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UNITED STATES

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 July 1, 2012

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
incorporation or organization) |  | (I.R.S. Employer Identification No.)

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

(Address of principal executive offices, zip code)

(714) 466-1000

(Registrants telephone number, including area code)





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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes  x    No   ̈

Explanatory Note: Pursuant to Rule 405(a)(2) of Regulation S-T, the registrant is relying upon the applicable 30-day grace period for the
initial filing of its first Interactive Data File required to contain detail-tagged footnotes or schedules. The registrant intends to file the required detail-tagged footnotes or schedules by the filing of an amendment to this Quarterly Report on
Form 10-Q within the 30-day period.

Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, and smaller-reporting company in Rule 12b-2 of the Exchange Act. (Check
one):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  | x
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes   ̈    No  x

As of August 7, 2012, the registrant had 31,741,931 shares of Common Stock outstanding.









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POWERWAVE TECHNOLOGIES, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE AND SIX MONTHS ENDED JULY 1, 2012

TABLE
OF CONTENTS



|                                                           |  |                                                                                       |    |      |    | 
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                           |  |                                                                                       |    | PAGE |   
|                                                           | 
|CAUTIONARY STATEMENT RELATED TO FORWARD LOOKING STATEMENTS |  |                                                                                       | 3  |     
|                                                           | 
|HOW TO OBTAIN POWERWAVE SEC FILINGS                        |  |                                                                                       | 4  |     
|                                                           | 
|PART I  FINANCIAL INFORMATION                             |  |                                                                                       | 5  |     
|                                                           |  |                                                                                      
|Item 1.                                                    |  | Financial Statements (Unaudited)                                                      |    |      | 5  | 
|                                                           |  |                                                                                      
|                                                           |  | Consolidated Balance Sheets                                                           |    |      | 5  | 
|                                                           |  |                                                                                      
|                                                           |  | Consolidated Statements of Operations                                                 |    |      | 6  | 
|                                                           |  |                                                                                      
|                                                           |  | Consolidated Statements of Comprehensive Income (Loss)                                |    |      | 7  | 
|                                                           |  |                                                                                      
|                                                           |  | Consolidated Statements of Cash Flows                                                 |    |      | 8  | 
|                                                           |  |                                                                                      
|                                                           |  | Notes to Consolidated Financial Statements                                            |    |      | 9  | 
|                                                           |  |                                                                                      
|Item 2.                                                    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |    |      | 23 | 
|                                                           |  |                                                                                      
|Item 3.                                                    |  | Quantitative and Qualitative Disclosures About Market Risk                            |    |      | 37 | 
|                                                           |  |                                                                                      
|Item 4.                                                    |  | Controls and Procedures                                                               |    |      | 38 | 
|                                                           | 
|PART II  OTHER INFORMATION                                |  |                                                                                       | 38 |     
|                                                           |  |                                                                                      
|Item 1.                                                    |  | Legal Proceedings                                                                     |    |      | 38 | 
|                                                           |  |                                                                                      
|Item 1A.                                                   |  | Risk Factors                                                                          |    |      | 40 | 
|                                                           |  |                                                                                      
|Item 6.                                                    |  | Exhibits                                                                              |    |      | 55 | 
|                                                           | 
|SIGNATURES                                                 |  |                                                                                       | 56 |     



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CAUTIONARY STATEMENT RELATED TO FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that concern matters that involve risks and uncertainties that could
cause actual results to differ materially from those projected in the forward-looking statements. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act
of 1995. All statements other than statements of historical fact contained in this report, including, without limitation, statements regarding future events, our future financial performance, our business strategy and plans and objectives of
management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by using terminology including anticipates, believes, can, continue,
could, estimates, expects, intends, may, plans, potential, predicts, should or will or the negative of these terms or other
comparable terminology. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Such forward-looking statements are subject to risks, uncertainties and other
factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Actual results could differ materially from those projected in forward-looking
statements as a result of the following factors, among others:



| |  |  | reductions in demand for our products by certain customers;
| | - |  | -----------------------------------------------------------



| |  |  | our need for additional capital in the future and the possibility that additional financing may not be available on favorable terms or at all;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limited cash and negative operating results have impacted our supply chain and production capabilities;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | our reliance upon a few customers to generate the majority of our revenues;
| | - |  | ---------------------------------------------------------------------------



| |  |  | potential delisting from the NASDAQ Global Select Market;
| | - |  | ---------------------------------------------------------



| |  |  | a reduction in our sales due to our strategic focus on growing sales of higher margin products;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | significant fluctuations in sales and operating results from quarter to quarter;
| | - |  | --------------------------------------------------------------------------------



| |  |  | continued or increased economic weakness and uncertainty resulting from continuing high unemployment rates, low consumer confidence, tight credit
markets, the sovereign debt crisis affecting certain countries in the European Union, and concerns about the level of sovereign debt within the United States;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our dependence upon single sources or limited sources for key components and products;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | our potential failure to develop products that are of adequate quality and reliability, which could negatively impact our ability to sell our
products and could expose us to significant liabilities;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | potential unexpected cost increases in coverage systems projects;
| | - |  | -----------------------------------------------------------------



| |  |  | financial difficulties of our key customers or suppliers;
| | - |  | ---------------------------------------------------------



| |  |  | unanticipated restructuring costs and the need to undertake restructuring actions;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | increases in commodity and energy costs;
| | - |  | ----------------------------------------



| |  |  | continuing declines in the sales prices of our products;
| | - |  | --------------------------------------------------------



| |  |  | potential direct competition from our suppliers, contract manufacturers and customers;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | the future growth, or lack of growth, in the wireless communications industry;
| | - |  | ------------------------------------------------------------------------------



| |  |  | inventory fluctuations due to our reliance on contract manufacturers, components and supply chains with long lead times;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | future additions to, or consolidations of manufacturing operations, which may present economic risks;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | risks related to future acquisitions or strategic alliances;
| | - |  | ------------------------------------------------------------



| |  |  | our ability to enhance our existing products or develop new products that are sufficiently manufacturable and meet our customers needs and
requirements;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to hire and retain highly-qualified technical and managerial personnel;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | risks related to our international operations, particularly with respect to operations in Asia and Europe;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | delays in forecasted sales as a result of our lengthy initial sales cycle;
| | - |  | --------------------------------------------------------------------------



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| |  |  | our ability to protect our intellectual property and third party claims of intellectual property infringement;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | the nature and complexity of regulatory requirements that apply to us, and our ability to obtain or maintain any required regulatory approvals;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the competitiveness of our industry, which is characterized by rapid technological change;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | variability in our quarterly and annual effective tax rate;
| | - |  | -----------------------------------------------------------



| |  |  | volatility with respect to the price of our Common Stock as a result of our recent financial performance, expectations regarding our future
financial performance, or other factors;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | potential decreases in the price of our Common Stock due to the issuance of Common Stock upon conversion of our outstanding convertible instruments;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | defensive provisions contained in our charter and bylaws; and
| | - |  | -------------------------------------------------------------



| |  |  | other risks set forth in Item 1A of Part II of this quarterly report under the heading Risk Factors.
| | - |  | ------------------------------------------------------------------------------------------------------

Readers are urged to carefully review and consider the various disclosures made by the Company,
which attempt to advise interested parties of the risks, uncertainties, and other factors that affect our business, operating results, financial condition and stock price, including without limitation the disclosures made under the caption
Managements Discussion and Analysis of Financial Condition and Results of Operations in this report and in the consolidated financial statements and notes thereto included elsewhere in this report as well as the disclosures made
under the captions Managements Discussion and Analysis of Financial Condition and Results of Operations, Risk Factors, Consolidated Financial Statements and Notes to Consolidated Financial
Statements included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2012, and in other filings we make with the SEC. Because the risks and uncertainties discussed in this quarterly report and other important
unanticipated factors may affect the Companys operating results, past performance should not be considered as indicative of future performance, and investors should not use historical results to anticipate results or trends in future periods.
Furthermore, such forward-looking statements speak only as of the date of this report. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to
changes in our opinions or expectations except as required by applicable law or the rules of the NASDAQ Stock Market.

HOW TO OBTAIN POWERWAVE SEC FILINGS

All reports filed by the Company with the Securities and Exchange Commission, or the SEC, are available free of charge via EDGAR
through the SEC website at www.sec.gov. In addition, the public may read and copy materials filed by the Company with the SEC at the SECs public reference room located at 100 F Street, N.E., Washington, D.C. 20549. The Company also provides
copies of its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and any amendments to each of the foregoing, at no charge to investors upon request and makes electronic copies of its most
recently filed reports available through its website at www.powerwave.com as soon as reasonably practicable after filing such material with the SEC.



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PART I  FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)



|                                                                                                                                     |  |             |            |   |                |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | ---------- | - | -------------- | - | -------- | -
|                                                                                                                                     |  | July 1,2012 |            |   | January 1,2012 |  
|ASSETS                                                                                                                               |  |             |            |   |                |   |          |  
|Current assets:                                                                                                                      |  |             |            |   |                |   |          |  
|Cash and cash equivalents                                                                                                            |  | $           | 11,616     |   |                | $ | 64,121   |  
|Restricted cash                                                                                                                      |  |             | 6,222      |   |                |   | 6,162    |  
|Accounts receivable, net of allowance for sales returns and doubtful accounts of $3,832 and $4,225, respectively                     |  |             | 69,399     |   |                |   | 96,777   |  
|Inventories                                                                                                                          |  |             | 70,361     |   |                |   | 88,627   |  
|Prepaid expenses and other current assets                                                                                            |  |             | 51,877     |   |                |   | 45,712   |  
|Deferred income taxes                                                                                                                |  |             | 4,084      |   |                |   | 6,968    |  
|                                                                                                                                     |  |             |            |   |                |   |          |  
|Total current assets                                                                                                                 |  |             | 213,559    |   |                |   | 308,367  |  
|Property, plant and equipment, net                                                                                                   |  |             | 13,508     |   |                |   | 27,771   |  
|Other assets                                                                                                                         |  |             | 5,486      |   |                |   | 6,192    |  
|                                                                                                                                     |  |             |            |   |                |   |          |  
|TOTAL ASSETS                                                                                                                         |  | $           | 232,553    |   |                | $ | 342,330  |  
|                                                                                                                                     |  |             |            |   |                |   |          |  
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)                                                                                       |  |             |            |   |                |   |          |  
|Current liabilities:                                                                                                                 |  |             |            |   |                |   |          |  
|Accounts payable                                                                                                                     |  | $           | 54,750     |   |                | $ | 71,094   |  
|Accrued payroll and employee benefits                                                                                                |  |             | 10,706     |   |                |   | 11,094   |  
|Accrued restructuring costs                                                                                                          |  |             | 1,305      |   |                |   | 3,112    |  
|Accrued expenses and other current liabilities                                                                                       |  |             | 29,230     |   |                |   | 28,725   |  
|                                                                                                                                     |  |             |            |   |                |   |          |  
|Total current liabilities                                                                                                            |  |             | 95,991     |   |                |   | 114,025  |  
|Long-term debt                                                                                                                       |  |             | 254,744    |   |                |   | 252,190  |  
|Other liabilities                                                                                                                    |  |             | 12,936     |   |                |   | 8,813    |  
|                                                                                                                                     |  |             |            |   |                |   |          |  
|Total liabilities                                                                                                                    |  |             | 363,671    |   |                |   | 375,028  |  
|Commitments and contingencies (Notes 8 and 9)                                                                                        |  |             |            |   |                |   |          |  
|Shareholders deficit:                                                                                                               |  |             |            |   |                |   |          |  
|Preferred Stock, $0.0001 par value, 5,000,000 shares authorized and no shares issued or outstanding                                  |  |             |            |   |                |   |          |  
|Common Stock, $0.0001 par value, 100,000,000 shares authorized, 31,741,931and 31,684,831 shares issued and outstanding,
respectively |  |             | 868,309    |   |                |   | 866,716  |  
|Accumulated other comprehensive income                                                                                               |  |             | 10,115     |   |                |   | 9,756    |  
|Accumulated deficit                                                                                                                  |  |             | (1,009,542 | ) |                |   | (909,170 | )
|                                                                                                                                     |  |             |            |   |                |   |          |  
|Net shareholders deficit                                                                                                            |  |             | (131,118   | ) |                |   | (32,698  | )
|                                                                                                                                     |  |             |            |   |                |   |          |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)                                                                                 |  | $           | 232,553    |   |                | $ | 342,330  |  
|                                                                                                                                     |  |             |            |   |                |   |          |  



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



5



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POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)



|                                                             |  |                    |         |   |                  |   |         |             |  |   |             |   |  |   |         |  
|------------------------------------------------------------ |  | ------------------ | ------- | - | ---------------- | - | ------- | ----------- |  | - | ----------- | - |  | - | ------- | -
|                                                             |  | Three Months Ended |         |   | Six Months Ended |  
|                                                             |  | July 1,2012        |         |   | July 3,2011      |   |         | July 1,2012 |  |   | July 3,2011 |  
|Net sales                                                    |  | $                  | 42,371  |   |                  | $ | 170,641 |             |  | $ | 85,641      |   |  | $ | 307,265 |  
|Cost of sales:                                               |  |                    |         |   |                  |   |         |             |  |   |             |   |  |   |         |  
|Cost of goods                                                |  |                    | 49,753  |   |                  |   | 122,849 |             |  |   | 103,889     |   |  |   | 223,613 |  
|Restructuring and impairment charges                         |  |                    | 4,947   |   |                  |   |        |             |  |   | 10,559      |   |  |   |        |  
|                                                             |  |                    |         |   |                  |   |         |             |  |   |             |   |  |   |         |  
|Total cost of sales                                          |  |                    | 54,700  |   |                  |   | 122,849 |             |  |   | 114,448     |   |  |   | 223,613 |  
|                                                             |  |                    |         |   |                  |   |         |             |  |   |             |   |  |   |         |  
|Gross profit (loss)                                          |  |                    | (12,329 | ) |                  |   | 47,792  |             |  |   | (28,807     | ) |  |   | 83,652  |  
|Operating expenses:                                          |  |                    |         |   |                  |   |         |             |  |   |             |   |  |   |         |  
|Sales and marketing                                          |  |                    | 4,853   |   |                  |   | 8,015   |             |  |   | 12,656      |   |  |   | 17,151  |  
|Research and development                                     |  |                    | 10,580  |   |                  |   | 15,748  |             |  |   | 23,597      |   |  |   | 32,351  |  
|General and administrative                                   |  |                    | 10,191  |   |                  |   | 11,332  |             |  |   | 20,451      |   |  |   | 23,323  |  
|Restructuring and impairment charges                         |  |                    | 178     |   |                  |   | 41      |             |  |   | 3,388       |   |  |   | 42      |  
|                                                             |  |                    |         |   |                  |   |         |             |  |   |             |   |  |   |         |  
|Total operating expenses                                     |  |                    | 25,802  |   |                  |   | 35,136  |             |  |   | 60,092      |   |  |   | 72,867  |  
|                                                             |  |                    |         |   |                  |   |         |             |  |   |             |   |  |   |         |  
|Operating income (loss)                                      |  |                    | (38,131 | ) |                  |   | 12,656  |             |  |   | (88,899     | ) |  |   | 10,785  |  
|Other expense, net                                           |  |                    | (4,097  | ) |                  |   | (4,155  | )           |  |   | (8,103      | ) |  |   | (6,836  | )
|                                                             |  |                    |         |   |                  |   |         |             |  |   |             |   |  |   |         |  
|Income (loss) before income taxes                            |  |                    | (42,228 | ) |                  |   | 8,501   |             |  |   | (97,002     | ) |  |   | 3,949   |  
|Income tax provision                                         |  |                    | 238     |   |                  |   | 1,480   |             |  |   | 3,370       |   |  |   | 3,903   |  
|                                                             |  |                    |         |   |                  |   |         |             |  |   |             |   |  |   |         |  
|Net income (loss)                                            |  | $                  | (42,466 | ) |                  | $ | 7,021   |             |  | $ | (100,372    | ) |  | $ | 46      |  
|                                                             |  |                    |         |   |                  |   |         |             |  |   |             |   |  |   |         |  
|Basic earnings (loss) per share:                             |  | $                  | (1.34   | ) |                  | $ | 0.21    |             |  | $ | (3.16       | ) |  | $ | 0.00    |  
|                                                             |  |                    |         |   |                  |   |         |             |  |   |             |   |  |   |         |  
|Diluted earnings (loss) per share:                           |  | $                  | (1.34   | ) |                  | $ | 0.20    |             |  | $ | (3.16       | ) |  | $ | 0.00    |  
|                                                             |  |                    |         |   |                  |   |         |             |  |   |             |   |  |   |         |  
|Shares used in the computation of earnings (loss) per share: |  |                    |         |   |                  |   |         |             |  |   |             |   |  |   |         |  
|Basic                                                        |  |                    | 31,741  |   |                  |   | 33,830  |             |  |   | 31,731      |   |  |   | 33,796  |  
|Diluted                                                      |  |                    | 31,741  |   |                  |   | 34,710  |             |  |   | 31,731      |   |  |   | 34,687  |  



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



6



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POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)



|                                                              |  |                    |         |   |                  |   |       |             |  |   |             |   |  |   |       | 
|------------------------------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ----- | ----------- |  | - | ----------- | - |  | - | ----- | 
|                                                              |  | Three Months Ended |         |   | Six Months Ended |  
|                                                              |  | July 1,2012        |         |   | July 3,2011      |   |       | July 1,2012 |  |   | July 3,2011 |  
|Net income (loss)                                             |  | $                  | (42,466 | ) |                  | $ | 7,021 |             |  | $ | (100,372    | ) |  | $ | 46    | 
|Other comprehensive income (loss):                            |  |                    |         |   |                  |   |       |             |  |   |             |   |  |   |       | 
|Foreign currency translation adjustments, net of income taxes |  |                    | (2,248  | ) |                  |   | 2,418 |             |  |   | 359         |   |  |   | 5,096 | 
|                                                              |  |                    |         |   |                  |   |       |             |  |   |             |   |  |   |       | 
|Comprehensive income (loss)                                   |  | $                  | (44,714 | ) |                  | $ | 9,439 |             |  | $ | (100,013    | ) |  | $ | 5,142 | 
|                                                              |  |                    |         |   |                  |   |       |             |  |   |             |   |  |   |       | 



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



7



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POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



|                                                                                          |  |                  |          |   |             |   |         |  
|----------------------------------------------------------------------------------------- |  | ---------------- | -------- | - | ----------- | - | ------- | -
|                                                                                          |  | Six Months Ended |         
|                                                                                          |  | July 1,2012      |          |   | July 3,2011 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                     |  |                  |          |   |             |   |         |  
|Net income (loss)                                                                         |  |                  | (100,372 | ) |             | $ | 46      |  
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                  |          |   |             |   |         |  
|Depreciation                                                                              |  |                  | 5,094    |   |             |   | 7,095   |  
|Amortization                                                                              |  |                  | 3,224    |   |             |   | 1,999   |  
|Non-cash restructuring and impairment charges                                             |  |                  | 13,947   |   |             |   | 42      |  
|Provision for sales returns and doubtful accounts                                         |  |                  | 963      |   |             |   | 491     |  
|Provision for excess and obsolete inventories                                             |  |                  | 14,419   |   |             |   | 549     |  
|Deferred taxes                                                                            |  |                  | 2,884    |   |             |   |        |  
|Compensation costs related to stock-based awards                                          |  |                  | 1,510    |   |             |   | 3,943   |  
|Gain on disposal of property, plant and equipment                                         |  |                  | (2,536   | ) |             |   | (325    | )
|Changes in operating assets and liabilities:                                              |  |                  |          |   |             |   |         |  
|Accounts receivable                                                                       |  |                  | 26,571   |   |             |   | (25,894 | )
|Inventories                                                                               |  |                  | (1,758   | ) |             |   | (18,191 | )
|Prepaid expenses and other current assets                                                 |  |                  | (6,296   | ) |             |   | (8,487  | )
|Accounts payable                                                                          |  |                  | (17,555  | ) |             |   | 33,295  |  
|Accrued expenses and other current liabilities                                            |  |                  | (7,865   | ) |             |   | (5,395  | )
|Other non-current assets                                                                  |  |                  | 36       |   |             |   | 23      |  
|Other non-current liabilities                                                             |  |                  | 4,406    |   |             |   | (9      | )
|                                                                                          |  |                  |          |   |             |   |         |  
|Net cash used in operating activities                                                     |  |                  | (63,328  | ) |             |   | (10,818 | )
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                     |  |                  |          |   |             |   |         |  
|Purchase of property, plant and equipment                                                 |  |                  | (1,736   | ) |             |   | (3,529  | )
|Restricted cash                                                                           |  |                  | (60      | ) |             |   | (55     | )
|Proceeds from the sale of property, plant and equipment                                   |  |                  | 12,573   |   |             |   | 357     |  
|                                                                                          |  |                  |          |   |             |   |         |  
|Net cash provided by (used in) investing activities                                       |  |                  | 10,777   |   |             |   | (3,227  | )
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                     |  |                  |          |   |             |   |         |  
|Debt issuance costs                                                                       |  |                  |         |   |             |   | (297    | )
|Proceeds from stock-based compensation arrangements                                       |  |                  | 83       |   |             |   | 979     |  
|Repurchase of common stock                                                                |  |                  |         |   |             |   | (36     | )
|                                                                                          |  |                  |          |   |             |   |         |  
|Net cash provided by financing activities                                                 |  |                  | 83       |   |             |   | 646     |  
|EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS                                     |  |                  | (37      | ) |             |   | 561     |  
|                                                                                          |  |                  |          |   |             |   |         |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                                 |  |                  | (52,505  | ) |             |   | (12,838 | )
|CASH AND CASH EQUIVALENTS, beginning of period                                            |  |                  | 64,121   |   |             |   | 61,601  |  
|                                                                                          |  |                  |          |   |             |   |         |  
|CASH AND CASH EQUIVALENTS, end of period                                                  |  |                  | 11,616   |   |             | $ | 48,763  |  
|                                                                                          |  |                  |          |   |             |   |         |  
|SUPPLEMENTAL CASH FLOW INFORMATION:                                                       |  |                  |          |   |             |   |         |  
|Cash paid for:                                                                            |  |                  |          |   |             |   |         |  
|Interest                                                                                  |  |                  | 4,251    |   |             | $ | 3,709   |  
|Income taxes                                                                              |  |                  | 1,198    |   |             | $ | 4,761   |  
|SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:                                             |  |                  |          |   |             |   |         |  
|Unpaid purchases of property and equipment                                                |  |                  | 922      |   |             | $ | 808     |  



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



8



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##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)

Note 1. Nature of Operations

Powerwave Technologies Inc. (the Company) is a global supplier of end-to-end wireless solutions for wireless communications networks. The Company designs, manufactures and markets antennas,
boosters, combiners, cabinets, shelters, filters, radio frequency power amplifiers, repeaters, tower-mounted amplifiers, remote radio head transceivers and advanced coverage solutions for use in cellular, personal communications services
(PCS), 3G and 4G networks throughout the world.

On May 23, 2012, the Company completed the sale of certain
fixed assets and inventory associated with its manufacturing facility in Suzhou, China to Shenzhen Tatfook Technology Co., Ltd. (Tatfook.) Tatfook acquired selected assets of the Companys China manufacturing facility, primarily
related to the custom OEM BTS filter business, and also assumed selected facility leases in China, and made offers of employment to employees located in the Companys China manufacturing operations. In connection with the sale, the Company
entered into a long term manufacturing and supply agreement with Tatfook. In addition, the Company licensed Tatfook to manufacture and sell selected antenna and tower mounted amplifier products within the China market under a license and
manufacturing agreement. The consideration paid by Tatfook was $12.5 million in cash which resulted in a gain of approximately $2.0 million. Tatfook will also pay an upfront license fee of $5.0 million under the license and manufacturing agreement
as well as on-going royalty fees on future product sales. Tatfook is a global manufacturing service provider engaging in both radio frequency subsystem solutions and structural assembly in the application of mobile telecommunications base stations.

Liquidity & Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. However, the Company has experienced significant recurring net losses and
operating cash flow deficits for the past four quarters. The Companys ability to continue as a going concern is dependent on many factors, including among others, its ability to raise additional funding, and its ability to successfully
restructure operations to lower manufacturing costs and reduce operating expenses.

As of July 1, 2012, the Company had
$11.6 million in unrestricted cash and cash equivalents available to support ongoing operations. During the six months ended July 1, 2012, the Company used approximately $63 million in operating activities, and its unrestricted cash balances
declined by approximately $53 million during this period. In addition, in July 2012, the Company entered into a payoff letter that terminated its credit agreement (see Note 15).

These conditions raise substantial doubt about the Companys ability to continue as a going concern, and its success is dependent
upon the successful outcome of its efforts to raise additional financing, restructure its operations, lower manufacturing costs and reduce operating expenses. The accompanying consolidated financial statements do not include any adjustments that
might result from the outcome of these uncertainties.

The Company is currently pursuing various sources of financing as well
as the implementation of additional restructuring plans designed to reduce operating expenses and manufacturing costs. The Company believes that assuming: (1) the successful implementation of restructuring actions to be taken, plus
restructuring actions already taken; (2) improved cash flows from operating activities; (3) the successful collection of billed and unbilled accounts receivable; (4) the collection of the $5 million license fee owed from Tatfook; and
(5) other net favorable working capital changes, it would have sufficient cash flows to continue through the end of 2012. However, the Company believes that it will need to raise additional funding to continue as a going concern for the next
twelve months.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include certain
footnotes and financial presentations normally required under GAAP for complete financial statements. The interim financial information is unaudited; however, it reflects all normal adjustments and accruals which are, in the opinion of management
considered necessary to provide a fair presentation for the interim periods presented. All intercompany balances and transactions have been eliminated in the accompanying consolidated financial statements.



9



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POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)



The results of operations for the interim periods are not necessarily indicative of the
results to be expected for the future quarters or full fiscal year ending December 30, 2012 (fiscal 2012.) The accompanying consolidated financial statements 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 January 1, 2012.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with accounting guidance now codified as ASC Topic 718, Compensation  Stock Compensation. Under the fair value
recognition provision of ASC Topic 718, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options granted using the Black-Scholes-Merton option pricing
model and a multiple option award approach. The fair value of restricted stock awards is based on the closing market price of the Companys common stock on the date of grant. Stock-based compensation, adjusted for estimated forfeitures, is
amortized on a straight-line basis over the requisite service period of the award, which is generally the vesting period.



10



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POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)



Stock-based compensation expense was recognized as follows in the consolidated statement
of operations:



|                                                 |  |                    |      |  |                  |   |       |             |  |   |             |  |  |   |       | 
|------------------------------------------------ |  | ------------------ | ---- |  | ---------------- | - | ----- | ----------- |  | - | ----------- |  |  | - | ----- | 
|                                                 |  | Three Months Ended |      |  | Six Months Ended |  
|                                                 |  | July 1,2012        |      |  | July 3,2011      |   |       | July 1,2012 |  |   | July 3,2011 | 
|Cost of sales                                    |  | $                  | 75   |  |                  | $ | 199   |             |  | $ | 182         |  |  | $ | 409   | 
|Sales and marketing expenses                     |  |                    | 71   |  |                  |   | 159   |             |  |   | 162         |  |  |   | 284   | 
|Research and development expenses                |  |                    | 152  |  |                  |   | 403   |             |  |   | 309         |  |  |   | 849   | 
|General and administrative expenses              |  |                    | 428  |  |                  |   | 1,144 |             |  |   | 857         |  |  |   | 2,401 | 
|                                                 |  |                    |      |  |                  |   |       |             |  |   |             |  |  |   |       | 
|Decrease to operating income before income taxes |  |                    | 726  |  |                  |   | 1,905 |             |  |   | 1,510       |  |  |   | 3,943 | 
|Income tax benefit recognized                    |  |                    |      |  |                  |   |       |             |  |   |             |  |  |   |       | 
|                                                 |  |                    |      |  |                  |   |       |             |  |   |             |  |  |   |       | 
|Impact on net income (loss)                      |  | $                  | 726  |  |                  | $ | 1,905 |             |  | $ | 1,510       |  |  | $ | 3,943 | 
|                                                 |  |                    |      |  |                  |   |       |             |  |   |             |  |  |   |       | 
|Impact to net income (loss) per share:           |  |                    |      |  |                  |   |       |             |  |   |             |  |  |   |       | 
|Basic                                            |  | $                  | 0.02 |  |                  | $ | 0.02  |             |  | $ | 0.05        |  |  | $ | 0.12  | 
|                                                 |  |                    |      |  |                  |   |       |             |  |   |             |  |  |   |       | 
|Diluted                                          |  | $                  | 0.02 |  |                  | $ | 0.02  |             |  | $ | 0.05        |  |  | $ | 0.12  | 
|                                                 |  |                    |      |  |                  |   |       |             |  |   |             |  |  |   |       | 

As of July 1, 2012, unrecognized compensation expense related to the unvested portion of the
Companys stock-based awards and employee stock purchase plan was approximately $2.8 million, net of estimated forfeitures of $0.3 million, which is expected to be recognized over a weighted-average period of 1.2 years.

The Black-Scholes-Merton option valuation model was developed for use in estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. Option valuation methods require the input of highly subjective assumptions including the weighted average risk-free interest rate, the expected life, and the expected stock price volatility. The weighted
average risk-free interest rate was determined based upon actual U.S. treasury rates over a one to ten year horizon and the actual life of options granted. The Company grants options with either a five year or ten year life. The expected life is
based on the Companys actual historical option exercise experience. For the employee stock purchase plan, the actual life of 6 months is utilized in this calculation. The expected life was determined based upon actual option grant lives over a
10 year period. The Company has utilized various market sources to calculate the implied volatility factor utilized in the Black-Scholes-Merton option valuation model. These included the implied volatility utilized in the pricing of options on the
Companys Common Stock as well as the implied volatility utilized in determining market prices of the Companys outstanding convertible notes. Using the Black-Scholes-Merton option valuation model, the estimated weighted average fair value
of options granted during the second quarter and first half of fiscal year 2011,was $13.50 and $12.05 respectively. No options were granted in the second quarter or first half of fiscal 2012.

The fair value of options granted under the Companys stock incentive plans during the second quarter and first half months of
fiscal 2011 were estimated on the date of grant according to the Black-Scholes-Merton option-pricing model utilizing the multiple option approach and the following weighted-average assumptions:



|                                          |  |                    |  |                 
|----------------------------------------- |  | ------------------ |  | ----------------
|                                          |  | Three Months Ended |  | Six Months Ended
|                                          |  | July 3,2011        |  | July 3,2011     
|Weighted average risk-free interest rate  |  | 2.0%               |  | 2.2%            
|Weighted average expected life (in years) |  | 3.6                |  | 3.6             
|Expected stock volatility                 |  | 72%                |  | 77%             
|Dividend yield                            |  | None               |  | None            



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POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)



Note 3. Supplemental Balance Sheet Information

Prepaid Expense and Other Current Assets



|                                                   |  |             |        |  |                |   |        | 
|-------------------------------------------------- |  | ----------- | ------ |  | -------------- | - | ------ | 
|                                                   |  | July 1,2012 |        |  | January 1,2012 |  
|Costs and estimated earnings in excess of billings |  | $           | 36,578 |  |                | $ | 35,717 | 
|Prepaid expense and other current assets           |  |             | 15,299 |  |                |   | 9,995  | 
|                                                   |  |             |        |  |                |   |        | 
|Total prepaid expense and other current assets     |  | $           | 51,877 |  |                | $ | 45,712 | 
|                                                   |  |             |        |  |                |   |        | 

Approximately $34.7 million of the cost and estimated earnings in excess of billings is related to a
single coverage solutions project. The Company is currently negotiating a contract amendment on this project.

In the first
quarter of fiscal 2011, the Company adjusted its cost estimates on a coverage solutions project which reduced both costs and estimated earnings in excess of billings and gross margin by approximately $3.6 million.

Inventories

Net inventories are as follows:



|                     |  |             |        |  |                |   |        | 
|-------------------- |  | ----------- | ------ |  | -------------- | - | ------ | 
|                     |  | July 1,2012 |        |  | January 1,2012 |  
|Parts and components |  | $           | 30,428 |  |                | $ | 32,145 | 
|Work-in-process      |  |             | 1,895  |  |                |   | 5,079  | 
|Finished goods       |  |             | 38,038 |  |                |   | 51,403 | 
|                     |  |             |        |  |                |   |        | 
|Total inventories    |  | $           | 70,361 |  |                | $ | 88,627 | 
|                     |  |             |        |  |                |   |        | 

Inventories are net of an allowance for excess and obsolete inventory of approximately $34.1 million and
$15.8 million as of July 1, 2012 and January 1, 2012, respectively.

Accrued Expenses and Other Current
Liabilities

Accrued expenses and other current liabilities are as follows:



|                                                     |  |             |        |  |                |   |        | 
|---------------------------------------------------- |  | ----------- | ------ |  | -------------- | - | ------ | 
|                                                     |  | July 1,2012 |        |  | January 1,2012 |  
|Accrued freight and storage                          |  | $           | 4,835  |  |                | $ | 6,215  | 
|Accrued warranty costs                               |  |             | 9,684  |  |                |   | 7,780  | 
|Other accrued expenses and other current liabilities |  |             | 14,711 |  |                |   | 14,730 | 
|                                                     |  |             |        |  |                |   |        | 
|Total accrued expenses and other current liabilities |  | $           | 29,230 |  |                | $ | 28,725 | 
|                                                     |  |             |        |  |                |   |        | 

Warranty

Accrued warranty costs are as follows:



|                                       |  |                  |        |   |             |   |        |  
|-------------------------------------- |  | ---------------- | ------ | - | ----------- | - | ------ | -
|                                       |  | Six Months Ended |       
|Description                            |  | July 1,2012      |        |   | July 3,2011 |  
|Warranty reserve beginning balance     |  | $                | 7,780  |   |             | $ | 7,029  |  
|Reductions for warranty costs incurred |  |                  | (5,522 | ) |             |   | (5,204 | )
|Additions charged to cost of sales     |  |                  | 7,426  |   |             |   | 4,592  |  
|                                       |  |                  |        |   |             |   |        |  
|Warranty reserve ending balance        |  | $                | 9,684  |   |             | $ | 6,417  |  
|                                       |  |                  |        |   |             |   |        |  



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##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)



Note 4. Long-Term Debt

Long term debt consists of the following:



|                                                      |  |             |         |  |                |   |         | 
|----------------------------------------------------- |  | ----------- | ------- |  | -------------- | - | ------- | 
|                                                      |  | July 1,2012 |         |  | January 1,2012 |  
|2.750% Convertible Senior Subordinated Notes due 2041 |  | $           | 104,693 |  |                | $ | 102,139 | 
|3.875% Convertible Subordinated Notes due 2027        |  |             | 150,000 |  |                |   | 150,000 | 
|1.875% Convertible Subordinated Notes due 2024        |  |             | 51      |  |                |   | 51      | 
|                                                      |  |             |         |  |                |   |         | 
|Total long-term debt                                  |  | $           | 254,744 |  |                | $ | 252,190 | 
|                                                      |  |             |         |  |                |   |         | 

Note 5. Restructuring and Impairment Charges

The costs associated with exit activities related to the following restructuring plans were recorded in accordance with the accounting
guidance now codified as ASC Topic 420, Exit or Disposal Obligations. Pursuant to this guidance, a liability for a cost associated with an exit or disposal activity shall be recognized in the period in which the liability is
incurred, except for a liability for certain one-time employee termination benefits that is incurred over time. In the unusual circumstance in which fair value cannot be reasonably estimated, the liability shall be recognized initially in the period
in which fair value can be reasonably estimated. The restructuring plan is subject to continued future refinement as additional information becomes available.

2012 Restructuring Plan

In the first quarter of fiscal 2012, the Company
formulated and began to implement a plan to further reduce manufacturing overhead and operating expenses (the 2012 Restructuring Plan). As part of this plan, the Company initiated personnel reductions in both its domestic and foreign
locations. These reductions were taken in further response to economic conditions and the continued decline in revenue in the first quarter of fiscal 2012. The Company expects to finalize this plan in the third quarter of 2012; however additional
amounts may be accrued in 2012 related to the actions associated with this plan.



|                              |  |                     |        |  
|----------------------------- |  | ------------------- | ------ | -
|                              |  | WorkforceReductions |       
|Balance as of January 1, 2012 |  | $                   |       |  
|Amounts accrued               |  |                     | 2,191  |  
|Amounts paid/incurred         |  |                     | (1,360 | )
|Effects of exchange rates     |  |                     |       |  
|                              |  |                     |        |  
|Balance as of July 1, 2012    |  | $                   | 831    |  
|                              |  |                     |        |  

The Company expects that the workforce reduction payments will be made through the first quarter of 2013.

2011 Restructuring Plan

In November 2011, the Company formulated and began to implement a plan to further reduce manufacturing overhead costs and operating expenses (the 2011 Restructuring Plan). As part of this
plan, the Company initiated personnel reductions of approximately 110 employees in both its domestic and foreign locations, with primary reductions in the U.S., Sweden, Finland, France, China and Canada. These reductions were undertaken in response
to economic conditions and the significant decline in revenues in the third quarter of 2011. The Company finalized this plan in the fourth quarter of 2011, however, additional amounts may be accrued in 2012 related to actions associated with this
plan.



13



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POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)



|                              |  |                     |        |  
|----------------------------- |  | ------------------- | ------ | -
|                              |  | WorkforceReductions |       
|Balance as of January 1, 2012 |  | $                   | 3,025  |  
|Amounts accrued               |  |                     | 36     |  
|Amounts paid/incurred         |  |                     | (2,587 | )
|Effects of exchange rates     |  |                     |       |  
|                              |  |                     |        |  
|Balance as of July 1, 2012    |  | $                   | 474    |  
|                              |  |                     |        |  

The Company expects that the workforce reduction payments will be made through the fourth quarter of
2012.



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##### Table of Contents

POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)



Restructuring and Impairment Charges

In connection with the plans described above, the Company recorded various restructuring and impairment charges in the second quarter and
first half of fiscal years 2012 and 2011. A summary of these charges is listed below:



|                                              |  |                    |       |  |                  |   |    |             |  |   |             |  |  |   |      |  
|--------------------------------------------- |  | ------------------ | ----- |  | ---------------- | - | -- | ----------- |  | - | ----------- |  |  | - | ---- | -
|                                              |  | Three Months Ended |       |  | Six Months Ended |  
|                                              |  | July 1,2012        |       |  | July 3,2011      |   |    | July 1,2012 |  |   | July 3,2011 | 
|Cost of Sales:                                |  |                    |       |  |                  |   |    |             |  |   |             |  |  |   |      |  
|Restructuring and impairment charges:         |  |                    |       |  |                  |   |    |             |  |   |             |  |  |   |      |  
|Inventory charges                             |  | $                  | 4,903 |  |                  | $ |   |             |  | $ | 10,305      |  |  | $ |     |  
|Severance                                     |  |                    | 44    |  |                  |   |   |             |  |   | 254         |  |  |   |     |  
|                                              |  |                    |       |  |                  |   |    |             |  |   |             |  |  |   |      |  
|Total cost of sales                           |  |                    | 4,947 |  |                  |   |   |             |  |   | 10,559      |  |  |   |     |  
|Operating Expenses:                           |  |                    |       |  |                  |   |    |             |  |   |             |  |  |   |      |  
|Restructuring and impairment charges:         |  |                    |       |  |                  |   |    |             |  |   |             |  |  |   |      |  
|Severance                                     |  |                    | 165   |  |                  |   | 41 |             |  |   | 1,926       |  |  |   | 162  |  
|Facility closure and asset impairment charges |  |                    | 13    |  |                  |   |   |             |  |   | 1,462       |  |  |   | (120 | )
|                                              |  |                    |       |  |                  |   |    |             |  |   |             |  |  |   |      |  
|Total operating expenses                      |  |                    | 178   |  |                  |   | 41 |             |  |   | 3,388       |  |  |   | 42   |  
|                                              |  |                    |       |  |                  |   |    |             |  |   |             |  |  |   |      |  
|Total restructuring and impairment charges    |  | $                  | 5,125 |  |                  | $ | 41 |             |  | $ | 13,947      |  |  | $ | 42   |  
|                                              |  |                    |       |  |                  |   |    |             |  |   |             |  |  |   |      |  

In the second quarter of fiscal 2012, the Company recorded a charge of approximately $2.8 million related
to the impairment of inventory that will be disposed of and will not generate future revenue, as well as vendor cancellation charges of $2.1 million, primarily related to the transactions with Tatfook. In the first quarter of fiscal 2012, the
Company recorded a charge of approximately $3.4 million related to the impairment of inventory and vendor cancellation charges of $2.0, also primarily related to Tatfook.

In the second quarter of fiscal 2012, the Company recorded charges of approximately $0.2 million in severance costs across several regions of which less than $0.1 million and approximately $0.2 million
were recorded in cost of sales and operating expenses, respectively. In the first quarter of fiscal 2012, the Company recorded charges of approximately $2.0 million in severance costs, of which approximately $0.2 million and $1.8 million were
recorded in cost of sales and operating expenses, respectively. In the second quarter of fiscal 2011, the Company recorded charges of less than $0.1 million related to severance in operating expense in all regions. In the first quarter of fiscal
2011, the Company recorded charges of approximately $0.1 million in severance costs, which was recorded in operating expenses.

In the first quarter of fiscal 2012, the Company sold its building in Finland for approximately $5.3 million. In connection with the
sale, the Company recorded a loss of approximately $1.4 million. In the first quarter of fiscal 2011, the Company recorded an adjustment to the excess remaining liability related to a prior restructuring plan that was completed in the first quarter
of fiscal 2011, which reduced total restructuring and impairment charges by $0.1 million.

Note 6. Other Income (Expense), Net

The components of other income (expense), net, are as follows:



|                                  |  |                    |        |   |                  |   |        |             |  |   |             |   |  |   |        |  
|--------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------ | ----------- |  | - | ----------- | - |  | - | ------ | -
|                                  |  | Three Months Ended |        |   | Six Months Ended |  
|                                  |  | July 1,2012        |        |   | July 3,2011      |   |        | July 1,2012 |  |   | July 3,2011 |  
|Interest income                   |  | $                  | 23     |   |                  | $ | 54     |             |  | $ | 80          |   |  | $ | 113    |  
|Interest expense                  |  |                    | (3,882 | ) |                  |   | (2,894 | )           |  |   | (7,799      | ) |  |   | (5,780 | )
|Foreign currency gain (loss), net |  |                    | (324   | ) |                  |   | (1,475 | )           |  |   | (674        | ) |  |   | (2,061 | )
|Other income, net                 |  |                    | 86     |   |                  |   | 160    |             |  |   | 290         |   |  |   | 892    |  
|                                  |  |                    |        |   |                  |   |        |             |  |   |             |   |  |   |        |  
|Total                             |  | $                  | (4,097 | ) |                  | $ | (4,155 | )           |  | $ | (8,103      | ) |  | $ | (6,836 | )
|                                  |  |                    |        |   |                  |   |        |             |  |   |             |   |  |   |        |  



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POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)



Included in interest expense are non-cash charges related to the amortization of debt
issuance costs, debt discount and bond accretion totaling $1.6 and $3.2 million, respectively, for the second quarter and first half of fiscal year 2012, and $1.0 and $2.0 million, respectively, for the second quarter and first half of 2011.



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POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)



Note 7. Income (Loss) Per Share

In accordance with ASC Topic 260, Earnings per Share, basic earnings (loss) per share is based upon the weighted
average number of common shares outstanding. Diluted earnings (loss) per share is based upon the weighted average number of common and potential common shares for each period presented and income available to common stockholders is adjusted to
reflect any changes in income or loss that would result from the issuance of the dilutive common shares. The Companys potential common shares include stock options under the treasury stock method and convertible subordinated debt under the
if-converted method. Potential common shares of 9,852,699 and 9,853,194 related to the Companys stock option programs and convertible debt have been excluded from diluted weighted average common shares for the second quarter and first half
ended July 1, 2012, respectively, as the effect would be anti-dilutive. In addition, potential common shares of 4,488,790 and 4,488,790 related to the Companys stock option programs and convertible debt have been excluded from diluted
weighted average common shares for the second quarter and first half ended July 3, 2011, respectively, as the effect would be anti-dilutive.

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



|                                                 |  |                    |         |   |                  |   |        |             |  |   |             |   |  |   |        |  
|------------------------------------------------ |  | ------------------ | ------- | - | ---------------- | - | ------ | ----------- |  | - | ----------- | - |  | - | ------ | -
|                                                 |  | Three Months Ended |         |   | Six Months Ended |  
|                                                 |  | July 1,2012        |         |   | July 3,2011      |   |        | July 1,2012 |  |   | July 3,2011 |  
|Basic:                                           |  |                    |         |   |                  |   |        |             |  |   |             |   |  |   |        |  
|Net income (loss)                                |  | $                  | (42,466 | ) |                  | $ | 7,021  |             |  | $ | (100,372    | ) |  | $ | 46     |  
|Weighted average common shares                   |  |                    | 31,741  |   |                  |   | 33,830 |             |  |   | 31,731      |   |  |   | 33,796 |  
|Basic earnings (loss) per share                  |  | $                  | (1.34   | ) |                  | $ | 0.21   |             |  | $ | (3.16       | ) |  | $ | (0.00  | )
|Diluted:                                         |  |                    |         |   |                  |   |        |             |  |   |             |   |  |   |        |  
|Net income (loss)                                |  | $                  | (42,466 | ) |                  | $ | 7,021  |             |  | $ | (100,372    | ) |  | $ | 46     |  
|Interest expense of convertible debt, net of tax |  |                    |        |   |                  |   |       |             |  |   |            |   |  |   |       |  
|                                                 |  |                    |         |   |                  |   |        |             |  |   |             |   |  |   |        |  
|Net income (loss), as adjusted                   |  | $                  | (42,466 | ) |                  | $ | 7,021  |             |  | $ | (100,372    | ) |  | $ | 46     |  
|                                                 |  |                    |         |   |                  |   |        |             |  |   |             |   |  |   |        |  
|Weighted average common shares                   |  |                    | 31,741  |   |                  |   | 33,830 |             |  |   | 31,731      |   |  |   | 33,796 |  
|Potential common shares                          |  |                    |        |   |                  |   | 880    |             |  |   |            |   |  |   | 891    |  
|                                                 |  |                    |         |   |                  |   |        |             |  |   |             |   |  |   |        |  
|Weighted average common shares, as adjusted      |  |                    | 31,741  |   |                  |   | 34,710 |             |  |   | 31,731      |   |  |   | 34,687 |  
|                                                 |  |                    |         |   |                  |   |        |             |  |   |             |   |  |   |        |  
|Diluted income (loss) per share                  |  | $                  | (1.34   | ) |                  | $ | 0.20   |             |  | $ | (3.16       | ) |  | $ | (0.00  | )

Note 8. Commitments and Contingencies

On November 4, 2011, Jaybeam Wireless SAS and Jaybeam Limited filed a patent infringement lawsuit against the Company in United States District Court for the District of Delaware. The complaint
alleges infringement by the Company of US patent 7,286,092 entitled Radio Communications Antenna with Misalignment of Radiation Lobe by Variable Phase Shifter. The complaint seeks compensatory damages, treble damages for willful infringement and
temporary and permanent injunctive relief. The parties are engaged in settlement discussions. If the parties are unable to reach a mutually agreed upon settlement, the Company intends to vigorously defend this matter.

In the first quarter of fiscal 2012, a purported shareholder class action complaint was filed in the United States District Court for the
Central District of California against the Company, its President and Chief Executive Officer and its Chief Financial Officer. On July 23, 2012, the lead plaintiff filed an amended complaint. The amended complaint, Pawel I. Kmiec v.
Powerwave Technologies, Inc. et. al. asserts claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder. The complaint purports to state claims on behalf of all persons who purchased our Common Stock between
October 28, 2010 and October 18, 2011 and seeks compensatory damages in an amount to be proven at trial. The complaint alleges that the defendants made misleading statements or omissions concerning the Companys operations and
projected sales revenues and engaged in false and misleading financial reporting. The Company believes that the purported shareholder class action is without merit and intends to defend it vigorously.



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POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)



In the first quarter of fiscal 2012, three additional lawsuits that relate to the above
purported shareholder class action were filed. The lawsuits are shareholder derivative actions, purported to be brought by individual shareholders on behalf of Powerwave, against certain executive officers and the current directors of Powerwave.
Powerwave is also named as a nominal defendant in the shareholder derivative actions. The shareholder derivative lawsuits are Yin Shen v. Buschur, et al., filed in the Superior Court of California, Kevin Pehlman v. Buschur, et
al., filed in United States District Court for the Central District of California, and Jorge L. Verar v. Buschur, et al., filed in the Superior Court of California and subsequently removed to United States District Court for the Central
District of California. The allegations of the derivative complaints closely resemble those in the initial class action complaint filed and pertain to the time period of February 1, 2011 through October 18, 2011. Based on those
allegations, the derivative complaints assert various claims for breach of fiduciary duty under state law. These three actions are presently stayed by stipulated orders entered in each action.

In addition to the litigation discussed above, we are subject to other legal proceedings and claims in the normal course of
business. We are currently defending these proceedings and claims, and, although the outcome of legal proceedings is inherently uncertain, we anticipate that we will be able to resolve these matters in a manner that will not have a material
adverse effect on our consolidated financial position, results of operations or cash flows.

Note 9. Contractual Guarantees and Indemnities

In the normal course of business, the Company makes certain contractual guarantees and indemnities pursuant to which it
may be required to make future payments under specific circumstances. The Company has not recorded any liability for these contractual guarantees and indemnities in the accompanying consolidated financial statements. A description of significant
contractual guarantees and indemnities existing as of July 1, 2012 includes:

Intellectual Property Indemnities

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

Director and Officer Indemnities and
Contractual Guarantees

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

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



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POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)



General Contractual Indemnities/Products Liability

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

Other
Guarantees and Indemnities

The Company occasionally issues guarantees for certain contingent liabilities under various
contractual arrangements, including customer contracts, self-insured retentions under certain insurance policies and governmental value-added tax compliance programs. These guarantees normally take the form of standby letters of credit issued by the
Companys banks, which may be secured by cash deposits, pledges or performance bonds issued by an insurance company. Historically, any amounts payable pursuant to such guarantees have not had a material negative effect on the Companys
business, financial condition or results of operations. In addition, the Company, as part of the agreements to register the convertible notes it issued in September 2007 and November 2004, agreed to indemnify the selling security holders against
certain liabilities, including liabilities under the Securities Act. The Companys indemnification obligations under such agreements are not limited in duration and are generally not limited in amount.

Note 10. Income Taxes

The Company provides for income taxes in interim periods based on the estimated effective income tax rate for the complete fiscal year.
The income tax provision is computed on the year to date pretax income of the consolidated entities located within each taxing jurisdiction based on current tax law. Deferred tax assets and liabilities are determined based on the future tax
consequences associated with temporary differences between income and expenses reported for financial accounting and tax reporting purposes. A valuation allowance for deferred tax assets is recorded to the extent the Company determines that it is
more likely than not that the deferred tax assets will not be realized.

Realization of deferred tax assets is principally
dependent upon the achievement of future taxable income, the estimation of which requires significant management judgment. The Companys judgment regarding future profitability may change due to many factors, including future market conditions
and the Companys ability to successfully execute its business plans and/or tax planning strategies. These changes, if any, may require material adjustments to these deferred tax asset balances. On a quarterly basis, the Company reassesses the
need for these valuation allowances based on operating results and its assessment of the likelihood of future taxable income and developments in the relevant tax jurisdictions. Based on an assessment performed in the second quarter of 2012, the
Company continues to record a valuation allowance against the net deferred tax assets in Finland and China in the amount of $2.9 million, as recorded in the first quarter of 2012. The Company continues to maintain a valuation allowance against its
net deferred tax assets in the U.S. and various foreign jurisdictions in 2012, where the Company believes it is more likely than not that deferred tax assets will not be realized. For the foreseeable future, the federal tax provision related to
future earnings will be offset substantially by a reduction in the valuation allowance. Accordingly, current and future tax expense will consist primarily of certain required state income taxes and taxes in certain foreign jurisdictions.

As of July 1, 2012, the liability for income taxes associated with uncertain tax positions is $5.9 million. Of the $5.9 million,
$3.9 million, if recognized, would affect tax expense and would require penalties and interest of $0.7 million. In addition, $0.6 million would result in an increase in prepaid assets, and $0.7 million would result in a decrease of deferred tax
assets in jurisdictions where the deferred tax assets are currently offset by a full valuation allowance.

The Company strives
to resolve open matters with each tax authority at the examination level and could reach agreement with a tax authority at any time. While the Company has accrued for amounts it believes are the expected outcomes, the final outcome with a tax
authority may result in a tax liability that is more or less than that reflected in the financial statements. Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal. The liability is
reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations between tax authorities,
identification of new issues, and issuance of new legislation, regulations or case law. Management believes that adequate amounts of tax and related interest, if any, have been provided for any adjustments that may result from these examinations of
uncertain tax positions.



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POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)



As a result of ongoing tax audits, the total liability for unrecognized tax benefits may
change within the next twelve months due to either settlement of audits or expiration of statutes of limitations. As of July 1, 2012, the Companys tax years for 2008, 2009 and 2010 are subject to examination by the tax authorities. With
few exceptions, as of July 1, 2012, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for years before 2008. As of July 1, 2012, the Company is not under corporate income tax
examination by federal or state taxing authorities.

Note 11. Fair Value of Financial Instruments

The estimated fair value of the Companys financial instruments has been determined using available market information and valuation
methodologies. Considerable judgment is required in estimating fair values. Accordingly, the estimates may not be indicative of the amounts the Company could realize in a current market exchange.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it was
practicable to estimate that value.

Cash and Cash Equivalents and Restricted Cash

The carrying amount approximates fair value because of the short maturity (less than 90 days) and high credit quality of these
instruments.

Long-Term Debt

The fair value of the Companys long-term debt is estimated based on the quoted market prices for the debt. The Companys long-term debt consists of convertible subordinated notes, which are not
actively traded as an investment instrument, and therefore, the quoted market prices may not reflect actual sales prices at which these notes would be traded. The Company carries and values these instruments at their stated principal value, which
represents the amount due at maturity less any unamortized discount or plus any accreted premium.

The estimated fair values
of the Companys financial instruments were as follows:



|                                                      |  |                |         |  |                 |   |        |                |  |   |           |  |  |   |        | 
|----------------------------------------------------- |  | -------------- | ------- |  | --------------- | - | ------ | -------------- |  | - | --------- |  |  | - | ------ | 
|                                                      |  | July 1, 2012   |         |  | January 1, 2012 |  
|                                                      |  | CarryingAmount |         |  | FairValue       |   |        | CarryingAmount |  |   | FairValue | 
|Cash and cash equivalents                             |  | $              | 11,616  |  |                 | $ | 11,616 |                |  | $ | 64,121    |  |  | $ | 64,121 | 
|Restricted cash                                       |  |                | 6,222   |  |                 |   | 6,222  |                |  |   | 6,162     |  |  |   | 6,162  | 
|Long-term debt                                        |  |                |         |  |                 |   |        |                |  |   |           |  |  |   |        | 
|2.750% Convertible Senior Subordinated Notes due 2041 |  |                | 104,693 |  |                 |   | 32,455 |                |  |   | 102,139   |  |  |   | 61,028 | 
|3.875% Convertible Subordinated Notes due 2027        |  |                | 150,000 |  |                 |   | 22,125 |                |  |   | 150,000   |  |  |   | 71,250 | 
|1.875% Convertible Subordinated Notes due 2024        |  |                | 51      |  |                 |   | 7      |                |  |   | 51        |  |  |   | 51     | 

ASC 820-10 requires that, for any assets and liabilities stated at fair value on a recurring basis in the
Companys financial statements, the fair value of such assets and liabilities be measured based on the price that would be received from selling an asset, or paid to transfer a liability, in an orderly transaction between market participants at
the measurement date. Level 1 asset and liability values are derived from quoted prices in active markets for identical assets and liabilities and Level 2 asset and liability values are derived from quoted prices in inactive markets. The
Companys assets measured at fair value on a recurring basis include only cash, cash equivalents and restricted cash, all of which are based upon Level 1 inputs. The fair value disclosures of the Companys long-term debt are determined by
Level 2 inputs based upon the quoted market price of the same or similar issues.



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POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)



Note 12. Customer Concentrations

The Companys product sales have historically been concentrated in a small number of customers. For the first half of fiscal 2012 one
customer, Ericsson, accounted for 11% of our total sales. No other customer accounted for 10% or more of revenues in the first half of fiscal 2012. For the first half of 2011, KMM Telecommunications (formerly known as Team Alliance), one of our
North American resellers, Nokia Siemens and Raycom, one of our European resellers, accounted for 22%, 20% and 13% of our total net sales, respectively.

As of July 1, 2012, one customer, KMM Telecommunications, one of the Companys North American resellers, accounted for approximately 28% of total accounts receivable. The inability to collect
outstanding receivables from any customers, the delay in collecting outstanding receivables within the contractual payment terms, or the loss of, or reduction in sales to any of these customers could have a material adverse effect on the
Companys business, financial condition and results of operations.

Note 13. Supplier Concentrations

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

Note 14. Segments

The
Company operates in one reportable business segment: Wireless Communications. The Companys revenues are derived from the sale of wireless communications network products and coverage solutions, including antennas, boosters,
combiners, cabinets, shelters, filters, radio frequency power amplifiers, remote radio head transceivers, repeaters, tower-mounted amplifiers and advanced coverage solutions for use in cellular, PCS, 3G and 4G wireless communications networks
throughout the world.

Customer Information

The Company manufactures multiple product categories at its manufacturing locations and produces certain products at more than one location. With regard to sales, the Company sells its products through
two major sales channels. The first channel is the original equipment manufacturer channel, which consists of large global companies such as Alcatel-Lucent, Ericsson, Huawei, Motorola, Nokia Siemens Networks and Samsung. The other major channel is
direct to wireless network operators, such as AT&T, Bouyges, Orange, Raycom, Serta, Sprint, T-Mobile, Verizon Wireless and Vodafone. A majority of the Companys products are sold in both sales channels. The Company maintains global
relationships with most of its customers. The Companys original equipment manufacturer customers normally purchase on a global basis and the sales to these customers, while recognized in various reporting regions, are managed on a global
basis. For network operator customers, where they have a global presence, the Company typically maintains a global purchasing agreement. Individual sales are made on a regional basis.

The Company measures its success by monitoring its net sales by product and consolidated gross margins, with a short-term goal of
maintaining a positive operating cash flow while striving to achieve long-term operating profits.

Note 15. Subsequent Event

On July 3, 2012, the Company entered into a payoff letter (Payoff Letter) with Wells Fargo Capital
Finance LLC (Wells Fargo) that terminates the Companys senior secured credit facility in the form of a revolving line of credit that had availability up to a maximum of $30 million (Credit Agreement.)



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POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)



Pursuant to the Payoff Letter, the Company repaid in full all of its obligations under
the Credit Agreement, including principal, interest, fees and other charges outstanding. The aggregate amount of such payments, inclusive of an early termination fee payable to Wells Fargo, was approximately $100,000. In consideration for such
payments, (i) the Companys obligations under the Credit Agreement were deemed satisfied in full, (ii) the Credit Agreement was immediately terminated, and (iii) the liens securing the obligations under the Credit Agreement were
released, in each case subject to limited exceptions as set forth in the Payoff Letter.

At the date of the Payoff Letter, the
Company had outstanding under the Credit Agreement letters of credit issued by Wells Fargo in the amount of approximately $5.4 million. These letters of credit remain outstanding following the termination of the Credit Agreement and are fully cash
collaterized. In connection with the execution of the Payoff Letter and as a condition to the termination of the Credit Agreement, the Company deposited an additional $505,000 with Wells Fargo to collateralize the outstanding letters of credit.



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|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 included under
Item 1, Financial Statements (Unaudited)of this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements, the realization of which may be impacted by certain important factors including, but not limited
to, those discussed in Risk Factors, in Part II, Item 1A included herein. Please see Cautionary Statement Regarding Forward Looking Statements at the beginning of this report.

Introduction and Overview

Powerwave Technologies, Inc. (the Company, we, us, or our) is a global supplier of
end-to-end wireless solutions for wireless communications networks. Our business consists of the design, manufacture, marketing and sale of products to improve coverage, capacity and data speed in wireless communications networks. Our principal
products include antennas, boosters, combiners, cabinets, shelters, filters, radio frequency power amplifiers, remote radio head transceivers, repeaters, tower-mounted amplifiers and advanced coverage solutions. These products are utilized in major
wireless networks throughout the world, which support voice and data communications by use of cell phones and other wireless communication devices. We sell our products to both original equipment manufacturers, who incorporate our products into
their proprietary base stations (which they then sell to wireless network operators), and directly to individual wireless network operators for deployment into their existing networks. We have also started marketing in new markets such as
government, public safety, military and homeland security.

During the last ten years, demand for wireless communications
infrastructure equipment has fluctuated dramatically. While demand for wireless infrastructure was strong during 2005, it weakened for us during 2006 and 2007 due to significant reductions in demand by three of our major customers, as well as a
general slowdown in overall demand within the wireless infrastructure industry. For 2008, demand for our products once again increased; however, in the fourth quarter of 2008 demand was negatively impacted by the global economic recession. The
recession and the ensuing period of economic weakness and uncertainty have significantly impacted demand for our products during the last three years. In particular our revenue in 2009 fell by 36% from 2008 levels, negatively impacting our financial
results. In response, during 2008 and 2009, we initiated several cost cutting measures aimed at lowering our manufacturing overhead and operating expenses. During fiscal 2011, our revenue declined by 25% compared to fiscal 2010, and during the
second half of 2011 our revenues fell by over 55% as compared to the first half of 2011. For the first half of fiscal 2012, our revenues fell by 72% when compared to the first half of fiscal 2011. We believe that the continued reductions in our
revenues in the second half of fiscal 2011 and the first two quarters of fiscal 2012 were due to several factors, including, significant slowdowns in spending by wireless network operators in several of our markets, including North America, Western
and Eastern Europe and the Middle East. In addition, we experienced a significant reduction in demand from our original equipment manufacturing customers. In response to these reductions in revenues, we initiated several cost reduction measures to
both lower our manufacturing costs and reduce our operating expenses. We cannot predict if such measures will be successful, and we may be required to further reduce operating expenses and manufacturing costs or curtail certain aspects of our
business if there is continued reduction in demand by our customers.

In the past, there have been significant deferrals in
capital spending by wireless network operators due to delays in the expected deployment of infrastructure equipment and financial difficulties on the part of the wireless network operators who were forced to consolidate and reduce spending to
strengthen their balance sheets and improve their profitability. Continuing economic weakness and uncertainty, increasing energy and commodity costs, continued low consumer confidence, reduced property values, constrained credit markets and concerns
about sovereign debt in some countries in the European Union have had a negative impact on the availability of financial capital, which has limited capital expenditures by wireless network operators and will likely have a negative impact on such
expenditures going forward in the near term. All of these factors can have a significant negative impact on overall demand for wireless infrastructure products, and, we believe, at various times, have directly led to reduced demand for our products
and increased price competition within our industry, thereby reducing our revenues and contributing to our reported operating losses.

We continue to invest in the research and development of wireless communications network technology and the diversification of our product offerings, and we believe that we have one of our industrys
leading product portfolios in terms of performance and features. We believe that our proprietary design technology is a further differentiator of our products.



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Looking back over the last eight years, beginning in fiscal 2004, we focused on cost savings
while we expanded our market presence, as evidenced by our acquisition of LGP Allgon. This acquisition involved the integration of two companies based in different countries and was a complex, costly and time-consuming process. During fiscal 2005,
we continued to focus on cost savings while we expanded our market presence, as evidenced by our acquisition of selected assets and liabilities of REMEC, Inc.s wireless systems business (the REMEC Wireless Acquisition). We believe
that this acquisition further strengthened our position in the global wireless infrastructure market. In October 2006, we completed the Filtronic plc wireless acquisition. We believe that this strategic acquisition provided us with the leading
position in transmit and receive filter products, as well as broadened our RF conditioning and base station solutions product portfolio and added significant additional technology to our intellectual property portfolio. For fiscal years 2007, 2008,
2009, and 2010 we completed the integration of these acquisitions, focused on consolidating operations and reducing our overall cost structure. During this same time, we encountered a significant unanticipated reduction in revenues, which caused us
to revise our integration and consolidation plans with a goal of further reducing our operating costs and significantly lowering our breakeven operating structure. As has been demonstrated during the last eight years, these acquisitions do not
provide any guarantee that our revenues will increase.

We measure our success by monitoring our net sales by product and
consolidated gross margins, with a short-term goal of attempting to achieve positive operating cash flow while striving to achieve long-term operating profits. We believe that there continues to be long-term growth opportunities within the wireless
communications infrastructure marketplace, and we are focused on positioning the Company to benefit from these long-term opportunities in both the traditional commercial market and new markets such as government, public safety, military and homeland
security.

Critical Accounting Policies and Estimates

Managements Discussion and Analysis of Financial Condition and Results of Operations is based on our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q, which
have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. The preparation of these
financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we evaluate these estimates and assumptions, including those related to revenue recognition, allowances for doubtful accounts, inventory reserves, warranty
obligations, restructuring reserves, asset impairment, income taxes and stock-based compensation expense. We base these estimates on our historical experience and on various other factors which we believe to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of certain expenses that are not readily apparent from other sources. These estimates and assumptions by their nature
involve risks and uncertainties, and may prove to be inaccurate. In the event that any of our estimates or assumptions is inaccurate in any material respect, it could have a material adverse effect on our reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

For a
summary of our critical accounting policies and estimates, see Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, of Part II of our Annual Report on Form 10-K for the fiscal year ended
January 1, 2012.

Accruals for Restructuring and Impairment Charges

In the second quarter and first half of fiscal 2012, we recorded restructuring and impairment charges of $5.1 and $13.9 million
respectively. Such charges relate to our restructuring plans. See further discussion of these plans in Note 5 of the Notes to Consolidated Financial Statements under Part I, Item I, Financial Information.

Restructuring and impairment accruals related primarily to workforce reductions and facility closure related expenses. Such accruals were
based on estimates and assumptions made by management about matters which were uncertain at the time, including the timing and amount of sublease income that will be recovered on vacated property and the net realizable value of used equipment that
is no longer needed in our continuing operations. While we used our best current estimates based on facts and circumstances available at the time to quantify these charges, different estimates could reasonably be used in the relevant periods to
arrive at different accruals and the actual amounts incurred or recovered may be substantially different from those based on the assumptions utilized, either of which could have a material impact on the presentation of our financial condition or
results of operations for a given period. As a result, we periodically review the estimates and assumptions used and reflect the effects of those revisions in the period that they become known.



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In the first quarter of fiscal 2012, we formulated and began to implement a plan to further
reduce manufacturing overhead and operating expenses (the 2012 Restructuring Plan). As part of this plan, we initiated personnel reductions in both our domestic and foreign locations. These reductions were taken in further response to
economic conditions and the continued decline in revenue in the first quarter of fiscal 2012. We expect to finalize this plan by the third quarter of 2012; however additional amounts may be accrued in 2012 related to the actions associated with this
plan.

In November 2011, we formulated and began to implement a plan to further reduce manufacturing overhead costs and
operating expenses (the 2011 Restructuring Plan). As part of this plan, we initiated personnel reductions of approximately 110 employees in both our domestic and foreign locations, with primary reductions in the U.S., Sweden, Finland,
France, China and Canada. These reductions were undertaken in response to economic conditions and the significant decline in revenues in the third quarter of 2011. We finalized this plan in the fourth quarter of 2011; however, additional amounts may
be accrued in 2012 related to actions associated with this plan.

Results of Operations

The following table summarizes our results of operations as a percentage of net sales for the three and six months ended July 1, 2012
and July 3, 2011:



|                                     |  |                    |        |    |                  |  |       |             |  |  |             |    |  |  |       |  
|------------------------------------ |  | ------------------ | ------ | -- | ---------------- |  | ----- | ----------- |  |  | ----------- | -- |  |  | ----- | -
|                                     |  | Three Months Ended |        |    | Six Months Ended | 
|                                     |  | July 1,2012        |        |    | July 3,2011      |  |       | July 1,2012 |  |  | July 3,2011 |   
|Net sales                            |  |                    | 100.0  | %  |                  |  | 100.0 | %           |  |  | 100.0       | %  |  |  | 100.0 | %
|Cost of sales:                       |  |                    |        |    |                  |  |       |             |  |  |             |    |  |  |       |  
|Cost of goods                        |  |                    | 117.4  |    |                  |  | 72.0  |             |  |  | 121.3       |    |  |  | 72.8  |  
|Restructuring and impairment charges |  |                    | 11.7   |    |                  |  |      |             |  |  | 12.3        |    |  |  |      |  
|                                     |  |                    |        |    |                  |  |       |             |  |  |             |    |  |  |       |  
|Total cost of sales                  |  |                    | 129.1  |    |                  |  | 72.0  |             |  |  | 133.6       |    |  |  | 72.8  |  
|                                     |  |                    |        |    |                  |  |       |             |  |  |             |    |  |  |       |  
|Gross profit                         |  |                    | (29.1  | )  |                  |  | 28.0  |             |  |  | (33.6       | )  |  |  | 27.2  |  
|Operating expenses:                  |  |                    |        |    |                  |  |       |             |  |  |             |    |  |  |       |  
|Sales and marketing                  |  |                    | 11.5   |    |                  |  | 4.7   |             |  |  | 14.8        |    |  |  | 5.6   |  
|Research and development             |  |                    | 24.9   |    |                  |  | 9.2   |             |  |  | 27.5        |    |  |  | 10.5  |  
|General and administrative           |  |                    | 24.1   |    |                  |  | 6.7   |             |  |  | 23.9        |    |  |  | 7.6   |  
|Restructuring and impairment charges |  |                    | 0.4    |    |                  |  | 0.0   |             |  |  | 4.0         |    |  |  | 0.0   |  
|                                     |  |                    |        |    |                  |  |       |             |  |  |             |    |  |  |       |  
|Total operating expenses             |  |                    | 60.9   |    |                  |  | 20.6  |             |  |  | 70.2        |    |  |  | 23.7  |  
|                                     |  |                    |        |    |                  |  |       |             |  |  |             |    |  |  |       |  
|Operating income (loss)              |  |                    | (90.0  | )  |                  |  | 7.4   |             |  |  | (103.8      | )  |  |  | 3.5   |  
|Other expense, net                   |  |                    | (9.6   | )  |                  |  | (2.4  | )           |  |  | (9.5        | )  |  |  | (2.2  | )
|                                     |  |                    |        |    |                  |  |       |             |  |  |             |    |  |  |       |  
|Income (loss) before income taxes    |  |                    | (99.6  | )  |                  |  | 5.0   |             |  |  | (113.3      | )  |  |  | 1.3   |  
|Income tax provision                 |  |                    | 0.6    |    |                  |  | 0.9   |             |  |  | 3.9         |    |  |  | 1.3   |  
|                                     |  |                    |        |    |                  |  |       |             |  |  |             |    |  |  |       |  
|Net income (loss)                    |  |                    | (100.2 | )% |                  |  | 4.1   | %           |  |  | (117.2      | )% |  |  | 0.0   | %
|                                     |  |                    |        |    |                  |  |       |             |  |  |             |    |  |  |       |  



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##### Table of Contents

Three Months ended July 1, 2012 and July 3, 2011

Net Sales

Our sales are derived from the sale of wireless communications network products and coverage solutions, including antennas, boosters,
combiners, cabinets, shelters, filters, radio frequency power amplifiers, remote radio head transceivers, repeaters, tower-mounted amplifiers and advanced coverage solutions for use in cellular, PCS, 3G and 4G wireless communications networks
throughout the world.

The following table presents a further analysis of our sales based upon our various customer groups:



|                                     |  |                                  |        |  |              |  |     |   |  |   |         |  |  |  |     |  
|------------------------------------ |  | -------------------------------- | ------ |  | ------------ |  | --- | - |  | - | ------- |  |  |  | --- | -
|                                     |  | Three Months Ended(in thousands) |       
|Customer Group                       |  | July 1, 2012                     |        |  | July 3, 2011 | 
|Wireless network operators and other |  | $                                | 28,459 |  |              |  | 67  | % |  | $ | 120,780 |  |  |  | 71  | %
|Original equipment manufacturers     |  |                                  | 13,912 |  |              |  | 33  |   |  |   | 49,861  |  |  |  | 29  |  
|                                     |  |                                  |        |  |              |  |     |   |  |   |         |  |  |  |     |  
|Total                                |  | $                                | 42,371 |  |              |  | 100 | % |  | $ | 170,641 |  |  |  | 100 | %
|                                     |  |                                  |        |  |              |  |     |   |  |   |         |  |  |  |     |  

Sales decreased by 75% to $42.4 million for the second quarter of fiscal 2012, from $170.6 million for
the second quarter of fiscal 2011. This decrease was due to several factors, including, but not limited to, a continued slowdown in spending by North American network operators coupled with further weakness in several international markets,
including Western and Eastern Europe and the Middle East. In addition, we experienced further reductions in demand with our original equipment manufacturing customers both as part of our strategic plan to reduce our dependence on low-margin
commodity type original equipment manufacturer business as well as an overall reduction in demand by our original equipment manufacturer customers. In particular, we experienced reductions in demand by Nokia Siemens Networks and Alcatel-Lucent of
over 93% when compared to the prior year period. Sales to our direct operator customers decreased by approximately 76% for the second quarter of fiscal 2012 from the second quarter of fiscal 2011. Sales to our original equipment manufacturers
decreased by 72% for the second quarter of fiscal 2012 from the second quarter of fiscal 2011. We believe that, among other factors, the current negative global economic environment has caused network operators to reduce or postpone their spending
plans for the near term while they evaluate the macro-economic pressures in each individual market. Due to our poor financial position, some of our suppliers have reduced or limited the amount of credit that they allocate to us, which has also
impacted our ability to obtain single or limited source components which has caused production and shipment delays that have negatively impacted revenues during the second quarter of 2012.

The following table presents a further analysis of our sales based upon our various product groups:



|                                      |              |                                  |        |              |  |  |     |   |  |   |         |  |  |  |     |  
|------------------------------------- | ------------ | -------------------------------- | ------ | ------------ |  |  | --- | - |  | - | ------- |  |  |  | --- | -
|Wireless Communications
Product Group |              | Three Months Ended(in thousands) |       
|                                      | July 1, 2012 |                                  |        | July 3, 2011 | 
|Antenna systems                       |              | $                                | 24,876 |              |  |  | 52  | % |  | $ | 76,046  |  |  |  | 45  | %
|Base station systems                  |              |                                  | 7,735  |              |  |  | 25  |   |  |   | 77,573  |  |  |  | 45  |  
|Coverage systems                      |              |                                  | 9,761  |              |  |  | 23  |   |  |   | 17,022  |  |  |  | 10  |  
|                                      |              |                                  |        |              |  |  |     |   |  |   |         |  |  |  |     |  
|Total                                 |              | $                                | 42,371 |              |  |  | 100 | % |  | $ | 170,641 |  |  |  | 100 | %
|                                      |              |                                  |        |              |  |  |     |   |  |   |         |  |  |  |     |  

Antenna systems consist of base station antennas and tower-mounted amplifiers. Base station systems
consist of products that are installed into or around the base station of wireless networks and include products such as boosters, combiners, filters, radio frequency power amplifiers and VersaFlex cabinets. Coverage systems consist primarily of
repeaters and advanced coverage solutions. The decrease in all of our product group sales during the second quarter of fiscal 2012 as compared with the second quarter of fiscal 2011 is due to the previously mentioned significant decrease in demand
we experienced from our wireless network operator and original equipment manufacturer customers.



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##### Table of Contents

We track the geographic location of our sales based upon the location of our customers to
which we ship our products. Since many of our original equipment manufacturer customers purchase products from us at central locations and then re-ship the product with other base station equipment to locations throughout the world, we are unable to
identify the final installation location of many of our products. The following table presents an analysis of our net sales based upon the geographic area to which a product was shipped:



|                    |  |                                  |        |  |              |  |     |   |  |   |         |  |  |  |     |  
|------------------- |  | -------------------------------- | ------ |  | ------------ |  | --- | - |  | - | ------- |  |  |  | --- | -
|                    |  | Three Months Ended(in thousands) |       
|Geographic Area     |  | July 1, 2012                     |        |  | July 3, 2011 | 
|Americas            |  | $                                | 16,782 |  |              |  | 40  | % |  | $ | 80,207  |  |  |  | 47  | %
|Asia Pacific        |  |                                  | 10,946 |  |              |  | 26  |   |  |   | 41,823  |  |  |  | 25  |  
|Europe              |  |                                  | 10,578 |  |              |  | 25  |   |  |   | 46,859  |  |  |  | 27  |  
|Other International |  |                                  | 4,065  |  |              |  | 9   |   |  |   | 1,752   |  |  |  | 1   |  
|                    |  |                                  |        |  |              |  |     |   |  |   |         |  |  |  |     |  
|Total               |  | $                                | 42,371 |  |              |  | 100 | % |  | $ | 170,641 |  |  |  | 100 | %
|                    |  |                                  |        |  |              |  |     |   |  |   |         |  |  |  |     |  

Revenues decreased in all regions in the second quarter of fiscal 2012 as compared to the second quarter
of fiscal 2011, with the exception of Other International, which includes the Middle East region. The decrease is attributable to the significant reductions in demand from our wireless network operator customers, other direct customers and original
equipment manufacturers which we believe is due to several factors, including, but not limited to, the current negative global economic environment that has caused network operators to reduce or postpone their equipment spending plans in most all
the regions we operate in. Since wireless network infrastructure spending is dependent on individual network coverage and capacity demands, we do not believe that our revenue fluctuations for any geographic region are necessarily indicative of a
trend for our future revenues by geographic area.

A large portion of our revenues are generated in currencies other than the
U.S. Dollar. During the last year, the value of the U.S. Dollar has fluctuated significantly against many other currencies. We have calculated that, when comparing exchange rates in effect for the second quarter of fiscal 2012 to those in
effect for the second quarter of fiscal 2011, the change in the value of foreign currencies as compared with the U.S. Dollar did not have a material impact on our net sales.

For the second quarter of fiscal 2012, one customer, Ericsson, accounted for 12% of our total sales. No other customer accounted for 10%
or more of our revenues. For the second quarter of fiscal 2011, total sales to KMM Telecommunications (formerly known as Team Alliance), one of our North American resellers, Nokia Siemens Networks and Raycom, one of our European resellers accounted
for approximately 28%, 16% and 15% of total sales respectively.

A number of factors have caused delays, and may cause future
delays in new wireless infrastructure and upgrade deployment schedules throughout the world, including deployments in the United States, Europe, Asia, South America and other areas. In addition, a number of factors may cause original equipment
manufacturers to alter their outsourcing strategy concerning certain wireless communications network products, which could cause such original equipment manufacturers to reduce or eliminate their demand for external supplies of such products or
shift their demand to alternative suppliers or internal suppliers. Such factors include lower perceived internal manufacturing costs and competitive reasons to remain vertically integrated. Due to the possible uncertainties associated with wireless
infrastructure deployments and original equipment manufacturer demand, we have experienced and expect to continue to experience significant fluctuations in demand from our original equipment manufacturer and network operator customers. Such
fluctuations have caused and may continue to cause significant reductions in our revenues and/or operating results, which has adversely impacted and may continue to adversely impact our business, financial condition and results of operations.

Cost of Sales and Gross Profit

Our cost of sales includes both fixed and variable cost components and consists primarily of materials, assembly and test labor and overhead, which includes equipment depreciation, facility lease expense,
transportation costs and warranty costs. Components of our fixed cost structure include test equipment depreciation, facility lease expense, purchasing and procurement expenses and quality assurance costs. Given the fixed nature of such costs, the
absorption of our overhead costs into inventory decreases and the amount of overhead variances expensed to cost of sales increases as volumes decline as we have fewer units to absorb our overhead costs against. Conversely, the absorption of our
overhead costs into inventory increases and the amount of overhead variances expensed to cost of sales decreases as volumes increase as we have more units to absorb our overhead costs against. As a result, our gross profit margins generally decrease
as revenue and volumes decline due to lower sales volume and higher amounts of overhead variances expensed to cost of sales. Our gross profit margins generally increase as our revenue and volumes increase due to higher sales volume and lower amounts
of overhead variances expensed to cost of sales.



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##### Table of Contents

The following table presents an analysis of our gross profit:



|                                     |  |                                  |         |   |              |  |       |    |  |   |         |  |  |  |       |  
|------------------------------------ |  | -------------------------------- | ------- | - | ------------ |  | ----- | -- |  | - | ------- |  |  |  | ----- | -
|                                     |  | Three Months Ended(in thousands) |        
|                                     |  | July 1, 2012                     |         |   | July 3, 2011 | 
|Net sales                            |  | $                                | 42,371  |   |              |  | 100.0 | %  |  | $ | 170,641 |  |  |  | 100.0 | %
|Cost of sales:                       |  |                                  |         |   |              |  |       |    |  |   |         |  |  |  |       |  
|Cost of sales                        |  |                                  | 49,753  |   |              |  | 117.4 |    |  |   | 122,849 |  |  |  | 72.0  |  
|Restructuring and impairment charges |  |                                  | 4,947   |   |              |  | 11.7  |    |  |   |        |  |  |  |      |  
|                                     |  |                                  |         |   |              |  |       |    |  |   |         |  |  |  |       |  
|Total cost of sales                  |  |                                  | 54,700  |   |              |  | 129.1 |    |  |   | 122,849 |  |  |  | 72.0  |  
|                                     |  |                                  |         |   |              |  |       |    |  |   |         |  |  |  |       |  
|Gross profit (loss)                  |  | $                                | (12,329 | ) |              |  | (29.1 | )% |  | $ | 47,792  |  |  |  | 28.0  | %
|                                     |  |                                  |         |   |              |  |       |    |  |   |         |  |  |  |       |  

Our gross profit decreased during the second quarter of fiscal 2012, compared to the second quarter of
fiscal 2011, primarily as a result of our significantly lower revenues. The significant drop in our revenues during the second quarter of fiscal 2012 caused us to be unable to absorb our overhead and manufacturing costs, which resulted in the
reduction in our gross margin as a percentage of revenue. Gross margin was also negatively impacted by inventory related charges of approximately $8.0 million associated with excess and obsolete inventory which is included in cost of sales, compared
with $0.5 million in the second quarter of fiscal 2011.

In the second quarter of fiscal 2012, the Company recorded a
restructuring and impairment charge of approximately $2.8 million related to the impairment of inventory that will be disposed of and will not generate future revenue, as well as vendor cancellation charges of $2.1 million, primarily related to the
transactions with Tatfook.

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. Certain of our competitors have aggressively lowered prices in an
attempt to gain market share. Due to these competitive pressures and the pressures of our customers to continually lower product costs, we expect that the average sales prices of our products will continue to decrease and negatively impact our gross
margins. In addition, we have introduced new products at lower sales prices, and these lower sales prices have impacted the average sales prices of our products. We have also reduced prices on our existing products in response to our competitors and
customer demands. We currently expect that pricing pressures will remain strong in our industry. Future pricing actions by our competitors and us may adversely impact our gross profit margins and profitability, which could result in decreased
liquidity and adversely affect our business, financial condition and results of operations.

A portion of our coverage
solution sales include design, customization, installation and implementation services and the supply of coverage solutions products. We recognize revenue using the percentage-of-completion method for these coverage solution projects. Due to the
nature of these types of projects, cost estimates can vary significantly, and the actual cost of such projects can fluctuate significantly during the life of a project. These fluctuations, such as the one which occurred in the first quarter of
fiscal 2011 when our gross profit was negatively impacted by a coverage solution project cost estimate adjustment of approximately $3.6 million, can have a negative impact on our gross profit margins and profitability, decreasing revenues and
adversely impacting our business, financial condition and results of operations.

We continue to strive for manufacturing and
engineering cost reductions to offset pricing pressures on our products, as evidenced by our decisions to close and consolidate several of our manufacturing locations as part of our restructuring plans. However, we cannot guarantee that these cost
reductions, and our outsourcing or product redesign efforts will keep pace with price declines and cost increases. If we are unable to further reduce our costs through our manufacturing, outsourcing and/or engineering efforts, our gross margins and
profitability will be adversely affected.



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##### Table of Contents

Operating Expenses

The following table presents a breakdown of our operating expenses by functional category and as a percentage of net sales:



|                                     |  |                                  |        |  |              |  |      |   |  |   |        |  |  |  |      |  
|------------------------------------ |  | -------------------------------- | ------ |  | ------------ |  | ---- | - |  | - | ------ |  |  |  | ---- | -
|                                     |  | Three Months Ended(in thousands) |       
|Operating Expenses                   |  | July 1, 2012                     |        |  | July 3, 2011 | 
|Sales and marketing                  |  | $                                | 4,853  |  |              |  | 11.5 | % |  | $ | 8,015  |  |  |  | 4.7  | %
|Research and development             |  |                                  | 10,580 |  |              |  | 24.9 |   |  |   | 15,748 |  |  |  | 9.2  |  
|General and administrative           |  |                                  | 10,191 |  |              |  | 24.1 |   |  |   | 11,332 |  |  |  | 6.7  |  
|Restructuring and impairment charges |  |                                  | 178    |  |              |  | 0.4  |   |  |   | 41     |  |  |  | 0.0  |  
|                                     |  |                                  |        |  |              |  |      |   |  |   |        |  |  |  |      |  
|Total operating expenses             |  | $                                | 25,802 |  |              |  | 60.9 | % |  | $ | 35,136 |  |  |  | 20.6 | %
|                                     |  |                                  |        |  |              |  |      |   |  |   |        |  |  |  |      |  

Sales and marketing expenses consist primarily of salaries and commissions, travel expenses, advertising
and marketing expenses, selling expenses, charges for customer demonstration units and trade show expenses. Sales and marketing expenses decreased by $3.2 million, or 39.5%, during the second quarter of fiscal 2012 as compared to the second quarter
of fiscal 2011, primarily due to decreased personnel, reduced commission and lower bad debt expenses. The personnel reductions were part of our restructuring plans.

Research and development expenses consist primarily of ongoing design and development expenses for new wireless communications network products, as well as for advanced coverage solutions. We also incur
design expenses associated with reducing the cost and improving the manufacturability of our existing products. Research and development expenses can fluctuate dramatically from period to period depending on numerous factors, including new product
introduction schedules, prototype developments and hiring patterns. Total research and development expenses decreased $5.2 million or 32.8% during the second quarter of fiscal 2012 as compared to the second quarter of fiscal 2011 due primarily to
lower personnel costs, reduced professional fees and lower materials expense. The personnel reductions were part of our restructuring plans.

General and administrative expenses consist primarily of salaries and other expenses for management, finance, information systems, legal fees, facilities and human resources. Total general and
administrative expenses decreased $1.1 million, or 10.0% during the second quarter of fiscal 2012 as compared to the second quarter of fiscal 2011, due primarily to lower personnel costs, stock compensation expense, facilities expense and
professional fees offset in part by an increase in rent expense related to rent on our headquarters facility as a result of the sale-leaseback transaction completed in the fourth quarter of 2011. The personnel reductions were part of our
restructuring plans.

Restructuring charges in operating expense of $0.2 million were recorded in the second quarter of fiscal
2012 primarily related to severance for terminated employees in the United States, Europe and South America.

Other Income
(Expense), net

The following table presents an analysis of other income (expense), net:



|                                  |  |                                  |        |   |              |  |      |    |  |   |        |   |  |  |      |   
|--------------------------------- |  | -------------------------------- | ------ | - | ------------ |  | ---- | -- |  | - | ------ | - |  |  | ---- | --
|                                  |  | Three Months Ended(in thousands) |       
|                                  |  | July 1, 2012                     |        |   | July 3, 2011 | 
|Interest income                   |  | $                                | 23     |   |              |  | 0.1  | %  |  | $ | 54     |   |  |  | 0.0  | % 
|Interest expense                  |  |                                  | (3,882 | ) |              |  | (9.1 | )  |  |   | (2,894 | ) |  |  | (1.7 | ) 
|Foreign currency gain (loss), net |  |                                  | (324   | ) |              |  | (0.8 | )  |  |   | (1,475 | ) |  |  | (0.8 | ) 
|Other income, net                 |  |                                  | 86     |   |              |  | 0.2  |    |  |   | 160    |   |  |  | 0.1  |   
|                                  |  |                                  |        |   |              |  |      |    |  |   |        |   |  |  |      |   
|Other income (expense), net       |  | $                                | (4,097 | ) |              |  | (9.6 | )% |  | $ | (4,155 | ) |  |  | (2.4 | )%
|                                  |  |                                  |        |   |              |  |      |    |  |   |        |   |  |  |      |   

Interest income decreased during the second quarter of fiscal 2012 compared to the second quarter of
fiscal 2011, due to lower cash balances. Interest expense increased by $1.0 million during the second quarter of fiscal 2012 as compared to the second quarter of fiscal 2011 due to higher debt levels and non-cash bond principal accretion
related to our 2.75% Convertible Senior Subordinated Notes due 2041 (the 2.75% Notes.) Included in non-cash charges are the amortization of debt issuance costs, debt discount and bond accretion totaling $1.6 and $1.0 million for the
second quarters of 2012 and 2011, respectively. Additionally, we recognized a net foreign currency translation loss of $0.3 million in the second quarter of fiscal 2012, primarily due to the fluctuations of the U.S. Dollar versus the Euro,
Chinese RMB, and several other currencies, as compared to the loss of $1.5 million in the second quarter of fiscal 2011. The reduction of other income (expense), net from the second quarter of fiscal 2011 to the second quarter of fiscal 2012 of $0.1
million is primarily related to lower net sub-lease income.



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##### Table of Contents

Income Tax Provision

Our effective tax rate for the second quarter of 2012 was an expense of approximately 0.6% of our pre-tax loss of $42.2 million. We have
recorded a valuation allowance against a portion of our deferred tax assets pursuant to Accounting Standards Codification (ASC) Topic 740, Income Taxes, due to the uncertainty as to the timing and ultimate realization of those
assets. As such, for the foreseeable future, the tax provision or tax benefit related to future U.S. earnings or losses will be offset substantially by a reduction or increase in the valuation allowance. Accordingly, the tax expense consisted
primarily of taxes from operations in foreign jurisdictions, primarily Sweden and India. We expect our tax rate to continue to fluctuate based on the percentage of income earned in each jurisdiction. In addition, our income tax expense was
reduced by $0.1 million related to an expiration of the statutory audit period for an uncertain tax position.

Net Income
(Loss)

The following table presents a reconciliation of operating income (loss) to net income (loss):



|                                  |  |                                  |         |   |             |   |        |  
|--------------------------------- |  | -------------------------------- | ------- | - | ----------- | - | ------ | -
|                                  |  | Three Months Ended(in thousands) |        
|                                  |  | July 1,2012                      |         |   | July 3,2011 |  
|Operating income (loss)           |  | $                                | (38,131 | ) |             | $ | 12,656 |  
|Other income (expense), net       |  |                                  | (4,097  | ) |             |   | (4,155 | )
|                                  |  |                                  |         |   |             |   |        |  
|Income (loss) before income taxes |  |                                  | (42,228 | ) |             |   | 8,501  |  
|Income tax provision              |  |                                  | 238     |   |             |   | 1,480  |  
|                                  |  |                                  |         |   |             |   |        |  
|Net income (loss)                 |  | $                                | (42,466 | ) |             | $ | 7,021  |  
|                                  |  |                                  |         |   |             |   |        |  

Our net loss for the second quarter of fiscal 2012 was $42.5 million, compared to a net income of
$7.0 million for the second quarter of fiscal 2011. The net loss in the second quarter of fiscal 2012 was largely due to our decreased revenues during the period, which resulted in a gross loss and, consequently an operating loss and the
resulting net loss.



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##### Table of Contents

Six Months ended July 1, 2012 and July 3, 2011

Net Sales

The following table presents a further analysis of our sales based upon our various customer groups:



|                                     |  |                                |        |  |              |  |     |   |  |   |         |  |  |  |     |  
|------------------------------------ |  | ------------------------------ | ------ |  | ------------ |  | --- | - |  | - | ------- |  |  |  | --- | -
|                                     |  | Six Months Ended(in thousands) |       
|Customer Group                       |  | July 1, 2012                   |        |  | July 3, 2011 | 
|Wireless network operators and other |  | $                              | 57,933 |  |              |  | 68  | % |  | $ | 202,291 |  |  |  | 66  | %
|Original equipment manufacturers     |  |                                | 27,708 |  |              |  | 32  |   |  |   | 104,974 |  |  |  | 34  |  
|                                     |  |                                |        |  |              |  |     |   |  |   |         |  |  |  |     |  
|Total                                |  | $                              | 85,641 |  |              |  | 100 | % |  | $ | 307,265 |  |  |  | 100 | %
|                                     |  |                                |        |  |              |  |     |   |  |   |         |  |  |  |     |  

Sales decreased by 72% to $85.6 million for the first half of fiscal 2012, from $307.3 million for the
first half of fiscal 2011. This decrease was due to several factors, including, but not limited to, a continued slowdown in spending by North American network operators coupled with further weakness in international markets, including Western and
Eastern Europe, Asia and the Middle East. In addition, we experienced further reductions in demand with our original equipment manufacturing customers both as part of our strategic plan to reduce our dependence on low-margin commodity type original
equipment manufacturer business as well as an overall reduction in demand by our original equipment manufacturer customers. In particular, we experienced reductions in demand by Nokia Siemens Networks and Alcatel-Lucent of over 90% when compared to
the prior year period. Sales to our direct operator customers decreased by approximately 71% for the first half of fiscal 2012 from the first half of fiscal 2011. Sales to our original equipment manufacturers decreased by 74% for the first half of
fiscal 2012 from the first half of fiscal 2011. We believe that, among other factors, the current negative global economic environment has caused network operators to reduce or postpone their spending plans for the near term while they evaluate the
macro-economic pressures in each individual market. Due to our poor financial position, some of our suppliers have reduced or limited the amount of credit that they allocate to us, which has also impacted our ability to obtain single or limited
source components which has caused production and shipment delays that have negatively impacted revenues during the second quarter of 2012.

The following table presents a further analysis of our sales based upon our various product groups:



|                                      |  |                                |        |  |              |  |     |   |  |   |         |  |  |  |     |  
|------------------------------------- |  | ------------------------------ | ------ |  | ------------ |  | --- | - |  | - | ------- |  |  |  | --- | -
|                                      |  | Six Months Ended(in thousands) |       
|Wireless Communications
Product Group |  | July 1, 2012                   |        |  | July 3, 2011 | 
|Antenna systems                       |  | $                              | 45,636 |  |              |  | 50  | % |  | $ | 140,991 |  |  |  | 45  | %
|Base station systems                  |  |                                | 17,892 |  |              |  | 24  |   |  |   | 136,656 |  |  |  | 45  |  
|Coverage systems                      |  |                                | 22,112 |  |              |  | 26  |   |  |   | 29,618  |  |  |  | 10  |  
|                                      |  |                                |        |  |              |  |     |   |  |   |         |  |  |  |     |  
|Total                                 |  | $                              | 85,641 |  |              |  | 100 | % |  | $ | 307,265 |  |  |  | 100 | %
|                                      |  |                                |        |  |              |  |     |   |  |   |         |  |  |  |     |  

The decrease in all of our product group sales during the first half of fiscal 2012 as compared with the
first half of fiscal 2011 is due to the previously mentioned significant decrease in demand we experienced from our wireless network operator and original equipment manufacturer customers.



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The following table presents an analysis of our net sales based upon the geographic area to
which a product was shipped:



|                    |  |                                |        |  |              |  |     |   |  |   |         |  |  |  |     |  
|------------------- |  | ------------------------------ | ------ |  | ------------ |  | --- | - |  | - | ------- |  |  |  | --- | -
|                    |  | Six Months Ended(in thousands) |       
|Geographic Area     |  | July 1, 2012                   |        |  | July 3, 2011 | 
|Americas            |  | $                              | 37,493 |  |              |  | 44  | % |  | $ | 134,468 |  |  |  | 44  | %
|Asia Pacific        |  |                                | 18,652 |  |              |  | 22  |   |  |   | 85,956  |  |  |  | 28  |  
|Europe              |  |                                | 23,496 |  |              |  | 27  |   |  |   | 76,871  |  |  |  | 25  |  
|Other International |  |                                | 6,000  |  |              |  | 7   |   |  |   | 9,970   |  |  |  | 3   |  
|                    |  |                                |        |  |              |  |     |   |  |   |         |  |  |  |     |  
|Total               |  | $                              | 85,641 |  |              |  | 100 | % |  | $ | 307,265 |  |  |  | 100 | %
|                    |  |                                |        |  |              |  |     |   |  |   |         |  |  |  |     |  

Revenues decreased in all regions in the first half of fiscal 2012 as compared to the first half of
fiscal 2011. The decrease is attributable to the significant reductions in demand from our wireless network operator customers, other direct customers and original equipment manufacturers which we believe is due to several factors, including, but
not limited to, the current negative global economic environment that has caused network operators to reduce or postpone their equipment spending plans. We experienced continued slowness in capital growth spending by wireless network operators in
most all the regions we operate in. Since wireless network infrastructure spending is dependent on individual network coverage and capacity demands, we do not believe that our revenue fluctuations for any geographic region are necessarily indicative
of a trend for our future revenues by geographic area.

A large portion of our revenues are generated in currencies other than
the U.S. Dollar. During the last year, the value of the U.S. Dollar has fluctuated significantly against many other currencies. We have calculated that, when comparing exchange rates in effect for the first half of fiscal 2012 to those in
effect for the first half of fiscal 2011, the change in the value of foreign currencies as compared with the U.S. Dollar did not have a material impact on our net sales.

For the first half of fiscal 2012, one customer, Ericsson, accounted for 11% of our total sales and no other customer accounted for 10% or more of our revenues. For the first half of fiscal 2011, sales to
KMM Telecommunications (formerly known as Team Alliance,) one of our North American resellers, accounted for 22% of our total sales, sales to Nokia Siemens Networks accounted for approximately 20% of sales, and sales to Raycom, one of our European
resellers, accounted for approximately 13% of our total sales.

Cost of Sales and Gross Profit

The following table presents an analysis of our gross profit:



|                                     |  |                                |         |   |              |  |       |    |  |   |         |  |  |  |       |  
|------------------------------------ |  | ------------------------------ | ------- | - | ------------ |  | ----- | -- |  | - | ------- |  |  |  | ----- | -
|                                     |  | Six Months Ended(in thousands) |        
|                                     |  | July 1, 2012                   |         |   | July 3, 2011 | 
|Net sales                            |  | $                              | 85,641  |   |              |  | 100.0 | %  |  | $ | 307,265 |  |  |  | 100.0 | %
|Cost of sales:                       |  |                                |         |   |              |  |       |    |  |   |         |  |  |  |       |  
|Cost of sales                        |  |                                | 103,889 |   |              |  | 121.3 |    |  |   | 223,613 |  |  |  | 72.8  |  
|Restructuring and impairment charges |  |                                | 10,559  |   |              |  | 12.3  |    |  |   |        |  |  |  |      |  
|                                     |  |                                |         |   |              |  |       |    |  |   |         |  |  |  |       |  
|Total cost of sales                  |  |                                | 114,448 |   |              |  | 133.6 |    |  |   | 223,613 |  |  |  | 72.8  |  
|                                     |  |                                |         |   |              |  |       |    |  |   |         |  |  |  |       |  
|Gross profit (loss)                  |  | $                              | (28,807 | ) |              |  | (33.6 | )% |  | $ | 83,652  |  |  |  | 27.2  | %
|                                     |  |                                |         |   |              |  |       |    |  |   |         |  |  |  |       |  

Our gross profit decreased during the first half of fiscal 2012, compared to the first half of 2011
primarily as a result of our significantly lower revenues. The significant drop in our revenues during the first half of fiscal 2012 caused us to be unable to absorb our overhead and manufacturing costs, which resulted in the reduction in our gross
margin as a percentage of revenue. Gross margin was also negatively impacted by inventory related charges of approximately $17.9 million associated with excess and obsolete inventory and scrapping of inventory compared with $0.5 million in the first
half of fiscal 2011. In addition, gross profit was impacted by warranty charges of $7.4 million in the first half of fiscal 2012 compared with $4.6 million in the first half of fiscal 2011, which were higher in 2012 due to higher specific warranty
claims.



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We incurred $10.6 million of restructuring charges during the first half of fiscal 2012
which included a charge of approximately $6.2 million related to the impairment of inventory that will be disposed of and will not generate future revenue, as well as vendor cancellation charges of $4.4 million, primarily related to the transactions
with Tatfook.

Operating Expenses

The following table presents a breakdown of our operating expenses by functional category and as a percentage of net sales:



|                                     |  |                                |        |  |              |  |      |   |  |   |        |  |  |  |      |  
|------------------------------------ |  | ------------------------------ | ------ |  | ------------ |  | ---- | - |  | - | ------ |  |  |  | ---- | -
|                                     |  | Six Months Ended(in thousands) |       
|Operating Expenses                   |  | July 1, 2012                   |        |  | July 3, 2011 | 
|Sales and marketing                  |  | $                              | 12,656 |  |              |  | 14.8 | % |  | $ | 17,151 |  |  |  | 5.6  | %
|Research and development             |  |                                | 23,597 |  |              |  | 27.5 |   |  |   | 32,351 |  |  |  | 10.5 |  
|General and administrative           |  |                                | 20,451 |  |              |  | 23.9 |   |  |   | 23,323 |  |  |  | 7.6  |  
|Restructuring and impairment charges |  |                                | 3,388  |  |              |  | 4.0  |   |  |   | 42     |  |  |  | 0.0  |  
|                                     |  |                                |        |  |              |  |      |   |  |   |        |  |  |  |      |  
|Total operating expenses             |  | $                              | 60,092 |  |              |  | 70.2 | % |  | $ | 72,867 |  |  |  | 23.7 | %
|                                     |  |                                |        |  |              |  |      |   |  |   |        |  |  |  |      |  

Sales and marketing expenses decreased by $4.5 million, or 26.2%, during the first half of fiscal 2012 as
compared to the first half of fiscal 2011, primarily due to lower personnel costs, marketing costs, commissions and professional fees offset in part by higher bad debt expense. These reductions are part of our restructuring plans.

Total research and development expenses decreased $8.8 million or 27.1% during the first half of fiscal 2012 as compared to the first
half of fiscal 2011 primarily due to lower personnel costs, reduced professional fees and lower materials expense. These reductions are part of our restructuring plans.

Total general and administrative expenses decreased $2.9 million or 12.3% during the first half of fiscal 2012 as compared to the first half of fiscal 2011, primarily due to lower personnel costs, stock
compensation expense, and professional fees. These reductions are part of our restructuring plans.

Restructuring charges in
operating expense of $3.4 million were recorded in the first half of fiscal 2012 due to a loss of $1.4 million on the sale of our Finland research and development facility, and severance costs of $2.0 million for terminated employees in Europe and
the United States.

Other Income (Expense), net

The following table presents an analysis of other income (expense), net:



|                                  |  |                                |        |   |              |  |      |    |  |   |        |   |  |  |      |   
|--------------------------------- |  | ------------------------------ | ------ | - | ------------ |  | ---- | -- |  | - | ------ | - |  |  | ---- | --
|                                  |  | Six Months Ended(in thousands) |       
|                                  |  | July 1, 2012                   |        |   | July 3, 2011 | 
|Interest income                   |  | $                              | 80     |   |              |  | 0.1  | %  |  | $ | 113    |   |  |  | 0.0  | % 
|Interest expense                  |  |                                | (7,799 | ) |              |  | (9.1 | )  |  |   | (5,780 | ) |  |  | (1.9 | ) 
|Foreign currency gain (loss), net |  |                                | (674   | ) |              |  | (0.8 | )  |  |   | (2,061 | ) |  |  | (0.6 | ) 
|Other income, net                 |  |                                | 290    |   |              |  | 0.3  |    |  |   | 892    |   |  |  | 0.3  |   
|                                  |  |                                |        |   |              |  |      |    |  |   |        |   |  |  |      |   
|Other income (expense), net       |  | $                              | (8,103 | ) |              |  | (9.5 | )% |  | $ | (6,836 | ) |  |  | (2.2 | )%
|                                  |  |                                |        |   |              |  |      |    |  |   |        |   |  |  |      |   

Interest income decreased during the first half of fiscal 2012 compared to the first half of fiscal 2011,
due to lower cash balances. Interest expense increased by $2.0 million during the first half of fiscal 2012 as compared to the first half of fiscal 2011 primarily due to non-cash bond principal accretion related to our 2.75% Notes.
Included in non-cash charges are the amortization of debt issuance costs, debt discount and bond accretion totaling $3.2 and $2.0 million for the first half of 2012 and 2011, respectively. Additionally, we recognized a net foreign currency loss of
$0.7 million in the first half of fiscal 2012, primarily due to the fluctuations of the U.S. Dollar versus the Euro, Chinese RMB, and several other currencies, as compared to the loss of $2.1 million in the first half of fiscal 2011. The
reduction of other income (expense), net from the first half of fiscal 2011 to the first half of fiscal 2012 of $0.6 million is primarily related to lower net sub-lease income.



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Income Tax Provision

Our effective tax rate for the first half of 2012 was an expense of approximately 3.5% of our pre-tax loss of $97.0 million. We have
recorded a valuation allowance against a portion of our deferred tax assets pursuant to Accounting Standards Codification (ASC) Topic 740, Income Taxes, due to the uncertainty as to the timing and ultimate realization of those
assets. We continue to record valuation allowances against the net deferred tax assets in Finland and China of $2.9 million in the second quarter of 2012. As such, for the foreseeable future, the tax provision or tax benefit related to future
Chinese, Finnish and U.S. earnings or losses will be offset substantially by a reduction or increase in the valuation allowance. Accordingly, current tax expense consisted primarily of taxes from operations in foreign jurisdictions, primarily Sweden
and India. We expect our tax rate to continue to fluctuate based on the percentage of income earned in each jurisdiction. In addition, our income tax expense was reduced by $0.1 million related to an expiration of the statutory audit period for
an uncertain tax position.

Net Income (Loss)

The following table presents a reconciliation of operating income (loss) to net income (loss):



|                                  |  |                                |          |   |             |   |        |  
|--------------------------------- |  | ------------------------------ | -------- | - | ----------- | - | ------ | -
|                                  |  | Six Months Ended(in thousands) |         
|                                  |  | July 1,2012                    |          |   | July 3,2011 |  
|Operating income (loss)           |  | $                              | (88,899  | ) |             | $ | 10,785 |  
|Other income (expense), net       |  |                                | (8,103   | ) |             |   | (6,836 | )
|                                  |  |                                |          |   |             |   |        |  
|Income (loss) before income taxes |  |                                | (97,002  | ) |             |   | 3,949  |  
|Income tax provision              |  |                                | 3,370    |   |             |   | 3,903  |  
|                                  |  |                                |          |   |             |   |        |  
|Net income (loss)                 |  | $                              | (100,372 | ) |             | $ | 46     |  
|                                  |  |                                |          |   |             |   |        |  

Our net loss for the first half of fiscal 2012 was $100.4 million, compared to a net income of $0.05
million for the first half of fiscal 2011. The net loss in the first half of fiscal 2012 was largely due to our decreased revenue during the period, which resulted in a gross loss and, consequently an operating loss and the resulting net loss.

Liquidity and Capital Resources

Introduction

We have historically financed our operations through a
combination of cash on hand, cash provided from operations, available borrowings under a bank line of credit, private debt offerings and both private and public equity offerings. We no longer have a bank line of credit. As a result, our principal
sources of liquidity currently consist of our existing cash balances and funds generated from future operations. As of July 1, 2012, we had working capital of $117.6 million, including $11.6 million in unrestricted cash and cash
equivalents, as compared to working capital of $194.3 million at January 1, 2012, which included $64.1 million in unrestricted cash and cash equivalents. We currently invest our excess cash in short-term, investment-grade,
money-market instruments with maturities of three months or less. We typically hold such investments until maturity and then reinvest the proceeds in similar money market instruments. We believe that all of our cash investments would be readily
available to us should the need arise.



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Cash Flows

The following table summarizes our cash flows for the six months ended July 1, 2012 and July 3, 2011:



|                                                                    |  |                                |         |   |             |   |         |  
|------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ----------- | - | ------- | -
|                                                                    |  | Six Months Ended(in thousands) |        
|                                                                    |  | July 1,2012                    |         |   | July 3,2011 |  
|Net cash provided by (used in):                                     |  |                                |         |   |             |   |         |  
|Operating activities                                                |  | $                              | (63,328 | ) |             | $ | (10,818 | )
|Investing activities                                                |  |                                | 10,777  |   |             |   | (3,227  | )
|Financing activities                                                |  |                                | 83      |   |             |   | 646     |  
|Effect of foreign currency translation on cash and cash equivalents |  |                                | (37     | ) |             |   | 561     |  
|                                                                    |  |                                |         |   |             |   |         |  
|Net increase (decrease) in cash and cash equivalents                |  | $                              | (52,505 | ) |             | $ | (12,838 | )
|                                                                    |  |                                |         |   |             |   |         |  

Operating Activities

Net cash used in operating activities in the first half of fiscal 2012 was $63.3 million as compared to $10.8 million used in operating activities in the first half of fiscal 2011. The increase
in cash used from operating activities was due to the reduction in revenue and related increase in net loss and an increase in working capital, primarily a decrease in accounts payable, accrued expenses and an increase in prepaid and other current
assets, partially offset by a decrease in accounts receivable.

Investing Activities

Net cash provided by investing activities in the first half of fiscal 2012 was $10.8 million as compared to $3.2 million used by
investing in the first half of fiscal 2011. The $10.8 million in net cash provided by investing activities during the first half of fiscal 2012 reflects proceeds from the sale of our Finland facility and other assets of approximately $5.6 million
and cash received from the Tatfook transaction of approximately $6.9 million, partially offset by capital expenditures of $1.7 million. The $3.2 million in net cash used by investing activities during the first half of fiscal 2011
represents capital expenditures of $3.5 million and an increase in restricted cash of $0.1 million offset in part by proceeds from the sale of property, plant and equipment of $0.4 million. The majority of the capital spending during both
periods related to computer hardware and test equipment utilized in our manufacturing and research and development areas. We expect our capital spending requirements for the remainder of this year to range between $1 million and $3 million,
consisting of test and production equipment, as well as computer hardware and software.

Financing Activities

Net cash provided by financing activities during the first half of fiscal 2012 and 2011 was $0.1 million and
$0.6 million respectively. The 2012 amount was primarily comprised of proceeds from our employee stock purchase plan and the 2011 amount was primarily comprised of proceeds from our employee stock purchase plan and stock option exercises,
offset partially by the payment of debt issuance costs related to the exchange of our 1.875% Convertible Subordinated Notes due 2024 (1.875% Notes.)

On July 26, 2011, we completed the private placement of $100 million in original principal amount of the 2.75% Notes. We used the proceeds from the sale of the 2.75% Notes to repurchase
$57.9 million in aggregate principal amount of our 1.875% Notes. We also utilized approximately $25.0 million of the net proceeds from the private placement of the 2.75% Notes to repurchase 2.2 million shares of our Common Stock, and
incurred debt issuance costs of $3.6 million during the year ended January 1, 2012.

We have a total of
$254.7 million of long-term convertible subordinated notes outstanding as of July 1, 2012, consisting of $0.1 million of the 1.875% Notes, $150.0 million of our Convertible Subordinated Notes due October 2027 (the 3.875%
Notes) and $104.7 million of the 2.75% Notes. Holders of the 3.875% Notes may require us to repurchase all or a portion of their notes for cash on October 1, 2014, 2017 and 2022 at 100% of the principal amount of the notes, plus
accrued and unpaid interest. Holders of the 2.75% Notes may require us to repurchase all or a portion of their notes for cash on July 15, 2018, 2025 or 2032 for a repurchase price equal to 100% of the accreted amount of the 2.75% Notes, plus
accrued and unpaid interest on the original principal amount.

Liquidity

We have experienced significant recurring net losses and operating cash flow deficits for the past four quarters. Our ability to continue
as a going concern is dependent on many factors, including among others, our ability to raise additional funding, and our ability to successfully restructure operations to lower manufacturing costs and reduce operating expenses.



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As of July 1, 2012, we had $11.6 million in unrestricted cash and cash equivalents
available to support ongoing operations. During the six months ended July 1, 2012, we used approximately $63 million in operating activities, and our unrestricted cash balances declined by approximately $53 million during this period. In
addition, in July 2012, we entered into a payoff letter that terminated its credit agreement.

These conditions raise
substantial doubt about our ability to continue as a going concern, and our success is dependent upon the successful outcome of our efforts to raise additional financing, restructure our operations, lower manufacturing costs and reduce operating
expenses.

We are currently pursuing various sources of financing as well as the implementation of detailed restructuring
plans designed to reduce operating expenses and manufacturing costs. We believe that assuming: (1) the successful implementation of restructuring actions to be taken, plus restructuring actions already taken; (2) improved cash flows from
operating activities; (3) the successful collection of billed and unbilled accounts receivable; (4) the collection of the $5 million license fee owed from Tatfook; and (5) other net favorable working capital changes, we would have
sufficient cash flows to continue through the end of 2012. We believe that we will need to raise additional funding to continue as a going concern for the next twelve months.

Credit Agreement

On July 3, 2012, we entered into a payoff letter
(Payoff Letter) with Wells Fargo Capital Finance LLC (formerly known as Wells Fargo Foothill, LLC), as arranger and administrative agent (Wells Fargo.) The Payoff Letter terminates the Credit Agreement entered into by and
among the Company, the lenders named therein (the Lenders,) and Wells Fargo on April 3, 2009 (as such has been amended from time to time thereafter, the Credit Agreement.) Pursuant to the Credit Agreement, the Lenders
made available to the Company a senior secured credit facility in the form of a revolving line of credit for up to a maximum of $30 million.

Pursuant to the Payoff Letter, we repaid in full all of our obligations under the Credit Agreement, including principal, interest, fees and other charges owing to Wells Fargo and the Lenders. The
aggregate amount of such payments, inclusive of an early termination fee payable to Wells Fargo, was approximately $100,000. In consideration for such payments, (i) our obligations under the Credit Agreement were deemed satisfied in full,
(ii) the Credit Agreement was immediately terminated, and (iii) the liens securing the obligations under the Credit Agreement were released, in each case subject to limited exceptions as set forth in the Payoff Letter.

At the date of the Payoff Letter, we had outstanding under the Credit Agreement letters of credit issued by Wells Fargo in the amount of
approximately $5.4 million. These letters of credit remain outstanding following the termination of the Credit Agreement and are fully cash collaterized. In connection with the execution of the Payoff Letter and as a condition to the termination of
the Credit Agreement, we deposited an additional $505,000 with Wells Fargo to collateralize the outstanding letters of credit.

We are in the process of pursuing a new senior secured credit facility as well as other financing options. There is no assurance that we
will be able to obtain new financing on favorable terms or at all.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements consist primarily of conventional operating leases, purchase commitments and other commitments arising
in the normal course of business, as further discussed in our Annual Report on Form 10-K for the fiscal year ended January 1, 2012, in Part II, Item 7 under the heading Contractual Obligations and Commercial Commitments. As of
July 1, 2012, we did not have any other relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually-narrow or limited purposes.



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|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Our financial instruments include cash and cash equivalents, restricted cash, short-term investments, capital leases and long-term debt. As of July 1, 2012, the carrying values of our financial
instruments approximated their fair values based upon current market prices and rates except for long-term debt for which the fair value is estimated based on the quoted market price.

We are exposed to a number of market risks in the ordinary course of business. These risks, which include foreign currency risk, interest
rate risk and commodity price risk, arise in the normal course of business rather than from trading. We have examined our exposures to these risks and do not believe that any of our market exposures will result in material changes to our financial
condition or results of operations.

Foreign Currency Risk

Our international operations represent a substantial portion of our operating results and asset base. We maintain various operations in foreign locations including Brazil, China, Finland, France, Germany,
India, Singapore, Sweden, Thailand and the United Kingdom. These international operations generally incur local operating costs and generate third-party revenues in currencies other than the U.S. Dollar. These foreign currency revenues and expenses
expose us to foreign currency risk and give rise to foreign currency exchange gains and losses. We do not presently hedge against the risks of foreign currency fluctuations. In the event of significant fluctuations in foreign currencies,
we may experience declines in revenue and adverse impacts on our operating results and such changes could be material.

We
regularly pursue new customers in various international locations where new deployments or upgrades to existing wireless communication networks are planned. As a result, a significant portion of our revenues are derived from international sources
(excluding North America), with our international customers accounting for approximately 59% of our net sales during the first half of fiscal 2012, 60% of our net sales during fiscal year 2011, 63% of our net sales during fiscal 2010 and 73% of our
net sales during fiscal 2009. International sources include Europe, the Middle East, Africa, Asia and South America, where there has been historical volatility in several of the regions currencies. Changes in the value of the U.S. Dollar
versus the local currency in which our products are sold exposes us to foreign currency risk, as the weakening of an international customers local currency and banking market may negatively impact such customers ability to meet their
payment obligations to us. In addition, some of our international customers require that we transact business with them in their own local currency, regardless of the location of our operations, which also exposes us to foreign currency risk. Since
we sell products or services in foreign currencies, we are required to convert the payments received into U.S. Dollars, which gives rise to foreign currency gains or losses. Given the uncertainty as to when and what specific foreign currencies we
may be required or choose to accept as payment from our international customers, we cannot predict the ultimate impact that such a decision will have on our business, financial condition and results of operations. For the first half of fiscal 2012,
we recorded a foreign exchange translation loss of $0.4 million due to fluctuations in the value of the U.S. Dollar. There can be no assurance that we will not incur foreign exchange translation losses in the future as the value of the
U.S. Dollar fluctuates.

Interest Rate Risk

As of July 1, 2012, we had cash equivalents of approximately $17.8 million in both interest and non-interest bearing accounts, including restricted cash. We also had $0.1 million of the 1.875% Notes
at a fixed annual interest rate of 1.875%, $150.0 million of the 3.875% Notes at a fixed rate of 3.875% and $104.7 million of the 2.75% Notes at a fixed interest rate of 2.75%, which additionally accrete principal at a rate of 5.0% per year
compounded semi-annually. We have exposure to interest rate risk primarily through our cash investment portfolio. Short-term investment rates decreased significantly during 2008 and remained low throughout 2009, 2010, 2011 and into 2012.
Nevertheless, we believe that we are not subject to material fluctuations in principal given the short-term maturities and high-grade investment quality of our investment portfolio, and the fact that the effective interest rate of our portfolio
tracks closely to various short-term money market interest rate benchmarks. Therefore, we currently do not use derivative instruments to manage our interest rate risk. Based on our overall interest rate exposure as of July 1, 2012, we do not
believe that a 100 basis point change in interest rates would have a material effect on our consolidated business, financial condition or results of operations.



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Commodity Price Risk

Our internal manufacturing operations and contract manufacturers require significant quantities of transistors, semiconductors and various metals for use in the manufacture of our products. Therefore, we
are exposed to certain commodity price risks associated with variations in the market prices for these electronic components, as these prices directly impact the cost to manufacture products and the price we pay our contract manufacturers to
manufacture our products. We attempt to manage this risk by entering into supply agreements with our contract manufacturers and various suppliers of these components in order to mitigate the impact of any fluctuations in commodity prices. These
supply agreements are not long-term supply agreements. If we or our contract manufacturers become subject to a significant increase in the price of one of these components, we may be unable to pass such costs onto our customers. In addition, certain
transistors and semiconductors are regularly revised or changed by their manufacturers, which may result in a requirement for us to redesign a product that utilizes these components or cease the production of such products. In such events, our
business, financial condition or results of operations could be adversely affected. Additionally, we require specialized electronic test equipment, which is utilized in both the design and manufacture of our products. The electronic test equipment
is available from limited sources and may not be available in the time periods required for us to meet our customers demand. If required, we may be forced to pay higher prices for equipment and/or we may not be able to obtain the equipment in
the time periods required, which would then delay our development or production of new products. These delays and any potential additional costs could have a material adverse effect on our business, financial condition or results of operations.
Prior increases to the price of oil and energy have translated into higher freight and transportation costs and, in certain cases, higher raw material supply costs. These higher costs negatively impacted our production costs. We may not be able to
pass on these higher costs to our customers and if we insist on raising prices, our customers may curtail their purchases from us. There are significant concerns in the business community about inflationary pressures on costs. Further increases in
energy prices may negatively impact our business, financial condition and results of operations.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Evaluation of
Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial
officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of July 1, 2012. We maintain disclosure controls and procedures that
are designed to provide a reasonable assurance level that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
SECs rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required
disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of July 1, 2012, our principal executive officer and principal financial officer concluded that, as of such
date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Controls Over Financial
Reporting

There were no changes to our internal controls over financial reporting during the quarter ended July 1,
2012 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II  OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

On
November 4, 2011, Jaybeam Wireless SAS and Jaybeam Limited filed a patent infringement lawsuit against the Company in United States District Court for the District of Delaware. The complaint alleges infringement by the Company of US patent
7,286,092 entitled Radio Communications Antenna with Misalignment of Radiation Lobe by Variable Phase Shifter. The complaint seeks compensatory damages, treble damages for willful infringement and temporary and permanent injunctive relief. The
parties are engaged in settlement discussions. If the parties are unable to reach a mutually agreed upon settlement, the Company intends to vigorously defend this matter.



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In the first quarter of fiscal 2012, a purported shareholder class action complaint was
filed in the United States District Court for the Central District of California against the Company, its President and Chief Executive Officer and its Chief Financial Officer. On July 23, 2012, the lead plaintiff filed an amended
complaint. The amended complaint, Pawel I. Kmiec v. Powerwave Technologies, Inc. et. al. asserts claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder. The complaint purports to state claims on behalf of all
persons who purchased our Common Stock between October 28, 2010 and October 18, 2011 and seeks compensatory damages in an amount to be proven at trial. The complaint alleges that the defendants made misleading statements or omissions
concerning the Companys operations and projected sales revenues and engaged in false and misleading financial reporting. The Company believes that the purported shareholder class action is without merit and intends to defend it
vigorously.

In the first quarter of fiscal 2012, three additional lawsuits that relate to the above purported shareholder
class action were filed. The lawsuits are shareholder derivative actions, purported to be brought by individual shareholders on behalf of Powerwave, against certain executive officers and the current directors of Powerwave. Powerwave is also named
as a nominal defendant in the shareholder derivative actions. The shareholder derivative lawsuits are Yin Shen v. Buschur, et al., filed in the Superior Court of California, Kevin Pehlman v. Buschur, et al., filed in United States
District Court for the Central District of California, and Jorge L. Verar v. Buschur, et al., filed in the Superior Court of California and subsequently removed to United States District Court for the Central District of California. The
allegations of the derivative complaints closely resemble those in the initial class action complaint filed and pertain to the time period of February 1, 2011 through October 18, 2011. Based on those allegations, the derivative complaints
assert various claims for breach of fiduciary duty under state law. These three actions are presently stayed by stipulated orders entered in each action.

In addition to the litigation discussed above, we are subject to other legal proceedings and claims in the normal course of business. We are currently defending these proceedings and claims, and,
although the outcome of legal proceedings is inherently uncertain, we anticipate that we will be able to resolve these matters in a manner that will not have a material adverse effect on our consolidated financial position, results of operations or
cash flows.



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|ITEM 1A. | RISK FACTORS
|-------- | ------------

Our
business faces significant risks. The risks described below may not be the only risks we face. Additional risks that we do not yet know of or that we currently think are immaterial also may impair our business operations. If any of the events or
circumstances described in the following risks actually occur, our business, financial condition and results of operation could suffer, and the trading price of our Common Stock could decline, and you may lose all or a part of your investment.

Risks Related to our Business

We have recently experienced significant reductions in demand for our products by certain customers and if this continues, our operating results will continue to be adversely impacted.

During fiscal 2011, we experienced a significant drop in our revenues, which fell by over 25% from fiscal 2010. During the second half of
fiscal 2011 our revenues fell by over 55% as compared to the first half of 2010. In addition, our revenues in the first half of fiscal 2012 fell to $85.6 million as compared to $307.3 million in the first half of fiscal 2011, a 72% reduction.
We believe that the reductions in our revenues were due to several factors, including, without limitation, significant slowdowns in spending by network operators in several of our markets, including North America, Europe and the Middle East. In
addition, we experienced a significant reduction of demand from our original equipment manufacturing customers both as part of our strategy to reduce our dependence on low-margin commodity type business with our original equipment manufacturer
customers as well as reduced demand from this overall business. Although we believe that quarterly revenue will increase in fiscal 2012, there is no assurance that this will occur. In addition, although we believe that our relations with our
customers are good, it is possible that customers could reduce their orders to us because of concerns with our negative financial results and liquidity concerns.

Also, in the past we have experienced significant unanticipated reductions in wireless network operator demand as well as significant delays in demand for 3G and 4G, or next generation service based
products, due to the high projected capital cost of building such networks, network operators deciding to slowdown or delay network deployments, and market concerns regarding the interoperability of such network protocols. In addition, certain
network operators may decide to consolidate all purchases of products for their network into a small group of companies in order to gain further perceived cost savings. If we are not one of these selected companies, or are required to sell our
products through such consolidators, our revenues and profits may be reduced which would have an adverse effect on our business, financial condition and results of operations. In combination with these market issues, a majority of wireless network
operators have, in the past, regularly reduced their capital spending plans in order to improve their overall cash flow. There is a substantial likelihood that the ongoing economic weakness and uncertainty will have continuing effects throughout
2012 and beyond, thereby having a negative impact on network operator deployment spending plans. The impact of any future reduction in capital spending by wireless network operators, coupled with any delays in the deployment of wireless networks,
will result in further reduced demand for our products, which will have a material adverse effect on our business, financial condition and results of operation.

We will likely need additional capital in the future and such additional financing may not be available on favorable terms or at all.

We have experienced net losses and operating cash flow deficits for the past four quarters. As of July 1, 2012, we had approximately
$11.6 million in unrestricted cash. In the first half of fiscal 2012 we used $63.6 million of cash in operating activities and in all of fiscal 2011 we used $47.9 million. If we are not successful in reducing our use of cash and growing our
businesses, reducing our manufacturing costs and operating expenses, reducing our inventories and accounts receivable, and managing the worldwide aspects of our company, our operations may not generate positive cash flow, and we may consume our cash
resources faster than we anticipate. We have initiated cost reduction measures to further lower our manufacturing costs, reduce our operating expenses and conserve cash. We cannot predict if such cost reduction measures will be successful in
reducing our cash used in operating activities. In addition, we cannot provide any guarantee that we will generate sufficient cash in the future to maintain or grow our operations over the long-term. We rely upon our ability to generate positive
cash flow from operating activities to fund our business. With the successful implementation of restructuring actions to be taken plus restructuring actions already taken, improved cash flows from operating activities, the expected successful
collection of billed and unbilled accounts receivable, the collection of the $5 million license fee owed from Tatfook and other net favorable working capital changes, we believe that we have sufficient cash flows to continue through the end of 2012.
However, we will need to raise additional funding to continue as a going concern for the next twelve months.

On July 3,
2012, we terminated our Credit Agreement with Wells Fargo and we are in the process of seeking new financing with additional availability via private debt or equity. There is no assurance that we will be able to obtain new financing on favorable
terms or at all. It is possible that any financing will include the issuance of securities convertible into common stock for nominal consideration or such other terms that are dilutive to existing stockholders. It is also possible that funding
under any loan may be contingent upon the successful fulfillments of certain milestones or covenants. Our fiscal 2011 and first half of 2012



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financial and operating performance has made it more difficult to obtain new sources of financing. Our ability to secure additional financing is also dependent upon not only our business
profitability, but also the credit markets, which became highly constrained due to credit concerns arising from the subprime mortgage lending market and subsequent worldwide economic recession. If we are unable to reduce our manufacturing costs and
operating expenses, generate positive cash flow from our operating activities or secure additional financing or if such financing is not available on acceptable terms, we may not be able to fund our business plan, repay our convertible debt, or
maintain operations.

Our limited cash and negative operating results have impacted our supply chain.

As of July 1, 2012, we had approximately $11.6 million in unrestricted cash available for operations. In July 2012, we
terminated our Credit Agreement with Wells Fargo and are in the process of seeking new financing. In order to preserve our limited cash resources, we have extended the payment terms to our component suppliers and other vendors. In
addition, our negative operating results have caused certain of our suppliers to reduce credit terms extended to us and some suppliers have required us to pay for components more frequently than in the past. Some suppliers have put us on credit
hold, and some suppliers are requiring cash in advance payment terms. One supplier has filed a lawsuit to seek recovery of alleged past due amounts. As a result, we have experienced shortages of components, including single-sourced and
limited source components, which have impacted deliveries of products to our customers. While we are actively working to replace such suppliers and obtain multiple supply sources for single or limited source components, there can be no
assurance that we will be able to obtain sufficient quantities of such components in the desired time periods. Due to these factors, we have experienced production and shipment delays during the second quarter of 2012, which has had a negative
impact on our revenues. If the production and delivery delays continue such that we do not meet the agreed upon delivery date with our customers, the delays could result in lost revenues due to customer cancellations as well as potential
financial penalties payable to our customers. Any such loss of revenue or financial penalties would have a material adverse effect on our business, financial condition and results of operations. If we are unable to generate more cash
through operations or complete an additional financing, we will have further disruptions in our production capacity which will have a negative impact on our results of operations.

We rely upon a few customers for the majority of our revenues and the loss of any one or more of these customers, or a significant
loss, reduction or rescheduling of orders from any of these customers, would have a material adverse effect on our business, financial condition and results of operations.

We sell most of our products to a small number of customers, and while we are continually seeking to expand and diversify our customer base, we expect this will continue. For the first half of fiscal
2012, one customer, Ericsson, accounted for 11% of our total sales and no other customer accounted for 10% or more of our revenues. For fiscal 2011 sales to Nokia Siemens Networks, KMM Communications (formerly, Team Alliance), one of our North
American resellers and Raycom, one of our European resellers, accounted for approximately 16%, 16% and 11% of our total sales respectively. Our revenues for the first half of fiscal 2012 versus the first half of fiscal 2011 declined by 72%, and our
revenues for fiscal 2011 declined by 25% from fiscal 2010, due to significant slowdowns in demand in several of our markets, including North America, Europe and the Middle East, as well as a significant reduction of demand from our original
equipment manufacturing customers. Any continued decline in business with our original equipment manufacturer customers, including Nokia Siemens Networks and Samsung, and our direct wireless network operator customers and resellers, will have an
adverse impact on our business, financial condition and results of operations. Our future success is dependent upon the continued purchases of our products by a small number of customers such as AT&T Wireless, Sprint, and other wireless network
operator customers and our resellers, such as KMM Communications and Raycom and our ability to continue to sell products into original equipment manufacturing customers such as Alcatel-Lucent, Ericsson and Samsung. In addition, our future success is
also dependent on our ability to sell our products into other market segments such as governmental, public safety, military and homeland security. Any fluctuation in demand from such customers or other customers has and will negatively impact our
business, financial condition and results of operations. If we are unable to broaden our customer base and expand relationships with major operators of wireless networks, our business will continue to be impacted by unanticipated demand fluctuations
due to our dependence on a small number of customers. Unanticipated demand fluctuations have a negative impact on our revenues and business, and an adverse effect on our business, financial condition and results of operations. In addition, our
dependence on a small number of major customers exposes us to numerous other risks, including:



| |  |  | a slowdown or delay in deployment of wireless networks by any one or more customers could significantly reduce demand for our products;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reductions in a single customers forecasts and demand could result in excess inventories;
| | - |  | ------------------------------------------------------------------------------------------



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| |  |  | the recent recession and current economic weakness and uncertainty have negatively affected several of our customers and have caused them to
significantly reduce current demand for our products;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the recent recession and current economic weakness and uncertainty could negatively affect one or more of our major customers and cause them to
significantly reduce operations, or file for bankruptcy;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | consolidation of customers can reduce demand as well as increase pricing pressure on our products due to increased purchasing leverage;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | each of our customers has significant purchasing leverage over us to require changes in sales terms including pricing, payment terms and product
delivery schedules;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | customers could decide to increase their level of internal design and/or manufacture of wireless communication network products and reduce their
purchases from us; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | concentration of accounts receivable credit risk, which could have a material adverse effect on our liquidity and financial condition if one of our
major customers declares bankruptcy or delays payment of its receivables.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our ability to publicly or
privately sell equity securities and the liquidity of our Common Stock could be adversely affected if we are delisted from the NASDAQ Global Select Market or if we are unable to transfer our listing to another stock market.

Our Common Stock is listed for trading on the NASDAQ Global Market. NASDAQ has adopted a number of continued listing standards that are
applicable to the Common Stock, including a requirement that the bid price of the Common Stock be at least $1.00 per share. Failure to maintain the minimum bid price can result in the delisting of the Common Stock from the NASDAQ Global Market.

The bid price for our Common Stock on the NASDAQ Global Select Market was below $1.00 for a significant period of time during
fiscal 2009. In addition, during October 2011, the bid price of our Common Stock was again below $1.00. Effective October 28, 2011, we completed a 1-for-5 reverse stock split of our issued and outstanding Common Stock that raised our
price per share above $1.00. On June 15, 2012, we received a letter from NASDAQ notifying the Company that it fails to comply with NASDAQ Listing Rule 5450(a)(1) because the bid price for the Companys common stock,
over the last 30 consecutive business days, had closed below the minimum $1.00 per share requirement for continued listing. The NASDAQ letter has no immediate effect on the listing of the Companys common stock.

In accordance with NASDAQ Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until December 12, 2012,
to regain compliance with the NASDAQ minimum bid price rule. If at any time before December 12, 2012, the bid price of our common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, we will regain
compliance with the minimum bid price rule, subject to NASDAQs discretion to increase this time period. If compliance with the minimum bid price rule cannot be demonstrated by December 12, 2012, NASDAQ will issue a Staff
Delisting Determination Letter and our common stock will be subject to delisting from The Nasdaq Global Select Market.

If our
Common Stock is delisted by NASDAQ, our Common Stock may be eligible to trade on the OTC Bulletin Board maintained by NASDAQ, or another over-the-counter market. Any such alternative would likely result in it being more difficult for investors
to dispose of, or obtain accurate quotations as to the market value of, our Common Stock. In addition, there can be no assurance that our Common Stock would be eligible for trading on any such alternative exchange or markets.

In addition, delisting from NASDAQ could adversely affect our ability to raise additional capital through the public or private sale
of equity securities. Delisting from NASDAQ would also make trading our Common Stock more difficult for investors, potentially leading to further declines in our share price and inhibiting the ability of our stockholders to liquidate all or
part of their investments in the Company.

We have strategically focused our business and sales efforts on growing our
sales of higher margin products and solutions, which has reduced our total sales.

Over the last two years, a period in
which we have experienced a broad decline in the weighted sales price of our products, we have implemented a revised business and sales strategy under which we do not actively pursue low-margin, high-volume business, also referred to as
commodity-like business. This strategy is having the effect of reducing our overall sales to original equipment manufacturer customers such as Alcatel-Lucent and Nokia Siemens Networks. Additionally, we recently sold assets and inventory associated
with our OEM BTS filter business to Tatfook, which will likely further reduce revenues for this product group. We have also targeted additional markets such as government, public safety, military and



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homeland security during this period. While we believe that we have made progress in addressing these new markets, we have not yet generated significant revenue in these areas. Any continued
reduction in demand from our original equipment manufacturer customers, if not offset by increased demand from other wireless network operator customers or customers in new markets, will have an adverse effect on our business, financial condition
and results of operations.

We have experienced, and will continue to experience, significant fluctuations in sales and
operating results from quarter to quarter.

Our quarterly results fluctuate due to a number of factors, including:



| |  |  | the concentration of our sales to a few large customers;
| | - |  | --------------------------------------------------------



| |  |  | the lack of any obligation by our customers to purchase their forecasted demand for our products;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | our suppliers may tighten or limit our available credit;
| | - |  | --------------------------------------------------------



| |  |  | variations in the timing, cancellation, or rescheduling of customer orders and shipments;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | production delays on new products that limit our revenue in a quarter;
| | - |  | ----------------------------------------------------------------------



| |  |  | increased costs associated with rising raw material costs, including oil prices;
| | - |  | --------------------------------------------------------------------------------



| |  |  | activity relating to consolidations or proposed consolidations within our industry;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | high fixed expenses that increase operating expenses, especially during a quarter with a sales shortfall;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | product failures and associated warranty and in-field service support costs;
| | - |  | ----------------------------------------------------------------------------



| |  |  | discounts given to certain customers for large volume purchases;
| | - |  | ----------------------------------------------------------------



| |  |  | unanticipated increases in costs associated with projects in our coverage solutions product group; and
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | shortages of materials and components to manufacture our products.
| | - |  | ------------------------------------------------------------------

We regularly generate a large percentage of our revenues in the last month of a quarter. Because we attempt to ship products quickly
after we receive orders, we may not always have a significant backlog of unfilled orders at the start of each quarter and we may be required to book a substantial portion of our orders during the quarter in which these orders ship. When we introduce
new products into production, we may encounter production delays, such as we did in the first quarter of fiscal 2011, which limit our revenue and have an adverse effect on our business. In addition, during the second quarter of fiscal 2012, certain
of our suppliers reduced or limited our available credit, thereby limiting the amount of materials we could purchase which negatively impacted our revenue and had an adverse effect on our business, financial condition and results of operations. Our
major customers generally have no obligation to purchase forecasted amounts and may cancel orders, change delivery schedules or change the mix of products ordered with minimal notice and without penalty. As a result, we may not be able to accurately
predict our quarterly sales. Because our expense levels are partially based on our expectations of future sales, our expenses may be disproportionately large relative to our revenues, and we may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Any shortfall in sales relative to our quarterly expectations or any delay of customer orders would adversely affect our business, financial condition and results of operations.

Order deferrals and cancellations by our customers, declining average sales prices, changes in the mix of products sold, shortages of
materials, reductions in the amount of credit our suppliers extend to us, delays in the introduction of new products and longer than anticipated sales cycles for our products have adversely affected our business, financial condition and results of
operations in the past. Despite these factors, we, along with our contract manufacturers, attempt to maintain significant finished goods, work-in-progress and raw materials inventory to meet estimated order forecasts. If our customers purchase less
than their forecasted orders or cancel or delay existing purchase orders, there will be higher levels of inventory that face a greater risk of obsolescence. If our customers choose to purchase products in excess of the forecasted amounts or in a
different product mix, there might be inadequate inventory or manufacturing capacity to fill their orders.

Due to these and
other factors, our past results are not reliable indicators of our future performance. Future revenues and operating results may not meet the expectations of market analysts or investors. In either case, the price of our Common Stock could be
materially adversely affected.

Our operating results have been adversely impacted by the recent worldwide economic crisis,
current economic uncertainty and credit tightening.

Beginning in the fourth quarter of 2008, worldwide economic
conditions significantly deteriorated due to the credit crisis and other factors, including slower economic activity, increased energy costs, decreased consumer confidence, reduced corporate profits, decreased property values, reduced or canceled
capital spending, adverse business conditions and liquidity



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concerns. While economic conditions have showed some signs of improving, we believe that these factors continue to have a negative impact on the availability of financial capital, which has
contributed to a reduction in demand for infrastructure in the wireless communication market. We believe that these conditions make it difficult for our customers and vendors to accurately forecast and plan future business activities, causing
domestic and foreign businesses to slow or suspend spending on our products and services. Some of our customers continue to find it difficult to gain sufficient credit in a timely manner, which has resulted in an impairment of their ability to place
orders with us or to make timely payments to us for previous purchases. If the current economic weakness and uncertainty continues, or if there is another economic recession, our revenues could be negatively impacted, thereby having a negative
impact on our business, financial condition and results of operations. In addition, we may be forced to increase our allowance for doubtful accounts and our days sales outstanding may increase significantly, which would have a negative impact on our
cash position, liquidity and financial condition. We cannot predict the magnitude, timing or duration of the current economic uncertainty or of its impact on the wireless industry.

Negative conditions in the financial and credit markets may impact our liquidity.

The ongoing economic weakness and uncertainty, concerns about a double dip recession, concerns about sovereign debt issues in some
countries in the European Union and the resulting constrained credit markets have had, and we anticipate will continue to have, an impact on our liquidity. In particular, some of our customers face liquidity shortages which affect their payments to
us, and the general tightness in the credit markets limits credit available to us as well as some of our customers. There can be no assurance that global economic conditions or our operating performance may not worsen, or our operating performance
will improve, which would have a corresponding negative effect on our liquidity. In addition, while we believe that we have invested our financial assets in sound financial institutions, should these institutions limit access to our assets, breach
their agreements with us or fail, we may be adversely affected. In addition, volatile financial and credit markets may reduce our ability to raise capital or refinance our debt on favorable terms, if at all, which could materially impact our ability
to meet our obligations. As market conditions change, we continue to monitor our liquidity position.

We depend on single
sources or limited sources for key components and products, which exposes us to risks related to product shortages or delays, as well as potential product quality issues, all of which could increase the cost of our products thereby reducing our
operating profits.

During fiscal 2010, we experienced significant supply shortages of various electronic components as
well as significantly increased order lead times for such components due to delays from increased worldwide demand for electronic components following improved global economic conditions following the 2008 global recession. This combined supply
shortage and increase in material order lead times impacted our ability to timely produce products, which negatively impacted our revenues during fiscal 2010. While supply lead times have improved somewhat, we currently expect some level of supply
shortages and increased lead times to continue throughout 2012 and beyond. In addition, during the second quarter of fiscal 2012, certain of our suppliers have reduced or limited the amount of credit they extend to us, thereby limiting the amount of
materials such supplier will provide to us, thereby causing shortages in our supply. If these shortages and extended lead times continue, our future revenues may be negatively impacted and our manufacturing costs may significantly increase. In
addition, a number of our products, and certain parts used in our products, are available from only one or a limited number of outside suppliers due to unique component designs, as well as certain quality and performance requirements, which in turn
may be dependent upon a limited number of suppliers themselves. Any disruption in this supply chain can negatively affect the timely availability of key components and parts necessary for the production of our products.

To take advantage of volume pricing discounts, we also purchase certain products, and along with our contract manufacturers, purchase
certain customized components, from single or limited sources. We have experienced, and expect to continue to experience, shortages of single-source and limited-source components. Shortages have compelled us to adjust our product designs and
production schedules and have caused us to miss customer requested delivery dates. Missed customer delivery dates have had a material adverse impact on our financial results. If single-source or limited-source components become unavailable in
sufficient quantities in the desired time periods, are discontinued or are available only on unsatisfactory terms, then we would be required to purchase comparable components from other sources and may be required to redesign our products to use
such components, which could delay production and delivery of our products. If the production and delivery of our products is delayed such that we do not meet the agreed upon delivery dates of our customers, such delays could result in lost revenues
due to customer cancellations, as well as potential financial penalties payable to our customers. Any such loss of revenue or financial penalties could have a material adverse effect on our business, financial condition and results of operations.



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Our reliance on certain single-source and limited-source components and products also
exposes us and our contract manufacturers to quality control risks if these suppliers experience a failure in their production process or otherwise fail to meet our quality requirements. A failure in a single-source or limited-source component or
product could force us to repair or replace a product utilizing replacement components. If we cannot obtain comparable replacements or redesign our products, we could lose customer orders or incur additional costs, which would have a material
adverse effect on our business, financial condition and results of operations.

We may fail to develop products that are of
adequate quality and reliability, which could negatively impact our ability to sell our products and could expose us to significant liabilities.

We have had quality problems with our products, including those we have acquired in acquisitions. We may have similar product quality problems in the future. We have replaced components in some products
and replaced entire products in accordance with our product warranties. We believe that our customers will demand that our products meet increasingly stringent performance and reliability standards. If we cannot keep pace with technological
developments, evolving industry standards and new communications protocols, if we fail to adequately improve product quality and meet the quality standards of our customers, or if our contract manufacturers fail to achieve the quality standards of
our customers, we risk losing business which would negatively impact our business, financial condition and results of operations. Design problems could also damage relationships with existing and prospective customers and could limit our ability to
market our products to large wireless infrastructure manufacturers, many of which build their own products and have stringent quality control standards. In addition, we have incurred significant costs addressing quality issues from products that we
have acquired in certain of our acquisitions, including warranty costs related to these products. While we seek recovery of amounts that we have paid, or may pay in the future to resolve warranty claims through indemnification from the original
manufacturer, this can be a costly and time consuming process. In our contracts with customers, we negotiate liability limits but not all of the contracts contain liability limits and some contracts contain limits which are greater than the price of
the products sold. As a result, if we have quality problems with our products that we cannot fix and our customers bring a claim against us, we could incur significant liabilities which would have a material adverse effect on our business, financial
condition and results of operations.

We may encounter unanticipated cost increases in coverage systems projects.

As part of our Coverage Solutions product group, we occasionally undertake installation projects in which we utilize
third party contractors in addition to our personnel to install and deploy Coverage Solutions. Installation projects can be very complex and unanticipated factors or events may occur during a project which significantly impacts the expected cost of
a project. Therefore, as part of these projects, we may encounter unanticipated deployment and installation costs, which if not reimbursed, will increase the overall costs of such projects and may have a negative impact on our gross margins,
financial condition and results of operations. We encountered such expenses in the first quarter of fiscal 2011 and may encounter them in the future.

We may be adversely affected by the financial difficulties or bankruptcy of our customers.

One of our original equipment manufacturer customers, Nortel, filed for bankruptcy protection in the first quarter of 2009. Given the continuing economic weakness and uncertainty, it is possible that one
or more of our other customers will suffer significant financial difficulties, including potentially filing for bankruptcy protection. In such an event, the demand for our products from these customers may decline significantly or cease completely.
We cannot guarantee that we will be able to continue to generate new demand to offset any such reductions from existing customers. If we are unable to continue to generate new demand, our revenues will decrease and our business, financial condition
and results of operations will be negatively impacted.

We may not successfully evaluate the creditworthiness of our
customers. While we maintain allowances for doubtful accounts and for estimated losses resulting from the inability of our customers to make required payments, greater than anticipated nonpayment and delinquency rates could harm our financial
results and liquidity. Given the continuing economic uncertainty, and the possibility of a future recession, there are potential risks of greater than anticipated customer defaults. If the financial condition of any of our customers were to
deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required and would negatively impact our business, financial condition and results of operations.



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We may incur unanticipated costs as we continue the restructuring of our business.

During fiscal 2011 and the first half of fiscal 2012, we experienced a significant drop in our revenues, which fell by
over 25% and 72% respectively from fiscal 2010 and the first half of fiscal 2011. We believe that the reduction in our revenues was due to several factors, including significant slowdowns in spending by network operators in several of our markets,
including North America, Europe and the Middle East. In addition, we experienced a significant reduction in demand from our original equipment manufacturing customers both as part of our strategic plan of not pursuing low margin commodity-type
business, as well as an overall reduction in demand by our original equipment manufacturing customers. In response to this reduction in revenues, we initiated cost reduction measures to both lower our manufacturing costs and reduce our operating
expenses which resulted in restructuring charges in the fourth quarter of 2011 and the first half of fiscal 2012 and will likely result in additional charges in future periods. We announced in February 2012 that we intend to undertake additional
restructuring activities to further reduce our cost structure and operating costs but we have not yet finalized such restructuring plans. In April 2012, we announced the sale of certain assets of our China manufacturing operation which is part of
our 2012 restructuring plan. The failure to timely complete and implement our restructuring activities as well as to ultimately achieve operating expense reductions could undermine the anticipated benefits of the restructuring, which could adversely
affect our business, financial condition and results of operations. These anticipated benefits are based on projections and assumptions and our actual results may vary from our projections. Also, in the future we may need to initiate additional
restructuring actions that could result in additional restructuring charges which could have a material impact on our business, financial condition, liquidity and results of operations. Such potential restructuring actions could include cash
expenditures that would reduce our available cash balances, which would have a negative impact on our business and our ability to repay our outstanding convertible subordinated debt.

The potential for increased commodity and energy costs may adversely affect our business, financial condition and results of
operations.

The worldwide economy has experienced significant fluctuations in the price of oil and energy during the last
four years and shortages of steel, copper and rare earth materials. Such fluctuations and shortages have resulted in significant price increases which translated into higher freight and transportation costs and higher raw material supply costs.
These higher costs have negatively impacted our production costs. We are not normally able to pass on these higher costs to our customers, and if we insist on raising prices, our customers may curtail their purchases from us. The costs of energy and
items directly related to the cost of energy will fluctuate due to factors that may not be predictable, such as the economy, political conditions and the weather. Further increases in energy prices, raw material costs or the onset of inflationary
pressures could negatively impact our business, financial condition and results of operations.

Our average sales prices
have declined, and we anticipate that the average sales prices for our products will continue to decline and negatively impact our gross profit margins.

Wireless service providers are continuing to place pricing pressure on wireless infrastructure manufacturers, which in turn, has resulted in lower selling prices for our products, with certain competitors
aggressively reducing prices in an effort to increase their market share. The consolidation of original equipment manufacturers such as Alcatel-Lucent and Nokia Siemens Networks has concentrated purchasing power at the surviving entities, placing
further pricing pressures on the products we sell to such customers. Moreover, the recent recession and current economic uncertainty have caused wireless service providers to become more aggressive in demanding price reductions as they attempt to
reduce costs. As a result, we are forced to further reduce our prices to such customers, which has negatively impacted our business, financial condition and results of operations. If we do not agree to lower our prices as some customers request,
those customers may stop purchasing our products, which would significantly impact our business. We believe that the average sales prices of our products will continue to decline for the foreseeable future. The weighted average sales price for our
products declined in the range of 0% to 11%, depending on the product line, from fiscal 2010 to fiscal 2011 and we expect that this will continue going forward. Since wireless infrastructure manufacturers frequently negotiate supply arrangements far
in advance of delivery dates, we must often commit to price reductions for our products before we know how, or if, we can obtain such cost reductions. In addition, average sales prices are affected by price discounts negotiated without firm orders
for large volume purchases by certain customers. To offset declining average sales prices, we must reduce manufacturing costs and ultimately develop new products with lower costs or higher average sales prices. If we cannot achieve such cost
reductions or increases in average selling prices, our gross margins will decline.



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Our suppliers, contract manufacturers or customers could become competitors.

Many of our customers, particularly our original equipment manufacturer customers, internally design and/or manufacture
their own wireless communications network products. These customers also continuously evaluate whether to manufacture their own wireless communications network products or utilize contract manufacturers to produce their own internal designs. Certain
of our customers regularly produce or design wireless communications network products in an attempt to replace products manufactured by us. In addition, some customers threaten to undertake such activities if we do not agree to their requested price
reductions. We believe that these practices will continue. In the event that our customers manufacture or design their own wireless communications network products, these customers might reduce or eliminate their purchases of our products, which
would result in reduced revenues and would adversely impact our business, financial condition and results of operations. Wireless infrastructure equipment manufacturers with internal manufacturing capabilities, including many of our customers, could
also sell wireless communications network products externally to other manufacturers, thereby competing directly with us. In addition, our suppliers or contract manufacturers may decide to produce competing products directly for our customers and,
effectively, compete against us. If, for any reason, our customers produce their wireless communications network products internally, increase the percentage of their internal production, require us to participate in joint venture manufacturing with
them, require us to reduce our prices, engage our suppliers or contract manufacturers to manufacture competing products, or otherwise compete directly against us, our revenues would decrease, which would adversely impact our business, financial
condition and results of operations.

Our success is tied to the growth of the wireless services communications market and
our future revenue growth is dependent upon the expected increase in the size of this market.

Our revenues come
principally from the sale of wireless communications network products and coverage solutions. Our future success depends upon the growth and increased availability of wireless communications services. Wireless communications services may not grow at
a rate fast enough to create demand for our products, as we have experienced periodically throughout the past several years. In addition, some of our network operator customers rely heavily on the availability of credit to finance the build-out or
expansion of their wireless networks. We believe that the ongoing economic weakness and uncertainty and constrained credit markets have resulted in lower demand for our products in fiscal 2009, 2010, 2011 and the first half of fiscal 2012 and will
likely result in a continuing reduction of demand from some of our customers in the near term. In addition, during 2011 a major North America wireless network operator significantly reduced demand while it pursued plans for a significant
acquisition. Another example of unanticipated reductions occurred during fiscal 2006 and fiscal 2007, when a major North American wireless network operator significantly reduced demand for new products. In addition, during the same period, several
major equipment manufacturers began a process of consolidating their operations, which significantly reduced their demand for our products. This reduced spending on wireless networks had a negative impact on our operating results. If wireless
network operators delay or reduce levels of capital spending, our business, financial condition and results of operations would be negatively impacted.

Our reliance on contract manufacturers exposes us to risks of excess inventory or inventory carrying costs as well as late or missed customer deliveries.

We use contract manufacturers to produce printed circuit boards for our products and to manufacture finished products. Following the
completion of our transaction with Tatfook, we use contract manufacturers more to manufacture our finished products. If our contract manufacturers are unable to respond in a timely fashion to changes in customer demand, we may be unable to produce
enough products to respond to sudden increases in demand, resulting in lost revenues. Alternatively, in the case of order cancellations or decreases in demand, we may be liable for excess or obsolete inventory or cancellation charges resulting from
contractual purchase commitments that we have with our contract manufacturers. We regularly provide rolling forecasts of our requirements to our contract manufacturers for planning purposes, pursuant to our agreements, a portion of which is binding
upon us. Additionally, we are committed to accept delivery on the forecasted terms for a portion of the rolling forecast. Cancellations of orders or changes to the forecasts provided to any of our contract manufacturers may result in cancellation
costs payable by us. In the past, we have been required to take delivery of materials from our suppliers and subcontractors that were in excess of our requirements, and we have previously recognized charges and expenses related to such excess
material. We expect that we will incur such costs in the future.

In addition, greater reliance on contract manufactures such
as Tatfook exposes us to potential late deliveries to customers if the contract manufacture delays production of product for any reason. We have had disputes with contract manufacturers which have caused them to slow down production which have
impacted deliveries to our customers. Such



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disputes have concerned pricing terms and payment terms for example. While we endeavor to avoid any potential dispute with our contract manufacturing suppliers, there can be no assurance that
future disputes will not impact customer deliveries. If the production and delivery of our products are delayed such that we do not meet the agreed upon delivery date of our customers, such delays could result in lost revenue due to customer
cancellations, as well as potential financial penalties payable to our customers. Any such loss of revenue or financials penalties would have a material adverse effect on our business, financial condition, and results of operations.

By using contract manufacturers, our ability to directly control the use of all inventories is reduced because we do not have full
operating control over their operations. If we are unable to accurately forecast demand for our contract manufacturers and manage the costs associated with our contract manufacturers, we may be required to purchase excess inventory and incur
additional inventory carrying costs. If we or our contract manufacturers are unable to utilize such excess inventory in a timely manner, and are unable to sell excess components or products due to their customized nature, our business, financial
condition and results of operations would be negatively impacted.

Future additions to, or consolidations of manufacturing
operations may present risks, and we may be unable to achieve the financial and strategic goals associated with such actions.

We have previously added new manufacturing locations, as well as consolidated existing manufacturing locations, in an attempt to achieve operating cost savings and improved operating results. We
continually evaluate these types of opportunities. We may acquire or invest in new locations, or we may consolidate existing locations into either existing or new locations in order to reduce our manufacturing costs. For example, in 2009, we
established a new manufacturing location in Thailand, and in 2012, as part of the transaction with Tatfook, Tatfook took over the operations of our former manufacturing facility in Suzhou, China. The addition, consolidation or closing of
manufacturing locations subjects us to numerous risks and uncertainties, including the following:



| |  |  | difficulty integrating the new locations into our existing operations;
| | - |  | ----------------------------------------------------------------------



| |  |  | the possibility of severance costs and lease termination payments associated with consolidating or closing manufacturing facilities;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | difficulty consolidating existing locations into one location;
| | - |  | --------------------------------------------------------------



| |  |  | inability to achieve the anticipated financial and strategic benefits of the specific new location or consolidation;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | significant unanticipated additional costs incurred to start up a new manufacturing location;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | inability to attract key technical and managerial personnel to a new location;
| | - |  | ------------------------------------------------------------------------------



| |  |  | inability to retain key technical and managerial personnel due to the consolidation of locations to a new location;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | diversion of our managements attention from other business issues; and
| | - |  | -----------------------------------------------------------------------



| |  |  | failure of our review and approval process to identify significant issues, including issues related to manpower, raw material supplies, legal and
financial contingencies.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If we are unable to manage these risks effectively as part of any investment in a
new manufacturing location or consolidation of locations, our business would be adversely affected.

Future acquisitions,
or strategic alliances, may present risks, and we may be unable to achieve the financial and strategic goals intended at the time of any acquisition or strategic alliance.

In the past, we have acquired and made investments in other companies, products and technologies and entered into strategic alliances with other companies. We continually evaluate these types of
opportunities. We may acquire or invest in other companies, products or technologies, or we may enter into joint ventures, mergers or strategic alliances with other companies. Such transactions subject us to numerous risks, including the following:



| |  |  | difficulty integrating the operations, technology and personnel of the acquired company;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | inability to achieve the anticipated financial and strategic benefits of the specific acquisition or strategic alliance;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | significant additional warranty costs due to product failures and or design differences that were not identified during due diligence, which could
result in charges to earnings if they are not recoverable from the seller;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | inability to retain key technical and managerial personnel from the acquired company;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | difficulty in maintaining controls, procedures and policies during the transition and integration process;
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| |  |  | diversion of our managements attention from other business concerns;
| | - |  | ---------------------------------------------------------------------



| |  |  | failure of our due diligence process to identify significant issues, including issues with respect to product quality, product architecture, legal and
financial contingencies, and product development; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | significant exit charges if products acquired in business combinations are unsuccessful.
| | - |  | ----------------------------------------------------------------------------------------

If we are unable to manage these risks effectively as part of any acquisition or joint venture, our business would be adversely affected.

We may fail to develop products that are sufficiently manufacturable, which could negatively impact our ability to sell
our products.

Manufacturing our products is a complex process that requires significant time and expertise to meet
customers specifications and expectations. Successful manufacturing is substantially dependent upon the ability to assemble and tune these products to meet specifications in an efficient manner. In this regard, we largely depend on our staff
of assembly workers and trained technicians at our internal manufacturing operations in the U.S. and Asia, as well as our contract manufacturers staff of assembly workers and trained technicians. We have previously experienced problems in the
manufacturing of new products where our actual costs have exceeded our expectations and our production yields have not met our internal expectations. Such issues have had a negative impact on gross margins and results of operations. If we cannot
design our products to minimize the manual assembly and tuning process, or if we or our contract manufacturers lose a number of trained assembly workers and technicians or are unable to attract additional trained assembly workers or technicians, we
may be unable to have our products manufactured in a cost effective manner.

If we are unable to hire and retain
highly-qualified technical and managerial personnel, we may not be able to sustain or grow our business.

Competition for
personnel, particularly qualified engineers, is intense. The loss of a significant number of qualified engineers, as well as the failure to recruit and train additional technical personnel in a timely manner, could have a material adverse effect on
our business, financial condition and results of operations. The departure of any of our management and technical personnel, the breach of their confidentiality and non-disclosure obligations to us, or the failure to achieve our intellectual
property objectives may also have a material adverse effect on our business.

We believe that our success depends upon the
knowledge and experience of our management and technical personnel and our ability to market our existing products and to develop new products. Our employees are generally employed on an at-will basis and do not have non-compete agreements.
Consequently, we have had employees leave us to work for competitors, and we may continue to experience this.

There are
significant risks related to our internal and contract manufacturing operations in Asia and Europe.

As part of our
manufacturing strategy, we utilize contract manufacturers to make finished goods and supply printed circuit boards in China, Europe, India, Singapore and Thailand. We also maintain our own manufacturing operations in the U.S. and Thailand. There are
particular risks of doing business in each jurisdiction and to doing business in foreign jurisdictions generally.

For
example, the Chinese legal system lacks transparency, which gives the Chinese central and local government authorities a higher degree of control over our business in China than is customary in the U.S., which makes the process of obtaining
necessary regulatory approval in China inherently unpredictable. In addition, the protection accorded our proprietary technology and know-how under the Chinese and Thai legal systems is not as strong as in the U.S. and, as a result, we may lose
valuable trade secrets and competitive advantage. Also, manufacturing our products and utilizing contract manufacturers, as well as other suppliers throughout the Asia region, exposes our business to the risk that our proprietary technology and
ownership rights may not be protected or enforced to the extent that they may be in the U.S. Although the Chinese government has been pursuing economic reform and a policy of welcoming foreign investments during the past two decades, it is possible
that the Chinese government will change its current policies in the future, making continued business operations in China difficult or unprofitable.

As another example, in September 2006, Thailand experienced a military coup which overturned the existing government. In late 2008, anti-government protests and civilian occupations culminated with a
court-ordered ouster of Thailands prime minister. In 2009 and 2010, continuing turmoil impacted the government of Thailand. To date, this has not had a significant impact on our operations in Thailand. In 2011, Thailand experienced significant
flooding that disrupted many companies operations in Thailand. While we did not experience any direct disruptions, these types of natural disasters



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could impact our operations in the future. If there are future coups or some other type of political unrest, such activity may impact the ability to manufacture products in this region and may
prevent shipments from entering or leaving the country. Any such disruptions could have a material negative impact on our business, financial condition and results of operations.

Furthermore, we require air or ocean transport to deliver products built in our various manufacturing locations to our customers. High
energy costs have increased our transportation costs which have had a negative impact on our production costs. Transportation costs would also escalate if there were a shortage of air or ocean cargo space and any significant increase in
transportation costs would cause an increase in our expenses and negatively impact our business, financial condition and results of operations. In addition, if we are unable to obtain cargo space or secure delivery of components or products due to
labor strikes, lockouts, work slowdowns or work stoppages by longshoremen, dock workers, airline pilots or other transportation industry workers, our delivery of products could be delayed.

The initial sales cycle associated with our products is typically lengthy, often lasting from nine to eighteen months, which could
cause delays in forecasted sales and cause us to incur substantial expenses before we record any associated revenues.

Our
customers normally conduct significant technical evaluations, trials and qualifications of our products before making purchase commitments. This qualification process involves a significant investment of time and resources from both our customers
and us in order to ensure that our product designs are fully qualified to perform as required. The qualification and evaluation process, as well as customer field trials, may take longer and be more expensive than initially forecasted, thereby
delaying the shipment of sales forecasted for a specific customer for a particular quarter and causing our operating results for the quarter to be less than originally forecasted. Such a sales shortfall would reduce our profitability and negatively
impact our business, financial condition and results of operations.

We conduct a significant portion of our business
internationally, which exposes us to increased business risks.

For fiscal years 2011, 2010 and 2009, international
revenues (excluding North American sales) accounted for approximately 60%, 63% and 73% of our net sales, respectively. There are many risks that currently impact, and will continue to impact, our international business and multinational operations,
including the following:



| |  |  | compliance with multiple and potentially conflicting regulations in Europe, Asia and North and South America, including export requirements, tariffs,
import duties and other trade barriers, as well as health and safety requirements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | potential labor strikes, lockouts, work slowdowns and work stoppages at U.S. and international ports;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | differences in intellectual property protection rights throughout the world;
| | - |  | ----------------------------------------------------------------------------



| |  |  | difficulties in staffing and managing foreign operations in Europe, Asia and South America, including relations with unionized labor pools in Europe
and in Asia;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | longer accounts receivable collection cycles in Europe, Asia and South America;
| | - |  | -------------------------------------------------------------------------------



| |  |  | currency fluctuations and resulting losses on currency translations;
| | - |  | --------------------------------------------------------------------



| |  |  | terrorist attacks on American companies;
| | - |  | ----------------------------------------



| |  |  | economic instability, including inflation and interest rate fluctuations, such as those previously seen in South Korea and Brazil;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | competition for foreign-based suppliers and from foreign-based competitors throughout the world;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | overlapping or differing tax structures;
| | - |  | ----------------------------------------



| |  |  | the complexity of global tax and transfer pricing rules and regulations and our potential inability to benefit/offset losses in one tax jurisdiction
with income from another;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | cultural and language differences between the U.S. and the rest of the world; and
| | - |  | ---------------------------------------------------------------------------------



| |  |  | political or civil turmoil, such as that occurring in Thailand.
| | - |  | ---------------------------------------------------------------

Any failure on our part to manage these risks effectively would seriously reduce our competitiveness in the wireless infrastructure
marketplace.



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Protection of our intellectual property is limited.

We rely upon trade secrets and patents to protect our intellectual property. We execute confidentiality and non-disclosure agreements
with certain employees and our suppliers, as well as limit access to and distribution of our proprietary information. We have an ongoing program to identify and file applications for U.S. and other international patents.

The departure of any of our management and technical personnel, the breach of their confidentiality and non-disclosure obligations to us,
or the failure to achieve our intellectual property objectives could have a material adverse effect on our business, financial condition and results of operations. We do not have non-compete agreements with our employees who are generally employed
on an at-will basis. Therefore, we have had employees leave us and go to work for competitors and we may continue to experience this. If we are not successful in prohibiting the unauthorized use of our proprietary technology or the use of our
processes by a competitor, our competitive advantage may be significantly reduced which would result in reduced revenues.

We are at risk of third-party claims of infringement that could harm our competitive position.

We have received third-party claims of infringement in the past and have been able to resolve such claims without having a material
impact on our business. As the number of patents, copyrights and other intellectual property rights in our industry increases, and as the coverage of these rights and the functionality of the products in the market further overlap, we believe that
we may face additional infringement claims. These claims, whether valid or not, could result in substantial cost and diversion of our resources. A third-party claiming infringement may also obtain an injunction or other equitable relief, which could
effectively block the distribution or sale of allegedly infringing products, which would adversely affect our customer relationships and negatively impact our revenues.

The communications industry is heavily regulated. We must obtain regulatory approvals to manufacture and sell our products, and our customers must obtain approvals to operate our products. Any failure
or delay by us or any of our customers to obtain these approvals could negatively impact our ability to sell our products.

Various governmental agencies have adopted regulations that impose stringent radio frequency emissions standards on the communications
industry. Future regulations may require that we alter the manner in which radio signals are transmitted or otherwise alter the equipment transmitting such signals. The enactment by governments of new laws or regulations or a change in the
interpretation of existing regulations could negatively impact the market for our products.

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 type of
governmental approval process have caused, and may continue to cause, the cancellation, postponement or rescheduling of the installation of communications systems by our customers. These types of unanticipated delays may result in delayed or
canceled customer orders.

We are subject to numerous governmental regulations concerning the manufacturing and use of our
products. We must stay in compliance with all such regulations and any future regulations. Any failure to comply with such regulations, and the unanticipated costs of complying with future regulations, may adversely affect our business, financial
condition and results of operations.

We manufacture and sell products which contain electronic components, and as such
components may contain materials that are subject to government regulation in both the locations that we manufacture and assemble our products, as well as the locations where we sell our products. An example of a regulated material is the use of
lead in electronic components. We maintain compliance with all current government regulations concerning the materials utilized in our products, for all the locations in which we operate. Since we operate on a global basis, this is a complex process
which requires continual monitoring of regulations and an ongoing compliance process to ensure that we and our suppliers are in compliance with all existing regulations. There are areas where future regulations may be enacted which could increase
our cost of the components that we utilize. While we do not currently know of any proposed regulation regarding components in our products, which would have a material impact on our business, if there is an unanticipated new regulation which
significantly impacts our use of various components or requires more expensive components, that would have a material adverse impact on our business, financial condition and results of operations.

Our manufacturing process is also subject to numerous governmental regulations, which cover both the use of various materials as well as
environmental concerns. We maintain compliance with all current government regulations concerning our production processes, for all locations in which we operate. Since we operate on a global basis, this is also a complex process which requires
continual monitoring of regulations and an ongoing compliance process to ensure that we and our



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suppliers are in compliance with all existing regulations. There are areas where future regulations may be enacted which could increase our manufacturing costs. One area which has a large number
of potential changes in regulations is the environmental area. Environmental areas such as pollution and climate change have had significant legislative and regulatory efforts on a global basis, and there are expected to be additional changes to the
regulations in these areas. These changes could directly increase the cost of energy which may have an impact on the way we manufacture products or utilize energy to produce our products. In addition, any new regulations or laws in the environmental
area might increase the cost of raw materials we use in our products. While future changes in regulations appears likely, we are currently unable to predict how any such changes will impact us and if such impacts will be material to our business. If
there is a new law or regulation that significantly increases our costs of manufacturing or causes us to significantly alter the way that we manufacture our products, this would have a material adverse effect on our business, financial condition and
results of operations.

The wireless communications infrastructure equipment industry is extremely competitive and is
characterized by rapid technological change, frequent new product development, rapid product obsolescence, evolving industry standards and significant price erosion over the life of a product. If we are unable to compete effectively, our business,
financial condition and results of operations would be adversely affected.

Our products compete on the basis of the
following characteristics:



| |  |  | performance;
| | - |  | ------------



| |  |  | functionality;
| | - |  | --------------



| |  |  | reliability;
| | - |  | ------------



| |  |  | pricing;
| | - |  | --------



| |  |  | quality;
| | - |  | --------



| |  |  | designs that can be efficiently manufactured in large volumes;
| | - |  | --------------------------------------------------------------



| |  |  | time-to-market delivery capabilities; and
| | - |  | -----------------------------------------



| |  |  | compliance with industry standards.
| | - |  | -----------------------------------

If we fail to address one or more of the above factors in the design and manufacturing of our products, there could be a material adverse effect on our business, financial condition and results of
operations.

Our current competitors include Comba Telecom Systems Holdings Ltd, CommScope, Inc., Fujitsu Limited, Hitachi
Kokusai Electric Inc., Japan Radio Co., Ltd., Kathrein-Werke KG, Radio Frequency Systems, and Tyco Electronics in addition to a number of privately held companies throughout the world, subsidiaries of certain multinational corporations and the
internal manufacturing operations and design groups of the leading wireless infrastructure manufacturers such as Alcatel-Lucent, Ericsson, Huawei, Motorola, Nokia Siemens Networks and Samsung. Some competitors have adopted aggressive pricing
strategies in an attempt to gain market share, which in turn, has caused us to lower our prices in order to remain competitive. Such pricing actions have had an adverse effect on our business, financial condition and results of operations. In
addition, some competitors have significantly greater financial, technical, manufacturing, sales, marketing and other resources than we do and have achieved greater name recognition for their products and technologies than we have. If we are unable
to successfully increase our market penetration or our overall share of the wireless communications infrastructure equipment market, our revenues will decline, which would negatively impact our business, financial condition and results of
operations.

Our failure to enhance our existing products or to develop and introduce new products that meet changing
customer requirements and evolving technological standards could have a negative impact on our ability to sell our products.

To succeed, we must improve current products and develop and introduce new products that are competitive in terms of the various factors outlined in the risk factor above. These products must adequately
address the requirements of wireless infrastructure manufacturing customers and end-users. To develop new products, we invest in the research and development of wireless communications network products and coverage solutions. We target our research
and development efforts on major wireless network deployments worldwide, which cover a broad range of frequency and transmission protocols. In addition, we are currently working on products for next generation networks, as well as development
projects for products requested by our customers and improvements to our existing products. The deployment of a wireless network may be delayed which could result in the failure of a particular research or development effort to generate a revenue
producing product. Additionally, the new products we develop may not achieve market acceptance or may not be able to be manufactured cost effectively in sufficient



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volumes. Our research and development efforts are generally funded internally and our customers do not normally pay for our research and development efforts. These costs are expensed as incurred.
Therefore, if our efforts are not successful at creating or improving products that are purchased by our customers, there will be a negative impact on our business, financial condition and results of operations due to high research and development
expenses.

We may experience significant variability in our quarterly and annual effective tax rate.

Variability in the mix and profitability of domestic and international activities, repatriation of earnings from foreign affiliates,
identification and resolution of various tax uncertainties and the inability to realize net operating losses and other carry-forwards included in deferred tax assets, among other matters, may significantly impact our effective income tax rate in the
future. A significant increase in our effective income tax rate could have a material adverse impact on our business, financial condition and results of operations.

Our business is subject to the risks of earthquakes and other natural catastrophic events, and to interruptions by man-made problems such as computer viruses or terrorism.

Our corporate headquarters and a large portion of our U.S.-based research and development operations are located in the State of
California in regions known for seismic activity. In addition, we have production facilities and have outsourced some of our production to contract manufacturers in Asia, another region known for seismic activity. In addition, we have a
manufacturing location in Thailand, a country that suffered significant flooding during 2011. A significant natural disaster, such as an earthquake or flooding, in either of these regions could have a material adverse effect on our business,
financial condition and results of operations. In addition, despite our implementation of network security measures, our servers are vulnerable to computer viruses, break-ins, and similar disruptions from unauthorized tampering with our computer
systems. Any such event could have a material adverse effect on our business, financial condition and results of operations.

The price of our Common Stock has been, and may continue to be, volatile and our shareholders may not be able to resell shares of our
Common Stock at or above the price paid for such shares.

The price for shares of our Common Stock has exhibited high
levels of volatility with significant volume and price fluctuations, which makes our Common Stock unsuitable for many investors. For example, for the three years ended July 1, 2012, the closing price of our Common Stock ranged from a high of
$23.45 to a low of $0.68 per share (as adjusted for the 1-for-5 share Reverse Stock Split). At times, the fluctuations in the price of our Common Stock may have been unrelated to our financial condition and operating performance. These broad
fluctuations may negatively impact the market price of shares of our Common Stock.

The price of our Common Stock may continue
to fluctuate greatly in the future due to a variety of factors, including:



| |  |  | fluctuations in our results of operations or the operations of our competitors or customers;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | the loss of a key customer or significant reductions in the amount or value of orders from key customers;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | failure of our results of operations and sales revenues to meet the expectations of stock market analysts and investors;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | the aggregate amount of our outstanding debt and perceptions about our ability to make debt service payments;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | reductions in wireless infrastructure demand or expectations regarding future wireless infrastructure demand by our customers;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | delays or postponement of wireless infrastructure deployments, or larger than anticipated costs associated with such deployments;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in stock market analyst recommendations regarding us, our competitors or our customers;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | the timing and announcements of technological innovations, new products or financial results by us or our competitors;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | increases in the number of shares of our Common Stock outstanding, including upon the conversion of outstanding debt securities;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the wireless industry;.
| | - |  | ----------------------------------



| |  |  | changes in general financial and other market conditions; and
| | - |  | -------------------------------------------------------------



| |  |  | domestic and international economic and regulatory conditions.
| | - |  | --------------------------------------------------------------



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In addition, the potential conversion of our outstanding convertible debt and other
instruments could result in a significant increase in the number of outstanding shares of our Common Stock. Such an increase may lead to sales of shares or the perception that sales may occur, either of which may adversely affect the market for, and
the market price of, our Common Stock. Any potential future sale or issuance of shares of our Common Stock or instruments convertible or exchangeable into shares of our Common Stock, or the perception that such sales or transactions could occur,
could adversely affect the market price of our Common Stock. Based on the foregoing factors, we expect that our stock price will continue to be extremely volatile. Therefore, we cannot guarantee that our investors will be able to resell our Common
Stock at or above the price at which they purchased it.

A material decline in the price of our Common Stock may result in the
assertion of certain claims against us, and/or the commencement of inquiries and/or investigations against us. See Item 1 of Part II of this quarterly report under the heading Legal Proceedings. A prolonged decline in the price of
our Common Stock could result in a reduction in the liquidity of our Common Stock or a reduction in our ability to raise capital. Any reduction in our ability to raise equity capital in the future may force us to allocate funds from other planned
uses and could have a significant negative effect on our business plans and operations.

Issuance of shares of our Common
Stock upon conversion of our outstanding convertible instruments and future sales of our Common Stock could adversely affect our Common Stock price.

As of August 7, 2012, an aggregate of 3,235,306 shares of our Common Stock were issuable upon exercise of outstanding stock options under our stock option plans, and an additional 2,868,948 shares of
our Common Stock were reserved for the issuance of additional options and shares under these plans. Furthermore an aggregate of 3,444,315 shares of our Common Stock were issuable upon conversion of our 3.875% Notes, and an aggregate of 6,406,150
shares of our Common Stock were issuable upon conversion of our 2.75% Notes.

Future sales of our Common Stock and instruments
convertible or exchangeable into our Common Stock, or the perception that such sales or transactions could occur, may adversely affect the market price of our Common Stock. In addition, this may also make it more difficult for us to sell equity
securities in the future at an appropriate time and price.

Certain provisions contained in our charter and bylaws could
make it more difficult for a third-party to acquire us, even if doing so would be beneficial to our stockholders.

Certain
provisions of our certificate of incorporation, as amended, and bylaws, as amended, are intended to encourage potential acquirers to negotiate with us and allow our Board of Directors the opportunity to consider alternative proposals in the interest
of maximizing shareholder value. These provisions may have the effect of deterring hostile takeovers or delaying or preventing changes in control or our management. For example, our bylaws provide that special meetings of stockholders may be called
only by our board of directors or certain officers, and may not be called by our stockholders. In addition, our bylaws provide that stockholders seeking to present proposals before, or nominate candidates for election as directors at, a meeting of
stockholders must provide advanced notice to us in writing and must provide specified information. Our certificate of incorporation grants our board of directors the authority to issue preferred stock, which could potentially be used to discourage
attempts by third parties to obtain control of us through a merger, tender offer, proxy or consent solicitation or otherwise, by making those attempts more difficult to achieve or more costly. Furthermore, Section 203 of the Delaware General
Corporation Law, which continues to apply to us, prohibits a public Delaware corporation from engaging in certain business combinations with an interested stockholder (as defined in such section) for a period of three years following the
time that such stockholder became an interested stockholder without the prior consent of our board of directors. This section, as well as certain provisions of our certificate of incorporation, may make the removal of management more difficult and
may discourage transactions that otherwise could involve the payment of a premium over prevailing market prices for our securities.



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|ITEM 6. | EXHIBITS
|------- | --------

The following
exhibits are filed as part of this report:



|              |  |                                                                                                                                                                                          
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                              
|              | 
|10.1          |  | Asset Purchase Agreement dated April 24, 2012 between Shenzhen Tatfook Technology Co., Ltd. and Filtronic (Suzhou) Telecommunications Products Co., Ltd. (a subsidiary of the
Company). 
|              | 
|10.2          |  | Supply Agreement dated as of April 24, 2012 between the Company and Shenzhen Tatfook Technology Co., Ltd. ***                                                                           
|              | 
|10.3          |  | License and Manufacturing Agreement dated as of April 24, 2012 between the Company and Shenzhen Tatfook Technology Co., Ltd. ***                                                        
|              | 
|31.1          |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.                                                               
|              | 
|31.2          |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.                                                               
|              | 
|32.1          |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.*                                                         
|              | 
|32.2          |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.*                                                         
|              | 
|101.INS       |  | XBRL Instance Document**                                                                                                                                                                 
|              | 
|101.SCH       |  | XBRL Taxonomy Extension Schema Document**                                                                                                                                                
|              | 
|101.CAL       |  | XBRL Taxonomy Extension Calculation Linkbase Document**                                                                                                                                  
|              | 
|101.DEF       |  | XBRL Taxonomy Extension Definition Linkbase Document**                                                                                                                                   
|              | 
|101.LAB       |  | XBRL Taxonomy Extension Label Linkbase Document**                                                                                                                                        
|              | 
|101.PRE       |  | XBRL Taxonomy Extension Presentation Linkbase Document**                                                                                                                                 



| | Filed herewith.
|- | ---------------

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

|** | Pursuant to Rule 405(a)(2) of Regulation S-T, the registrant is relying upon the applicable 30-day grace period for the initial filing of its first Interactive Data
File required to contain detail-tagged footnotes and schedules. The registrant intends to file the required detail-tagged footnotes or schedules by the filing of an amendment to this Quarterly Report on Form 10-Q within the 30-day period.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*** | Registrant has sought confidential treatment pursuant to Rule 24b-2 of the Exchange Act for a portion of the referenced exhibit.
|--- | --------------------------------------------------------------------------------------------------------------------------------



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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.



|                      |  |                              |  |                         
|--------------------- |  | ---------------------------- |  | ------------------------
|Date: August 10, 2012 |  | POWERWAVE TECHNOLOGIES, INC.
|                      |  |                             
|                      |  | By:                          |  | /s/    KEVIN T. MICHAELS
|                      |  |                              |  | Kevin T. Michaels       
|                      |  |                              |  | Chief Financial Officer 



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