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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-K



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|x | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2006

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 0-11685



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Radyne Corporation

LOGO

(Exact name of Registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 11-2569467                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|3138 East Elwood Street, Phoenix, Arizona                      |  | 85034                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          

Registrants telephone number including area code: (602) 437-9620

Securities Registered Under Section 12(b) of the Exchange Act:



|                                         |  |                                          
|---------------------------------------- |  | -----------------------------------------
|Title of Each Class                      |  | Name of Each Exchange on Which Registered
|Common Stock, par value $0.001 per share |  | The NASDAQ Stock Market LLC              

Securities Registered Under Section 12(g) of the Exchange Act:

None

Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ̈No  x

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes ̈No  x

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

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

Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act (Check One).

Large accelerated filer ̈Accelerated filer  x    Non-accelerated filer ̈

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

The aggregate market value of the common stock held by non-affiliates of the registrant was approximately $171 million computed by reference to the
closing price of the stock on the NASDAQ Stock Market on June 30, 2006, the last trading day of the registrants most recently completed second fiscal quarter. For purposes of this determination, shares of common stock held by each officer
and director and by each person who owns 5% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive
determination for other purposes.

The number of shares of the registrants common stock, that were outstanding as of the close of business on
January 31, 2007 was 18,362,451.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrants Proxy Statement relating to its 2007 Annual Meeting of Stockholders are incorporated by reference into Part III
of this Form 10-K. The Annual Meeting of Stockholders is to be held on June 27, 2006 at 2 p.m. in the registrants Phoenix office.



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Table of Contents



|         |  |          |  |                                                                                                |  |   
|-------- |  | -------- |  | ---------------------------------------------------------------------------------------------- |  | --
|PART I   |  |          |  |                                                                                                |  |   
|         |  | Item 1.  |  | Business                                                                                       |  | 3 
|         |  | Item 1A. |  | Risk Factors                                                                                   |  | 11
|         |  | Item 1B. |  | Unresolved Staff Comments                                                                      |  | 15
|         |  | Item 2.  |  | Properties                                                                                     |  | 15
|         |  | Item 3.  |  | Legal Proceedings                                                                              |  | 15
|         |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                            |  | 15
|PART II  |  |          |  |                                                                                                |  |   
|         |  | Item 5.  |  | Market for Companys Common Equity and Related Shareholder Matters                             |  | 16
|         |  | Item 6.  |  | Selected Financial Data                                                                        |  | 18
|         |  | Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operation           |  | 19
|         |  | Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                                     |  | 28
|         |  | Item 8.  |  | Financial Statements and Supplementary Data                                                    |  | 28
|         |  | Item 9.  |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure           |  | 49
|         |  | Item 9A. |  | Controls and Procedures                                                                        |  | 49
|         |  | Item 9B. |  | Other Information                                                                              |  | 52
|PART III |  |          |  |                                                                                                |  |   
|         |  | Item 10. |  | Directors and Executive Officers of the Registrant                                             |  | 53
|         |  | Item 11. |  | Director and Executive Compensation                                                            |  | 53
|         |  | Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 53
|         |  | Item 13. |  | Certain Relationships and Related Transactions                                                 |  | 54
|         |  | Item 14. |  | Principal Accounting Fees and Services                                                         |  | 54
|PART IV  |  |          |  |                                                                                                |  |   
|         |  | Item 15. |  | Exhibits and Financial Statement Schedules                                                     |  | 55



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Part I

Item 1.
Business

Development of Business

History of Business

Radyne Corporation (Company) was formed in 1980 as a corporation
under the laws of the state of New York. In 1995, a new management team moved the Company to Arizona. The Company reincorporated in Delaware in July 2000. The Company completed the following acquisitions of complementary business lines:
ComStream Corp of San Diego, CA in 1998, Armer Communications of Chandler, AZ in 2000, the assets of Tiernan Communications of San Diego, CA in 2001 and Xicom Technology, Inc. of Santa Clara, CA in May 2005.

Current Business

The Company designs, manufactures,
sells, integrates and installs products, systems and software used for the transmission and reception of data and video over satellite, troposcatter, microwave and cable communication networks. The Companys products are used in applications
for telephone (land line and mobile), data, video and audio broadcast communications, private and corporate data networks, Internet applications, and digital television for cable and network broadcast. Through its Tiernan subsidiary, the Company is
a supplier of HDTV and SDTV encoding and transmission equipment. The Xicom subsidiary is a producer of high power amplifiers for communications applications. The Company is headquartered in Phoenix, Arizona, has sales and manufacturing facilities in
Phoenix, Arizona and San Diego and Santa Clara, California, and sales or service centers in; Boca Raton, Florida; Singapore; China; Indonesia; the Netherlands; and the United Kingdom. We serve customers in over 90 countries, including customers in
the television broadcast industry, international telecommunications companies, Internet service providers, private communications networks, network and cable television, and the United States government.

Our products have or will be utilized in major communication systems worldwide, including the following:



| |  |  | Satellite modems and high power amplifiers used as the backbone for major U.S. Department of Defense and Homeland Security communications systems.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Satellite modems, high power Ka band amplifiers and HD encoders for expanded direct to home (DTH) distribution of HDTV from satellite.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | HDTV encoders and decoders for a major American television network for use during their coverage of the 2008 Olympics in Beijing and the National Basketball
Association.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Satellite backhaul systems for GSM mobile phone providers in India and China.
| | - |  | -----------------------------------------------------------------------------



| |  |  | Tri-band satellite amplifiers for a major U.S. satellite communications integrator that are used in a mobile satellite program for the U.S. military.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | DMD20 satellite modem, frequency converters, and redundancy switches for a large expansion project by leading telecom providers in the Asia Pacific region.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Major expansion of U.S. government satellite monitoring network.
| | - |  | ----------------------------------------------------------------



| |  |  | DataPath, a premier U.S. government supplier, with DMD20s to use in its DKET and TRACKX products.
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Solid-State Block Upconverters for major U.S. satellite communication integrators.
| | - |  | ----------------------------------------------------------------------------------



| |  |  | Satellite products for disaster recovery projects, including, for example, the Hurricane Katrina recovery effort.
| | - |  | -----------------------------------------------------------------------------------------------------------------

Financial Information about Segments

The Company has
been organized into two operating segments: 1) Satellite Electronics and Broadcast Equipment, which provides Radyne and Tiernan brand products to satellite, microwave, television, and cable communications customers; and 2) Amplifiers, which
provides Xicom Traveling Wave Tube Amplifiers (TWTAs), Klystron Power Amplifiers (KPAs) and Solid State Power Amplifiers (SSPAs) used in broadcast and broadband satcom applications including IP-over-Satellite markets. Each



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segment is organized and managed separately to make key decisions such as sales/marketing and product development. Please refer to note 13  Segment
Reportingin the consolidated financial statements for additional segment reporting information and financial data.

Description of
Business

Industry Overview

Satellite technology
is a key element in the worldwide infrastructure of communications systems. Satellites enable communications service where there is no suitable alternative available to provide a redundant backup solution for terrestrial based infrastructure (like
fiber-optic cables and microwave networks) or to supplement existing inadequate service. Unlike the cost of land-based networks, such as microwave and fiber cable, the cost to provide services via satellite does not increase with the distance
between sending and receiving stations. Satellite networks can be rapidly installed, upgraded, and reconfigured as compared with land-based networks, which require rights-of-way and are expensive and time consuming to install and upgrade.

Satellite communication systems consist of two key segments: satellites (the space segment); and ground-based transmission/reception systems
(the ground segment). The space segment consists of a single satellite or a constellation of satellites in earth orbit, which typically provide continuous communications coverage over a wide geographic area. These satellites typically
contain multiple transponders, each of which is capable of simultaneously receiving and transmitting one or more signals to or from multiple users. The satellite ground segment, the segment of the industry within which the Company operates, consists
principally of one or more earth stations. An earth station is an integrated system consisting of antennae, radio signal transmitting and receiving equipment, amplifiers, satellite modems, frequency converters, redundancy switches and voice, data,
and/or video network interface equipment. Earth stations provide a communications link from the content originator (such as a broadcast studio or Internet service provider) to the end user either directly or through land-based networks.

The ground segment consists of multiple applications in which the Company operates. The three principal categories of satellite communication applications are fixed
satellite services, mobile satellite services, and direct broadcast services.



| |  |  | Fixed Satellite.Fixed satellite services provide point-to-point and point-to-multipoint satellite communication of voice, data, and video between fixed
ground-based earth stations. The introduction of high-power satellites has created new opportunities within the fixed satellite services segment by enabling the use of smaller, less costly earth stations for applications such as corporate data
networks, Intranet access, and rural telephony.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mobile Satellite.Mobile satellite services operate between fixed earth stations and mobile earth stations, or terminals. These services provide mobile voice
and data transmission capability on land, sea, and air. New mobile satellite services are being developed to bring more extensive coverage and circuit reliability for mobile telephone and data services to underserved populations throughout the
world. Further, there is increased demand for live origination of broadcast television programming, such as live coverage of news, sports or cultural events that employ mobile satellite services for transmission from the venue to
television studios.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Direct Broadcast.Direct broadcast services provide a direct transmission link from high-power satellites to customers over a wide geographic area. This
includes direct-to-home television and radio services, distribution of television and radio programming to local affiliates direct broadcast data services, and Internet access.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Industry Growth and Market Opportunity

We believe that demand for
satellite system ground-based equipment has been and will continue to be driven by:

Worldwide Demand for Communications Services.Factors
contributing to the demand for communications services include worldwide economic development and the increasing globalization of commerce. Businesses have a need for higher bandwidth services to communicate with their customers and employees around
the world and are increasingly reliant upon Internet and multimedia applications. We expect demand for these kinds of higher bandwidth services to continue to grow in both developed and developing countries.

Deregulation and Privatization.Many developing countries that had previously not committed significant resources to or placed a high priority on developing and
upgrading their communications systems are now doing so, primarily through deregulation and privatization. A significant number of these countries lack the resources, or have large geographic areas or terrain that make it difficult, to install
extensive land-based networks on a cost-effective basis. This provides an opportunity for satellite communications services systems to meet the growing demand for communications services in these countries.



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Cost-Effectiveness of Satellite Communications.The relative cost-effectiveness of satellite communications
services is a major factor driving the growth of satellite communications services in areas with rapidly growing telecommunications infrastructures. Large geographic areas, where significant distances separate population concentrations, require a
technology whose cost and speed of implementation is relatively insensitive to distance. Unlike the cost of land-based networks, the cost to provide services via satellite does not increase with the distance between sending and receiving stations.

Technological Advances.Technological advances continue to increase the capacity of a single satellite and reduce the overall cost of a system and
the service it delivers. This increases the number of potential end-users for the services and expands the available market. We believe that recent technological developments such as complex bandwidth efficient modulation schemes, turbo error
correcting codes, bandwidth on demand, digital television compression technology, and signal processing methods will continue to stimulate the demand for the use of satellite communication services.

Government and Military.Satellites allow the military to have instant secure communications when deploying rapidly to troubled parts of the world and further
support the infrastructure necessary for military tactical deployments. The U.S. government provides a significant market opportunity for satellite equipment manufacturers as government policies encourage the use of commercial
off-the-shelf components whenever feasible. This provides us with the opportunity to configure our standard products for a sizable customer that is likely to provide consistent business.

Because of current concerns with international terrorism, the militaries of many countries have increased requirements for communications as their forces are spread
around the world in such places as Afghanistan and Iraq. The U.S. governments needs, such as maintaining communications with embassies, and the U.S. militarys worldwide command and control requirements, continue to drive more demand for
satellite communications.

Television Video Distribution. Compressed HDTV digital video is a technology that has the potential to provide
significant new market growth. The development of digital compression technology preserves the quality of TV signals and allows the transmission of television signals via satellite, point-to-point or fiber in a smaller bandwidth than is currently
possible through alternative technologies, the most prevalent of which is over-the-air analog signals which use much larger frequency spectums than digital systems require. This advance in communications technology is enabling a wider application of
satellite solutions for television and video broadcast services. The increased compression allows broadcasters to increase their channel offering within a smaller, allocated spectrum. New HDTV content provides opportunities for additional network
and local programming choices along with related revenue opportunities. Satellites provide television broadcasters with an efficient and economical method to distribute their programming to cable service providers and direct broadcast satellite
operators. Direct Broadcast Services, in turn, use satellites to distribute digital television programming. Compressed video encoding and decoding make satellites available for less demanding video transmissions, including business teleconferencing,
private business networks, and telemedicine. The economics of compressed video allow the use of satellite transmission for long-distance teaching applications. Digital cinema distribution is a viable alternative to the physical distribution of
feature length films and special media events.

Radio Broadcasts.Satellites are an ideal transmission medium for broadcast services, as a single
satellite has the ability to communicate with ground locations spread across up to one-third of the surface of the earth. Radio network operators, financial news providers, merchandise retailers, and others use satellite systems to provide financial
data and other audio transmissions for a variety of applications, such as local radio programming, news wire services and supermarket in-store radio. In addition, direct radio broadcasters use satellites to broadcast multiple channels of programming
directly to consumers.

Private Networks.As businesses and other organizations expand into regions of the world where the telecommunications
infrastructure is inadequate for land-based networks, the need for alternative communications connections among multiple facilities becomes evident. A private network is a dedicated communications and/or data transmission network. Such a network may
link employees of a multiple-location business with co-workers located throughout the world. Users can consolidate multiple applications over a single satellite network and receive the same quality of service at a lower over-all cost. We believe the
satellite communications industry is poised to gain a foothold in this market by offering reliable high-speed connectivity. Satellite systems can bypass the complexity of land-based networks, multiple carriers, and varying price and billing
schedules.

Internet Communications.The Internet has evolved into a global medium, allowing millions of individuals throughout the world to
communicate, share information, and engage in electronic commerce. Growth in this sector is expected to be driven by the large and growing number of personal computers installed in homes and offices, the declining prices of personal computers,
improvements in network infrastructure, the availability of faster and cheaper Internet access, and the increasing familiarity with and acceptance of the Internet by businesses and consumers. Internet usage also is expected to continue to grow
rapidly due to unique characteristics that differentiate it from traditional media, such as real-time access to interactive content, real-time communication capabilities, and the absence of geographic or temporal limitations.



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We expect satellite communications to continue to offer a cost-effective augmentation capability for Internet service
providers, particularly in markets where land-based networks are unlikely to be either cost-effective or abundant, such as rural areas.

Products

Satellite Electronics and Broadcast Equipment

The Company
supplies satellite modems, converters, and switches and HDTV broadcast products and standard/digital encoders and decoders thru its Radyne and Tiernan brands. The two principal product groups are listed below:



| |  |  | Satellite Electronics
| | - |  | ---------------------



| |  |  | ModemsSatellite modems transform user information, such as data, video or audio, into a signal that can be further processed for transmission via satellite.
We produce several varieties of satellite modems, which operate at different speeds using a variety of modulation techniques. Featured products include: the DMD20  Universal Satellite Modem, the DMD2050  MIL-STD Compliant Universal
Satellite Modem, and the DMD20LBST  L-Band Satellite Modem and ODU Driver.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Frequency Converters/TransceiversEach satellite is configured to receive or transmit a particular radio wave pattern, otherwise called a frequency band, which
is typically different from the frequency of the satellite modem. Frequency converters are used to alter the input/output of a satellite modem into a wave pattern that can be interpreted by the particular satellite being used in the satellite system
to relay communication signals. The Company currently markets a variety of converters used to transmit and receive signals over satellites in the commercial satellite frequency ranges of C-Band, Ka-Band, and Ku-Band. We also produce a redundancy
control unit, which will switch a satellite system to stand-by equipment in the event of a malfunction in a satellite modem or converter. Such redundancy is a critical element for many of our customers, such as rural or international telephony
networks, that strive to provide uninterrupted satellite communications services to their customers. Featured products include: SFC-1450 Ku-Band up-converter and SFC-1275 Ku-Band down-converter.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Earth StationsOur earth stations typically consist of several components, including a satellite modem, a frequency converter, a transceiver, a transmitter,
redundancy switches and an antenna. Earth stations serve as an essential link in transmitting signals to and receiving signals from satellites. Our earth stations enable users to program power levels and operating parameters in order to compensate
for low signal levels, extreme weather conditions, and other variables. We design and manufacture our earth stations using components that we manufacture as well as components that we obtain from other manufacturers. Featured products include: the
DMD20LB/ST  Satellite Earth Station.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Troposcatter  In 2005, the Company introduced a new troposcatter product or over-the-horizon modem in partnership with General Dynamics C4
Systems. The TM-20 modem has the ability to transmit and receive radio waves over the curvature of the Earth by reflecting signals off irregularities in the troposphere which is approximately 10Km above the Earths surface. The TM-20s
patented software is a major advance in troposcatter technology and will be marketed to the U.S. military, which currently employs troposcatter systems throughout the world, and to commercial interests.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Broadcast Equipment
| | - |  | -------------------



| |  |  | Standard and High Definition TV Encoders/Decoders  TV encoders convert analog signals to digital format and compress the signal to fit over available
bandwidth. Decoders are used to convert the compressed signal back into a form that can be viewed and edited. Encoders are used in satellite, cable and terrestrial applications. Many U.S. broadcasters rely on encoders to provide news/live event
gathering and direct to home service. The Company offers a complete product line of SDTV and HDTV encoders for professional applications. Both models feature MPEG-2 video encoding capability and audio compression. The HDTV encoder features a monitor
screen on its faceplate which enables the technician to monitor actual unit performance in real time. Featured products include: the HE4000  High and Standard Definition Encoder, the SE4000  DVB MPEG-2 Contribution Encoder, the HD4000
 High Definition Contribution Decoder, and the TDR4022  DVB Professional Integrated Receiver/Decoder.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In
early 2007, the Tiernan Division introduced a new standard definition encoder employing advance video codec, also known as MPEG-4. This encoder, known as the AVC-4000, is the first product in a new family of products that employ this technology
which allows for further compression of video signals to levels that allow more efficient use of available bandwidth when compared with MPEG-2 alternatives.



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| |  |  | High-Speed and DVB ModemsModulators and demodulators are similar to modems as they transform a signal for transmission to a satellite and then, at the
receiving station, convert the signal back into a form usable as part of the broadcast data stream. Featured products include: the DM240  Digital Video Broadcast Modulator and the DD240 Digital Video Broadcast Demodulator.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cable and MicrowaveOur cable modulators are used primarily in the distribution of digital video for use by cable television distributors and in HDTV. The
design of our cable modulators allows for the transmission of digital video on terrestrial, broadband cable and enables system operators to manage and control available bandwidth. Our microwave modems are used with point-to-point microwave radios
and usually feature high-speed and multidata-rate capabilities that provide a complete point-to-multipoint communication link that facilitates microwave link upgrades. For example, television stations use our microwave modems to transmit audio and
video over a microwave link to and from digital newsgathering trucks. Featured products include: the MM200Terrestrial Microwave Modem and the QAM256  Digital Video Modulator.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Satellite electronics and broadcast equipment products accounted for 54% of consolidated revenue for the year ended 2006.

Amplifiers

The Company provides a variety of high powered amplifiers
thru the Amplifier segment under the Xicom brand.

Satellite amplifiers boost the strength of a signal prior to transmission to satellites which are often
more than 21,000 miles from the surface of the earth. Xicoms Solid State Power Amplifiers (SSPA), Traveling Wave Tube Amplifiers (TWTA), and Klystron Tube Amplifiers (KTA) are used in commercial and military
satellite communications terminals throughout the world. These High Power Amplifiers (HPA) provide power levels vital to satellite communications in fixed, satellite news gathering (SNG), flyaway, mobile, shipboard, and
airborne platforms. Applications include mobile SNG television trucks, fixed satellite ground stations and mobile platforms such as helicopters and ships. Featured products include antenna and rack-mount SSPAs, single-band (C-, X-, Ku-, Ka-, and
DBS), and multi-band TWTAs.

Amplifiers accounted for 46% of consolidated revenue for the year ended 2006.

Competition

We face significant competition in the satellite
communications field. The major competitors include companies such as Comtech EFData Corp., Paradise Datacom, Tandberg Television, and Scopus in the Satellite Electronics and Broadcast Equipment segment. In the Amplifier segment, CPI
(Communications & Power Industries) and Miteq Inc. are the principal competitors. The Company maintains a sizable market share in each of these segments and anticipates further penetration with subsequent acquisition and organic growth.

We compete by deploying a direct sales effort in domestic and international markets and emphasizing our product features, quality and service. We believe
that the quality, performance, and capabilities of our products, our ability to customize certain network functions, and the relatively lower overall cost of our products as compared to the cost of the competing products generally offered by our
major competitors represent major factors in our ability to compete. However, our major competitors have the resources to develop products with features and functions that are competitive with or superior to our products. Competition from current
competitors or future entrants in the markets in which we compete could cause us to lose orders or customers or could force us to lower the prices we charge for our products.

We believe we are well positioned to capitalize on the demand for satellite ground segment systems and that our future success in this market will be based upon our ability to leverage our competitive advantages,
which include the following:



| |  |  | An experienced management group, which has extensive technological and engineering expertise and excellent customer relationships. The members of our management
team average over 20 years experience in the satellite communications industry.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A broad line of well-known, well-respected, off-the-shelf, state-of-the-art equipment that enables us to meet our customers requirements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ongoing new product development and product introductions that address changing customer needs.
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| |  |  | Our ability to custom design products for our customers special applications and to provide a one-stop shopping option to our customers.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Equipment that meets or exceeds all applicable military and government standards, including the first satellite modem to obtain Defense Information Systems
Administration (DISA) certification, the DMD-20.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The ability to meet the complex satellite ground communications systems requirements of our customers in diverse political, economic, and regulatory environments in
various locations around the world.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our worldwide sales and service organization with the expertise to successfully conduct business internationally through sales and service offices staffed by our
employees in most of our major markets throughout the world, including Beijing, Singapore, London, Jakarta, and Amsterdam.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The ability to offer a full line of satellite ground equipment with the mix of the Companys different product lines.
| | - |  | ---------------------------------------------------------------------------------------------------------------------

Strategy

Our primary business goals are to expand market share in
our ground-based satellite systems business and improve profitability. We expect to achieve these goals through the following strategies:

Target
Providers of Fixed, Mobile, and Direct Broadcast Communications Services in Developing Markets.We plan to target developing markets that we believe will account for a significant portion of the demand for satellite-based systems. These markets
typically lack terrestrial infrastructure adequate to support demand for domestic and international communications services. We believe that we offer a cost effective alternative to land based networks. We plan to target providers of mobile and
rural telephony services and Internet service providers in developing markets because we believe they will rely extensively upon satellite communication solutions. In developed countries, we plan to target emerging satellite communications service
providers such as those offering direct broadcast applications.

Pursue Military, Homeland Defense and Other US Government Markets.Continued demand
for technological solutions to national defense, homeland security and other government security requirements represents a key opportunity for our products. We plan to extend development of existing and new products in all of our lines of business
to serve these needs.

Capitalize On Our Existing Technology Leadership. We believe that the global satellite communications services and equipment
market and the digital television market present a number of attractive opportunities to apply our advanced technologies and capabilities. We plan to develop new products and enhance existing products by leveraging our technology to capture a share
of these growth opportunities.

Develop New Products to Exploit New Market Opportunities.We plan to use our international sales force and our
research and development capabilities to identify new market opportunities and develop new products to exploit these opportunities. We intend to develop new products to penetrate and increase our presence in the markets for digital television,
Internet communications, mobile and rural telephony for developing markets, high-speed satellite communications, government data equipment, cable television distribution, and private networks for businesses and governments.

Provide High-Margin Customized Products to Niche Markets.We design our products so we can adapt them to differing specifications with minimal engineering. We
plan to design and produce customized products for niche markets, particularly military and government markets, which require customized technology.

Continual Emphasis on Operational Efficiency and Financial Performance.We have historically maintained a strong emphasis on operation efficiency and financial performance. We believe that continued focus on our operational
efficiencies is essential to future financial success while continuing to grow our business. As part of this continued emphasis, we plan to devote significant time and resources to key components of our business, such as our manufacturing processes,
design systems and customer relationships.

Pursue Strategic Acquisitions.We intend to pursue strategic acquisitions of competitive or
complementary companies in order to gain market share, increase our revenues, expand our product lines, improve our sales force and increase our profitability.



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Research and Development

We conduct an active and ongoing research and development program that focuses on advancing technology, developing improved design and manufacturing processes, and improving the overall quality of the products we
provide. Our goal is to provide our customers with new solutions that address their needs. Our research and development personnel concentrate on technology for the satellite and microwave communications, telecommunications, and cable television
industries. Our future growth depends on increasing the market share of our new products, adapting our existing products/technologies to new applications, and introducing new communications products that will find market acceptance and benefit from
our established international distribution channels. Accordingly, we are actively applying our communications technology expertise to improving the performance of our existing products and developing new products to serve existing and new markets.

We work closely with our customers and potential customers to assess their needs in order to facilitate our design and development of new
products. We believe that this approach minimizes our development risk and improves the potential for market acceptance of our product introductions. Additionally, we use information obtained from our customers and our technological expertise to
develop custom-designed products for our customers special applications.

We intend to use a significant portion of our cash flows from operations to
fund our research into products for improved satellite communications, over-the-horizon (troposcatter) communications, new amplifier products, audio and HDTV encoders, and other new telecommunications products. We also plan to focus our research and
development activities on digital audio, video, and data products. However, there is no assurance that we will continue to have access to sufficient capital to fund the necessary research and development or that such efforts, even if adequately
funded, will ultimately prove successful. Refer to Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operationsfor research and development expense over a two year period.

Sales and Marketing

We sell our products through an
international direct sales force with sales and/or service offices in the United States (Phoenix, Arizona; San Diego and Santa Clara California; and Boca Raton, Florida, Singapore, China, Indonesia, the United Kingdom, and the Netherlands. Our
direct sales force consists of 36 individuals supported by systems and applications engineers. We focus direct sales activities on expanding our international sales by identifying emerging markets and establishing new customer accounts.
Additionally, we directly target certain major accounts that may provide entry into new markets or lead to subsequent distribution arrangements. International representatives, agents and systems integrators sell our products, supported by our sales
and marketing personnel.

We supplement our direct sales force through the use of distributors and local agents who help develop sales
leads and provide ongoing support. Typically, a member of our direct sales staff then assists in completing the sale. Generally, our distributors do not carry inventory of our products.

We participate in approximately 15 trade shows each year. We also generate new sales leads through advertising in trade magazines, direct mail, and our
website. For further information on our products please visitwww.radn.com.

We maintain a warranty department that also includes customer service and support staff that support customers and agents and provide installation
supervision, if needed. In certain instances, we use third-party companies to install and maintain our products at customer sites.

Refer to
Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operationsfor selling, general and administrative expense over a two year period.

Customers

Our customers generally include national
and international telecommunications providers (including radio and television stations), digital television users (including broadcast and cable networks), Internet service providers, financial information providers, systems integrators, and other
corporate entities and the U.S. government.

Our direct sales into principal foreign markets for the periods indicated consisted of the
following percentages of total sales.



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##### Table of Contents

|                    |  |                          |   |  |      |   |  |      |  
|------------------- |  | ------------------------ | - |  | ---- | - |  | ---- | -
|                    |  | Years ended December 31, |  
|Region              |  | 2006                     |   |  | 2005 |   |  | 2004 |  
|Asia                |  | 19                       | % |  | 16   | % |  | 21   | %
|Africa/Middle East  |  | 5                        | % |  | 7    | % |  | 10   | %
|Americas            |  | 2                        | % |  | 3    | % |  | 3    | %
|Europe              |  | 16                       | % |  | 15   | % |  | 13   | %
|                    |  |                          |   |  |      |   |  |      |  
|Total Foreign Sales |  | 42                       | % |  | 41   | % |  | 47   | %
|Domestic            |  | 58                       | % |  | 59   | % |  | 53   | %
|                    |  |                          |   |  |      |   |  |      |  
|                    |  | 100                      | % |  | 100  | % |  | 100  | %
|                    |  |                          |   |  |      |   |  |      |  

In addition to the above sales, we believe that a substantial portion of our domestic sales are for products which
ultimately are installed in foreign countries. We believe that foreign sales will continue to make up a major portion of our total sales in subsequent periods. We consider our ability to continue to sell our products in developing markets to be
important to our future growth. We may not, however, succeed in our efforts to cultivate such markets due to political or other factors. Besides the USA, there is no other country that represents more than 10% of consolidated revenue for 2006. See
note 11  Significant Customers and Foreign and Domestic Salesfor significant customers with 10% or more of segment sales.

Manufacturing

We assemble and test certain products at our Phoenix, Arizona and San Diego and Santa Clara, California facilities using subsystems and
circuit boards acquired from subcontractors. We obtain the remainder of our products, completely assembled and tested, from subcontractors. Although we believe that we maintain adequate stock to minimize the procurement lead-time for certain
components, our products use a number of specialized components or subassemblies produced by a limited number of suppliers. In the event that such suppliers were unable or unwilling to fulfill our requirements, we could experience interruptions in
production while we develop alternative procurement sources. We maintain an inventory of certain chips, components and subassemblies to limit the exposure for such an interruption; and we believe that there are a number of alternative suppliers
capable of providing replacements for the types of chips, customized components and subassemblies used in production. However, there can be no assurance that this inventory is sufficient or that alternative suppliers can be secured quickly enough to
prevent a significant interruption of our business.

For both segments, the Company maintains an adequate supply of inventory based upon a master
production schedule that is reviewed by management on a regular basis. Although there is not a firm forecast, the Company takes into account current market trends and historical data to supply their product.

As of December 31, 2006, the Company had backlog (orders to be shipped in future periods) of $9.1 million in the Satellite Electronics and Broadcast Equipment
segment and $16.6 million for the Amplifier segment before eliminations.

The Companys Phoenix, San Diego, and Santa Clara facilities have been
awarded ISO 9001 certification, the international quality control standard for research and development, marketing, sales, manufacturing, and distribution processes. Subsequently, we have continued to improve our processes and methods of operations,
consistent with our goals and the certification requirements. This certification assists in increasing the acceptance of our products. As of December 31, 2006, the Companys ISO 9001 certifications remained in effect.

Intellectual Property

We rely on our proprietary
technology and intellectual property to maintain our competitive position. We protect a significant portion of our proprietary technology as trade secrets by relying on confidentiality agreements with our employees and certain suppliers. We also
control access to and distribution of confidential information concerning our proprietary information.

We also have patents, which protect
certain of our proprietary technology. We have been cautious in seeking to obtain patent protection for our products, since patents often provide only narrow protection that may not prevent competitors from developing products that function in a
manner similar to those covered by our patents. In addition, some of the foreign countries in which we sell our products do not provide the same level of protection to intellectual property as the laws of the United States. We will continue to seek
patent protection for our proprietary technology in those cases where we think it can be obtained and will provide us with a competitive advantage.

We also license proprietary technology from third parties under license agreements. Some of these agreements include royalty payments based on the number of units sold. These agreements allow us to produce sufficient numbers of units to
assure availability of all of our products as required by market demands.



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Employees

As of December 31, 2006, we had 343 full-time employees, including 4 executive officers, 177 manufacturing and operations personnel, 79 research and development personnel, and 83 selling, general and administration personnel. These
figures include employees who are based outside the United States. Our employees are not represented by a labor union. We believe that our relationships with our employees are satisfactory and in good standing.

Available Information

The Companys website iswww.radn.com. We make available (free of charge), through our website, our annual, quarterly, and current reports, and any
amendments to those reports as soon as practicable after electronically filing the reports with the Securities and Exchange Commission (the Commission). Any materials we file with the Commission may be read and copied at the
Commissions Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. Information concerning the operation of the Commissions Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. The Commission
also maintains a website atwww.sec.govwhere you can view and download copies of reports, proxy and information statements and
other information filed electronically through the Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. Information contained on our website is not a part of this report.

Item 1A.
Risk Factors

In addition to the factors affecting specific business operations identified in connection with
the description of these operations contained elsewhere in this Form 10-K, the following risk factors should be considered in evaluating the Companys business. The Companys business, financial condition or results of operations
could be materially adversely affected by any of these risks. Please note that additional risks not presently known to the Company or that the Company currently deems immaterial may also impair its business and operations.

We Have A History Of Inconsistent Operating Results, And Could Suffer A Reduction In Profitability and Even Losses In The Future.

As a result of operating losses from time to time in prior years, we had an accumulated deficit of $9.5 million at December 31, 2003. While the Company regained
profitability, and has continued to be profitable each year since 2003, we are in a highly competitive business and our profitability is dependent on growth in our markets, the continued introduction and market acceptance of our products, and
management of our expenses. There can be no assurance that we will be able to continue our earnings growth, maintain current earnings levels, or remain profitable at all. We anticipate that 2007 earnings could be impacted by margin pressures.

Our Quarterly Operating Results Have Fluctuated Significantly In The Past, And We Anticipate That They Could Do So In The Future, Which Could Adversely
Affect Our Stock Price.

We may continue to experience significant quarter to quarter fluctuations in our operating results, which may result in
volatility in the price of our common stock. These fluctuating operating results derive from a variety of factors, including the following:



| |  |  | quarter to quarter variability in demand for our products;
| | - |  | ----------------------------------------------------------



| |  |  | introduction of new or enhanced products by us or our competitors;
| | - |  | ------------------------------------------------------------------



| |  |  | growth of demand for Internet-based products and services in developing countries;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | timing of significant marketing programs we may implement;
| | - |  | ----------------------------------------------------------



| |  |  | extent and timing of hiring additional personnel;
| | - |  | -------------------------------------------------



| |  |  | competitive conditions in our industry; and
| | - |  | -------------------------------------------



| |  |  | general economic conditions in the United States and abroad.
| | - |  | ------------------------------------------------------------

The factors described above are difficult to forecast and could harm our business, financial condition and results of operations. Furthermore, there have been recent years that have been challenging for the telecommunication and Internet
industries. Our business is somewhat seasonal, with the first quarter generally being the weakest, and the fourth quarter generally the strongest. Accordingly, we may have difficulty in accurately forecasting our revenues for any future quarter.

We Depend On International Sales, Which Could Cause Our Sales Levels To Be Volatile.

A significant portion of our business depends on sales to customers outside the United States. We expect that international sales will continue to account for a significant portion of our revenues for the foreseeable
future. For example, sales to foreign



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customers were approximately 42%, 41% and 47% for the years ended December 31, 2006, 2005 and 2004, respectively. Accordingly, we expect that our sales
will continue to include a significant proportion of customers located outside the United States. As a result of our dependence on foreign markets, the occurrence of any negative international political, economic or geographic events could result in
significant revenue shortfalls. These shortfalls could cause our business, financial condition and results of operations to be harmed. Some of the risks of doing business internationally include:



| |  |  | changing regulatory requirements;
| | - |  | ---------------------------------



| |  |  | fluctuations in the exchange rate for the United States dollar;
| | - |  | ---------------------------------------------------------------



| |  |  | the availability of export licenses;
| | - |  | ------------------------------------



| |  |  | political and economic instability;
| | - |  | -----------------------------------



| |  |  | difficulties in staffing and managing foreign operations, tariffs and other trade barriers;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | changes in diplomatic and trade relationships;
| | - |  | ----------------------------------------------



| |  |  | complex foreign laws and treaties;
| | - |  | ----------------------------------



| |  |  | acts of terrorism; and
| | - |  | ----------------------



| |  |  | difficulty of collecting foreign accounts receivable.
| | - |  | -----------------------------------------------------

The Company is subject to the Foreign Corrupt Practices Act, which prohibits us from making payments to government officials and others in order to influence the granting of contracts we may be seeking. In addition, we must comply with US
Customs laws that forbid us to do business with certain other countries. Our non-U.S. based competitors are not subject to these laws, which gives them a competitive advantage in those countries.

We Depend On Developing Markets And Their Uncertain Growth Potential Could Result In A Reduction In Revenues And Even Losses.

We believe a substantial portion of the growth in demand for our products will depend upon customers in developing countries. We cannot provide assurance that such
increases in demand will occur or that prospective customers will accept our products. The degree to which we are able to penetrate potential markets in developing countries will be affected to a large extent by the speed with which other competing
elements of the communications infrastructure, such as other satellite-delivered solutions, telephone lines, television cable, and land-based solutions, are installed in these developing countries.

A Significant Portion of Our Sales are to the US Government and Government Entities and Changes in Political Priorities Could Reduce Our Revenue

A significant portion of the Companys consolidated net sales are directly to the US Government, or to entities reselling to these civilian agencies and the branches
of the military. Demand for our products has been elevated due to natural disasters, high military alerts and governmental usage due to world wide terror levels and general upgrades to infrastructures throughout the worlds military and police
forces. These customerss needs vary according to the priorities of each respective entity. A change in control of any of the companies, political offices or other related entities could result in reduced demand for our products and,
ultimately, lower sales and profits.

The Sales And Implementation Cycles for our Products are Long and Continue to Increase, and We May Incur
Substantial, Non-Recoverable Expenses or Devote Significant Resources To Sales That May Not Occur When Anticipated, If At All.

A customers
decision to purchase our products involves a significant commitment of its resources and a lengthy evaluation and product qualification process. After a customer decides to purchase our products, the timing of their deployment and implementation
depends on a variety of factors specific to each customer. Further, prospective customers may delay purchasing our products in order to evaluate new technologies and develop and implement new systems. Throughout the sales cycle, we spend
considerable resources educating and providing information to prospective customers regarding the use and benefits of our products.

Competition In Our
Industry Is Intense And Can Lead To Reduced Sales And Market Share.

The markets for ground segment systems are highly competitive. We have a number of
major competitors in the satellite communications equipment field. These include large companies, such as Comtech EFData Corp., Paradise Datacom, Tandberg Television, Scopus, CPI (Communications & Power Industries) and Miteq Inc., that have
significantly larger and more diversified operations and greater financial, marketing, personnel and other resources than we possess. As a result, these competitors may develop and expand their products more quickly, adapt more quickly to new or
emerging technologies and changes in customer requirements, take advantage of acquisition and other opportunities more readily, and devote greater resources to the marketing and sale of their products than we can.



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Competition from current competitors or future entrants in the markets in which we compete could cause us to lose orders
or customers or could force us to lower the prices we charge for our products, all of which would have a material adverse impact on our business, financial condition, and results of operations.

Our Products May Become Obsolete Due To Rapid Technological Change.

The telecommunications industry, including the ground-based satellite communications systems business, is characterized by rapid and continuous technological change. Future technological advances in the telecommunications industry may
result in the introduction of new products or services that compete with our products or render them obsolete. Our success depends in part on our ability to respond quickly to technological changes through the improvement of our current products and
the development of new products. Accordingly, we believe that we will need to allocate a substantial amount of capital to research and development activities in the future. We may not generate cash flow from operations or have access to outside
financing in amounts that are sufficient to adequately fund the development of new products. Even if we are able to obtain the required funding to develop new products, we cannot assure you that we will be able to develop products that we will be
able to sell successfully. Our inability to improve our existing products and develop new products could have a material adverse effect on our business, financial condition, and results of operations.

Our Research And Development Efforts Are Costly And The Results Are Uncertain, Which May Reduce Our Profitability And Could Result In Losses.

Our continued growth depends on penetrating new markets, adapting existing satellite communications products to new applications, and introducing new communications
products that achieve market acceptance and benefit from our established international distribution channels. Accordingly, we are actively applying our communications expertise to design and develop new hardware and software products and enhance
existing products. These efforts are costly. We expended $10.9 million, or 8.2% of our net sales, in fiscal 2006 on research and development activities. Additionally, our research and development programs may not produce successful results, which
could have a material adverse effect on our business, financial condition, and results of operations.

Continued Growth Through Acquisition Could Prove
Unsuccessful And Strain Our Personnel And Systems And Divert Our Resources.

We have pursued, and will continue to pursue, growth opportunities through
internal development and acquisition of complementary businesses, products and technologies. Our operations have expanded significantly as a result of our acquisitions of ComStream, Armer, Tiernan, and Xicom. We are unable to predict whether or when
any other prospective acquisition will be completed. However, in order to pursue successfully the opportunities presented by emerging satellite-delivered communications and broadcast equipment markets, we will be required to continue to expand our
operations. This expansion could entail various risks, including the following:



| |  |  | difficulty of assimilating the operations and personnel of acquired businesses or products due to unforeseen circumstances;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | the necessity to attract, train, motivate, and manage a significantly larger number of employees;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | the use of a disproportionate amount of our managements attention or our resources;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | substantial cash expenditures, potentially dilutive issuances of equity securities, the incurrence of additional debt and contingent liabilities, and amortization
expenses related to intangible assets;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | potential disruption of our ongoing business;
| | - |  | ---------------------------------------------



| |  |  | our inability, once integrated, to achieve comparable levels of revenues, profitability or productivity as our existing business or otherwise perform as expected;
and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our potential inability to obtain the desired financial and strategic benefits from the acquisition or investment.
| | - |  | ------------------------------------------------------------------------------------------------------------------

Moreover, we cannot assure that we will be able to successfully identify suitable acquisition candidates, complete acquisitions, or expand into new markets. The
occurrence of any of the risks described above or any failure to manage further growth in an efficient manner and at a pace consistent with our business could have a material adverse effect on our growth and our business, financial condition, and
results of operations.

Our Ability To Use Our Net Operating Loss Carryforwards May Be Limited By The Ownership Change Caused By The Sale Of All Of The
Shares Of Our Common Stock Held By Our Majority Stockholders.

We have net operating loss carryforwards that expire between the years 2007 and
2022. As a result of the sale in 2004 by Stetsys Pte Ltd. and Stetsys US, Inc. of all of the shares of our common stock held by each company, we experienced an ownership change as defined by Section 382 of the U.S. Internal Revenue Code of
1986, as amended. Because of the



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ownership change, we are limited in our ability to use the net operating losses from before the date of the ownership change to offset items
of taxable income realized after that date. The annual limitation will also result in the expiration of some of the net operating losses before utilization. In addition, any future ownership change could further limit the availability
of our net operating loss carryforwards to offset tax liabilities and may be viewed negatively by a prospective buyer of the stock.

Our Competitive
Position Relies Heavily On Our Proprietary Technology And Intellectual Property.

We rely on our proprietary technology and intellectual property to
maintain our competitive position. Unauthorized parties could attempt to copy aspects of our technologies or to obtain information that we regard as proprietary. We may not be able to police unauthorized use of our intellectual property. Our failure
to protect our proprietary technology and intellectual property could adversely affect our competitive position.

We generally rely on confidentiality
agreements with our employees and some of our suppliers to protect our proprietary technology. We also control access to and distribution of confidential information concerning our proprietary technology. We cannot guarantee that the other parties
to these agreements will not disclose or misappropriate the confidential information concerning our proprietary technology, which could have a material adverse effect on our business.

We rely on patents to protect certain of our proprietary technology. Patents, however, often provide only narrow protection that may not prevent competitors from developing products that function in a manner similar
to those covered by our patents. In addition, some foreign countries in which we sell our products do not provide the same level of protection to intellectual property as the laws of the United States provide. We cannot assure you that any patents
we currently own or control, or that we may acquire in the future, will prevent our competitors from independently developing products that are substantially similar or superior to ours.

We may find it necessary to take legal action in the future to enforce or protect our intellectual property rights. Litigation can be very expensive and can distract our managements time and attention, which
could adversely affect our business. In addition, we may not be able to obtain a favorable outcome in any intellectual property litigation.

We Depend
Upon Certain Suppliers And Subcontractors, The Loss Of Which Could Cause An Interruption In The Production Of Our Products.

We rely on subcontractors
to assemble and test some of our products. Additionally, our products use a number of specialized chips and customized components or subassemblies produced by a limited number of suppliers. We maintain limited inventories of these products and do
not have long-term supply contracts with our vendors. In the event our subcontractors or suppliers are unable or unwilling to fulfill our requirements, we could experience an interruption in product availability until we are able to secure
alternative sources of supplies. We are also subject to price increases by suppliers that could increase the cost of our products or require us to develop alternative suppliers, which could interrupt our business. It may not be possible to obtain
alternative sources at a reasonable cost. Supply interruptions could cause us to lose orders or customers, which would result in a material adverse impact on our business, financial condition, and results of operations.

The Inability To Attract Or Retain Additional Technical Personnel Could Impair Our Ability To Conduct And Expand Our Business.

Our continued ability to attract and retain highly skilled personnel also is critical to the operation and expansion of our business. The market for skilled engineers and
other technical personnel is extremely competitive, and recruitment and retention costs are high. Although we have been able to attract and retain the personnel necessary to operate our business, we may not be able to do so in the future,
particularly as we continue to expand our business.

The Transition and Loss Of The Services Of Certain Members Of Our Senior Management

During 2006, the Company transitioned CEOs from Robert Fitting, a long time expert in the Satellite industry, to Carl Myron Wagner. The timeliness and ability of
Mr. Wagner to successfully operate in his new role of CEO is critical to the Companys performance. Along with Mr. Wagner, Steve Eymann, our CTO, is critical to our business. The Board of Directors has active succession plans that
should mitigate the loss of one or more of our executives. Nonetheless, there can be no assurance that succession plans will be successful. Further, the failure to attract and retain personnel with the necessary skills when needed could materially
and adversely affect our business and expansion plans.



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##### Table of Contents

|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

None



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

We currently occupy approximately 40,000 square feet of building space in Phoenix,
Arizona, and 26,000 square feet in our San Diego, California facility, and 72,000 square feet in our two Santa Clara, California facilities. The Phoenix and San Diego facilities are used in the Companys satellite electronics and broadcast
equipment segment. The Santa Clara facility is the base for the amplifier segment. In addition, we sublease 16,000 square feet in Chandler, Arizona. The lease for our Phoenix facility expires in July 2008, subject to an option to renew for two
consecutive terms of five years each. The lease for the Chandler facility expires in October 2008, subject to an option for a five-year renewal. The lease for the San Diego facility expires in June 2010, subject to an option to renew for two
consecutive terms of five years each. The lease for the Santa Clara facility was renewed in 2006 for an additional five years and added additional space. We also lease facilities for our regional sales and service offices in China, Singapore, the
Netherlands, and the United Kingdom. The Company believes that our facilities are adequate to meet current and reasonably anticipated needs in the immediate future.



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

On April 2006, Comtech EF Data Corp. filed a complaint ( Comtech EF
Data Corporation v. Radyne Corporation /Case No. CIV 06-1132-PHX-MHM) in the United States District Court for the District of Arizona alleging one count of patent infringement of US Patent No. 5,666,646 claiming that some of the
Companys radio frequency converter products infringed on the patent held by Comtech EF Data Corp. The complaint seeks an injunction and unspecified monetary damages. The Company submitted its answer to the complaint on May 30,
2006. Representatives of the Company have met with Comtech EFData in attempts to resolve the matter, but all efforts to date have been unsuccessful. The Company believes Comtech EF Data Corp.s claims are without merit,
that the accused products do not infringe, and that the Company has other substantial factual and legal defenses to the claims. The Company intends to defend itself vigorously in this lawsuit. However, there is no assurance that the
Company will ultimately prevail in this proceeding.

From time to time, in addition to those identified above, Radyne is subject to legal proceedings,
claims, investigations and proceedings in the ordinary course of business, including commercial, employment and other matters. In accordance with U.S. generally accepted accounting principles, Radyne makes a provision for a liability when it is both
probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel,
and other information and events pertaining to a particular case. Litigation is inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending against Radyne. It is possible, however, that our
consolidated financial position, cash flows or results of operations could be affected by the resolution of one or more of such contingencies.



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

No matters were submitted to a vote of the Companys
security holders during the fourth quarter of 2006.



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##### Table of Contents

PART II



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

Market for Common Stock

Our common stock is quoted on the NASDAQ Global Select Market under the symbol RADN.
The following table sets forth the range of high and low closing prices per share for our common stock as reported by the NASDAQ Global Select Market for the periods indicated.



|               |  |      |       |     |   |      
|-------------- |  | ---- | ----- | --- | - | -----
|               |  | High |       | Low
|2006           |  |      |       |     |   |      
|First quarter  |  | $    | 16.07 |     | $ | 12.95
|Second quarter |  | $    | 17.41 |     | $ | 10.30
|Third quarter  |  | $    | 12.60 |     | $ | 10.31
|Fourth quarter |  | $    | 13.15 |     | $ | 9.65 
|2005           |  |      |       |     |   |      
|First quarter  |  | $    | 9.36  |     | $ | 7.38 
|Second quarter |  | $    | 9.20  |     | $ | 7.24 
|Third quarter  |  | $    | 11.43 |     | $ | 8.91 
|Fourth quarter |  | $    | 15.17 |     | $ | 10.27

Holders of Record

As of January 1, 2006, we had approximately 260 holders of record of our common stock. We estimate that we have another 5,000 holders of our common stock in street name.

Dividends

We have not paid dividends on our common
stock since inception and we do not intend to pay any dividends to our stockholders in the foreseeable future. We currently intend to reinvest earnings, if any, in the development and expansion of our business. The declaration of dividends in the
future will be at the election of our Board of Directors and will depend upon our earnings, capital requirements and financial position, general economic conditions, and other pertinent factors.

The following graph shows a comparison of cumulative total returns for our common stock, the NASDAQ Global Select Market, and the Communication Equipment
group assuming the investment of $100 in our common stock and each index on December 31, 2001 and the reinvestment of dividends, if any. Prior period performance should not be used as a guide to future expected performance.



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LOGO

Equity Compensation Plans

See Part III, Item 12.



17



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##### Table of Contents

|Item 6. | Selected Financial Data
|------- | -----------------------

The following selected consolidated statements of operations data for the years ended
December 31, 2006, 2005, 2004, 2003 and 2002, and the selected consolidated balance sheet data at those dates, are derived from our consolidated financial statements and notes thereto, audited by an independent registered public accounting
firm, KPMG LLP. The following data is not necessarily indicative of results of future operations and should be read in conjunction with Item 7.Managements Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and notes thereto as of December 31, 2006 and 2005 and for the three years ended December 31, 2006, included elsewhere in this Annual Report on Form 10-K. The selected financial data
below includes a full year consolidation of Xicom during 2006. For 2005, the results of Xicom are from the date of acquisition, May 27, 2005, through December 31, 2005.



|                                                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|                                                                                            |  | Years Ended December 31, (in thousands, except per share data) |        
|                                                                                            |  | 2006                                                           |         |   | 2005 |   |         | 2004 |  |   | 2003   |   |  | 2002 |       
|CONSOLIDATED STATEMENTS OF OPERATIONS DATA:                                                 |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Net sales                                                                                   |  | $                                                              | 134,209 |   |      | $ | 103,263 |      |  | $ | 56,578 |   |  | $    | 57,991 |   |  | $ | 57,662 |  
|Cost of sales                                                                               |  |                                                                | 77,738  |   |      |   | 57,251  |      |  |   | 26,435 |   |  |      | 31,640 |   |  |   | 38,472 |  
|                                                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Gross profit                                                                                |  |                                                                | 56,471  |   |      |   | 46,012  |      |  |   | 30,143 |   |  |      | 26,351 |   |  |   | 19,190 |  
|                                                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Selling, general and administrative                                                         |  |                                                                | 28,627  |   |      |   | 21,777  |      |  |   | 15,420 |   |  |      | 13,559 |   |  |   | 13,471 |  
|Research and development                                                                    |  |                                                                | 10,947  |   |      |   | 8,824   |      |  |   | 5,330  |   |  |      | 6,294  |   |  |   | 8,665  |  
|Asset impairment charge                                                                     |  |                                                                |        |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   | 995    |  
|Restructuring charge                                                                        |  |                                                                |        |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   | 1,102  |  
|                                                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Total operating expenses                                                                    |  |                                                                | 39,574  |   |      |   | 30,601  |      |  |   | 20,750 |   |  |      | 19,853 |   |  |   | 24,233 |  
|                                                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Earnings (loss) from operations                                                             |  |                                                                | 16,897  |   |      |   | 15,411  |      |  |   | 9,393  |   |  |      | 6,498  |   |  |   | (5,043 | )
|Interest expense                                                                            |  |                                                                | 241     |   |      |   | 252     |      |  |   | 29     |   |  |      | 28     |   |  |   | 62     |  
|Interest and other income                                                                   |  |                                                                | (1,359  | ) |      |   | (665    | )    |  |   | (492   | ) |  |      | (254   | ) |  |   | (236   | )
|                                                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Earnings (loss) before income taxes and cumulative effect of change in accounting principle |  |                                                                | 18,015  |   |      |   | 15,824  |      |  |   | 9,856  |   |  |      | 6,724  |   |  |   | (4,869 | )
|Income taxes (benefit)                                                                      |  |                                                                | 6,150   |   |      |   | 5,138   |      |  |   | (3,644 | ) |  |      | 2,599  |   |  |   | (196   | )
|                                                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Earnings (loss) before cumulative effect of change in accounting principle                  |  |                                                                | 11,865  |   |      |   | 10,686  |      |  |   | 13,500 |   |  |      | 4,125  |   |  |   | (4,673 | )
|Cumulative effect of change in accounting principle                                         |  |                                                                |        |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   | 4,281  |  
|                                                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Net earnings (loss)                                                                         |  | $                                                              | 11,865  |   |      | $ | 10,686  |      |  | $ | 13,500 |   |  | $    | 4,125  |   |  | $ | (8,954 | )
|                                                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Earnings (loss) per share:                                                                  |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Basic                                                                                       |  | $                                                              | 0.66    |   |      | $ | 0.63    |      |  | $ | 0.83   |   |  | $    | 0.27   |   |  | $ | (0.59  | )
|                                                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Diluted                                                                                     |  | $                                                              | 0.63    |   |      | $ | 0.60    |      |  | $ | 0.79   |   |  | $    | 0.26   |   |  | $ | (0.59  | )
|                                                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Weighted average number of common shares outstanding                                        |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Basic                                                                                       |  |                                                                | 18,026  |   |      |   | 16,838  |      |  |   | 16,357 |   |  |      | 15,488 |   |  |   | 15,180 |  
|                                                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Diluted                                                                                     |  |                                                                | 18,845  |   |      |   | 17,700  |      |  |   | 17,136 |   |  |      | 15,718 |   |  |   | 15,180 |  
|                                                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|                                                                                            | 
|                                                                                            |  | December 31, (in thousands)                                    |        
|                                                                                            |  | 2006                                                           |         |   | 2005 |   |         | 2004 |  |   | 2003   |   |  | 2002 |       
|CONSOLIDATED BALANCE SHEET DATA:                                                            |  |                                                                |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Cash and cash equivalents                                                                   |  | $                                                              | 27,540  |   |      | $ | 16,928  |      |  | $ | 39,300 |   |  | $    | 30,130 |   |  | $ | 16,230 |  
|Working capital                                                                             |  | $                                                              | 62,272  |   |      |   | 41,169  |      |  |   | 53,432 |   |  |      | 41,642 |   |  |   | 34,252 |  
|Total assets                                                                                |  | $                                                              | 120,004 |   |      |   | 100,628 |      |  |   | 65,416 |   |  |      | 50,609 |   |  |   | 44,407 |  
|Long-term obligations                                                                       |  | $                                                              | 148     |   |      |   | 4,961   |      |  |   | 430    |   |  |      | 475    |   |  |   | 849    |  
|Total liabilities                                                                           |  | $                                                              | 18,139  |   |      |   | 22,988  |      |  |   | 7,222  |   |  |      | 6,991  |   |  |   | 7,118  |  
|Stockholders equity                                                                        |  | $                                                              | 101,865 |   |      |   | 77,640  |      |  |   | 58,194 |   |  |      | 43,618 |   |  |   | 37,288 |  



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##### Table of Contents

|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Introduction

The following should be read in conjunction with the Companys Consolidated Financial Statements and the related Notes that appear in Item 8
of this Annual Report on Form 10-K. References to Note or Notes refer to the Notes to the Companys Consolidated Financial Statements.

Overview

The Company designs, manufactures, sells, integrates and installs products, systems and software used for the
transmission and reception of data and video over satellite, troposcatter, microwave and cable communication networks. The Companys products are used in applications for telephone (land line and mobile), data, video and audio broadcast
communications, private and corporate data networks, Internet applications, and digital television for cable and network broadcast. Through its Tiernan subsidiary, the Company is a supplier of HDTV and SDTV encoding and transmission equipment. The
Xicom subsidiary is a producer of high power amplifiers for communications applications. The Company is headquartered in Phoenix, Arizona, has sales and manufacturing facilities in Phoenix, Arizona and San Diego and Santa Clara, California, and
sales or service centers in Boca Raton, Florida; Singapore; China; Indonesia; the Netherlands; and the United Kingdom.

We sell our
products through our direct sales offices and local agents and distributors. We serve customers in over 90 countries, including customers in the television broadcast industry, international telecommunications companies, Internet service providers,
private communications networks, network and cable television and the U.S. government.

During 2006 our sales set a record at $134.2
million. The increase in sales was due, in part, to the strong results in our amplifier segment during 2006. Xicom sales for the year were $62.1 million and the satellite electronics and broadcast equipment business generated $72.2 million. The
consolidated business also set a new record for earnings from operations at $16.9 million.

For 2007, we will continue to pursue customers
around the world where we believe we are well positioned to offer cost effective technology solutions that are competitive with other products in the marketplace. Our approach remains to focus our efforts on well defined hardware markets where we
can rapidly develop and market communications products. We are committed to offering reliable products that compare well with those of our competition in order to achieve our goal of growing sales while maintaining strong gross margins. We continue
to manage our operations with tight cost control while investing in new product research and development where we believe we can achieve returns either through new product sales or reduced cost of manufacture.

In addition, we continue to evaluate opportunities to acquire new technologies or other businesses that complement our existing product lines and have a
clear path to providing accretive returns.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires
the Companys management to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. These
estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to bad debts, inventories, income taxes, warranty obligations,
and contingencies based upon historical results, anticipated future events, and various other assumptions, factors, and circumstances. We believe that our estimates and assumptions are reasonable in the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

Management believes the Companys most critical accounting policies and estimates used in the preparation of its consolidated financial statements relate to:



| |  |  | Revenue Recognition. Revenues from product sales are recognized upon the actual shipment of product and transfer of the risk of ownership from us, or our
contract manufacturers, to our customers in accordance with SEC Staff Bulletins No. 104 Revenue Recognition and No. 101, Revenue Recognition in Financial Statements,as amended. We do not sell through distributors and we do
not use consignment resellers as a method of selling our products. Revenue from services principally
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| | consists of sales related to services for installation and integration of satellite earth stations and video and microwave hub stations and are recognized at
the time the services are performed. We consider products and services as separate units of accounting under EITF 00-21, Revenue Arrangements with Multiple Deliverables. Revenue is allocated to the separate units of accounting based on their
relative fair values. Sales related to government agencies or subcontractors with Cost Plus Fixed Fee arrangements are accounted for using the Percentage of Cost to Complete method in accordance with ARB 43, Restatement
and Revision of Accounting Research Bulletins  Chapter 11 Government Contracts.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Stock Compensation. On January 1, 2006, the Company adopted Statement of Financial Accounting Standard No. 123 (revised 2004) (SFAS
123(R)), Share-Based Payment, and SEC Staff Accounting Bulletin No. 107 (SAB 107), Share-Based Payment, which requires the measurement and recognition of all share-based compensation under the fair value method. The Company
implemented SFAS 123(R) using the modified prospective transition method, which does not result in the restatement of previously issued financial statements.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For those periods prior to December 31, 2005 the Company accounted for stock option grants in accordance with Accounting Principles Board Opinion
No. 25 (APB 25), Accounting for Stock Issued to Employees, and related interpretations for fiscal year 2005 and prior years, and, accordingly, recognized no compensation expense for the stock option grants, until December 2005, when we
accelerated the vesting of all unvested options.



| |  |  | Valuation of Receivables. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required
payments. Bad debt reserves are recorded based upon historic default averages as well as through the creation of reserves established for specific customers deemed marginal in their ability to pay based upon factors known at that time. In general,
if the financial condition of a customer deteriorates, resulting in an impairment of that customers ability to make payments, additional allowances may be required.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Valuation and Impairment of Intangible Assets.In assessing our goodwill and other intangible assets for impairment in accordance with Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets, (SFAS 142) we are required to make significant assumptions about the future cash flows, overall performance, identity and allocation and valuation of the
assets, including goodwill and other intangibles of our reporting units. Market prices are not readily available for certain businesses, unique physical assets, and most intangible assets to be evaluated in goodwill impairment tests. Therefore, we
estimate fair values using estimating techniques and assumptions that are matters of judgment. During 2005, as a result of the Xicom acquisition, we recorded goodwill of approximately $30.0 million on our balance sheet. During 2006, we applied the
provisions of SFAS 142 and determined that there was no impairment.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warranty Liability.We provide limited warranties on certain of our products and systems for periods generally not exceeding two years. Estimated warranty
costs for potential product liability and warranty claims based on our claim experience are accrued as cost of sales at the time revenue is recognized. While we engage in extensive product quality programs and processes, including actively
monitoring and evaluating the quality of our vendors, our warranty liability is affected by product failure rates and material usage and service delivery costs incurred in correcting product failures. Should actual product failure rates, material
usage or service delivery costs differ from the Companys present estimates, additional warranty liabilities may be required.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Valuation of Inventories.Inventories, consisting of satellite electronics and broadcast equipment as well as amplifiers, are valued at standard costs which
approximates lower of cost or market using the first-in, first-out (FIFO) method. Our inventories include high-technology components and systems sold into rapidly changing and competitive markets; accordingly, our inventories are subject
to technological obsolescence. We evaluate inventories for excess, obsolescence or other factors that may render inventories unmarketable at normal margins. Write-downs are recorded so that inventories reflect the approximate net realizable value.
Assumptions about future demand, market conditions and decisions to discontinue certain product lines can impact the decision to write down inventories. If assumptions about future demand change or actual market conditions are less favorable than
those projected by management, additional inventory write-downs may be required. If market conditions were to improve, we would not reverse previously recorded downward adjustments. We monitor the subsequent sale of impaired inventory and the
amounts subsequently sold are immaterial to our gross margin. In any case, actual amounts could be different from those estimated.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Accounting for Income Taxes. Managements judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and
the valuation allowance recorded against net deferred tax assets. We consider the technical merits of positions taken in our income tax return filing in estimating tax benefits to be recorded. In determining the need for a valuation allowance we
consider historic levels of income, expectations and risk associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies. Accounting rules require that income tax estimates assume that current income tax
rules will remain in effect and only after rule changes become enacted can adjustments be made to the estimates used. These, and other factors, may result in large swings in estimates from period to period.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Results of Operations

Sales:

Net sales generally consist of sales of products, net of returns and allowances, and revenues
from long term contracts. Those related to government agencies or subcontractors with Cost Plus Fixed Fee arrangements are accounted for using the Percentage of Cost to Complete method in accordance with ARB 43.

2006 vs. 2005



|      |  |                                         |         |      |   |         |  |   |        |  |    |  
|----- |  | --------------------------------------- | ------- | ---- | - | ------- |  | - | ------ |  | -- | -
|      |  | Years ended December 31, (in thousands) |        
|      |  | 2006                                    |         | 2005 |   | Change  |  | % |       
|Sales |  | $                                       | 134,209 |      | $ | 103,263 |  | $ | 30,946 |  | 30 | %

During 2006, consolidated net sales grew 30% which was largely the result of the sales growth and
the full year inclusion of Xicom. Xicom was acquired in May of 2005, and the Companys consolidated results for that year included seven months of sales from Xicom. Nonetheless, on a pro forma basis, Xicom sales grew at a 30% annual rate during
2006 while net sales for the Companys satellite electronics and broadcast equipment segment grew 2%. Forecasting sales growth rates is difficult; however, the Company believes that its historic range of 8% to 12% sales growth is a reasonable
forecast for 2007. While Xicom sales growth may slow from their high rates during 2006, sales in the satellite electronics and broadcast equipment business may increase due to new product introductions, such as the DMD 1050 modem card, and other
sales initiatives. There can be no assurance that sales will grow in either of the Companys segments however.

2005 vs. 2004



|      |  |                                         |         |      |   |        |  |   |        |  |    |  
|----- |  | --------------------------------------- | ------- | ---- | - | ------ |  | - | ------ |  | -- | -
|      |  | Years ended December 31, (in thousands) |        
|      |  | 2005                                    |         | 2004 |   | Change |  | % |       
|Sales |  | $                                       | 103,263 |      | $ | 56,578 |  | $ | 46,685 |  | 83 | %

For 2005, sales increased primarily due to the acquisition of Xicom and growth in our
pre-acquisition satellite electronics and broadcast equipment segment. The addition of Xicom contributed approximately $32.4 million in sales growth with the balance resulting from growth in the pre-acquisition business. The growth in our
pre-acquisition business was largely due to increased demand for our satellite electronics products used in direct television broadcast in the US and in landline and mobile telephony backhaul in countries with rapidly growing telecommunications
demand such as Pakistan, India and China.

Cost of sales:

Cost of sales generally consists of costs associated with components, outsourced manufacturing and in-house labor associated with assembly, testing, packaging, shipping, and quality assurance, depreciation of
equipment, and indirect manufacturing costs. In addition, any expense related to adjusting the value of excess or obsolete inventory to reflect current market values (when lower than original cost) is included in cost of sales. Gross profit is the
difference between net sales and cost of sales. Gross margin is gross profit stated as a percentage of net sales. The following table summarizes the year-over-year comparison of our cost of sales, gross profit and gross margin for the periods
indicated:

2006 vs. 2005



|               |  |                                         |        |   |      |   |        |        |  |   |        |   |  |    |  
|-------------- |  | --------------------------------------- | ------ | - | ---- | - | ------ | ------ |  | - | ------ | - |  | -- | -
|               |  | Years ended December 31, (in thousands) |       
|               |  | 2006                                    |        |   | 2005 |   |        | Change |  |   | %      |  
|Cost of Sales  |  | $                                       | 77,738 |   |      | $ | 57,251 |        |  | $ | 20,487 |   |  | 36 | %
|Gross Profit   |  | $                                       | 56,471 |   |      | $ | 46,012 |        |  | $ | 10,459 |   |  | 23 | %
|Gross Margin % |  |                                         | 42     | % |      |   | 45     | %      |  |   | -3     | % |  | -7 | %



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##### Table of Contents

During 2006, gross margins decreased as a result of the inclusion of a full year of Xicom. Xicom
amplifiers historically have had lower margins than the satellite electronics and broadcast equipment segment. In addition, gross margins for satellite electronics and broadcast products declined as a result of competitive pressure, particularly for
large satellite modem orders in Asia, and as a result of one time expenses associated with the introduction of new video and audio encoders and decoders. Cost of Sales was further increased and Gross margins reduced by the adoption of FAS123
(R) which resulted in equity compensation expense was $266,000 during 2006. The Company expects gross margins to stabilize near the levels for 2006 over the foreseeable future as a result of reduction in production expenses for encoders and
decoders coupled with improved gross margins for amplifier sales.

2005 vs. 2004



|               |  |                          |        |   |      |   |        |        |  |   |        |   |  |     |  
|-------------- |  | ------------------------ | ------ | - | ---- | - | ------ | ------ |  | - | ------ | - |  | --- | -
|               |  | Years ended December 31, |       
|               |  | (in thousands)           |       
|               |  | 2005                     |        |   | 2004 |   |        | Change |  |   | %      |  
|Cost of Sales  |  | $                        | 57,251 |   |      | $ | 26,435 |        |  | $ | 30,816 |   |  | 117 | %
|Gross Profit   |  | $                        | 46,012 |   |      | $ | 30,143 |        |  | $ | 15,869 |   |  | 53  | %
|Gross Margin % |  |                          | 45     | % |      |   | 53     | %      |  |   | -8     | % |  | -15 | %

During 2005, overall gross margins decreased due to acquisition of Xicom. Margins from our
pre-acquisition satellite electronics and broadcast equipment segment also decreased slightly as a result of increased competitive pressure and larger orders with quantity pricing. Cost of Sales was further increased (and gross margin further
reduced) due to write-down and write-off expenses resulting from periodic review of inventory values in our satellite electronics and broadcast equipment segment. These expenses were approximately $1.2 million in 2005 compared to approximately
$574,000 in 2004. This increase in excess and obsolescence expense was primarily the result of discontinuance of older products that were replaced with newer and updated models.

Selling, General, and Administrative Costs (SG&A):

Sales and marketing expenses
consist of salaries, commissions for marketing and support personnel, and travel. Executive and administrative expenses consist primarily of salaries and other personnel-related expenses of our finance, human resources, information systems, and
other administrative personnel, as well as facilities, professional fees, depreciation and amortization and related expenses. The following table summarizes the year-over-year comparison of our selling, general and administrative expenses for the
periods indicated:

2006 vs. 2005



|                                  |  |                          |        |      |   |        |  |   |       |  |    |  
|--------------------------------- |  | ------------------------ | ------ | ---- | - | ------ |  | - | ----- |  | -- | -
|                                  |  | Years ended December 31, |       
|                                  |  | (in thousands)           |       
|                                  |  | 2006                     |        | 2005 |   | Change |  | % |      
|Selling, general & administrative |  | $                        | 28,627 |      | $ | 21,777 |  | $ | 6,850 |  | 31 | %

SG&A increased primarily with the inclusion of Xicom, which accounted for a $3.7 million
increase over the previous year. Corporate expenses were responsible for the remainder of the change over the period which included additional equity compensation expense of $1.4 million (as a result of the adoption of SFAS-123(R)), accounting and
compliance costs of $698,000, management incentives of $305,000, additional headcount as a result of the CEO transition of $134,000, and acquisition activities of $130,000. The acquisition activities during the year were reflective of increased
emphasis in merger and acquisition and related due diligence activities during the year. The increase in equity compensation and management incentives was a result of CEO transition costs. The Company does not expect the same level of equity
compensation and transition cost during 2007. SG&A as a percent of sales remained at 21% as compared with 2005.

2005 vs. 2004



|                                  |  |                          |        |      |   |        |  |   |       |  |    |  
|--------------------------------- |  | ------------------------ | ------ | ---- | - | ------ |  | - | ----- |  | -- | -
|                                  |  | Years ended December 31, |       
|                                  |  | (in thousands)           |       
|                                  |  | 2005                     |        | 2004 |   | Change |  | % |      
|Selling, general & administrative |  | $                        | 21,777 |      | $ | 15,420 |  | $ | 6,357 |  | 41 | %



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##### Table of Contents

SG&A increased primarily due to the inclusion of additional expense from Xicom ($4.9 million). In
addition, the Xicom acquisition caused increases in certain corporate expenses such as professional services, $737,000 (audit, preparation of Xicom for compliance with the provisions of the Sarbanes-Oxley Act of 2002, Section 404 (SOX
404) and tax advisory), and insurance, $420,000. Although the absolute amount of SG&A rose as a percentage of sales, it dropped to 21% of 2005 sales from 27% of 2004 sales.

Research and Development (R&D):

Research and development expenses consist primarily
of salaries and personnel-related costs and materials. The following table summarizes the year-over-year comparison of our research and development expenses for the periods indicated:

2006 vs. 2005



|                       |  |                                         |        |      |   |        |  |   |       |  |    |  
|---------------------- |  | --------------------------------------- | ------ | ---- | - | ------ |  | - | ----- |  | -- | -
|                       |  | Years ended December 31, (in thousands) |       
|                       |  | 2006                                    |        | 2005 |   | Change |  | % |      
|Research & development |  | $                                       | 10,947 |      | $ | 8,824  |  | $ | 2,123 |  | 24 | %

During 2006, R&D increased primarily due to the inclusion of Xicom, which itself accounted for
$1.7 million of the increase. The remainder can be attributed to sustaining engineering cost in core products, new product introduction in the broadcast sector, and an increase in equity compensation ($132,000). R&D as a percentage of sales
decreased to 8% during 2006 compared to 9% in 2005. The Company anticipates that R&D, as a proportion of sales, will remain at current levels for 2007 because of continued investment in new products.

2005 vs. 2004



|                       |  |                                         |       |      |   |        |  |   |       |  |    |  
|---------------------- |  | --------------------------------------- | ----- | ---- | - | ------ |  | - | ----- |  | -- | -
|                       |  | Years ended December 31, (in thousands) |      
|                       |  | 2005                                    |       | 2004 |   | Change |  | % |      
|Research & development |  | $                                       | 8,824 |      | $ | 5,330  |  | $ | 3,494 |  | 66 | %

The R&D increase was primarily attributable to expenses related to the inclusion of Xicom
($2.7 million). The balance of increased R&D expense resulted from the Companys development of its new over-the-horizon troposcatter modem and enhancements to other satellite electronic products. As a proportion of sales, we expect R&D
expense to remain consistent with 2005 at approximately 9% (R&D as a proportion of sales in 2004 was also 9%).

Interest Expense:

Interest expense was approximately $241,000 and $252,000 for the years ended December 31, 2006 and 2005, respectively, as compared to $29,000 for the
year ended December 31, 2004. The decrease in interest expense in the current year was due to the payoff of a loan in the fourth quarter of 2006. Interest expense should decrease substantially during 2007 because the Company is not carrying any
debt. The Company is actively seeking acquisition opportunities and interest expense could increase substantially if the Company is successful and borrows money to finance an acquisition. Please see note 8  Financial Instrumentsin the
Consolidated Financial Statements for a complete discussion of the Companys current borrowing needs.

Interest and Other Income:

Other income increased to $1.4 million in the year ended December 31, 2006 from $665,000 in the year ended December 31, 2005 and from
$492,000 in the year ended December 31, 2004. Other income is comprised primarily of interest income, which increased as a result of higher daily cash balances and higher average interest rates during 2006 as compared to 2005 and 2004. We keep
our cash in money market accounts and short term AAA or AA rated investments maturing within seven to twenty-eight days. Although we expect to generate additional cash balances during the coming year and we further expect interest rates to remain at
or rise from current levels, new acquisitions, other business opportunities or an unexpected cash need could reduce our interest income. See Liquidity and Capital Resources below.

Income Taxes:

We recorded an income tax expense during the year ended December 31, 2006 of $6.2
million compared to an expense of $5.1 million for the year ended December 31, 2005. The Company also recorded an income tax benefit of $3.6 million in 2004.



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##### Table of Contents

The tax expense during 2005 includes a benefit of $317,000 due to the recognition of deferred tax assets resulting from previously earned and unused R&D
tax credits. The increase in tax expense, during 2006, resulted from the increase in profits generated by the Company and the impact of stock based compensation recorded pursuant to FAS 123(R) for which no tax benefit could be recorded. As of
December 31, 2006, the Company has total deferred tax assets of $4.0 million with a corresponding valuation allowance of $1.2 million.

During the year ended December 31, 2004, the Company reduced the valuation allowance related to the deferred tax assets by $7.3 million based on managements belief that it was more likely than not that such deferred tax assets
will be realized through the generation of future taxable income. Of this net reduction in the valuation allowance, approximately $7.0 million was recorded as a reduction of income tax expense, approximately $772,000 was recorded as an increase to
additional paid-in capital and approximately $465,000 was recorded as an increase in deferred tax assets. In addition to the $772,000 increase in additional paid-in capital for the release of the valuation allowance related to the tax benefits of
stock option exercises in prior years, additional paid-in capital was increased for the tax benefit of stock option exercises during the year ended December 31, 2004 in the amount of approximately $1.1 million for a total increase of
approximately $1.8 million.

For the year ended December 31, 2006, the Company reduced the valuation allowance and corresponding
deferred tax asset by approximately $1.3 million. This reduction was due to the expiration of a portion of the net operating loss carryforward, which was limited as to its utilization pursuant to IRC §382.

The valuation allowance applies to the deferred tax assets related to net operating loss carryforwards which management believes are limited as to
utilization under Internal Revenue Service Code Section 382.

Ultimate realization of any or all of the deferred tax assets is not
assured due to significant uncertainties associated with estimates of future taxable income during the carryforward periods and is subject to change depending on the tax laws in effect in the years in which the carryforwards are used. Management
will continue to evaluate the recoverability of the deferred tax assets and will adjust the valuation allowance recorded against the deferred tax assets accordingly.

Net Earnings:

Net earnings is the result of reducing gross profit by selling, general and
administrative expenses and research & development expenses, other income and expense (including interest), and income taxes. The following table summarizes our net earnings and the earnings available to each diluted share of common stock
for the periods indicated:

2006 vs. 2005



|                           |  |                                         |        |      |   |        |  |   |       |  |    |  
|-------------------------- |  | --------------------------------------- | ------ | ---- | - | ------ |  | - | ----- |  | -- | -
|                           |  | Years ended December 31, (in thousands) |       
|                           |  | 2006                                    |        | 2005 |   | Change |  | % |      
|Net earnings               |  | $                                       | 11,865 |      | $ | 10,686 |  | $ | 1,179 |  | 11 | %
|Earnings per diluted share |  | $                                       | 0.63   |      | $ | 0.60   |  | $ | 0.03  |  | 5  | %

Net earning and earnings per share (EPS), on a diluted basis, increased during 2006 as
a result of increased sales. Net earnings were adversely impacted by pre-tax equity compensation expense for the year of $2.4 million EPS was impacted by an increase in the diluted share count, of 1.1 million shares, resulting from the sale of
stock to employees through the employee stock purchase plan and the stock option plans. For the coming year, the Company believes that diluted earnings per share should increase at a rate equal to, if not somewhat higher than, the rate of growth in
sales. As described above, management believes that equity compensation expenses should decline while other expenses should remain constant as a percentage of sales. There can be no assurance, however, that either sales or earnings will increase in
the coming year.

2005 vs. 2004



|                           |  |                                         |        |      |   |        |  |    |       |   |  |     |  
|-------------------------- |  | --------------------------------------- | ------ | ---- | - | ------ |  | -- | ----- | - |  | --- | -
|                           |  | Years ended December 31, (in thousands) |       
|                           |  | 2005                                    |        | 2004 |   | Change |  |    | %     |  
|Net earnings               |  | $                                       | 10,686 |      | $ | 13,500 |  | ($ | 2,814 | ) |  | -21 | %
|Earnings per diluted share |  | $                                       | 0.60   |      | $ | 0.79   |  | ($ | 0.19  | ) |  | -24 | %



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EPS decreased in 2005 due to increased income tax expense compared to a one-time tax benefit the Company
received in 2004 (see Income Taxes above). Earnings before income taxes increased to $15.8 million during 2005 from $9.9 million in 2004. The increase was principally the result of increased sales and other factors described above.

Bookings and Backlog:

Bookings
consist of orders taken while backlog is the total of these orders not yet shipped at the end of the period. The Company charges cancellation fees for orders that cancel and the net difference between the backlog amount and the cancellation charge
is recorded as a negative booking. There is no guarantee that cancellation charges will ultimately be paid to the Company. The following table summarizes the year-over-year comparison of bookings (orders taken) and backlog (orders to be shipped in
future periods) for the periods presented below:

2006 vs. 2005



|               |  |                                         |         |      |   |         |  |    |        |   |  |     |  
|-------------- |  | --------------------------------------- | ------- | ---- | - | ------- |  | -- | ------ | - |  | --- | -
|               |  | Years ended December 31, (in thousands) |        
|               |  | 2006                                    |         | 2005 |   | Change  |  |    | %      |  
|Bookings       |  | $                                       | 127,284 |      | $ | 107,180 |  | $  | 20,104 |   |  | 19  | %
|Ending Backlog |  | $                                       | 25,321  |      | $ | 32,246  |  | ($ | 6,925  | ) |  | -21 | %

Bookings set a new record for Radyne Corporation during 2006. The inclusion of Xicom, amplifier
segment, accounted for the majority of the increase from 2005. The reduction in ending backlog was a result of the uneven nature of sales in our businesses. Illustrative of that fact are the robust bookings in the traditionally slow month of January
(2007) which resulted in a backlog, at month end, of $33.4 million. The Company believes that bookings for 2007 should reflect the 8% to 12% growth in sales discussed above. Managements forecast of sales growth in 2007 reflects the long
term historic trend in the industries the Company serves and is not assured.

2005 vs. 2004



|               |  |                                         |         |      |   |        |  |   |        |  |     |  
|-------------- |  | --------------------------------------- | ------- | ---- | - | ------ |  | - | ------ |  | --- | -
|               |  | Years ended December 31, (in thousands) |        
|               |  | 2005                                    |         | 2004 |   | Change |  | % |       
|Bookings       |  | $                                       | 107,180 |      | $ | 57,871 |  | $ | 49,309 |  | 85  | %
|Ending Backlog |  | $                                       | 32,246  |      | $ | 9,585  |  | $ | 22,661 |  | 236 | %

During 2005, bookings increased compared to 2004 as a result of the addition of new Xicom orders
($34.3 million) and growth in the Companys pre-acquisition satellite electronics and broadcast equipment segment ($15.6 million). Excluding Xicom, bookings increased 27% in the pre-acquisition satellite electronics and broadcast equipment
segment. Backlog at year end increased due to the same factors: the addition of Xicom operations ($20.4 million), and growth in the pre-acquisition segment - $2.6 million. As discussed above, the growth in the pre-acquisition segments bookings and
backlog resulted from increased sales to direct broadcast providers in the US and to providers of new landline and mobile telephony infrastructure in emerging telecommunications market in Asia.

Liquidity and Capital Resources

The
Company had cash and cash equivalents totaling $27.5 million at December 31, 2006, compared to $16.9 million at December 31, 2005, an increase of $10.6 million. The increase resulted primarily from cash provided by operating activities of
$7.2 million and cash provided by financing activities of $5.2 million. This was partially offset by the cash used in investing activities of $1.9 million. As a result of strong sales during the fourth quarter, working capital increased 51% to $62.3
million at December 31, 2006, from $41.2 million at December 31, 2005. The Company has already collected a large portion of the accounts receivable that were created during the quarter.

We maintain virtually all of our cash balances in the United States in US dollars. Continued cash from operations is expected to be primarily based on
continued profitability which cannot be assured. Further, our net cash position would likely decrease if we acquire another company.

Cash from
Operating Activities:

During 2006, net cash provided by operating activities was $7.2 million as compared to $12.8 million for 2005.
Net cash provided by operating activities for 2006 resulted primarily from $11.9 million of net earnings, depreciation and amortization of $3.4 million, stock compensation expense of $2.4 million, and an increase of $1.6 million for accrued expenses
and accounts



25



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##### Table of Contents

payable. These were partially offset by increases in accounts receivable of $7.9 million and inventory of $3.0 million. Cash was further reduced by a
decrease in customer advance payments of $1.3 million. Approximately $1.4 million of cash from operations was reclassified to cash from financing activities due to the Companies adoption of FSP 123(R)-3 in the 4thquarter of 2006. In prior interim periods during the year, these cash flows were accounted for according to the transition method described in
paragraph 81 of SFAS 123(R) and the guidance related to reporting cash flows in paragraph 68 of SFAS 123(R).

During 2005, net cash
provided by operating activities was $12.8 million as compared to $10.6 million for 2004. Net cash provided by operating activities for 2005 resulted primarily from $10.7 million of net earnings, deferred income taxes of $3.1 million,
depreciation and amortization of $2.4 million, and an increase of $2.0 million in accrued expenses. These were partially offset by increases in accounts receivable of $4.8 million, and a decrease in accounts payable of $2.3 million.
Cash was further reduced by a decrease in long-term obligations of $399,000.

During 2004, net cash provided by operating activities was
$10.6 million. Net cash provided by operating activities for 2004 resulted primarily from $13.5 million of net earnings, depreciation and amortization of $1.2 million, a tax benefit on stock option exercises of $1.8 million and an increase of $1.6
million in accrued expenses. These were partially offset by increases in deferred tax assets of $5.7 million and increases in asset accounts of $1.0 million (including accounts receivable, inventory and prepaid expenses and other current assets).
Cash was further reduced by a decrease in customer advance payments of $728,000 and a decrease in accounts payable $615,000.

As noted
above, we expect that cash from operations will be sufficient to meet operating needs including changes in working capital for the foreseeable future. There is no assurance that the business operation will generate sufficient cash to meet these
needs.

Cash Used In Investing Activities:

Investing activities included $1.9 million in net cash used in investing activities during 2006, which included $2.1 million in capital expenditures. During 2005, net cash used was $45.5 million which was the result of the Xicom acquisition
of $43.5 million and capital expenditures of $2.1 million. During 2004, net cash used was $674,000 which included $822,000 in capital expenditures. During 2007, we believe that we will continue to invest in our businesses through additional capital
expenditures at a rate similar to that of 2006. As part of our business strategy, we occasionally evaluate potential acquisitions of businesses, products and technologies. Accordingly, a portion of our available cash may be used at any time for the
acquisition of complementary products or businesses. Our ability to spend funds on capital equipment or acquisitions is conditioned on the overall health of our business and cannot be assured.

Cash From Financing Activities:

During 2006, net
cash provided by financing activities was $5.2 million. Cash provided by financing activities was a result of exercises of stock options and proceeds from sale of common stock to employees totaling $7.5 million and $2.5 million from tax benefit from
disqualifying dispositions and this was offset by the Companys repayment of a loan in the amount of $4.8 million during the year.

During 2005, net cash provided by financing activities was $10.3 million. This cash resulted primarily from net borrowings of $4.8 million, the exercise of redeemable warrants of $2.7 million, the issuance of common stock through the
exercise of employee stock options of $2.1 million and the sale of common stock to employees of $768,000.

During 2004, net cash used in
financing activities was $773,000. The Companys share repurchase plan used $2.8 million in cash. Cash generated by financing activities included $1.6 million from the issuance of common stock through the exercise of stock options and $460,000
from the sale of common stock to employees through the Employee Stock Purchase Plan.

The Company entered into a credit arrangement with a
bank, in 2005, for up to $15.0 million. Under this credit facility, we borrowed $5.0 million in the form of a term note with a three year maturity on May 2, 2005. The facility is secured by all of the Companys assets, including accounts
receivables, intangible, and fixed assets. These funds were used to provide working capital and to finance a portion of the acquisition of Xicom. The note was paid and there was no outstanding balance as of December 31, 2006. The credit
arrangement expires in May 2008 and the Company was in compliance with all covenants at December 31, 2006.

We believe that cash and cash
equivalents on hand and anticipated future cash receipts will be sufficient to meet our obligations as they become due for the next twelve months. As noted above, potential acquisitions or other operating conditions may require substantial capital
resources, which, in turn, may require us to seek additional debt or equity financing. There are no assurances that we will be able to consummate any of these transactions.



26



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Contractual Obligations and Commitments

We had the following contractual obligations and commitments outstanding as of December 31, 2006 (in thousands):



|                            |  |       |        |      |   |        |  |      |       |      |   |       |  |            |       |  |   |       |  |   |    
|--------------------------- |  | ----- | ------ | ---- | - | ------ |  | ---- | ----- | ---- | - | ----- |  | ---------- | ----- |  | - | ----- |  | - | ---
|                            |  | Total |        | 2007 |   | 2008   |  | 2009 |       | 2010 |   | 2011  |  | Thereafter
|Operating leases            |  | $     | 8,328  |      | $ | 2,476  |  | $    | 2,102 |      | $ | 1,290 |  | $          | 1,173 |  | $ | 977   |  | $ | 311
|Purchase commitments        |  |       | 24,211 |      |   | 14,955 |  |      | 4,244 |      |   | 1,237 |  |            |      |  |   | 3,774 |  |   |   
|Other long-term liabilities |  |       | 148    |      |   | 148    |  |      |      |      |   |      |  |            |      |  |   |      |  |   |   
|                            |  |       |        |      |   |        |  |      |       |      |   |       |  |            |       |  |   |       |  |   |    
|Total                       |  | $     | 32,687 |      | $ | 17,579 |  | $    | 6,346 |      | $ | 2,527 |  | $          | 1,173 |  | $ | 4,751 |  | $ | 311
|                            |  |       |        |      |   |        |  |      |       |      |   |       |  |            |       |  |   |       |  |   |    

Impact of Inflation

We do not believe that inflation has had a material impact on revenues or expenses during our last five fiscal periods. We do not expect that inflation will materially affect our business within the next year.

Recent Accounting Pronouncements



| |  |  | In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). The purpose of SFAS 157 is to define fair
value, establish a framework for measuring fair value and enhance disclosures about fair value measurements. The measurement and disclosure requirements are effective for the Company beginning in the first quarter of fiscal 2008. The Company is
currently evaluating whether SFAS No. 157 will result in a change to its fair value measurements.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements (SAB 108), which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a
materiality assessment. SAB 108 is effective for the first fiscal year ending after November 15, 2006. SAB 108 did not have a significant impact to the Company.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In June 2006, the FASB issued FASB Interpretation No. (FIN) 48, Accounting for Uncertainty in Income Taxes, which clarifies the accounting for
uncertainty in income taxes recognized in financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that we recognize in our consolidated financial statements only those tax positions that are more-likely-than-not of being
sustained as of the adoption date, based on the technical merits of the position. The provisions of FIN 48 also provide guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
Any necessary adjustment would generally be recorded directly to retained earnings in the period of adoption and reported as a change in accounting principle. This Interpretation is effective as of the beginning of the first fiscal year beginning
after December 15, 2006. The term more-likely-than-not means a likelihood of more than 50 percent. This recognition threshold is below the recognition threshold we currently utilize in assessing our current income tax positions
and, hence, may result in the recognition of additional deferred tax assets or reduction in income taxes payable. The Company adopted Interpretation No. 48 on January 1, 2007 and is currently assessing the potential impact on our financial
statements. Upon completion of our analysis of the impact of adopting FIN 48, during the first quarter of 2007, it is possible that we may reduce our liability for income taxes or increase the benefit recorded for income tax attribute carryforwards
with a corresponding increase in retained earnings.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Disclosure Concerning Forward-Looking Statements

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, with respect to the financial condition, results of operations and business of the Company. You can find many of these statements by looking for words like believes, expects,
anticipates, should, will, may, estimates or similar expressions in this Annual Report or in documents incorporated by reference in this Annual Report.

Although management believes that the plans and expectations reflected in or suggested by these forward-looking statements are reasonable, management cannot assure you
that we will achieve or realize these plans and expectations. Because



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forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by them. Management
cautions you not to place undue reliance on these statements, which speak only as of the date of this Annual Report.

The Company does not undertake any
obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.



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

We are exposed to market risk on our financial
instruments from changes in interest rates. As of December 31, 2006, a change in interest rates of 10% over a years period would not have a material impact on our interest earnings. During the fourth quarter of 2006 the Company paid off a
loan that was entered into on May 2, 2005 as described above in Liquidity and Capital Resources and note 8  Financial Instrumentsin the Consolidated Financial Statements.



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

Our consolidated financial statements as of December 31, 2006
and 2005 and for each of the years in the three-year period ended December 31, 2006, together with related notes and the report of KPMG LLP, independent registered public accounting firm, are on the following pages. Other required financial
information is more fully described in Part IV, Item 15 below.



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Radyne Corporation:

We have audited the accompanying consolidated balance sheets of Radyne Corporation and subsidiaries (the Company) as of December 31, 2006 and 2005, and the related
consolidated statements of operations, stockholders equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

We also have audited, in
accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Companys internal control over financial reporting as of December 31, 2006, based on criteria established inInternal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 1, 2007 expressed an unqualified opinion on managements assessment of, and the effective
operation of, internal control over financial reporting.

As discussed in Note 3 to the consolidated financial statements, effective January 1,
2006, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 123R, Share-based Payment.

/s/ KPMG
LLP

Phoenix, Arizona

March 1, 2007



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##### Table of Contents

Radyne Corporation

Consolidated Balance Sheets

December 31, 2006 and 2005

(in thousands, except share data)



|                                                                                                                                           |  |              |         |      |   |        
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | ------- | ---- | - | -------
|                                                                                                                                           |  | December 31,
|                                                                                                                                           |  | 2006         |         | 2005
|Assets                                                                                                                                     |  |              |         |      |   |        
|Current assets:                                                                                                                            |  |              |         |      |   |        
|Cash and cash equivalents                                                                                                                  |  | $            | 27,540  |      | $ | 16,928 
|Accounts receivabletrade, net of allowance for doubtful accounts of $266 and $804, respectively                                           |  |              | 27,828  |      |   | 20,337 
|Inventories                                                                                                                                |  |              | 21,106  |      |   | 18,057 
|Deferred tax assets                                                                                                                        |  |              | 2,593   |      |   | 3,010  
|Prepaid expenses and other assets                                                                                                          |  |              | 1,196   |      |   | 864    
|                                                                                                                                           |  |              |         |      |   |        
|Total current assets                                                                                                                       |  |              | 80,263  |      |   | 59,196 
|                                                                                                                                           |  |             
|Goodwill                                                                                                                                   |  |              | 29,950  |      |   | 30,333 
|Intangible assets                                                                                                                          |  |              | 5,567   |      |   | 6,706  
|Deferred tax assets, net                                                                                                                   |  |              | 190     |      |   |       
|Property and equipment, net                                                                                                                |  |              | 3,822   |      |   | 4,098  
|Other assets                                                                                                                               |  |              | 212     |      |   | 295    
|                                                                                                                                           |  |              |         |      |   |        
|Total Assets                                                                                                                               |  | $            | 120,004 |      | $ | 100,628
|                                                                                                                                           |  |              |         |      |   |        
|                                                                                                                                           |  |             
|Liabilities and Stockholders Equity                                                                                                       |  |              |         |      |   |        
|Current liabilities:                                                                                                                       |  |              |         |      |   |        
|Accounts payable                                                                                                                           |  | $            | 5,959   |      | $ | 5,054  
|Accrued expenses                                                                                                                           |  |              | 9,994   |      |   | 9,045  
|Customer advance payments                                                                                                                  |  |              | 1,057   |      |   | 2,319  
|Current portion of long-term debt                                                                                                          |  |              |        |      |   | 1,000  
|Income taxes payable                                                                                                                       |  |              | 981     |      |   | 609    
|                                                                                                                                           |  |              |         |      |   |        
|Total current liabilities                                                                                                                  |  |              | 17,991  |      |   | 18,027 
|                                                                                                                                           |  |             
|Long-term debt, less current portion                                                                                                       |  |              |        |      |   | 3,750  
|Deferred tax liability                                                                                                                     |  |              |        |      |   | 752    
|Deferred rent                                                                                                                              |  |              | 148     |      |   | 413    
|Accrued stock option compensation                                                                                                          |  |              |        |      |   | 46     
|                                                                                                                                           |  |              |         |      |   |        
|Total liabilities                                                                                                                          |  |              | 18,139  |      |   | 22,988 
|                                                                                                                                           |  |              |         |      |   |        
|Commitments and contingencies (notes 9 and 17)                                                                                             |  |              |         |      |   |        
|Stockholders equity:                                                                                                                      |  |              |         |      |   |        
|Common stock; $.001 par valueauthorized, 50,000,000 shares; issued and outstanding, 18,351,576 shares and 17,334,467 shares,
respectively |  |              | 18      |      |   | 17     
|Additional paid-in capital                                                                                                                 |  |              | 75,500  |      |   | 63,171 
|Retained earnings                                                                                                                          |  |              | 26,315  |      |   | 14,450 
|Other comprehensive income                                                                                                                 |  |              | 32      |      |   | 2      
|                                                                                                                                           |  |              |         |      |   |        
|Total stockholders equity                                                                                                                 |  |              | 101,865 |      |   | 77,640 
|                                                                                                                                           |  |              |         |      |   |        
|Total Liabilities and Stockholders Equity                                                                                                 |  | $            | 120,004 |      | $ | 100,628
|                                                                                                                                           |  |              |         |      |   |        

See accompanying notes to consolidated financial statements.



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Radyne Corporation

Consolidated Statements of Operations

For the Years Ended December 31, 2006, 2005 and 2004

(in thousands, except per share data)



|                                                      |  |                         |         |   |      |   |         |      |  |   |        |  
|----------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                      |  | Year ended December 31, |        
|                                                      |  | 2006                    |         |   | 2005 |   |         | 2004 | 
|Net sales                                             |  | $                       | 134,209 |   |      | $ | 103,263 |      |  | $ | 56,578 |  
|Cost of sales                                         |  |                         | 77,738  |   |      |   | 57,251  |      |  |   | 26,435 |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |        |  
|Gross profit                                          |  |                         | 56,471  |   |      |   | 46,012  |      |  |   | 30,143 |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |        |  
|Operating expenses:                                   |  |                         |         |   |      |   |         |      |  |   |        |  
|Selling, general and administrative                   |  |                         | 28,627  |   |      |   | 21,777  |      |  |   | 15,420 |  
|Research and development                              |  |                         | 10,947  |   |      |   | 8,824   |      |  |   | 5,330  |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |        |  
|Total operating expenses                              |  |                         | 39,574  |   |      |   | 30,601  |      |  |   | 20,750 |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |        |  
|Earnings from operations                              |  |                         | 16,897  |   |      |   | 15,411  |      |  |   | 9,393  |  
|                                                      |  |                         |        
|Other (income) expense:                               |  |                         |         |   |      |   |         |      |  |   |        |  
|Interest expense                                      |  |                         | 241     |   |      |   | 252     |      |  |   | 29     |  
|Interest and other income                             |  |                         | (1,359  | ) |      |   | (665    | )    |  |   | (492   | )
|                                                      |  |                         |         |   |      |   |         |      |  |   |        |  
|Earnings before income taxes                          |  |                         | 18,015  |   |      |   | 15,824  |      |  |   | 9,856  |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |        |  
|Income tax expense (benefit)                          |  |                         | 6,150   |   |      |   | 5,138   |      |  |   | (3,644 | )
|                                                      |  |                         |         |   |      |   |         |      |  |   |        |  
|Net earnings                                          |  | $                       | 11,865  |   |      | $ | 10,686  |      |  | $ | 13,500 |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |        |  
|Earnings per share:                                   |  |                         |         |   |      |   |         |      |  |   |        |  
|Basic                                                 |  | $                       | 0.66    |   |      | $ | 0.63    |      |  | $ | 0.83   |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |        |  
|Diluted                                               |  | $                       | 0.63    |   |      | $ | 0.60    |      |  | $ | 0.79   |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |        |  
|Weighted average number of common shares outstanding: |  |                         |         |   |      |   |         |      |  |   |        |  
|Basic                                                 |  |                         | 18,026  |   |      |   | 16,838  |      |  |   | 16,357 |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |        |  
|Diluted                                               |  |                         | 18,845  |   |      |   | 17,700  |      |  |   | 17,136 |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |        |  

See accompanying notes to consolidated financial statements.



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Radyne Corporation

Consolidated Statements of Stockholders Equity and Comprehensive Income

Years ended
December 31, 2006, 2005 and 2004

(in thousands)



|                                                              |  |              |   |                          |        |    |                                       |   |        |                                      |  |       |        |   |  |   |    |  |   |         |  
|------------------------------------------------------------- |  | ------------ | - | ------------------------ | ------ | -- | ------------------------------------- | - | ------ | ------------------------------------ |  | ----- | ------ | - |  | - | -- |  | - | ------- | -
|                                                              |  | Common Stock |   | AdditionalPaid-incapital |        |    | Retained earnings(accumulateddeficit) |   |        | Accumulated othercomprehensiveincome |  | Total |       
|                                                              |  | Shares       |   |                          | Amount |    |                                       |   |       
|Balance, December 31, 2003                                    |  | 16,131       |   |                          |        | 16 |                                       |   | 53,102 |                                      |  |       | (9,500 | ) |  |   |   |  |   | 43,618  |  
|Exercise of stock options                                     |  | 435          |   |                          |        |   |                                       |   | 1,572  |                                      |  |       |       |   |  |   |   |  |   | 1,572   |  
|Issuance of common stock through employee stock purchase plan |  | 70           |   |                          |        |   |                                       |   | 460    |                                      |  |       |       |   |  |   |   |  |   | 460     |  
|Common stock repurchased and retired                          |  | (403         | ) |                          |        |   |                                       |   | (2,555 | )                                    |  |       | (236   | ) |  |   |   |  |   | (2,791  | )
|Tax benefit from stock option exercises                       |  |             |   |                          |        |   |                                       |   | 1,835  |                                      |  |       |       |   |  |   |   |  |   | 1,835   |  
|Comprehensive income:                                         |  |              |   |                          |        |    |                                       |   |        |                                      |  |       |        |   |  |   |    |  |   |         |  
|Net earnings                                                  |  |             |   |                          |        |   |                                       |   |       |                                      |  |       | 13,500 |   |  |   |   |  |   | 13,500  |  
|                                                              |  |              |   |                          |        |    |                                       |   |        |                                      |  |       |        |   |  |   |    |  |   |         |  
|Comprehensive income                                          |  |              |   |                          |        |    |                                       |   |        |                                      |  |       |        |   |  |   |    |  |   | 13,500  |  
|                                                              |  |              |   |                          |        |    |                                       |   |        |                                      |  |       |        |   |  |   |    |  |   |         |  
|Balance, December 31, 2004                                    |  | 16,233       |   |                          |        | 16 |                                       |   | 54,414 |                                      |  |       | 3,764  |   |  |   |   |  |   | 58,194  |  
|Exercise of stock options                                     |  | 462          |   |                          |        | 1  |                                       |   | 2,053  |                                      |  |       |       |   |  |   |   |  |   | 2,054   |  
|Exercise of stock warrants                                    |  | 311          |   |                          |        |   |                                       |   | 2,717  |                                      |  |       |       |   |  |   |   |  |   | 2,717   |  
|Issuance of common stock through employee stock purchase plan |  | 109          |   |                          |        |    |                                       |   | 768    |                                      |  |       |       |   |  |   |   |  |   | 768     |  
|Shares issuedacquisition                                     |  | 220          |   |                          |        |   |                                       |   | 2,018  |                                      |  |       |       |   |  |   |   |  |   | 2,018   |  
|Acceleration of stock options                                 |  |             |   |                          |        |   |                                       |   | 365    |                                      |  |       |       |   |  |   |   |  |   | 365     |  
|Tax benefit from stock option exercises                       |  |              |   |                          |        |    |                                       |   | 836    |                                      |  |       |       |   |  |   |   |  |   | 836     |  
|Comprehensive income:                                         |  |              |   |                          |        |    |                                       |   |        |                                      |  |       |        |   |  |   |    |  |   |         |  
|Foreign translation adjustment                                |  |             |   |                          |        |   |                                       |   |       |                                      |  |       |       |   |  |   | 2  |  |   | 2       |  
|Net earnings                                                  |  |             |   |                          |        |   |                                       |   |       |                                      |  |       | 10,686 |   |  |   |   |  |   | 10,686  |  
|                                                              |  |              |   |                          |        |    |                                       |   |        |                                      |  |       |        |   |  |   |    |  |   |         |  
|Comprehensive income                                          |  |              |   |                          |        |    |                                       |   |        |                                      |  |       |        |   |  |   |    |  |   | 10,688  |  
|Balance, December 31, 2005                                    |  | 17,335       |   |                          | $      | 17 |                                       | $ | 63,171 |                                      |  | $     | 14,450 |   |  | $ | 2  |  | $ | 77,640  |  
|                                                              |  |              |   |                          |        |    |                                       |   |        |                                      |  |       |        |   |  |   |    |  |   |         |  
|Exercise of stock options                                     |  | 870          |   |                          |        | 1  |                                       |   | 6,265  |                                      |  |       |       |   |  |   |   |  |   | 6,266   |  
|Issuance of common stock through employee stock purchase plan |  | 127          |   |                          |        |   |                                       |   | 1,190  |                                      |  |       |       |   |  |   |   |  |   | 1,190   |  
|Stock compensationstock awards                               |  | 20           |   |                          |        |   |                                       |   | 259    |                                      |  |       |       |   |  |   |   |  |   | 259     |  
|Stock compensationstock options granted                      |  |             |   |                          |        |   |                                       |   | 1,699  |                                      |  |       |       |   |  |   |   |  |   | 1,699   |  
|Stock compensationESPP                                       |  |             |   |                          |        |   |                                       |   | 429    |                                      |  |       |       |   |  |   |   |  |   | 429     |  
|Tax benefit from stock option exercises                       |  |             |   |                          |        |   |                                       |   | 2,487  |                                      |  |       |       |   |  |   |   |  |   | 2,487   |  
|Comprehensive income:                                         |  |              |   |                          |        |    |                                       |   |        |                                      |  |       |        |   |  |   |    |  |   |         |  
|Foreign translation adjustment                                |  |             |   |                          |        |   |                                       |   |       |                                      |  |       |       |   |  |   | 30 |  |   | 30      |  
|Net earnings                                                  |  |             |   |                          |        |   |                                       |   |       |                                      |  |       | 11,865 |   |  |   |   |  |   | 11,865  |  
|                                                              |  |              |   |                          |        |    |                                       |   |        |                                      |  |       |        |   |  |   |    |  |   |         |  
|Comprehensive income                                          |  |             |   |                          |        |   |                                       |   |       |                                      |  |       |       |   |  |   |   |  |   | 11,895  |  
|                                                              |  |              |   |                          |        |    |                                       |   |        |                                      |  |       |        |   |  |   |    |  |   |         |  
|Balance, December 31, 2006                                    |  | 18,352       |   |                          |        | 18 |                                       |   | 75,500 |                                      |  |       | 26,315 |   |  |   | 32 |  |   | 101,865 |  
|                                                              |  |              |   |                          |        |    |                                       |   |        |                                      |  |       |        |   |  |   |    |  |   |         |  

See accompanying notes to consolidated financial statements.



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Radyne Corporation

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2006, 2005 and 2004

(in thousands)



|                                                                                                            |  |                          |        |   |      |   |         |      |  |   |        |  
|----------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                                                            |  | Years ended December 31, |       
|                                                                                                            |  | 2006                     |        |   | 2005 |   |         | 2004 | 
|Cash flows from operating activities:                                                                       |  |                          |        |   |      |   |         |      |  |   |        |  
|Net earnings                                                                                                |  | $                        | 11,865 |   |      | $ | 10,686  |      |  | $ | 13,500 |  
|Adjustments to reconcile net earnings to net cash provided by operating activities:                         |  |                          |        |   |      |   |         |      |  |   |        |  
|Asset impairment charge                                                                                     |  |                          |       |   |      |   |        |      |  |   | 135    |  
|Provision for bad debt                                                                                      |  |                          | 374    |   |      |   | (331    | )    |  |   | 318    |  
|Deferred income taxes                                                                                       |  |                          | 187    |   |      |   | 3,070   |      |  |   | (5,663 | )
|Gain on disposal of assets                                                                                  |  |                          | (264   | ) |      |   | (53     | )    |  |   | (23    | )
|Depreciation and amortization                                                                               |  |                          | 3,441  |   |      |   | 2,378   |      |  |   | 1,246  |  
|Tax benefit from stock plan dispositions                                                                    |  |                          |       |   |      |   | 836     |      |  |   | 1,835  |  
|Stock compensation expense                                                                                  |  |                          | 2,387  |   |      |   | 365     |      |  |   |       |  
|Increase (decrease) in cash resulting from changes in:                                                      |  |                          |        |   |      |   |         |      |  |   |        |  
|Accounts receivable                                                                                         |  |                          | (7,865 | ) |      |   | (4,787  | )    |  |   | (266   | )
|Inventories                                                                                                 |  |                          | (3,049 | ) |      |   | 542     |      |  |   | (366   | )
|Prepaid expenses and other current assets                                                                   |  |                          | (332   | ) |      |   | 324     |      |  |   | (364   | )
|Other assets                                                                                                |  |                          | 66     |   |      |   | (44     | )    |  |   | 20     |  
|Accounts payable                                                                                            |  |                          | 682    |   |      |   | (2,262  | )    |  |   | (615   | )
|Accrued expenses                                                                                            |  |                          | 949    |   |      |   | 1,971   |      |  |   | 1,571  |  
|Income taxes payable                                                                                        |  |                          | 372    |   |      |   | 286     |      |  |   | 57     |  
|Customer advance payments                                                                                   |  |                          | (1,262 | ) |      |   | 347     |      |  |   | (728   | )
|Long-term obligations                                                                                       |  |                          | (265   | ) |      |   | (399    | )    |  |   | 19     |  
|Accrued stock option compensation                                                                           |  |                          | (46    | ) |      |   | (100    | )    |  |   | (59    | )
|                                                                                                            |  |                          |        |   |      |   |         |      |  |   |        |  
|Net cash provided by operating activities                                                                   |  |                          | 7,240  |   |      |   | 12,829  |      |  |   | 10,617 |  
|                                                                                                            |  |                          |        |   |      |   |         |      |  |   |        |  
|Cash flows from investing activities:                                                                       |  |                          |        |   |      |   |         |      |  |   |        |  
|Acquisition, net of cash                                                                                    |  |                          | (104   | ) |      |   | (43,538 | )    |  |   |       |  
|Capital expenditures                                                                                        |  |                          | (2,134 | ) |      |   | (2,053  | )    |  |   | (822   | )
|Proceeds from sales of property and equipment                                                               |  |                          | 388    |   |      |   | 104     |      |  |   | 148    |  
|                                                                                                            |  |                          |        |   |      |   |         |      |  |   |        |  
|Net cash used in investing activities                                                                       |  |                          | (1,850 | ) |      |   | (45,487 | )    |  |   | (674   | )
|                                                                                                            |  |                          |        |   |      |   |         |      |  |   |        |  
|Cash flows from financing activities:                                                                       |  |                          |        |   |      |   |         |      |  |   |        |  
|Borrowing from notes payable                                                                                |  |                          |       |   |      |   | 5,000   |      |  |   |       |  
|Payments under notes payable                                                                                |  |                          | (4,750 | ) |      |   | (250    | )    |  |   |       |  
|Repurchase of common stock                                                                                  |  |                          |       |   |      |   |        |      |  |   | (2,791 | )
|Net proceeds from sale of common stock to employees                                                         |  |                          | 1,190  |   |      |   | 768     |      |  |   | 460    |  
|Exercise of stock options                                                                                   |  |                          | 6,265  |   |      |   | 2,054   |      |  |   | 1,572  |  
|Exercise of redeemable warrants                                                                             |  |                          |       |   |      |   | 2,717   |      |  |   |       |  
|Tax benefit from stock plan dispositions                                                                    |  |                          | 2,487  |   |      |   |        |      |  |   |       |  
|Principal payments on capital lease obligations                                                             |  |                          |       |   |      |   | (5      | )    |  |   | (14    | )
|                                                                                                            |  |                          |        |   |      |   |         |      |  |   |        |  
|Net cash (used in) provided by financing activities                                                         |  |                          | 5,192  |   |      |   | 10,284  |      |  |   | (773   | )
|                                                                                                            |  |                          |        |   |      |   |         |      |  |   |        |  
|Net (decrease) increase in cash and cash equivalents                                                        |  |                          | 10,582 |   |      |   | (22,374 | )    |  |   | 9,170  |  
|Effects of exchange rate changes on cash and cash equivalents                                               |  |                          | 30     |   |      |   | 2       |      |  |   |       |  
|Cash and cash equivalents, beginning of year                                                                |  |                          | 16,928 |   |      |   | 39,300  |      |  |   | 30,130 |  
|                                                                                                            |  |                          |        |   |      |   |         |      |  |   |        |  
|Cash and cash equivalents, end of year                                                                      |  | $                        | 27,540 |   |      | $ | 16,928  |      |  | $ | 39,300 |  
|                                                                                                            |  |                          |        |   |      |   |         |      |  |   |        |  
|Supplemental disclosures of cash flow information:                                                          |  |                          |        |   |      |   |         |      |  |   |        |  
|Cash paid for interest                                                                                      |  | $                        | 275    |   |      | $ | 176     |      |  | $ | 29     |  
|                                                                                                            |  |                          |        |   |      |   |         |      |  |   |        |  
|Cash paid for taxes                                                                                         |  | $                        | 3,104  |   |      | $ | 623     |      |  | $ | 125    |  
|                                                                                                            |  |                          |        |   |      |   |         |      |  |   |        |  
|Non-cash investing activities:                                                                              |  |                          |        |   |      |   |         |      |  |   |        |  
|Issuance of 219,709 shares of common stock in acquisition                                                   |  | $                        |       |   |      | $ | 2,018   |      |  | $ |       |  
|                                                                                                            |  |                          |        |   |      |   |         |      |  |   |        |  
|Adjustments for Xicom acquisition accounting, primarily for tax credits identified during allocation period |  | $                        | 488    |   |      | $ |        |      |  | $ |       |  
|                                                                                                            |  |                          |        |   |      |   |         |      |  |   |        |  

See accompanying notes to consolidated financial statements.



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Radyne Corporation

Notes to the Consolidated Financial Statements

For the year ended December 31, 2006, 2005 and
2004

1) Organization and Nature of Business

Radyne Corporation (Company) was formed in 1980 as a corporation under the laws of the state of New York. In 1995, a new management team moved the Company to Arizona. The Company reincorporated in
Delaware in July 2000. The Company completed the following acquisitions of complementary business lines; ComStream Corp of San Diego, CA in 1998, Armer Communications of Chandler, AZ in 2000, the assets of Tiernan Communications of San Diego, CA in
2001 and in May of 2005 Xicom Technology, Inc. (Xicom) of Santa Clara, CA.

The Company designs, manufactures, sells,
integrates and installs products, systems and software used for the transmission and reception of data and video over satellite, microwave and cable communication networks. Our products are used in applications for telephone (land line and mobile),
data, video and audio broadcast communications, private and corporate data networks, Internet applications, and digital television for cable and network broadcast. The Company, through its Tiernan subsidiary, is a supplier of HDTV and SDTV encoding
and transmission equipment. The Xicom subsidiary is a producer of high power amplifiers for communications applications. The Company is headquartered in Phoenix, Arizona, has sales and manufacturing facilities in Phoenix, Arizona, San Diego and
Santa Clara, California and sales or service centers in: Boca Raton, Florida; Singapore; China; Indonesia; and the United Kingdom.

2) Summary of
Significant Accounting Policies

a) Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect
the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions based upon historical experience and various other factors and circumstances. The Company believes
that its estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

b) Principles of Consolidation

The consolidated financial statements include
the accounts of the Company and its subsidiaries. The consolidated statements of operations and cash flows include the results of operations of Xicom from May 27, 2005, the date of the acquisition, through December 31, 2006. Significant
intercompany accounts and transactions have been eliminated in the consolidation.

c) Cash Equivalents

The Company considers all money market accounts and short term AAA or AA investments with original maturities of 90 days or less to be
cash equivalents.

d) Accounts Receivable

Accounts receivable consist of trade receivables from customers. The Company maintains an allowance for doubtful accounts for estimated losses resulting
from the inability of the Companys customers to make required payments. The allowance is assessed on a regular basis by management and is based upon managements periodic review of the collectibility of the receivables with respect to
historical experience. If the financial condition of the Companys customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

e) Revenue Recognition

The Company recognizes revenue when products have been shipped to the customer, an agreement with the customer has been executed, transfer of title and acceptance has occurred, pricing is fixed and collectibility is probable. Revenue from
services is recognized when the related services have been performed. We consider products and services as separate



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units of accounting under EITF 00-21, Revenue Arrangements with Multiple Deliverables. Revenue is allocated to the separate units of accounting based
on their relative fair values. Milestone payments or other advance payments received prior to the delivery of products or services are recorded as a liability under Customer Advanced Payments until revenue is recognized.

f) Inventories

Inventories are valued at standard costs which approximates lower of cost or market using the first-in, first-out (FIFO) method. The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to
the difference between the cost of inventory and the estimated market value based on assumptions about future demand and market conditions. If market conditions were to improve, the Company would not reverse previously recorded downward adjustments.

g) Property and Equipment

Property and equipment are stated at cost. Equipment held under capital leases is stated at the present value of future minimum lease payments. Expenditures for repairs and maintenance are charged to operations as
incurred, and improvements, which extend the useful lives of the assets, are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives as follows: machinery and equipment, three to seven years; furniture
and fixtures, two to seven years; demonstration units, two to three years and computers and software, three to five years. Equipment held under capital leases and leasehold improvements are amortized on a straight-line basis over the shorter of the
lease term or estimated useful lives of the assets.

h) Intangible Assets and Impairment of Long-Lived Assets

Goodwill represents the excess cost of a business acquisition over the fair value of the net assets acquired. In accordance with the
Financial Accounting Standards Boards Statement of Financial Accounting Standards (SFAS 142) No. 142, Goodwill and Other Intangible Assets, goodwill is not amortized. The Company at least annually reviews goodwill,
considering factors such as projected cash flows, revenue and earnings multiples, to determine whether the carrying value of the goodwill is impaired. If the goodwill is deemed to be impaired, the difference between the carrying amount reflected in
the financial statements and the estimated fair value is recognized as an expense in the period in which the impairment occurs in accordance with Statement of Financial Accounting Standards No. 144, Accounting for Impairment or Disposal of
Long-Lived Assets(SFAS 144).

The Company assesses the recoverability of the carrying value of its other long-lived assets,
including identifiable intangible assets with finite useful lives, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable in accordance with SFAS 142. The Company evaluates the
recoverability of such assets based upon the expectations of undiscounted cash flows from such assets. If the sum of the expected future undiscounted cash flows were less than the carrying amount of the asset, the difference would be expensed.

i) Warranty Costs

The Company provides limited warranties on certain of its products and systems for periods generally not exceeding two years. Estimated warranty costs for potential product liability and warranty claims based on the
Companys claim experience are accrued as cost of sales at the time revenue is recognized. While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its vendors,
the Companys warranty liability is affected by product failure rates and material usage and service delivery costs incurred in correcting product failures. Should actual product failure rates, material usage or service delivery costs differ
from the Companys estimates, revisions to the estimated warranty liability would be required. The following table summarizes the activity related to our product warranty liability for 2006 and 2005.



|                               |  |                        |        |   |      |   |        |  
|------------------------------ |  | ---------------------- | ------ | - | ---- | - | ------ | -
|                               |  | Year ended December 31 |       
|(in thousands)                 |  | 2006                   |        |   | 2005 |  
|Balance at beginning of period |  | $                      | 2,101  |   |      | $ | 1,913  |  
|Provision                      |  |                        | 3,572  |   |      |   | 2,010  |  
|Payments                       |  |                        | (3,147 | ) |      |   | (1,822 | )
|                               |  |                        |        |   |      |   |        |  
|Balance at end of Period       |  | $                      | 2,525  |   |      | $ | 2,101  |  
|                               |  |                        |        |   |      |   |        |  



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j) Research and Development

The cost of research and development is charged to expense as incurred.

k) Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future consequences attributed to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

The Company evaluates the recoverability of the deferred tax
assets and records a valuation allowance to reduce its deferred tax assets to an amount for which realization is more likely than not. Should we determine that we are not able to realize all or part of our deferred tax assets in the future, a
valuation allowance is recorded against the deferred tax assets with a corresponding charge to income in the period such determination is made. Likewise, should we determine that we would be able to realize deferred tax assets in the future in
excess of our net recorded amount, an adjustment to the valuation allowance for deferred tax assets would result in an income tax benefit in the period such determination was made.

l) Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, are principally accounts receivable. The Company maintains ongoing credit evaluations of its customers and generally does not require collateral.

The Company maintains allowances for doubtful accounts for the estimated losses resulting from the inability of its customers to make
required payments and such losses have not exceeded managements expectations. If the financial condition of the Companys customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances
may be required.

Periodically during the year, the Company maintains cash in financial institutions in excess of the amounts insured by the
federal government.

m) Net Earnings Per Share

Basic earnings per share is computed by dividing earnings available to common stockholders by the weighted-average number of shares outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or contracts to issue common stock were exercised or converted to stock or resulted in the issuance of stock that then shared in the earnings of the Company.

n) Fair Value of Financial Instruments

The Companys financial instruments include cash equivalents, accounts receivable, accounts payable and long term debt.

The
fair value of cash equivalents, accounts receivable and accounts payable approximates the carrying value due to the short-term nature of these instruments.

The fair value of the long-term debt was not materially different than the carrying value, as the variable rate debt approximated rates currently available to the Company. The accounting for the interest rate swap is
immaterial to the consolidated financial statements and is not expected to materially affect the results of operations in any single period.

o) Share-Based Compensation

Effective January 1, 2006, the Company began accounting for share-based compensation under
the provision of Statement of Financial Accounting Standards (SFAS 123 (R)) No. 123(R), Share-Based Payment, which requires the recognition of the fair value of share-based compensation. Under the fair value recognition
provisions of SFAS 123(R) compensation is estimated at the grant date based on the fair value of the awards expected to vest and recognized as expense ratably over the requisite service period of the award. The Company has used the Black-Scholes
valuation model to estimate fair value of share-based awards, which requires various assumptions including estimating stock price volatility, forfeiture rates and expected life. For detail on the accounting effect of share-based compensation see
note 3  Share-Based Compensation.



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On November 10, 2005, the FASB issued FASB Staff Position No. FAS 123(R)-3 Transition Election
Related to Accounting for Tax Effects of Share-Based Payment Awards (FSP 123(R)-3). We adopted the alternative transition method provided in the FASB Staff Position for calculating the tax effects of stock-based compensation pursuant to SFAS
123(R) in the fourth quarter of fiscal 2006. The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of employee stock-based
compensation, and to determine the subsequent impact on the APIC pool and Consolidated Statements of Cash Flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of SFAS 123(R). The adoption did not
have a material impact on our results of operations and financial condition.

p) Segment Reporting

The Company has utilized the management approach as defined by Statement of Financial Accounting Standards No. 131 Disclosures about Segments of
an Enterprise and Related Information(SFAS 131) to determine if the Company has reportable operating segments. Based on this evaluation, after the acquisition of Xicom, the Company organized into two operating segments: 1) satellite
electronics and broadcast equipment, which includes satellite, microwave, television, and cable communications represented by the Radyne and Tiernan brand products and 2) amplifiers, which represent Xicom brand products . Each segment is organized
and managed separately to make key decisions such as sales/marketing and product development. Ultimately, the chief operating decision maker evaluates and makes decisions based on the financial information available about these two segments. The
chief operating decision maker for the Company is the CEO.

q) Foreign Currency Translation

Assets and liabilities are translated to U.S. dollars at the reporting period exchange rate, and the resulting gains and losses arising from the
translation of net assets are recorded as other comprehensive income in equity on the Consolidated Balance Sheets. Elements of the consolidated statements of operations are translated at average exchange rates in effect during the period and foreign
currency transaction gains and losses are included in the Consolidated Statements of Operations. Xicom Technology Europe, Ltd (XTEL), a Xicom subsidiary, is located in the United Kingdom and uses British pounds as its functional
currency.

r) Lease Obligations

The Company recognizes lease obligations with fixed escalations of rental payments on a straight-line basis in accordance with SFAS No. 13, Accounting for Leases. Accordingly, the total amount of base rentals over the term of
the Companys leases is charged to expense on a straight-line method, with the amount of rental expense in excess of lease payments recorded as a deferred rent liability.

3) Share-Based Compensation

On January 1, 2006, the Company adopted Statement of
Financial Accounting Standard No. 123 (revised 2004) (SFAS 123(R)), Share-Based Payment, and SEC Staff Accounting Bulletin No. 107 (SAB 107), Share-Based Payment, requiring the measurement and recognition of all
share-based compensation under the fair value method. The Company implemented SFAS 123(R) using the modified prospective transition method, which does not result in the restatement of previously issued financial statements. The Company elected to
use the Alternative Method of calculating its APIC Pool in accordance with FSP 123(R)3 during the fourth quarter of 2006.

Prior
to Adoption of SFAS 123 (R)

For those periods prior to December 31, 2005, the Company accounted for stock option grants in
accordance with Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and related interpretations for fiscal 2005 and prior years, and, accordingly, recognized no compensation expense for the stock
option grants. In December 2005, the Company accelerated the vesting of all unvested stock options and recorded a charge of



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$365,000, in accordance with APB 25, related to the future expected forfeiture rate on the accelerated options. The Company recognized expenses of $365,000,
which were reflected in the various categories on the Consolidated Statement of Operations: Cost of sales$62,000, selling general and administration $226,000, and research & development$77,000. As a result of the vesting
acceleration, options to purchase approximately 1.4 million shares became exercisable immediately. Under SFAS 123(R) which the Company adopted effective January 1, 2006, the Company would have been required to recognize approximately $3.5
million in additional stock compensation expense over the remaining vesting term of the unvested options in its statements of operations. By vesting these options prior to adoption of SFAS 123(R), the Company reduced future stock compensation
expense, related to these options.

The following table represents the effect on net income and earnings per share if the Company had
applied the fair value based method and recognition provisions of SFAS 123 for 2005 and 2004:



|                                                          |  |                         |        |   |      |   |        |  
|--------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | -
|                                                          |  | Year Ended December 31, |       
|                                                          |  | 2005                    |        |   | 2004 |  
|                                                          |  | (in thousands)          |       
|Net earnings:                                             |  |                         |        |   |      |   |        |  
|As reported                                               |  | $                       | 10,686 |   |      | $ | 13,500 |  
|Compensation expense using intrinsic method, net of tax   |  |                         | 365    |   |      |   |       |  
|Compensation expense, using fair value method, net of tax |  |                         | (3,248 | ) |      |   | (1,508 | )
|                                                          |  |                         |        |   |      |   |        |  
|Pro forma                                                 |  | $                       | 7,073  |   |      | $ | 11,992 |  
|                                                          |  |                         |        |   |      |   |        |  
|Earnings per share:                                       |  |                         |        |   |      |   |        |  
|Basicas reported                                         |  | $                       | 0.63   |   |      | $ | 0.83   |  
|                                                          |  |                         |        |   |      |   |        |  
|Basicpro forma                                           |  | $                       | 0.42   |   |      | $ | 0.73   |  
|                                                          |  |                         |        |   |      |   |        |  
|Dilutedas reported                                       |  | $                       | 0.60   |   |      | $ | 0.79   |  
|                                                          |  |                         |        |   |      |   |        |  
|Dilutedpro forma                                         |  | $                       | 0.40   |   |      | $ | 0.70   |  
|                                                          |  |                         |        |   |      |   |        |  

Financial Impact of SFAS 123 (R)

SFAS 123(R) resulted in stock option expense during the year ended 2006. Below is an allocation of the expense:



|                                            |  |                                  |      
|------------------------------------------- |  | -------------------------------- | -----
|                                            |  | December 31, 2006 (in thousands)
|                                           
|Cost of sales                               |  | $                                | 265  
|Research and development                    |  |                                  | 273  
|Selling, general and administrative         |  |                                  | 1,848
|                                            |  |                                  |      
|Total stock compensation expense            |  | $                                | 2,387
|                                            |  |                                  |      
|Total stock compensation expense, after tax |  | $                                | 1,572
|                                            |  |                                  |      
|Diluted earnings per share impact           |  | $                                | 0.08 
|                                            |  |                                  |      

The Company utilizes the Black-Scholes Options-Pricing Model to determine the fair value of stock
options under SFAS 123(R). Management is required to make certain assumptions with respect to selected model inputs, including anticipated changes in the underlying stock price (i.e., expected volatility) and option exercise activity (i.e., expected
term). The Company made assumptions for the three categories of compensation expense recorded during the period: stock options, employee stock purchase plan, and awards granted. Since directors, executives and non-executives have different
historical option exercise patterns, the Company grouped its assumptions into categories for options issued under these categories. The expected term was determined to be 5 years for directors, 6 years for executives and 3 years for non-executives
based on these historical option exercise patterns and excluding grants that the Company determined were not reflective of the current business environment. Volatility was calculated using the Companys historical volatility rates. The risk
free interest rate was calculated using the current quoted rates from U.S Government Treasury instruments. The following table outlines the assumptions, on average, for all of the share-based compensation the Company issued during 2006.



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|                        |  |                   |  
|----------------------- |  | ----------------- | -
|                        |  | December 31, 2006 |  
|Expected life (years)   |  | 4                 |  
|Risk-free interest rate |  | 4.7               | %
|Dividend yield          |  |                  |  
|Volatility              |  | 67                | %

For the employee stock purchase plan, historical information was used from the prior six-month
period to determine the term and volatility.

The Company currently has two option-share-based compensation programs, the 1996 Incentive
Stock Option Plan (the 1996 Plan) and the 2000 Long-Term Incentive Stock Option Plan (the 2000 Plan). The below table outlines the grants under these plans, for further grant detail refer to note 16  Employee Benefit
Plans.



|                                 |  |                                |   |  |                                  |       |                       |      |                                        |   |      
|-------------------------------- |  | ------------------------------ | - |  | -------------------------------- | ----- | --------------------- | ---- | -------------------------------------- | - | -----
|Activity                         |  | Number ofOptions(in thousands) |   |  | Weighted - AverageExercise Price |       | AverageRemaining Term |      | AggregateIntrinsic Value(in thousands)
|Outstanding at December 31, 2005 |  | 2,795                          |   |  | $                                | 7.75  |                       |      |                                        |   |      
|Granted                          |  | 454                            |   |  |                                  | 12.78 |                       |      |                                        |   |      
|Exercised                        |  | (871                           | ) |  |                                  | 7.21  |                       |      |                                        |   |      
|Cancelled or expired             |  | (10                            | ) |  |                                  | 13.44 |                       |      |                                        |   |      
|                                 |  |                                |   |  |                                  |       |                       |      |                                        |   |      
|Outstanding at December 31, 2006 |  | 2,368                          |   |  | $                                | 8.89  |                       | 6.61 |                                        | $ | 6,708
|                                 |  |                                |   |  |                                  |       |                       |      |                                        |   |      
|Vested and Expected to Vest      |  | 2,331                          |   |  | $                                | 8.83  |                       | 6.57 |                                        | $ | 6,707
|                                 |  |                                |   |  |                                  |       |                       |      |                                        |   |      
|Exercisable at December 31, 2006 |  | 2,082                          |   |  | $                                | 8.35  |                       | 6.24 |                                        | $ | 6,698
|                                 |  |                                |   |  |                                  |       |                       |      |                                        |   |      

The weighted-average grant-date fair value of share options granted during the year ended
December 31, 2006 was $7.10. The aggregate intrinsic value represents the difference between the Companys closing stock price of $10.74 as of December 31, 2006 and the exercise price multiplied by the number of options outstanding or
exercisable as of that date. The actual tax benefit realized from stock plan dispositions totaled $2.5 million for the year ended December 31, 2006. In accordance with FSP 123(R)-3, in the Consolidated Statement of Cash Flows, the Company
classified the $2.5 million tax benefits from stock plan dispositions to cash provided by financing activities. The Company received $7.5 million in cash on the exercise of stock options and net proceeds for sales to employees during 2006.

The Company will recognize approximately $1.4 million in future compensation expense related to non-vested options with a weighted average
vesting period remaining of 2.2 years.

4) Inventories

Inventories consist of the following:



|                             |  |                |        |      |   |       
|---------------------------- |  | -------------- | ------ | ---- | - | ------
|                             |  | December 31,  
|                             |  | 2006           |        | 2005
|                             |  | (in thousands)
|Raw materials and components |  | $              | 14,638 |      | $ | 12,694
|Work-in-process              |  |                | 4,069  |      |   | 3,874 
|Finished goods               |  |                | 2,398  |      |   | 1,489 
|                             |  |                |        |      |   |       
|                             |  | $              | 21,106 |      | $ | 18,057
|                             |  |                |        |      |   |       



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##### Table of Contents

5) Property and Equipment

Property and equipment consist of the following:



|                                               |  |                |        |   |      |   |        |  
|---------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                               |  | December 31,   |       
|                                               |  | 2006           |        |   | 2005 |  
|                                               |  | (in thousands) |       
|Machinery and equipment                        |  | $              | 7,286  |   |      | $ | 6,135  |  
|Furniture and fixtures                         |  |                | 536    |   |      |   | 1,452  |  
|Leasehold improvements                         |  |                | 668    |   |      |   | 625    |  
|Demonstration units                            |  |                | 2,526  |   |      |   | 2,154  |  
|Computers and software                         |  |                | 2,731  |   |      |   | 1,690  |  
|                                               |  |                |        |   |      |   |        |  
|                                               |  |                | 13,747 |   |      |   | 12,056 |  
|Less accumulated depreciation and amortization |  |                | (9,925 | ) |      |   | (7,958 | )
|                                               |  |                |        |   |      |   |        |  
|                                               |  | $              | 3,822  |   |      | $ | 4,098  |  
|                                               |  |                |        |   |      |   |        |  

Depreciation expense for the years ended December 31, 2006, 2005, and 2004 was $2.3 million, $1.7 million,
and $1.2 million respectively.

6) Intangible Assets

The following intangible assets as of December 31, 2006, resulted from the valuation of the assets acquired in the Xicom acquisition in 2005.



|                                           |  |                            |  |      |       |                         |   |       |  |   |      
|------------------------------------------ |  | -------------------------- |  | ---- | ----- | ----------------------- | - | ----- |  | - | -----
|(in thousands)                             |  | Amortizationperiod - years |  | Cost |       | Accumulatedamortization |   | Net  
|Intangible assets subject to amortization: |  |                            |  |      |       |                         |   |       |  |   |      
|Core technologies                          |  | 10                         |  | $    | 4,920 |                         | $ | 779   |  | $ | 4,141
|Customer relationship                      |  | 4                          |  |      | 2,040 |                         |   | 808   |  |   | 1,233
|Covenant-not-to compete                    |  | 3                          |  |      | 410   |                         |   | 216   |  |   | 194  
|                                           |  |                            |  |      |       |                         |   |       |  |   |      
|Total                                      |  |                            |  | $    | 7,370 |                         | $ | 1,803 |  | $ | 5,567
|                                           |  |                            |  |      |       |                         |   |       |  |   |      

Amortization expense for the years ended December 31, 2006 and 2005 was $1.1 million and $644,000
respectively. Amortization expense for the following years are estimated as follows: 2007 - $1.1 million, 2008 - $1.1 million, 2009 - $705,000, 2010 - $492,000, 2011 - $492,000, and $1.7 million for the remaining lives.



|                                |  |   |        |  
|------------------------------- |  | - | ------ | -
|Goodwill                        |  |   |       
|Balance as of May 27, 2005      |  | $ | 28,879 |  
|Additions                       |  |   | 1,454  |  
|Balance as of December 31, 2005 |  | $ | 30,333 |  
|Deductions                      |  |   | (383   | )
|                                |  |   |        |  
|Balance as of December 31, 2006 |  | $ | 29,950 |  
|                                |  |   |        |  

Goodwill (non-tax deductible), created in connection with the acquisition of Xicom, decreased over the year ended
December 31, 2006 due to additional R&D tax credits of $711,000 recognized for the periods prior to acquisition and offset by certain liabilities totaling $328,000 which were not recorded as of the acquisition date. Any subsequent changes
to the costs will result in a charge to earnings in accordance with EITF 95-3  Recognition of Liabilities in Connection with a Purchase Business Combination.



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7) Accrued Expenses

The following represents a summary of accrued expenses:



|                                          |  |                |       |      |   |      
|----------------------------------------- |  | -------------- | ----- | ---- | - | -----
|                                          |  | December 31,  
|                                          |  | 2006           |       | 2005
|                                          |  | (in thousands)
|Wages, vacation and related payroll taxes |  | $              | 4,868 |      | $ | 4,449
|Professional fees                         |  | $              | 705   |      |   | 569  
|Warranty reserve                          |  | $              | 2,525 |      |   | 2,101
|Commissions                               |  | $              | 767   |      |   | 753  
|Deferred rent                             |  | $              | 269   |      |   | 494  
|Sales taxes payable                       |  | $              | 444   |      |   | 272  
|Other                                     |  | $              | 416   |      |   | 407  
|                                          |  |                |       |      |   |      
|                                          |  | $              | 9,994 |      | $ | 9,045
|                                          |  |                |       |      |   |      

8) Financial Instruments

The Company maintains a credit arrangement with a bank for up to $15.0 million, based upon 75% of eligible accounts receivable plus cash. The amount of credit available under the credit agreement at December 31,
2006 was approximately $14.8 million. The Company paid $50,000 representing a facility fee and bank costs for a two year commitment for the arrangement, whether or not any amounts are actually drawn on the line of credit.

The credit agreement expires on May 1, 2008 and limits or prohibits mergers, consolidations, acquisitions, transfers of assets, liens, loans and investments in
other entities and limits the use of proceeds, acquisitions of assets, indebtedness and capital expenditures, without the banks consent. To be eligible to draw funds under the line of credit, the credit agreement requires us to maintain
specific levels of tangible net worth, earnings and other ratios. We were in compliance with all covenants at December 31, 2006. The overall credit agreement specifies an interest rate between LIBOR plus 150 basis points and prime rate minus 50
basis points depending on terms and other conditions.

Under this credit facility, the Company borrowed $5.0 million in the form of a term note with a
three year maturity on May 2, 2005. These funds were used to provide working capital and to finance part of the acquisition of Xicom. The facility is secured by all of the Companys assets, including accounts receivables, intangible, and
fixed assets. We borrowed these funds and simultaneously entered into an interest rate swap agreement. The interest rate swap agreement established a fixed 5.61% interest rate on the term note for 18 months. At the beginning of 2006 there was an
outstanding balance of $4.75 million. The Company subsequently paid the entire note during the fourth quarter of 2006.

9) Commitments

Amounts paid under lease and rental agreements were $2.1 million, $2.3 million and $1.9 million for the years ended December 31, 2006, 2005 and 2004,
respectively. The Company records lease expense on a straight-line basis over the lease term when the lease contains escalating rent payments. Future minimum rentals under leases after December 31, 2006 are as follows (in thousands):



|                  |  |   |      
|----------------- |  | - | -----
|2007              |  | $ | 2,476
|2008              |  |   | 2,102
|2009              |  |   | 1,290
|2010              |  |   | 1,173
|2011              |  |   | 977  
|Thereafter        |  |   | 311  
|                  |  |   |      
|Total commitments |  | $ | 8,328
|                  |  |   |      

The lease for our Phoenix facility expires in July 2008 subject to an option to renew for two consecutive terms of
five years each. The lease for the Chandler facility expires in October 2008 subject to an option for a five-year renewal. The lease for the San Diego facility expires in June 2010 subject to an option to renew for two consecutive terms of five
years each. The lease for the Santa Clara facility was renewed in 2006 expiring in April 2012, with additional square footage acquired, subject to an option for a five-year renewal.



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##### Table of Contents

The Company currently subleases a portion of its Phoenix and Armer facilities. Rent expense was offset by $488,000,
$292,000, and $283,000 for the years ended December 31, 2006, 2005 and 2004, respectively, for rent payments received through this sublease. Future minimum rentals under leases after December 31, 2006 have not been reduced by minimum
sublease rentals of $518,000 and 412,000 for the years ended December 31, 2007 and 2008. This sublease agreement expires in 2008.

The Company
primarily has commitments with certain suppliers and subcontract manufacturers to supply certain components and products and we estimate that non-cancelable obligations under these commitments were approximately $24.2 million at December 31,
2006, $15.0 million of which is anticipated to be paid in 2007. Payments due under these obligations for 2008 -$4.2 million, 2009$1.2 million, 2010$0, and 2011$3.8 million.

10) Income Taxes

Income tax expense (benefit) amounted to $6.2
million, $5.1 million, and $(3.6) million for the years ended December 31, 2006, 2005 and 2004, respectively. The federal tax rate for 2006, 2005 and 2004 was 35%, 35% and 34% respectively. The actual tax expense (benefit) for these periods
differs from the Federal statutory tax expense for those periods as follows:



|                                       |  |                         |       |   |      |   |       |      |  |   |        |  
|-------------------------------------- |  | ----------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                       |  | Year ended December 31, |      
|                                       |  | 2006                    |       |   | 2005 |   |       | 2004 | 
|                                       |  | (in thousands)          |      
|Computed Federal statutory tax expense |  | $                       | 6,306 |   |      | $ | 5,538 |      |  | $ | 3,351  |  
|State tax expense (benefit)            |  |                         | 608   |   |      |   | 530   |      |  |   | (335   | )
|Change in federal valuation allowance  |  |                         |      |   |      |   |      |      |  |   | (6,396 | )
|                                       |  |                         |      
|Extra territorial income exclusion     |  |                         | (349  | ) |      |   | (407  | )    |  |   | (456   | )
|Research and development credit        |  |                         | (254  | ) |      |   | (400  | )    |  |   |       |  
|Other adjustments                      |  |                         | (161  | ) |      |   | (123  | )    |  |   | 192    |  
|                                       |  |                         |       |   |      |   |       |      |  |   |        |  
|Total                                  |  | $                       | 6,150 |   |      | $ | 5,138 |      |  | $ | (3,644 | )
|                                       |  |                         |       |   |      |   |       |      |  |   |        |  

Components of income tax expense (benefit) for 2006, 2005 and 2004 follow:



|        |  |                         |       |          |   |        |       |  |   |        |  
|------- |  | ----------------------- | ----- | -------- | - | ------ | ----- |  | - | ------ | -
|        |  | Year ended December 31, |      
|        |  | Current                 |       | Deferred |   |        | Total | 
|        |  | (in thousands)          |      
|2006    |  |                         |       |          |   |        |       |  |   |        |  
|Federal |  | $                       | 5,258 |          | $ | 5      |       |  | $ | 5,263  |  
|State   |  |                         | 702   |          |   | 182    |       |  |   | 884    |  
|Foreign |  |                         | 3     |          |   |       |       |  |   | 3      |  
|        |  |                         |       |          |   |        |       |  |   |        |  
|Total   |  | $                       | 5,963 |          | $ | 187    |       |  | $ | 6,150  |  
|        |  |                         |       |          |   |        |       |  |   |        |  
|2005    |  |                         |       |          |   |        |       |  |   |        |  
|Federal |  | $                       | 1,540 |          | $ | 2,773  |       |  | $ | 4,313  |  
|State   |  |                         | 518   |          |   | 297    |       |  |   | 815    |  
|Foreign |  |                         | 10    |          |   |       |       |  |   | 10     |  
|        |  |                         |       |          |   |        |       |  |   |        |  
|Total   |  | $                       | 2,068 |          | $ | 3,070  |       |  | $ | 5,138  |  
|        |  |                         |       |          |   |        |       |  |   |        |  
|2004    |  |                         |       |          |   |        |       |  |   |        |  
|Federal |  | $                       | 1,942 |          | $ | (5,080 | )     |  | $ | (3,138 | )
|State   |  |                         | 77    |          |   | (583   | )     |  |   | (506   | )
|        |  |                         |       |          |   |        |       |  |   |        |  
|Total   |  | $                       | 2,019 |          | $ | (5,663 | )     |  | $ | (3,644 | )
|        |  |                         |       |          |   |        |       |  |   |        |  



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Components of deferred tax assets and liabilities follow:



|                                                |  |                |        |   |      |   |        |  
|----------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                                |  | December 31,   |       
|                                                |  | 2006           |        |   | 2005 |  
|                                                |  | (in thousands) |       
|Tax effect of net operating loss carryforwards: |  |                |        |   |      |   |        |  
|Federal                                         |  | $              | 1,489  |   |      | $ | 3,346  |  
|State                                           |  |                | 62     |   |      |   | 253    |  
|Tax credits                                     |  |                | 390    |   |      |   | 632    |  
|Reserves and accruals:                          |  |                |        |   |      |   |        |  
|Compensated absenses                            |  |                | 402    |   |      |   | 308    |  
|Inventory reserves                              |  |                | 201    |   |      |   | 484    |  
|Bad debt reserves                               |  |                | 95     |   |      |   | 254    |  
|263A Inventory                                  |  |                | 200    |   |      |   | 298    |  
|Warranty reserves                               |  |                | 994    |   |      |   | 800    |  
|Deferred rent                                   |  |                | 131    |   |      |   | 314    |  
|Other reserves                                  |  |                | 1,680  |   |      |   | 662    |  
|Depreciation                                    |  |                | 46     |   |      |   | (464   | )
|Amortization of goodwill and intangible assets  |  |                | (1,706 | ) |      |   | (2,083 | )
|                                                |  |                |        |   |      |   |        |  
|Net deferred tax assets                         |  |                | 3,984  |   |      |   | 4,804  |  
|Valuation allowance                             |  |                | (1,201 | ) |      |   | (2,546 | )
|                                                |  |                |        |   |      |   |        |  
|                                                |  | $              | 2,783  |   |      | $ | 2,258  |  
|                                                |  |                |        |   |      |   |        |  

During the year ended December 31, 2004, the Company reduced the valuation allowance related to the deferred
tax assets to record such asset at the amount management believed was more likely than not to be realized through the generation of future taxable income. The net change in total valuation allowance for the year ended December 31, 2004 was
approximately $7.3 million. Of the decrease in the valuation allowance during the year ended December 31, 2004 approximately $7.0 million was recorded as a reduction of income tax expense, approximately $772,000 was recorded as an increase to
additional paid-in capital and approximately $465,000 was recorded as an increase in deferred tax assets. In addition to the approximate $772,000 increase in additional paid-in capital for the release of the valuation allowance related to the tax
benefits of stock option exercises in prior years, additional paid-in capital was increased for the tax benefit of stock option exercises during the year ended December 31, 2004 in the amount of approximately $1,063,000 for a total increase of
approximately $1.8 million.

For the year ended December 31, 2005 there was no change in the valuation allowance. For the year ended December 31,
2006, the Company reduced the valuation allowance and corresponding deferred tax asset by approximately $1.3 million. This reduction was due to the expiration of a portion of the net operating loss carryforward, which was limited as to its
utilization pursuant to IRC §382. For the years ended December 31, 2005 and December 31, 2006, additional paid-in capital was increased for the tax benefit of stock option exercises recognized differently for financial reporting and
tax purposes in the amount of approximately $836,000 and $2,487,000 respectively. At December 31, 2006, the Company has federal net operating loss carryforwards of approximately $4.3 million expiring in various amounts from 2007 through 2010;
state net operating loss carryforwards of approximately $1.7 million expiring in various amounts from 2019 to 2022; federal general business tax credit carryforwards of approximately $185,000, which expire in various amounts from 2021 through 2025;
and state tax credit carryforwards of approximately $314,000, which do not expire. Approximately, $3.6 million of the federal net operating loss carryforwards are expected to expire due to limitations pursuant to IRC §382 thus, the Company has
maintained a valuation allowance for these net operating losses. The balance of the net operating losses and tax credits are available for utilization against taxable income/taxes payable in future periods, if any.

11) Significant Customers and Foreign and Domestic Sales

During the
years ended December 31, 2006, 2005 and 2004, no single customer represented more than 10% of our net sales. Because of the nature of our business, we anticipate that any customer who could potentially represent 10% or more of our total revenue
will vary from period to period depending upon the placement of significant orders by a particular customer or customers in any given year. There are two customers in the amplifiers segment that accounted separately for more than 10% of the
segmented sales and one customer in the satellite electronics and broadcast equipment segment. During 2006, there was no country, besides the USA, that accounted for more than 10% of consolidated sales.



43



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##### Table of Contents

The Companys sales in principal foreign and domestic markets as a percentage of total sales for the years ended
December 31, 2006, 2005, and 2004 follow:



|                    |  |                          |   |  |      |   |  |      |  
|------------------- |  | ------------------------ | - |  | ---- | - |  | ---- | -
|                    |  | Years ended December 31, |  
|Region              |  | 2006                     |   |  | 2005 |   |  | 2004 |  
|Asia                |  | 19                       | % |  | 16   | % |  | 21   | %
|Africa/Middle East  |  | 5                        | % |  | 7    | % |  | 10   | %
|Americas            |  | 2                        | % |  | 3    | % |  | 3    | %
|Europe              |  | 16                       | % |  | 15   | % |  | 13   | %
|                    |  |                          |   |  |      |   |  |      |  
|Total Foreign Sales |  | 42                       | % |  | 41   | % |  | 47   | %
|Domestic            |  | 58                       | % |  | 59   | % |  | 53   | %
|                    |  |                          |   |  |      |   |  |      |  
|                    |  | 100                      | % |  | 100  | % |  | 100  | %
|                    |  |                          |   |  |      |   |  |      |  

12) Stockholders Equity

On June 4, 2004, the Board of Directors authorized management to purchase up to $10 million of the Companys outstanding common stock. As of December 31, 2005, the Company had purchased and retired
402,600 shares under the program at a total cost of $2.8 million, which has been recorded as a reduction to additional paid-in capital of $2.6 million and a reduction to retained earnings of $236,000. This program expired on June 3, 2005 and
was the only repurchase program authorized during 2005.

In February 2000, the Company completed an offering of 2,400,000 units, each consisting of one
share of common stock and one five-year common stock purchase warrant, plus an additional 360,000 units sold pursuant to the underwriters over-allotment option, for a total of approximately $16.3 million cash, net of issuance costs. Each
warrant was exercisable to purchase one share of common stock at a price of $8.75, subject to adjustment in certain circumstances, at any time after the warrants were issued until February 7, 2005. Commencing February 7, 2001, the Company
could redeem the warrants for $0.01 per warrant upon no less than 30 days or more than 60 days notice mailed within five days after the closing sales price of the common stock has equaled or exceeded $10.9375 for each of 20 consecutive trading days.
After December 31, 2004 but prior to the expiration date of February 7, 2005, 310,571 of our redeemable common stock purchase warrants were exercised. We received proceeds of $2.7 million related to the exercises and have issued 310,571
shares of our common stock to the former holders of the redeemable warrants. The remaining 1,832,966 unexercised warrants expired on February 7, 2005. The warrants were issued as part of our 2000 secondary offering and were redeemable at $8.75
per share.

The Company has the authority to issue ten million shares of preferred stock, par value $0.001 per share. At December 31, 2006 and 2005,
no preferred shares were issued or outstanding.

13) Segment Reporting

Below are the results of operations from the two operating segments. Xicom was acquired in May 2005, thus the results below are not comparable from 2005 to 2006.



|                              |  |                                              |        |            |   |           |  |   |         |   |  |   |        
|----------------------------- |  | -------------------------------------------- | ------ | ---------- | - | --------- |  | - | ------- | - |  | - | -------
|                              |  | Year ended December 31, 2006                 |        |            |   |           | 
|                              |  | (in thousands)                               |        |            |   |           | 
|                              |  | Sattelite electronics andbroadcast equipment |        | Amplifiers |   | Corporate |  |   | Total  
|Net sales                     |  | $                                            | 72,156 |            | $ | 62,053    |  | $ |        |   |  | $ | 134,209
|Operating income (expense)    |  |                                              | 26,659 |            |   | 6,485     |  |   | (16,246 | ) |  | $ | 16,898 
|                              |  |                                              |        |            |   |           |  |   |         |   |  |   |        
|Depreciation and amortization |  | $                                            | 1,056  |            | $ | 2,385     |  | $ |        |   |  | $ | 3,441  
|                              |  |                                              |        |            |   |           |  |   |         |   |  |   |        
|Total assets                  |  | $                                            | 57,126 |            | $ | 62,878    |  | $ |        |   |  | $ | 120,004
|                              |  |                                              |        |            |   |           |  |   |         |   |  |   |        



|                              |  |                                              |        |            |   |           |  |   |         |   |  |   |        
|----------------------------- |  | -------------------------------------------- | ------ | ---------- | - | --------- |  | - | ------- | - |  | - | -------
|                              |  | Year ended December 31, 2005                 |        |            |   |           | 
|                              |  | (in thousands)                               |        |            |   |           | 
|                              |  | Sattelite electronics andbroadcast equipment |        | Amplifiers |   | Corporate |  |   | Total  
|Net sales                     |  | $                                            | 70,848 |            | $ | 32,415    |  | $ |        |   |  | $ | 103,263
|Operating income (expense)    |  |                                              | 27,423 |            |   | 1,656     |  |   | (13,668 | ) |  |   | 15,411 
|                              |  |                                              |        |            |   |           |  |   |         |   |  |   |        
|Depreciation and amortization |  | $                                            | 973    |            | $ | 1,405     |  | $ |        |   |  | $ | 2,378  
|                              |  |                                              |        |            |   |           |  |   |         |   |  |   |        
|Total assets                  |  | $                                            | 42,136 |            | $ | 58,492    |  | $ |        |   |  | $ | 100,628
|                              |  |                                              |        |            |   |           |  |   |         |   |  |   |        

For the year ended December 31, 2005, the Company classified certain assets which were obtained in the acquisition
of Xicom as assets of the satellite electronics and broadcast equipment segment. As of December 31, 2006, these assets have been classified in the amplifier segment for all periods presented.



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##### Table of Contents

14) Earning Per Share

A reconciliation of the numerators and the denominators of the basic and diluted per share computations and a description and amount of potentially dilutive securities follow:



|                                                                            |  |                                       |        |      |   |        |  |   |       
|--------------------------------------------------------------------------- |  | ------------------------------------- | ------ | ---- | - | ------ |  | - | ------
|                                                                            |  | Years Ended December 31,             
|                                                                            |  | 2006                                  |        | 2005 |   | 2004  
|                                                                            |  | (in thousands, except per share data)
|Numerator:                                                                  |  |                                       |        |      |   |        |  |   |       
|Net earnings                                                                |  | $                                     | 11,865 |      | $ | 10,686 |  | $ | 13,500
|Denominator:                                                                |  |                                       |        |      |   |        |  |   |       
|Weighted average common shares for basic earnings per share                 |  |                                       | 18,026 |      |   | 16,838 |  |   | 16,357
|Net effect of dilutive stock options and warrants                           |  |                                       | 819    |      |   | 862    |  |   | 779   
|                                                                            |  |                                       |        |      |   |        |  |   |       
|Weighted average common shares for diluted earnings per share               |  |                                       | 18,845 |      |   | 17,700 |  |   | 17,136
|Basic earnings per share:                                                   |  |                                       |        |      |   |        |  |   |       
|Net earnings per basic share                                                |  | $                                     | 0.66   |      | $ | 0.63   |  | $ | 0.83  
|Diluted earnings per share:                                                 |  |                                       |        |      |   |        |  |   |       
|Net earnings per diluted share                                              |  | $                                     | 0.63   |      | $ | 0.60   |  | $ | 0.79  
|Options and warrants excluded from earnings per share due to anti-dilution: |  |                                       |        |      |   |        |  |   |       
|Stock options with exercise price greater than the average market price     |  |                                       | 595    |      |   | 693    |  |   | 485   
|Common stock warrants with $8.75 exercise price                             |  |                                       |       |      |   |       |  |   | 2,144 

15) Acquisition  Business Combination

On May 27, 2005, the Company completed its acquisition of Xicom Technology, Inc. (Xicom). Xicom is a leading provider of satellite and microwave power amplifiers and other RF products. The combination
of Xicoms amplifier products and RF technologies with the Companys line of satellite electronics and broadcast equipment makes the Company a full line supplier of satellite electronic systems.

The Company paid approximately $37.5 million in cash, $2.0 million in shares (219,708 shares valued at $9.186 per share-based on the average share price for the two days
prior through the two days after acquisition agreement) and assumed $5.0 million in debt for 100% of the common stock of Xicom. The purchase price has decreased over the year, which was due to R&D tax credits recognized for the reacquisition
periods and offset by certain liabilities which were not recorded as of the acquisition date which is reflected in a decrease to goodwill for 2006. Any subsequent changes to the costs will result in a charge to earnings in accordance with EITF
95-3  Recognition of Liabilities in Connection with a Purchase Business Combination.



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##### Table of Contents

The purchase price recorded was calculated as follows:



|                     |  |   |       
|-------------------- |  | - | ------
|Xicom Purchase Price
|(in thousands)      
|Issuance of stock    |  | $ | 2,018 
|Acquisition costs    |  |   | 1,268 
|Cash                 |  |   | 37,539
|Assume debt          |  |   | 5,034 
|                     |  |   |       
|Total Purchase Price |  | $ | 45,859

The purchase price was allocated as reflected below:



|                                     |  |   |        |  
|------------------------------------ |  | - | ------ | -
|Purchase Allocation                  | 
|(in thousands)                       | 
|Cash                                 |  | $ | 242    |  
|Receivables                          |  |   | 5,541  |  
|Other assets                         |  |   | 108    |  
|Inventory                            |  |   | 10,467 |  
|Prepaid expenses                     |  |   | 341    |  
|Deferred tax benefit - current       |  |   | 2,164  |  
|Property and equipment               |  |   | 2,207  |  
|Accounts payable                     |  |   | (5,971 | )
|Accrued liabilities                  |  |   | (2,443 | )
|Long term obligations, less current  |  |   | (436   | )
|Deferred tax liability - non-current |  |   | (1,800 | )
|Income tax payable                   |  |   | (58    | )
|Customer advances                    |  |   | (1,823 | )
|Core technologies                    |  |   | 4,920  |  
|Customer Relationships               |  |   | 2,040  |  
|Covenant-not-to-compete              |  |   | 410    |  
|                                     |  |   |        |  
|                                     |  |   |        |  
|Excess of purchase price - Goodwill  |  | $ | 29,950 |  

The following unaudited pro forma summary of condensed combined financial information presents the Companys
combined results of operations as if the acquisition of Xicom had occurred at the beginning of each period presented. The Company had full financial inclusion of Xicom during 2006.



|                                      |  |      |         |      |   |        
|------------------------------------- |  | ---- | ------- | ---- | - | -------
|Year ended December 31, 2005 and 2004
|(in thousands, except per share data)
|                                      |  | 2005 |         | 2004
|Net sales                             |  | $    | 113,048 |      | $ | 100,985
|Net income                            |  | $    | 8,727   |      | $ | 12,701 
|                                      |  |     
|Net income per share, basic           |  | $    | 0.52    |      | $ | 0.77   
|Net income per share, diluted         |  | $    | 0.49    |      | $ | 0.73   



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##### Table of Contents

16) Employee Benefit Plans

401(k) Plan

During the years ended December 31, 2006, 2005 and 2004, Radyne matched 50% of each employee contribution to the
plan up to a maximum annual match of $2,000. The Company contributed $217,000 under the Radyne match for 2006. Xicom matches two thirds of the first 6% of employees annual compensation. The Company contributed $298,000 under the Xicom match
for 2006. The Company has a qualified contributory 401(k) plan that covers all employees who have attained the age of 18 and are employed at the enrollment date. Overall, the Company provided contributions of $515,000, $372,000, and $194,000
respectively, for the years ended December 31, 2006, 2005 and 2004. Each participant may elect to contribute any portion of his or her gross compensation up to the maximum amount allowed by the Internal Revenue Service.

Employee Stock Options

In June 2000, the Board of Directors
adopted the 2000 Long-Term Incentive Stock Option Plan (the 2000 Plan), which was approved by the stockholders on June 29, 2000. The 2000 Plan provided for the grant of options to employees of the Company to purchase 2,500,000 shares of common
stock. In May 2002, the shareholders approved an amendment to the plan that increased the shares available for issuance under the plan by 1,500,000 to 4,000,000 shares. The option price per share under the 2000 Plan may not be less than the fair
market value of the stock (110 percent of the fair market value for an optionee who is a 10 percent stockholder) on the day the option is granted. At December 31, 2006, the Company had 1,800,792 options outstanding under this plan and 468,317
options available for future issuance.

In November 1996, the Board of Directors adopted the 1996 Incentive Stock Option Plan (the Plan), which was
approved by the stockholders on January 8, 1997. The Plan provided for the grant of options to employees of the Company to purchase up to 1,282,042 shares of common stock, of which 110,100 shares were used for a stock rights offering to
employees in 1997. The option price per share under the Plan may not be less than the fair market value of the stock (110 percent of the fair market value for an optionee who is a 10 percent stockholder) on the day the option is granted. In November
1998, the Plan was amended to increase the options available by 900,000, providing a total of 2,071,942 options available to purchase shares of common stock. At December 31, 2006, the Company had 566,582 options outstanding under this plan and
0 options available for future issuance.

Typically the Board of Directors grants options with a ten year contractual term with a vesting schedule of 25%
vesting immediately and the rest vest over a three year period.

At December 31, 2006, the Company had a total of 2,367,374 options outstanding at
exercise prices ranging from $2.25 to $14.63 per share. Of the total options, the Company had 0 and 25,993 options outstanding, during 2006 and 2005, at an exercise price of $2.50 per share that carry the right to a cash bonus of $1.719 per
purchased share, payable upon exercise. The stock option compensation accrual related to the bonus is $0 and $46,000 at December 31, 2006 and 2005, respectively. A summary of the aforementioned stock plan activity follows:



|                           |  |                  |   |  |                                |      
|-------------------------- |  | ---------------- | - |  | ------------------------------ | -----
|                           |  | Number ofoptions |   |  | WeightedAverage PricePer Share
|Balance, December 31, 2003 |  | 2,603,456        |   |  | $                              | 5.99 
|Granted                    |  | 495,450          |   |  |                                | 7.16 
|Forfeited                  |  | (40,788          | ) |  |                                | 5.19 
|Exercised                  |  | (434,556         | ) |  |                                | 3.64 
|                           |  |                  |   |  |                                |      
|Balance, December 31, 2004 |  | 2,623,562        |   |  | $                              | 6.62 
|Granted                    |  | 671,650          |   |  |                                | 9.87 
|Forfeited                  |  | (37,660          | ) |  |                                | 6.98 
|Exercised                  |  | (462,671         | ) |  |                                | 4.46 
|                           |  |                  |   |  |                                |      
|Balance, December 31, 2005 |  | 2,794,881        |   |  | $                              | 7.75 
|Granted                    |  | 453,500          |   |  | $                              | 12.78
|Forfeited                  |  | (10,437          | ) |  |                                | 13.44
|Exercised                  |  | (870,570         | ) |  |                                | 7.21 
|                           |  |                  |   |  |                                |      
|Balance, December 31, 2006 |  | 2,367,374        |   |  | $                              | 8.89 



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##### Table of Contents

A summary of stock options outstanding at December 31, 2006 follows:



|                         |  |                                      |  |                                                      |  |                                
|------------------------ |  | ------------------------------------ |  | ---------------------------------------------------- |  | -------------------------------
|                         |  | Options Outstanding and Exerciseable
|Range of exercise prices |  | Number outstanding                   |  | Weighted average remaining contractual life in years |  | Weighted average exercise price
|$ 2.25 to $ 3.50         |  | 142,156                              |  | 3.96                                                 |  | $ 2.67                         
|$ 3.51 to $ 4.75         |  | 173,305                              |  | 4.35                                                 |  | 4.09                           
|$ 4.76 to $ 6.25         |  | 400,513                              |  | 6.43                                                 |  | 5.32                           
|$ 6.26 to $ 7.50         |  | 411,456                              |  | 6.04                                                 |  | 6.79                           
|$ 7.51 to $ 8.75         |  | 181,990                              |  | 8.29                                                 |  | 8.19                           
|$ 8.76 to $ 10.00        |  | 100,252                              |  | 7.70                                                 |  | 9.24                           
|$ 10.01 to $ 14.63       |  | 957,702                              |  | 7.31                                                 |  | 13.17                          
|                         |  |                                      |  |                                                      |  |                                
|                         |  | 2,367,374                            |  | 6.61                                                 |  | $ 8.89                         

Employee Stock Purchase Plan

On June 15, 1999, the Companys shareholders adopted the 1999 Employee Stock Purchase Plan (the Purchase Plan), as a means of rewarding and retaining existing employees. The purchase plan allows
employees, including officers and directors who are employees, to purchase shares of the Companys common stock at semi-annual intervals through periodic payroll deductions. The purchase price per share, in general, will be 85% of the lower of
the fair market value of the common stock on the participants entry date into the offering period or 85% of the fair market value on the semi-annual purchase date. The Board of Directors or a committee of two or more directors, none of whom
will be officers or employees, have full authority to administer all aspects of the Purchase Plan. There were 1,000,000 shares authorized for issuance under the plan. As of December 31, 2006, 134,323 shares remain un-issued under the Purchase
Plan. The Purchase Plan is deemed a compensatory plan after the adoption of SFAS 123(R) due to the plan provisions.

17) Contingencies

The Company is involved in litigation and claims arising in the normal course of operations. In the opinion of management based on consultation with legal counsel,
losses, if any, from this litigation are covered by insurance or are immaterial; therefore, no provision has been made in the accompanying consolidated financial statements for losses, if any, which might result from the ultimate outcome of these
matters.

During 2006, there was a complaint filed against the Company in the United States District Court for the District of Arizona alleging one count
of patent infringement. The Company believes the claims are without merit and that the Company has other substantial factual legal defenses to the claims. However, there is no assurance that the Company will ultimately prevail in this proceeding.

18) Supplemental Financial Information

A summary of
additions and deductions related to the allowance for doubtful accounts for the years ended December 31, 2006, 2005 and 2004 follows:



|                                        |  |                            |     |                       |     |           |     |            |     |                       |   |    
|--------------------------------------- |  | -------------------------- | --- | --------------------- | --- | --------- | --- | ---------- | --- | --------------------- | - | ---
|Years ended December 31: (in thousands) |  | Balance atbeginning ofyear |     | Acquired Xicomreserve |     | Additions |     | Deductions |     | Balance at endof year
|2006                                    |  | $                          | 804 |                       |    |           | 374 |            | 912 |                       | $ | 266
|2005                                    |  | $                          | 350 |                       | 473 |           | 331 |            | 350 |                       | $ | 804
|2004                                    |  | $                          | 489 |                       |    |           | 318 |            | 457 |                       | $ | 350



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##### Table of Contents

19) Quarterly Financial DataUnaudited

A summary of the quarterly data for the years ended December 31, 2006 and 2005 follows:



|                           |  |                                       |        |                |   |               |  |                |        |       |   |        |  |   |        
|-------------------------- |  | ------------------------------------- | ------ | -------------- | - | ------------- |  | -------------- | ------ | ----- | - | ------ |  | - | -------
|                           |  | First Quarter                         |        | Second Quarter |   | Third Quarter |  | Fourth Quarter |        | Total
|                           |  |                                       |        |                |  
|                           |  | (in thousands, except per share data)
|2006:                      |  |                                       |        |                |   |               |  |                |        |       |   |        |  |   |        
|Total revenues             |  | $                                     | 31,193 |                | $ | 34,633        |  | $              | 32,073 |       | $ | 36,310 |  | $ | 134,209
|Gross profit               |  |                                       | 12,889 |                |   | 14,430        |  |                | 14,208 |       |   | 14,944 |  | $ | 56,471 
|Operating expenses         |  |                                       | 9,395  |                |   | 9,661         |  |                | 10,423 |       |   | 10,095 |  | $ | 39,574 
|Earnings from operations   |  |                                       | 3,494  |                |   | 4,769         |  |                | 3,785  |       |   | 4,849  |  | $ | 16,897 
|Net earnings               |  |                                       | 2,393  |                |   | 3,155         |  |                | 2,754  |       |   | 3,563  |  | $ | 11,865 
|Basic earnings per share   |  | $                                     | 0.14   |                | $ | 0.18          |  | $              | 0.15   |       | $ | 0.19   |  | $ | 0.66   
|Diluted earnings per share |  | $                                     | 0.13   |                | $ | 0.17          |  | $              | 0.15   |       | $ | 0.19   |  | $ | 0.63   
|                           |  |                                       |        |                |  
|2005:                      |  |                                       |        |                |   |               |  |                |        |       |   |        |  |   |        
|Total revenues             |  | $                                     | 13,709 |                | $ | 20,613        |  | $              | 32,146 |       | $ | 36,795 |  | $ | 103,263
|Gross profit               |  |                                       | 7,126  |                |   | 9,640         |  |                | 13,366 |       |   | 15,880 |  |   | 46,012 
|Operating expenses         |  |                                       | 5,175  |                |   | 6,547         |  |                | 8,992  |       |   | 9,887  |  |   | 30,601 
|Earnings from operations   |  |                                       | 1,951  |                |   | 3,093         |  |                | 4,374  |       |   | 5,993  |  |   | 15,411 
|Net earnings               |  |                                       | 1,444  |                |   | 2,075         |  |                | 2,880  |       |   | 4,287  |  |   | 10,686 
|Basic earnings per share   |  | $                                     | 0.09   |                | $ | 0.12          |  | $              | 0.17   |       | $ | 0.25   |  | $ | 0.63   
|Diluted earnings per share |  | $                                     | 0.08   |                | $ | 0.12          |  | $              | 0.16   |       | $ | 0.24   |  | $ | 0.60   



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

None



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

Based on their evaluation as of December 31, 2006, our Chief Executive Officer and
Chief Financial Officer have concluded that our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), were effective as of the end of the
period covered by this report to ensure that the information required to be disclosed by us in this Annual Report on Form 10-K was recorded, processed, summarized and reported within the time periods specified in the SECs rules and
instructions for Form 10-K. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management,
including our Principal Executive Officer and our Principal Financial Officer, to allow timely decisions regarding required disclosure.

Managements Annual Report on Internal Control over Financial Reporting

Management of the Company is responsible for
establishing and maintaining adequate internal control over financial reporting as defined by Rules13a-15(f) and 15d-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate. Management assessed the effectiveness of the Companys internal control over financial reporting as of December 31, 2006. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment of those criteria, management believes that the Company maintained effective internal control over financial
reporting as of December 31, 2006.

KPMG LLP, the independent registered public accounting firm that audited the consolidated financial statements of
the Company included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, issued its report on managements assessment of, and the effectiveness of, the Companys internal control over financial reporting as
of December 31, 2006. The report is included in our Annual Report on Form 10-K filed on March 2, 2007.



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##### Table of Contents

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended
December 31, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



50



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Radyne Corporation:

We have audited managements assessment, included in the accompanying Managements Report on Internal Control over Financial Reporting,that Radyne
Corporation (the Company) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, managements assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated,
in all material respects, based on criteria established inInternal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).Also, in our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established inInternal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of the Company and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders equity and comprehensive income, and cash flows for each of the years in the
three-year period ended December 31, 2006, and our report dated March 1, 2007 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Phoenix, Arizona

March 1, 2007



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

On February 28, 2007, Garry D. Kline, our Vice President, Corporate
Controller, Assistant Secretary, and Principal Accounting Officer, resigned his position as Principal Accounting Officer. Mr. Kline will remain our Vice President, Corporate Controller, and Assistant Secretary. Effective
February 28, 2007, Malcolm C. Persen, our Chief Financial Officer, Vice President of Finance and Secretary, will serve as our Principal Accounting Officer.

Mr. Persen has been our Chief Financial Officer, Vice President of Finance and Secretary since April 2004. From 2002 to April 2004, Mr. Persen served as the Chief Financial Officer for DW
Acquisitions, a private equity partnership involved in the acquisition and operation of direct-mail and marketing businesses. From June 1999 to July 2002, Mr. Persen was employed as Director of Finance for Avnet, Inc, a
distributor of electronic components and computer systems. From March 1995 to July 2002, Mr. Persen was a Senior Manager with the consultancy, Arthur D. Little, where he worked with a global portfolio of clients primarily involved
with corporate level strategy development and execution.



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PART III



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

Except as set forth herein, the information
required by this item is incorporated by reference from the Companys Proxy Statement for its 2007 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31,
2006.

Code of Ethics

The Company has
adopted a code of ethics that applies to all directors, officers and employees of the Company, including the Chief Executive Officer, Chief Financial Officer, and Chief Technical Officer. A copy of the Companys Code of Ethics is located on the
Companys investor relations website at http://investors.radn.com or will be mailed, at no charge, upon request submitted to Investor Relations, Radyne Corporation, 3138 East Elwood St., Phoenix, Arizona 85034. If the Company makes any
amendment to, or grants any waivers of, a provision of the code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller where such amendment or waiver is required to be
disclosed under applicable SEC rules, the Company intends to disclose such amendment or waiver and the reasons therefore on its Internet website at www.radn.com.



|Item 11. | D
irector and Executive Compensation
|-------- | ------------------------------------

The information required by this item is incorporated by
reference to the Companys Proxy Statement for its 2007 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2006.

The information incorporated by reference under the caption Compensation Committee Report in our Proxy Statement shall be deemed furnished,
and not filed, in this Form 10-K and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, as a result of this furnishing, except to the extent
that we specifically incorporate it by reference.



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

Except as set forth herein, the information required by this item is incorporated by reference from the Companys Proxy Statement for its 2007 Annual Meeting of Stockholders to be filed with the SEC within 120 days after
the end of the fiscal year ended December 31, 2006.

Disclosure with Respect to the Companys Equity Compensation Plans as of
December 31, 2006

The Company maintains the 1996 Employee Incentive Stock Option Plan (the 1996 Plan), the 2000 Long-Term Incentive
Plan (the 2000 Plan) and the 1999 Employee Stock Purchase Plan (the ESPP), pursuant to which it may grant equity awards to eligible persons.

The following table gives information about equity awards under the Companys 1996 Plan, the 2000 Plan and the ESPP.



|                                                           |  |                                                                                             |     |  |                                                                             |      |                                                                                                                                             |         |    
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- | --- |  | --------------------------------------------------------------------------- | ---- | ------------------------------------------------------------------------------------------------------------------------------------------- | ------- | ---
|                                                           |  | Number of securities to be issued upon exercise of outstanding options, warrants and rights |     |  | Weighted-average exercise price of outstanding options, warrants and rights |      | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |        
|Plan category                                              |  | (a)                                                                                         |     |  | (b)                                                                         |      | (c)                                                                                                                                         |        
|Equity compensation plans approved by security holders     |  | 2,367,374                                                                                   | [1] |  | $                                                                           | 8.89 |                                                                                                                                             | 602,640 | [2]
|Equity compensation plans not approved by security holders |  | None                                                                                        |     |  |                                                                             | N/A  |                                                                                                                                             | None    |    
|                                                           |  |                                                                                             |     |  |                                                                             |      |                                                                                                                                             |         |    
|Total                                                      |  | 2,367,374                                                                                   |     |  | $                                                                           | 8.89 |                                                                                                                                             | 602,640 |    
|                                                           |  |                                                                                             |     |  |                                                                             |      |                                                                                                                                             |         |    



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##### Table of Contents

---

|1 | Of the total options outstanding, 566,582 and 1,800,792 have been granted under the 1996 Plan and the 2000 Plan, respectively.
|- | ------------------------------------------------------------------------------------------------------------------------------

|2 | Of these shares, 134,323 remain available for purchase under the ESPP.
|- | ----------------------------------------------------------------------



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

The information required by this item is
incorporated by reference to the Companys Proxy Statement for its 2007 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2006.



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

The information required by this item is incorporated by
reference to the Companys Proxy Statement for its 2007 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2006.



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##### Table of Contents

PART IV



|Item 15. | Financial Statements, Financial Statement Schedules, and Exhibits
|-------- | -----------------------------------------------------------------



| | (1) | Financial Statements:
| | --- | ---------------------

See Item 8.
Financial Statements and Supplementary Data.



| | (2) | Financial Statement Schedules:
| | --- | ------------------------------

There are no
financial statement schedules filed as part of this annual report, since the required information is included in the consolidated financial statements, including the notes thereto, or the circumstances requiring inclusion of such schedules are not
present.



| | (3) | Exhibits:
| | --- | ---------

See Exhibit Index



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.



RADYNE CORPORATIONBy:

/s/ Carl Myron WagnerCarl Myron Wagner, Chief Executive Officer(Principal Executive Officer)By:

/s/ Malcolm C. PersenMalcolm C. Persen, Vice President, Secretary and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)


Dated: March 2, 2007

KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints, jointly and severally, Carl Myron Wagner and Malcolm C. Persen, his true and lawful attorney-in-fact
and agents, with full power of substitution, for him in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities
and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitute, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



|                                              |  |                                                                                                                      |  |              
|--------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                                          |  | Title                                                                                                                |  | Date         
|                                              |  |                                                                                                                     
|/s/ C.J. Waylan C.J.
Waylan                   |  | Chairman of the Board of Directors                                                                                   |  | March 2, 2007
|                                              |  |                                                                                                                     
|/s/ Lee Yip Loi Lee Yip
Loi                   |  | Director                                                                                                             |  | March 2, 2007
|                                              |  |                                                                                                                     
|/s/ Dennis Elliott Dennis
Elliott             |  | Director                                                                                                             |  | March 2, 2007
|                                              |  |                                                                                                                     
|/s/ James J. Spilker Jr. James J.
Spilker Jr. |  | Director                                                                                                             |  | March 2, 2007
|                                              |  |                                                                                                                     
|/s/ Robert C. Fitting Robert C.
Fitting       |  | Director                                                                                                             |  | March 2, 2007
|                                              |  |                                                                                                                     
|/s/ William Keiper William
Keiper             |  | Director                                                                                                             |  | March 2, 2007
|                                              |  |                                                                                                                     
|/s/ Carl Myron Wagner Carl Myron
Wagner       |  | Chief Executive Officer and Director                                                                                 |  | March 2, 2007
|                                              |  |                                                                                                                     
|/s/ Malcolm C. Persen Malcolm C.
Persen       |  | Vice President, Secretary and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |  | March 2, 2007



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EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                                                                      
|            | 
|3.1(1)      |  | Restated Certificate of Incorporation                                                                                                                                                                                                        
|            | 
|3.2(2)      |  | Certificate of Ownership and Merger (amending the Restated Certificate of Incorporation) certified June 1, 2005                                                                                                                              
|            | 
|3.3(3)      |  | Amended and Restated ByLaws                                                                                                                                                                                                                  
|            | 
|10.1(a)(4)  |  | 1996 Incentive Stock Option Plan                                                                                                                                                                                                             
|            | 
|10.1(b)(5)  |  | Amendment to 1996 Incentive Stock Option Plan                                                                                                                                                                                                
|            | 
|10.2(6)     |  | 1999 Employee Stock Purchase Plan                                                                                                                                                                                                            
|            | 
|10.3(a)(7)  |  | 2000 Long-Term Incentive Plan                                                                                                                                                                                                                
|            | 
|10.3(b)(8)  |  | Amendment to 2000 Long-Term Incentive Plan                                                                                                                                                                                                   
|            | 
|10.3(c)(9)  |  | Amendment to 2000 Long-Term Incentive Plan                                                                                                                                                                                                   
|            | 
|10.4(a)(10) |  | Lease by and between ADI Communication Partners, L.P. and ComStream dated April 23, 1997                                                                                                                                                     
|            | 
|10.4(b)(10) |  | First Amendment to lease by and between ADI Communication Partners L.P. and ComStream dated July 16, 1997                                                                                                                                    
|            | 
|10.4(c)(10) |  | Second Amendment to Lease by and between Kilroy Realty, L.P. and ComStream dated November 18, 1998                                                                                                                                           
|            | 
|10.5(11)    |  | Lease Agreement dated November 11,1997 by and between Registrant and OMB Development I, L.L.C.                                                                                                                                               
|            | 
|10.6(12)    |  | Lease Agreement dated April 7th, 2000 by and between Xicom Technology, Inc. and Mission West Properties L.P. III                                                                                                                             
|            | 
|10.7(13)    |  | Lease Agreement dated November 8th, 2004 by and between Registrant and RREEF AMERICA REIT II CORP., JJ                                                                                                                                       
|            | 
|10.8(14)    |  | Credit Agreement by and between the Registrant and Wells Fargo HSBC Trade Bank, N.A.                                                                                                                                                         
|            | 
|10.9(15)    |  | Form of Indemnification Agreement                                                                                                                                                                                                            
|            | 
|10.10(16)   |  | ***Change of Control Agreement, dated as of March 20, 2002, by and between Registrant and Steven Eymann                                                                                                                                      
|            | 
|10.11(17)   |  | ***Change of Control Agreement, dated as of March 20, 2002, by and between Registrant and Brian Duggan                                                                                                                                       
|            | 
|10.14(18)   |  | ***Change of Control Agreement, dated May 13, 2004, by and between Registrant and Malcolm C. Persen                                                                                                                                          
|            | 
|10.15(19)   |  | ***Employment Agreement by and between Registrant and Malcolm C. Persen dated as of March 9, 2005                                                                                                                                            
|            | 
|10.16(20)   |  | ***Amendment to the Change of Control Agreement by and between Radyne Corporation and Malcolm C. Persen, effective May 5, 2006.                                                                                                              
|            | 
|10.17(21)   |  | ***Employment Agreement by and between Registrant and Carl Myron Wagner effective as of January 30, 2006                                                                                                                                     
|            | 
|10.18(22)   |  | Agreement and Plan of Merger, dated March 2, 2005, by and among Registrant, Xicom Acquisition Inc., Xicom Technology., the Xicom Shareholders (as defined therein) and Walt Wood, solely in his
capacity as the Shareholders Representative.
|            | 
|10.19(23)   |  | Amendment No. 1 to Agreement and Plan of Merger by and among Registrant, Xicom Acquisition Inc., Xicom Technology Inc., the Xicom Shareholders (as defined therein) and Walt Wood, solely in his
capacity as the Shareholders Representative
|            | 
|21.1*       |  | Subsidiaries of the Registrant                                                                                                                                                                                                               
|            | 
|23.1*       |  | Consent of KPMG LLP                                                                                                                                                                                                                          
|            | 
|24.1*       |  | Power of Attorney (see signature page)                                                                                                                                                                                                       
|            | 
|31.1*       |  | Certification of the Principal Executive Officer Pursuant to Rule 13-14(a) Under the Securities Exchange Act of 1934                                                                                                                         
|            | 
|31.2*       |  | Certification of the Principal Financial Officer pursuant to Rule 13-14(a) Under the Securities Exchange Act of 1934                                                                                                                         
|            | 
|32.1**      |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                



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---

|* | Filed herewith
|- | --------------

|** | Furnished herewith
|-- | ------------------

|*** | Indicates management compensatory contract, plan or arrangement
|--- | ---------------------------------------------------------------

|(1) | Incorporated by reference from exhibit 3.1 to Registrants description of capital stock on Form 8-A12G, filed on July 13, 2000.
|--- | -------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to Exhibit 3.2 to Registrants Annual Report on Form 10-K, as filed with the SEC on March 16, 2006
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to Exhibit 3.1 to Registrants Current Report on Form 8-K, as filed with the SEC on October 24, 2006 (File No. 000-11685)
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to Exhibit 4.1 to Registrants Registration Statement on Form S-8, dated and declared effective on March 12, 1997 (File No. 333-23159).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to Exhibit 4.1 to Registrants Registration Statement on Form S-8, dated and declared effective on November 18, 1998 (File No. 333-67469).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated by reference to Exhibit 4.1 to Registrants Registration Statement on Form S-8, dated and declared effective on November 5, 1999 (File No. 333-90383).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to Exhibit 4.1 to Registrants Registration Statement on Form S-8, dated and declared effective on July 19, 2000 (File No. 333-41704)
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Incorporated by reference to Exhibit 4.1 to Registrants Registration Statement on Form S-8, dated and declared effective on May 29, 2002 (File No. 333-89316).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Incorporated by reference to Exhibit 10.2 to Registrants Current Report on Form 8-K as filed with the SEC on June 13, 2006.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(10) | Incorporated by reference from Registrants Registration Statement on Form S-2, filed January 11, 1999 (File No. 333-70403).
|---- | ----------------------------------------------------------------------------------------------------------------------------

|(11) | Incorporated by reference to Exhibit 10.3 to Registrants Annual Report on Form 10-K for the year ended December 31, 1997, as filed with the SEC on March 27, 1998
(File No. 000-11685).
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Incorporated by reference to Exhibit 10.1 to Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, as filed with the SEC on November 9,
2005 (File No. 000-11685)
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | Incorporated by reference to Exhibit 10.2 to Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, as filed with the SEC on November 9,
2005 (File No. 000-11685)
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(14) | Incorporated by reference to Exhibit 10.6 to Registrants Annual Report on Form 10-K for the year ended December 31, 2001, as filed with the SEC on April 1, 2002
(File No. 000-11685).
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(15) | Incorporated by reference from exhibit 10.1 to Registrants Current Report on Form 8-K, as filed with the SEC on October 24, 2006 (File No. 000-11685)
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|(16) | Incorporated by reference to Exhibit 10.2 to Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, as filed with the SEC on May 15, 2002
(File No. 000-11685).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(17) | Incorporated by reference to Exhibit 10.3 to Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, as filed with the SEC on May 15, 2002
(File No. 000-11685).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(18) | Incorporated by reference to Exhibit 10.1 to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 as filed with the SEC on August 11, 2004
(File No. 000-11685).
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(19) | Incorporated by reference to Exhibit 10.11 to Registrants Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the SEC on March 16, 2005
(File No. 000-11685).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(20) | Incorporated by reference to Exhibit 10.2 to Registrants Current Report on Form 8-K, as filed with the SEC on October 24, 2006 (File No. 000-11685)
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|(21) | Incorporated by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K, as filed with the SEC on January 17, 2006 (File No. 000-11685).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(22) | Incorporated by reference to Exhibit 10.12 to Registrants Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the SEC on March 16, 2005
(File No. 000-11685).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(23) | Incorporated by reference to Exhibit 2.1 to Registrants Current Report on Form 8-K/A, as filed with the SEC on May 31, 2005 (File No. 000-11685)
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------

Copies of any of the exhibits referred to above will be furnished at no cost to security holders who make a written request therefore to Investor Relations, Radyne
Corporation, 3138 E. Elwood St., Phoenix, Arizona 85034 or via the Company website (www.radn.com).



59