================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

--------------------------------------------------------------------------------

                                    FORM 10-K

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

For the fiscal year ended                                        Commission File
December 31, 1999                                                 Number 0-11685

--------------------------------------------------------------------------------

                              RADYNE COMSTREAM INC.
             (Exact name of Registrant as specified in its charter)

                        NEW YORK                    11-2569467
              (State or other jurisdiction       (I.R.S. Employer
            of incorporation or organization)   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: None

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

                          Common Stock, $.002 Par Value
                         Common Stock Purchase Warrants

--------------------------------------------------------------------------------

     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.   [ ]

     The  aggregate  market  value of the voting  stock  held by  non-affiliates
(deemed by the registrant to be persons,  along with members of their  families,
known to the  registrant to  beneficially  own,  exclusive of shares  subject to
options,  less  than 5% of the  outstanding  shares of the  registrant's  common
stock) of the registrant as of February 22, 2000 was approximately $67,800,000

     As of February 22, 2000,  there were 13,552,496  shares of the registrant's
common stock outstanding.

================================================================================



<PAGE>

                                     PART I

                DISCLOSURE CONCERNING FORWARD-LOOKING STATEMENTS

     Certain   statements  under  the  captions   "Business"  and  "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
constitute "forward-looking statements" within the meaning of Section 21E of the
Securities  Exchange Act of 1934, as amended.  Such  forward-looking  statements
involve known and unknown  risks,  uncertainties  and other  factors,  which may
cause the actual results,  performance or achievements of Radyne ComStream Inc.,
or  industry  results,  to be  materially  different  from any  future  results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements. Such factors include, among others, the following:

     o    loss of, and failure to replace, any significant customers;

     o    timing and success of new product introductions;

     o    product developments, introductions and pricing of competitors;

     o    timing of substantial customer orders;

     o    availability of qualified personnel;

     o    the impact of local  political  and  economic  conditions  and foreign
          exchange fluctuations on international sales;

     o    performance of suppliers and subcontractors;

     o    market   demand  and  industry   and  general   economic  or  business
          conditions;

     o    availability, cost and terms of capital;

     o    the "Risk Factors" set forth in our Registration Statement on Form S-2
          (No. 333-90731), dated February 7, 2000;

     o    other factors to which this report refers.

ITEM 1.  BUSINESS

Overview

     We design, manufacture, and sell equipment used in the ground-based portion
of satellite  communication  systems to receive, and transmit data, video, audio
and Internet over satellite  communications links. We also design,  manufacture,
and sell equipment used in cable  television  systems.  Our products are used in
applications  for telephone,  data,  video and audio  broadcast  communications,
private  and  corporate  data  networks,  Internet  applications,   and  digital
television  for  cable.  We  serve  customers  in over 80  countries,  including
customers in the television broadcast industry, international telecommunications
companies,  Internet service providers, private communications networks, and the
United States government.

     Our products have been utilized in major communications  systems worldwide,
including the following:

     o    The world's highest capacity  domestic,  digital  satellite  telephone
          network -- PT Telkom, Indonesia.

     o    Italy's first digital  telephone/data  network -- Telespacio,  Italian
          Railways.

     o    Colombia's first alternate telecommunications network -- Americatel.

     o    Earth stations for the first  international  satellite links in China,
          India, Pakistan, Brazil, Haiti and Zambia.

                                       2

<PAGE>

     o    The world's largest private satellite broadcast network -- Reuters.

     o    International  Cablecasting  Technologies -- utilizing  40,000 digital
          audio broadcast receivers.

Industry Overview

     Satellite technology has been established as a key element in the growth of
communications  systems.  Satellites  enable high-speed  communications  service
where there is no suitable alternative available.  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. The three principal
categories of satellite  communications service applications are fixed satellite
services, mobile satellite services, and direct broadcast services.

     Fixed Satellite Services.  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  additional  growth 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 Services.  Mobile satellite services operate between fixed
earth  stations and mobile user 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.

     Direct Broadcast  Services.  Direct broadcast  satellite services provide a
direct  transmission  link from  high-power  satellites to customers over a wide
geographic  area.  This  includes  direct-to-home  television  services,  direct
broadcast data services, and Internet access.

     Satellite  communication  systems used to provide these services consist of
two elements: satellites (the "space segment") and ground-based transmission and
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 consists principally of one or more
earth stations. An earth station is an integrated system consisting of antennae,
radio  signal  transmitting  and  receiving  equipment,  a  satellite  modem,  a
frequency  controller,  and voice, data, and video network interface  equipment.
Earth stations provide a communications  link to the end user either directly or
through land-based networks.

     We have participated  principally in the ground segment products,  systems,
and networks portion of the market. The Satellite Industry Association estimates
the global market for satellite  ground  equipment and integration  services was
$15.2 billion in 1998, of which our  management  estimates  $800 million was for
the type of equipment we develop, manufacture, and market.

Industry Growth

     We  believe  that  growth  in  demand  for  satellite  system  ground-based
equipment has been and will  continue to be driven by, among other  things,  the
growth of satellite-delivered communications services such as the fixed, mobile,
and direct  broadcast  services  described  above.  According  to the  Satellite
Industry  Indicators  Survey:  Selected  1998 Survey  Results  conducted  by the
Satellite  Industry  Association  and Futron  Corporation,  total  revenues  for
providers of satellite  communications  services grew at an 18% compound  growth
rate to $26.2  billion in 1998,  from $21.2 billion in 1997 and $15.9 billion in
1996.

     We believe that future growth in satellite  communications services will be
driven principally by the following major factors:

     o    Global   deregulation  and  privatization  of   government-monopolized
          telecommunications  carriers,  which  will  stimulate  growth  in  the
          communications industry in general.

     o    Growing  worldwide  demand for  communications  services  in  general,
          including data communications services over the Internet and corporate
          Intranets.

                                       3

<PAGE>

     o    The relative  cost-effectiveness of satellite  communications for many
          applications, such as digital television delivery.

     o    Technological  advancements that broaden applications for and increase
          the capacity in satellite networks.

     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 do not have 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 requirement for  communications  services in these
countries.

     Growing Worldwide Demand for Communications Services.  Factors contributing
to the growing demand for  communications  services include  worldwide  economic
development  and the increasing  globalization  of commerce.  Businesses  have a
growing 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 grow in both developed and developing countries.

     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
population  concentrations  are separated by  significant  distances,  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  bandwidth  on  demand,  digital  television  compression
technology,  and signal processing  methods will continue to simulate the demand
for the use of satellite communication services.

Market Opportunities

     Satellite  communication  systems  provide  a  number  of  advantages  over
land-based  networks for a variety for applications.  We have identified several
key markets and customer  groups that we believe provide  opportunities  to sell
our products.

International and Rural Telephony

     Satellite   communication   systems  enjoy   advantages  in   international
telecommunications markets for several reasons:

     o    It is not cost-effective to utilize land-based  networks in many areas
          of  the  world,   especially   developing   countries   where   modern
          communications capabilities are just beginning to develop.

     o    All areas  within a satellite  beam receive the same level of service,
          making  it  highly  attractive  in  rough  terrain  or  underdeveloped
          regions.

     o    Satellites  can be deployed  much more rapidly to offer  international
          services.

     We  believe  there  are  certain  communication  requirements  that  can be
reasonably  satisfied  only  with  satellite  systems.  For  example,  satellite
communications offer a cost-effective  solution that can be installed relatively
quickly to  provide  communications  services  in remote or  sparsely  populated
areas,  in rugged or in  mountainous  terrain,  or in nations  composed  of many
islands,  a  geographical  feature  which is  relatively  common in the  Pacific
region.

     The  potential  to reach areas of low  subscriber  density  without  costly
construction  of land-based  networks makes  satellite  communication  systems a
viable solution for rural telephony systems. Rural telephony can be described as
an intra-country  telecommunications network linking many remote locations, such
as small villages or islands in the  Philippines.  These networks allow villages
to communicate  with each other and with the world. In a typical rural telephony
system,  a small village  might  install a satellite  earth station in a central
location  such as the local  post  office.  Residents  then use this  convenient
location to communicate throughout the country and the world.

                                       4

<PAGE>

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.

Information and 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.  Financial  news  providers,
merchandise  retailers,  and others use satellite  systems to provide  financial
data and other audio and video transmissions for a variety of applications, such
as news wire services and supermarket in-store radio.

Television Video Distribution

     Compressed digital video is a recently  developed  technology that provides
significant new market opportunities for the satellite  communications industry.
The development of digital  compression  technology  allows the  transmission of
television  signals  via  satellite  in a smaller  bandwidth  than is  currently
possible  through  alternative  technologies.  This  advance  in  communications
technology is enabling a wider application of satellite solutions for television
and video broadcast services, including the following:

     o    Satellites  provide  television  broadcasters  with an  efficient  and
          economical  method to distribute  their  programming  to cable service
          providers and direct broadcast satellite operators.

     o    Compressed  video encoding and decoding make satellites  available for
          less    demanding    video    transmissions,     including    business
          teleconferencing, private business networks, and telemedicine.

     o    The  economics  of  compressed   video  allow  the  use  of  satellite
          transmission for long-distance teaching applications.

     o    Digital cinema distribution is emerging as a viable alternative to the
          physical distribution of feature length films.

     o    There is an emerging  market to provide data and video directly to the
          personal computer via satellite.

Internet Communications

     The  Internet  is  evolving  into a global  medium,  allowing  millions  of
individuals throughout the world to communicate,  share information,  and engage
in electronic commerce.  According to International Data Corporation, the number
of people  worldwide  accessing  the Internet will grow from  approximately  100
million at year end 1998 to 320  million by 2002.  This growth 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.

     According to DTT Consulting,  a satellite industry  consulting and research
firm,  there has been  significant  growth in the use of satellites for Internet
traffic in recent years.  This growth has been  centered on connecting  Internet
service  providers,  or ISPs, with Internet  servers.  DTT Consulting  estimates
there were 948  satellite ISP links in operation in January 1999, up from 222 at
the same time in the prior year.  Satellite capacity is being used for ISP links
primarily  where  fiber cable is  prohibitively  expensive  or rare,  such as in
underdeveloped or emerging countries or where there is insufficient transoceanic
fiber.   Although  ISPs  rarely  use   satellites   to  provide   point-to-point
infrastructure  for the Internet  within the United States,  the following table
sets  forth  data that  indicates  that  nearly  one in ten ISPs  worldwide  use
satellite capacity to link with an Internet server for point-to-point traffic.

                                       5

<PAGE>

                Internet Service Providers Connections by Region
                               As of January 1999

                                                                     % ISPS
                                                    No. Satellite   Connected
    Geographic Area                   No. of ISPS       Links      via Satcoms*
    ---------------                   -----------   -------------  ------------
Western Europe ..................        2,273            84           3.7%
CEE and CIS** ...................          359           280          78.0
Sub-Saharan Africa ..............          288           131          45.5
Latin America ...................          577           138          23.9
Middle East & North Africa ......          156            48          30.8
Asia ............................          825            85          10.3
Australasia .....................          748            86          11.5
North America ...................        4,512            96           2.1
                                         -----         -----          ----
         Total ..................        9,738           948           9.7%
                                         =====         =====          ====

Source: DTT Consulting

---------
*    Satcoms are communications satellites.

**   CEE  stands  for  Central  and  Eastern  Europe  and  CIS  stands  for  the
     Commonwealth of Independent States.

     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. Additionally,  satellite broadcast architecture provides an
attractive  alternative  for Internet  service  providers,  which  presently are
dealing with the bottlenecks  associated with rapid and uneven Internet  growth.
Satellite  systems  can relieve  congestion  by  providing  a low-cost  means of
selectively distributing content to sites closer to end-users. Today, only 1,000
Websites  represent  over 80% of the most  frequently  accessed  content  on the
Internet.  These Web pages can be transmitted via satellite at regular intervals
to designated server  destinations and then stored in servers for local users to
access.  This cached content  reduces the need to retrieve the most popular data
from the source, thus reducing delays and congestion on the Internet.  Likewise,
we expect Internet  multicasting to serve as a solution for the  distribution of
large applications, such as database updates.

Government and Military

     The United States government  provides a significant market opportunity for
satellite  equipment  manufacturers as the defense budget shrinks and 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  customer  that is  sizable  and  likely to  provide  consistent
business.

Strategy

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

     Target  Providers of Fixed,  Mobile,  and Direct  Broadcast  Communications
Services  Worldwide.  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 plan to target
providers  of  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.

     Exploit New Applications for Our Existing Satellite Technology.  We plan to
adapt existing products for use in the Internet broadband, cable television, and
television  news  gathering   markets,   which  utilize  digital  receivers  and
transmission equipment using many of the same modulation, coding, interface, and
protocol  technologies  as the satellite  business.  We have adapted some of our
products for the television distribution market, including satellite modems that
we converted for use in cable television  systems. We also recently entered into
a strategic  relationship  with  DiviCom  Inc., a major  producer of  compressed
digital television systems.  Under this arrangement,  our strategic partner will
utilize our products in cable systems that it markets to cable television system
operators.

                                       6

<PAGE>

     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  Internet  communications,  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.

     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  line,  improve our sales force or
increase our profitability.

Products

     We offer the following product families:

     o    Satellite modems and earth stations.

     o    Frequency converters.

     o    Data, audio, and video broadcast equipment.

     o    Digital video broadcast (DVB) and high speed modems.

     o    Cable and microwave modems.

Satellite Modems and Earth Stations

     We produce  satellite modems that are sold  individually and earth stations
that are a bundled solution built around our satellite 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.

     Our earth  stations  commonly  consist of several  components,  including a
satellite modem, a frequency  converter,  a transceiver,  a transmitter,  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.

     Our Star Network  Management System augments these product  offerings.  The
Star Network  Management  System,  which  consists of a Windows  NT(R) point and
click system,  is used to remotely  monitor and maintain the  functioning  of an
entire network of modems, earth stations,  and ancillary equipment.  This can be
done  from a single  location,  thereby  eliminating  the need to travel to each
remote location. This system provides local and remote modem management, control
of the  equipment  connected  to the modems and earth  stations,  collection  of
network status and alarm  information,  remote channel  monitoring,  and dial-up
control.

Frequency Converters

     We currently market two varieties of converters used to transmit signals to
satellites and three converters used to receive signals relayed from satellites.
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.

     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


                                       7
<PAGE>

modem into a wave pattern that can be interpreted  by the  particular  satellite
being used in the satellite system to relay communication signals.

Data, Audio and Video Broadcast Equipment

     Our digital audio  distribution  products  provide radio networks,  service
providers,  and merchandise  retailers with a satellite  distribution system for
the  broadcast  of  in-store   advertising  and  background   music.   Our  data
distribution  products  deliver  real-time,  high-value  data and digital  video
broadcast  services.  To date, the primary  customers for our data  distribution
products have been  participants  in the financial  industry.  For example,  our
IntelliCast  Digital  Data  Broadcast  Receiver  is used by  customers,  such as
Reuters, to distribute financial  information,  up-to-date news stories or image
files of weather  information  and database  updates from a central  location to
many remote outlets.

     Our  Mediacast  Satellite  PC/Receiver  card allows  personal  computers to
request  information  over a  telephone  link and then  receive a digital  video
broadcast of a wide range of data, audio, and video information  directly from a
satellite.  This speeds the reception of  information,  particularly  in regions
with underdeveloped telephony, and is often used by Internet service providers.

Digital Video Broadcast (DVB) and High Speed Modems

     Our DVB modems  facilitate the  transmission of  high-quality  video images
among multiple locations via satellite. These modems utilize digital compression
technology  that  allows  users to  transmit  television  signals  in a  smaller
bandwidth than is possible  using older  technology,  thereby making  television
transmission  by satellite more  economical.  Video  compression  allows for the
transmission  by  satellite  of a  much  higher  number  of  channels  than  was
previously the case,  thus producing a significant  new market for our products.
Satellites are often used in industries  where live,  high-quality  video images
are essential, such as direct television broadcasts.

     Our  high-speed  digital  modems  transmit  a  greater  volume of data than
standard  satellite  modems.  Our  modems  are  used in large  satellite  system
connections that transmit  significant amounts of data at high speeds.  Internet
service  providers  and  government  agencies are  principal  customers  for our
high-speed and digital high-speed products.

Cable and Microwave Modems

     Our cable modems are used  primarily in the  distribution  of digital video
for use by cable television distributors and in high-definition  television. The
design of our cable  modems  allows for the  transmission  of  digital  video on
terrestrial,  broadband cable and enables system operators to manage and control
the  available   bandwidth.   Our  microwave   modems  transmit  over  microwave
frequencies 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
news gathering trucks.

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 communications,  telecommunications,  and cable television industries.
Our future growth  depends on  increasing  the market share of our new products,
adapting our existing satellite communications products 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.

                                       8
<PAGE>

     Research  and  development  expenses  amounted to $9.1 million for the year
ended December 31, 1999,  $4.3 million for the year ended December 31, 1998, and
$2.3 million for the year ended December 31, 1997. A number of new products were
either  launched  or reached  an  advanced  stage of  development  during  these
periods.

     Much  of the  increase  in  research  and  development  expenses  is due to
developmental  products acquired in the 1998 acquisition of ComStream  Holdings,
Inc., but the remainder is directly related to our ongoing  commitment to expand
our product  line and  penetrate  new  markets.  We intend to use a  significant
portion of the proceeds  obtained  through a public offering of our common stock
to fund our research into Internet-related products for satellite ISP links, and
other  new  telecommunications  products.  This  offering  became  effective  on
February 7, 2000. We also plan to target our research and development activities
at 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
prove successful.

Sales and Marketing

     We sell our products through an international sales force with sales and/or
service offices in San Diego, Phoenix, Boca Raton, Beijing,  Singapore,  London,
Amsterdam,  and  Jakarta.  Our direct  sales force  consists  of 14  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,   distributors  and
systems  integrators  sell our  products,  supported by our sales and  marketing
personnel.

     We participate in approximately six trade shows each year. We also generate
new sales leads through advertising in trade magazines, direct mail, and our Web
site (http://www.RadyneComStream.com).

     We maintain a customer  service and support staff that  primarily  supports
customers  and  distributors  and is  responsible  for  after-sale  support  and
installation supervision.  In certain instances, we use third-party companies to
install and maintain our products at our customers' sites.

Customers

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

     For the  years  ended  December  31,  1999 and  1998,  no  single  customer
represented  more than 10% of our net sales.  During the year ended December 31,
1997, one customer  represented 14.5% of our net sales. Because of the nature of
our business, we anticipate that any customers that 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.

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

    Region                   Year ended          Year ended          Year ended
    ------                    12-31-99            12-31-98            12-31-97
                             ----------          ----------          ----------
Asia                             25%                  7%                 32%
Africa/Middle East                4%                  8%                  0%
Latin America                     4%                  9%                 12%
Europe                           21%                 23%                  7%
Canada                            2%                  3%                  5%
                                 --                  --                  --
Total Exports                    56%                 50%                 56%


     We believe  that the  amount of our total  exports  may rise 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.

                                       9

<PAGE>

Competition

     We have a  number  of major  competitors  in the  satellite  communications
field. These include large companies,  such as Hughes Network Systems,  NEC, and
Adaptive  Broadband  Corp.,  all of which  have  significantly  larger  and more
diversified  operations  and  greater  financial,  marketing,  human  and  other
resources  than we  possess.  We  estimate  that our  major  competitors  in the
principal  markets  in which we  compete  have the  following  market  shares as
compared to our market share:

<TABLE>
<CAPTION>
                                                              Digital Video
                                    Satellite Modems &         Broadcast &          Government &         Data, Audio &
Competitor                            Earth Stations        High Speed Modems      Military Modems      Video Broadcast
----------                             --------------       -----------------      ---------------      ---------------
<S>                                         <C>                    <C>                   <C>                   <C>
Adaptive Broadband............              19%                    30%                   35%                    *
Hughes Network Systems........              19                     *                       *                    *
SSE Telecom...................              8                      *                      10                    *
NEC...........................              24                     *                       *                    *
Wegener.......................              *                      *                       *                   25
IDC...........................              *                      *                       *                   25
Radyne ComStream..............              8                     35                      35                   40
</TABLE>

---------
*    Competitor does not participate in product category.

     We do not believe that any other single  competitor  has a greater than 10%
market share for any of these product  classes.  However,  the foregoing  market
share figures represent estimates based on the limited information  available to
us, and we cannot assure you that it is accurate.

     We compete by concentrating our sales efforts in the  international  market
and emphasizing our product  features and quality.  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 increased 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:

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

     o    Our  expansive  line  of  well-known,  well-respected,  off-the-shelf,
          state-of-the-art  equipment  that  enables  us to meet our  customers'
          requirements.

     o    Our  ability to custom  design  products  for our  customers'  special
          applications  and  to  provide  a  one-stop  shopping  option  to  our
          customers.

     o    Our  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.

     o    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  in  Beijing,  Singapore,   London,
          Jakarta, and Amsterdam.

     o    Our October 1998 acquisition of ComStream, which:

          o    significantly expanded our product lines,

          o    enhanced our sales force,

                                       10

<PAGE>

          o    increased our market share, and

          o    increased our profitability.

Manufacturing

     We assemble and test  certain of our  products at our Phoenix,  Arizona and
San Diego,  California  facilities  using  subsystems and circuit boards that we
obtain from subcontractors.  We obtain the remainder of our products, completely
assembled and tested, from subcontractors.  Although we believe that we maintain
adequate stock to reduce the procurement lead time for certain  components,  our
products  use a  number  of  specialized  chips  and  customized  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 an interruption in production until we develop an alternative  supply
source.   We  maintain  an  inventory  of  certain  chips  and   components  and
subassemblies to limit the potential for such an  interruption.  We believe that
there are a number of companies capable of providing  replacements for the types
of chips and customized components and subassemblies used in our products.

     In 1999,  our Phoenix  facility  was awarded  ISO-9001  certification,  the
international quality control standard for research and development,  marketing,
sales, manufacturing, and distribution processes. This certification will assist
in increasing  the acceptance of our products in foreign  markets.  We intend to
pursue  certification  of our San Diego facility.  We cannot provide  assurance,
however, that certification will be granted.

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 some of our 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  provide.  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.

Employees

     As of December 31, 1999, we had 183 full-time  employees,  including  three
executive  officers,  123 in  engineering  and  manufacturing,  34 in  marketing
operations, and 23 in administration. These figures include 23 employees who are
based outside the United  States.  None of our employees  are  represented  by a
union in collective  bargaining with us. We believe that our relationships  with
our employees are satisfactory.

ITEM 2. PROPERTIES

     In order to  accommodate  our  recent  growth,  we  moved  into new  leased
facilities in both Phoenix,  Arizona and San Diego,  California in late 1998. We
currently  have 76,000  square feet  available in Phoenix and 66,400 square feet
available in the San Diego facility.  The lease for our Phoenix facility expires
in July 2008 and we have an option  to renew for two  consecutive  terms of five
years each.  The lease for our San Diego  facility  expires in March 2005 and we
have an option to renew for two consecutive  terms of five years each. We expect
these facilities will be adequate for meeting our needs in the immediate future.

     We also have  regional  sales and service  offices in Boca Raton,  Beijing,
Singapore, London, Jakarta, and Amsterdam. All of these facilities are leased.

ITEM 3. LEGAL PROCEEDINGS

     We are not currently a party to any material legal proceedings.



                                       11
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of securities  holders during the three
months ended December 31, 1999.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common  stock was  traded on the OTC  Bulletin  Board  under the symbol
"RADN" as of December 31, 1999. As a result of our public offering, which became
effective  February  7, 2000,  our common  stock and  warrants  now trade on the
Nasdaq SmallCap Market under the symbols "RADN" and "RADNW,"  respectively.  The
following  table sets forth the range of high and low trading prices as reported
by the OTC Bulletin  Board for the periods  indicated.  At February 22, 2000, we
had approximately 419 stockholders of record and approximately  2,460 beneficial
owners of our common stock.

                                                       High $              Low $
                                                       ------              -----
1997:
         First Quarter .....................                6              3 1/8
         Second Quarter ....................            3 1/4                  3
         Third Quarter .....................           10 3/4                  5
         Fourth Quarter ....................           10 1/2                  4

1998:
         First Quarter .....................            5 1/4              2 1/8
         Second Quarter ....................                5              2 3/4
         Third Quarter .....................          4 15/16              3 1/4
         Fourth Quarter ....................                5              2 1/2

1999:
         First Quarter .....................            4 1/4              2 1/4
         Second Quarter ....................            3 3/4              2 1/2
         Third Quarter .....................           3 9/16              2 1/4
         Fourth Quarter ....................            8 1/2              2 3/4

     On March 1, 2000 the last sale price of the common stock as reported by the
NASDAQ SmallCap Market was $28.50 per share.

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




                                       12

<PAGE>


ITEM 6. SELECTED FINANCIAL DATA

     The following  selected  statement of  operations  data for the years ended
December 31, 1999,  1998 and 1997,  the six months ended  December 31, 1996, the
year ended June 30, 1996 and the six and  one-half  month  period ended June 30,
1995, and the selected  balance sheet data at those dates,  are derived from our
consolidated  financial  statements and notes thereto audited by our independent
auditors:  KPMG LLP (in the case of the years ended  December 31, 1999 and 1998)
and Deloitte & Touche LLP (in the case of the year ended  December 31, 1997, the
six months ended  December 31, 1996,  the year ended June 30, 1996,  and the six
and one-half months ended June 30, 1995). Per share data and shares  outstanding
reflect an adjustment for the effects of the 1-for-5 reverse split of our common
stock,  which became  effective on January 9, 1997. The following data should be
read in  conjunction  with  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations" and the consolidated  financial  statements
and notes thereto included elsewhere in this 10-K Annual Report.

     The  variations in the duration of the  respective  periods in the table on
the following  page are due to a series of changes in our fiscal year.  Upon our
emergence from  bankruptcy on December 16, 1994, our fiscal year ended.  We then
adopted the fiscal year of our new parent, which ran through June 30, 1995 which
created a 6 1/2 month  period,  followed by a full year ended June 30, 1996.  We
then became a  subsidiary  of ST in August 1996 and adopted its fiscal year (the
calendar  year),  which  created a stub fiscal  period from July 1, 1996 through
December 31, 1996.




                                       13

<PAGE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA:
                                                        Years Ended December 31,             6 Months                   6 1/2 Months
                                                ----------------------------------------      Ended      Year Ended        Ended
                                                    1999          1998          1997         12/31/96      6/30/96        6/30/95
                                                ------------  ------------  ------------   ------------  ------------  ------------

<S>                                             <C>           <C>           <C>            <C>           <C>           <C>
Net sales ..................................... $ 55,839,792  $ 21,111,704  $ 13,446,852   $  4,905,059  $  3,829,523  $  1,861,262
Cost of sales .................................   29,970,560    15,808,459     8,022,262      4,052,433     2,559,350     1,228,747
                                                ------------  ------------  ------------   ------------  ------------  ------------
Gross profit ..................................   25,869,232     5,303,245     5,424,590        852,626     1,270,173       632,515
                                                ------------  ------------  ------------   ------------  ------------  ------------
Selling, general and administrative expense ...   12,355,188     5,531,213     4,242,138      1,437,971     1,843,576       961,162
Research and development expense ..............    9,126,545     4,296,268     2,262,066        808,025     1,794,823            --
Stock option compensation expense .............      350,000     1,566,075            --             --            --            --
In-process research and development expense ...           --     3,909,000            --             --            --            --

Restructuring costs ...........................           --     3,100,000            --             --            --            --

Asset impairment charges(1) ...................           --       262,935            --        421,000            --            --
                                                              ------------  ------------   ------------  ------------  ------------
Total operating expenses ......................   21,831,733    18,665,491     6,504,204      2,666,996     3,638,399       961,162
                                                ------------  ------------  ------------   ------------  ------------  ------------
Earnings (loss) from operations ...............    4,037,499   (13,362,246)   (1,079,614)    (1,814,370)   (2,368,226)     (328,647)
Interest expense ..............................    1,910,422     1,198,777       677,102        255,604       256,871        36,209
Other income ..................................      (76,045)      (23,480)           --             --            --            --
                                                ------------  ------------  ------------   ------------  ------------  ------------
Earnings (loss) before income taxes and
extraordinary item ............................    2,203,122   (14,537,543)   (1,756,716)    (2,069,974)   (2,625,097)     (364,856)
Income taxes ..................................       85,000            --            --             --            --            --
                                                ------------  ------------  ------------   ------------  ------------  ------------
Earnings (loss) before extraordinary item .....    2,118,122   (14,537,543)   (1,756,716)    (2,069,974)   (2,625,097)     (364,856)
Extraordinary item ............................      188,182            --            --             --            --            --
                                                ------------  ------------  ------------   ------------  ------------  ------------
Net earnings (loss) ........................... $  2,306,304  ($14,537,543) ($ 1,756,716)    (2,069,974)   (2,625,097)     (364,856)
                                                ============  ============  ============   ============  ============  ============
Basic earnings (loss) per share:
   Earnings (loss) before extraordinary item .. $       0.30  $      (2.45) $      (0.35)  $      (0.55) $      (0.70) $      (0.10)
   Extraordinary item .........................         0.02          0.00          0.00           0.00          0.00          0.00
                                                ------------  ------------  ------------   ------------  ------------  ------------
   Net earnings (loss) ........................ $       0.32  $      (2.45) $      (0.35)  $      (0.55) $      (0.70) $      (0.10)
                                                ============  ============  ============   ============  ============  ============
Diluted earnings (loss) per share:
   Earnings (loss) before extraordinary item .. $       0.28  $      (2.45) $      (0.35)  $      (0.55) $      (0.70) $      (0.10)
   Extraordinary item .........................         0.02          0.00          0.00           0.00          0.00          0.00
                                                ------------  ------------  ------------   ------------  ------------  ------------
   Net earnings (loss) ........................ $       0.30  $      (2.45) $      (0.35)  $      (0.55) $      (0.70) $      (0.10)
                                                ============  ============  ============   ============  ============  ============
Weighted average shares used in computation
Basic .........................................    7,111,777     5,931,346     5,012,664      3,750,699     3,742,227     3,729,721
                                                ============  ============  ============   ============  ============  ============
Diluted                                            7,571,425     5,931,346     5,012,664      3,750,699     3,742,227     3,729,721
                                                ============  ============  ============   ============  ============  ============
EBITDA (2) .................................... $  6,948,568  ($12,297,678) ($   625,431)  ($ 1,636,835) ($ 2,091,313) ($   181,124)

BALANCE SHEET DATA:
Cash and cash equivalents ..................... $  2,947,660  $    254,956  $    569,692   $    186,488  $        971  $      2,109

Working capital (deficit) .....................   (2,255,064)   (8,803,970)    1,654,857     (5,851,527)   (4,082,987)   (1,343,018)

Total assets ..................................   28,236,062    29,190,714    10,231,617      6,572,917       272,686     3,452,999

Long-term liabilities .........................      760,085    16,862,337     4,649,404        161,968       130,414       168,304

Total liabilities .............................   23,909,150    44,427,634    11,381,678     11,019,543     5,669,338     3,264,554

Stockholder's equity (deficiency) .............    4,326,912   (15,236,920)   (1,150,061)    (4,446,626)   (2,396,652)      188,445
</TABLE>

(1)  Consists  of  the  writedown  of  designs  and  drawings  in  light  of the
     introduction of replacement products.

(2)  Earnings before interest, taxes, depreciation and amortization


                                       14

<PAGE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

     In reviewing the following discussion and analysis,  the reader should take
note of the fact that the  respective  periods  being  compared  are of  various
durations.  When we became an indirect subsidiary of Singapore  Technologies Pte
Ltd ("ST") in August 1996, we adopted ST's calendar fiscal year, which created a
stub fiscal period from July 1, 1996 through December 31, 1996.

     Radyne  Corp.,  our  predecessor,  was  incorporated  in 1980 and filed for
Chapter 11 bankruptcy  protection in April 1994.  It  successfully  emerged from
bankruptcy in December 1994 upon the  acquisition  of  approximately  91% of its
common stock by Engineering and Technical Services,  Inc. ("ETS"),  then a major
customer.  On August 12, 1996, ST acquired ETS through its indirect wholly owned
subsidiary, Stetsys US, Inc. ST held approximately 71% of our common stock as of
February 11, 2000.

     In 1995, we installed a new  management  team,  which moved our  operations
from New York to Phoenix,  Arizona.  As part of this management change, we hired
an almost entirely new staff of engineering, sales and support personnel.

     On October 15, 1998, we purchased ComStream  Holdings,  Inc. (a corporation
incorporated  under the laws of the State of Delaware  with an office  currently
located at 6340  Sequence  Drive,  San Diego,  California)  from Spar  Aerospace
Limited  ("Spar"),  a Canadian  advanced  technology  company.  ComStream  is an
international  provider of digital transmission solutions for voice, data, audio
and video applications with offices in the United States, Singapore,  Indonesia,
China and the United Kingdom.  ComStream  recorded revenue of approximately  $37
million in fiscal  1998.  We acquired  ComStream in an effort to expand our core
business and to supplement  our product lines with a number of viable  developed
products and superior  quality  products in the design stage,  all of which have
since been  released  for  production.  In  addition,  we based our  decision to
acquire  ComStream on the  strategic  belief that the combined  companies  could
compete more  effectively  and realize  certain  synergies.  We believe that our
acquisition  of  ComStream  has had and will have a number of positive  effects,
including the following:

     1.   The combined  annual  revenue of Radyne  ComStream for fiscal 1999 was
          approximately  $56 million  versus  Radyne  Corp.'s  1998  stand-alone
          revenue of approximately $13 million. This dramatic difference in size
          provides us with better control over prices and margins and enables us
          to compete in larger markets.

     2.   The acquisition has produced positive synergistic effects by combining
          Radyne's newer product lines with ComStream's established products and
          sales channels.  We have experienced positive results from the efforts
          of the ComStream sales force as compared with our historic reliance on
          independent  sales   representatives.   The  addition  of  ComStream's
          technology in the satellite  communications  industry has strengthened
          our market share and provided new customers for our existing products.

     3.   While  we  viewed   ComStream's   gross  margins  as  excellent,   its
          profitability had suffered from extremely high expenses.  During 1999,
          we reduced ComStream's recurring expenses by approximately  $1,000,000
          per month. The continued efficiencies and restructuring of our product
          lines have resulted in significant cost savings.

     We recorded the  acquisition  of ComStream  under the "purchase  method" of
accounting. Accordingly, we allocated the purchase price to the assets purchased
and the liabilities  assumed based upon the estimated fair values at the date of
acquisition.  The excess of the  purchase  price over the fair values of the net
assets  acquired  was  approximately  $8.7  million,  of which $3.9  million was
allocated to  in-process  research and  development,  $2.5 million was valued as
purchased technology, which is being amortized over 6.25 years, and $2.3 million
has been recorded as goodwill,  which is being  amortized  over ten years.  As a
result of the recent  completion of our settlement  negotiations  with Spar, the
amount of goodwill  recorded in the  transaction was reduced by $516,000 to $1.5
million  (after  amortization  of $254,000) in the year ended December 31, 1999.
See " -- Liquidity and Capital Resources." We have included  ComStream's results
in our combined statement of operations from the acquisition date.


                                       15

<PAGE>

RESULTS OF OPERATIONS

FISCAL YEAR ENDED  DECEMBER 31, 1999 COMPARED TO FISCAL YEAR ENDED  DECEMBER 31,
1998

     The Company's net sales increased 164% to $55,840,000 during the year ended
December 31, 1999 from $21,112,000 during the year ended December 31, 1998. This
increase is primarily attributable to the increased product sales resulting from
our  acquisition  and  integration  of ComStream in October 1998 and new product
development.

     The Company's  cost of sales as a percentage of net sales  decreased to 54%
during the year ended December 31, 1999 from 75% for the year ended December 31,
1998.  Costs  associated  with the delivery of new  products to the  marketplace
accounted for the high period costs in 1998. We expensed $911,000 during 1998 to
write off  these  costs and to  increase  our  provision  for  obsolescence;  we
anticipate that neither of these  adjustments  will have an impact on our future
results of operations. In addition, we were able to realize certain synergies in
our  operations as a result of the  acquisition  and  integration  of ComStream,
which enabled us to significantly increase our margins on product sales.

     Selling,  general and administrative  costs increased to $12,355,000 or 22%
of sales during the year ended December 31, 1999 from $5,531,000 or 26% of sales
for the year  ended  December  31,  1998.  The  increase  in real  costs and the
reduction,  in terms of  percentage  of sales,  was primarily a result of higher
expense  levels and sales  amounts due to our  acquisition  and  integration  of
ComStream into our operations.

     Research and  development  expenditures  increased to  $9,127,000 or 16% of
sales from  $4,296,000 or 20% of sales during the year ended  December 31, 1998.
These expenses reflect our continued  commitment to invest in our future through
technological  advances and our efforts to improve our older  product  lines for
manufacturability and lower costs. The increase in real costs and the reduction,
in terms of  percentage of sales,  was primarily a result of the higher  expense
levels and sales amounts due to our  acquisition  and  integration  of ComStream
into our  operations.  It is  anticipated  that the  Company  will  continue  to
experience  high  research  and  development  expenses as it  positions  itself,
through the introduction of new products, to gain market share.

     Based on the increases in our gross margins and our lower  operating  costs
as a  percentage  of sales  (39% in 1999  compared  to 88% in 1998) we  recorded
earnings before  interest and taxes ("EBIT") of $4,037,000  during 1999 compared
to a loss before interest and taxes of $13,362,000 in 1998. In addition to lower
sales and higher  operating  costs as a percentage of sales in 1998, we recorded
stock option  expense of $1,566,000  (as compared to $350,000 in 1999) and other
costs  of  $7,272,000  as  a  result  of  the  acquisition  of  ComStream  which
significantly reduced our EBIT in 1998.

     Interest  expense  increased  to  $1,910,000  or 3% of sales  in 1999  from
$1,199,000  or 6% of sales in 1998  due to our  increased  level of debt for the
first three quarters of 1999.

     We recorded  extraordinary  income of  $188,000  during 1999 as a result of
negotiated  forgiveness of previously  recorded and accrued  interest expense in
connection with the note payable to Spar related to the ComStream acquisition.

     We have  recorded  income tax  expense in 1999 of  $85,000,  which  related
solely to Alternative Minimum Tax. Additionally,  the effective tax rate is 3.6%
which  is  significantly  below  statutory  income  tax  rates  because  of  the
utilization of net operating loss carryforwards.

     Based on all of the above,  we recorded net earnings of  $2,306,000 or $.30
per diluted weighted average share outstanding  during 1999 as compared to a net
loss of ($14,538,000) or ($2.45) per diluted weighted average share  outstanding
during 1998.

     Our new-orders-booked (Bookings) increased 151% to $62,531,000 for the year
ended December 31, 1999 from  $24,904,000  for the year ended December 31, 1998.
This  increase was  primarily a result of our  acquisition  and  integration  of
ComStream  into our  operations  in  addition  to new  product  development  and
enhancement.

     Our  "Backlog"  of orders to be shipped  (unshipped  orders  from the prior
period  plus new orders  booked  less  orders  shipped  during the  period)  was
$14,522,000  as of December  31,1999,  an increase of 69% over the $8,606,000 in
Backlog  as of  December  31,  1998.  Our  Backlog  consists  of firm  orders as
evidenced by written contracts and/or purchase orders from customers.

     In connection with the acquisition of ComStream, we allocated $3,909,000 of
the purchase price to seven in-process research and development  projects.  This
allocation  represents  the estimated fair value based on  risk-adjusted  future
cash flows related to the incomplete  projects.  At the date of the acquisition,
the development of these projects had not yet reached technological  feasibility
and the  research and  development  in process had no  alternative  future uses.
Accordingly, these costs were expensed as of the acquisition date.


                                       16

<PAGE>

     This  allocation  was based on a number  of  assumptions,  including  those
regarding  estimated  project  completion  dates and costs. As of the year ended
December 31, 1999, all of the seven projects have been  completed.  The original
cost estimates remain essentially  accurate and no other material  variations in
the assumptions have appeared.  Therefore,  we continue to regard the $3,909,000
valuation as correct.

     The  nature,  amount,  and timing of the costs  required  to  complete  the
in-process technology are presented in the following chart:

<TABLE>
<CAPTION>
                                                                                                       Total
                                           Product                                                   Cost at
                     Base                  Line                        Started     Completion     Completion
Description          Technology            Applicability        (Month - Year)           Date         $000'S
-----------          ----------            -------------        --------------           ----         ------
<S>                  <C>                   <C>                         <C>            <C>          <C>
2 MB Card            QPSK, FEC Coding      Modems                      01 - 98        11 - 99         $1,820*

"CM 601" Low         Coding Modulation     Modems                      05 - 97        03 - 99          1,400**
  Cost Modem

"DT8000"             Modulation Coding     Earth Stations              03 - 97        12 - 98          2,850***
  Ku-band 2 Watt     Transmission
  Earth Station

"DBR 2000" Data      L-Band Receivers      Broadcast Data              06 - 98        06 - 99            400
  Broadcast          Packet Protocol
  Receiver

"ABR 202" Audio      L-Band Receivers      Broadcast Audio             03 - 98        12 - 98            750
  Receiver           Multiplexing

Set Top Box          DTH Television        Satellite                   03 - 97        07 - 99          1,600
  Receiver           Cable Television      Television Cable
                     Proprietary           Television
                     IC's -- MPEG
                     Decoders

MediaCast Card       Proprietary           Internet Receiver           03 - 97        03 - 99          1,900
  Receiver           IC's -- Internet      Video Receiver
                     Protocol DVB MPEG
                     Decoders
                                                                                                   ---------
                                                                                                   $  10,720
                                                                                                   =========
</TABLE>

---------
*    Estimated at $1,800 in our Form 10-K/A for the year ended 12/31/98.

**   Estimated at $1,500 in our Form 10-K/A for the year ended 12/31/98.

***  Estimated at $2,750 in our Form 10-K/A for the year ended 12/31/98.


                                       17

<PAGE>

FISCAL YEAR ENDED  DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED  DECEMBER 31,
1997

     We  increased  our net sales by 57% to  $21,112,000  during  the year ended
December 31, 1998 from $13,447,000 during the year ended December 31, 1997. This
increase was primarily  attributable  to the increased  product sales  resulting
from our purchase of ComStream.

     Our cost of sales as a percentage of net sales  increased to 75% during the
year ended  December  31, 1998 from 60% for the year ended  December  31,  1997.
During the year ended December 31, 1998, we recorded adjustments to inventory of
approximately  $911,000  (4.3%  of  sales)  to write  off  excess  and  obsolete
inventory as well as costs  associated  with the  introduction  of new products.
This included  approximately  $280,000 of inventory associated with the DMD-5000
and  DMD-4500  modem  product  lines  and  approximately  $30,000  of  inventory
associated with the initial DVB-3000 video broadcast products, all of which were
essentially  rendered obsolete by the introduction of newer products.  The costs
associated  with  the  introduction  of new  products  (approximately  $601,000)
related principally to the following product lines in the following  approximate
amounts: the DD-45 and DM-45 high-speed modem products ($75,000), the DD-160 and
DM-160 high speed  modem  products  ($80,000),  Ku band  converters  ($110,000),
C-band  converters  ($40,000),   L-band  modem  line  ($100,000),   the  DMD-15G
government FM order wire products ($90,000), upgrade and enhancements on digital
video  broadcast  lines  ($20,000) and upgrade and  enhancements on the DMD-2401
modem line ($10,000).  These costs included  production line personnel  training
costs, short-lived diagnostic and measurement equipment, set-up costs, expedited
product  delivery  costs,  low volume  pricing  for  purchased  parts on initial
production  runs and the costs of reworking  early  circuit  board  designs.  In
addition,  we increased our inventory  obsolescence reserve by $1,261,000 during
the year ended December 31, 1998. The principal  components of this reserve were
approximately  $700,000  in parts for our  DT-7000  earth  station  product  and
$500,000 in parts for the DT-8000 Au band  product,  both of which were rendered
slow moving or obsolete by the  introduction  of the  superior  and more popular
DT-8000 Ku band product around December 1, 1998.

     Selling,  general and administrative costs increased to $5,531,000,  or 26%
of sales,  during the year ended  December 31, 1998 from  $4,242,000,  or 32% of
sales,  for the year ended  December  31,  1997.  The  decrease in expenses as a
percentage of sales was primarily  attributable to the sales growth as explained
above.  The increase in pure dollars is mainly  attributable  to the purchase of
ComStream in October 1998.

     We recorded an asset  impairment  charge of $263,000  during the year ended
December  31, 1998,  to reflect a valuation  adjustment  to certain  designs and
drawings that were fully impaired by the introduction of competing product lines
which we obtained in our purchase of  ComStream.  Impairment  was  determined by
comparing the amount of undiscounted  projected cash flows  attributable to each
product using the related technology to the carrying value of the asset.

     Research  and  development  expenditures  increased to  $4,296,000  (20% of
sales) from  $2,262,000  (17% of sales) during the year ended December 31, 1997.
The  increase  in  expenses  was  primarily  attributable  to major  development
programs  instituted  during  1997  and to the  inclusion  of the  research  and
development  expenses  from our San Diego  facility  acquired in the purchase of
ComStream in October 1998.

     We recorded  stock option  compensation  expense of  $1,566,000  in 1998 to
reflect the bonus and related expenses to be incurred as a result of the vesting
of 657,000  incentive  stock options under the 1996 Incentive Stock Option Plan.
These  options  carry the right to a cash  bonus of $1.72 per  purchased  share,
payable upon exercise. These options were fully vested by action of the Board of
Directors effective October 15, 1998.

     We recorded  restructuring costs of $3,100,000 in 1998 in connection with a
corporate  restructuring  cost-cutting  initiative.  This  amount  included  (a)
$1,100,000  reserved  for  additional  costs  expected  in  connection  with the
termination of approximately  25% of the ComStream work force and (b) $2,000,000
reserved for costs related to the  termination  of a lease for a 125,000  square
foot facility in San Diego,  including $700,000 in leasehold  improvements which
were abandoned.

     In connection with the acquisition of ComStream, we allocated $3,909,000 of
the  purchase  price to  in-process  research  and  development  projects.  This
allocation  represents  the estimated fair value based on  risk-adjusted  future
cash flows related to the incomplete  projects.  At the date of the acquisition,
the development of these projects had not yet reached technological  feasibility
and the  research and  development  in process had no  alternative  future uses.
Accordingly, these costs were expensed as of the acquisition date.

     Interest  expense net of interest  income  increased to  $1,199,000  (6% of
sales)  during the year ended  December 31, 1998 from $677,000 (5% of sales) for
the year ended  December 31, 1997.  The large  increase in expense was primarily
attributable to our


                                       18
<PAGE>

increased debt that, in turn, was primarily  attributable  to the acquisition of
ComStream.

     For the year ended  December 31, 1998, we did not provide for income taxes,
due to the current period net loss and our net operating loss carryforwards.  We
also did not provide for income taxes for the prior period due to net  operating
losses. The tax examinations  disclosed in Note 18 to the consolidated financial
statements have been concluded without change to our tax liability.

     For the year ended  December 31, 1998, we had a net loss of  $14,538,000 as
compared with a net loss of $1,757,000 for the year ended December 31, 1997. The
increase in net loss was  primarily  attributable  to the  restructuring  costs,
acquired in-process research and development, increased research and development
expense, the stock option compensation expense and the asset impairment charge.

     Bookings for the year ended December 31, 1998 were  $24,904,000 as compared
to  $15,788,000  for the year ended December 31, 1997. The increase is primarily
attributable  to the  bookings  included in the fourth  quarter for the acquired
ComStream products.

     Our Backlog of orders to be shipped was $8,606,000 as of December 31, 1998,
an increase of 79% over the  $4,814,000 in Backlog as of December 31, 1997.  Our
Backlog  consists  of firm  orders as  evidenced  by  written  contracts  and/or
purchase orders from customers.

LIQUIDITY AND CAPITAL RESOURCES

     The Company had a working  capital  deficit of  $2,255,000  at December 31,
1999, which represents an increase in our working capital of $6,549,000 from our
working  capital  deficit of  ($8,804,000)  at December  31,  1998.  Our working
capital increased primarily as a result of a reduction in current liabilities of
$4,416,000  primarily  made up of a reduction  in  short-term  notes  payable of
($2,080,000),  a reduction  in accrued  expenses of  ($2,853,000),  offset by an
increase in accounts payable of $612,000. In addition,  current assets increased
by  $2,133,000  primarily as a result of an increase in accounts  receivable  of
$1,407,000,  and an  increase  in cash of  $2,693,000,  offset by a decrease  in
inventories   of   ($1,041,000),   and  a  decrease  in  other   receivables  of
($1,265,000).

     Net cash provided by operating activities was $2,564,000 for the year ended
December 31, 1999  compared to cash used in operating  activities  of $3,850,000
for the year ended December 31, 1998. The change is primarily due to an increase
in earnings from  operations  of  $17,400,000  to $4,037,000  for the year ended
December 31, 1999 compared to a loss from operations of $13,362,000 for the year
ended  December 31, 1998.  Net cash used by operating  activities was $3,850,000
for the year ended  December 31, 1998 compared to $4,945,000  for the year ended
December 31, 1997.

     Cash used in investing  activities was $279,000 for the year ended December
31, 1999 compared to cash used in investing  activities of  $10,551,000  for the
year ended  December 31, 1998 and $593,000 for the year ended December 31, 1997.
The decrease of $10,272,000  from $10,551,000 in 1998 to $279,000 in 1999 is due
to the purchase of ComStream in October 1998. The increase of almost $10,000,000
in 1998  compared to 1997 was also  related to the  purchase of  Comstream.  The
Company has no material  commitments  to make  capital  expenditures  in 2000 or
thereafter.

     The  Company  derived  net cash  from  financing  activities  of  $408,000,
$14,086,000  and $5,922,000  during the years ended December 31, 1999,  1998 and
1997,  respectively.   During  the  current  period,  net  cash  from  financing
activities was composed  primarily of $17,173,000 from proceeds obtained through
the sale of common stock,  $4,920,000 from line of credit  borrowings and offset
by  ($15,618,000)  in  repayments  of loans  from  affiliates,  ($5,963,000)  in
repayments  of notes  payable and  ($105,000)  in principal  payments on capital
leases.  During  1998,  net cash  from  financing  activities  was  composed  of
$3,000,000 obtained through line of credit borrowings, $15,618,000 obtained from
loans due to affiliates and $40,000  received on notes issued in connection with
common stock and was offset by  ($4,500,000)  in  repayments  on loans under the
line of credit and ($72,000) in principal payments on capital lease obligations.
During 1997,  net cash from  financing  activities  was  composed of  $7,506,000
obtained  through line of credit  borrowings and $4,600,000  obtained from loans
due to affiliates and $5,053,000  obtained from the sale of common stock and was
offset by  ($11,200,000) in payments on loans due to affiliates and ($38,000) in
principal payments on capital lease obligations.



                                       19
<PAGE>

     As a result of the  foregoing,  the Company  increased  its cash balance by
$2,693,000 for the year ended  December 31, 1999,  decreased its cash balance by
($315,000)  for the year ended December 31, 1998, and increased its cash balance
by $383,000 for the year ended December 31, 1997.

     The Company has a $20,500,000  credit  agreement with  Citibank,  N.A. that
includes $20,000,000  available under an uncommitted line of credit facility and
facilities for bank guarantees  and/or standby letters of credit up to $500,000.
All loans  pursuant  to the bank  line of  credit  are  short  term  loans  with
maturities no later than September 29, 2000. The bank could demand  repayment at
any time  after the  maturity  date of the loans in which  case we might have to
seek  additional  financing  to repay our line of credit.  If we are required to
seek additional sources of financing to repay our line of credit, such financing
may  not be  available  on  terms  that  we  consider  acceptable  or may not be
available in  sufficient  amounts to enable us to repay our  obligations  to the
bank. Any of these circumstances would have a material and adverse impact on our
business,  financial condition, and results of operations. We believe the bank's
willingness to provide us with the line of credit is based in part on the bank's
relationship  with ST. ST has  provided  the bank with a letter of  awareness in
which ST states it (1) will endeavor to ensure that we utilize  sound  financial
and business practices in our operations and (2) ST will give that bank at least
60 days' prior written  notice of any divestment of our shares held by ST or its
affiliates. ST has not, however,  guaranteed our indebtedness to the bank and is
under no obligation to do so or to otherwise satisfy our debts if we fail to pay
them  when  due.  Borrowings  under  the  line  of  credit  bear  interest  at a
fluctuating  rate  equal to LIBOR plus 1% per annum or an  alternative  Citibank
Quoted Rate plus 1% per annum.

     The  availability  of  additional  borrowings  under the  credit  agreement
expires September 29, 2000 and is renewable  annually at the option of the Bank.
The Company owed principal of  $12,920,000  under the line of credit at interest
rates from 6.59% percent to 6.94% as of December 31, 1999. Subsequent to the end
of the period reported on herein,  the Company repaid  $4,920,000 of outstanding
borrowings using cash from operations.

     During  1999,  we  also  had a  note  payable  to  Spar  in the  amount  of
$7,000,000.  This note was issued on October 15,  1998 as partial  consideration
for the  acquisition  of ComStream  Holdings,  Inc. The note matured on July 15,
1999 with  interest  at 8% per annum.  We  negotiated  a  reduction  in the note
balance due to Spar for the following reasons:  (i) a $521,000 reduction for our
assumption  of  $115,000  of  liabilities  from  Spar and the  waiver  of Spar's
obligation  to  indemnify  us  against a  $406,000  claim by a product  assembly
contractor for costs incurred on  ComStream's  behalf prior to the  acquisition,
and (ii) a $516,000 reduction in the note for certain inventory,  furniture, and
equipment erroneously carried on ComStream's  pre-closing balance sheet. Because
these  discrepancies were identified prior to the purchase price allocation,  no
portion of our purchase  price for ComStream  was  allocated to such  inventory,
furniture, and equipment.  Therefore,  this $516,000 reduction has resulted in a
reduction of goodwill.  We paid the note during the quarter ended  September 30,
1999. In addition,  we  negotiated a $278,000  reduction in interest on the note
($188,000  of which had been accrued in prior  periods and has been  reported as
extraordinary  income).  We have financed the repayment of debt incurred for the
ComStream  acquisition,  certain  planned  restructuring  costs and our  ongoing
working  capital needs through (i) a rights  offering  pursuant to which we sold
$16,860,584 of Common Stock to our existing  stockholders  and (ii) the existing
bank  line  of  credit.  In  the  rights  offering,  we  issued  rights  to  our
shareholders  entitling them to purchase an aggregate of up to 4,745,076  shares
of our common stock at a purchase  price of $3.73 per share.  On  September  30,
1999, ST instructed us to capitalize the entire $15,618,272  principal amount of
the debt we owed to ST in partial exercise of its rights in the rights offering.
In October  1999, ST exercised the balance of its rights by paying cash to us in
the amount of $423,700.  We used the funds, along with $932,200 of cash on hand,
to pay the accrued interest due to ST.

     The rights  offering was  concluded on December 1, 1999.  Our  shareholders
purchased  4,520,264 shares at an aggregate purchase price of $16,860,585 in our
rights  offering,  including  ST's purchase of 4,300,800  shares at an aggregate
purchase price of $16,041,984.

     Subsequent  to  December  31,  1999,  we  completed  a public  offering  of
2,400,000 units,  each consisted of one share of common stock and one warrant to
purchase  one  share  of  common  stock,  plus  a  360,000  unit   underwriter's
over-allotment  that was exercised at closing,  providing us with  approximately
$16,759,000 in net proceeds,  a significant  portion of which we plan to use for
our research and development programs and to hire additional technical personnel
to carry out those programs. The offering closed on February 11, 2000.

         We believe that the proceeds from the offerings,  our bank credit lines
and cash from  operations are likely to be sufficient to fund our planned future
operations  and capital  requirements  for continued  growth  through the end of
2000.



                                       20
<PAGE>

SUPPLEMENTARY INFORMATION

YEAR 2000 COMPLIANCE

     In preparation  for the Year 2000, we engaged in efforts to ensure that our
products and business systems properly recognized date-sensitive  information in
the Year 2000 and beyond.  These efforts and their costs are described below. We
have not experienced any significant  "Year 2000 problems" with our products and
business systems and do not expect that we will do so in the future.

     State of  Readiness.  In 1999 we hired  outside  consultants  to audit  and
assess the ability of our hardware and software  systems to operate  properly in
the Year  2000 and  beyond.  We  investigated  the Year  2000  readiness  of our
software,  hardware and other significant  vendors by requiring them to complete
questionnaires and submit internal Year 2000 plans to insure no disruption would
occur in our supply  chain.  To date we have not  encountered  any material Year
2000 issues or significant disruptions to our operations.

     Cost of Assessment and  Remediation.  We have incurred direct costs of less
than $120,000 in assessing and  remediating  Year 2000  problems,  and we do not
expect to spend more than $120,000 in the aggregate to complete the process.

     Risks. We could be exposed to a loss of revenues and our operating expenses
could increase if our products or business systems have Year 2000 problems.  Our
potential  areas of exposure  include  products  purchased  from third  parties,
information  technology,  including computers and software,  and non-information
technology, including telephone systems and other equipment used internally. The
reasonable  likely  worst case  scenario  for Year 2000  problems  would be if a
significant  defect exists in key hardware or software and if a solution to such
a problem were not immediately available.

     Contingency  Plan.  Although we have not  experienced any Year 2000 related
problems affecting our internal systems, we have developed  contingency plans to
be implemented if our efforts to identify and correct Year 2000 problems are not
effective. Depending on the systems affected, these plans include:

     o    accelerated replacement of affected equipment or software;

     o    short to  medium-term  use of back-up  equipment and software or other
          redundant systems; and

     o    increased  work hours for our  personnel  or the hiring of  additional
          information technology staff.

     The  discussion  of our  efforts  and  expectations  relating  to Year 2000
compliance  are  forward-looking  statements.  Our ability to achieve  Year 2000
compliance, and the level of incremental costs associated with compliance, could
be adversely  affected by, among other  things,  the  availability  and costs of
external  resources,  third  party  suppliers'  ability  to  modify  proprietary
software and unanticipated problems not identified in our ongoing review.

IMPACT OF INFLATION

     We do not believe that  inflation has had a material  impact on revenues or
expenses during the last four fiscal periods reported on herein.

ACCOUNTING MATTERS

     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging  Activities" (SFAS No. 133). This statement requires  recognition of
all  derivatives  as  either  assets or  liabilities  on the  balance  sheet and
measurement  of  those  instruments  at fair  value.  Changes  in fair  value of
derivatives are recorded each period in current earnings or other  comprehensive
income (loss).  Proper  accounting for changes in fair value of derivatives held
is dependent on whether the  derivative  transaction  qualifies as an accounting
hedge and on the classification of the hedge transaction.

     In June 1999, the Financial  Accounting Standards Board issued Statement of
Financial Accounting  Standards No. 137, "Accounting for Derivative  Instruments
and Hedging  Activities-Deferral  of the  Effective  Date of FASB  Statement No.
133." This  statement  amended the effective  date of SFAS No. 133 to all fiscal
quarters of all fiscal years beginning after June 15, 2000.


                                       21

<PAGE>

Management  does not  expect  the  adoption  of SFAS No.  133 to have a material
impact on the Company.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to market risk on our financial  instruments from changes in
interest rates. We do not use financial  instruments for trading  purposes or to
manage  interest rate risk.  Increases in market interest rates would not have a
substantial adverse effect on profitability.

     Our financial  instruments  consist  primarily of short-term  variable rate
revolving  credit  lines,  and fixed rate debt.  Our debt at  December  31, 1999
consists of notes payable under a line of credit agreement.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                                    <C>
Independent Auditors' Reports...........................................................................23

Consolidated Balance Sheets as of December 31, 1999 and 1998............................................25

Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997..............26

Consolidated Statements of Stockholders' Equity (Deficiency) for the Years Ended
  December 31, 1999, 1998 and 1997......................................................................27

Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997..............28

Notes to Consolidated Financial Statements..............................................................29
</TABLE>

                                       22

<PAGE>

                          Independent Auditors' Report

The Board of Directors and Stockholders
Radyne ComStream Inc.:

We have audited the accompanying consolidated balance sheets of Radyne ComStream
Inc. and subsidiaries  (the Company) (a  majority-owned  subsidiary of Singapore
Technologies  Pte  Ltd) as of  December  31,  1999  and  1998,  and the  related
consolidated  statements of operations,  stockholders' equity (deficiency),  and
cash flows for the years then ended. 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  generally   accepted  auditing
standards.  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  present fairly, in all
material respects, the financial position of the Company as of December 31, 1999
and 1998, and the results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.

                                  /s/ KPMG LLP

Phoenix, Arizona
February 4, 2000

                                       23

<PAGE>

                          Independent Auditors' Report

The Board of Directors and Stockholders
Radyne ComStream Inc.:

We  have  audited  the  accompanying  statements  of  operations,  stockholders'
deficiency and cash flows of Radyne ComStream Inc.  (formerly Radyne Corp.) (the
Company) for the year ended December 31, 1997.  These  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance about whether the statements of operations,  stockholders' deficiency,
and cash flows are free of material  misstatement.  An audit includes examining,
on a  test  basis,  evidence  supporting  the  amounts  and  disclosures  in the
statements of operations,  stockholders'  deficiency,  and cash flows.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  presentation  of the
statements of operations,  stockholders' deficiency,  and cash flows. We believe
that our audit of the statements of operations,  stockholders'  deficiency,  and
cash flows provides a reasonable basis for our opinion.

In our opinion, the statements of operations, stockholders' deficiency, and cash
flows present fairly,  in all material  respects,  the results of operations and
cash flows of the Company  for the year ended  December  31, 1997 in  conformity
with generally accepted accounting principles.

                            /s/ Deloitte & Touche LLP

Phoenix, Arizona
February 4, 1998

                                       24

<PAGE>

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                                             December 31
                                                                                                   ---------------------------------
                                    Assets                                                             1999                 1998
                                                                                                   ------------        ------------

Current assets:
<S>                                                                                                <C>                      <C>
     Cash and cash equivalents                                                                     $  2,947,660             254,956
     Accounts receivable - trade, net of allowance for doubtful
        accounts of $791,746 and $632,815, respectively                                               8,678,153           7,270,732
     Other receivable                                                                                        --           1,265,000
     Inventories, net                                                                                 8,339,112           9,380,478
     Prepaid expenses                                                                                   929,076             590,161
                                                                                                   ------------        ------------
                 Total current assets                                                                20,894,001          18,761,327
                                                                                                   ------------        ------------
Property and equipment, net                                                                           3,595,168           5,533,645

Other assets:
     Purchased technology, net of accumulated amortization of $505,000
        and $105,000 at December 31, 1999 and 1998, respectively                                      1,995,000           2,395,000
     Goodwill, net of accumulated amortization of $253,530 and
        $35,960 at December 31, 1999 and 1998, respectively                                           1,544,861           2,278,300
     Deposits and other                                                                                 207,032             222,442
                                                                                                   ------------        ------------
                 Total other assets                                                                   3,746,893           4,895,742
                                                                                                   ------------        ------------
                                                                                                   $ 28,236,062          29,190,714
                                                                                                   ============        ============

               Liabilities and Stockholders' Equity (Deficiency)

Current liabilities:
     Note payable under line of credit agreement                                                   $ 12,920,000           8,000,000
     Note payable                                                                                            --           7,000,000
     Current installments of obligations under capital leases                                            44,332             124,891
     Accounts payable, trade                                                                          3,911,742           3,291,915
     Accounts payable, affiliate                                                                             --               8,150
     Accrued expenses                                                                                 5,588,609           8,441,874
     Taxes payable                                                                                      684,382             698,467
                                                                                                   ------------        ------------
                 Total current liabilities                                                           23,149,065          27,565,297

Notes payable to affiliates                                                                                  --          15,618,272
Obligations under capital leases, excluding current installments                                         64,652              88,588
Accrued stock option compensation                                                                       695,433           1,155,477
                                                                                                   ------------        ------------
                 Total liabilities                                                                   23,909,150          44,427,634
                                                                                                   ------------        ------------

Stockholders' equity (deficiency):
     Common stock; $.002 par value - authorized,  20,000,000 shares;  issued and
        outstanding, 10,739,382 and 5,931,346 shares
        at December 31, 1999 and 1998, respectively                                                      21,476              11,862
     Additional paid-in capital                                                                      23,353,318           6,105,404
     Accumulated deficit                                                                            (19,047,882)        (21,354,186)
                                                                                                   ------------        ------------
                 Total stockholders' equity (deficiency)                                              4,326,912         (15,236,920)

Commitments, contingent liabilities and subsequent events (note 7, 8, 9, 11, 13,
     15, 17 and 18)
                                                                                                   ------------        ------------
                                                                                                   $ 28,236,062          29,190,714
                                                                                                   ============        ============
</TABLE>

See accompanying notes to consolidated financial statements.



                                       25
<PAGE>

<TABLE>
<CAPTION>

                              RADYNE COMSTREAM INC.

                      Consolidated Statements of Operations

                                                                   Years ended December 31,
                                                    --------------------------------------------------
                                                        1999               1998               1997
                                                    ------------       ------------       ------------
<S>                                                 <C>                  <C>                <C>
Net sales                                           $ 55,839,792         21,111,704         13,446,852
Cost of sales                                         29,970,560         15,808,459          8,022,262
                                                    ------------       ------------       ------------
                 Gross profit                         25,869,232          5,303,245          5,424,590
                                                    ------------       ------------       ------------

Operating expenses:
     Selling, general and administrative              12,355,188          5,531,213          4,242,138
     Research and development                          9,126,545          4,296,268          2,262,066
     Stock option compensation expense                   350,000          1,566,075                 --
     In-process research and development                      --          3,909,000                 --
     Restructuring costs                                      --          3,100,000                 --
     Asset impairment charge                                  --            262,935                 --
                                                    ------------       ------------       ------------
                 Total operating expenses             21,831,733         18,665,491          6,504,204
                                                    ------------       ------------       ------------
Earnings (loss) from operations                        4,037,499        (13,362,246)        (1,079,614)

Other (income) expense:
     Interest expense                                  1,910,422          1,198,777            677,102
     Other                                               (76,045)           (23,480)                --
                                                    ------------       ------------       ------------

Earnings (loss) before income taxes and
     extraordinary item                                2,203,122        (14,537,543)        (1,756,716)

Income taxes                                              85,000                 --                 --
                                                    ------------       ------------       ------------
Earnings (loss) before extraordinary item              2,118,122        (14,537,543)        (1,756,716)

Extraordinary item                                       188,182                 --                 --
                                                    ------------       ------------       ------------
                 Net earnings (loss)                $  2,306,304        (14,537,543)        (1,756,716)
                                                    ============       ============       ============

Basic net earnings (loss) per share:

     Earnings (loss) before extraordinary item      $       0.30              (2.45)             (0.35)
     Extraordinary item                                     0.02                 --                 --
                                                    ------------       ------------       ------------
                 Net earnings (loss)                $       0.32              (2.45)             (0.35)
                                                    ============       ============       ============

Diluted net earnings (loss) per share:

     Earnings (loss) before extraordinary item      $       0.28              (2.45)             (0.35)
     Extraordinary item                                     0.02                 --                 --
                                                    ------------       ------------       ------------
                 Net earnings (loss)                $       0.30              (2.45)             (0.35)
                                                    ============       ============       ============

Weighted average number of common shares
     outstanding - basic                               7,111,777          5,931,346          5,012,664
                                                    ============       ============       ============

Weighted average number of common shares
     outstanding - diluted                             7,571,425          5,931,346          5,012,664
                                                    ============       ============       ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       26
<PAGE>

                              RADYNE COMSTREAM INC.

          Consolidated Statements of Stockholders' Equity (Deficiency)

                  Years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                                                                           Notes
                                                                        Additional                       receivable
                                                 Common stock             paid-in        Accumulated       from
                                             Shares         Amount        capital          Deficit      stockholders        Total
                                           ----------      -------      -----------      -----------       -------      -----------
<S>                                         <C>            <C>              <C>           <C>              <C>           <C>
Balances, December 31, 1996                 3,759,721      $ 7,519          605,782       (5,059,927)           --       (4,446,626)

Issuance of common stock, net of issuance
     cost of $335,696                       2,171,625        4,343        5,089,024               --            --        5,093,367

Promissory notes received in connection
     with issuance of stock                        --           --               --               --       (40,086)         (40,086)

Net loss                                           --           --               --       (1,756,716)           --       (1,756,716)
                                           ----------      -------      -----------      -----------       -------      -----------

Balances, January 1, 1997                   5,931,346       11,862        5,694,806       (6,816,643)      (40,086)      (1,150,061)

Payments received on promissory notes              --           --               --               --        40,086           40,086

Stock option plan                                  --           --          410,598               --            --          410,598

Net loss                                           --           --               --      (14,537,543)           --      (14,537,543)
                                           ----------      -------      -----------      -----------       -------      -----------

Balances, December 31, 1998                 5,931,346       11,862        6,105,404      (21,354,186)           --      (15,236,920)

Issuance of common stock for cash           4,520,264        9,040       16,420,239               --            --       16,429,279

Exercise of stock options                     287,772          574          743,580               --            --          744,154

Tax benefit of stock option exercises              --           --           84,095               --            --           84,095

Net earnings                                       --           --               --        2,306,304            --        2,306,304
                                           ----------      -------      -----------      -----------       -------      -----------

Balances, December 31, 1999                10,739,382      $21,476       23,353,318      (19,047,882)           --        4,326,912
                                           ==========      =======      ===========      ===========       =======      ===========
</TABLE>


See accompanying notes to consolidated financial statements.


                                       27
<PAGE>

                              RADYNE COMSTREAM INC.

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                             Years ended December 31,
                                                                                 --------------------------------------------------
                                                                                     1999               1998               1997
                                                                                 ------------       ------------       ------------

<S>                                                                              <C>                 <C>                 <C>
Cash flows from operating activities:

     Net earnings (loss)                                                         $  2,306,304        (14,537,543)        (1,756,716)
     Adjustments to reconcile net earnings (loss) to net cash provided by
        (used in) operating activities:
           Forgiveness of interest                                                   (188,182)                --                 --
           Loss on disposal of assets                                                      --            961,069              2,122
           Depreciation and amortization                                            2,835,024          1,041,088            454,183
           Asset impairment charge                                                         --            262,935                 --
           Stock option compensation                                                       --          1,566,075                 --
           Write-off of in-process research and development                                --          3,909,000                 --
           Increase (decrease) in cash resulting from changes in:
              Accounts receivable                                                    (142,421)          (915,154)           374,459
              Prepaid expenses and other current assets                              (338,915)            20,069             26,222
              Inventories                                                           1,041,366          2,833,811         (3,398,560)
              Deposits and other                                                       15,410            242,787            (34,338)
              Accounts payable, trade                                                 286,550           (985,095)          (138,077)
              Accounts payable, affiliate                                              (8,150)           113,682           (420,300)
              Accrued expenses                                                     (2,853,265)         1,932,071            (25,924)
              Taxes payable                                                            70,010            (94,581)           (28,487)
              Accrued stock option compensation                                      (460,044)                --                 --
                                                                                 ------------       ------------       ------------

                    Net cash provided by (used in) operating activities             2,563,687         (3,649,786)        (4,945,416)
                                                                                 ------------       ------------       ------------

Cash flows from investing activities:

     Capital expenditures                                                            (279,048)          (543,630)          (593,072)
     Purchase of ComStream, net of cash acquired                                           --        (10,007,369)                --
                                                                                 ------------       ------------       ------------

                 Net cash used in investing activities                               (279,048)       (10,550,999)          (593,072)
                                                                                 ------------       ------------       ------------

Cash flows from financing activities:

     Net borrowings from notes payable under line of credit                         4,920,000          3,000,000          7,506,180
     Payment on note payable under line of credit                                          --         (4,500,000)                --
     Payment on note payable                                                       (5,962,561)                --                 --
     Proceeds from notes payable to affiliates                                             --         15,618,272          4,600,000
     Payments on note payable to affiliate                                        (15,618,272)                --        (11,200,000)
     Payment of debt issuance costs on line of credit                                      --           (200,000)                --
     Net proceeds from sale of common stock                                        17,173,433                 --          5,053,281
     Payments received on promissory notes issued in connection
        with common stock                                                                  --             40,086                 --
     Principal payments on capital lease obligations                                 (104,535)           (72,309)           (37,769)
                                                                                 ------------       ------------       ------------

                 Net cash provided by financing activities                            408,065         13,886,049          5,921,692
                                                                                 ------------       ------------       ------------

Net increase (decrease) in cash                                                     2,692,704           (314,736)           383,204

Cash and cash equivalents, beginning of year                                          254,956            569,692            186,488
                                                                                 ------------       ------------       ------------

Cash and cash equivalents, end of year                                           $  2,947,660            254,956            569,692
                                                                                 ============       ============       ============

Supplemental disclosures of cash flow information:

     Cash paid for interest                                                      $  2,090,298            568,812            687,626
                                                                                 ============       ============       ============

     Cash paid for taxes                                                         $     22,000                 --                 --
                                                                                 ============       ============       ============

Supplemental disclosures of noncash investing and financing activities:

     During 1997, the Company incurred capital lease obligations of $106,512 for
     new  machinery  and  equipment.  In  October  1998,  the  Company  made  an
     acquisition  for  $17,000,000  plus  $300,000  of other  costs  incurred in
     connection  with the  acquisition.  A  summary  of the  acquisition  was as
     follows:

           Purchase price                                                        $ 17,000,000
           Costs incurred                                                             300,000
           Less issuance of note payable                                           (7,000,000)
           Less cash acquired                                                        (292,631)
                                                                                 ------------

                    Cash invested                                                $ 10,007,369
                                                                                 ============
</TABLE>

     During 1999, the Company negotiated a write-down of the note payable in the
     amount of $515,940.

See accompanying notes to consolidated financial statements.


                                       28
<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


(1)  Organization and Acquisition

     Radyne  ComStream Inc. (the Company) has locations in Phoenix,  Arizona and
     San  Diego,  California.  The  Company  designs,  manufactures,  and  sells
     products,  systems and software used for the  transmission and reception of
     data over satellite and cable communication networks.

     Radyne Corp., a New York corporation, (Radyne) was incorporated on November
     25, 1980.  On August 12,  1996,  Radyne  became a  subsidiary  of Singapore
     Technologies Pte Ltd (STPL), through its wholly-owned  subsidiary,  Stetsys
     US, Inc. (ST). In 1996,  Radyne changed its fiscal year-end to December 31.
     In March 1999, Radyne changed its name to Radyne ComStream Inc.

     On October 15, 1998,  Radyne  purchased  all of the  outstanding  shares of
     common  stock of  ComStream  Holdings,  Inc.  (ComStream)  for an aggregate
     purchase price of $17 million, of which $10 million was paid in cash at the
     closing,  using funds borrowed from its  controlling  stockholder,  and the
     balance of which was in the form of a $7 million  note (the Note),  payable
     nine months from the purchase date. In addition,  the Company  accrued $1.6
     million of severance  costs as a result of the  acquisition  (note 5). This
     acquisition  was  recorded  in  accordance  with the  "purchase  method" of
     accounting.  The excess of the purchase price over the net assets  acquired
     was  approximately  $8.7  million of which $3.9  million was  allocated  to
     in-process  research and development,  $2.5 million was valued as purchased
     technology,  which is being amortized over 6.25 years, and $2.3 million was
     recorded as goodwill,  which is being amortized over ten years. The results
     of  operations  of  ComStream  have  been  included  in  the   accompanying
     consolidated statement of operations from October 15, 1998.

     The Company  negotiated a reduction in the note balance due to Spar for the
     following reasons: (i) a $521,000 reduction for the Company's assumption of
     $115,000 of  liabilities  from Spar and the waiver of Spar's  obligation to
     indemnify  the  Company  against a  $406,000  claim by a  product  assembly
     contractor  for  costs   incurred  on  ComStream's   behalf  prior  to  the
     acquisition,  and  (ii) a  $516,000  reduction  in  the  note  for  certain
     inventory and furniture and equipment  erroneously  carried on  ComStream's
     pre-closing  balance sheet.  Because these  discrepancies  were  identified
     prior  to the  purchase  price  allocation,  no  portion  of the  Company's
     purchase price for ComStream was allocated to such inventory, furniture and
     equipment.  Therefore,  this $516,000 reduction has resulted in a reduction
     in goodwill. The note was paid during the quarter ended September 30, 1999.
     In addition, the Company negotiated a $278,000 reduction in interest on the
     note  ($188,000 of which had been accrued in prior  periods and so has been
     reported as extraordinary income in the current period).

     The allocation to in-process research and development, for which management
     was primarily  responsible,  represents  the estimated  fair value based on
     risk-adjusted future cash flows related to the incomplete projects.  At the
     date of the  acquisition,  the  development  of these  projects had not yet
     reached  technological  feasibility  and the  research and  development  in
     process  had no  alternative  future  uses.  Accordingly,  these costs were
     expensed as of the acquisition date.

     The  assets  appraised  in  the  valuation  analysis  included   in-process
     technology,  developed technology and assembled  workforce.  Based upon the
     nature of the assets,  the income approach was considered most  appropriate
     for  analyzing  both  the  developed  and  in-process  technologies.   This
     valuation approach considers the commercial profits and growth prospects of
     the  products  as  well as the  relative  investment  risk of the  required
     complementary assets.



                                       29
<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

     Products-in-development  at ComStream at the time of the  acquisition  were
     classified as in-process technology.  All of the products were completed by
     December  31,  1999.  These  include  the  following  products  with  their
     respective completion dates:

                        Description                         Completion Date
          ------------------------------------------   -------------------------
          A 2MB card                                             Jan-99
          "CM601" modem modifications                            Mar-99
          "DT 8000" - a Ku-band 2 Watt earth station             Dec-98
          "DBR 2000" - a new data broadcast receiver             Jun-99
          "ABR 202" - a new audio receiver                       Nov-98
          Set Top Box                                            Jun-99
          MediaCast Card Receiver                                Mar-99

     Revenue streams associated with these  products-in-development were used to
     estimate fair value using the discounted cash flow method.  The products in
     development at ComStream had not attained "technological  feasibility",  as
     that term is defined in Financial  Accounting  Statement  No. 86, as of the
     acquisition  date.  In other  words,  either  the  research  projects  were
     incomplete  or  major  technical  uncertainties   remained.   Technological
     feasibility was achieved for all products during 1998 or 1999.

     It was  determined  that  there  was no  alternative  future  use  for  the
     in-process  technology as of the acquisition date.  Consideration was given
     to possible  other  projects in which the hardware  and  software  products
     could have been put to use,  but none of these  projects  had yet  attained
     "technological  feasibility",  and so they themselves were considered to be
     in-process technology.

     The  discounted  cash flow method began with  estimates of future cash flow
     using  ComStream  management's  forecasts.  In  deriving  these cash flows,
     estimates of ComStream's  future  revenues,  cost of goods sold,  sales and
     marketing,  general  and  administrative,   and  research  and  development
     expenses on a stand-alone basis were used to estimate a baseline measure of
     earnings  attributable to the products. By adding back non-cash charges and
     deducting projected capital expenditures, a measure of debt-free cash flow,
     useful for valuing ComStream's in-process technology, was derived.

     From the  debt-free  cash flow  forecasts,  which  represent  the cash flow
     return on all of ComStream's  assets,  returns were deducted for the use of
     certain  other assets:  developed  technology,  net fixed  assets,  working
     capital, and assembled workforce and goodwill. For this purpose, the annual
     charge for core technology  included in the products under  development was
     calculated  by  multiplying  the  unamortized  book value of the  developed
     technology  for that  year by the  required  rate of  return  on  developed
     technology.  The opening value of core  technology was  calculated  using a
     residual income approach  similar to the methodology  employed to calculate
     the value of in-process research and development.  The remaining book value
     of the developed  technology  was calculated by amortizing its opening fair
     value over 6.25 years.  The total charge was  allocated  to the  in-process
     technology  based on the  in-process  technology  projects'  share of total
     revenue.

     The cash flow returns  attributable  to the products  (debt-free cash flow)
     were  reduced  by the  return  requirement  for  each of the  other  assets
     employed.  The resulting  residual  cash flows  represent the expected cash
     flows attributable to the in-process  technologies.  A factor, based on the
     stage of completion of the


                                       30
<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


     in-process  projects,  was applied to these  expected cash flows to isolate
     the value  relating to  development  efforts  completed at the  acquisition
     date. These cash flows were then discounted at a rate of 36 percent.

     The  Company  believes  that the  assumptions  used in the  forecasts  were
     reasonable  at the time of the  acquisition.  No  assurance  can be  given,
     however, that the underlying  assumptions used to estimate expected product
     sales,  development costs or  profitability,  or the events associated with
     such  projects,  will  transpire as estimated.  For these  reasons,  actual
     results  may  vary  from  the  projected  results.   Within  the  satellite
     communications  equipment industry, there are several specific technologies
     incorporated  within a single product.  It is therefore difficult to relate
     specific  revenue  streams to  individual  technologies  or projects.  As a
     result,   instead  of  attempting  to  model  each  individual  project  or
     technology,  the  cash  flow  generated  by  ComStream's  products  in  the
     aggregate was examined.  We allocated the aggregate  revenues to developed,
     in-process  and  future  technology,  in  a  manner  which  we  believe  is
     reasonable.

     The Company has determined that no changes to the original assumptions were
     deemed necessary as a result of completing the in-process technologies.

     ComStream   operates   primarily   in  North   America  in  the   satellite
     communications  industry.  ComStream  designs,  markets  and  manufacturers
     satellite  interactive modems and earth stations.  Additionally,  ComStream
     manufactures and markets full-transponder satellite digital audio receivers
     for music providers and has designed and developed a PC broadband satellite
     receiver card which is an Internet and high-speed data networking product.

(2)  Summary of Significant Accounting Policies

     (a)  Use of Estimates

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities and disclosure of contingent  assets and liabilities as of
          the financial  statement date and the reported  amounts of revenue and
          expenses  during  the  reporting  period.  The  industry  in which the
          Company operates is characterized  by rapid  technological  change and
          short  product life  cycles.  As a result,  estimates  are required to
          provide for product obsolescence and warranty returns as well as other
          matters. Actual results could differ from those estimates.

     (b)  Principles of Consolidation

          The  consolidated  financial  statements  include the  accounts of the
          Company and its subsidiaries.  Significant  intercompany  accounts and
          transactions have been eliminated in the consolidation.

     (c)  Cash Equivalents

          The Company  considers all money market accounts with a maturity of 90
          days or less to be cash equivalents.

     (d)  Revenue Recognition

          The Company recognizes revenue upon shipment of product.


                                       31

<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


     (e)  Inventories

          Inventories,  consisting of satellite modems and related products, are
          valued at the lower of cost (first-in, first-out) or market.

     (f)  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  and  amortization  of
          machinery and equipment are computed  using the  straight-line  method
          over an estimated  useful life of three to ten 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.

     (g)  Goodwill

          Goodwill,  which  represents  the excess of  purchase  price over fair
          value of net assets  acquired,  is amortized on a straight-line  basis
          over ten years.

     (h)  Purchased Technology

          In connection with the acquisition of ComStream, value was assigned to
          purchased  technology.  Purchased  technology is being  amortized on a
          straight-line  basis over the expected  period to be benefited of 6.25
          years.

     (i)  Impairment of Long-Lived Assets

          The  Company  reviews  long-lived  assets  and  certain   identifiable
          intangibles for impairment whenever events or changes in circumstances
          indicate  the  carrying  amount  of an asset  may not be  recoverable.
          Recoverability  of  assets  to be  held  and  used  is  measured  by a
          comparison of the carrying  amount of an asset to future  undiscounted
          net cash flows  expected to be generated by the asset.  If such assets
          are  considered  to be impaired,  the  impairment  to be recognized is
          measured  by the  amount by which the  carrying  amounts of the assets
          exceed  the fair value of the  assets.  Assets to be  disposed  of are
          reported at the lower of the carrying  amount or fair value less costs
          to sell.  During  1998,  the Company  recognized  a design and drawing
          impairment  charge of $262,935,  with no  associated  tax benefit as a
          result of technology used in new products.

     (j)  Warranty Costs

          The Company provides limited warranties on certain of its products and
          systems for periods  generally not  exceeding  two years.  The Company
          accrues  estimated  warranty costs for potential product liability and
          warranty  claims based on the Company's claim  experience.  Such costs
          are accrued as cost of sales at the time revenue is recognized.

     (k)  Research and Development

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


                                       32

<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


     (l)  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. Differences between income
          for  financial  and  tax  reporting   purposes  arise  primarily  from
          amortization of certain designs and drawings and accruals for warranty
          reserves and compensated absences. 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.

     (m)  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 provides reserves
          for  potential  credit  losses  and  such  losses  have  not  exceeded
          management's expectations.

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

     (n)  Net Earnings (Loss) Per Share

          Basic  earnings  (loss) per share is  computed  by  dividing  earnings
          (loss)  available to  stockholders by the  weighted-average  number of
          shares  outstanding for the period.  Diluted earnings (loss) 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
          or loss of the Company.  Assumed exercise of outstanding stock options
          for 1998 and 1997 have been excluded from the  calculations of diluted
          net loss per share as their effect is antidilutive.  Per share amounts
          have been  adjusted  to  reflect a 1-for-5  reverse  stock  split that
          occurred on January 9, 1997.

     (o)  Fair Value of Financial Instruments

          The fair value of accounts  receivable,  accounts payable, and accrued
          expenses  approximates the carrying value due to the short-term nature
          of these instruments. Management has estimated that the fair values of
          the notes payable approximate the current balances outstanding,  based
          on currently available rates for debt with similar terms.

     (p)  Employee Stock Options

          The Company has elected to follow Accounting  Principles Board Opinion
          No. 25,  Accounting for Stock Issued to Employees (APB 25) and related
          interpretations  in accounting  for its employee  stock options and to
          adopt the "disclosure only"  alternative  treatment under Statement of
          Financial  Accounting  Standards No. 123,  Accounting for  Stock-Based
          Compensation  (SFAS  123).  SFAS 123  requires  the use of fair  value
          option  valuation  models that were not  developed  for use in valuing
          employee stock options.  Under SFAS No. 123, deferred  compensation is
          recorded  for the excess of the fair value of the stock on the date of
          the option grant, over the exercise price of the option.  The deferred
          compensation is amortized over the vesting period of the option.

                                       33
<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


     (q)  Segment Reporting

          The  Company  has only one  operating  business  segment,  the sale of
          equipment for satellite and cable communications networks.

     (r)  Reclassifications

          Certain   reclassifications   have  been  made  to  the  prior  years'
          consolidated  financial  statement  amounts to conform to the  current
          year presentation.

(3)  Inventories

     Inventories at December 31 consist of the following:

                                               1999                1998
                                           ------------       ------------
     Raw materials and components          $  5,550,279          6,065,751
     Work-in-process                          3,724,908          4,319,338
     Finished goods                             863,154            546,858
                                           ------------       ------------
                                             10,138,341         10,931,947
     Obsolescence reserve                    (1,799,229)       (1,551,469)
                                           ------------       ------------
                                           $  8,339,112          9,380,478
                                           ============       ============

(4)  Property and Equipment

     Property and equipment at December 31 consist of the following:

                                                      1999              1998
                                                   -----------      -----------
     Machinery and equipment                       $ 3,674,803        3,598,732
     Furniture and fixtures                          2,048,976        2,661,195
     Leasehold improvements                            445,127          312,425
     Computers and software                            462,042               --
                                                   -----------      -----------
                                                     6,630,948        6,572,352
     Less accumulated depreciation and
       amortization                                 (3,035,780)      (1,038,707)
                                                   -----------      -----------
     Property and equipment, net                   $ 3,595,168        5,533,645
                                                   ===========      ===========


                                       34

<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


(5)  Accrued Expenses

     Accrued expenses at December 31 consist of the following:

                                                         1999           1998
                                                      ----------     ----------
     Wages, vacation and related payroll taxes        $  788,559      1,355,316
     Interest                                            303,205        803,929
     Professional fees                                   630,650        378,817
     Warranty reserve                                    924,928        679,964
     Severance                                                --      1,282,761
     Lease buyout (notes 8 and 16)                       172,511      2,443,110
     Other                                             2,768,756      1,497,977
                                                      ----------     ----------
     Total accrued expenses                           $5,588,609      8,441,874
                                                      ==========     ==========

     The  severance  balance  included in accrued  expenses at December 31, 1998
     consisted  of  approximately  $688,000  associated  with the  restructuring
     charge  in the  fourth  quarter  of 1998,  discussed  in note  16,  and the
     remaining  $595,000 of severance  (for 16 technical  staff and  management)
     related to the Company's  acquisition  of ComStream in October  1998.  This
     $595,000 is part of a termination  benefits cost totaling  $1,600,000 (note
     1).

(6)  Notes Payable

     The  Company  has a  $20,500,000  credit  agreement  with a  bank  expiring
     September  29, 2000.  STPL has issued a  nonbinding  letter of awareness in
     connection with this credit agreement.  Borrowings under the line of credit
     bear  interest  equal to LIBOR or the bank's Quoted Rate plus 1 percent per
     annum at the time of draw.  The  interest  rates on the  December  31, 1999
     borrowings  ranged from 6.59% to 6.94% and 6.125% on the  December 31, 1998
     borrowings.  At December 31, 1999 and 1998,  outstanding borrowings against
     the line  were  $12,920,000  and  $8,000,000,  respectively,  plus  accrued
     interest.  This credit facility is an uncommitted  line of credit which the
     bank may modify or cancel without prior notice.

     In  connection  with the  purchase of  ComStream,  the  Company  executed a
     $7,000,000  note  payable to the former owner of  ComStream.  This note was
     issued on October 15, 1998 as partial  consideration for the acquisition of
     ComStream Holdings, Inc. The note matured on July 15, 1999 with interest at
     8% per annum. The Company negotiated a reduction in the note balance due to
     Spar (note 1). The note was paid during the  quarter  ended  September  30,
     1999.

(7)  Obligations Under Capital Leases

     The Company leases  machinery and equipment under capital leases.  The cost
     and  accumulated  depreciation  of the  equipment was $289,558 and $132,531
     respectively,  at  December  31,  1999  and is  included  in  property  and
     equipment  in the  accompanying  consolidated  balance  sheets and is being
     depreciated over the estimated useful lives of the machinery and equipment.


                                       35

<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


     Payments on capital lease  obligations  due after  December 31, 1999 are as
     follows:

          2000                                                        $  52,693
          2001                                                           37,330
          2002                                                           18,786
          2003                                                           12,230
          2004                                                            6,790
     2005 and thereafter                                                     --
                                                                      ---------

     Total minimum lease payments                                       127,829
     Less amount representing interest at
          rates of 2.26% to 12.96%                                      (18,845)
                                                                      ---------

     Present value of minimum lease payments                            108,984
     Less current installments                                          (44,332)
                                                                      ---------

     Capital lease obligations due after one year                     $  64,652
                                                                      =========

(8)  Commitments

     Rent expense was approximately  $1,790,248,  $517,853,  and $94,000 for the
     years ended December 31, 1999, 1998 and 1997.  Future minimum rentals under
     leases after December 31, 1999 are as follows:

          2000                                                      $ 1,803,124
          2001                                                        1,806,877
          2002                                                        1,800,441
          2003                                                        1,830,431
          2004                                                        1,784,509
          Thereafter                                                  3,126,603
                                                                    -----------

                                                                    $12,151,985
                                                                    ===========

     Prior to October 15, 1998,  ComStream  leased two  buildings  (of different
     size)  from the  same  landlord  under a single  lease.  The  entire  lease
     remained in effect  after  Radyne's  acquisition  of the stock of ComStream
     from Spar Aerospace Limited. However, Spar and Radyne agreed that ComStream
     would occupy only the larger of the two buildings, while Spar would seek to
     divide the lease into two separate  building  leases with Spar as lessor of
     the smaller  building.  Spar agreed to indemnify  Radyne ComStream from all
     costs associated with the lease of the smaller building. However, after the
     closing of the acquisition, a new tenant was found for the larger building.
     This permitted both Spar and Radyne  ComStream to realize  substantial cost
     savings.  Accordingly  on November  18, 1998,  the  landlord and  ComStream
     agreed that ComStream  would (i) retain the smaller  building,  (ii) vacate
     the larger  building no later than December 15, 1998,  (iii) pay $2,000,000
     to the  landlord,  and (iv)  commence  paying rent on the smaller  building
     alone as of March 1, 1999.  Additionally,  the  Company  negotiated  a cost
     reimbursement  of  $1,265,000  from  Spar,  which was  netted  against  the
     restructuring  cost discussed in note 16, resulting in a net  restructuring
     cost of $1.3  million  for the lease  buyout.  The  recovery is recorded as
     other  receivable as of December 31, 1998. The  $2,000,000  cash buyout was
     paid in two equal installments of $1,000,000 on March 1, 1999 and September
     1, 1999.

                                       36
<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


     The  Company   generally  has  commitments   with  certain   suppliers  and
     subcontract  manufacturers to purchase certain components and estimates its
     non-cancelable  obligations to be approximately  $4,800,000 at December 31,
     1999.

(9)  Income Taxes

     Income tax expense  amounted to $85,000,  and $0 and $0 for the years ended
     December  31, 1999,  1998 and 1997.  The actual tax expense  (benefit)  for
     these periods  differs from the "expected" tax expense for those periods as
     follows:

<TABLE>
<CAPTION>
                                                    Years ended December 31,
                                         ---------------------------------------------
                                             1999            1998              1997
                                         -----------      -----------      -----------
<S>                                      <C>               <C>                <C>
     Computed "expected" tax expense     $   813,043       (4,943,000)        (597,000)
     State tax expense                       190,158         (541,000)         (64,000)
     Valuation allowance benefit          (1,080,360)       5,190,000          613,000
     Other adjustments                       162,159          294,000           48,000
                                         -----------      -----------      -----------
              Total                      $    85,000             --               --
                                         ===========      ===========      ===========
</TABLE>

     Components of income tax expense for 1999 follows:

                                     Current         Deferred          Total
                                  ------------     ------------    ------------
     1999:

       Federal                    $     85,000             --            85,000
       State                              --               --              --
                                  ------------     ------------    ------------
          Total                   $    $85,000             --            85,000
                                   ============    ============    ============

     There was no current or  deferred  income tax  expense  for the years ended
     December 31, 1998 and 1997.

     Deferred tax assets at December 31 consisted of the following:

                                                     1999               1998
                                                 ------------      ------------
     Deferred tax assets:
       Cumulative tax effect of net
         operating loss carryforwards            $  9,316,187      $  8,459,000
       Tax credits                                    552,846           155,000
       Temporary differences                        3,937,989         3,734,000
       Valuation allowance                        (13,807,022)      (12,348,000)
                                                 ------------      ------------
                                                 $       --        $       --
                                                 ============      ============

     The net  change  in the  total  valuation  allowance  for the  years  ended
     December 31, 1999 and 1998 was $1,459,022 and $7,625,000,  respectively. At
     December 31, 1999,  the Company has net  operating  loss  carryforwards  of
     approximately  $24,241,000  expiring  in  various  years  through  2019 and
     general business credit carryforwards of $351,000 expiring in various years
     through 2004,  and federal AMT credit of


                                       37
<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


     $202,000 for  utilization  against taxable  income/taxes  payable of future
     periods,  if any.  Approximately  $6,200,000 of the Company's net operating
     loss and tax credit carryforwards are subject to an annual limitation under
     Internal  Revenue Code Section 382, in future years, as a result of changes
     in ownership of the Company's stock. Management believes that the inability
     to utilize net operating loss and tax credit carryforwards to offset future
     taxable income within the carryforward  periods under existing tax laws and
     regulations is more likely than not.  Accordingly,  a 100 percent valuation
     allowance  has been  recorded  against  the net  deferred  tax assets as of
     December 31, 1999 and 1998.

(10) Significant Customers and Foreign and Domestic Sales

     During 1999 and 1998, no customers  represented  greater than 10 percent of
     net sales. During 1997, one customer represented 14.5 percent of net sales.

     Our sales in  principal  foreign and domestic  markets as a  percentage  of
     total sales for the years ended December 31, 1999, 1998 and 1997 follow:

                                            Years ended December 31,
                                    --------------------------------------
                                      1999           1998           1997
                                    --------       --------       --------

     Asia                                 25%             7%            32%
     Africa/Middle East                    4              8              0
     Latin America                         4              9             12
     Europe                               21             23              7
     Canada                                2              3              5
                                    --------       --------       --------
     Total foreign                        56             50             56
     Domestic                             44             50             44
                                    --------       --------       --------

                                         100%           100%           100%
                                    ========       ========       ========

     Foreign assets                 $333,000        385,000              *
                                    ========       ========       ========

     *    Total  foreign asset  information  is not available as of December 31,
          1997.

     The Company  does not track sales by customer by country.  Therefore,  this
     information is not available.

     The  Company  has two  primary  product  lines:  1)  satellite  modems  and
     earthstations, and 2) broadcast products. The sales of satellite modems and
     earthstations  accounted for  approximately 54% of 1999 and 75% of 1998 net
     sales.  Information  concerning  the breakout of sales by these two product
     lines for periods prior to 1998 is not available.

(11) Stockholders' Equity

     In December  1999,  the Company  completed a rights  offering of  4,520,264
     shares  of  common   stock  to  existing   shareholders   for  a  total  of
     approximately  $16,429,000,   net  of  issuance  costs.  The  Company  used
     $15,618,272  of the  proceeds  from the  partial  exercise by ST to pay the
     total amount of debt owed to ST.


                                       38

<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


     The  Compensation  Committee and the Board of Directors  resolved to permit
     senior  management  to borrow  funds from the  Company  for the  purpose of
     exercising stock options. In October and November 1999, the chief executive
     officer,  chief technology  officer,  and chief financial  officer borrowed
     $200,000, $100,000 and $50,000, respectively, for the purpose of exercising
     stock options.  The Company  recorded the $350,000 in forgivable loans made
     as compensation expense in 1999.

     In February  2000,  the Company  completed an offering of 2,400,000  units,
     each  consisting  of one share of common  stock and one warrant to purchase
     one share of common stock,  plus an additional  360,000 units sold pursuant
     to the underwriters'  over-allotment  option,  for a total of approximately
     $16,759,000 cash, net of issuance costs.

(12) Earnings (Loss) Per Share

     A summary of the  reconciliation  from basic  earnings  (loss) per share to
     diluted earnings (loss) per share follows:

<TABLE>
<CAPTION>
                                                            Years ended December 31,
                                              -----------------------------------------------
                                                  1999               1998              1997
                                              -------------      -------------     ----------
<S>                                           <C>                  <C>             <C>
     Earnings (loss) available to common
       stockholders                           $   2,306,304        (14,537,543)    (1,756,716)
                                              =============      =============     ==========

     Basic EPS-weighted average shares
       outstanding                                7,111,777          5,931,346      5,012,664
                                              =============      =============     ==========

     Basic earnings (loss) per share:
       Earnings (loss) before
         extraordinary item
                                              $        0.30              (2.45)          (.35)
       Extraordinary item                              0.02               --             --
                                              -------------      -------------     ----------

                  Net earnings (loss)         $        0.32              (2.45)          (.35)
                                              =============      =============     ==========

     Basic EPS-weighted average shares
       outstanding                                7,111,777          5,931,346      5,012,664
     Effect of dilutive securities                  459,648               --             --
                                              -------------      -------------     ----------

     Dilutive EPS-weighted average shares
       outstanding                                7,571,425          5,931,346      5,012,664
                                              =============      =============     ==========

     Diluted earnings (loss) per share:
       Earnings (loss) before
         extraordinary item                   $        0.28              (2.45)          (.35)
       Extraordinary item                              0.02               --             --
                                              -------------      -------------     ----------

                  Net earnings (loss)         $        0.30              (2.45)          (.35)
                                              =============      =============     ==========

     Stock options not included in
       diluted EPS since antidilutive                  --              691,559        169,818
                                              =============      =============     ==========
</TABLE>


                                       39

<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


(13) Employee Benefit Plan

     The  Company  has a  qualified  contributory  401(k)  plan that  covers all
     employees  in Phoenix,  Arizona,  who have  attained  the age of 18 and are
     employed at the  enrollment  date.  Matching  contributions  were  $85,301,
     $31,690 and $30,230 for the years ended  December 31, 1999,  1998 and 1997,
     respectively.  Each participant may elect to contribute up to 15 percent of
     his or her gross  compensation  up to the  maximum  amount  allowed  by the
     Internal  Revenue  Service.  The  Company  matches  up to 1 percent  of the
     employee's salary.

     The  Company  has a  qualified  contributory  401(k)  plan that  covers all
     full-time  employees  in San  Diego,  California,  who have  been  employed
     continuously  for  at  least  30  days  before  enrollment  date.  Matching
     contributions  were  $143,487  for the year  ended  December  31,  1999 and
     $30,450  for the  period  October  15,  1998  through  December  31,  1998,
     respectively.  Each participant may elect to contribute up to 15 percent of
     his or her gross  compensation  up to the  maximum  amount  allowed  by the
     Internal Revenue Service. The Company matches $.35 for every dollar up to 7
     percent of the participant's contribution.

(14) Stock Options

     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.  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 October 1998,
     the Company amended the terms of certain stock options pursuant to the Plan
     to accelerate  vesting of the awards,  thereby  creating a new  measurement
     date  and,   accordingly,   recognized   compensation  costs  amounting  to
     $1,566,075.  The Company  recognized no compensation cost relative to those
     stock options in 1997. In November  1998,  the Plan was amended to increase
     the options  available by 900,000,  providing a total of 2,182,042  options
     available to purchase shares of common stock.

     At December 31, 1999,  the Company had  1,535,206  options  outstanding  at
     exercise  prices  ranging  from  $2.50 to 4.188  per  share.  Of the  total
     options,  the Company had 394,769 options  outstanding at an exercise price
     of $2.50  per  share  that  carry  the  right to a cash  bonus of $1.72 per
     purchased  share,  payable upon  exercise.  The stock  option  compensation
     accrual related to the bonus is $695,433 at December 31, 1999.

     The  Company  applies APB Opinion 25 in  accounting  for its Plan.  Had the
     Company  determined  compensation cost based on the fair value at the grant
     date for its stock  options  under SFAS No. 123, the Company's net earnings
     (loss) and earnings (loss) per share would have been reduced (increased) to
     the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                       ----------------------------------------------------
                                                                            1999              1998                1997
                                                                       --------------    --------------      --------------
<S>                                          <C>                      <C>               <C>                 <C>
     Net earnings (loss)                     As reported              $    2,306,304    $  (14,537,543)     $   (1,756,716)
                                             Pro forma (unaudited)         1,482,399       (15,293,957)         (2,028,121)
     Earnings (loss) per share - basic       As reported                         .32             (2.45)               (.35)
                                             Pro forma (unaudited)               .21             (2.58)               (.40)
     Earnings (loss) per share - diluted     As Reported                         .30             (2.45)               (.35)
                                             Pro forma (unaudited)               .20             (2.58)               (.40)
</TABLE>

                                       40
<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


     The full impact of  calculating  compensation  cost for stock options under
     SFAS No. 123 is not reflected in the pro forma net earnings  (loss) amounts
     presented above because compensation cost is reflected (increased) over the
     options' vesting period of three years.

     The fair value of options  granted under the Plan was estimated on the date
     of grant with  vesting  periods  ranging  from one to three years using the
     Black-Scholes  option-pricing  model with the  following  weighted  average
     assumptions used: no dividend yield,  expected  volatility of 118 percent -
     184  percent,  risk free  interest  rate of 6 percent - 5.27  percent,  and
     expected lives of five years.

     A summary of the aforementioned stock plan activity follows:

                                                                  Weighted
                                                                Average Price
                                                    Number        Per Share
                                                  ----------    -------------
     Balance, December 31, 1996                      684,395          $2.50
     Granted                                          15,500           2.50
     Forfeited                                        (9,230)          2.50
                                                  ----------     ----------
     Balance, December 31, 1997                      690,665           2.50
     Granted                                         553,000           2.89
     Forfeited                                       (37,708)          2.50
                                                  ----------     ----------
     Balance, December 31, 1998                    1,205,957           2.68
     Granted                                         857,000           3.60
     Forfeited                                      (239,979)          3.45
     Exercised                                      (287,772)          2.54
                                                  ----------     ----------
     Balance, December 31, 1999                    1,535,206          $3.09
                                                  ==========     ==========

     A summary of stock options granted at December 31, 1999 follows:

<TABLE>
<CAPTION>
                                               Options Outstanding                             Options Exercisable
                            -------------------------------------------------------       -------------------------------
                                                     Weighted-            Weighted-                            Weighted-
                                Number                Average              Average            Number            Average
         Range of           Outstanding at           Remaining            Exercise        Exercisable at        Exercise
     Exercise Prices           12/31/99          Contractual Life           Price            12/31/99            Price
     ---------------        --------------       ----------------       -----------       --------------       -----------
<S>                              <C>                  <C>                <C>                 <C>               <C>
     $    2.50                   410,904              1 years            $    2.50           410,904           $    2.50
     $    2.50                     6,500              2 years                 2.50             4,875                2.50
     $2.50 to 3.125              439,552              3 years                 2.92           219,776                2.92
     $3.00 to 4.1875             678,250              4 years                 3.57           169,562                3.57
                               ---------                                 ---------         ---------           ---------
                               1,535,206                                 $    3.09           805,117           $    2.84
                               =========                                 =========         =========           =========
</TABLE>

                                       41

<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


(15) Employee Stock Purchase Plan

     On June 15, 1999, our 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 utilize  payroll  deductions to purchase
     shares of our common stock. 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. As of December
     31, 1999,  1,000,000 shares are authorized for issuance under the plan. The
     Purchase Plan was activated in the first quarter of 2000.

(16) Restructuring Costs

     In  November  1998,  the  Company   announced  a  corporate   restructuring
     cost-cutting   initiative,   and   provided  a   restructuring   charge  of
     approximately  $3,100,000.   Included  in  this  restructuring  charge  was
     approximately  $1,100,000 in termination  benefits for 38 technical,  sales
     and  administrative  staff. The Company paid $412,000 of these  termination
     benefits  prior to December  31, 1998 and  $688,000 was included in accrued
     expenses as of  December  31,  1998 which was paid in 1999.  The  remaining
     $2,000,000  was comprised of $1,300,000  for the net cost of a lease buyout
     and $700,000 of leasehold improvements that were abandoned upon movement to
     a new  building  in San  Diego,  California.  At  December  31,  1999,  the
     remaining  balance in the  accrued  expenses  related to the  restructuring
     costs is comprised of remaining costs associated with the lease buyout.

(17) Related Party Transactions

     Sales to a  subsidiary  of STPL for the years ended  December  31, 1998 and
     1997 were $50,000 and $152,500, respectively.

     Sales to Agilis Communication  Technologies Pte Ltd (Agilis),  an affiliate
     of ST,  amounted  to  $200,000,  $65,000 and  $540,000  for the years ended
     December 31, 1999, 1998 and 1997, respectively.

     Interest expense on notes payable to affiliates was $765,914,  $581,000 and
     $148,000  for  the  years  ended   December   31,  1999,   1998  and  1997,
     respectively, of which $0 and $581,000 were included in accrued expenses in
     the  accompanying  consolidated  balance sheets as of December 31, 1999 and
     1998, respectively.

     During 1998, an ST affiliate made loans of $15,618,272 to the Company.  The
     Company used the proceeds  from the 1999 rights  offering to pay off the ST
     loan (note 11).

(18) Contingencies

     The Company developed a plan to deal with the Year 2000 issue and converted
     its computer systems to be Year 2000 compliant.  The Year 2000 issue is the
     result of computer programs being written using two digits rather than four
     to define the applicable  year.  Management has also assessed the Year 2000
     remediation  efforts  of  the  Company's  significant  suppliers.  Although
     management  believes its efforts minimize the potential  adverse effects on
     the  Company of a  supplier's  failure to be Year 2000  compliant  on time,
     there can be no absolute  assurance that all its suppliers will become Year
     2000  compliant  on  time or in a way  that  will be  compatible  with  the
     Company's systems. Additionally, there can be no assurance that the Company
     will be able to  completely  resolve  all  Year  2000  issues  or that  the
     ultimate cost to identify and  implement  solutions to all Year 2000 issues
     will not be material to the Company.



                                       42
<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


     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, that
     might result from the ultimate outcome of these matters.

(19) Supplemental Financial Information

     A summary of additions and deductions related to the allowance for doubtful
     accounts and inventory  obsolescence  reserve for the years ended  December
     31, 1999, 1998 and 1997 follows:

<TABLE>
<CAPTION>
                                              Balance at                   Charged to                     Balance
                                              Beginning                      Other                       at End of
                                               of Year       Additions      Accounts     Deductions        Year
                                              ----------     ---------     ---------     ----------     ----------
<S>                                           <C>            <C>           <C>           <C>            <C>
     Allowances for doubtful receivables:
        Years ended December 31:
          1999                                $  632,815       175,000          --          16,069         791,746
                                              ==========     =========     =========     =========      ==========
          1998                                $   15,000       155,000       462,815*         --           632,815
                                              ==========     =========     =========     =========      ==========
          1997                                $   13,000         2,000          --            --            15,000
                                              ==========     =========     =========     =========      ==========

     Reserve for inventory obsolescence:
        Years ended December 31:
          1999                                $1,551,469       420,162          --         172,402       1,799,229
                                              ==========     =========     =========     =========      ==========
          1998                                $  291,000     1,260,469          --            --         1,551,469
                                              ==========     =========     =========     =========      ==========
          1997                                $  486,000          --            --        (195,000)        291,000
                                              ==========     =========     =========     =========      ==========
</TABLE>

     *    Balance  represents  allowance  acquired  during purchase of ComStream
          Holdings, Inc.


                                       43

<PAGE>

                             RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


     (20) Quarterly Financial Data - Unaudited

     A summary of the quarterly data for the years ended December 31, 1999, 1998
     and 1997 follows:

<TABLE>
<CAPTION>
                                                                 First         Second          Third        Fourth
                                                                Quarter        Quarter        Quarter       Quarter        Total
                                                               ---------      ---------      ---------     ---------      -------
<S>                                                            <C>            <C>            <C>           <C>            <C>
     1999:
        Total revenues                                         $  12,319         12,944         13,999        16,578       55,840
                                                               =========      =========      =========     =========      =======
        Gross profit                                           $   5,546          5,921          6,704         7,698       25,869
                                                               =========      =========      =========     =========      =======
        Operating expenses                                     $   5,308          4,956          5,605         5,963       21,832
                                                               =========      =========      =========     =========      =======
        Earnings (loss) before interest
          expense taxes and extraordinary item                 $     238            965          1,099         1,812        4,114
                                                               =========      =========      =========     =========      =======
               Net earnings (loss)                             $    (317)           422            809         1,392        2,306
                                                               =========      =========      =========     =========      =======
     Basic earnings (loss) per share                           $    (.05)           .07            .13           .13          .32
                                                               =========      =========      =========     =========      =======
     Diluted earnings (loss) per share                         $    (.05)           .06            .13           .13          .30
                                                               =========      =========      =========     =========      =======

     1998:
        Total revenues                                         $   3,949          2,718          3,307        11,138       21,112
                                                               =========      =========      =========     =========      =======
        Gross profit                                           $   1,194             48          1,027         3,034        5,303
                                                               =========      =========      =========     =========      =======
        Operating expenses                                     $   1,506          1,577          1,384        14,198       18,665
                                                               =========      =========      =========     =========      =======
        Loss before interest expense                           $    (312)        (1,529)          (357)      (11,164)     (13,362)
                                                               =========      =========      =========     =========      =======
               Net loss                                        $    (490)        (1,727)          (550)      (11,771)     (14,538)
                                                               =========      =========      =========     =========      =======
     Basic loss per share                                      $    (.08)          (.29)          (.09)        (1.99)       (2.45)
                                                               =========      =========      =========     =========      =======
     Diluted loss per share                                    $    (.08)          (.29)          (.09)        (1.99)       (2.45)
                                                               =========      =========      =========     =========      =======

     1997:
        Total revenues                                         $   2,741          2,812          4,434         3,460       13,447
                                                               =========      =========      =========     =========      =======
        Gross profit                                           $   1,061          1,158          2,036         1,170        5,425
                                                               =========      =========      =========     =========      =======
        Operating expenses                                     $   1,363          1,499          1,788         1,854        6,504
                                                               =========      =========      =========     =========      =======
        Earnings (loss) before interest expense                $    (302)          (341)           248          (684)      (1,080)
                                                               =========      =========      =========     =========      =======
                 Net earnings (loss)                           $    (474)          (504)            86          (865)      (1,757)
                                                               =========      =========      =========     =========      =======
     Basic earnings (loss) per share                           $    (.13)          (.11)           .01          (.12)        (.35)
                                                               =========      =========      =========     =========      =======
     Diluted earnings (loss) per share                         $    (.13)          (.11)           .01          (.12)        (.35)
                                                               =========      =========      =========     =========      =======
</TABLE>


                                       44
<PAGE>

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE.

     See our report on Form 8-K/A, filed on July 31, 1998.

                                    PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

     The following table sets forth certain information  regarding our executive
officers and directors:

Name                     Age                         Position
----                     ---                         --------

Robert C. Fitting.....    64    Director, Chief Executive Officer and President
Steven W. Eymann......    47    Executive  Vice  President  and Chief  Technical
                                Officer

Garry D. Kline........    50    Vice  President  of  Finance,   Chief  Financial
                                Officer and Secretary
Ming Seong Lim........    52    Chairman of the Board
Yip Loi Lee...........    56    Director
Robert A. Grimes......    47    Director
Dennis W. Elliott.....    58    Director
Kum Chuen Tang........    44    Director

                                   ----------

     Robert C. Fitting has been Chief  Executive  Officer since October 1998 and
has been President  since February 1995. He became a Director in March 1995. Mr.
Fitting has a Master of Electrical  Engineering  degree from New York University
and a Bachelors with  distinction from Penn State  University.  His professional
career began at Bell  Laboratories in 1962,  where he spent six years developing
innovative  communication  technologies.  Mr.  Fitting  then joined the Motorola
Government  Electronics  Division,  where  he was  an  engineering  manager.  He
published  more  than a dozen  technical  papers  and was  awarded  a number  of
patents.  Mr.  Fitting  left  Motorola in 1978 to build a new  company  under an
agreement  with Comtech  Telecommunications.  The new company was named  Comtech
Data Corporation, currently known as Fairchild Data Corporation. Mr. Fitting was
the General Manager and President of Comtech Data Corporation from 1978 to 1984.
In August 1984,  Mr. Fitting left Comtech,  along with Steven  Eymann,  to start
EFData Corporation. As co-founder, CEO, and President of EFData Corporation, Mr.
Fitting  built  the  company  into  a  worldwide   market  leader  in  satellite
communications  equipment.  While  at  EFData,  Mr.  Fitting  won  the  "Arizona
Entrepreneur  of the Year"  award in 1993 in the  manufacturing/high  technology
category. Mr. Fitting left EFData in February 1995 to join our company. Pursuant
to our underwriting agreement with HD Brous & Co. Inc., we have agreed to obtain
"key  person"  life  insurance  on the  life of Mr.  Fitting  in the  amount  of
$1,000,000. The proceeds of this policy will be payable to us.

     Steven Eymann has been Chief  Technical  Officer since October 1998 and has
been our Executive Vice President since February 1995. Mr. Eymann graduated with
honors and a Bachelor of Science in Electrical  Engineering  from the University
of Nebraska.  His professional  career began in 1974 at the Motorola  Government
Electronics Division,  where he was a design engineer, task leader and finally a
project leader for the DSU-23/29B fuse development  program.  As project leader,
he was responsible for project management,  budgets,  schedules,  and design and
testing of the fuse. He designed the computer-controlled  automatic test set for
factory testing based on a HP 9825 computer. The DSU-23/29B is a L-Band PN radar
for  accurate,  low-cost  altitude  direction.  In June 1981,  Mr. Eymann joined
Comtech  Data  Corporation,  where he was Director of Product  Development.  Mr.
Eymann was responsible for budget,  schedule,  and technical  aspects of all new
product  development  within Comtech.  Prior to becoming the Director of Product
Development,  he served as a senior  engineer with program and technical  design
responsibility.  He left Comtech in 1984,  along with Robert  Fitting,  to start
EFData  Corporation.  As co-founder and Vice President of EFData, Mr. Eymann was
responsible for new product development and engineering management in the design
and  manufacture  of high  technology,  military and  commercial  communications
equipment. Mr. Eymann left EFData in February 1995 to join our company. Pursuant
to our underwriting agreement with HD Brous & Co. Inc., we have agreed to obtain
"key person" life


                                       45
<PAGE>

insurance on the life of Mr.  Eymann in the amount of $500,000.  The proceeds of
this policy will be payable to us.

     Garry D. Kline,  Vice  President of Finance,  Chief  Financial  Officer and
Secretary,  joined our company in September 1995. From that time until July 1997
he was Secretary  and  Controller.  From 1987 until  September  1995,  Mr. Kline
served as CFO and  Controller of EFData  Corporation.  Prior to 1987,  Mr. Kline
served in various positions, including Vice President of Finance for Megatronics
Inc., a publicly held printed  circuit  board  manufacturer,  Vice  President of
Operations for Vernal Lodging Associates,  a hospitality management company, and
General Partner of Tax and Accounting Computer Service, an accounting firm.

     Ming Seong Lim has been a Director  and  Chairman of the Board since August
13, 1996 and is chairman of the  Compensation  Committee.  He is the Chairman of
Stetsys Pte Ltd and  Stetsys US,  Inc.,  members of the  Singapore  Technologies
group.  He has been Group  Director of  Singapore  Technologies  Pte Ltd,  since
February 1995. From March 1992 until February 1995, he was Executive Director of
Singapore Technologies Ventures Pte Ltd and from February 1990 to March 1992, he
was Group  President of Singapore  Technologies  Holdings Pte Ltd. Prior to that
time he held  various  corporate  and  government  positions,  including  Deputy
Secretary in the Singapore Ministry of Defense from 1979 to 1986.

     Yip Loi Lee has been a Director  since  August 13,  1996 and is chairman of
the Audit Committee and a member of the Compensation  Committee of the Board. He
was Regional  Director  (America) of Singapore  Technologies  Pte Ltd from March
1994 until  December 1998, and from May 1990 to January 1997 he was President of
its  affiliate,  Metheus  Corporation.  Prior to that  time he held a number  of
managerial  positions  with  such  corporations  as  Morgan  Guaranty  Trust and
Singapore  Technologies  Pte Ltd and  government  positions  with the  Singapore
Ministries of Education, Defense, Culture and Home Affairs. Mr. Lee is currently
a director of Stetsys Pte Ltd, Stetsys US Inc.,  California Avitron Corporation,
Tritech Microelectronics Ltd, and Vertex Management, Inc.

     Robert A. Grimes, who is a member of the Audit and Compensation  Committees
of the Board,  has served as a member of the Board of Directors  since  December
1994. He has been President of Pinkerton  Systems  Integration  since 1998. From
1991 to 1998,  Mr.  Grimes  served  as a member  of the  Board of  Directors  of
Engineering  and  Technical  Services,  Inc.,  of which he was  President  until
December 31, 1997.  He was also the  President of Stetsys US, Inc. from February
24, 1997 to January 23, 1998.

     Dennis  W.  Elliott  has been a  Director  and a member  of the  Audit  and
Compensation Committees since October 1998. He has been the President of Elliott
Communications  Co.,  a  technology/marketing  consulting  concern  involved  in
advising   companies  on  strategy   and   developing   operating   ventures  in
telecommunications,   data  networking,   digital   television/high   definition
television  and  multimedia  since  1990.  Mr.  Elliott  was a  Director  of STM
Wireless,  Inc.  and a member of its  Compensation  Committee  from  January  to
September  1998.  Mr.  Elliott is currently a director of Firetalk,  Inc. He has
also  held  executive   positions  at  Pacific   Telecom,   Inc.,  RCA  American
Communications (now GE American Communications) and RCA Global Communications.

     Kum Chuen Tang has been a director  since June 1999.  Mr. Tang has been the
General  Manager of Agilis  Communication  Technologies  Pte Ltd.  since January
1999.  From July 1997 until December 1998, he was the Deputy General  Manager of
CET  Technologies  Pte Ltd.  From April 1990 until June 1997, he was employed by
Singapore Technologies Electronics Limited, initially as Senior Project Engineer
and promoted to Divisional Manager in July 1996. From May 1987 until March 1990,
he held various government positions with the Singapore Ministry of Defense. Mr.
Tang has a Master  of  Science  degree  (IE)  from the  National  University  of
Singapore and a Bachelor of Engineering  degree (First Class Honors) from Monash
University.

     Each director is elected for a period of one year at the annual  meeting of
shareholders and serves until the next meeting and until his or her successor is
duly  elected and  qualified.  A director is elected by a plurality of the votes
cast by the  shareholders.  Officers are elected by, and serve at the discretion
of,  the  Board of  Directors.  Messrs.  Elliott  and  Grimes  are  "independent
directors"  as  defined  in  the  North   American   Securities   Administration
Association  ("NASAA")  Statement of Policy  Regarding  Loans and Other Material
Affiliated Transactions.  We will maintain at least two independent directors on
the  Board  of  Directors  and it is our  intention  to add a third  independent
director prior to June 2001.



                                       46
<PAGE>

Certain Key Employees

     David  Koblinski has been general manager of our Phoenix  operations  since
October 1998. Additionally, from 1995 to September 1999 he also served as a Vice
President of Operations for our Phoenix facility.  Mr. Koblinski's  professional
career began in 1982 at Comtech Data Corporation,  where he held the position of
Customer Service Representative. He was responsible for repairs as well as field
and telephone support of satellite data modems. From 1985 to 1995, Mr. Koblinski
was  the  Senior  Product  Manager  and  Customer  Support  Manager  for  EFData
Corporation.

     John Restivo has been Executive  Vice President and General  Manager of our
San Diego operations since March 1999. His duties presently  include  management
of our San Diego  facility.  Mr.  Restivo  has a Bachelor  of Science  degree in
Engineering  from  Florida  Institute of  Technology.  His  professional  career
includes more than thirteen years in engineering and  management.  He has held a
variety of  positions,  most  recently as Chief  Technical  Officer of Radiation
Systems,  Inc. Previous experience  includes  Scientific  Atlanta,  where he was
Director of Engineering and Operations, and Hughes Aircraft Company as a systems
engineer.

     Brian  Duggan  has been the Vice  President  of Sales and  Marketing  since
December 1998.  Mr. Duggan  handles  global sales and marketing  efforts for our
complete  equipment line, with all regional sales offices reporting  directly to
him. Prior to this appointment, Mr. Duggan served as Director of Worldwide Sales
for ComStream  Corporation.  Before joining  ComStream in 1995, Mr. Duggan spent
eight years as Director of  Marketing  with  Comtech  Systems,  Inc. He has held
various positions with Plessey  Electronics Systems Ltd. (UK) in engineering and
sales and  marketing,  and with  Datotek  Corporation  in Texas as  Director  of
Marketing.  Mr. Duggan is a graduate of Hatfield  College in the United Kingdom,
where he majored in engineering.

     Based  solely  upon a review  of Forms  3, 4 and 5 and  amendments  thereto
furnished to the  registrant  during the period from January 1, 1999 to December
31, 1999,  none of the officers or directors of the registrant or the beneficial
owners  of its  equity  securities  failed  to file  reports  on Forms 3, 4 or 5
required to be filed during such period or prior  thereto,  except that a Form 3
Report  was filed  late by Tang Kum Chuen and a Form 4 Report  was filed late by
Stetsys Pte Ltd and Temasek Holdings (Private) Limited and by Steve Eymann.

ITEM 11. DIRECTOR AND EXECUTIVE COMPENSATION

     Our policy has been to pay no cash  compensation  to directors  who are our
employees or ST affiliates for their service as directors. Outside directors are
paid $4,000 per meeting  attended and $500 if  attendance is via  telephone.  In
April 1999,  all directors  became  eligible to receive stock  options.  In June
1999,  the Board of Directors  voted to grant stock  options to four  directors.
Robert Grimes,  Dennis Elliot,  Kum Chuen Tang, and Yip Loi Lee each received an
option to purchase up to 10,000 shares of our common stock at an exercise  price
of $3.25 per share. The options expire in June 2009.

     In  August  1999,  our  Board  of  Directors   recognized  the  significant
achievements of our senior management in effecting the ComStream  integration by
awarding bonuses of $203,900 to Robert C. Fitting,  $98,900 to Steven W. Eymann,
and $46,700 to Garry Kline. In addition, to further the goal of providing senior
management an equity stake in our company,  the  Compensation  committee and the
Board of Directors resolved to permit senior management to borrow funds from our
company for the purpose of exercising  stock options.  In October 1999,  Messrs.
Fitting and Kline borrowed $200,000 and $50,000,  respectively,  for the purpose
of exercising stock options.  In November 1999, Mr. Eymann borrowed $100,000 for
the purpose of exercising his stock options.  No additional  loans are available
under  this  arrangement.  We  recorded  the  $350,000  in loans made to Messrs.
Fitting Eymann and Kline as compensation expense in 1999.

     Under  the  terms  of the  promissory  notes  executed  by each of  Messrs.
Fitting, Eymann, and Kline, each promises to pay 50% of the principal amount due
with interest on the first  anniversary  date of the note.  The remainder of the
principal, plus interest, is due on the second anniversary date of the note. The
unpaid  principal  bears  interest  at a rate of 5% per annum.  If the  borrower
continues to be employed by us, we will forgive one-half of each loan (including
interest) in January 2001, and we will provide  sufficient bonus compensation at
those  times to enable  the  employees  to  satisfy  the  resulting  income  tax
obligation. If we sever our relationship with any of Messrs. Fitting, Eymann, or
Kline for  cause or if any of them  voluntarily  severs  the  relationship,  any
portion of the loan not forgiven


                                       47
<PAGE>

will become due and payable.  Further,  based upon their exercise of the options
exercised with the proceeds of these loans, each of Messrs. Fitting, Eymann, and
Kline has agreed not to own, operate or be employed by a competing entity during
a two-year period  commencing from the date of the termination of his employment
either involuntarily for cause or voluntarily by the employee.

     The  following  table  sets  forth the  compensation  for  services  in all
capacities to the Company for the years ended  December 31, 1999,  1998 and 1997
of the Company's  Chief  Executive  Officer,  Executive Vice President and Chief
Financial Officer.  No other executive officer or employee received total annual
salary and bonus of more than $100,000.

<TABLE>
<CAPTION>
                                                SUMMARY COMPENSATION TABLE

                                                             YEAR                                  ALL OTHER
     NAME AND PRINCIPAL POSITION                             ENDED        SALARY      OPTIONS(#) COMPENSATION(1)
     ---------------------------                             -----        ------      ---------- ---------------
<S>                                                         <C>          <C>            <C>         <C>
     Robert C. Fitting, CEO ...........................     12/31/99     $366,588            0      $229,056
                                                            12/31/98      144,234       30,000         1,186
                                                            12/31/97      116,529            0         1,165


     Steven Eymann, Exec. Vice Pres ...................     12/31/99     $236,916            0      $138,588
                                                            12/31/98      133,543       30,000         1,174
                                                            12/31/97      111,162            0         1,112

     Garry Kline, CFO .................................     12/31/99     $113,045       20,000      $ 92,070
                                                            12/31/98       75,000       30,000           692
                                                            12/31/97       69,904            0           524
</TABLE>

(1) For the years ended in 1997 and 1998,  these  amounts were for matching 401K
contributions.  For 1999,  Mr.  Fitting's  other  compensation  consisted  of an
executive bonus of $203,900 plus matching 401K  contributions of $2,000,  excess
group term life insurance premiums of $3,048 and cafeteria plan related benefits
of $20,108.  Mr.  Eymann's  other  compensation  for 1999 consisted of executive
bonuses of $132,900  plus matching 401K  contributions  of $2,000,  excess group
term life  insurance  premiums of $635 and  cafeteria  plan related  benefits of
$3,053.  Mr. Kline's other  compensation for 1999 consisted of executive bonuses
of $87,200 plus matching 401K contributions of $2,000 and cafeteria plan related
benefits of $2,870.

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                     PERCENT OF TOTAL OPTIONS
                       OPTIONS       GRANTED TO EMPLOYEES IN        EXERCISE     EXPIRATION    GRANT DATE PRESENT
NAME                   GRANTED             FISCAL YEAR               PRICE          DATE            VALUE(1)
----                   -------             ----------                -----          ----            --------
<S>                    <C>                      <C>                  <C>           <C>                <C>
Robert C. Fitting ..      0                     0%                    N/A            N/A               N/A

Steven Eymann.......      0                     0%                    N/A            N/A               N/A


Garry Kline ........   20,000                   1%                   $3.00         9/16/09            $5.62
</TABLE>

----------
(1)  Based on the Black-Scholes  option pricing model,  assuming that one-fourth
     of the options will be  exercisable on the grant date and each of the first
     three anniversaries thereof, no dividend yield, expected volatility of 130%
     and a  risk-free  interest  rate of 5.76%.  Potential  gains are net of the
     exercise  price,  but before taxes  associated  with the exercise.  Amounts
     represent  hypothetical  gains that could be  achieved  for the  respective
     options if exercised at the end of the option  term.  The assumed  rates of
     stock price  appreciation  are provided in accordance with the rules of the
     SEC and do not  represent our estimate or projection of the future price of
     our common stock.  Actual  gains,  if any, on stock option  exercises  will
     depend upon the future market prices of our common stock.

                                       48
<PAGE>

AGGREGATE OPTION EXERCISES IN 1999 AND HOLDINGS AT YEAR END

     The following table sets forth information  concerning option exercises and
option  holdings for the year ended  December 31, 1999 with respect to Robert C.
Fitting,  the Chief  Executive  Officer and  President  of the  Company,  Steven
Eymann,  the  Executive  Vice  President  and Garry Kline,  the Chief  Financial
Officer of the Company.

                       AGGREGATE OPTIONS EXERCISED IN THE
                LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUE

<TABLE>
<CAPTION>
                                                       NUMBER OF UNEXERCISED OPTIONS     VALUE OF UNEXERCISED, IN-THE-MONEY
                           NUMBER                                 HELD AT                            OPTIONS AT
                         OF SHARES                           DECEMBER 31, 1999                  DECEMBER 31, 1999(1)
                        ACQUIRED ON       VALUE              -----------------                  --------------------
NAME                      EXERCISE       REALIZED     EXERCISABLE     UNEXERCISABLE       EXERCISABLE      UNEXERCISABLE
----                      --------       --------     -----------     -------------       -----------      -------------
<S>                        <C>            <C>           <C>               <C>               <C>                <C>
Robert C. Fitting......    128,200        $64,100       101,885           15,000            $428,324           $59,063

Steven Eymann..........     64,100        19,871        165,985           15,000            705,436             59,063

Garry Kline ...........     25,551        11,511         10,492           16,500             38,659            115,313
</TABLE>

----------
(1)  Based on the December  31, 1999 closing  price of the Common Stock of $6.75
     per share on the OTC Bulletin Board, less the per share exercise price.

Employee Compensation Plans

1996 Incentive Stock Option Plan

     Our shareholders  adopted the 1996 Incentive Stock Option Plan (the "Plan")
on January 8, 1997,  as a means of  rewarding  certain  employees,  officers and
directors for their efforts in improving our competitive and financial  position
and also as an incentive to retain these individuals in the future. Our Board of
Directors  or the  compensation  committee  administers  the Plan.  Each has the
authority to determine all matters relating to the Plan, including the selection
of  individuals  to be  granted  options,  the  number of shares  subject to the
options,  the exercise price, and the term of an method by which the options may
be exercised.  As of December 31, 1999,  options to purchase 1,535,206 shares of
common stock were  outstanding at a weighted average exercise price of $3.09 per
share and  options  have been  exercised  to purchase  287,772  shares of common
stock.  The  total  number of shares of  common  stock  remaining  reserved  for
issuance under the Plan as of December 31, 1999 was  1,784,170.  Under the Plan,
we may not grant  options after  November 12, 2006.  Subsequent to the year end,
the Board of Directors issued all of the remaining unissued stock options.

     Options  granted  under the Plan may be  non-qualified  options  or options
qualifying as incentive  stock options  within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.  The initial exercise option price of
each stock option  granted  under the Plan will not be less than the fair market
value (100% of the fair market value if the grant is to any grantee  owning more
than 10% of our  outstanding  common  stock) of the common stock  subject to the
option.

     Any  option  granted on or after  October 6, 1998 under the Plan  generally
becomes  exercisable  immediately  as to 25% of the shares  covered  thereby and
becomes exercisable for an additional 25% in each of the succeeding three years.
An  amendment  to the Plan has  accelerated  the  exercise  schedule  on certain
earlier  option  grants to match the current  schedule or to become  immediately
exercisable. No options granted under the Plan are transferable, except upon the
death of the grantee.


                                       49
<PAGE>

1999 Employee Stock Purchase Plan

     On June 15, 1999, our shareholders adopted the 1999 Employee Stock Purchase
Plan (the  "Purchase  Plan"),  as a means of rewarding  and  retaining  existing
employees.  The Purchase Plan allows eligible employees,  including officers and
directors, to utilize payroll deductions to purchase shares of our common stock.

     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.  As of December 31,  1999,  1,000,000  shares are
authorized for issuance under the Purchase Plan. The Purchase Plan was activated
in the first quarter of 2000.

     Each  eligible  employee  may  elect  to have  from 1% to 15% of his or her
salary  deducted in each pay period and deposited into a stock purchase  account
in such employee's name. At the conclusion of each purchase period, the employee
may  exercise  the right to  purchase  shares  of  common  stock or elect a cash
distribution of all amounts held in the stock purchase account.  Amounts in such
accounts may be used by employees to purchase the largest number of whole shares
available at the purchase  price.  The purchase price for shares of common stock
will be the lesser of 85% of the fair  market  value of the common  stock on (a)
the first day of the  applicable  purchase  period,  or (b) the last day of such
period.  In the event of termination of a participant's  employment of all funds
in the employee's stock purchase account will be distributed to such employee of
all funds in the employee's  stock purchase  account will be distributed to such
employee  in  cash,  except  for  termination  relating  to a  normal  or  early
retirement, in which case the balance in the stock purchase account will be used
to purchase shares of common stock.

Employee Benefit Plan

     We have a qualified  contributory  401(k) plan that covers all employees in
our Phoenix  facility  who have  attained  the age of 18 and are employed at the
enrollment  date.  We provided  contributions  of  $85,301,  $31,690 and $30,230
respectively  for the  years  ended  December  31,  1999,  1998 and  1997.  Each
participant  may elect to contribute up to 15% of his or her gross  compensation
up to the maximum amount  allowed by the Internal  Revenue  Service.  During the
years  ended  December  31,  1999,  1998 and 1997,  we  matched  up to 1% of the
employee's  salary.  Beginning  January 1, 2000,  we match 50% of each  employee
contribution to the plan up to a maximum annual match of $2,000.

     We also have a qualified contributory 401(k) plan that covers all full-time
employees in our San Diego facility who have been employed  continuously  for at
least  30 days  prior to the  enrollment  date.  We  provided  contributions  of
$143,487 and $30,450 for the year ended December 31, 1999 and the period October
15, 1998 through December 31 1998,  respectively.  Each participant may elect to
contribute up to 15% of his or her gross  compensation  up to the maximum amount
allowed by the Internal Revenue  Service.  We match $0.35 for every dollar up to
7% of the employee's contribution.

EMPLOYMENT AGREEMENTS

     Under the employment agreement between the Company and Messrs.  Fitting and
Eymann,  they will serve as Chief Executive Officer and Executive Vice President
of the Company  until the earlier of June 30, 2000 or such time as the Company's
adjusted  earnings before interest and taxes exceeds  $6,000,000 for a period of
four calendar  quarters.  Pursuant to the agreement,  the Company presently pays
Mr.   Fitting  and  Mr.  Eymann  annual   salaries  of  $200,000  and  $150,000,
respectively, and has granted them certain of the stock options described in the
above  table.  Each of Mr.  Fitting  and Mr.  Eymann has also agreed he will not
engage in any business  which  competes  with the Company until after the second
anniversary  of his  termination of employment  with the Company,  except in the
case of involuntary termination without cause.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The  Compensation  Committee  consists of Messrs.  Lim,  Lee,  Grimes,  and
Elliott. There were no interlocking  relationships between our company and other
entities  that  might  affect  the  determination  of  the  compensation  of our
executive  officers.  Mr. Lim is  currently  the Chairman of Stetsys Pte Ltd and
Stetsys US, Inc.


                                       50
<PAGE>

and has been the Group Director of Singapore Technologies Pte Ltd since February
1995.  Additionally,  Mr.  Lee  served  as  a  Regional  Director  of  Singapore
Technologies Pte Ltd until December 1998.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth,  as of February 11, 2000, the ownership of
the Common Stock by (i) each person who is known by the Company to own of record
or beneficially  more than 5% of the outstanding  Common Stock, (ii) each of the
Company's   directors  and  its  Chief  Executive  Officer  and  Executive  Vice
President,  and (iii) all directors  and executive  officers of the Company as a
group. Except as otherwise indicated,  the Stockholders listed in the table have
sole voting and investment  powers with respect to the shares indicated  subject
to applicable community property law.

                                                Number       Percentage
         Name and Address                     of Shares(1)   of Class(1)
         ----------------                     ------------   -----------

     Stetsys US, Inc.(2) ................     1,180,000         8.71%
     Stetsys Pte Ltd(2) .................     9,676,800(3)     71.40%
     Robert C. Fitting(4) ...............       242,385(5)      1.77%
     Steven W. Eymann(4) ................       241,585(6)      1.76%
     Garry D. Kline(4) ..................        46,243(7)         *
     Ming Seong Lim(2) ..................             0            0
     Yip Loi Lee(4) .....................        10,000(8)         *
     Robert A. Grimes(4) ................        10,000(8)         *
     Dennis W. Elliott(4) ...............        10,000(8)         *
     Kum Chuen Tang(2) ..................        10,000(8)         *
     All directors and executive officers
       of the company as a group (eight
       persons) .........................       570,213         4.20%

*    Less than one percent.

(1)  The  numbers  and  percentages  shown  include  the shares of common  stock
     actually  owned as of February 11, 2000 and the shares of common stock that
     the person or group had the right to  acquire  within 60 days of such date.
     In calculating the percentage of ownership, all shares of common stock that
     the  identified  person or group had the right to acquire within 60 days of
     February 11, 2000 upon the exercise of options are deemed to be outstanding
     for the purpose of computing  the  percentage of the shares of common stock
     owned by such person or group, but are not deemed to be outstanding for the
     purpose of computing the  percentage of the shares of common stock owned by
     any other person.

(2)  The address for each of these  shareholders is: c/o Singapore  Technologies
     Pte Ltd, 83 Science  Park Drive,  #01-01/02  The Curie,  Singapore  Science
     Park, Singapore 118258.

(3)  The shares reported as owned by Stetsys Pte Ltd include the shares reported
     as beneficially  owned by Stetsys US, Inc., of which Stetsys Pte Ltd is the
     sole stockholder.  The Minister of Finance (Incorporated) of Singapore owns
     100% of the stock of  Singapore  Technologies  Pte Ltd,  which in turn owns
     100% of Stetsys Pte Ltd.  An  aggregate  of  3,900,000  of the  outstanding
     shares  held by  Stetsys  Pte Ltd.  and  Stetsys US Inc.  are  subject to a
     lock-in  agreement  required by certain state  regulatory  authorities,  as
     described in "Lock-in Agreements" below.

(4)  The address for each of these  shareholders  is: c/o Radyne ComStream Inc.,
     3138 East Elwood Street, Phoenix, Arizona 85034.

(5)  Includes 109,385 shares underlying exercisable options held by Mr. Fitting.
     Of the outstanding shares owned by Mr. Fitting,  59,500 shares are, and 40%
     of any shares  acquired  by Mr.  Fitting  upon  exercise of options may be,
     subject  to a  lock-in  agreement  required  by  certain  state  regulatory
     authorities, as described in "Lock-in Agreements" below.

(6)  Includes 173,485 shares underlying  exercisable options held by Mr. Eymann.
     Of the outstanding  shares owned by Mr. Eymann,  27,250 shares are, and 40%
     of any shares  acquired  by Mr.  Eymann  upon  exercise  of options may be,
     subject  to a  lock-in  agreement  required  by  certain  state  regulatory
     authorities, as described in "Lock-in Agreements" below.

(7)  Includes 17,992 shares underlying exercisable options held by Mr. Kline. Of
     the  outstanding  shares  owned by Mr.  Kline,  11,500 are,  and 40% of any
     shares  acquired by Mr. Kline upon exercise of options may be, subject to a
     lock-in  agreement  required by certain state  regulatory  authorities,  as
     described "Lock-in Agreements" below.

                                       51
<PAGE>

(8)  Represents  10,000 shares  underlying  exercisable  options held by each of
     Messrs. Elliott, Grimes, Lee, and Tang.


Lock-in Agreements

     We have entered into lock-in  agreements  with Stetsys Pte Ltd,  Stetsys US
Inc. and Messrs.  Fitting, Eymann and Kline pursuant to which these shareholders
have agreed not sell, pledge, hypothecate, assign, grant any option for the sale
of, or otherwise transfer or dispose of

     o    an aggregate  of  3,998,250  shares of our common stock owned by these
          shareholders, plus

     o    any shares issued to these  shareholders with respect to the locked-in
          shares in any stock dividend, stock split, recapitalization or similar
          transaction, plus

     o    40% of any  shares  acquired  by these  shareholders  pursuant  to the
          exercise of any option during the terms of the lock-in agreement.

     These  lock-in   agreements  were  required  by  certain  state  regulatory
authorities in connection with our recently  concluded public offering,  and the
terms of these  agreements  cannot  be  amended  without  the  consent  of these
regulatory authorities.

     In  the  event  of  a  dissolution,   liquidation,  merger,  consolidation,
reorganization,  sale or exchange of our assets or securities  (including by way
of a tender offer),  or any other transaction or proceeding with a person who is
not a Promoter  (as  defined  in the North  American  Securities  Administrators
Association  Statement  of Policy on  Corporate  Securities  Definitions)  which
results  in a  distribution  of our  assets  or  securities  while  the  lock-in
agreements are in effect:

     o    all holders of our common stock, except the shareholders who are party
          to the lock-in agreements with respect to the shares they own that are
          subject  to the  lock-in  agreements,  will  first  share  in any such
          distribution  on a per-share  basis until they have received $7.00 for
          each share of our common stock that they own, then

     o    all of the shareholders who are parties to the lock-in agreements will
          share in such  distribution  on a per-share  basis with respect to the
          shares they own that are the subject of the lock-in  agreements  until
          they have received $7.00 for each such share of common stock, then

     o    all of our  shareholders  will share in any  remaining  portion of the
          distribution equally on a per-share basis.

     The  distribution  may be made on  terms  that are  more  favorable  to the
shareholders who are party to the lock-in agreements if a majority of the shares
of common stock held by our other  shareholders vote in favor of, or consent to,
such terms.

     During the term of the lock-in  agreements the shareholders who are parties
to such agreements  cannot vote any of their shares in favor of any dissolution,
liquidation,  merger,  consolidation,  reorganization,  sale or  exchange of our
assets  or  securities  (including  by  way of a  tender  offer),  or any  other
transaction  or  proceeding  which  results in a  distribution  of our assets or
securities  unless a majority of our  independent  directors  have  approved the
transaction.

     Unless  the  lock-in  agreements  terminate  sooner,  as  described  below,
commencing  February  11,  2001,  2 1/2%  of the  locked-in  shares  held by the
shareholders  will be  released  from the terms of the lock-in  agreements  each
quarter. All shares remaining subject to the lock-in agreements will be released
February 11, 2002.

     The lock-in  agreements  have a two year term  commencing  on February  11,
2000,  but will  terminate  earlier  if our  common  stock  becomes  a  "covered
security" as defined under the National  Securities  Markets  Improvement Act of
1996. Our common stock would be a covered  security if it were to be listed on a
national stock exchange or on Nasdaq's National Market.

                                       52

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     As disclosed under "Management - Executive Compensation," we made loans of:
(1) $200,000 to Robert C. Fitting on October 8, 1999;  (2) $100,000 to Steven W.
Eymann on November 1, 1999;  and (3) $50,000 to Garry Kline on October 11, 1999.
The proceeds of these loans were used by each of Messrs.  Fitting,  Eymann,  and
Kline to exercise stock options in October and November 1999 for an aggregate of
217,851  shares of common stock  granted under the 1996  Incentive  Stock Option
Plan.

     Sales  of   products  in  the   ordinary   course  of  business  to  Agilis
Communication  Technologies  Pte Ltd,  an  affiliated  company  under the common
control of ST, were $200,115 for year ended  December 31, 1999,  $65,000 for the
year ended December 31, 1998, and $540,000 for the year ended December 31, 1997.

     Until  October  1998,  ETS was a wholly  owned  subsidiary  of ST. Sales of
products in the  ordinary  course of business to ETS were  $172,750 for the year
ended  December 31,  1999,  $50,000 for the year ended  December  31, 1998,  and
$152,000 for the year ended December 31, 1997.

     During 1998, ST loaned us $5,618,272,  which bore interest at rates ranging
from  6.625% to  6.844%.  We used the  proceeds  from  these  loans to repay and
terminate  a bank line of credit  with Bank of America NT & SA, for which ST had
provided a  non-binding  letter of  awareness.  In October 1998, ST loaned us an
additional  $10.0 million in connection  with the ComStream  acquisition,  which
bore  interest at 6.375%.  On September 30, 1999, ST instructed us to capitalize
the  entire  $15,618,272  principal  amount of the debt we owed to ST in partial
exercise of its rights under our rights offering.  In October 1999, ST exercised
the  balance of its rights by paying  cash to us in the amount of  $423,700.  We
used  these  funds,  along with  $932,200  of cash on hand,  to pay the  accrued
interest due of $1,355,000 to ST.

     Interest expense on notes payable to ST was $774,000, $581,000 and $148,000
for the years ended December 31, 1999, 1998 and 1997, respectively.  There is no
outstanding  debt to ST as of December  31, 1999 and accrued  interest  has been
paid in full.

     Management believes that all of the foregoing transactions were on terms no
less  favorable to Radyne  ComStream  than it could have obtained in arms length
transactions with unaffiliated third parties.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a) (1) The following consolidated financial statements of Radyne ComStream
Inc. and subsidiaries are included in Part II, Item 8:

     Independent Auditors' Reports

     Consolidated Balance Sheets as of December 31, 1999 and 1998

     Consolidated  Statements  of  Operations  for the Years Ended  December 31,
     1999, 1998 and 1997

     Consolidated  Statements  of  Stockholders'  Equity  for  the  Years  Ended
     December 31, 1999, 1998 and 1997

     Consolidated  Statements  of Cash Flows for the Years  Ended  December  31,
     1999, 1998 and 1997

     Notes to Consolidated Financial Statements

     (a) (2) All financial  statement  schedules have been omitted  because they
are not applicable,  not required,  or the information has been disclosed in the
consolidated  financial  statements  or notes  thereto or otherwise in this Form
10-K report.

     (a) (3) The following exhibits are included in this Form 10-K report:


                                       53

<PAGE>

                                     EXHIBIT

     NO.

     2.1*        Stock Purchase Agreement dated August 28, 1998 between Spar
                 Aerospace Limited and Radyne Corp.
     3.1**       Restated Certificate of Incorporation

     3.2***      By-Laws, as amended and restated
     10.1****    1996 Incentive Stock Option Plan
     10.2*****   Employment Agreement with Robert C. Fitting (Radyne Termsheet)
     10.3+       Lease between ADI Communication Partners, L.P. and
                 ComStream dated April 23, 1997
     10.4+       First Amendment to lease between ADI Communication
                 Partners L.P. and ComStream dated July 16, 1997
     10.5+       Second Amendment to Lease between Kilroy Realty, L.P. and
                 ComStream dated November 18, 1998
     10.6+       Indemnity Agreement between Pacific Bell Corporation and
                 ComStream dated November 18, 1998
     10.7+       Letter Agreement between Spar and Radyne Corp. dated
                 November 18, 1998
     10.8******  Lease for facility in Phoenix, Arizona
     10.9++      Amendment to 1996 Incentive Stock Option Plan
     10.10+++    Uncommitted Line of Credit Facility Letter Agreement, dated
                 as of May 18, 1998, and amended as of September 28, 1998 and
                 September 30, 1999
     10.11+++    Stock Purchase Loan Agreement executed by Robert Fitting,
                 dated October 8, 1999
     10.12+++    Promissory Note executed by Robert Fitting, dated
                 October 8, 1999 in the amount of $200,000
     10.13+++    Stock Purchase Loan Agreement executed by Garry Kline,
                 dated October 8, 1999
     10.14+++    Promissory Note executed by Garry Kline, dated
                 October 11, 1999 in the amount of $50,000
     10.15+++    Stock Purchase Loan Agreement executed by Steven Eymann,
                 dated November 11, 1999
     10.16+++    Promissory Note executed by Steven Eymann, dated
                 November 1, 1999 in the amount of $100,000
     10.17+++    General Release and Settlement Agreement between Spar
                 Aerospace Limited and Radyne ComStream Inc. dated
                 September 29, 1999
     21.1        Subsidiaries of the Registrant
     23.1        Consent of KPMG LLP
     23.2        Consent of Deloitte & Touche LLP
     27.0        Financial Data Schedule

----------

       *      Incorporated by reference from Registrant's Form 8-K filed on
              August 28, 1998.

       **     Incorporated by reference from Registrant's report on Form 10-Q
              filed on March 11, 1997.

       ***    Incorporated by reference from Registrant's amended report on Form
              10-K for the year ended December 31, 1998.

       ****   Incorporated by reference from Registrant's Registration Statement
              on Form S-8, dated and declared effective on March 12, 1997 (File
              No. 333-23159).

       *****  Incorporated by reference from Registrant's amended Registrant
              Statement on Form S-1, dated May 8, 1997 and declared effective on
              May 12, 1997 (File No. 333-18811).

       ****** Incorporated by reference from Registrant's Annual Report on Form
              10-K for the year ended December 31, 1997.

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

       ++     Incorporated by reference from Registrant's Registration Statement
              on Form S-8, dated and declared effective on November 18, 1998
              (File No. 333-67469).

                                       54
<PAGE>

       +++    Incorporated by reference from Registrant's amended Registration
              Statement on Form S-2, dated and declared effective on February 7,
              2000 (File No. 333-90731).

     (b)  Registrant  filed the following  reports on Form 8-K during the period
          of October 1 through December 31, 1999:

     Current Report on Form 8-K dated November 12, 1999, Item 5.


                                       55

<PAGE>

                                   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 COMSTREAM INC.
                                               ---------------------
                                               (Registrant)


                                      By: /s/ Robert C. Fitting
                                          -------------------------------------
                                          Robert C. Fitting,
                                          Chief Executive Officer and President

Dated: March  1, 2000

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.

<TABLE>
<CAPTION>
          Name                                 Title                         Date
          ----                                 -----                         ----
<S>                             <C>                                      <C>
/s/ Lim Ming Seong              Chairman of the Board of Directors       March  1, 2000
------------------------
Lim Ming Seong


/s/ Robert C. Fitting           Chief Executive Officer, President       March  1, 2000
------------------------        and Director
Robert C. Fitting


/s/ Garry D. Kline              Vice President, Finance                  March  1, 2000
------------------------        (Principal Financial and
Garry D. Kline                  Accounting Officer)


/s/ Robert A. Grimes            Director                                 March  1, 2000
------------------------
Robert A. Grimes


/s/ Lee Yip Loi                 Director                                 March  1, 2000
------------------------
Lee Yip Loi


/s/ Dennis Elliot               Director                                 March  1, 2000
------------------------
Dennis Elliot


/s/ Tang Kum Chuen              Director                                 March  1, 2000
------------------------
Tang Kum Chuen
</TABLE>


                                       56