (0.02   | )   
|Diluted loss per share                 |  | $              | (0.16   | ) |                 | $ | (0.23   | )                 |  | $ | (0.09             | ) |  | $ | (0.02   | )   
|Basic weighted average common shares   |  |                | 65,877  |   |                 |   | 65,976  |                   |  |   | 63,639            |   |  |   | 63,174  |     
|Diluted weighted average common shares |  |                | 65,877  |   |                 |   | 65,976  |                   |  |   | 63,639            |   |  |   | 63,174  |     

---

|(1) | Financial results include LGP Allgon beginning May 2004.
|--- | --------------------------------------------------------

|(2) | Operating income (loss) and net income (loss) for the quarter ended July 4, 2004 include a
non-cash charge of $23.5 million for in-process research and development acquired in the LGP Allgon acquisition. See Note 17. Acquisition of the preceding Notes to Consolidated Financial Statements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Net income (loss) for the quarter ended January 2, 2005 includes a non-cash charge of $45.0
million related to the establishment of a full valuation allowance against Powerwaves net U.S. deferred tax asset. See Note 16. Income Taxes of the preceding Notes to Consolidated Financial Statements.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PART III



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



Directors



Bruce C.
Edwards,51, became Executive Chairman of the Board of Directors of Powerwave in February 2005. Mr. Edwards joined the Company in February 1996 as President and Chief Executive Officer and Director. Mr. Edwards was Chief Executive Officer of
Powerwave from February 1996 to February 2005 and was President from February 1996 to May 2004. Mr. Edwards was Executive Vice President, Chief Financial Officer and Director of AST Research, Inc., a personal computer company, from July 1994 to
December 1995 and Senior Vice President, Finance and Chief Financial Officer of AST Research, Inc. from March 1988 to July 1994. Mr. Edwards currently serves on the Board of Directors of Emulex Corporation.



Ronald J. Buschur, 41, joined the Company in June 2001 as Chief
Operating Officer. In May 2004, Mr. Buschur became President of the Company and in February 2005, Mr. Buschur became Chief Executive Officer and a member of the Board of Directors. Prior to joining the Company, Mr. Buschur held various positions at
HMT Technology/Komag, an independent supplier of thin-film disks, including President and Chief Operating Officer from 1999 to 2000, Vice President of Sales, Marketing and Quality Assurance from 1997 to 1999 and Vice President of Quality Assurance
from 1994 to 1997. From 1993 to 1994, Mr. Buschur was Director of Quality at Maxtor, a disk drive company. Mr. Buschur held various managerial positions at Digital Equipment Corporation, a computer manufacturer from 1987 to 1993.



John L. Clendenin, 70, became Lead Director in February 2005. Mr.
Clendenin was non-executive Chairman of the Board of Directors of Powerwave from January 3, 1999 to February 2005 and has been a member of the Board of Directors since May 1998. Mr. Clendenin is a Chairman Emeritus of BellSouth Corporation, a
telecommunications holding company. He served as Chairman of the Board of BellSouth until December 31, 1997 and as President and Chief Executive Officer from 1984 until his retirement at the end of 1996. Prior to BellSouth, Mr. Clendenin was
President of Southern Bell from April 1981 to December 1983. He also serves on the Board of Directors of Coca-Cola Enterprises, Inc., Equifax Inc., Acuity Brands, Inc., The Kroger Company and The Home Depot, Inc.



Daniel A. Artusi, 50, joined Powerwaves Board of Directors in
December 2002. Mr. Artusi is the President and Chief Executive Officer of Silicon Laboratories Inc., a designer and manufacturer of integrated circuits for the communications industry. Prior to joining Silicon Laboratories in August 2001, Mr. Artusi
held various positions at Motorola, Inc. from 1977 to 2001. From August 1999 to August 2001, Mr. Artusi served as Corporate Vice President and General Manager of Motorolas Networking and Computing Systems Group. Mr. Artusi served as Vice
President and General Manager of Motorolas Wireless Infrastructure Division from May 1997 to August 1999 and as General Manager of Motorolas RF Products Division from April 1996 to May 1997.



David L. George, 51, has been a member of Powerwaves Board of
Directors since November 1995. Since January 2005, he has served as Executive Vice President Operations of the Land Mobile Division of Vertex Standard Inc., a company that designs, manufactures and sells communications equipment for commercial land
mobile, amateur radio and general aviation applications. From April 2002 to June 2004, Mr. George served as Chief Operating Officer, Chief Technical Officer and President of the Wireless Communications Division of Bizcom U.S.A., Inc., a public
company specializing in emergency management software solutions and wireless communications systems. Prior to joining Bizcom, Mr. George was in private practice providing consulting services to participants in the wireless industry. From June 2000
to June 2001, he was Executive Vice President of Operations for Securicor Wireless, Inc., a large mobile radio network provider. Mr. George was the co-founder and served as Executive Vice President and Chief Technical Officer of ComSpace
Corporation, formerly known as Unique Technologies, International, L.L.C., a wireless technology development company from February 1994 to June 2000. From November 1983 to February 1994, Mr. George served as Vice President, Director of Operations,
Commercial Communications Division of Uniden America. A member of the Institute of Electrical and Electronic Engineers for more than 22 years, he holds several patents relating to wireless technology and networks.



Eugene L. Goda, 68, has been a member of Powerwaves Board of
Directors since November 1995. From June 1997 to March 2000, Mr. Goda served as Chairman of the Board, President and Chief Executive Officer of



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##### Table of Contents

Objectshare Inc., a software company. From October 1991 to October 1995, Mr. Goda served as Chief Executive Officer of Simulation Sciences, Inc., a software
company. From July 1989 to September 1991, he served as Chief Executive Officer of Meridian Software Systems.



Carl W. Neun, 61, has been a member of Powerwaves Board of Directors since February 2000. From 1993 to January 2000, Mr. Neun was Senior Vice
President and Chief Financial Officer of Tektronix, Inc. From 1987 to 1993, he was Senior Vice President of Administration and Chief Financial Officer of Conner Peripherals, Inc. Mr. Neun currently serves on the Board of Directors of Planar Systems,
RadiSys Corp, and Oregon Steel Mills, Inc.



Andrew J.
Sukawaty, 49, has been a member of Powerwaves Board of Directors since May 1998. Mr. Sukawaty is Chairman and Chief Executive Officer of Inmarsat Group Holdings Ltd. and President of Cable Partners Europe L.L.C. Mr. Sukawaty is also a
Deputy Chairman of mm02, PLC, formerly BT Wireless, and was previously Chairman of Telenet. He is also Chairman of Xyratex Group Ltd (NASDAQ). From September 1996 to June 2000, Mr. Sukawaty served as President and Chief Executive Officer of Sprint
PCS. Prior to joining Sprint PCS, Mr. Sukawaty was Chief Executive Officer of NTL Limited since 1994. From 1989 to 1994, he was Chief Operating Officer of Mercury One-2-One, a PCS service provider in the United Kingdom. Prior to 1989, Mr. Sukawaty
held various positions with US WEST, Inc., AT&T and Northwestern Bell.



Mikael R. Gottschlich, 44, has been a member of Powerwaves Board of Directors since May 2004. Mr. Gottschlich had previously been a member of the Board of LGP Allgon Holding AB since 1997. Mr. Gottschlich
was President and Chief Executive Officer of LGP Telecom from June 1993 until April 2002, including certain predecessor companies, specifically MG Instruments from 1993 to 1997 and Arkivator from 1997 to 1999. Since March 2003, Mr. Gottschlich is a
Director of Skanditek Industriförvaltning AB, a publicly held industrial holding company with investments in Swedish companies.



Executive Officers



Bruce C. Edwards,51, became Executive Chairman of the Board of Directors of Powerwave in February 2005. Mr. Edwards joined the Company in February
1996 as President and Chief Executive Officer and Director. Mr. Edwards was Chief Executive Officer of Powerwave from February 1996 to February 2005 and was President from February 1996 to May 2004. Mr. Edwards was Executive Vice President, Chief
Financial Officer and Director of AST Research, Inc., a personal computer company, from July 1994 to December 1995 and Senior Vice President, Finance and Chief Financial Officer of AST Research, Inc. from March 1988 to July 1994. Mr. Edwards
currently serves on the Board of Directors of Emulex Corporation.



Ronald J. Buschur, 41, joined the Company in June 2001 as Chief Operating Officer. In May 2004, Mr. Buschur became President of the Company and in February 2005, Mr. Buschur became Chief Executive Officer and a
member of the Board of Directors. Prior to joining the Company, Mr. Buschur held various positions at HMT Technology/Komag, an independent supplier of thin-film disks, including President and Chief Operating Officer from 1999 to 2000, Vice President
of Sales, Marketing and Quality Assurance from 1997 to 1999 and Vice President of Quality Assurance from 1994 to 1997. From 1993 to 1994, Mr. Buschur was Director of Quality at Maxtor, a disk drive company. Mr. Buschur held various managerial
positions at Digital Equipment Corporation, a computer manufacturer from 1987 to 1993.



Kevin T. Michaels,46, joined the Company in June 1996 as Vice President, Finance and Chief Financial Officer and was appointed Secretary in June 1996. Mr. Michaels was named Senior Vice President, Finance in
February 2000. Prior to joining the Company, Mr. Michaels worked for AST Research, Inc. for eight years, most recently as Vice President, Treasurer from October 1995 to June 1996. From July 1991 to October 1995, Mr. Michaels was Treasurer of AST
Research, Inc. and from June 1988 to June 1991, he was Assistant Treasurer.



Robert J. Legendre, 47, joined the Company in July 2002, as Vice President of Supply Chain Management and Operations. Mr. Legendre was named President of the Americas and Asia business unit in May 2004
following the completion of the exchange offer for all of the shares of LGP Allgon. Prior to joining the Company, Mr. Legendre was Vice President of Global Supply Chain Management and Operations for InFocus Corp., a manufacturer of video projectors
from June 2001 to July 2002. From May 2000 to May 2001, Mr. Legendre was Vice President of Worldwide Materials at Pemstar Corporation, a supplier of engineering, product design and automation and test services. From October 1996 to April 2000, Mr.
Legendre was Vice President and Managing Director of Operations for Western Digitals disk drive manufacturing operations in Singapore.



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##### Table of Contents

Johan H. Ek, 37, has been President of the Companys European business unit since May of
2004. From September 2001 to April 2003, Mr. Ek was Vice President of Operations of LGP Allgon and in March 2002 Mr. Ek became Executive Vice President of LGP Allgon. Prior to this, Mr. Ek was responsible for LGP Allgons contract manufacturing
division. Mr. Ek joined LGP Allgon in August 1999. From 1995 to 1999, Mr. Ek worked as a consultant for McKinsey & Company. Mr. Ek is a member of the Board of Partnertech AB, listed on the Stockholm Stock Exchange.



Audit Committee and Audit Committee Financial Expert



The Company has a standing Audit Committee and the current members of this
committee are David L. George, Eugene L. Goda, and Carl W. Neun, all of whom are independent under both Section 10A of the Securities Act of 1934 (Exchange Act) and under the Nasdaq marketplace rules. The Companys Board of
Directors has determined that Carl W. Neun is an audit committee financial expert as such term is defined in Item 401(h) of SEC Regulation S-K. For Mr. Neuns relevant experience, see his biography listed in Directors above.



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Exchange Act requires the Companys directors and
executive officers, and persons who own more than ten percent of a registered class of the Companys equity securities, to file reports of ownership with the Securities and Exchange Commission (SEC) and Nasdaq. Directors, executive
officers and greater than ten-percent beneficial owners are required by SEC regulations to furnish the Company with copies of all Section 16(a) reports they file.



To the Companys knowledge, based solely on a review of filings with the SEC and written representations by each
director and executive officer that no other reports were required, we believe that all of our directors and executive officers have complied with the reporting requirements of Section 16(a) of the Exchange Act during fiscal 2004, except that each
of the following directors, Mikael Gottschlich, Daniel Artusi, Carl Neun, Andrew Sukawaty, Eugene Goda, David George and John Clendenin inadvertently filed a Form 4 late to report a director option grant in December 2004.



Code of Ethics



The Company has adopted a code of ethics as defined in Item 406(b) of SEC Regulation S-K that applies to all
employees of the Company, including the Companys principal executive officer, principal financial officer and principal accounting officer. This code of ethics is designed to comply with the Nasdaq marketplace rules related to codes of
conduct. A copy of our Code of Business Conduct and Ethics Policy is attached as Exhibit 14 to the Companys Form 10-K for the year ended December 28, 2003 that was filed with the SEC on February 13, 2004. A copy of our Code of Business Conduct
and Ethics Policy is also posted on our website at www.powerwave.com and is available upon written request.



ITEM 11. EXECUTIVE COMPENSATION



Compensation
Committee Report on Executive Compensation



Powerwaves compensation policies applicable to its executive officers are administered by the Compensation Committee of the Board of Directors. The Compensation Committees members consist of directors who are independent from
the executive officers or management of the Company. Powerwaves executive compensation programs are designed to attract, motivate and retain the executive talent needed to optimize shareholder value. The programs are designed to enhance
shareholder value by aligning the financial interests of the executive officers of the Company with those of our shareholders.



Compensation Policy



Powerwaves executive compensation programs are based on the belief that the interests of the executives should be closely aligned with the
Companys shareholders. In support of this philosophy, a meaningful portion of each executives compensation is placed at-risk and is linked to the accomplishment of specific results that are expected to lead to the creation of value for
Powerwaves shareholders from both a short-term and long-term perspective. With this pay-for-performance and shareholder alignment orientation, Powerwaves compensation policies and programs are designed to (1) attract, develop, reward and
retain highly qualified and productive individuals; and (2) motivate executives to improve the overall performance and profitability of Powerwave.





37



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There are three primary components of executive compensation: base salary, bonus and stock option grants.
While the elements of compensation are considered separately, the Compensation Committee takes into account the total compensation package afforded by the Company to the individual executive.



Base Salary



Salaries paid to executive officers (including the Chief Executive Officer)
are reviewed annually by the Compensation Committee and proposed adjustments are based upon an assessment of the nature of the position, the individuals contribution to corporate goals, experience and tenure of the executive officer,
comparable market salary data, growth in the Companys size and complexity, and changes in the executives responsibilities. The Compensation Committee approves all changes to executive officers salaries.



Annual Management Bonus



Powerwave maintains a cash bonus plan for executive officers of the Company.
The bonus plan is intended to provide incentives to executive officers of the Company in the form of cash bonus payments for achieving certain objective performance goals based on annual and quarterly revenue and earnings per share targets. The
performance targets are established at the beginning of a fiscal year on the basis of an annual budget and are approved by the Compensation Committee of the Board of Directors. Each executive officer has an annual target bonus amount that is based
on a percentage of his or her base salary. The annual target bonus amount for the executives range from 30% to 100% of annual base salary and these target percentages are approved by the Compensation Committee of the Board of Directors. With respect
to fiscal 2005, if the objective performance criteria are fulfilled for a quarter of fiscal 2005, each executive officer will receive up to 20% of his or her annual target bonus amount. In the fourth quarter of 2005, an executive officer may receive
an additional 20% of the annual target bonus amount (bringing the total for the fourth quarter of 2005 to 40% of the annual target bonus amount) based on individual subjective performance criteria. The individual performance targets are established
at the beginning of a fiscal year and these targets are designed to further Powerwaves corporate goals. Payment of these quarterly bonuses is dependent on the Company achieving specific revenue and earnings per share targets for each fiscal
quarter of fiscal 2005 and no amounts attributable to individual performance are paid unless the Company first achieves the Company performance targets for the fiscal year.



On February 10, 2005, the Compensation Committee of the Board of Directors of Powerwave awarded discretionary cash bonuses
of $29,100 to Bruce C. Edwards, Chief Executive Officer, $17,000 to Ronald J. Buschur, President and Chief Operating Officer, $13,601 to Kevin T. Michaels, Senior Vice President Finance, Chief Financial Officer, $13,001 to Robert J. Legendre,
President, Americas and Asia Business Unit, and $7,844 to Johan H. Ek, President, European Business Unit. In addition, the Compensation Committee awarded Mr. Michaels an additional $5,000 in January 2004 in recognition of his efforts related to the
LGP Allgon acquisition.



Stock Options



Stock options are designed to align the interests of executives with those
of the shareholders. Stock option grants may be made to executive officers when one of the following events occurs: upon initial employment, upon promotion to a new, higher level position that entails increased responsibilities and accountability,
for the recognition of superior performance, or as an incentive for continued service with Powerwave as well as continued superior performance. For executive officers, the Chairman of the Board of Directors or the Chief Executive Officer recommends
the number of options to be granted within a range associated with the individual executives salary level, and presents this to the Compensation Committee and the entire Board of Directors for their review and approval. The Compensation
Committee takes into account the total compensation offered to its executives when considering the number of options awarded. The Chief Executive Officer and the Chief Financial Officer comprise the members of the Companys Option Committee,
and are empowered by the Board of Directors and the Compensation Committee to grant options to non-officer employees of the Company up to a grant amount of 20,000 shares per employee. All grants for employees of the Company in excess of this amount
are submitted to the Compensation Committee or the Board of Directors for approval. All grants for executive officers of Powerwave are submitted to both the Compensation Committee and the entire Board of Directors for approval. In fiscal 2004, Mr.
Buschur, Mr. Michaels and Mr. Legendre each received an option grant as an incentive for continued service to the Company and Mr. Ek received an option grant when he was named President of the Companys European Business Unit upon the closing
of the LGP Allgon acquisition. See Executive OfficersOption Grants In Fiscal 2004 below.



38



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##### Table of Contents

CEO Compensation



The principal components of compensation for the Chief Executive Officer for fiscal 2004 included base salary and a bonus.
The Compensation Committee increased Mr. Edwards base salary from $440,000 to $485,000, effective October 1, 2004, based on an assessment of the nature of his position, comparable market salary, contribution to corporate goals, and experience
with Powerwave. Mr. Edwards was paid a cash bonus of $29,100 in February 2005 for recognition of the Companys performance in the fourth quarter of fiscal 2004. In fiscal 2004, Mr. Edwards was not granted any options to purchase shares of
Powerwaves Common Stock.



Policy Regarding Section
162(m) of the Internal Revenue Code



The Compensation
Committee has reviewed Powerwaves executive compensation plans to determine if revisions may be necessary due to the provisions of Section 162(m) of the Internal Revenue Code which generally disallows a tax deduction to public corporations for
compensation paid to any of the corporations executive officers in excess of $1,000,000 during any fiscal year. It is the current policy of the Compensation Committee to preserve, to the extent reasonably possible, Powerwaves ability to
obtain a corporate tax deduction for compensation paid to executive officers of Powerwave to the extent consistent with the best interests of the Company and its shareholders. The Compensation Committee continually reviews Powerwaves existing
executive compensation plans and will propose changes, if necessary and reasonable, to ensure compliance with the provisions of Section 162(m) which allow performance-based compensation to be excluded from the deduction limits.



Members of the Compensation Committee:



Andrew J. SukawatyChairman of the Compensation Committee



Daniel A. Artusi



John L. Clendenin



Compensation Committee Interlocks and Insider Participation



During fiscal 2004, all of the members of the Compensation Committee
consisted of independent directors and none of the members of the Compensation Committee served as an employee of the Company.



Compensation of Executive Officers



The following sets forth certain information regarding Powerwaves executive officers:



Summary Compensation Table



The following table sets forth summary information concerning compensation paid by or accrued for services rendered to the Company in all capacities
during the past three fiscal years to the Companys Chief Executive Officer and to each of the four additional executive officers whose salary and bonus exceeded $100,000 (the Named Executive Officers.)



39



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|                                                                                        |  |              |  |                            |                       |       |                                      |                |                       |     |                    |           |  |                       |  |     |               |       
|--------------------------------------------------------------------------------------- |  | ------------ |  | -------------------------- | --------------------- | ----- | ------------------------------------ | -------------- | --------------------- | --- | ------------------ | --------- |  | --------------------- |  | --- | ------------- | ------
|                                                                                        |  |              |  | Summary Compensation Table |                       |       |                                      |                |                       |    
|Name and Principal Position                                                             |  | Fiscal Year  |  | Annual Compensation        |                       |       | Long-termCompensationAwards Options |                | All OtherCompensation |    
|                                                                                        |  | Salary       |  | Bonus                      |                       | Other |                                      |                |                      
|Bruce C. Edwards Chief Executive Officer(1)                                             |  | 200420032002 |  | $$$                        | 459,884438,077416,539 |       | $$$                                  | 29,100100,800 |                       | $$$ | 28,82029,81824,191 | (2)(2)(2) |  | 400,000             |  | $$$ |            |       
|                                                                                        |  |              |  |                            |                       |      
|Ronald J. Buschur President and Chief Operating Officer(1) (3)                          |  | 200420032002 |  | $$$                        | 431,254395,238348,462 |       | $$$                                  | 17,00056,000  |                       | $$$ | 22,61718,4305,910  | (4)(4)(4) |  | 200,000200,000100,000 |  | $$$ | 6,972101,797 | (5)(6)
|                                                                                        |  |              |  |                            |                       |      
|Kevin T. Michaels Senior Vice President, Finance, Chief Financial Officer and Secretary |  | 200420032002 |  | $$$                        | 343,481297,619274,231 |       | $$$                                  | 18,60144,000  |                       | $$$ | 29,97828,60522,060 | (7)(7)(7) |  | 200,00075,00075,000   |  | $$$ |            |       
|                                                                                        |  |              |  |                            |                       |      
|Robert J. Legendre President, Americas and Asia Business Unit(8)                        |  | 2004         |  | $                          | 327,425               |       | $                                    | 13,001         |                       | $   | 30,643             | (9)       |  | 200,000               |  | $   |              |       
|                                                                                        |  |              |  |                            |                       |      
|Johan H. Ek President, European Business Unit(10)                                       |  | 2004         |  | $                          | 194,544               |       | $                                    | 17,055         |                       | $   | 48,555             | (11)      |  | 150,000               |  | $   |              |       

---

|(1) | In February 2005, Mr. Edwards became Executive Chairman of the Board and Mr. Buschur became
Chief Executive Officer. Mr. Edwards was also President of the Company through May 2004 at which time Mr. Buschur became President.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes $6,204, $11,388 and $11,477 of 401(k) matching contributions, and $22,616, $18,430
and $12,714 of insurance premium payments during fiscal years 2004, 2003 and 2002, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | In May 2004, Mr. Buschur became President, in addition to Chief Operating Officer of the
Company. In February 2005, Mr. Buschur became Chief Executive Officer of the Company.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes of $22,617, $18,430 and $5,910 of insurance premium payments during fiscal years
2004, 2003 and 2002, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(5) | Consists of $6,972 of reimbursement related to costs associated with Mr. Buschurs
relocation to Southern California.
|--- | ---------------------------------------------------------------------------------------------------------------------

|(6) | Consists of $101,797 of reimbursement related to costs associated with Mr. Buschurs
relocation to Southern California.
|--- | -----------------------------------------------------------------------------------------------------------------------

|(7) | Includes $7,361, $10,175 and $9,346 of 401(k) matching contributions, and $22,617, $18,430
and $12,714 of insurance premium payments during fiscal years 2004, 2003 and 2002, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | In May 2004, Mr. Legendre became President of the Companys Americas and Asia Business
Unit.
|--- | --------------------------------------------------------------------------------------------

|(9) | Includes $8,027 of 401(k) matching contributions, and $22,616 of insurance premium payments
during fiscal year 2004.
|--- | --------------------------------------------------------------------------------------------------------------------

|(10) | In May 2004, Mr. Ek became President of the Companys European Business Unit.
|---- | -----------------------------------------------------------------------------

|(11) | Includes $40,441 of pension contributions, and $8,114 of insurance premium and other benefit
payments during fiscal year 2004.
|---- | ------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Option Grants in Fiscal 2004



The following table sets forth certain information concerning grants of
options to each of Powerwaves Named Executive Officers during the fiscal year ended January 2, 2005. In addition, in accordance with the rules and regulations of the SEC, the following table sets forth the hypothetical gains that would exist
for the options based on the assumption that the stock price were to appreciate annually by 5% and 10%, respectively. These rates do not represent Powerwaves estimate or projection of future Common Stock prices and no assurance can be given
that the share price will appreciate at the rates shown in the table.



|                   |  |                                             |     |  |                                                      |   |  |                            |      |                   |            |                                                                                              |   |         |     |  |   |           |    
|------------------ |  | ------------------------------------------- | --- |  | ---------------------------------------------------- | - |  | -------------------------- | ---- | ----------------- | ---------- | -------------------------------------------------------------------------------------------- | - | ------- | --- |  | - | --------- | ---
|                   |  |                                             |     |  | Option Grants During Fiscal 2004                     |   |  |                            |      |                   |           
|Name               |  | Number ofSecuritiesUnderlyingOptionsGranted |     |  | % of TotalOptionsGranted toEmployeesin FiscalYear(1) |   |  | ExercisePrice ($/Share)(2) |      | ExpirationDate(3) |            | Potential Realizable Value atAssumed Annual Rates ofStock Price
Appreciation for Option Term |  
|                   |  |                                             |     |  | 5%                                                   |   |  | 10%                        |     
|Bruce C. Edwards   |  |                                            |     |  |                                                     |   |  |                            |     |                   |           |                                                                                              |   |        |     |  |   |          |    
|Ronald J. Buschur  |  | 200,000                                     | (4) |  | 12.5                                                 | % |  | $                          | 5.01 |                   | 07/21/2014 |                                                                                              | $ | 630,152 | (5) |  | $ | 1,596,930 | (5)
|Kevin T. Michaels  |  | 200,000                                     | (4) |  | 12.5                                                 | % |  | $                          | 5.01 |                   | 07/21/2014 |                                                                                              | $ | 630,152 | (5) |  | $ | 1,596,930 | (5)
|Robert J. Legendre |  | 200,000                                     | (4) |  | 12.5                                                 | % |  | $                          | 5.01 |                   | 07/21/2014 |                                                                                              | $ | 630,152 | (5) |  | $ | 1,596,930 | (5)
|Johan H. Ek        |  | 150,000                                     | (6) |  | 9.4                                                  | % |  | $                          | 6.98 |                   | 05/03/2014 |                                                                                              | $ | 658,453 | (7) |  | $ | 1,668,648 | (7)

---

|(1) | Options to purchase an aggregate of 1,602,500 shares of Common Stock were granted to
employees, including the Named Executive Officers, during the fiscal year ended January 2, 2005.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The exercise price of each option is equal to the fair market value of Common Stock on the
date of the grant.
|--- | -------------------------------------------------------------------------------------------------------------

|(3) | Options granted have a term of 10 years, subject to earlier termination in certain events
related to termination of employment.
|--- | -------------------------------------------------------------------------------------------------------------------------------

|(4) | Subject to continued employment with the Company, the options become exercisable beginning on
July 21, 2005.
|--- | ------------------------------------------------------------------------------------------------------------

|(5) | The amount assumes a Common Stock price of $8.16 at 5% appreciation and $12.99 at 10%
appreciation. There is no guarantee that the Common Stock price will actually appreciate to these levels.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Subject to continued employment with the Company, the options become exercisable beginning on
May 3, 2005.
|--- | ----------------------------------------------------------------------------------------------------------

|(7) | The amount assumes a Common Stock price of $11.37 at 5% appreciation and $18.10 at 10%
appreciation. There is no guarantee that the Common Stock price will actually appreciate to these levels.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Aggregated Option Exercises and Values for
Fiscal 2004



The following table sets forth certain
information concerning the exercise of options by each of Powerwaves Named Executive Officers during fiscal 2004, including the aggregate value of gains on the date of exercise. In addition, the table includes the number of shares covered by
both exercisable and unexercisable stock options as of January 2, 2005. Also reported are the values for in-the-money options which represent the positive spread between the exercise prices of any such existing stock options and the
fiscal year end price of Powerwaves Common Stock.



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|                                                                                    |  |                          |             |               |               |                                                               |             |                                                           |               |  |   |         |  |   |          
|----------------------------------------------------------------------------------- |  | ------------------------ | ----------- | ------------- | ------------- | ------------------------------------------------------------- | ----------- | --------------------------------------------------------- | ------------- |  | - | ------- |  | - | ---------
|Aggregated Option Exercises During Fiscal 2004 and Option Values at January 2,
2005
|Name                                                                                |  | SharesAcquiredonExercise |             | ValueRealized |               | Number of SecuritiesUnderlying UnexercisedOptions at 01/02/05 |             | Value of Unexercised In-the- Money Options at 01/02/05(1)
|                                                                                    |  |                          | Exercisable |               | Unexercisable |                                                               | Exercisable |                                                           | Unexercisable
|Bruce C. Edwards                                                                    |  |                         |             | $             |              |                                                               | 191,666     |                                                           | 158,334       |  | $ | 588,415 |  | $ | 486,085  
|Ronald J. Buschur                                                                   |  |                         |             | $             |              |                                                               | 468,749     |                                                           | 431,251       |  | $ | 296,893 |  | $ | 1,086,107
|Kevin T. Michaels                                                                   |  |                         |             | $             |              |                                                               | 312,687     |                                                           | 282,813       |  | $ | 781,917 |  | $ | 886,611  
|Robert J. Legendre                                                                  |  |                         |             | $             |              |                                                               | 94,375      |                                                           | 300,625       |  | $ | 169,613 |  | $ | 883,488  
|Johan H. Ek                                                                         |  |                         |             | $             |              |                                                               |            |                                                           | 150,000       |  | $ |        |  | $ | 225,000  

---

|(1) | In accordance with the SECs rules, values are calculated by subtracting the exercise
price from the fair market value of the underlying common stock. For purposes of this table, the fair market value per share is deemed to be $8.48, Powerwaves closing Common Stock price reported by Nasdaq on December 31, 2004, the last trading
day of fiscal year 2004.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Employment Agreements and
Change-in-Control Arrangements



Effective August 1, 2003,
Powerwave entered into severance agreements with Bruce C. Edwards, Ronald J. Buschur and Kevin T. Michaels. Mr. Edwards severance agreement provides that if his employment is terminated without cause or if he voluntarily resigns
for good reason (as such terms are defined below), he shall be entitled to (i) a lump-sum payment equal to three times his total annual compensation; and (ii) continued group health insurance for a period of thirty-six
months. For purposes of this agreement, total annual compensation is defined as base salary for the year in which employment terminates plus the greater of Mr. Edwards target bonus for the year in which employment terminates or the
actual bonus paid in the prior year. Mr. Buschur and Mr. Michaels have executed identical severance agreements, except that the severance payment amount is two times their total annual compensation, and the period of continued health coverage is
twenty-four months.



Effective August 1, 2003, Powerwave also
entered into change of control agreements with Mr. Edwards, Mr. Buschur and Mr. Michaels. Mr. Edwards change in control agreement provides that if in anticipation of, connection with, or within two years following a change in
control, Mr. Edwards employment is terminated without cause, or if Mr. Edwards voluntarily resigns for good reason, then Mr. Edwards shall be entitled to (i) a lump-sum payment equal to three times his total
annual compensation; (ii) continued health insurance for a period of thirty-six months; and (iii) the immediate vesting of all unvested stock options held by Mr. Edwards. For purposes of this agreement, the term total annual compensation
has the same definition as provided in the severance agreement. Mr. Buschur and Mr. Michaels have executed identical change in control agreements, except that the lump sum payment is two times their total annual compensation, and the period of
continued health insurance coverage is twenty-four months.



Effective August 2003, Powerwave entered into a Change in Control Agreement with Robert Legendre which provides that if in anticipation of, or within twelve months following, a change in control of Powerwave, Mr. Legendres
employment is terminated without cause or if Mr. Legendre voluntarily resigns with good reason, then he shall be entitled to (i) a lump sum payment equal to 1.5 times his annual salary plus his target bonus for the year in
which the termination occurs; and (ii) continued health coverage for a period of eighteen months.



In January 2005, Powerwave Technologies Sweden AB signed an employment agreement with Johan H. Ek, effective May 2004, under which Mr. Ek is employed as
President of Powerwaves European Business Unit. The agreement provides for a base salary of 1,852,000 SEK ($254,396 based on the SEK/USD exchange rate of 7.28 SEK to $1.00). If the agreement is terminated by Powerwave without cause, Mr. Ek is
entitled to receive six months of notice or to receive his full pay and benefits during the notice period. In addition, Mr. Ek will receive a lump sump payment equal to 12 months of base salary, payable at the end of the notice period. If Mr.
Eks employment is terminated within 12 months following a change of control or if Mr. Ek resigns for good reason following a change of control, Mr. Ek is entitled to receive six months of notice and a severance payment equal to 12 months of
base salary, plus his target bonus for the year in which the termination occurs.



For purposes of these agreements, cause means the continued, unreasonable refusal or omission by the employee to perform any material duties required of him by the Company, if such duties are consistent
with duties customary for his position; any material act or omission by the employee involving malfeasance or gross negligence



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in the performance of his duties to, or material deviation from any of the policies or directives of the Company; conduct on the part of the employee which
constitutes the breach of any statutory or common law duty of loyalty to the Company, including the unauthorized disclosure of material confidential information or trade secrets of the Company; or any illegal act by employee which materially and
adversely affects the business of the Company or any felony committed by employee, as evidenced by conviction thereof, provided that the Company may suspend the employee with pay while any allegation of such illegal or felonious act is investigated.



The term good reason means any of the following,
without the employees written consent: a reduction by the Company in the employees compensation that is not made in connection with an across the board reduction of all the Companys executive salaries; a reduction by the Company of
the employees benefits from those he was entitled to immediately prior to the termination of employment or a change in control, whichever occurs first, that is not made in connection with an across the board reduction of all the Companys
benefits; the failure of the Company to obtain an agreement from any successor to the Company, or purchaser of all or substantially all of the Companys assets, to assume the severance agreement or change in control agreement; the assignment of
duties to the employee which reflect a material adverse change in authority, responsibility or status with the Company or any successor; a relocation of the employee to a location more than 30 miles from the location where the employee was regularly
assigned to immediately prior to the employees termination of employment or a change in control, whichever occurs first; or a failure by the Company to pay any portion of the employees compensation within ten (10) days of the date due.



These agreements define change in control as the
occurrence of any of the following events: (i) the acquisition, directly or indirectly, by any person or group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of the beneficial ownership of more than fifty
percent of the outstanding securities of Powerwave; (ii) a merger or consolidation in which Powerwave is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which Powerwave in incorporated;
(iii) the sale, transfer or other disposition of all or substantially all of the assets of Powerwave; (iv) a complete liquidation or dissolution of Powerwave; or (v) any reverse merger in which Powerwave is the surviving entity but in which
securities possessing more than fifty percent (50%) of the total combined voting power of the Companys outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such
merger.



Compensation of Directors



Base Compensation



For fiscal 2004, Powerwaves non-employee directors received a retainer
fee of $20,000 per year, payable in quarterly installments, $1,000 for each Board meeting attended (including phone meetings where resolutions were taken) and $1,000 for each Committee meeting attended (including phone meetings where resolutions
were taken). The non-executive Chairman received an additional retainer fee of $20,000 for fiscal 2004 payable in quarterly installments. Directors of the Company who are also employees received no additional compensation for their services as a
director.



Options



The 1996 Director Stock Option Plan (the Director Plan), as
amended, provides that a total of 1,200,000 shares of the Companys Common Stock are reserved for issuance under the plan. The Director Plan provides that each member of Powerwaves Board of Directors who is not an employee or paid
consultant of the Company will automatically be eligible to receive non-statutory options to purchase Common Stock under the plan. Pursuant to the terms of the Director Plan, each director elected after December 5, 1996, will be granted an initial
option under the Director Plan covering 30,000 shares of Common Stock that shall vest at the rate of 25% on the first anniversary of the grant date and the remaining 75% shall vest in equal monthly installments over the following three years.
Furthermore, on each anniversary date of December 5, each director who shall have been an eligible participant under the Director Plan for at least six months shall be granted an annual option under the Director Plan to purchase 10,000 shares of
Common Stock that vests 100% on the fourth anniversary date of the grant. The Director Plan provides that the exercise price per share of grants issued under the Director Plan shall be equal to 100% of the fair market value of a share of Common
Stock on the grant date. All options expire no later than five years after the grant date. As of January 2, 2005, a total of 195,000 options had been exercised under the Director Plan. There were 420,000 options outstanding under the Director Plan
as of January 2, 2005 at a weighted average exercise price of $16.93 per share. There were 585,000 shares available for grant under the Director Plan at January 2, 2005.



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On December 6, 2004, Messrs. Clendenin, Artusi, George, Goda, Neun, Sukawaty and Gottschlich were each
granted an option to purchase 10,000 shares of Common Stock at an exercise price of $8.47 per share under the Director Plan in connection with their annual membership on the Board. In addition, Mr. Gottschlich received an option grant for 30,000
shares when he became a member of the Board of Directors upon the closing of the LGP Allgon acquisition in May 2004.



Corporate Governance Policies and Practices



The following is a summary of the Companys corporate governance policies and practices:



| |  |  | All members of the Board of Directors are independent directors, as defined by Nasdaq, excluding the Chief Executive Officer and the Executive Chairman of the Board. Independent
directors do not receive consulting, legal or other fees from Powerwave other than Board of Directors and Committee compensation.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The independent directors of the Board of Directors meet regularly without the presence of management.
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | All of our employees, officers and directors are subject to Powerwaves Code of Business Conduct and Ethics Policy. The ethics policy meets the requirements of Nasdaq, as well
as the code of ethics requirements of the SEC.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Directors stand for reelection every year.
| | - |  | ------------------------------------------



| |  |  | The Board of Directors current policy is to separate the roles of Executive Chairman of the Board and Chief Executive Officer.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Audit and Compensation Committees consist entirely of independent directors.
| | - |  | --------------------------------------------------------------------------------



| |  |  | At least annually, the Board of Directors review Powerwaves business initiatives, capital projects and budget matters.
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | The Audit Committee reviews and approves all related-party transactions, if any.
| | - |  | --------------------------------------------------------------------------------



| |  |  | As part of our Code of Business Conduct and Ethics Policy, we have made a whistleblower hotline available to all employees for anonymous reporting of financial or other
concerns. The Audit Committee receives directly, without management participation, all hotline activity reports, including complaints on accounting, internal controls or auditing matters.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Stock Performance Graph



The following graph compares the cumulative total shareholder returns for Powerwaves Common Stock with the cumulative
total return of the S & P 500 Index and the S & P Communications Equipment Index. The presentation assumes $100 invested on January 2, 2000 in Powerwaves Common Stock, the S & P 500 Index and the S & P Communications Equipment
Index with all dividends reinvested. No cash dividends were declared on Powerwaves Common Stock during this period. Shareholder returns over the indicated period should not be considered indicative of future shareholder returns.



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LOGO



|                                         |  |                             |     |                 |   |                                    |  |   |   
|---------------------------------------- |  | --------------------------- | --- | --------------- | - | ---------------------------------- |  | - | --
|Measurement Period (Fiscal Year
Covered) |  | PowerwaveTechnologies, Inc. |     | S & P 500 Index |   | S & PCommunicationsEquipment Index
|2000                                     |  | $                           | 301 |                 | $ | 91                                 |  | $ | 44
|2001                                     |  | $                           | 93  |                 | $ | 80                                 |  | $ | 16
|2002                                     |  | $                           | 27  |                 | $ | 62                                 |  | $ | 7 
|2003                                     |  | $                           | 40  |                 | $ | 80                                 |  | $ | 12
|2004                                     |  | $                           | 44  |                 | $ | 89                                 |  | $ | 13



Notwithstanding
anything to the contrary set forth in the Companys previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings, including this Annual Report on Form
10-K, in whole or in part, the Board Compensation Committee Report on Executive Compensation and the Stock Performance Comparison Graph shall not be incorporated by reference into any such filings.



45



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##### Table of Contents

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



The following table sets forth information concerning the beneficial ownership of Powerwaves outstanding Common Stock as of February 28, 2005,
except as otherwise noted, by persons who are directors, executive officers, nominees or persons known to Powerwave to be beneficial owners of five percent or more of our outstanding Common Stock. The table also includes the beneficial stock
ownership of all directors and executive officers of Powerwave as a group.



|                                                             |  |                                        |      |  |                                   
|------------------------------------------------------------ |  | -------------------------------------- | ---- |  | ----------------------------------
|Name and Address of Beneficial Owner(1)                      |  | Number of Shares Beneficially Owned(2) |      |  | Percentage of SharesOutstanding(2)
|FMR Corp.82 Devonshire StreetBoston, MA 02109                |  | 7,651,059                              | (3)  |  | 7.7                               
|Mikael R. Gottschlich                                        |  | 2,640,000                              |      |  | 2.7                               
|Bruce C. Edwards                                             |  | 977,291                                | (4)  |  | 1.0                               
|Ronald J. Buschur                                            |  | 524,999                                | (5)  |  | *                                 
|Kevin T. Michaels                                            |  | 327,869                                | (6)  |  | *                                 
|John L. Clendenin                                            |  | 149,000                                | (7)  |  | *                                 
|Carl W. Neun                                                 |  | 5,800                                  | (8)  |  | *                                 
|Johan H. Ek                                                  |  | 88,000                                 |      |  | *                                 
|Robert J. Legendre                                           |  | 110,625                                | (9)  |  | *                                 
|David L. George                                              |  | 40,625                                 | (10) |  | *                                 
|Eugene L. Goda                                               |  | 35,000                                 | (11) |  | *                                 
|Andrew J. Sukawaty                                           |  | 20,000                                 | (12) |  | *                                 
|Daniel A. Artusi                                             |  | 17,500                                 | (13) |  | *                                 
|All Directors and Executive Officers as a Group (12 persons) |  | 4,936,709                              | (14) |  | 4.9                               

---

|* | Less than 1%
|- | ------------

|(1) | Unless otherwise indicated, the business address of each holder is: c/o Powerwave
Technologies, Inc., 1801 E. St. Andrew Place, Santa Ana, CA 92705.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Beneficial ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with respect to securities. Shares of Common Stock subject to options or warrants currently exercisable, or exercisable within 60 days of February 28, 2005, and shares of Common
Stock subject to our outstanding 1.25% convertible notes due July 2008 and our outstanding 1.875% convertible notes due November 2024 currently convertible, or convertible within 60 days of February 28, 2005, are deemed outstanding for computing the
percentage of the person holding such options, warrants or convertible notes, but are not deemed outstanding for computing the percentage of any other person. As of February 28, 2005, the Company had a total of 99,619,488 shares of Common Stock
issued and outstanding. Except as indicated by footnote and subject to community property laws where applicable, to the knowledge of the Company, the companies and persons named in this table have sole voting and investment power with respect to all
shares of Common Stock shown to be beneficially owned by them.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Based on a Schedule 13G dated February 14, 2005, filed with the Securities and Exchange
Commission by FMR Corp., which reflects ownership as of December 31, 2004. The Schedule 13G states that FMR Corp. has sole voting power to vote or direct the vote of 87,420 shares and sole dispositive power as to 7,651,059 shares.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes options exercisable for 216,666 shares within 60 days of February 28, 2005.
|--- | ------------------------------------------------------------------------------------

|(5) | Consists of options exercisable for 524,999 shares within 60 days of February 28, 2005.
|--- | ---------------------------------------------------------------------------------------



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|(6) | Includes options exercisable for 323,625 shares within 60 days of February 28, 2005.
|--- | ------------------------------------------------------------------------------------

|(7) | Includes options exercisable for 65,000 shares within 60 days of February 28, 2005.
|--- | -----------------------------------------------------------------------------------

|(8) | Includes options exercisable for 5,000 shares within 60 days of February 28, 2005.
|--- | ----------------------------------------------------------------------------------

|(9) | Consists of options exercisable for 110,625 shares within 60 days of February 28, 2005.
|--- | ---------------------------------------------------------------------------------------

|(10) | Includes options exercisable for 5,000 shares within 60 days of February 28, 2005.
|---- | ----------------------------------------------------------------------------------

|(11) | Includes options exercisable for 5,000 shares within 60 days of February 28, 2005.
|---- | ----------------------------------------------------------------------------------

|(12) | Includes options exercisable for 5,000 shares within 60 days of February 28, 2005.
|---- | ----------------------------------------------------------------------------------

|(13) | Consists of options exercisable for 17,500 shares within 60 days of February 28, 2005.
|---- | --------------------------------------------------------------------------------------

|(14) | Includes options exercisable for 1,278,415 shares within 60 days of February 28, 2005 (see
footnotes 4 -14).
|---- | ------------------------------------------------------------------------------------------------------------



Securities Authorized for Issuance Under
Equity Compensation Plans



All stock option plans under
which our Common Stock is reserved for issuance have previously been approved by our shareholders. We have no other equity compensation plans other than our stock option plans. The following table provides summary information as of January 2, 2005
for all of our stock option plans:



|                             |  |                                                                                                   |  |                                                                       |       |                                                                                                                                         |          
|---------------------------- |  | ------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------- | ----- | --------------------------------------------------------------------------------------------------------------------------------------- | ---------
|                             |  | Number of Shares ofCommon Stock tobe Issued uponExercise ofOutstandingOptions, Warrantsand Rights |  | WeightedAverageExercise Priceof OutstandingOptions,Warrants andRights |       | Number of Shares ofCommon StockRemaining Availablefor Future Issuanceunder our StockOption Plans(Excluding
SharesReflected in Column 1)
|Approved by Shareholders     |  | 8,949,251                                                                                         |  | $                                                                     | 10.90 |                                                                                                                                         | 1,709,903
|Not Approved by Shareholders |  |                                                                                                  |  |                                                                       |      |                                                                                                                                         |         
|                             |  |                                                                                                   |  |                                                                       |       |                                                                                                                                         |          
|Total                        |  | 8,949,251                                                                                         |  | $                                                                     | 10.90 |                                                                                                                                         | 1,709,903
|                             |  |                                                                                                   |  |                                                                       |       |                                                                                                                                         |          



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



The Company has entered into indemnification agreements with its directors and certain executive officers. Such agreements require the Company to indemnify such individuals to the fullest extent permitted by Delaware
law.



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES



The Audit Committee regularly reviews and determines whether specific projects or expenditures with our independent auditors, Deloitte & Touche LLP and their affiliates (Deloitte & Touche),
potentially affect their independence. The Audit Committees policy is to pre-approve all audit and permissible non-audit services provided by Deloitte & Touche. Pre-approval is generally provided by the Audit Committee for up to one year,
is detailed as to the particular service or category of services to be rendered, and is generally subject to a specific budget. The Audit Committee may also pre-approve additional services or specific engagements on a case-by-case basis. Management
is required to provide quarterly updates to the Audit Committee regarding the extent of any services provided in accordance with this pre-approval, as well as the cumulative fees for all non-audit services incurred to date.



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##### Table of Contents

The following table sets forth the aggregate fees billed to us by Deloitte & Touche for the fiscal
years ended January 2, 2005 and December 28, 2003:



|                                                      |  |                    |           |                  |   |        
|----------------------------------------------------- |  | ------------------ | --------- | ---------------- | - | -------
|                                                      |  | Fiscal Years Ended
|                                                      |  | January 2,2005     |           | December 28,2003
|Audit Fees (1)                                        |  |                    |           |                  |   |        
|Audits of financial statements and statutory accounts |  | $                  | 390,651   |                  | $ | 265,925
|Audit of internal controls over financial reporting   |  |                    | 216,532   |                  |   |       
|                                                      |  |                    |           |                  |   |        
|Total audit fees                                      |  |                    | 607,183   |                  |   | 265,925
|                                                      |  |                    |           |                  |   |        
|Audit-Related Fees (2)                                |  |                    |           |                  |   |        
|Registration statements                               |  |                    | 511,868   |                  |   | 639,406
|                                                      |  |                    |           |                  |   |        
|Total audit-related fees                              |  |                    | 511,868   |                  |   | 639,406
|                                                      |  |                    |           |                  |   |        
|Tax Fees (3)                                          |  |                    |           |                  |   |        
|Tax compliance                                        |  |                    | 54,588    |                  |   | 34,500 
|Other tax consulting                                  |  |                    | 1,490     |                  |   | 15,148 
|                                                      |  |                    |           |                  |   |        
|Total tax fees                                        |  |                    | 56,078    |                  |   | 49,648 
|                                                      |  |                    |           |                  |   |        
|Total Fees                                            |  | $                  | 1,175,129 |                  | $ | 954,979
|                                                      |  |                    |           |                  |   |        

---

|(1) | Includes fees for professional services rendered for the audit of Powerwaves annual
financial statements and review of Powerwaves annual report on Form 10-K for the fiscal years 2004 and 2003, for the audit of Powerwaves internal controls over financial reporting for fiscal 2004, and reviews of the financial statements
included in Powerwaves quarterly reports on Form 10-Q for the first three quarters of fiscal 2004 and 2003.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes fees for professional services rendered in fiscal 2004 and 2003, in connection with
statutory or regulatory filings and SEC registration statements, primarily related to the Companys acquisition of LGP Allgon and the Companys 2003 convertible debt offering.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes fees for professional services rendered in fiscal 2004 and 2003, in connection with
tax compliance (including U.S. federal and international returns) and tax consulting.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



PART IV



ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES



(a)(3) Exhibits. The following exhibits are filed as part of this Amendment No. 1.



|               |  |                                                                                                                                   
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                       
|23.1           |  | Independent Auditors Consent.                                                                                                    
|               | 
|31.1           |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.                
|               | 
|31.2           |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.                
|               | 
|32.1           |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.***
|               | 
|32.2           |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.***

---

|*** | In accordance with Item 601(b)(32)(ii) of Regulation S-K, this exhibit shall not be deemed filed for the purposes of Section 18 of the Securities and Exchange Act of
1934 or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of
Santa Ana, State of California, on the 8th day of April 2005.



POWERWAVE TECHNOLOGIES, INC.By:

/s/ KEVIN T. MICHAELSKevin T. MichaelsSenior Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting
Officer)




Pursuant to the
requirements of the Securities Exchange Act of 1934, this Amendment No. 1 to Annual Report on Form 10-K has been signed below by the following persons in the capacities and on the dates indicated.



|                    |  |                                                                                                         |  |              
|------------------- |  | ------------------------------------------------------------------------------------------------------- |  | -------------
|                    |  |                                                                                                        
|Signature           |  | Title                                                                                                   |  | Date         
|*Ronald J. Buschur  |  | President, Chief Executive Officer and Director (Principal Executive Officer)                           |  | April 8, 2005
|                    |  |                                                                                                        
|*Kevin T. Michaels  |  | Senior Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting Officer) |  | April 8, 2005
|                    |  |                                                                                                        
|*Bruce C. Edwards   |  | Chairman of the Board of Directors                                                                      |  | April 8, 2005
|                    |  |                                                                                                        
|*John L. Clendenin  |  | Director                                                                                                |  | April 8, 2005
|                    |  |                                                                                                        
|*Daniel A. Artusi   |  | Director                                                                                                |  | April 8, 2005
|                    |  |                                                                                                        
|*Mikael Gottschlich |  | Director                                                                                                |  | April 8, 2005
|                    |  |                                                                                                        
|*David. L. George   |  | Director                                                                                                |  | April 8, 2005
|                    |  |                                                                                                        
|*Eugene L. Goda     |  | Director                                                                                                |  | April 8, 2005
|                    |  |                                                                                                        
|*Carl W. Neun       |  | Director                                                                                                |  | April 8, 2005
|                    |  |                                                                                                        
|*Andrew J. Sukawaty |  | Director                                                                                                |  | April 8, 2005

---

|     |  |                                     
|---- |  | ------------------------------------
|     | 
|*By: |  | /s/ KEVIN T. MICHAELS               
|     |  | Kevin T. Michaels (Attorney-in-Fact)





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