<PAGE>
 
================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                        

                                   FORM 10-Q
                                        

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
        EXCHANGE ACT OF 1934


        For the quarterly period ended September 28, 1997

                                      OR
                                        

[_]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934


        For the transition period from            to
                                       -----------  ----------

                        Commission File Number 000-21507
                                        

                          POWERWAVE TECHNOLOGIES, INC.
            (Exact name of registrant as specified in its charter)
                                        


                Delaware                              11-2723423
      (State or other jurisdiction of              (I.R.S. Employer
       incorporation or organization)              Identification No.)
                                      
                      
                               2026 McGaw Avenue
                            Irvine, California 92614
               (Address of principal executive offices, zip code)
                                        

       Registrant's telephone number, including area code: (714) 757-0530
                                        

                                 ----------- 
                                        


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

     As of October 27, 1997, the number of outstanding shares of Common Stock,
par value $.0001 per share, of the Registrant was 17,773,338.

================================================================================
<PAGE>
 
                          POWERWAVE TECHNOLOGIES, INC.
                                     INDEX

                                                            
                                                            

Part I.  Financial Information
<TABLE>
<CAPTION>                                                                                                        Page
                                                                                                                 ---- 
         Item 1.  Financial Statements                                                                           
                           <S>                                                                                   <C>
 
                            Consolidated Balance Sheets at September 28, 1997 (Unaudited)
                              and December 29, 1996                                                               3
 
                            Consolidated Statements of Income (Unaudited) for the three and nine months ended
                              September 28, 1997 and September 29, 1996                                           4
 
                            Consolidated Statements of Cash Flows (Unaudited) for the nine months ended
                              September 28, 1997 and September 29, 1996                                           5
 
                            Notes to Consolidated Financial Statements (Unaudited)                                6-7
 


         Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations           8-22


Part II.  Other Information


         Item 2.  Change in Securities and Use of Proceeds                                                        23
 
         Item 6.  Exhibits and Reports on Form 8-K                                                                24 


Signatures                                                                                                        25
</TABLE> 


This Quarterly Report on Form 10-Q includes certain forward-looking statements
as defined within the Private Securities Litigation Reform Act of 1995.  Such
forward-looking statements are subject to risks and uncertainties which could
cause actual results to differ materially from those projected or implied.  The
realization of such forward-looking statements may be impacted by certain
important factors which are discussed in "Additional Factors That May Affect
Future Results" under Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations."  The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
which may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.

                                       2
<PAGE>
 
                          POWERWAVE TECHNOLOGIES, INC.
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
 
                                                                  September 28,    December 29,
ASSETS:                                                                1997            1996
                                                                  --------------   -------------
Current Assets:                                                    (Unaudited)
<S>                                                               <C>              <C>
 
     Cash and cash equivalents                                     $ 70,133,596    $ 32,386,331
     Accounts receivable, net of allowance for doubtful
          accounts of $500,590 and $485,368 at September 28,
          1997 and December 29, 1996, respectively                    9,511,210       3,324,699
     Inventories, net                                                 8,345,319       4,707,545
     Prepaid expenses and other current assets                          823,797         327,816
     Deferred tax assets                                              1,875,572       1,875,572
                                                                   ------------    ------------
          Total current assets                                       90,689,494      42,621,963
 
Property and equipment                                                9,311,384       5,211,764
Accumulated depreciation and amortization                            (2,126,978)     (1,011,132)
                                                                   ------------    ------------
      Net property and equipment                                      7,184,406       4,200,632
                                                                   ------------    ------------
Other assets                                                            681,729         109,606
                                                                   ------------    ------------
TOTAL ASSETS                                                       $ 98,555,629    $ 46,932,201
                                                                   ============    ============
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
     Accounts payable                                              $  9,429,862    $  3,588,885
     Accrued expenses and other liabilities                           7,967,762       3,878,396
     Current portion of long-term debt                                  369,839         253,747
     Income taxes payable                                             1,906,182       1,658,019
                                                                   ------------    ------------
          Total current liabilities                                  19,673,645       9,379,047
 
Deferred tax liabilities                                                189,432         189,432
Other non-current liabilities                                           148,113               -
Long-term debt                                                          916,511         520,399
                                                                   ------------    ------------
TOTAL LIABILITIES                                                    20,927,701      10,088,878
                                                                   ------------    ------------
 
Commitments and contingency
 
Shareholders' Equity:
Preferred Stock, $.0001 par value, 5,000,000 shares
     authorized and no shares outstanding                                     -               -
Common Stock, $.0001 par value, 40,000,000 shares
     authorized, 17,702,527 and 15,862,497 shares issued
     and outstanding at September 28, 1997 and December 29, 1996     63,466,310      33,570,573
Retained earnings                                                    26,392,998      15,504,130
Less treasury stock at cost                                         (12,231,380)    (12,231,380)
                                                                   ------------    ------------
     Total shareholders' equity                                      77,627,928      36,843,323
                                                                   ------------    ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         $ 98,555,629    $ 46,932,201
                                                                   ============    ============
 
</TABLE>


   The accompanying notes are an integral part of these financial statements

                                       3
<PAGE>
 
                          POWERWAVE TECHNOLOGIES, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)
<TABLE>
<CAPTION>
 
                                              Three Months Ended               Nine Months Ended
                                         -----------------------------   -----------------------------
                                         September 28,   September 29,   September 28,   September 29,
                                             1997            1996            1997            1996
                                         -------------   -------------   -------------   -------------
<S>                                      <C>             <C>             <C>             <C>
 
Net sales                                  $34,348,637     $14,486,996     $81,950,958     $43,594,547
Cost of sales                               20,564,797       8,142,386      48,949,665      25,371,134
                                           -----------     -----------     -----------     -----------
Gross profit                                13,783,840       6,344,610      33,001,293      18,223,413
Operating expenses:
     Sales and marketing                     2,341,062       1,156,145       6,062,878       3,314,715
     Research and development                3,341,570       1,583,607       7,937,823       4,034,140
     General and administrative              1,360,628         720,592       3,321,944       2,003,390
                                           -----------     -----------     -----------     -----------
Total operating expenses                     7,043,260       3,460,344      17,322,645       9,352,245
                                           -----------     -----------     -----------     -----------
 
Operating income                             6,740,580       2,884,266      15,678,648       8,871,168
Other income, net                              719,838         154,435       1,763,719         333,041
 
Income before income taxes                   7,460,418       3,038,701      17,442,367       9,204,209
Provision for income taxes                   2,760,357       1,245,864       6,553,499       3,773,725
                                           -----------     -----------     -----------     -----------
 
Net income                                 $ 4,700,061     $ 1,792,837     $10,888,868     $ 5,430,484
                                           ===========     ===========     ===========     ===========
 
Net income and pro forma net
     income per share                             $.26            $.12            $.63            $.37
 
Weighted average and pro forma
     weighted average common shares         18,071,665      14,475,481      17,218,415      14,475,481
 
</TABLE>


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

                                       4
<PAGE>
 
                          POWERWAVE TECHNOLOGIES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                  Nine Months Ended
                                                         -----------------------------------
                                                           September 28,      September 29,
                                                                1997               1996
                                                         ------------------   --------------
<S>                                                      <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                   $10,888,868      $ 5,430,484
  Adjustments to reconcile net income to net
   cash provided by operating activities:
      Depreciation and amortization                              1,166,617          246,311
  Changes in assets and liabilities:
   Accounts receivable                                          (6,186,511)      (2,064,078)
   Inventories                                                  (3,637,774)         229,041
   Income tax refund receivable                                          -          609,550
   Prepaid expenses and other current assets                      (495,982)        (114,826)
   Accounts payable                                              5,840,979          402,920
   Accrued expenses and other liabilities                        4,237,479        2,301,711
   Compensation costs related to stock options                      31,254                -
   Other assets                                                   (572,123)        (101,219)
   Income taxes payable                                          3,778,498          265,363
                                                               -----------      -----------
  Net cash provided by operating activities                     15,051,305        7,205,257
                                                               -----------      -----------
 
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                            (5,153,628)      (2,872,361)
                                                               -----------      -----------
  Net cash used in investing activities                         (5,153,628)      (2,872,361)
                                                               -----------      -----------
 
CASH FLOW FROM FINANCING ACTIVITIES:
  (Principal payments) borrowings on long-term debt               (332,067)         (54,274)
  Increase (decrease) in amounts due to
      shareholders                                                       -          (50,000)
  Proceeds from sale of assets                                   1,847,508                -
  Issuance of Common Stock                                      24,895,815          300,000
  Proceeds from exercise of stock options                        1,438,332                -
                                                               -----------      -----------
  Net cash provided by financing activities                     27,849,588          195,726
                                                               -----------      -----------
 
NET INCREASE IN CASH AND
   CASH EQUIVALENTS                                             37,747,265        4,528,622
CASH AND CASH EQUIVALENTS, beginning                            32,386,331        5,860,785
                                                               -----------      -----------
CASH AND CASH EQUIVALENTS, ending                              $70,133,596      $10,389,407
                                                               ===========      ===========
 
SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid for:
   Interest                                                    $    72,380      $    13,751
                                                               ===========      ===========
   Income taxes                                                $ 2,775,000      $ 2,924,000
                                                               ===========      ===========
NON-CASH ITEMS:
   Tax benefit related to stock options                        $ 3,530,336      $         -
                                                               ===========      ===========
   Acquisition of property through capital leases              $   804,591      $         -
                                                               ===========      ===========
   Preferred dividends payable                                 $         -      $ 1,350,000
                                                               ===========      ===========
 
</TABLE>

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

                                       5
<PAGE>
 
                          POWERWAVE TECHNOLOGIES, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)
                              September 28, 1997

Basis of Presentation

  The accompanying consolidated financial statements have been prepared by the
Company without audit (except for balance sheet information as of December 29,
1996) in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X.  In the opinion of management, all adjustments (consisting only
of normal recurring accruals) considered necessary for a fair presentation have
been included.  The accompanying consolidated financial statements do not
include certain footnotes and financial presentations normally required under
generally accepted accounting principles and, therefore, should be read in
conjunction with the audited consolidated financial statements included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 29,
1996.  The accounting policies followed by the Company are set forth in Note 2
of the Notes to Consolidated Financial Statements in the Company's Annual Report
on Form 10-K for the fiscal year ended December 29, 1996.

  The results of operations for the three and nine months ended September 28,
1997, are not necessarily indicative of the results to be expected for the
entire fiscal year ended December 28, 1997 (fiscal year 1997).  For further
information on additional factors that may affect future results, please refer
to the "Management Discussion and Analysis of Financial Condition and Results of
Operations" under Item 2, the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 29, 1996, and the Company's Form S-1 filed with the Securities
and Exchange Commission on July 1, 1997.

Net Income and Pro Forma Net Income Per Share and Shareholders' Equity

   Net income and pro forma net income per share amounts are based upon the
weighted average number of common shares and dilutive common equivalent shares
for each period presented and the pro forma conversion of preferred stock into
common stock up to the date of such conversion.  Weighted average and pro forma
weighted average common and common equivalent shares include common stock, stock
options using the treasury stock method and the conversion of outstanding shares
of Series A Preferred Stock into shares of common stock.  Pursuant to Securities
and Exchange Commission Staff Accounting Bulletin Topic 4D, stock options
granted during the twelve months prior to the date of the initial filing of the
Company's Form S-1 Registration Statement relating to the Company's initial
public offering have been included in the calculation of common equivalent
shares using the treasury stock method.

New Accounting Pronouncement

  In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share, which is effective
for financial statements for both interim and annual periods ending after
December 15, 1997, and replaces the presentation of "primary" earnings per share
with "basic" earnings per share and the presentation of "fully diluted" earnings
per share with "diluted" earnings per share.  Early adoption of the statement is
not permitted.  When adopted, all previously reported earnings per share amounts
must be restated based on the provisions of the new standard.  Pro forma basic
and diluted earnings per share calculated in accordance with SFAS No. 128 are
provided below:
<TABLE>
<CAPTION>
 
                                        Three Months Ended                 Nine Months Ended
                                ----------------------------------   -----------------------------
                                  September 28,      September 29,   September 28,   September 29,
                                       1997              1996            1997            1996
                                ------------------   -------------   -------------   -------------
<S>                             <C>                  <C>             <C>             <C>
 
Basic earnings per share                     $ .27           $ .13           $ .65           $ .39
                                             =====           =====           =====           =====
Diluted earnings per share                   $ .26           $ .12           $ .63           $ .37
                                             =====           =====           =====           =====
</TABLE>

                                       6
<PAGE>
 
For the fiscal years beginning after December 28, 1997, the Company will adopt
SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131 "Disclosures
About Segments of an Enterprise and Related Information."  The Company is
reviewing the impact of such statements on its financial statements.

Stock Option  Plans

  The following is a summary of stock option transactions under the Company's
stock option plans, including the 1995 Stock Option Plan, the 1996 Stock
Incentive Plan, and the 1996 Director Stock Option Plan, for the nine months
ended September 28, 1997:
<TABLE>
<CAPTION>
 
 
                                                                           Number of
                                                                           Options
                                                                           Exercisable
                                   Number of            Price per          as of
                                    Shares               Share             September 28, 1997
                                   ----------        --------------        ------------------
<S>                                <C>               <C>                   <C> 
Balance at December 29, 1996       1,919,252           $ 2.47-11.50
Granted                              269,550           $14.50-40.50
Exercised                           (439,148)          $ 2.47-11.50
Canceled                            (145,354)          $ 2.47-33.00
                                   ---------
Balance at September 28, 1997      1,604,300                                     393,877
                                   =========                                     =======
 
</TABLE>

Employee Stock Purchase Plan
 
  The first offering period under the Company's Employee Stock Purchase Plan
(the "Purchase Plan") concluded on July 31, 1997, with the purchase of 40,882
shares of the Company's Common Stock purchased under the Purchase Plan.  At
September 28, 1997 there were rights to purchase approximately 3,300 shares of
Common Stock outstanding under the Purchase Plan's second offering, which will
conclude on January 31, 1998.

                                       7
<PAGE>
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations.

  The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto.  This discussion may contain forward-
looking statements, the realization of which may be impacted by certain
important factors including, but not limited to, those discussed in "Additional
Factors That May Affect Future Results".

Results of Operations

  The following table summarizes the Company's results of operations as a
percentage of net sales for the three and nine months ended September 28, 1997
and September 29, 1996.
<TABLE>
<CAPTION>
 
                                                             Percentage of Total Revenue
                                              Three Months Ended                     Nine Months Ended
                                     ------------------------------------   -----------------------------------
                                     September 28,       September 29,      September 28,      September 29,
                                          1997               1996                1997               1996
                                     --------------   -------------------   --------------   ------------------
<S>                                  <C>              <C>                   <C>              <C>
Net sales                                100.0%              100.0%             100.0%             100.0%
Cost of sales                             59.9                56.2               59.7               58.2
                                         -----               -----              -----              -----
Gross profit                              40.1                43.8               40.3               41.8
Operating expenses:
     Sales and marketing                   6.8                 8.0                7.4                7.6
     Research and development              9.7                10.9                9.7                9.3
     General and administrative            4.0                 5.0                4.1                4.6
                                         -----               -----              -----              -----
Total operating expenses                  20.5                23.9               21.2               21.5
                                         -----               -----              -----              -----
 
Operating income                          19.6                19.9               19.1               20.3
Other income, net                          2.1                 1.1                2.2                0.8
                                         -----               -----              -----              -----
 
Income before income taxes                21.7                21.0               21.3               21.1
Provision for income taxes                 8.0                 8.6                8.0                8.7
                                         -----               -----              -----              -----
 
Net income                                13.7%               12.4%              13.3%              12.4%
                                         =====               =====              =====              =====
</TABLE>
Three months ended September 28, 1997 and September 29, 1996

Net Sales

  The Company's net sales are derived primarily from the sale of RF power
amplifiers for use in wireless communications networks.  Sales increased by
137.1% to $34.3 million for the quarter ended September 28, 1997 from $14.5
million for the quarter ended September 29, 1996.  The growth in revenue was
primarily attributable to volume shipments of the Company's new single carrier
PCS amplifier products (which began volume shipments in the second quarter of
fiscal 1997), as well as increased sales of the Company's cellular multi-carrier
amplifiers.  The Company's single carrier PCS amplifiers are being utilized in
the deployment of the new PCS networks in South Korea and the Company's cellular
multi-carrier amplifiers are being utilized in the continued deployment of the
digital cellular CDMA system in South Korea, as well as in cellular systems of
operators in the United States and other countries.

  For the quarter ended September 28, 1997, cellular multi-carrier amplifiers
(including racks) accounted for approximately 52.5% of revenues or $18.0
million, compared to approximately 83.9% or $12.1 million for the quarter ended
September 29, 1996. PCS products (including racks) accounted for approximately
43.3% of revenues or $14.9 million for the third quarter of 1997, compared to
 .6% or $.1 million for the third quarter in 1996.  Sales of Land Mobile Radio
("LMR") (previously referred to as Specialized Mobile Radio or "SMR") amplifiers
accounted for approximately 4.2% of revenues or $1.4 million for the quarter
ended September 28, 1997, compared to approximately 9.4% of revenues or $1.4
million for the quarter ended September 29, 1996.  There were no sales of air-
to-ground amplifiers for the quarter ended September 28, 1997 compared to
approximately $.9 million or 6.1% 

                                       8
<PAGE>
 
of sales for the quarter ended September 29, 1996. International sales,
primarily to a small number of customers in South Korea, accounted for 87.3% of
revenues for the quarter ended September 28, 1997, compared with 78.7% for the
quarter ended September 29, 1996. See "Additional Factors That May Affect Future
Results - Customer Concentration."

Gross Profit

     Cost of sales consists primarily of raw materials, assembly and test labor,
overhead, warranty costs and royalties.  Gross profit margins for the third
quarter of fiscal 1997 and 1996 were 40.1% and 43.8%, respectively.  The
decrease in gross margins is primarily due to increased shipments of lower
priced single carrier PCS amplifiers which also have lower gross margins.  While
the Company continues to strive for manufacturing cost reductions to offset
pricing pressures on its products, there can be no assurance that these cost
reduction efforts will continue to keep pace with price declines.  If the
Company is unable to continue to obtain cost reductions, its gross margins and
profitability will be adversely affected.  For a discussion of the effects of
declining average sales prices on the Company's business, see "Additional
Factors That May Affect Future Results - Declining Average Sales Prices."

     The wireless communications infrastructure equipment industry is extremely
competitive and is characterized by rapid technological change, new product
development and product obsolescence, evolving industry standards and
significant price erosion over the life of a product.  Due to these competitive
pressures, the Company expects that the average sales prices of its products
will continue to decrease.  The Company has introduced new products at lower
sales prices which has impacted the average sales prices of the Company's
products. Future pricing actions by the Company and its competitors may also
adversely impact the Company's gross profit margins and profitability, which
could also result in decreased liquidity and adversely affect the Company's
business, results of operations and financial condition. For a discussion of the
impact of new products on the Company's business, see "Additional Factors That
May Affect Future Results - Rapid Technological Change; Dependence on New
Products."

Operating Expenses

     Sales and marketing expenses consist primarily of sales commissions,
salaries, other expenses for sales and marketing personnel, travel expenses,
reserves for credit losses and trade show expenses. Sales and marketing expenses
increased by 102.5% to $2.3 million for the quarter ended September 28, 1997
from $1.2 million for the quarter ended September 29, 1996. As a percentage of
sales, sales and marketing expenses were 6.8% and 8.0%, respectively. The
increase in actual sales and marketing expenses was primarily attributable to
increases in the sales and marketing staff, sales commissions related to
increased product sales.

     Research and development expenses include ongoing amplifier design and
development expenses, as well as those design expenses associated with reducing
the cost and improving the manufacturability of existing amplifiers.  Research
and development expenses increased by 111.1% to $3.3 million for the quarter
ended September 28, 1997 from $1.6 million for the quarter ended September 29,
1996.  Research and development expenses as a percentage of sales were 9.7% and
10.9%, respectively.  The increase in actual research and development expenses
was primarily attributable to increased staffing and associated engineering
costs related to continued new and existing product development, including the
continued development of amplifiers for PCS networks which initially began
during the third quarter of 1996. The Company intends to continue to emphasize
investment in research and development programs in future periods with current
programs covering both PCS and cellular products.

     General and administrative expenses consist primarily of salaries and other
expenses for management, finance, facilities maintenance and human resources.
General and administrative expenses increased by 88.8% to $1.4 million for the
quarter ended September 28, 1997, from $.7 million for the quarter ended
September 29, 1996.  General and administrative expenses as a percentage of
sales were 4.0% and 5.0%, respectively.  The increase in actual general and
administrative expenses was primarily attributable to increased staffing costs
associated with supporting the Company's increased revenues.

                                       9
<PAGE>
 
Other Income

     The Company earned other income, net, of $.7 million in the third quarter
of 1997 compared to $.2 million for the third quarter of 1996. Other income
consists primarily of interest income, net of any interest expense. The increase
in other income is attributable to the Company's increased cash position
maintained during the third quarter of 1997 compared to the cash balances
maintained during the third quarter of 1996. The larger cash balances are due to
the Company's initial public offering of Common Stock which was completed in
December 1996, the secondary Common Stock offering completed in July 1997, as
well as cash flow generated from operations. The larger cash balances were
invested in short-term money market instruments.

Provision for Income Taxes

     The Company's effective tax rate was 37.0% and 41.0% for the quarters ended
September 28, 1997 and September 29, 1996, respectively.

Nine months ended September 28, 1997 and September 29, 1996

Net Sales

     Sales increased by 88.0% to $82.0 million for the nine months ended
September 28, 1997 from $43.6 million for the nine months ended September 29,
1996. The growth in revenues was primarily attributable to initial sales of
single carrier PCS amplifiers, as well as increased sales of cellular multi-
carrier linear amplifiers, offset by a decrease in sales of LMR amplifiers along
with no sales of air-to-ground amplifiers. The first nine months of fiscal 1997
experienced continued demand for cellular multi-carrier amplifiers by the
Company's South Korean customers as they continued deployment of the digital
cellular CDMA system in South Korea, as well as initial volume shipments of the
Company's single carrier PCS amplifiers for implementation in the new Korean PCS
network. The Company currently expects sales of cellular multi-carrier
amplifiers for deployment in South Korea to begin to decline during 1997 with
full deployment estimated to be completed during 1998.

     For the nine months ended September 28, 1997, cellular multi-carrier
amplifiers (including racks) accounted for approximately 58.0% of revenues or
$47.5 million, compared to approximately 75.0% or 32.7 million for the first
nine months of fiscal 1996.  The first nine months of 1997 saw an increase in
the demand for PCS single carrier products with initial volume shipments of such
products.  PCS products (including racks) accounted for approximately 36.3% of
revenues or $29.8 million for the first nine months of 1997 compared to .2% or
$.1 million for the first nine months in 1996.  The Company anticipates that PCS
products will continue to account for a significant percentage of the Company's
net sales.  LMR (or SMR) amplifiers accounted for approximately 5.7% or $4.6
million of revenues for the nine months ended September 28, 1997, compared to
approximately 12.8% or $5.6 million of revenues for the nine months ended
September 29, 1996.  There were no sales of air-to-ground amplifiers for the
first nine months of 1997 compared to approximately $5.2 million or 12.0% of
sales for the nine months ended September 29, 1996.  In January 1997, In-Flight
Phone Corporation, one of the Company's major customers for air-to-ground
amplifiers, filed for Chapter 11 Bankruptcy protection.  The Company had
previously fully reserved its accounts receivable exposure to this customer and
does not expect this bankruptcy filing to have any material impact on the
Company's financial condition.  International sales, primarily to customers in
South Korea, accounted for 87.5% of revenues for the nine months ended September
28, 1997, compared with 72.5% for the nine months ended September 29, 1996.

Gross Profit

  Gross profit margins for the first nine months of fiscal 1997 and 1996 were
40.3% and 41.8% respectively.  The decrease in gross margins was primarily
attributable to the introduction and volume shipments of the new single carrier
PCS product line which has lower prices and gross margins.  The Company
anticipates that its sales of single carrier PCS amplifiers, which have lower
sales prices and lower gross margins, will continue to account for a significant
portion of revenues which will accordingly impact the Company's total gross
margins.  For a discussion of the effects of declining average sales prices on
the Company's business, see "Additional Factors that May Affect Future Results--
Declining Average Sales Prices."

                                       10
<PAGE>
 
Operating Expenses

     Sales and marketing expenses increased by 82.9% to $6.1 million for the
nine months ended September 28, 1997 from $3.3 million for the nine months ended
September 29, 1996. As a percentage of sales, sales and marketing expenses were
7.4% and 7.6%, respectively. The increase in actual sales and marketing expenses
was primarily attributable to increases in the sales and marketing staff and
sales commissions related to increased product sales.

     Research and development expenses increased by 96.8% to $7.9 million for
the nine months ended September 28, 1997 from $4.0 million for the nine months
ended September 29, 1996. Research and development expenses as a percentage of
sales were 9.7% and 9.3%, respectively. The increase in research and development
expenses was primarily attributable to increased staffing and associated
engineering costs related to continued new and existing product development,
including the continued development of amplifiers for PCS networks which
initially began during the third quarter of 1996. There was no PCS development
during the first two quarters of 1996. The Company intends to continue to
emphasize investments in research and development programs in future periods
with current programs covering both PCS and cellular products.

     General and administrative expenses increased by 65.8% to $3.3 million for
the nine months ended September 28, 1997 from $2.0 million for the nine months
ended September 29, 1996. General and administrative expenses as a percentage of
sales were 4.1% and 4.6%, respectively. The increase in actual general and
administrative expenses was primarily attributable to increased staffing costs
associated with supporting the Company's increased revenues.

Other Income

     The Company earned other income of $1.8 million in the first nine months of
1997 compared to $.3 million for the first nine months of 1996.  Other income
consists primarily of interest income, net of any interest expense.  The
increase in net interest income is attributed to the Company's increased cash
position maintained during the first nine months of 1997 compared to the cash
balances maintained during the first nine months of 1996.  The larger cash
balances were due to both the Company's initial public offering of Common Stock
and secondary Common Stock offering, as well as cash flow generated from
operations.  The larger cash balances were invested in short-term money market
instruments.

Provision for Income Taxes

     The Company's effective tax rate was 37.6% and 41.0% for the nine month
periods ended September 28, 1997 and September 29, 1996, respectively.

Liquidity and Capital Resources

     The Company has historically financed its operations primarily through a
combination of cash on hand, cash provided from operations, equipment lease
financings, available borrowings under its bank line of credit and both private
and public equity offerings.  As of September 28, 1997, the Company had working
capital of $71.0 million, including $70.1 million in cash and cash equivalents
as compared with working capital of $33.2 million at December 29, 1996.  The
increase in cash balances for the first nine months of 1997 compared to the
prior period was primarily attributed to the Company's initial public offering
of Common Stock which was completed in December 1996 and provided the Company
with additional cash of $18.3 million (net of expenses), the sale of the over-
allotment  common shares which added an additional $3.9 million in January 1997,
and the secondary offering of Common Stock completed in July 1997 which provided
additional cash of $20.6 million (net of expenses).

     Net accounts receivable were approximately $9.5 million at September 28,
1997, compared with $3.3 million at December 29, 1996. This increase in accounts
receivable was primarily due to increased revenues during the third quarter of
1997 when compared to the fourth quarter of 1996. Net inventory increased to
$8.3 million at September 28, 1997, from $4.7 million at December 29, 1996. This
increase is largely attributed to the production of the new single carrier PCS
product line and increased production of multi-carrier cellular amplifiers.
Inventory turns as of September 28, 1997 were 9.9 compared to 8.0 at the end of
fiscal 1996. Accounts payable increased to $9.4 million 

                                       11
<PAGE>
 
at September 28, 1997, from $3.6 million at December 29, 1996. The increase in
accounts payable was primarily due to increased inventory levels, increased
production levels and increased capital spending.

     Cash provided by operations was approximately $15.1 million for the nine
months ended September 28, 1997, compared to $7.2 million for the nine months
ended September 29, 1996.  Cash provided by financing activities was
approximately $27.8 million for the first nine months of 1997 compared with $.2
million for the first nine months of 1996.  The majority of the cash provided by
financing activities for the first nine months of 1997 resulted from the
secondary offering of 1,000,000 shares of Common Stock which provided net
proceeds of $20.6 million. In addition, the sale of 360,000 shares of Common
Stock in January 1997 provided the Company with net proceeds of $3.9 million and
was associated with the Company's December 1996 initial public offering of
Common Stock.  During the first nine months of 1997, the Company sold  $1.8
million of purchased test equipment to a bank leasing company, which leased the
equipment back to the Company for a three-year period.

     Capital expenditures were approximately $5.2 million for the first nine
months 1997 compared with $2.9 million in the first nine months of 1996.
Approximately $.8 million of capital expenditures for the first nine months of
1997 were financed through capital leases. The majority of the capital spending
during the first nine months of 1997 represents spending on electronic test
equipment utilized in both the Company's manufacturing and research and
development areas.

     On May 30, 1996, the Company entered into a $5 million unsecured committed
revolving credit agreement which expired on May 31, 1997.  On August 21, 1997,
the Company entered into a new $10 million unsecured revolving credit agreement.
The credit agreement contains covenants regarding certain financial ratios and
activities of the Company.  The Company is required to pay a commitment fee
equal to .1% per annum on the average daily unused portion of the facility.  The
commitment fee is payable quarterly in arrears.  The agreement allows the
Company to borrow at the bank's reference rate (8.5% at September 28, 1997) or
the bank's LIBOR rate plus 1.25% per annum, all at the Company's option.  The
Company was in compliance with all covenants at September 28, 1997 and no
amounts were outstanding under the facility.  The agreement terminates on July
31, 1998.

     On July 7, 1997 the Company completed the sale of 3,737,500 shares of
Common Stock (with 1,000,000 shares being sold by the Company and the balance by
selling shareholders), at a price of $22 per share of Common Stock. Net proceeds
received by the Company were approximately $20.6 million.

     The Company had cash and cash equivalents of $70.1 million at September 28,
1997, compared with $32.4 million at December 29, 1996.  The Company regularly
reviews its cash funding requirements and attempts to meet those requirements
through a combination of cash on hand, cash provided by operations, available
borrowings under any credit facilities, financing through equipment lease
transactions and possible future public or private debt and/or equity offerings.
The Company invests its excess cash in investment grade short-term money market
instruments.

     The Company believes that existing cash balances and funds expected to be
generated from operations will provide the Company with sufficient funds to
finance its operations for at least the next 12 months.  The Company has
utilized both operating and capital lease financing for certain equipment used
in its manufacturing and research and development operations and expects to
continue to selectively do so in the future. The Company may in the future
require additional funds to support its working capital requirements or for
other purposes, and may seek to raise such additional funds through the sale of
public or private equity and/or debt financings or from other sources.  No
assurance can be given that additional financing will be available in the future
or that, if available, such financing will be obtainable on terms favorable to
the Company or its shareholders when the Company may require it.

Additional Factors That May Affect Future Results

     Future operating results may be impacted by a number of factors that could
cause actual results to differ materially from those stated herein, which
reflect management's current expectations.  These factors include worldwide
economic and political conditions, industry specific factors, the Company's
ability to finance its activities and maintain its financial liquidity, the
Company's ability to timely develop and produce commercially 

                                       12
<PAGE>
 
viable products at competitive prices, the availability and cost of components,
the Company's ability to produce products which meet the quality standards of
both existing and potential new customers, the ability of the Company's products
to operate and be compatible with various OEMs base station equipment, the
Company's ability to manage expense levels, and the Company's ability to
accurately anticipate customer demand.

Customer Concentration

     A small number of customers account for a substantial majority of the
Company's net sales.  Although the Company is attempting to expand its customer
base, the Company expects that a limited number of customers will continue to
represent a substantial portion of the Company's net sales for the foreseeable
future.  The Company believes that its future success depends upon its ability
to broaden its customer base.  The Company's three largest customers include, in
alphabetical order, Hyundai Electronics Industries Co., Ltd. ("Hyundai"), LG
Information & Communications Co., Ltd. ("LGIC") and Samsung Electronics Co. Ltd.
("Samsung").  For the nine months ended September 28, 1997, these customers,
each of which accounted for at least 10% of the Company's net sales for such
period, accounted for approximately 86% of the Company's net sales in the
aggregate.  For fiscal 1996, these customers accounted for approximately 75% of
the Company's net sales.  Hyundai, LGIC and Samsung currently purchase products
primarily for implementation in the South Korean digital cellular telephone
network and the new South Korean digital PCS network which began initial
operation in October 1997.  The Company expects that these three customers will
account for a substantial majority of the Company's PCS product sales for the
foreseeable future.  In addition, the Company currently believes that the South
Korean digital cellular network is more than 65% completed and that the build-
out phase of this network has begun declining during 1997 with full deployment
estimated to be completed by the end of 1998.  The delay, termination or early
completion of the implementation of the South Korean digital cellular or PCS
communications networks would have a material adverse effect on the Company's
business, results of operations and financial condition.

     A limited number of large OEMs account for a majority of RF power amplifier
purchasers in the wireless infrastructure market, and the Company's success will
be dependent upon its ability to establish and maintain relationships with these
types of customers.  There can be no assurance that a major customer will not
reduce, delay or eliminate its purchases from the Company, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.  In addition, major customers also have significant
leverage and may attempt to change the terms, including pricing and product
delivery schedules, upon which the Company and such customers do business,
thereby adversely affecting the Company's business, results of operations and
financial condition.  Further, one or more of these customers may determine to
manufacture amplifiers internally, thus reducing or eliminating its purchases
from the Company and possibly becoming a direct competitor of the Company. See
"--Internal Amplifier Production Capabilities of OEMs."  As a result, the
Company's success will depend upon its ability to expand its customer base and,
in particular, to successfully market its products to OEMs for wireless networks
and have its products chosen over any internally designed or manufactured
products.

     The Company currently sells to its major customers under purchase orders
which are usually placed with short-term delivery requirements. As such, while
the Company receives periodic order forecasts from its major customers, such
customers have no obligation to purchase the forecasted amounts and may cancel
orders, change delivery schedules or change the mix of products ordered with
minimal notice. Nonetheless, the Company maintains significant work-in-progress
and raw materials inventory as well as maintaining increased levels of technical
production staff to meet order forecasts. To the extent its major customers
purchase less than the forecasted amounts, the Company will have higher levels
of inventory than otherwise needed, increasing the risk of obsolescence, and the
Company will have increased levels of production staff to support such
forecasted orders. Such higher levels of inventory and increased employee levels
would reduce the Company's liquidity and could have a material adverse effect on
the Company's business, results of operations and financial condition. In
addition, in the event the Company's major customers desire to purchase products
in excess of the forecasted amounts, the Company may not have sufficient
inventory or manufacturing capacity to fill such increased orders, which could
have a material adverse effect on the Company's relationships and future
business with its customers.

                                       13
<PAGE>
 
Reliance upon South Korean Market and Growth of Wireless Services Market

     Three of the Company's customers, Hyundai, LGIC and Samsung, collectively
accounted for approximately 86% of the Company's net sales for the nine months
of fiscal 1997, and approximately 75% of the Company's net sales for fiscal
1996.  These customers are expected to continue to account for a substantial
majority of the Company's sales during the remainder of 1997.  These customers
supply equipment for implementation in the South Korean digital cellular and PCS
networks.  During fiscal 1995, 1996 and the first nine months of 1997, Hyundai,
LGIC and Samsung purchased multi-carrier linear RF power amplifiers for
installation in the build out of the South Korean digital cellular network.  The
delay or termination of the continued implementation of the South Korean digital
cellular network would have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, the Company
currently believes that the South Korean digital cellular network is more than
65% completed and that the build-out phase of this network has begun declining
during 1997 with full deployment estimated to be completed by the end of 1998.
Accordingly, the Company's sales directly related to the South Korean digital
cellular network are anticipated to decrease significantly over the same time
period.

     In contrast to the South Korean digital cellular network, the build-out of
the South Korean PCS network began in the first quarter of 1997. During the
first nine months of 1997, the Company began shipping in volume PCS single
carrier amplifiers for use in the new PCS network being built in South Korea.
Sales to the Company's Korean customers for the Korean PCS network represented
substantially all of the Company's PCS sales. The delay, termination or early
completion of the infrastructure build-out of the South Korean PCS network would
have a material adverse effect on the Company's business, results of operations
and financial condition. Further, even if this network is developed as
anticipated, there can be no assurance that the Company's PCS products will
achieve market acceptance outside of Korea, or be capable of being manufactured
at competitive prices in sufficient volumes, In the event that the Company's PCS
products are not timely developed or do not gain market acceptance or are not
capable of being manufactured at competitive costs, the Company's business,
results of operations and financial condition would be materially adversely
affected.

     Hyundai, LGIC and Samsung also have begun marketing wireless infrastructure
equipment for installation in networks outside of the South Korean market.
There can be no assurance that such customers will be successful in obtaining
new business outside of South Korea or that, if successful, they will continue
to purchase amplifiers from the Company.  Any significant decrease in the
Company's sale of amplifiers to these customers, without an offsetting increase
in sales to other customers, would have a material adverse effect on the
Company's business, results of operations and financial condition.

     A substantial majority of the Company's revenues are derived from the sale
of RF power amplifiers for wireless communications networks, and the future
success of the Company depends to a considerable extent upon the continued
growth and increased availability of cellular and other wireless communications
services, including PCS, in the United States and internationally. There can be
no assurance that either subscriber use or the implementation of wireless
communications services will continue to grow, or that such factors will create
demand for the Company's products. The Company believes that continued growth in
the use of wireless communications services depends on significant reductions in
infrastructure capital equipment cost per subscriber and corresponding
reductions in wireless service pricing. While in the United States the Federal
Communications Commission ("FCC") has adopted regulations requiring local phone
companies to reduce the rates charged to cellular carriers for connection to
their wireline networks, it is anticipated that wireless service rates will
remain higher than rates charged by traditional wireline companies. The growth
in the implementation of wireless communications services is dependent upon both
developed countries, such as the United States, allowing continued deployment of
new networks, and less developed foreign countries deploying wireless
communications networks as opposed to constructing wireline infrastructures.
Foreign countries or local government authorities may decline to construct
wireless communications systems, place moratoriums on building base stations or
terminate or delay construction of such systems for a variety of reasons,
including environmental issues, political unrest, economic downturns, the
availability of favorable pricing for other communications services, the
availability and cost of related equipment or other delays in the implementation
of these systems, in which event demand for the Company's products will be
similarly reduced or delayed, which would materially adversely affect the
Company's business, results of operations and financial condition. See "--Risks
of Doing Business in International Markets."

                                       14
<PAGE>
 
Risks of Doing Business in International Markets

     For the fiscal years 1995, 1996 and the first nine months of fiscal 1997,
international revenues accounted for approximately 67%, 77% and 88%,
respectively, of the Company's net sales.  The Company expects that
international revenues will continue to account for a significant percentage of
the Company's net sales for the foreseeable future.  As a result, the Company is
subject to various risks, including political and economic instability, the
difficulty of administering business globally, compliance with multiple and
potentially conflicting regulatory requirements such as export requirements,
tariffs and other barriers, differences in intellectual property protections,
health and safety requirements, difficulties in staffing and managing foreign
operations, longer accounts receivable cycles, currency fluctuations,
restrictions against the repatriation of earnings, export control restrictions,
overlapping or differing tax structures, political and economic instability and
general trade restrictions.  If any of these risks materializes, it could have a
material adverse effect on the Company's business, results of operations and
financial condition.  In particular, a large portion of the Company's existing
customers and potential new customers are servicing new markets in developing
countries that the Company's customers expect will deploy wireless
communications networks as an alternative to the construction of a wireline
infrastructure.  If such countries decline to construct wireless communication
systems, or construction of such systems are delayed for any of a variety of
reasons, including business and economic conditions and changes in economic
stability due to factors such as increased inflation and political turmoil, such
delays could have a material adverse effect on the Company's business, results
of operations and financial condition.  In recent years, a substantial majority
of the Company's net sales resulted from the sale of products to a small number
of companies in South Korea, where future sales may be dependent upon continuing
favorable business and economic conditions, as well as trade relations with the
United States and a lack of political conflicts with North Korea. During the
last month, economic conditions have deteriorated throughout the Asia-Pacific
region, causing reductions in local exchange rates throughout the region and
general financial market uncertainty.  In addition, during the last six months,
there have been press reports of deteriorating living conditions within North
Korea, which could lead to civil unrest possibly resulting in potential military
conflicts with South Korea.  There have also been press reports of military
conflicts between North and South Korea, which could potentially escalate into a
large scale conflict.  Any conflict, either political or military, between North
and South Korea could have a material adverse impact on the Company's business,
results of operations and financial condition.   Any significant change in the
South Korean economy or the deterioration of United States trade relations or
the economic or political stability of other foreign locations in which the
Company sells its products would have a material adverse effect on the Company's
business, results of operations and financial condition.

     The Company's foreign sales are generally invoiced in U.S. dollars.
Accordingly, the Company does not currently engage in foreign currency hedging
transactions.  However, as the Company continues to expand its international
operations, the Company may be paid in foreign currencies and exposure to losses
in foreign currency transactions may increase.  The Company may choose to limit
such exposure by the purchase of forward foreign exchange contracts or similar
hedging strategies.  There can be no assurance that a currency hedging strategy
would be successful in avoiding exchange-related losses.  In addition, if the
relative value of the U.S. dollar in comparison to the currency of the Company's
foreign customers should increase, the resulting effective price increase of the
Company's products to such foreign customers could result in decreased sales
which could have a material adverse impact on the Company's business, results of
operations and financial condition.

Fluctuations in Quarterly Results

     The Company experiences, and expects to continue to experience, significant
fluctuations in sales and operating results from quarter to quarter.  Quarterly
results fluctuate due to a number of factors, any of which could have a material
adverse effect on the Company's business, results of operations and financial
condition.  In particular, the Company's quarterly results of operations can
vary due to the timing, cancellation, or rescheduling of customer orders and
shipments; variations in manufacturing capacities, efficiencies and costs; the
availability and cost of components; capacity and production constraints
associated with single source component suppliers; the timing, availability and
sale of new products by the Company; product failures and associated in-field
service support costs; changes in the mix of products having differing gross
margins; warranty expenses; changes in average sales prices; long sales cycles
associated with the Company's products; economic slowdowns in the Company's
customers' operating regions; and variations in product development and other
operating expenses.  The Company's quarterly 

                                       15
<PAGE>
 
revenues are also affected by volume discounts given to certain customers for
large volume purchases over a given period of time. In addition, the Company's
quarterly results of operations are influenced by competitive factors, including
pricing, availability and demand for the Company's and competing amplifier
products. A large portion of the Company's expenses are fixed and difficult to
reduce in a short period of time. If net sales do not meet the Company's
expectations, the Company's fixed expenses would exacerbate the effect of such
net sales shortfall. Furthermore, announcements by the Company or its
competitors regarding new products and technologies could cause customers to
defer purchases of the Company's products. In addition, while the Company
receives periodic order forecasts from its major customers, such customers have
no binding obligation to purchase the forecasted amounts. See "--Customer
Concentration." Order deferrals and cancellations by the Company's customers,
declining average sales prices, changes in the mix of products sold, delays in
the Company's introduction of new products and longer than anticipated sales
cycles for the Company's products have in the past adversely affected the
Company's quarterly results of operations. There can be no assurance that the
Company's quarterly results of operations will not be similarly adversely
affected in the future.

     Due to the foregoing factors, the Company believes that period-to-period
comparisons of its operating results are not necessarily meaningful and that
such comparisons cannot be relied upon as indicators of future performance.
There can be no assurance that the Company will maintain its current
profitability in the future or that future revenues and operating results will
not be below the expectations of public market analysts and investors.  In
either case, the price of the Company's Common Stock could be materially
adversely affected.  See "--Possible Volatility of Stock Price."

Declining Average Sales Prices

     The Company has experienced, and expects to continue to experience,
declining average sales prices for its products. Wireless infrastructure OEMs
have come under increasing price pressure from cellular service providers and
PCS service providers, which in turn has resulted in downward pricing pressure
on the Company's products. In addition, competition among third-party suppliers
has increased the downward pricing pressure on the Company's products. Since
wireless infrastructure OEMs frequently negotiate supply arrangements far in
advance of delivery dates, the Company must often commit to price reductions for
its products before it knows how, or if, cost reductions can be obtained. In
addition, average sales prices are affected by price discounts negotiated for
large volume purchases by certain customers over a given period of time. To
offset declining average sales prices, the Company believes that in the near
term it must achieve manufacturing cost reductions, and in the longer term the
Company must develop new products that incorporate advanced features and that
can be manufactured at lower cost or sold at higher average sales prices. If,
however, the Company is unable to achieve such cost reductions or product
improvements, the Company's gross margins could decline, and such decline could
have a material adverse effect on the Company's business, results of operations
and financial condition.

     In the fourth quarter of 1996, the Company introduced single carrier
amplifiers for PCS networks, and such products have accounted for an increasing
percentage of the Company's net sales during the first nine months of 1997.
Since that time sales of single carrier amplifiers have been subject to intense
price competition and tend to carry lower gross margins than multi-carrier
amplifier products.  In addition, while the Company has increased the production
level of its single carrier PCS products, the Company has had difficulty
reducing the cost of materials for such products during this ramp-up.  In the
event that the Company is unable to reduce the manufacturing costs of its single
carrier amplifiers and such amplifiers continue to account for a significant
percentage of net sales, the Company's overall gross margins will be materially
adversely affected.

Management of Growth; Dependence Upon Key Personnel

     The growth in the Company's business has placed, and is expected to
continue to place, a significant strain on the Company's management and
operations. The Company's ability to compete effectively and to manage future
expansion of its operations, if any, will require the Company to continue to
improve its financial and management controls, reporting systems and procedures
on a timely basis and effectively expand, train and manage its work force. In
particular, the Company must carefully manage production and inventory levels
and product quality to meet increasing product demand and new product
introductions. Inaccuracies in demand forecasts in the environment in which the
Company operates can quickly result in either insufficient or excessive
inventories and

                                       16
<PAGE>
 
disproportionate overhead expenses.  Any degradation in product quality could
adversely impact production rates, product delivery schedules and overhead
expenses associated with product support.  The Company continues to implement a
number of new financial and management controls, reporting systems and
procedures.  The Company has recently hired a significant number of employees,
including engineers, production technicians and sales and marketing employees,
and plans to further increase its total employee base to meet demand forecasts.
In the event that the Company's new personnel are unable to work effectively as
a team or achieve desired production levels and product quality or if the
Company's demand forecasts are incorrect, the Company's business, results of
operations and financial condition could be materially adversely affected.
There can be no assurance that the Company will be able to continue to attract
and retain qualified personnel necessary for the development of its business.
The Company's failure to manage growth effectively would have a material adverse
effect on the Company's business, results of operations and financial condition.

     Due to the specialized nature of the Company's business, the Company is
highly dependent on the continued services of, and on its ability to attract and
retain, qualified technical, marketing and managerial personnel. Competition for
such personnel, particularly qualified engineers, is intense, and the loss of a
significant number of such persons, as well as the failure to recruit and train
additional technical personnel in a timely manner, could have a material adverse
effect on the Company's business, results of operations and financial condition.

Dependence on Single Sources for Key Components

     The Company currently procures, and expects to continue to procure, certain
components from single source manufacturers due to unique component designs as
well as certain quality and performance requirements.  In addition, in order to
take advantage of volume pricing discounts, the Company purchases certain
customized components for its products from single sources.  The Company has
experienced, and may in the future experience, shortages of single-sourced
components.  In such event, the Company may have to make adjustments to both
product designs and production schedules.  If such single-sourced components
were to become unavailable in sufficient quantities or were to become available
only on terms unsatisfactory to the Company, the Company would be required to
purchase comparable components from other sources and "retune" its products to
function properly with the replacement components or redesign its products to
use other components, either of which could result in delays in production and
delivery.  If for any reason the Company could not obtain comparable replacement
components in sufficient volume from other sources or could not expeditiously
retune its products to operate with the replacement components, or redesign its
products to use other components, the Company's business, results of operations
and financial condition could be adversely affected.  In addition, if the
Company were unable to obtain sufficient quantities of single-sourced components
used in the manufacture of its RF power amplifiers, resulting delays or
reductions in product shipments could occur and could have a material adverse
affect on the Company's business, results of operations and financial condition,
including a material adverse effect on the Company's relationships with its
customers as well as potential customers.

Competition

     The wireless infrastructure equipment industry is extremely competitive and
is characterized by rapid technological change, new product development, product
obsolescence, evolving industry standards and significant price erosion over the
life of a product. The principal elements of competition in the Company's market
include performance, functionality, reliability, pricing, quality, the ability
to design products which can be efficiently manufactured in volume production,
time-to-market delivery capabilities and standards compliance. While the Company
believes that overall it competes favorably with respect to the foregoing
elements, there can be no assurance that it will be able to continue to do so.

     Currently, the Company competes primarily with Avantek (a division of
Hewlett-Packard), AML Communications, Inc., M/A-COM, Inc. (a subsidiary of AMP,
Inc.), Microwave Power Devices, Inc. and Spectrian Corporation, in addition to
the amplifier manufacturing operations captive within certain of the leading
wireless infrastructure OEMs. Certain of the Company's current and potential
competitors have significantly greater financial, technical, manufacturing,
sales, marketing and other resources than the Company and have achieved greater
name recognition for their existing products and technologies than has the
Company.

                                       17
<PAGE>
 
     The Company's success depends in part upon the rate at which wireless
infrastructure OEMs incorporate the Company's products into their systems.  The
Company believes that a substantial portion of the present worldwide production
of amplifiers is captive within the internal manufacturing operations of a small
number of wireless infrastructure OEMs and that the amplifiers manufactured by
these OEMs are offered for sale as part of their wireless systems.  These OEMs
include, among others, LM Ericsson Telephone Company ("Ericsson"), Lucent
Technologies Incorporated ("Lucent"), Motorola Corporation ("Motorola"), Nokia
Corporation ("Nokia") and Northern Telecom Limited ("Nortel").  In addition,
Samsung, a significant customer of the Company, manufacturers power amplifiers
in addition to purchasing such components from the Company.  The Company
believes that these OEMs, as well as other customers of the Company,
continuously evaluate whether to manufacture their own RF power amplifiers
rather than purchase them from third-party vendors such as the Company.  These
and other large manufacturers of wireless infrastructure equipment could also
determine to offer and sell their power amplifiers to other OEMs or customers of
the Company and compete directly with the Company.  In addition, these or other
OEMs may enter into joint ventures or strategic relationships with the Company's
competitors, in which event the Company's ability to sell products to such OEMs
could be reduced or eliminated.  See "--Internal Amplifier Production
Capabilities of OEMs."

     The Company has experienced significant price competition and expects price
competition in the sale of RF power amplifiers to increase.  No assurance can be
given that the Company's competitors will not develop new technologies or
enhancements to existing products or introduce new products that will offer
superior price or performance features.  The Company expects its competitors to
offer new and existing products at prices necessary to gain or retain market
share.  Several of the Company's competitors have substantial financial
resources, which may enable them to withstand sustained price competition or a
downturn in the market.  There can be no assurance that the Company will be able
to compete successfully in the pricing of its products, or otherwise, in the
future.

Rapid Technological Change; Dependence on New Products

     The markets in which the Company and its customers compete are
characterized by rapidly changing technology, evolving industry standards and
communications protocols, and continuous improvements in products and services.
The Company's future success depends on its ability to enhance its current
products and to develop and introduce in a timely manner new products that keep
pace with technological developments, industry standards and communications
protocols, compete effectively on the basis of price, performance and quality,
adequately address OEM customer and end-user customer requirements and achieve
market acceptance. The Company believes that to remain competitive in the future
it will need to continue to develop new products, which will require the
investment of significant financial resources in new product development. During
the nine months of fiscal 1997, the Company continued to invest significant
resources in the development and manufacture of RF power amplifiers for PCS
networks and expects to continue to invest significant resources in this area.
There can be no assurance that the deployment of PCS networks will not be
delayed or that the Company's PCS-based products will achieve widespread market
acceptance or be capable of being manufactured at competitive prices in
sufficient volumes. In the event the Company's PCS products are not timely and
economically developed and are not produced in sufficient quantities or do not
gain widespread market acceptance, the Company's business, results of operations
and financial condition would be materially adversely affected.

     In addition to its PCS development efforts, the Company continues to
develop improvements and additions to its cellular line of amplifier products,
including the Company's next-generation multi-carrier linear cellular amplifier.
Any delays in commencement of commercial shipments of these products may result
in customer dissatisfaction and delay or loss of product revenues, which could
have a material adverse effect on the Company's business, results of operations
and financial condition. No assurance can be given that the Company's product
development efforts will be successful, or that its new products will achieve
customer acceptance or that its customers' products and services will achieve
market acceptance. If a significant number of development projects do not result
in manufacturable new products or product enhancements within anticipated time-
frames, the Company's business, results of operations and financial condition
could be materially adversely affected. Any failure by the Company to anticipate
or respond adequately to technological developments and customer requirements,
or any significant delays in product development, introduction or deliveries,
could result in a loss of competitiveness and reduced net sales. While the
Company maintains an active development program to attempt to improve its
product offerings, there can be no assurance that such efforts will be
successful or that other companies 

                                       18
<PAGE>
 
or institutions will not develop and commercialize products based on new
technologies that are superior in performance or cost-effectiveness to the
Company's products. There can also be no assurance that the Company's products
will not be rendered obsolete by the introduction and acceptance of new
communications protocols.

No Assurance of Product Manufacturability, Quality or Reliability

     Manufacturing the Company's products is an extremely complex process and
requires significant time and expertise to tune the products to meet customers'
specifications.  The ability of the Company to cost-effectively manufacture its
RF power amplifier products in volume is substantially dependent upon the
Company's ability to tune these products to meet specifications in an efficient
manner.  In this regard, the Company is dependent upon its staff of trained
technicians and engineers.  If the Company is unable to design its products to
minimize the manual tuning process or if the Company were unable to attract
additional trained technicians, or were to lose the services of a number of its
trained technicians, the Company's business, results of operations and financial
condition would be materially adversely affected.  The Company has been required
to replace certain components in some of its products in accordance with
warranty provisions under which the products were sold.  The Company recently
introduced single carrier RF power amplifiers for PCS networks and anticipates
that it will continue to introduce new-generation RF power amplifiers products
for both cellular and PCS networks.  Companies involved in the development and
manufacture of new products which contain complex technologies often encounter
difficulties in performance and reliability and encounter delays in product
introduction and volume shipments.  The Company believes that customers will
demand increasingly stringent product performance, quality and reliability.  The
Company has in the past experienced, and may from time to time in the future
experience, quality problems with its products.  If any of these problems were
to occur on a significant level, the Company could experience increased costs,
delays in or cancellations of, or rescheduling of, orders or deliveries and
product returns, any of which could damage relationships with current customers
and have a material adverse effect on the Company's business, results of
operations and financial condition.   There can be no assurance that the
Company's product designs will continue to be successful or will keep pace with
technological developments, evolving industry standards and communications
protocols, and allow for continuous improvements in product quality and meet the
quality standards of customers.  Any potential design problems could damage
relationships with both existing and prospective customers and, in particular,
could limit the Company's ability to market its products to large OEMs, many of
which manufacture power amplifiers internally and have stringent quality control
standards.  See "--Internal Amplifier Production Capabilities of OEMs."

Internal Amplifier Production Capabilities of OEMs

     Many of the leading wireless infrastructure equipment manufacturers
internally manufacture their own RF power amplifiers, and the Company believes
that its existing customers continuously evaluate whether to manufacture their
own amplifiers. Certain customers of the Company have produced internally
designed amplifiers in an attempt to replace products manufactured by the
Company. The Company expects that this practice will continue. In addition,
LGIC, one of the Company's customers, has entered into a joint venture
manufacturing arrangement with one of the Company's competitors. In the event
that customers of the Company do manufacture their own amplifiers, such
customers could eliminate or reduce their purchases of the Company's products.
There can be no assurance that the Company's current customers will continue to
rely, or expand their reliance, on the Company as an external source of supply
for their RF power amplifiers, or that other wireless telecommunications OEMs
such as Lucent, Ericsson, Motorola, Nokia and Nortel will become and remain
customers of the Company. OEMs with internal manufacturing capabilities could
also sell amplifiers externally to other OEMs, thereby competing directly with
the Company. In addition, even if the Company were successful in selling its
products to these OEMs, it is anticipated that such OEMs would demand price and
other concessions based on their ability to manufacture amplifiers internally.
There can be no assurance that the Company will continue to enter into supply
contracts with OEMs on terms that are acceptable to the Company, if at all, or
that such contracts will not be terminated on short notice. Any significant loss
of sales to current customers, not offset by sales to other customers, would
have a material adverse effect on the Company's business, results of operations
and financial condition. If, for any reason, the Company's major customers
decide to produce their RF power amplifiers internally or through joint ventures
with other competitors, or require the Company to participate in joint venture
manufacturing with such OEM, the Company's business, results of operations and
financial condition could be materially adversely affected.

                                       19
<PAGE>
 
     The Company's customers and other wireless infrastructure equipment
manufacturers are protective of their intellectual property, which may
contribute to certain manufacturers deciding to not seek RF power amplifiers
from external sources.  While the Company takes measures to ensure the
confidentiality of intellectual property disclosed to the Company by its
customers or developed by the Company for such customers, the appearance of a
close working relationship with a particular customer may adversely affect the
Company's ability to establish or maintain a relationship with, or sell products
to, competitors of the particular customer.  If the Company's major customers
decide not to purchase products from the Company due to the Company's
relationship to other customers, the Company's business, results of operations
and financial condition could be materially adversely affected.

Proprietary Technology; Risk of Third-Party Claims of Infringement

     The Company relies primarily upon trade secrets to protect its intellectual
property.  The Company generally enters into confidentiality and non-disclosure
agreements with its employees and limits access to and distribution of its
proprietary information.  In addition, the Company has applied for a U.S. patent
for its proprietary implementation of feedforward technology and regularly
examines various aspects of its technology for possible patent applications.
The Company believes that its success depends upon the knowledge and experience
of its management and technical personnel and its ability to market its existing
products and to develop new products.

     The Company's ability to compete successfully and achieve future revenue
growth will depend, in part, on its ability to protect its proprietary
technology and operate without infringing upon the rights of others.  There can
be no assurance that the Company will be able to successfully protect its
intellectual property or that the Company's intellectual property or proprietary
technology will not otherwise become known or be independently developed by
competitors.  In addition, the laws of certain countries in which the Company's
products are or may be sold may not protect the Company's products and
intellectual property rights to the same extent as the laws of the United
States.  The inability of the Company to protect its intellectual property and
proprietary technology could have a material adverse effect on its business,
results of operations and financial condition.  As the number of patents,
copyrights and other intellectual property rights in the Company's industry
increases, and as the coverage of these rights and the functionability of the
products in the market further overlap, the Company believes that its products
may increasingly become the subject of infringement claims.  The Company may in
the future be notified that it is infringing upon certain patent or other
intellectual property rights of others.  Although the Company has not received
any such notification to date and there are no pending or threatened
intellectual property lawsuits against the Company, there can be no assurance
that such litigation or infringement claims will not occur in the future.  Such
litigation or claims could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
results of operations and financial condition.  A third party claiming
infringement may also be able to obtain an injunction or other equitable relief,
which could effectively block the ability of the Company or its customers to
distribute, sell or import into the United States allegedly infringing products.
If it appears necessary or desirable, the Company may seek licenses under
patents or other rights from third parties covering intellectual property that
the Company is allegedly infringing.  No assurance can be given, however, that
any such licenses could be obtained on terms acceptable to the Company, if at
all.  The failure to obtain the necessary licenses or other rights could have a
material adverse effect on the Company's business, results of operations and
financial condition.

Risks Associated with Developing Technologies; Product Liability

     If wireless telecommunications systems or other systems or devices that
rely on or incorporate the Company's products are determined, perceived or
alleged to create a health risk, the Company could be named as a defendant, and
held liable, in product liability lawsuits commenced by individuals alleging
that the Company's products harmed them. The occurrence of any such event could
have a material adverse effect on the Company's business, results of operations
and financial condition. Any alleged health or environmental risk could also
lead to a delay or prohibition against the installation of wireless networks
which could have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, an inability to maintain
insurance at an acceptable cost or to otherwise protect against potential
product liability could inhibit the commercialization of the Company's products
and have a material adverse effect on the Company's business, results of
operations and financial condition. Further, the installation of base stations
for wireless networks may be delayed or prohibited by 

                                       20
<PAGE>
 
various environmental regulations. Any such delay or prohibition would have a
material adverse effect on the Company's business, results of operations and
financial condition.

Environmental Regulations

     The Company is subject to a variety of local, state and federal government
regulations relating to the storage, discharge, handling, emission, generation,
manufacture and disposal of toxic or other hazardous substances used to
manufacture the Company's products.  Certain of the Company's products are also
subject to regulation of emissions by the FCC and similar government agencies.
The Company believes that it is currently in compliance in all material respects
with such regulations and that it has obtained all necessary environmental
permits and licenses to conduct its business.  The failure to comply with
current or future regulations could result in the imposition of substantial
fines on the Company, suspension of production, alteration of its manufacturing
processes or cessation of operations.  Corrective action may require the Company
to acquire expensive remediation equipment or to incur substantial expenses.
Any failure by the Company to control the use, disposal, removal or storage of,
or to adequately restrict the discharge of, or assist in the cleanup up,
hazardous or toxic substances, could subject the Company to significant
liabilities, including joint and several liability under certain statutes.  The
imposition of such liabilities could materially adversely affect the Company's
business, results of operations and financial condition.  In addition, the
installation of base stations by wireless service providers may be delayed or
restricted by various environmental regulations, land use restrictions and
zoning ordinances.  Any such delay or restriction could have a material adverse
effect on the Company's business, results of operations and financial condition.

Government Regulation of Communications Industry

     Radio frequency transmissions and emissions, and certain equipment used in
connection therewith, are regulated in the United States, Canada and
internationally.  Regulatory approvals generally must be obtained by the Company
in connection with the manufacture and sale of its products, and by the
Company's customers to operate the Company's products.  The FCC has adopted new
regulations that impose more stringent radio frequency emissions standards on
the communications industry and there can be no assurance that the Company and
its customers will not be required to alter the manner in which radio signals
are transmitted or otherwise alter the equipment transmitting such signals,
which could materially adversely affect the Company's products and markets. The
Company is also subject to regulatory requirements in international markets
where the Company is less prominent than local competitors and may have fewer
opportunities to participate in the formation of regulatory and standards
policies.  The enactment by federal, state, local or international governments
of new laws or regulations or a change in the interpretation of existing
regulations could adversely affect the market for the Company's products.
Although recent liberalization of international communications industries along
with recent radio frequency spectrum allocations made by the FCC have increased
the potential demand for the Company's products by providing users of those
products with opportunities to establish new PCS networks, there can be no
assurance that the trend toward deregulation and current regulatory developments
favorable to the promotion of new and expanded wireless services will continue
or that other future regulatory changes will have a positive impact on the
Company. The increasing demand for wireless communications has exerted pressure
on regulatory bodies worldwide to adopt new standards for such products,
generally following extensive investigation and deliberation over competing
technologies.  The delays inherent in this governmental approval process have in
the past caused, and may in the future cause, the cancellation, postponement or
rescheduling of the installation of communications systems by the Company's
customers.  These delays could have a material adverse effect on the Company's
business, results of operations and financial condition.

Possible Volatility of Stock Price

     The stock market has from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies, and the market prices for securities of technology
companies have been especially volatile.  These broad market fluctuations have
and may continue to adversely affect the market price of the Company's Common
Stock.  Factors such as fluctuations in the Company's results of operations,
failure of such results of operations to meet the expectations of stock market
analysts and investors, change in stock market analyst recommendations regarding
the Company and or its competitors, the timing and announcements of
technological innovations or new products by the Company, or its competitors,
developments 

                                       21
<PAGE>
 
with respect to patents and proprietary rights, timing and announcements of
developments related to the Company's customers, results of operations of
certain of the Company's competitors, government regulation, political or
economic instability in countries in which the Company sells its products,
changes in the wireless communications industry generally and general market
conditions may have a significant adverse effect on the market price of the
Company's Common Stock.

                                       22
<PAGE>
 
                          PART II.  OTHER INFORMATION
                                        

Item 2.    Changes in Securities and Use of Proceeds

           (f) Use of Proceeds
 
     On December 6, 1996, the Company completed its initial public offering of
Common Stock (the "IPO") by selling a total of 2,400,000 shares of Common Stock,
which included 1,800,000 shares sold by the Company and 600,000 shares sold by
the Selling Shareholders.  The initial price to the public of the Company's
Common Stock was $11.50 per share, less underwriting discounts and commissions
of $.805 per share.  The Company received net proceeds of $19.3 million from the
sale of the Common Shares before deducting offering expenses.  The Company did
not receive any of the proceeds from the sale of shares by the Selling
Shareholders.  Effective upon the closing of the IPO, the 3,375,900 shares of
Series A Convertible Preferred Stock of the Company were converted into
5,063,850 shares of Common Stock and all accrued dividends payable thereon were
reversed and eliminated.

     On January 3, 1997, the underwriters of the Company's IPO exercised their
option to purchase an additional 360,000 shares of Common Stock directly from
the Company at a price of $11.50 per share, less underwriting discounts and
commissions of $.805 per share.  The Company received net proceeds of $3.9
million from the sale of the Common Stock pursuant to the exercise of such
option.

     In conjunction with completing the IPO, the Company incurred total direct
offering expenses payable to unrelated third parties of approximately $.9
million.  Total net proceeds to the Company from the IPO and the over-allotment
exercise after deducting total expenses and underwriting discounts and
commissions was $22.2 million.

     The Company has used approximately $5.2 million of the net proceeds from
the IPO for capital expenditures, all of which were paid directly to unrelated
third parties. The remaining net proceeds of $17.0 million have been invested in
short-term investment grade money market instruments.

     On June 30, 1997, the Company completed a secondary offering of Common
Stock by selling a total of 3,250,000 shares of Common Stock, which included
750,000 shares sold by the Company and 2,500,000 shares sold by the Selling
Shareholders. The price to the public of the Company's Common Stock was $22.00
per share, less underwriter's discounts and commissions of $1.10 per share. The
underwriters exercised their option to purchase an additional 487,500 shares of
Common Stock (with 250,000 shares sold by the Company and the remaining 237,500
sold by the Selling Shareholders) at a price of $22.00 per share, less
underwriting discounts and commissions of $1.10 per share. The Company received
net proceeds of $20.9 million from the sale of shares in the secondary offering
before deducting offering expenses. The Company did not receive any of the
proceeds from the sale of shares by the Selling Shareholders. The Company
incurred total direct offering expenses payable to unrelated third parties of
approximately $.3 million in conjunction with the secondary offering of Common
Stock. The net proceeds after deducting total offering expenses and underwriting
discounts and commissions from the secondary offering were $20.6 million and
have been invested in short-term investment grade money market instruments.

                                       23
<PAGE>
 
Item 6.    Exhibits and Reports on Form 8-K

           (a) Documents filed as a part of this report:

<TABLE> 
<CAPTION> 
Exhibit
Number  Description
------  -----------
<C>     <S> 
 10.1   Credit Agreement dated as of August 1, 1997 between Powerwave
        Technologies, Inc. and Bank of America NT & SA.

 11.1   Computation of pro forma net income and net income per share.

 27.1   Financial Data Schedule.
</TABLE> 


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

                                       24
<PAGE>
 
                                   SIGNATURES
                                        
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                         POWERWAVE TECHNOLOGIES, INC.




Date: October 31, 1997              By:        /s/  KEVIN T. MICHAELS
                                        ----------------------------------------
                                                  Kevin T. Michaels
                                           Vice President, Finance and Chief
                                                  Financial Officer
 
                                       25
<PAGE>
 
                          POWERWAVE TECHNOLOGIES, INC.
                                        
                               INDEX TO EXHIBITS
<TABLE> 
<CAPTION> 

Exhibit
Number  Exhibits
------  --------
<C>     <S>     
 10.1   Credit Agreement dated as of August 1, 1997 between Powerwave
        Technologies, Inc. and Bank of America NT & SA.

 11.1   Computation of pro forma net income and net income per share.

 27.1   Financial Data Schedule.

</TABLE> 

                                       26