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

                                  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, 1998                                                 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
--------------------------------------------------------------------------------

     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 March 22, 1999 was approximately $1,877,000

         Indicate by check mark whether the  registrant  has filed all documents
and reports  required to be filed by Section 12, 13 or 15 (d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a Court. Yes _X_  No____

     As of March 22,  1999,  there  were  5,932,346  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    Radyne  ComStream's  level of success in  effectuating  its  strategic
          plan, including  realization of all of the anticipated benefits of the
          integration of Radyne and the recently  acquired  ComStream  Holdings,
          Inc.; and

     o    other factors to which this report refers.

ITEM 1.  BUSINESS

Overview

     Radyne  ComStream Inc.  designs,  manufactures  and sells equipment used to
receive data from,  and  transmit  data to,  satellites.  We have engaged in the
advanced  design and  production  of digital data  communications  equipment for
satellite  telecommunications  systems for over  seventeen  years.  Our products
include:

     o    satellite  modulators  and  demodulators  and earth  stations  used to
          receive data from and send data to orbiting satellites;

     o    satellite  broadcast  receivers,  used to receive  communications from
          satellites;


<PAGE>

     o    frequency converters,  used to channel higher frequency  transmissions
          into lower frequency transmissions and vice versa;

     o    ancillary products;

     o    equipment racks containing  integrated modems and supporting equipment
          for data, audio, and television communications; and

     o    an  integrated  modem and  router  product  for the  Internet  service
          provider market.

     Radyne Corp., our predecessor which was incorporated in 1980, was forced to
file 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.,  then a major
customer. On August 12, 1996, ETS was acquired by Singapore Technologies Pte Ltd
through its indirect wholly owned subsidiaries, Stetsys US, Inc. and Stetsys Pte
Ltd. (collectively,  "ST"). As a result, approximately 91% of Radyne ComStream's
common stock is now held by ST.

     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 all new staff of engineering, sales and support personnel.

Recent trends and developments

     Consistent with our new growth  strategy,  we recently  acquired  ComStream
Holdings,  Inc. from Spar  Aerospace  Limited,  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. Revenues of
ComStream for 1998 were  approximately $37 million.  We acquired ComStream in an
effort to expand our core  business,  and  supplement  our product  lines with a
number of viable developed  products and superior quality products in the design
phase,  some 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 Radyne's acquisition of ComStream will have a number of positive
effects, including the following:

1.   The combined annual  revenues of Radyne  ComStream  should  approximate $50
     million  versus Radyne Corp.'s  stand-alone  revenues of about $13 million.
     This dramatic difference in size should provide us with better control over
     prices and  margins and enable us to compete in larger  markets.  It should
     also  increase the  likelihood  that our common stock can be qualified  for
     trading on the Nasdaq Stock Market, our exchange of choice.

2.   We also  anticipate  the  combination  to  produce  synergistic  effects by
     combining  Radyne's newer product lines with  ComStream's  worldwide  sales
     channels.  We expect the  introduction of newer and more numerous  products
     into the ComStream  distribution  channels to have positive  effects on our
     revenues commencing in the first calendar quarter of 1999 and continuing in
     the second  calendar  quarter as more products in development are completed
     and  released to  production.  We also  expect  positive  results  from the
     ComStream  sales force as compared to our historic  reliance on independent
     sales representatives.

3.   While we viewed  ComStream's gross margins as excellent,  its profitability
     had suffered from extremely high expenses. Since closing the acquisition in
     October,   1998  we  have  reduced   ComStream's   recurring   expenses  by
     approximately  $1,000,000 per month. We expect  continued  efficiencies and
     restructuring of our product lines to result in additional cost savings.

     As a combined  entity,  Radyne ComStream has an expanded product line and a
worldwide sales and service organization with international  offices in Beijing,
Singapore, London, Moscow, Jakarta, Rio de Janeiro and Amsterdam.

     Radyne  ComStream  is  currently  addressing  four   markets/businesses  as
follows:

     o    satellite modems and earth stations, including Intelsat equipment;

     o    digital video and high-speed modems;



                                       2
<PAGE>

     o    military and government data modems; and

     o    data, audio, and video broadcast equipment.


Operating strategy

     Radyne ComStream's operating strategy is to:

     o    continue to build on the experience, skills and customer access of its
          management  team; 

     o    maintain a strong international position in the earth station business
          and  capitalize  on  its  dominant  position  of  supplying  satellite
          broadcast   receivers   while  beginning  to  supply  Internet  access
          providers with a personal computer receiver card;

     o    continue to find new military and government market niches;

     o    complete the integration and  restructuring of ComStream and Radyne so
          as to maximize  cost savings and the benefits of  ComStream's  product
          lines and sales channels; and

     o    continue to expand our special  offerings in market segments,  such as
          Internet  communications,  rural telephone,  private network services,
          government network services and compressed television transmission.

     Radyne  ComStream's  engineering staff and support facilities are dedicated
to:

     o    maintaining the  state-of-the-art  status of Radyne  ComStream's  core
          products for the satellite ground equipment segment of the market;

     o    designing  and enhancing  products for  high-growth  markets,  such as
          Internet   communications,   rural  telephony  for  developing  areas,
          high-speed satellite communications, government data equipment and the
          growing private network market; and

     o    providing  special  configurations  to satisfy  customers'  individual
          needs.

     Radyne ComStream has shipped  commercial  volumes of its products for rural
telephony  and private  network  applications  and has shipped  units to several
government data equipment  customers.  Radyne ComStream has fulfilled a contract
with AT&T, one of the world's largest telephone and data service  providers,  to
develop a new line of satellite  modems with a higher frequency L-Band interface
which will be used to replace aging  equipment in existing earth  stations.  The
use of L-Band as an interface  mechanism  has the  advantage of requiring  fewer
conversions,  thereby improving reliability of communication.  This equipment is
designed to substantially reduce the space and power requirements in these earth
stations,  and to  improve  reliability  and  permit  lower  maintenance  costs.
Management  believes this equipment will be the future  standard for major earth
stations.

     We are a major  supplier  of  satellite  broadcast  receivers  for data and
audio,  with an  installed  base  of  more  than  100,000  receivers.  Broadcast
receivers  are used to receive  financial  data,  audio and video.  We have also
supplied  more  than  1,000,000  set-top  television  receivers  on an  original
equipment manufacturer basis. Additionally,  we have a line of personal computer
receiver  cards which function as satellite  receivers used to receive  Internet
information and private network data in personal  computers.  This receiver card
is capable of delivering  multimedia  communications  to personal  computers and
local  area  networks  at  speeds up to 1,000  times  faster  than  conventional
telephone modems, opening a new realm of practical and efficient distribution of
data intensive applications.

     Radyne ComStream's satellite modems can receive communications with a large
range of data rates,  from 2.4 kilobytes per second to 155 megabytes per second.
Our modems can be used in applications  ranging from data and audio to telephony
and high definition  television.  Radyne ComStream's line of frequency converter
products  can be used in many types of earth  stations  to convert  intermediate
frequencies  into  microwave  frequencies  for  satellite  transmission.   These
converters are competitively priced, small in size and accommodate either single
or dual  bands  used in the  satellite  industry.  We  believe  that most of our
current  line of modems and  converters  are smaller  and lower  priced than the
previous generation of products,  facilitating the installation of large systems
in significantly less space than the products of our competitors. We also market
redundancy  switches  which operate in  conjunction  with  satellite  modems and
converters and provide  automatic fault  monitoring.  In the event of a failure,
such standby equipment takes over.



                                       3
<PAGE>

     Radyne ComStream also  manufactures a line of small earth stations that are
used worldwide for private phone and data systems.  The earth stations  receive,
transmit and convert data in both C-Band and Ku-Band,  which are analogous to AM
and FM radio frequencies, and are the most widely used frequencies for satellite
transmission.  We have recently  begun shipping the new lower cost earth station
using an  L-Band  interface.  Unlike  the  C-Band  and  Ku-Band,  which  must be
converted  prior  to use in a  final  application,  the  use of  L-Band  signals
eliminates this step, thereby reducing costs and increasing  reliability.  These
earth stations include an indoor mounted modem, which is common to all frequency
bands, and an outdoor mounted power amplifier and antenna.

     Radyne  ComStream's  newer products  include a low cost modem with expanded
features and small size,  making it attractive for use in both private  networks
and rural  telephone  systems  offered in China,  Indonesia  and  India.  Radyne
ComStream also manufactures a line of satellite frequency  translators presently
used for testing satellite earth stations.

     The  development  of  digital   compression   technology  has  allowed  the
transmission  of  television  in a smaller  bandwidth  than would  otherwise  be
possible using existing  technology,  which has made television  transmission by
satellite more economical than ever before.  Video compression allows many times
more channels on a satellite than was previously the case,  thus producing a new
market for our products of major interest.  This compression  technology is used
for transmission of television to network facilities and homes,  distribution of
cable television to cable companies, high definition television distribution and
video teleconferencing.  To meet the demands of this industry,  Radyne ComStream
has developed a modulator and demodulator,  also known as a modem, product to be
used in  conjunction  with  compression  equipment  and has been  shipping  this
product for the past two and one-half years.

     Radyne  ComStream  has  developed a line of modems used in  government  and
defense systems. This equipment is interoperable with certain existing equipment
in use by the U.S.  Army. Our customers are replacing  older  equipment with our
newer  technology  to enable the military to  communicate  with ships and ground
units.

     Radyne  ComStream  has also  developed  a new  product  for use by Internet
access providers which integrates our core satellite modem  technologies  with a
router.

     Notwithstanding  the  foregoing,  investors  should  be aware  that  Radyne
ComStream's  future  plans are subject to a number of  variables  outside of its
control,  and there can be no assurance  that Radyne  ComStream  will be able to
implement any or all of such plans or that such plans,  when and if implemented,
will be successful.

Industry overview

     There are more than 190 major commercial communications satellites in orbit
today,  almost 60 of which were launched in the past two years.  Over 65 more of
these  expensive  geosynchronous   earth-orbiting  satellites  (GEO's)  will  be
deployed in the near future.  (Source: VIA Online 1998 Global Satellite Survey).
The ways in which  satellites  are used continue to shift over time.  Satellites
are principally used today in television  distribution,  international telephone
service, data and audio broadcasting,  Internet service and private networks. As
more  fiber  cables  are  laid  under  the  oceans,  the use of  satellites  for
international  telephony  is slowing.  However,  satellites  represent a sizable
investment and a unique  communications medium which will continue to be used in
other ways. For example,  the use of this satellite resource is already shifting
towards  domestic  telephony in  countries,  such as China and India,  which are
seriously lacking in infrastructure.  In addition,  technological advances, such
as voice compression,  have made it economical for third world countries to have
more telephone  service.  Moreover,  television  distribution is going through a
technological  revolution in which ten times as many programs can be transmitted
through  satellites  than was  possible  5 years ago.  A typical  satellite  can
deliver  250 or  more  channels  today  compared  to 24  channels  before.  This
technological  and  economical  breakthrough  has created many new markets.  For
example,  it is now  cost-effective for many relatively small market segments to
have their own television  networks,  such as the networks for regional  college
sports.  In  addition,  satellites  are  an  ideal  medium  to  distribute  high
definition  television.  Finally,  the  lowering of  international  barriers and
privatization are allowing the expansion of more private networks.

     Almost anyone who uses a satellite as a means of transmission  has the need
for equipment of the sort produced by Radyne ComStream. Radyne ComStream expects
to continue  operating  within the  satellite  ground  equipment  segment of the
market for the next several years,  while  continuing to expand into various new
markets. For example,  additional needs for Internet service, new data broadcast
requirements, and communications directly to computers are areas in which Radyne

                                       4
<PAGE>

ComStream  expects  to realize  the  greatest  growth  potential.  Although  the
telecommunications  industry  is rapidly  changing,  becoming  more  complex and
requiring new technology,  we do not expect the  transformation and evolution of
the industry to cause  satellite  data  equipment to become  obsolete,  at least
within the near future.


Industry trends

     Several  major trends in the  telecommunications  industry  should  provide
opportunities for Radyne ComStream.

     o    Telecommunications  needs in the Pacific Rim, South  America,  and the
          Eastern European countries and an increase in the number of satellites
          orbiting over the Pacific and Indian Oceans will produce a substantial
          need for satellite data communications equipment.

     o    The  requirement  for  increased   dissemination   of  financial  data
          increases the requirements for broadcast receivers.

     o    If  the  United  States  defense  budget  continues  to  shrink,  more
          commercial  off-the-shelf  products may be purchased  from  suppliers,
          such as Radyne  ComStream,  who can offer these products for much less
          than the  government  would pay to develop or  produce  the  products.
          Radyne  ComStream  anticipates  being able to and has already begun to
          supply commercial versions of military equipment.

     o    As digital television and high-definition television become available,
          the need for satellite  equipment for  distribution to cable companies
          and homes will increase.

Satellite modems and earth stations

     Satellite communication has been established as a key element in the growth
of the telecommunications industry. Although the emergence of fiber cable, which
industry  prefers for certain  applications,  created  competition for satellite
communications,  satellite  communications  enjoy advantages in many markets for
several reasons:

     o    It is not  cost-effective  to utilize  fiber cable in all areas of the
          world,   especially   emerging   countries  where   telecommunications
          capabilities are just beginning to develop.

     o    Although fiber cable has performance advantages,  it has a tendency to
          break, resulting in the need for satellite capabilities as a back-up.

     o    Fiber  cable is  utilized  mainly for  point-to-point  communications.
          Satellite   transmission,   on  the  other  hand,   is  superior   for
          distribution  communications,  for example,  distribution of financial
          market information or video broadcasting on major television networks.

     Thus,  although  fiber  cable can be viewed as a  competitor  of  satellite
communications,  it has  not  historically  reduced,  nor is it  anticipated  to
reduce,  the need for satellite  modem  equipment.  Moreover,  in the opinion of
management, there should be "niche" requirements that can be satisfied only with
satellite communications for a long time to come.

     An example of the continued need for satellite communications is evident in
the difficulty of providing  telecommunications  services in certain areas.  For
instance,  it is not cost effective to lay fiber cable in mountainous terrain or
in nations composed of many islands, a geographical  feature which is relatively
common  in the  Pacific  region.  Sparsely  populated  areas are  generally  not
conducive to fiber cable on a cost-effective basis. Moreover, fiber cable is not
suitable for portable  communications,  such as personal communications systems,
commonly referred to as PCS, news gathering, emergency services and other mobile
communication requirements.

     Rural  telephony  and  private  network  Demand  Assigned  Multiple  Access
("DAMA")  products require special  communications  equipment which is efficient
for low traffic  volume in many  different  locations.  DAMA products allow many
users to access the same channel on demand.  Rural telephony can be described as
an  intra-country  telecommunications  network  linking  many small  villages or
islands in a country like the Philippines,  for example, ultimately allowing the
villages to communicate  with each other and with the world.  In a typical rural
telephony service, a small village might designate a post office as the location
of  telephone  service.   Residents  could  use  this  location  to  communicate
throughout  the country.  Communications  outside of the country are  frequently
enabled by the use of a central hub in such countries. All international traffic
from within such a country would be routed through such a hub.



                                       5
<PAGE>

     A private network,  on the other hand, can be described as a network in the
commercial world. For example, banks and other financial institutions, airlines,
and  large  and  multi-unit   corporations  all  have  the  need  for  satellite
communications and may be linked by a private  satellite-based  network.  Radyne
ComStream  serves the DAMA products and rural telephony market segments with its
DMD-2401 modem and related products.

     Radyne  ComStream  sells these  products to system  integrators  who make a
business of supplying turnkey earth station operations, as components of systems
that they have designed, as well as directly to end users.

     The RCS-10  represents  the newest  generation  system  used in major earth
stations which combines modems and redundancy  switching in a single unit. Up to
30 modems  can be  combined  in a single  rack and each  redundancy  switch  can
control up to 10 modems.  The compact  design  which  eliminates  more than 1500
parts and cables from prior systems,  offers improved transmission and reception
reliability and rapid installation.  In addition to an expanded data rate range,
the RCS-10  offers an improved  display and more  options.  The newest  version,
under development through a contract from a major  international  communications
supplier,  is the RCS-10L.  The RCS-10L is a version  with an L-Band  interface,
allowing  substantially  lower  power  consumption.   In  addition,  the  L-Band
interface has a 500MHz bandwidth instead of the usual 36 MHZ bandwidth, reducing
the number of frequency converters required by 60%.

     The CM-701 modem has been the  workhorse  of the industry for 8 years.  The
CM-701 is used in Intelsat  applications,  digital video and small earth station
applications.

     Radyne  ComStream  offers  3  different  earth  stations.  The  DT-7000  is
primarily used for C-Band applications. The DMD-2401 LB/ST is a low cost version
that can be used in  either  the  C-Band or  Ku-Band  applications.  The  newest
version, the DT-8000, is used in Ku-Band applications.

     Radyne  ComStream also has a complete line of converters  which  synthesize
frequencies  either up or down. Radyne ComStream also offers a full line of loop
test translators,  including C-Band,  Ku-Band,  X-Band and Tri-Band models. Loop
back testing involves the sending of data which is subsequently  received by the
same  equipment.  Our products  consist of self contained  frequency  converters
which perform transmit-to-receive loopback testing of earth station equipment.

     Augmenting these product offerings is the Star Network  Management  System.
The Star  Network  Management  System  consists  of a Windows NT point and click
system used to monitor and maintain the  functioning of a system  remotely.  The
Star  system  allows for the  monitoring  and  control  of an entire  network of
modems, earth stations, and ancillary equipment from a single location,  thereby
eliminating  the need to travel to each remote  location.  It 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.

Digital video and high-speed modems

     Compressed digital video is the latest frontier in satellite communications
technology.  Several aspects of this market are of particular interest to Radyne
ComStream:

     o    Television  broadcasters  have requirements for efficient and economic
          distribution.

     o    Compressed  video  encoding and decoding  are  available  for the less
          demanding  business  video   teleconferencing  and  distance  learning
          markets.

     o    Expanding   Internet   usage  should  produce  demand  for  high-speed
          satellite  transmission for connecting to the Internet.  International
          connections  are  relayed  to the  United  States  by  satellite.  The
          economics  of the new  compressed  video  allows the use of  satellite
          transmission for long-distance teaching applications.

     o    Digital  cinema  distribution  is emerging  as a viable  means of film
          distribution.  As movie theaters get smaller and thereby  proliferate,
          the  costs  of  making  and  distributing   copies  of  films  becomes
          proportionally  greater. Using satellite  distribution,  movies can be
          distributed  directly  to  thousands  of theaters  simultaneously.  We
          expect the digital cinema market to become  substantial  over the next
          five years.

     Radyne ComStream has entered the high-speed satellite,  cable and microwave
communications   market  with  various  products  that  have  been  designed  to
incorporate the most advanced technologies  available to condense a large amount
of  data  into  small  bandwidths.  Communications  equipment  in  this  segment
possesses  higher  data  rate  capabilities, 


                                       6
<PAGE>

allowing much more data to be  transmitted  than in traditional  equipment,  and
supports  distribution of digital video, high definition television and Internet
traffic.

     The DD-45 demodulator and DM-45 modulator are  multi-purpose  solutions for
digital video broadcast and high-speed  data  transmission.  Radyne  ComStream's
newest high-speed  entrants are the DM-160 and MM-160 microwave modem that offer
excellent  solutions for  applications  requiring high data rates,  such as high
definition  television.  These  products also allow an increase in the number of
television channels that can be transmitted by satellite.  In addition,  our new
MM-155  microwave modem in conjunction with commercial  off-the-shelf  microwave
radios is ideal for high throughput service  requirements,  such as transmission
of video, data and voice.

     The  DVB-3030   digital  video   broadcast   modulators  are  flexible  and
programmable,  and fully  compatible  with  digital  video  standards.  They are
principally used in digital video hub uplinks,  mobile satellite news gathering,
video distribution and one-way data  distribution.  They are also high speed and
frequency agile and, thus,  ideal for use in digital video hub uplinks,  flyaway
and mobile satellite news gathering applications.

     In addition,  Radyne  ComStream  manufactures the QAM-256 which is used for
distribution  of digital  video and high  definition  television  over cable and
microwave links.

Government and military modems

     The United States Government has provided a significant  market opportunity
for  Radyne  ComStream  as  the  defense  budget  shrinks  and it  becomes  cost
prohibitive for the government to develop its own products. Radyne ComStream has
an agreement  with a major  government  supplier and has recently been awarded a
contract to provide a modem for use in the Special  Forces  Terminal  for the US
Army. We have also been awarded a contract from Datapath to provide  modems that
can be used in conjunction with other Army modems.

     Radyne  ComStream is currently  supplying two different modems of this type
and is working on a third.  The  DMD-15G/FM is a universal  modem used in the US
Army  Special  Forces  Terminal  in support of military  operations.  This modem
interoperates  with  military  equipment  that can no longer be  procured by the
military  because  of price and age.  A second  modem is the  DMD-15G  which can
operate with thousands of military modems that are deployed throughout the world
and operate within the defense communication  system,  perhaps the largest phone
system in the world.

Integrated modem and router for Internet access

     We have  recently  developed a product which  combines our standard  L-Band
modem and a wide area network  router.  This product will enable Internet access
providers,  particularly  those in remote areas or in locations with undeveloped
telecommunications  systems,  to  receive  a high  speed  Internet  feed  from a
satellite.  For many smaller Internet access providers, the integrated modem and
router product offers the  convenience of an all-in-one  solution.  This product
will help Radyne  ComStream  move into the  fast-growing  Internet  connectivity
solution market.

Data, audio and video broadcast products

     Radyne ComStream is a major supplier of satellite  broadcast  receivers and
associated  equipment for data and audio,  having manufactured more than 100,000
units.  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.  Satellite  broadcast
receivers  are used to  provide  music and other  audio  services  as well as to
distribute  financial data and other digital services.  The new DBR-202 receiver
is a low cost platform  handling audio,  data,  Internet Protocol data, and MPEG
video and audio.

     There is an  emerging  market to  provide  data and video  directly  to the
personal  computer.  Towards that end, Radyne ComStream has developed a very low
cost  receiver  card for use in personal  computers.  The card has  successfully
passed trials in a private  network,  resulting in an order for 2,000 cards, and
we expect to receive additional orders.

     Our data  broadcast  networks  consist of a single  data  uplink,  multiple
receivers and the Star Network  Management  System for security,  monitoring and
control.  The receivers can be configured  for C-band and Ku-band  transmissions
and 


                                       7
<PAGE>

can be located anywhere within the range of a satellite.  The DBR401VR  variable
rate commercial data receiver  provides a low-cost  alternative for transmitting
data  across a wide range of data rates.  Our DBR801  high speed  receiver is an
ideal solution for high speed transmission of digital audio, video or data.

Manufacturing

     Radyne ComStream's products are to a certain extent assembled and tested at
its Phoenix,  Arizona and San Diego,  California facilities using subsystems and
circuit  boards  supplied  by  subcontractors.   Some  products  are  completely
assembled and tested at subcontractors, including subcontractors in Thailand and
in Wales,  UK. Although  Radyne  ComStream  believes that it maintains  adequate
stock to  reduce  the  procurement  lead  time for  certain  components,  Radyne
ComStream's 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 to be unable or  unwilling to fulfill  Radyne  ComStream's
requirements,  Radyne  ComStream could  experience an interruption in production
until an alternative supply source was developed.  Radyne ComStream maintains an
inventory  of  certain  chips  and  components  and  subassemblies  to limit the
potential for such an interruption.  Radyne ComStream  believes that there are a
number of companies  capable of providing  replacements  for the types of unique
chips and customized components and subassemblies used in its products.

Sales and marketing

     Radyne ComStream sells its products  through an  international  sales force
with sales and/or service offices in San Diego,  Phoenix,  Boca Raton,  Beijing,
Singapore,  London and  Jakarta.  Additionally,  international  representatives,
distributors  and systems  integrators  sell our  products,  supported by Radyne
ComStream's sales and marketing personnel.

     Radyne  ComStream's  direct  sales  force is  comprised  of 14  individuals
supported  by  systems  and  applications   engineers.  We  focus  direct  sales
activities on expanding Radyne  ComStream's  international  sales by identifying
emerging markets and establishing new customer  accounts.  Additionally,  Radyne
ComStream  directly  targets certain major accounts which may provide entry into
new markets or lead to subsequent distribution arrangements. Such major accounts
tend  to  be   telecommunications   agencies  and  major   corporations  in  new
international  markets.  Radyne  ComStream  has a customer  service  and support
group,  which primarily  supports  customers and distributors and is responsible
for  after-sale  support and  installation  supervision.  In certain  instances,
Radyne ComStream uses third party companies for installation and maintenance.

     During 1998, no customers represented greater than 10 percent of net sales.
During  1997,  one  customer  represented  14.5  percent of net  sales.  For the
six-month period ended December 31, 1996, two customers represented 15.6 percent
and 18.3 percent of net sales. During the year ended June 30, 1996, one customer
represented 12.7 percent of net sales.

     Radyne  ComStream's  sales in its principal foreign markets for the periods
indicated consisted of the following percentages of total sales.

<TABLE>
<CAPTION>
                              Year ended          Year ended       Six months ended          Year ended
Region                         12-31-98            12-31-97            12-31-96               6-30-96
------                         --------            --------            --------               -------
<S>                               <C>                <C>                  <C>                    <C>
Asia                               7%                32%                  30%                    23%
Latin America                      9%                12%                  24%                    --
Europe                            31%                 7%                  --                     19%
Others*                            3%                 5%                  12%                     8%
                               --------            --------             -------                ------
Total Exports                     50%                55%                  66%                    50%
</TABLE>

*    For the six months ended December 31. 1996,  "Other" includes  Europe.  For
     the year ended June 30, 1996, "Other" includes Latin America.






                                       8
<PAGE>

     Radyne  ComStream  believes  that the above total export figure may rise in
subsequent  periods.  We consider our ability to continue to deliver products in
developing markets to be important to our growth potential.  However, we may not
succeed in our efforts to cultivate such markets.

Research and development

     Radyne  ComStream's  research  and  development  efforts  to date have been
devoted  to the  design  and  development  of new  products  for  the  satellite
communications  and  telecommunications  industries.  Radyne  ComStream's future
growth depends on increasing  the market shares of its new products,  adaptation
of its existing satellite  communications products to new applications,  and the
introduction of new communications products that will find market acceptance and
benefit from Radyne ComStream's established international distribution channels.
Accordingly,  Radyne ComStream is actively applying its communications expertise
to design and develop new hardware and  software  products and enhance  existing
products.  However, there is no assurance that Radyne ComStream 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.

     Research and development  expenses amounted to $4,296,000 in the year ended
December 31, 1998,  $2,262,000 in the year ended December 31, 1997,  $808,000 in
the six months ended December 31, 1996 and $1,795,000 in the year ended June 30,
1996. A number of new products were either launched or reached an advanced stage
of development during these periods.

     In connection  with the  acquisition  of ComStream,  we recorded a one-time
charge of  approximately  $3.9 million,  which  represents the value assigned to
purchased in-process research and development.

Competition

     The  Satellite  Industry  Association   estimates  the  global  market  for
satellite  ground  communications  equipment  to be in excess of $11 billion per
annum.  Radyne ComStream estimates that its addressable markets are in excess of
$350 million.

     Radyne  ComStream  has a  number  of  major  competitors  in the  satellite
communications  field.  These include large  companies,  such as Hughes  Network
Systems,  NEC and the  EFData  division  of  California  Microwave,  which  have
significantly  larger and more  diversified  operations  and greater  financial,
marketing,  human and other resources than Radyne  ComStream.  Radyne  ComStream
estimates  that the major  competitors  in the main markets in which it operates
have the following market shares as compared to Radyne ComStream's share:

<TABLE>
<CAPTION>
                                      Satellite Modems        Digital Video &        Gov't & Military      Data & Audio
                                      & Earth Stations       High Speed Modems             Modems           Broadcast
                                      ----------------       -----------------             ------           ---------
<S>                                        <C>                       <C>                       <C>             <C>
Competitor
California Microwave/EF Data               33%                       20%                       15%              5%
Hughes Network Systems                     10%                       --                        --              --
SSE Telecom                                 5%                       --                        10%             --
NEC                                        20%                       --                        --              --
Wegener                                    --                        --                        --              15%
IDC                                        --                        --                        --              15%
Radyne ComStream                           15%                       25%                       15%             30%
</TABLE>

     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 there can be no assurance of precision.

     We believe  that we have been able to compete  by  concentrating  our sales
efforts  in  the  international   market,   utilizing  the  resources  of  local
distributors,  and by  emphasizing  product  features.  However,  most of Radyne
ComStream's  


                                       9
<PAGE>

competitors  offer products which have one or more features or functions similar
to those  offered  by  Radyne  ComStream.  Radyne  ComStream  believes  that the
quality,  performance and capabilities of its products, its ability to customize
certain network functions and the relatively lower overall cost of its products,
as  compared  to  the  costs  generally  offered  by  Radyne  ComStream's  major
competitors,   have  contributed  to  Radyne  ComStream's   ability  to  compete
successfully.  However,  Radyne ComStream's major competitors have the resources
available to develop products with features and functions competitive with those
offered by Radyne  ComStream.  There can be no assurance  that such  competitors
will not  successfully  develop such products or that Radyne  ComStream  will be
able to maintain a lower cost advantage for its products. Moreover, there can be
no assurance that Radyne ComStream will not experience increased  competition in
the future from these or other competitors currently unknown.

Employees

     As of  March  1,  1999,  Radyne  ComStream  had 197  full  time  employees,
including 7 executive officers, 173 in engineering,  manufacturing and marketing
operations,  and 17 in administration.  None of Radyne ComStream's employees are
represented  by a union or governed by a collective  bargaining  agreement,  and
Radyne  ComStream  believes  that  its  relationships  with  its  employees  are
satisfactory.

Technology

     While  Radyne  ComStream  has a number  of  patents,  copyrights  and other
intellectual  property  rights in the form of software  and  integrated  circuit
designs,  it has been  cautious in obtaining  patents on existing  products.  In
general,  we believe that improvement of existing products,  reliance upon trade
secrets,  copyrights and unpatented  proprietary know-how and the development of
new products are generally as important as patent protection in establishing and
maintaining a  competitive  advantage.  Furthermore,  patents often provide only
narrow  protection  which may not provide a  competitive  advantage  in areas of
rapid technological  change and patent applications require public disclosure of
information which may otherwise be subject to trade secret protection.  However,
Radyne  ComStream's  technology could be found to infringe upon the intellectual
property  of  others.  If  Radyne  ComStream's  technology  should  be  found to
impermissibly  utilize  the  intellectual  property  of others,  our  ability to
utilize the technology  could be materially  restricted or  prohibited.  In such
event,  Radyne ComStream might be required to obtain licenses from third parties
to utilize the patents or proprietary  rights of others.  Any licenses  required
may not be  obtainable  on terms  acceptable  to Radyne  ComStream or at all. In
addition,  in such event,  Radyne  ComStream  could incur  substantial  costs in
defending  itself  against  infringement  claims  made by  third  parties  or in
enforcing its own intellectual property rights.

ITEM 2.  PROPERTIES

     Radyne  ComStream's  primary  facilities  consist of a leased 76,000 square
foot lab,  office and  manufacturing  facility in Phoenix,  Arizona and a leased
66,400  square  foot  lab,  office  and  manufacturing  facility  in San  Diego,
California.   These  leases  expire  in  September   2008  and  February   2005,
respectively,  and both leases provide options for renewal.  The Company's plans
include  subleasing a certain amount of space in both of these  facilities until
such time as the space is  required  for  internal  use.  We believe  that these
facilities will provide for expected growth for the foreseeable future.

     Radyne  ComStream also has regional  sales offices in the U.K.,  Singapore,
Boca Raton, Florida,  China and Indonesia and customer service centers in China,
the U.K., and Indonesia. All such facilities are leased.

ITEM 3.  LEGAL PROCEEDINGS

     Radyne ComStream 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 expected to be covered
by insurance or to be immaterial.



                                       10
<PAGE>

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

     During the three months ended December 31, 1998, the Company  submitted two
items to a vote of security holders.  Pursuant to written consents,  dated as of
November 5 and  November  25, 1998,  respectively,  the majority  holders of the
Company's common stock agreed to:

     1. Amend the  Company's  1996  Incentive  Stock Option Plan to make another
900,000  shares of Common Stock  available  for grants of options under the Plan
and to accelerate the vesting of options previously granted; and

     2. Change the name of the Company to "Radyne  ComStream Inc." and amend the
Company's  By-Laws to (a) clarify that either the directors or the  stockholders
may resolve to vary the number of directors between three and ten, (b) eliminate
limitations  on the forms of  compensation  which the  Company  may  provide  to
non-employee  directors,  and (c)  permit  record  date and notice  periods  for
stockholder  meetings and other proceedings to be as long as sixty (60) days, in
conformity with a recent amendment of New York law.


                                       11
<PAGE>


                                     PART II

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

     Radyne  ComStream's Common Stock is traded in the  over-the-counter  market
under the OTC Bulletin  Board symbol  "RADN".  However,  there is no established
trading market as actual  transactions are infrequent.  The following table sets
forth  the range of high and low  trading  prices as  reported  by the  National
Quotation Bureau,  Inc. for the periods indicated.  At December 31, 1998, Radyne
ComStream  had  approximately  448  stockholders  of  record.  Radyne  ComStream
believes  that the number of  beneficial  owners is actually in excess of 1,600,
due to the fact that a large number of shares are held in street name.

                                                     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              2-7/64
Second Quarter...................................    5                  2-3/4
Third Quarter....................................    5                  3-3/16
Fourth Quarter...................................    5                  2-1/2

     On March 22,  1999 the last sale price of the Common  Stock as  reported by
the OTC Bulletin Board was $3-3/8 per share.

     The Company has not paid dividends on the Common Stock since  inception and
does not intend to pay any  dividends  to its  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.

ITEM 6. SELECTED FINANCIAL DATA

     The following  selected  statement of  operations  data for the years ended
December 31, 1998 and December 31, 1997, the six month period ended December 31,
1996, the year ended June 30, 1996, the six and one-half month period ended June
30, 1995 and the ten and one-half  month period ended December 16, 1994, and the
selected  balance  sheet data at those  dates,  are derived  from the  financial
statements of the Company and notes thereto  audited by KPMG LLP (in the case of
the year ended  December 31, 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, the six and one-half months ended June 30, 1995 and the ten
and one-half  months  ended  December 16,  1994),  independent  auditors for the
Company.  Per share data and shares  outstanding  reflect an adjustment  for the
effects of the 1-for-5 reverse split of the Company's 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  financial  statements  of the  Company  and notes  thereto
included elsewhere in this 10-K Annual Report.



                                       12
<PAGE>

                                             STATEMENT OF OPERATIONS DATA

<TABLE>
<CAPTION>
                                                                                                                         TEN-AND-
                                                                                                       SIX-AND-          ONE-HALF
                                                                       SIX MONTHS                      ONE-HALF           MONTHS
                                       YEAR ENDED      YEAR ENDED         ENDED        YEAR ENDED        MONTHS            ENDED
                                        DECEMBER        DECEMBER        DECEMBER         JUNE            ENDED            DECEMBER
                                           31,             31,             31,             30,          JUNE 30,            16,
                                          1998            1997            1996            1996           1995              1994(1)
                                      ------------    ------------    ------------    ------------    ------------       ---------
<S>                                   <C>             <C>             <C>             <C>             <C>                <C>      
Net Sales .........................   $ 21,111,704    $ 13,446,852    $  4,905,059    $  3,829,523    $  1,861,262       2,569,396
Cost of Sales .....................     15,808,459       8,022,262       4,052,433       2,559,350       1,228,747       2,229,329
Gross Profit ......................      5,303,245       5,424,590         852,626       1,270,173         632,515         340,067
Selling, general and
   Administrative expense .........      5,531,213       4,242,138       1,437,971       1,843,576         961,162       1,658,388
Asset impairment charge(2) ........        262,935            --           421,000            --              --              --
Professional fees related to
   Reorganization .................           --              --              --              --              --           600,198

Research and development ..........      4,296,268       2,262,066         808,025       1,794,823            --              --
Stock option compensation expense .      1,155,477            --              --              --              --              --
In process research and
   development ....................      3,909,000            --              --              --              --              --
Restructuring costs ...............      3,100,000            --              --              --              --              --
   Total operating expenses .......     18,254,893       6,504,204       2,666,996       3,638,399         961,162       2,258,586
Operating loss ....................    (12,951,648)     (1,079,614)     (1,814,370)     (2,368,226)       (328,647)     (1,918,519)
Interest expense ..................      1,198,777         677,102         255,604         256,871          36,209         118,235
Other .............................        (23,480)           --              --              --              --              --
Loss before fresh start
   adjustments and
   extraordinary items ............    (14,126,945)     (1,756,716)     (2,069,974)     (2,625,097)       (364,856)     (2,036,754)
Fresh start adjustments ...........           --              --              --              --              --         1,598,841
Loss before extraordinary
   items and taxes on income ......    (14,126,945)     (1,756,716)     (2,069,974)     (2,625,097)       (364,856)       (437,913)
Extraordinary items(3) ............           --              --              --              --              --         2,699,156

Income (loss) before taxes ........    (14,126,945)     (1,756,716)     (2,069,974)     (2,625,097)       (364,856)      2,261,243

Net loss per share before
   Extraordinary items ............          (2.38)          (0.35)          (0.55)          (0.70)          (0.10)          (1.33)

Net income (loss) per share
   after extraordinary
   items ..........................          (2.38)          (0.35)          (0.55)          (0.70)          (0.10)           6.87

Weighted average number
   of outstanding shares ..........      5,931,346       5,012,664       3,750,699       3,742,227       3,729,721         329,020
</TABLE>


                                       13
<PAGE>

                               BALANCE SHEET DATA

<TABLE>
<CAPTION>
                                  12/31/98         12/31/97       12/31/96        6/30/96         6/30/95        12/16/94(1)
                                ------------    ------------    ------------    ------------    ------------    ------------
<S>                             <C>             <C>             <C>             <C>             <C>             <C>         
Cash and cash equivalents ...   $    254,956    $    569,692    $    186,488    $        971    $      2,109    $    256,398
Working capital (deficit) ...     (8,803,970)      1,654,857      (5,851,527)     (4,082,987)     (1,343,018)       (977,678)
Total assets ................     29,190,714      10,231,617       6,572,917       3,272,686       3,452,999       3,084,394
Long-term liabilities .......     16,862,337       4,649,404         161,968         130,414         168,304         192,603
Total liabilities ...........     44,427,634      11,381,678      11,019,543       5,669,338       3,264,554       2,531,093
Stockholder equity (deficit)     (15,236,920)     (1,150,061)     (4,446,626)     (2,396,652)        188,445         553,301
</TABLE>

----------
(1)  The Company's  predecessor  petitioned for  bankruptcy  protection in April
     1994 and operated as a debtor-in-possession until December 16, 1994.

(2)  Consists  of  the  writedown  of  designs  and  drawings  in  light  of the
     introduction  of replacement  products.  (3) Consists of $1,062,667 gain on
     exchange of debt for common stock and $1,636,489 gain on debt forgiveness.

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

GENERAL

     In reviewing  the  following  material,  the reader should take note of the
fact that the respective periods being compared are of various duration. This is
due to  several  changes in the  Company's  fiscal  year.  Upon  emergence  from
bankruptcy on December 16, 1994, the predecessor  company's fiscal year ended on
that date.  The adoption of the fiscal year of the Company's new parent (ETS) at
that time created a fiscal  period from December 17, 1994 through June 30, 1995,
followed by a full year ended June 30, 1996. Upon becoming a subsidiary of ST in
August of 1996,  the  Company  adopted  ST's fiscal  year (the  calendar  year),
creating a stub fiscal period from July 1 through December 31, 1996.

     Acquisition.  On October 15, 1998,  the Company  completed  the purchase of
ComStream  Holdings,  Inc.  from Spar  Aerospace  Limited,  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.  Revenues of ComStream  for 1998 were  approximately  $37  million.  We
acquired ComStream in an effort to expand our core business,  and supplement our
product lines with a number of viable  developed  products and superior  quality
products  in the  design  stage,  some of which have  since  been  released  for
production.

     The acquisition  was recorded in accordance  with the "purchase  method" of
accounting and, accordingly, the purchase price has been allocated 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.  The
results of operations of ComStream have been included in the Company's  combined
statement of operations from the acquisition date.

RESULTS OF OPERATIONS

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

     The Company's net sales increased 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 is primarily attributable to the increased product sales resulting from
our purchase of ComStream.

     The Company's  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 


                                       14
<PAGE>

as "start-up"  costs  associated  with the  introduction of new products such as
set-up fees,  expedited product  deliveries and low-volume pricing for purchased
parts on initial  production  runs. The  establishment of a reserve to allow for
costs  associated  with valuation of older versions of products that will become
"slow-moving"  or obsolete as a result of the  introduction of the newer version
products are referred to as "excess and obsolete" reserves.

     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 our San Diego
operation in October, 1998.

     The Company  recorded an "asset  impairment  charge" of $263,000 during the
year ended  December 31, 1998, to reflect a valuation  adjustment to Designs and
Drawings  which were fully  impaired by the  introduction  of competing  product
lines due to the 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  due to the  purchase  of
ComStream in October,  1998. 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.

     Stock option compensation expense of $1,155,000 was recorded to reflect the
bonus and related  expenses to be incurred as a result of the vesting of 657,000
shares of Incentive Stock Options under the Incentive Stock Option Plan of 1996.
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.

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

     In connection  with the  acquisition of ComStream  Holdings,  Inc.,  Radyne
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.

     There are three  generally  accepted  valuation  methodologies  useful  for
valuing  intellectual  property and intangible  assets:  market  approach,  cost
approach, and income approach. The market approach is the most direct and easily
understood  appraisal  technique,  utilizing data on comparable assets. The cost
approach seeks to measure the future  benefits of ownership by  quantifying  the
amount of money that would be required to replace the future service  capability
of the  subject  property.  The  income  approach  steps  away  from the cost of
constructing  or  creating  a new asset and  focuses on a  consideration  of the
income-producing capability of the asset.

     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.

     Products-in-development  at ComStream at the time of the  acquisition  were
classified as in-process  technology.  These include the following products with
their respective estimated completion dates:

          Description                                 Estimated Completion Date
          -----------                                 -------------------------

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

                                       15
<PAGE>

     Revenue streams associated with these  products-in-development were used to
estimate  fair value using the  discounted  cash flow  method  within the income
approach.  In the  classification  of these assets as in-process,  the following
were considered:

     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 expected to be achieved,  for a few of the products in the fourth quarter of
1998 and the remaining  products within 1999. The nature,  amount, and timing of
the costs  required to complete the  in-process  technology are presented in the
following chart:

<TABLE>
<CAPTION>
                                                                              ------------ ---------- ----------
                                                                                Estimated  Estimated  TotalCosts
                                           Product      Started                  Cost To    Cost To      at
                              Base          Line         (Month    Completion     Date      Complete  Completion
      Description          Technology   Applicability    -Year)       Date       $000's      $000's    $000's
----------------------------------------------------------------------------------------------------------------
<S>                       <C>             <C>             <C>         <C>       <C>         <C>         <C>     
2 MB Card                 QPSK,FEC        Modems          01-98       01-99     $  1,100    $   700     $  1,800
                          Coding                                                             
"CM 601" Low Cost Mod     Coding          Modems          05-97       03-99          600        900        1,500
                          Modulation                                                         
"DT8000" Ku-band          Modulation      Earth           03-97       12-98        1,950        800        2,750
2 Watt Earth Station      Coding          Stations                                           
                          Transmission    
"DBR 2000" Data           L-Band          Broadcast       06-98       06-99          100        300          400
Broadcast Receiver        Receivers       Data                                               
                          Packet          
                          Protocol        
"ABR 202" Audio Receiver  L-Band          Broadcast                   11-98          600        150          750
                          Receivers       Audio                                              
                          Multiplexing    
Set Top Box Receiver      DTH   TV  -     Satellite TV -  03-97       06-99        1,400        200        1,600
                          Cable TV  -     Cable TV                                  
                          Proprietary     
                          IC's  - MPEG    
                          Decoders        
MediaCast Card Receiver   Proprietary     Internet        03-97       03-99        1,600        300        1,900
                          IC's       -    Receiver   -                                       
                          Internet        Video
                          Protocol   -    Receiver
                          DVB  MPEG       
                          Decoders        
                                                                                $  7,350    $ 3,350     $ 10,700
                                                                                ========    =======     ========
</TABLE>

                                          
     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, revenues,
cost of goods  sold,  sales  and  marketing,  general  and  administrative,  and
research and  development  expenses were used to estimate a baseline  measure of
earnings  attributable  to the products.  These earnings  represent the expected
income the products  would produce once  ComStream's  technology  was integrated
with the  resources of Radyne.  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.



                                       16
<PAGE>

     The fair value of  ComStream's  total  assets  reflects  an  investment  of
capital,  which  requires a return to its  investors;  in addition the Company's
firm-wide cash flows need to satisfy  requirements on all of ComStream's assets,
and not just its  technology.  Overall,  a 28% rate of return  was  employed  as
representing  ComStream's weighted average cost of capital. The weighted average
cost of capital was  allocated  among all the assets of the Company,  based upon
the  relative  risk  associated  with  each  asset.  By  allocating  the  return
requirements for the entire firm to its assets,  values can be established based
upon an asset's relative risk and discrete return capability.

     Accordingly,  the procedure used to value ComStream's in-process technology
was  "residual" in nature.  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, with the remaining cash flow used to value the in-process
technology.  This is the cash flow that would be available to satisfy the return
requirement on the amount of money invested in the in-process technology.

     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.

     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 the increased debt of the Company,  which in turn, is primarily
attributable to the acquisition of ComStream Holdings, Inc.

     For the year ended  December  31,  1998,  the  Company  did not provide for
income  taxes,  due to the current  period net loss and its net  operating  loss
carryforwards.  The Company  also did not provide for income taxes for the prior
period due to net operating losses.

     For the  year  ended  December  31,  1998,  the  Company  had a net loss of
$14,127,000  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.

     "New Orders Booked" (firm,  fixed orders from customers) 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.

     The Company's  "Backlog" of orders to be shipped (unshipped orders from the
prior period plus new orders booked less orders  shipped  during the period) 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. The Company's  Backlog  consists of firm orders
as evidenced by written contracts and/or purchase orders from customers.


FISCAL YEAR ENDED  DECEMBER 31, 1997  COMPARED TO SIX MONTHS ENDED  DECEMBER 31,
1996

     The Company's net sales  increased  174% to  $13,447,000  during the twelve
month period ended December 31, 1997 from $4,905,000 during the six months ended
December 31, 1996. This increase is primarily attributable to the increased time
frame of the later period  relative to the prior period and to the  introduction
of  the  Company's  new  product  lines  which  experienced  exceptional  market
acceptance.

     The Company's  cost of sales as a percentage of net sales  decreased to 60%
during the twelve  months  ended  December  31, 1997 from 83% for the six months
ended  December  31,  1996.  During  the six months  ended  December  31,  1996,
adjustments  to  inventory  of   approximately   $491,000  (10%  of  sales)  for
obsolescence,  of which $364,000 was related to the introduction of new products
(which  essentially  rendered  one entire  older  product  line  obsolete),  and
$340,000 (7% of sales) for start-up  costs  related to the  introduction  of new
products  were  included in the cost of sales as old product lines were replaced
with  new  product  lines.  These  products  included  a  new  generation  modem
sub-system  which makes use of the Company's  proprietary  technology from older
products while adding features and reducing 


                                       17
<PAGE>

future  manufacturing  costs.  Also,  the  Company  introduced  and  shipped new
"digital video broadcast" modems which experienced exceptional acceptance in the
marketplace.

     The Company was  obligated  to pay  royalties to Merit  Microwave,  Inc. on
sales of certain translator products developed by Merit. The royalty rate ranges
from five to ten percent of the selling price.  During the period ended December
31, 1997, the Company accrued $5,600 for royalty  expenses,  which were included
in direct cost of goods sold.

     Selling, general and administrative costs increased to $4,242,000 or 32% of
sales during the twelve months ended December 31, 1997 from $1,438,000 or 29% of
sales for the six months ended  December 31, 1996. The increase in expenses as a
percentage of sales was primarily  attributable to growth and expenses  incurred
for market  penetration.  The increase in pure dollars was also  attributable to
the increased time frame of the later period over the prior period.

     The Company  recorded an "asset  impairment  charge" of $421,000 during the
six months ended December 31, 1996, to reflect a valuation adjustment to designs
and  drawings  which were  partially  impaired  due to the  introduction  of new
product  lines.  The  valuation  of  designs  and  drawings  was the  result  of
adjustments  made by the Company to adopt Fresh Start  reporting  in  accordance
with AICPA  Statement  of  Position  90-7,  Financial  Reporting  by Entities in
Reorganization   Under  the   Bankruptcy   Code,   and   represents  the  excess
reorganization value that was applied to the acquired technology  supporting the
Company's products.  Amortization of designs and drawings was computed using the
straight-line  method over an estimated  useful life of four to seven years. The
remaining  asset  carried  a net book  value of  $472,000,  amortized  using the
straight-line  method over the  remaining  estimated  useful life of one to four
years.

     Research  and  development  expenditures  increased to  $2,262,000  (17% of
sales)  during the twelve  months ended  December 31, 1997 from $808,000 (16% of
sales) for the six months ended  December 31, 1996. The increase in expenses was
primarily  attributable to the increased time frame of the later period over the
prior period and to major development programs instituted during the fiscal year
ended  December 31, 1997. It was  anticipated  that the Company will continue to
experience high R&D expenses as it positions itself, through the introduction of
new products, to gain market share.

     As of the last day of the fiscal  period,  the Company  held  approximately
$600,000 worth of inventory,  in the form of finished  goods in a  ready-to-ship
status,  on the shipping  dock for two orders placed with the Company which were
to be purchased with funds underlying  international  letters of credit.  Due to
unexpected  difficulties,  the letters of credit were not received by the end of
the period and so the  products  were not shipped.  The impact of these  delayed
letters  of  credit  was  to  delay  shipment,   and  revenue  recognition,   of
approximately $945,000 in sales.

     Interest expense net of interest income increased to $677,000 (5% of sales)
during the twelve months ended December 31, 1997 from $256,000 (5% of sales) for
the six months  ended  December  31,  1996.  The large  increase  in expense was
primarily  attributable to the increased time frame of the later period over the
prior period.

     For the period ended  December  31,  1997,  the Company did not provide for
income taxes,  due to the net loss.  The Company also did not provide for income
taxes, for the six months ended December 31, 1996, due to net operating losses.

     For the twelve month period ended  December 31, 1997, the Company had a net
loss of  ($1,757,000)  as compared  with a net loss of  ($2,070,000)  in the six
month period ended December 31, 1996. The decrease was primarily attributable to
increased sales with a lower percentage of cost of sales.

     "New Orders  Booked"  (firm,  fixed orders from  customers)  for the twelve
months ended  December 31, 1997 were  $15,788,000  as compared to $5,939,000 for
the six months ended  December 31,  1996.  This  increase was as a result of the
increased  time frame of the later period over the prior period coupled with the
increased  effort,  on the part of the  Company,  to  rejuvenate  its  marketing
strategy.

     The Company's  "Backlog" of orders to be shipped (unshipped orders from the
prior period plus new orders booked less orders  shipped  during the period) was
$4,814,000  as of December 31, 1997,  an increase of 95% over the


                                       18
<PAGE>

$2,473,000 in Backlog as of December 31, 1996. The Company's Backlog consists of
firm  orders as  evidenced  by written  contracts  and/or  purchase  orders from
customers.  Approximately  $945,000  of this amount was due to the effect of the
late  letters  of credit  from two  orders.  One of these  orders was from South
America and subsequently shipped. The other order was from Indonesia and has not
shipped to date.

SIX MONTH PERIOD ENDED  DECEMBER 31, 1996 COMPARED TO FISCAL YEAR ENDED JUNE 30,
1996.

     The  Company's net sales  increased 28% to $4,905,000  during the six month
period ended  December 31, 1996 from  $3,830,000  during the twelve months ended
June 30, 1996. This increase was primarily  attributable to the  introduction of
the Company's new product lines which experienced exceptional market acceptance.
Sales of products  introduced since July 1, 1995 increased from $434,000 for the
period ended June 30, 1996 to $3,477,000 for the period ended December 31, 1996.

     The Company's  cost of sales as a percentage of net sales  increased to 83%
during the six months ended December 31, 1996 from 67% for the fiscal year ended
June 30, 1996.  There were two primary  reasons for this increase in percentage.
First,  there were  adjustments  to  inventory  of  $491,000  (10% of sales) for
obsolescence.  Of this amount,  $364,000 was related to the  introduction of new
products which essentially  rendered one entire product line obsolete,  $110,000
was  related to ongoing  product  development  and  $17,000  was  related to the
valuation  of  excess  materials  on hand.  Second,  $340,000  (7% of  sales) of
start-up costs related to the  introduction of new products were included in the
cost of sales for the period ended December 31, 1996. These products  included a
new generation  modem  sub-system  which makes use of the Company's  proprietary
technology  from older  products  while  adding  features  and  reducing  future
manufacturing  costs.  Also, the Company introduced and shipped the new "Digital
Video Broadcast" modem which experienced  exceptional  market  acceptance.  Also
contributing  to the  increase  in cost of sales as a  percentage  of sales were
freight  charges  related to  international  sales (2% of sales) and higher than
anticipated  warranty  expense on some of the  Company's  older  products (1% of
sales).

     The Company was  obligated  to pay  royalties  to Merit on sales of certain
translator products developed by Merit. The royalty rate ranges from five to ten
percent of the selling  price.  During the period ended  December 31, 1996,  the
Company paid $2,200 for royalty expenses,  which were included in direct cost of
goods sold.

     Selling, general and administrative costs decreased to $1,438,000 or 29% of
sales during the six months ended  December 31, 1996 from  $1,844,000  or 48% of
sales for the fiscal year ended June 30,  1996.  The  decrease  in expenses  was
primarily attributable to the decreased time frame of the latter period over the
prior period and partially offset by increased costs related to the higher level
of business that the Company experienced during the latter period.

     The Company  recorded an "asset  impairment  charge" of $421,000 during the
six month period ended  December 31, 1996 to reflect a valuation  adjustment  to
Designs and Drawings which were partially  impaired due to the  introduction  of
new product lines.

     Research and development  expenditures decreased to $808,000 (16% of sales)
during the six months ended December 31, 1996 from $1,795,000 (47% of sales) for
the twelve  months ended June 30, 1996.  The decrease in expenses was  primarily
attributable  to the decreased  time frame of the latter period  relative to the
prior  period.  Additionally,  the Company had  embarked on a major  development
program  during  the  fiscal  year  ended  June 30,  1996,  in order to regain a
competitive  posture after two fiscal  periods during which the Company had made
no development effort.

     Interest expense net of interest income decreased to $256,000 (5% of sales)
during the six months ended  December  31, 1996 from  $257,000 (7% of sales) for
the fiscal year ended June 30, 1996. The small decrease in expense was primarily
attributable to the decreased time frame of the latter period as compared to the
prior period,  offset by additional  interest from the Company's  increased debt
level.

     For the six month  period  ended  December  31,  1996,  the Company did not
provide  for  income  taxes,  due  to  the  net  loss  and  net  operating  loss
carryforwards  from prior  periods.  The Company also did not provide for income
taxes for the twelve month period ended June 30, 1996, for the same reasons.



                                       19
<PAGE>

     For the six month  period ended  December  31, 1996,  the Company had a net
loss of  ($2,070,000)  as compared with a net loss of ($2,625,000) in the twelve
month period ended June 30, 1996. The decrease was primarily attributable to the
decreased  time  frame of the  latter  period  relative  to the prior  period as
partially  offset by the increase in cost of sales as a percentage  of sales and
the expenses of increased business  activity,  and the $421,000 asset impairment
charge as discussed above.

     "New Orders Booked" (firm,  fixed orders from customers) for the six months
ended  December 31, 1996 were  $5,939,000 as compared to $4,184,000 for the year
ended June 30, 1996.  The  Company's  "Backlog" of orders to be shipped  (orders
from the prior period which had not yet been shipped plus new orders booked less
orders  shipped  during the period) was  $2,473,000  as of December 31, 1996, an
increase  of 72%  over the  $1,439,000  in  Backlog  as of June  30,  1996.  The
Company's  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 ($8,804,000) at December 31,
1998,  as compared to working  capital of  $1,655,000 at December 31, 1997 and a
deficit of ($5,852,000) at December 31, 1996 and  ($4,083,000) at June 30, 1996.
The current working capital deficit is attributable  principally to the increase
in short-term  debt  associated  with ongoing  operations  ($3,000,000)  and the
ComStream   acquisition   ($7,000,000),   and  increases  in  accounts   payable
(approximately  $2,625,000)  and  accrued  expenses  (approximately  $8,239,000)
associated with the ComStream  acquisition,  as partially offset by increases in
receivables  (approximately $6,176,000) and inventory (approximately $3,991,000)
associated with the ComStream acquisition.

     Net cash used in operating  activities  was $3,850,000 for the twelve month
period ended  December 31, 1998, as compared to $4,945,000  for the twelve month
period ended December 31, 1997, and $3,546,000 for the six months ended December
31, 1996 and $2,581,000 used in the year ended June 30, 1996.

     Cash used in  investing  activities  was  $10,551,000  for the period ended
December 31, 1998, $593,000 for the period ended December 31, 1997, $255,000 for
the period ended  December 31, 1996 and $389,000 for period ended June 30, 1996.
The current  year's  increase of almost  $10,000,000  relates to the purchase of
ComStream.  The Company has no material commitments to make capital expenditures
in 1999 or thereafter.

     The  Company  derived net cash from  financing  activities  of  $14,086,000
during  the year  ended  December  31,  1998,  $5,922,000  during the year ended
December 31,  1997,  $3,986,000  during the six month period ended  December 31,
1996 and  $2,969,000  during the year ended June 30,  1996.  During the  current
period net cash from  financing  activities  was  composed  primarily of line of
credit borrowings ($3,000,000),  loans from affiliates ($15,618,000) and line of
credit repayments ($4,500,000).

     As a result of the  foregoing,  the Company  decreased  its cash balance by
$315,000 for the twelve month period ended December 31, 1998, increased its cash
balance by  $383,000  for the twelve  month  period  ended  December  31,  1997,
increased  its cash balance by $186,000  for the six months  ended  December 31,
1996 and decreased its cash balance by $1,000 for the year ended June 30, 1996.

     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.
An  affiliate of ST has issued a  nonbinding  letter of awareness in  connection
with this credit agreement. 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  (rates of 6.125% and 6.938% on  balances  owed at
December 31, 1998 and 1997,  respectively).  The credit  agreement  requires the
Company to maintain  certain  financial  leverage  ratios.  The  availability of
additional  borrowings under the credit agreement expires September 29, 1999 and
is renewable  annually at the option of the Bank.  The Company owed principal of
$8,000,000  under the line of credit as of December 31, 1998.  Subsequent to the
end of the period reported on herein,  the Company borrowed  another  $1,500,000
under the credit agreement at rates ranging from 5.97% to 6.06%.

     Notes  payable  to  parent  (ST)  outstanding  at  December  31,  1998 were
$15,618,272. These notes bear interest at rates from 6.375% to 6.844% and mature
on March 31, 2000. Of this amount,  $10,000,000  was borrowed in 


                                       20
<PAGE>

September 1998 for the acquisition of ComStream Holdings,  Inc. ST has committed
to purchase approximately $16,000,000 of the Company's Common Stock in the below
described  rights  offering,  the proceeds of which will be used to retire these
notes.

     The Company also has a note payable to Spar Aerospace Limited 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., matures on July 15, 1999 with
interest at 8% per annum and is  convertible  under certain  circumstances  into
Common Stock of the Company.

     The  Company  intends to finance the  repayment  of debt  incurred  for the
ComStream  acquisition,  certain  planned  restructuring  costs and its  ongoing
working  capital needs through (i) a rights  offering  pursuant to which it will
offer approximately $17,700,000 of Common Stock to its existing stockholders and
(ii) the existing  bank line of credit.  This  offering will be made strictly by
means of a prospectus  which will be distributed to stockholders of record as of
April 16, 1999.

     The  purpose  of all of the above  described  loans has been to  finance or
refinance  the  capital  needs  associated  with the  Company's  acquisition  of
ComStream  Holdings,  Inc.,  growth  in  backlog  and the cost of  research  and
development.  To date, the Company's capital resources (as supplemented by loans
from ST and its  affiliates)  have been  sufficient to fund its  operations  and
increased level of business.  ST has confirmed its ability and intent to provide
working  capital  necessary  to ensure  that  Radyne  ComStream  remains a going
concern.  With this support, the Company believes that its bank credit lines and
cash from  operations  are likely to be  sufficient  to fund its planned  future
operations  and capital  requirements  for continued  growth  through the end of
1999, as well as repayment of the above described $7,000,000 note.

SUPPLEMENTARY INFORMATION

YEAR 2000 COMPLIANCE

     The Company  recognizes the potential  business impacts related to the Year
2000 computer  system issue and has implemented a plan to assess and improve the
Company's state of readiness with respect to such issues. The year 2000 issue is
one where computer  systems may recognize the designation  "00" as the year 1900
when it is  intended  to mean the year  2000,  resulting  in system  failure  or
miscalculations.

     The  Company  has  undertaken  a  comprehensive  review of its  information
technology  systems,  which the Company is dependent  upon to conduct day to day
business  operations,  in order to determine  the  adequacy of those  systems in
light of  future  business  requirements.  Year  2000  readiness  was one of the
factors  considered  in the review  process.  The  Company is in the  process of
formalizing  its Year 2000 plan. This plan document should be completed by April
30, 1999.  The plan provides for the  completion of efforts to assess,  test and
verify,  remediate and develop contingency plans for all internal systems,  both
IT and non-IT,  for Year 2000  compliance by September  30, 1999.  The Company's
review  of  internal  systems  is in  process.  The  majority  of the  Company's
application  software programs are purchased from and maintained by vendors. The
Company will work with these software vendors to verify these  applications are,
or will become, year 2000 compliant.

     The Company  presently  believes that all mission  critical  systems are or
will timely  become Year 2000  compliant  and therefore the Year 2000 issue will
not pose significant  operational  problems for the Company's  internal systems.
All Year 2000 costs to date have been  expensed  and the Company does not expect
to incur any future costs in excess of $100,000  related to the Year 2000 issue.
We anticipate  that future costs related to bringing the Company into compliance
will be written off in the period incurred.  However,  the Company may choose to
upgrade certain existing software that is already Year 2000 compliant and, if it
does,  the costs  related to those  upgrades will be  capitalized  in the normal
course of business.

     As part of the Company's  comprehensive  review, it is continuing to verify
the Year 2000 readiness of third parties  (vendors and customers)  with whom the
Company has material  relationships.  The Company is not able to  determine  the
effect on the Company's results of operations, liquidity and financial condition
in the event the  Company's  material  vendors and  customers  are not Year 2000
compliant.  The Company  will  continue to monitor the  


                                       21
<PAGE>

progress of its material  vendors and customers and formulate a contingency plan
if and when the Company  concludes that a material vendor or customer may not be
compliant.

     During the year ended December 31, 1998, a Year 2000  readiness  survey was
sent to all of the  Company's  material  vendors and  customers.  The  readiness
surveys are currently being  collected for review and analysis.  The Company has
undertaken to advise all of its customers as to the Company's Year 2000 state of
readiness with regard to its products.

     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 problems will not be material to the Company.

IMPACT OF INFLATION

     The Company does 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 1997, the Financial  Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive  Income" (SFAS
No. 130) which became  effective for the Company  January 1, 1998.  SFAS No. 130
establishes standards for reporting and displaying  comprehensive income and its
components in a full set of general-purpose  financial statements.  The adoption
of SFAS No. 130 did not have a material impact on the Company.

     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise and Related  Information"  (SFAS No. 131) which became  effective for
the Company January 1, 1998. SFAS No. 131 establishes standards for the way that
public  enterprises  report  information  about  operating  segments  in  annual
financial  statements  and  requires  that  those  enterprises  report  selected
information about operating  segments in interim reports issued to stockholders.
The adoption of SFAS No. 131 did not have a material impact on the Company.

     In February 1998, the Financial Accounting Standards Board issued Statement
of  Financial  Accounting  Standards  No.  132,  "Employer's  Disclosures  about
Pensions  and  Other  Postretirement  Benefits"  (SFAS  No.  132)  which  became
effective for the Company on January 1, 1998. SFAS No. 132 establishes standards
for  the  information  that  public   enterprises  report  in  annual  financial
statements.  The adoption of SFAS No. 132 did not have a material  impact on the
Company.

     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) which becomes effective for the Company
on July 1, 1999. 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, 1998
consisted of notes payable to  affiliates,  notes payable under a line of credit
agreement and a note payable.



                                       22
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Company's  consolidated  financial  statements as of December 31, 1998,
December  31,  1997,  December  31, 1996 and June 30, 1996 are  included in this
report as listed in the Index to Financial Statements in Item 14.

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

     None reportable.



                                       23
<PAGE>

                                    PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

     The directors and executive  officers of the Company,  their positions held
with the Company, and their ages are as follows:

              NAME                AGE              POSITION
--------------------------------  ----  ------------------------------
Lim Ming Seong .................   51   Director, Chairman of the Board
Chan Wee Piak ..................   43   Director
Lee Yip Loi ....................   55   Director
Robert A. Grimes ...............   46   Director
Dennis W. Elliott ..............   57   Director
Robert C. Fitting...............   64   Director, Chief Executive Officer and
                                        President
Steven W. Eymann ...............   46   Executive Vice President, Chief
                                        Technical Officer
Garry D. Kline .................   49   Vice President of Finance

     Each director is elected for a period of one year at the  Company's  annual
meeting  of  stockholders  and  serves  until  the next  meeting  and  until his
successor is duly elected and  qualified.  Officers are elected by, and serve at
the discretion of, the Board of Directors.

     The  following  is a brief  summary  of the  background  of each  director,
executive officer and certain key employees of the Company:

DIRECTORS AND EXECUTIVE OFFICERS:

     LIM MING  SEONG  has a been a  Director  and  Chairman  of the Board of the
Company since August 13, 1996 and is chairman of its Compensation  Committee. He
is the Chairman of ST and of Vertex Management,  Inc., a member of the Singapore
Technologies group, and he has been Group Director of Singapore Technologies Pte
Ltd,  the parent of ST since  February of 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.  Mr. Lim is a director of 41 subsidiary  companies of
Singapore Technologies.

     LEE YIP LOI has been a Director of the Company since August 13, 1996 and is
chairman of the Audit  Committee and a member of the  Compensation  Committee of
the Board. Mr. Lee is also a director of ST. 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 Pte
Ltd, Tritech Microelectronics Inc., Chartered Semiconductor  Manufacturing Inc.,
ST Assembly and Test Services, Inc., Vertex Management,  Inc. and Tritech Design
Inc.

     CHAN WEE PIAK has been a Director  since August 13, 1996 and is a member of
the  Compensation  Committee  of the Board.  He is a director of ST and has been
General Manager of Agilis  Communication  Technologies Pte Ltd, also a member of
the Singapore  Technologies  group,  since  January 1992.  From November 1989 to
February 1992, he was General  Manager of Chartered  Microwave Pte Ltd. Prior to
that time, he held various  managerial  positions in the  Singapore  Ministry of
Defense and with Singapore Electronic and Engineering.

     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 


                                       24
<PAGE>

Integration  since 1998.  From 1991 to 1998 Mr. Grimes served as a member of the
Board 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 is 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/HDTV  and multimedia.
Until  September  1998, 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.

     ROBERT C.  FITTING has been Chief  Executive  Officer of the Company  since
October  1998 and has been  President of the Company  since  February  1995.  He
became a Director  of the  Company 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.  He 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.  He left
Comtech to start a new company called 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.

     STEVEN EYMANN has been Chief Technical Officer of the Company since October
1998 and has been its 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 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 an HP 9825 computer.  The DSU-23/29B is an
L-Band PN radar for accurate,  low-cost altitude direction. In June of 1981, Mr.
Eymann  joined  Comtech  Data  Corporation  where  he was  Director  of  Product
Development.  He 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 to begin a new company  called
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.

     GARRY D. KLINE,  Vice  President of Finance,  Chief  Financial  Officer and
Secretary,  joined the Company in September  of 1995.  From that time until July
1997 he was Secretary and Controller of the Company. From 1987 through 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.

CERTAIN KEY EMPLOYEES:

     ALAN POTTER has been the Vice President of Marketing for Radyne Corp. since
December 1995. His duties at Radyne include market  research,  neoteric  product
concepts,  new corporate  alliances and  distribution  systems in Europe and the
Middle East. He joined Radyne after ten years with EFData as Sales Manager.  Mr.
Potter graduated from the University of Houston with honors,  holding a Bachelor
of Arts in  Communications.  After post  graduate  studies at the  University of
Massachusetts,  Amherst,  he  began  his  professional  career  as an  Associate
Professor of Communications at the University of Texas at Houston.  While there,
in 1973, he developed and operated the first  practical  bi-directional  coaxial
cable network to simultaneously carry voice, data and video  communications.  He
then


                                       25
<PAGE>

designed,  developed and managed a series of broadband cable television and data
networks  for  Columbia  Cable   Television,   Michelson  Media  and  Cox  Cable
Communications.  Mr. Potter joined Comtech Data in 1984 and, two years later, he
followed  Messrs.  Fitting  and  Eymann to  initiate  the  Sales  and  Marketing
Department  at EFData.  He is currently an MBA  candidate at the  University  of
Phoenix.

     DAVE  KOBLINSKI has been the Vice  President of Operations for Radyne Corp.
since March,  1995.  His duties  presently  include  general  management  of the
Phoenix  facility.   Mr.  Koblinski  has  a  Bachelor  of  Science  in  Business
Administration  from  Arizona  State  University.  He  also  holds a  degree  in
Electronics  Technology from Mesa Community  College.  His  professional  career
began in 1982 at Comtech Data Corporation where he held the position of Customer
Service  Representative.  He was  responsible  for repairs,  field and telephone
support of  satellite  data modems.  From 1985 to 1995,  Mr.  Koblinski  was the
Senior Product Manager for EFData Corporation.  His general  responsibilities at
EFData  included  relating  customer  requests and concerns to the factory.  His
direct responsibilities included the customer service, technical publication and
order entry departments.

     Based  solely  upon a review  of Forms  3, 4 and 5 and  amendments  thereto
furnished to the  registrant  during the period from January 1, 1998 to December
31, 1998,  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 Dennis  Elliott  and Form 4 Reports  were filed late on
three occasions by Robert Grimes.


ITEM 11. DIRECTOR AND EXECUTIVE COMPENSATION

     Radyne  ComStream's policy has been to pay no compensation to directors who
are employees of the Company or ST affiliates for their service as directors. On
October 6, 1998 the Board of Directors  resolved that outside  directors will be
paid  $4,000 per  meeting  attended  and $500 if  attendance  is via  telephone.
Moreover,  commencing in March 1999,  all directors  will be eligible to receive
stock options, if granted. Expenses will continue to be reimbursed.

     The  following  table  sets  forth the  compensation  for  services  in all
capacities  to the  Company  for the period  from the year  ended June 30,  1996
through December 31, 1998 of the Company's Chief Executive Officer and Executive
Vice  President.  No other executive  officer or employee  received total annual
salary and bonus of more than $100,000.


                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                            YEAR                                                     ALL OTHER
NAME AND PRINCIPAL POSITION               ENDED(1)           SALARY            OPTIONS(#)         COMPENSATION(2)
---------------------------               --------           ------            ----------         ---------------
<S>                                       <C>              <C>                   <C>                  <C>    
Robert C. Fitting, CEO...........         12/31/98         $ 144,234              30,000              $ 1,186
                                          12/31/97           116,529                   0                1,165
                                          12/31/96            40,000             279,085                  435
                                          06/30/96            80,000                   0                  738

Steven Eymann, Exec. Vice Pres...         12/31/98         $ 133,543              30,000              $ 1,174
                                          12/31/97            11,162                   0                1,112
                                          12/31/96            40,000             279,085                  435
                                          06/30/96            80,000                   0                  738
</TABLE>

(1)  The Company's  fiscal year was changed to the calendar year, so the figures
     shown for the year ended December 31, 1996 reflect a period of six months.

(2)  Matching 401(k) plan contributions.



                                       26
<PAGE>

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                         PERCENT OF TOTAL OPTIONS
                            OPTIONS       GRANTED TO EMPLOYEE IN       EXERCISE      EXPIRATION    START DATE PRESENT
NAME                        GRANTED            FISCAL YEAR              PRICE          DATE            VALUE(1)
---------------------      -------             -----------              -----          ----            --------
<S>                         <C>                     <C>                 <C>           <C>                 <C>  
Robert C. Fitting ...       15,000                  3%                   $2.50         2/5/08             $3.37
                            15,000                  3%                  $3.125        10/15/08            $2.48
Steven Eymann........       15,000                  3%                   $2.50         2/5/08             $3.37
                            15,000                  3%                  $3.125        10/15/08            $2.48

</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 105%
     and a risk-free interest rate of 6.125%.



AGGREGATE OPTION EXERCISES IN 1998 AND HOLDINGS AT YEAR END

     The following table sets forth information  concerning option exercises and
option  holdings for the year ended  December 31, 1998 with respect to Robert C.
Fitting,  the Chief  Executive  Officer and  President of the Company and Steven
Eymann, the Executive Vice President.

                       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
                          SHARES OF                         DECEMBER 31, 1998                  DECEMBER 31, 1998(1)
                         ACQUIRED ON       VALUE      -----------------------------       -------------------------------
NAME                      EXERCISE       REALIZED     EXERCISABLE     UNEXERCISABLE       EXERCISABLE       UNEXERCISABLE
----                      --------       --------     -----------     -------------       -----------       -------------
<S>                              <C>       <C>          <C>               <C>               <C>                <C>    
Robert C. Fitting......          0         $0.00        182,585           62,500            $157,418           $47,656
Steven Eymann..........          0          0.00        182,585           62,500             157,418            47,656
</TABLE>

----------
(1)  Based on the December 31, 1998 closing  price of the Common Stock of $3.375
     per share on the OTC Bulletin Board, less the per share exercise price.

EMPLOYMENT AGREEMENTS

     Under the employment agreement between the Company and Messrs.  Fitting and
Eymann, they will serve as President and 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 $160,000 and  $140,000,  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 that if he exercises any of the stock options, 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, Chan, Lee, Grimes and
Elliott. There were no interlocking  relationships between the Company and other
entities  that  might  affect  the  determination  of  the  compensation  of the
executive officers of the Company.



                                       27
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth, as of the date hereof, 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.

<TABLE>
<CAPTION>
                                                                 NUMBER
                                                                   OF              PERCENTAGE
NAME AND ADDRESS                                                 SHARES             OF CLASS
----------------                                                 ------             --------
<S>                                                             <C>                    <C>   
Stetsys US, Inc............................................     1,180,000              19.69%
     c/o Singapore Technologies Pte Ltd
     83 Science Park Drive
     #01-01/02 The Curie, Singapore Science Park
     Singapore 118258

Stetsys Pte Ltd............................................     5,376,000 (1)          90.6%
     c/o Singapore Technologies Pte Ltd
     83 Science Park Drive
     #01-01/02 The Curie, Singapore Science Park
     Singapore 118258

Dennis W. Elliott..........................................            --               --
     c/o Radyne Corp.
     3138 East Elwood Street
     Phoenix, Arizona 85034

Steven Eymann..............................................         4,000               *
     c/o Radyne Corp.
     3138 East Elwood Street
     Phoenix, Arizona 85034

Robert C. Fitting..........................................            --               --
     c/o Radyne Corp.
     3138 East Elwood Street
     Phoenix, Arizona 85034

Robert A. Grimes...........................................            --               --
     c/o Radyne Corp.
     3138 East Elwood Street
     Phoenix, Arizona 85034

Lee Yip Loi................................................            --               --
     c/o Singapore Technologies Pte Ltd
     83 Science Park Drive
     #01-01/02 The Curie, Singapore Science Park
     Singapore 118258
</TABLE>

                                       28
<PAGE>

<TABLE>
<CAPTION>
                                                                 NUMBER
                                                                   OF              PERCENTAGE
NAME AND ADDRESS                                                 SHARES             OF CLASS
----------------                                                 ------             --------
<S>                                                             <C>                    <C>   
Chan Wee Piak..............................................        10,000               *
     c/o Singapore Technologies Pte Ltd
     83 Science Park Drive
     #01-01/02 The Curie, Singapore Science Park
     Singapore 118258

Lim Ming Seong.............................................             --              --
     c/o Singapore Technologies Pte Ltd
     83 Science Park Drive
     #01-01/02 The Curie, Singapore Science Park
     Singapore 118258

All directors and executive officers of the                
     Company as a group (3 persons)........................        15,500               *
</TABLE>

----------
*    Less than one percent.

(1)  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 sole
     stockholder.  100% of the stock of Stetsys US, Inc.  and Stetsys Pte Ltd is
     ultimately owned by the Minister for Finance (Incorporated) of Singapore.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Sales to ETS for the twelve  month period  ended  December  31, 1998,  were
$50,000. Until October 1998, ETS was a wholly owned subsidiary of ST. During the
fiscal  year  ended  December  31,  1998,  the  Company  made  sales  to  Agilis
Communication Technologies Pte Ltd, another member of the Singapore Technologies
group, of $65,000.  The General Manager of Agilis,  Chan Wee Piak, is a Director
of the Company.

     ST loaned $10  million  to the  Company in  connection  with the  ComStream
acquisition.  Under the terms of this loan,  the Company is required to repay ST
with  interest at 6.375% per annum out of the  proceeds of a rights  offering of
its Common Stock. In turn, Stetsys Pte Ltd has agreed to purchase  approximately
$16,040,000 of Common Stock at $3.73 in the rights offering.  As of December 31,
1998,  the Company owed ST another  $5,618,272,  plus  interest at rates ranging
from 6.625% to 6.844% per annum.

     Interest  expense on notes payable to affiliates  was $581,000 for the year
ended December 31, 1998.


                                       29
<PAGE>

                                     PART IV

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

     a) The following is an index of financial  statements  of Radyne  ComStream
Inc., financial statement schedules and exhibits included in Part IV, Item 14:

                              FINANCIAL STATEMENTS

Independent Auditors' Reports................................................F-1

Consolidated Balance Sheets as at December 31, 1998 and 1997.................F-3

Consolidated Statements of Operations for the Years Ended 
December 31, 1998 and 1997, the Six- Month Period Ended 
December 31, 1996 and the Year Ended June 30, 1996...........................F-4

Consolidated Statements of Stockholders' Capital Deficiency for the 
Years Ended December 31, 1998 and 1997, the Six-Month Period 
Ended December 31, 1996 and the Year Ended June 30, 1996.....................F-5

Consolidated Statements of Cash Flows for the Years Ended 
December 31, 1998 and 1997, the Six- Month Period Ended 
December 31, 1996 and the Year Ended June 30, 1996...........................F-6

Notes to Consolidated Financial Statements...................................F-7

                          FINANCIAL STATEMENT SCHEDULES

     Schedules for the years ended  December 31, 1998 and December 31, 1997, the
six months ended  December 31, 1996, and the year ended June 30, 1996 - Schedule
II - Valuation and Qualifying Accounts

     All other schedules are omitted  because they are not required,  or are not
applicable,  or  the  information  is  included  in the  consolidated  financial
statements or notes to consolidated financial statements.


                                     EXHIBITS

      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

     4.1***         Convertible  Promissory Note between Spar Aerospace Inc. and
                    the  Company  dated  October  15,  1998  with  the  form  of
                    Registration   Rights  Agreement   included  as  Appendix  A
                    thereto.

     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



                                       30
<PAGE>

     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

     21.1           Subsidiaries of the Registrant

     23.1           Consent of KPMG LLP

     23.2           Consent of Deloitte & Touche LLP

     24.1           Power of Attorney (set forth on the signature page hereof)

     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  Registration Statement on
          Form 8-K filed on October 30, 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).

(b)       Registrant  filed the following  reports on Form 8-K during the period
          of October 1 through December 31, 1998:

     Current  Report on Form 8-K dated  October 30, 1998,  Item 2, as amended on
December  23,  1998.  Financial  Statements  included  with respect to ComStream
Holdings,  Inc.'s  Consolidated  Balance Sheets for the Years ended December 31,
1997 and  1996,  Consolidated  Statements  of  Operations  for the  Years  ended
December 31, 1997, 1996 and 1995, and  Consolidated  Statements of Operations at
December  31, 1997;  ComStream  Holdings,  Inc.'s  Unaudited  Condensed  Interim
Balance Sheet for the Nine Months ended September 30, 1998,  Unaudited Condensed
Consolidated  Statements of Operations  for the Nine Months ended  September 30,
1998 and 1997 and Unaudited Condensed  Consolidated  Statement of Cash Flows for
the Nine Months ended  September 30, 1998 and 1997; and Radyne Corp.'s Pro Forma
Condensed  Combined  Balance Sheet as of September 30, 1998, Pro Forma Condensed
Combined  Statement of Operations for the Nine Month Period ended  September 30,
1998 and Pro Forma Condensed Combined Statement of Operations for the Year ended
December 31, 1997.



                                       31
<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: April 14, 1999

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

          Name                               Title                    Date
          ----                               -----                    ----

/s/ Lim Ming Seong         Chairman of the Board of Directors     April 14, 1999
---------------------
Lim Ming Seong


/s/ Robert C. Fitting      Chief Executive Officer, President     April 14, 1999
---------------------       and Director
Robert C. Fitting           


/s/ Garry D. Kline         Vice President, Finance                April 14, 1999
---------------------       (Principal Financial and
Garry D. Kline              Accounting Officer)    
                           


/s/ Robert A. Grimes       Director                               April 14, 1999
---------------------
Robert A. Grimes


/s/ Lee Yip Loi            Director                               April 14, 1999
---------------------
Lee Yip Loi


/s/ Chan Wee Piak          Director                               April 14, 1999
---------------------
Chan Wee Piak


/s/ Dennis W. Elliott      Director                               April 14, 1999
---------------------
Dennis W. Elliott


                                       32
<PAGE>





                          Independent Auditors' Report



The Board of Directors and Stockholders
Radyne Comstream Inc.:


We have audited the accompanying  consolidated  balance sheet of Radyne Comstram
Inc. and  subsidiaries  (the  Company) (a  90.6%-owned  subsidiary  of Singapore
Technologies  Pte Ltd) as of December  31,  1998,  and the related  consolidated
statements of operations,  stockholders' capital deficiency,  and cash flows for
the  year  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 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  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 audit provides 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,
1998, and the results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles.



                                                     /s/KPMG LLP

March 19, 1999


                                      F-1
<PAGE>


INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholders
Radyne Comstream Inc.
Phoenix, Arizona


We have  audited  the  accompanying  balance  sheets  of Radyne  Comstream  Inc.
(formerly Radyne Corp.) (the "Company") as of December 31, 1997, and the related
statements of operations,  stockholders' capital deficiency,  and cash flows for
the year ended December 31, 1997,  the six-month  period ended December 31, 1996
and  the  year  ended  June  30,  1996.  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 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,  such  financial  statements  present  fairly,  in all material
respects, the financial position of the Company as of December 31, 1997, and the
results of its  operations  and its cash flows for the year ended  December  31,
1997,  the six-month  period ended December 31, 1996 and the year ended June 30,
1996 in conformity with generally accepted accounting principles.



/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP
Phoenix, Arizona

February 4, 1998



                                      F-2
<PAGE>

                              RADYNE COMSTREAM INC.

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                                       ----------------------------
                                          Assets                                           1998            1997
                                                                                       ------------    ------------
<S>                                                                                    <C>                  <C>    
Current assets:
     Cash and cash equivalents                                                         $    254,956         569,692
     Accounts receivable - trade, net of allowance for doubtful accounts of $632,815
        and $15,000, respectively                                                         7,270,732       2,359,443
     Other receivable                                                                     1,265,000              -- 
     Inventories, net                                                                     9,380,478       5,389,920
     Prepaid expenses                                                                       590,161          68,076
                                                                                       ------------    ------------

                 Total current assets                                                    18,761,327       8,387,131
                                                                                       ------------    ------------

Property and equipment, net                                                               5,533,645       1,322,551

Other assets:
     Designs and drawings, net of accumulated amortization of $705,404
         at December 31, 1997                                                                    --         471,935
     Purchased technology, net of accumulated amortization of $105,000
         at December 31, 1998                                                             2,395,000              -- 
     Goodwill, net of accumulated amortization of $35,960 at December 31, 1998            2,278,300              -- 
     Deposits and other                                                                     222,442          50,000
                                                                                       ------------    ------------

                 Total other assets                                                       4,895,742         521,935
                                                                                       ------------    ------------

                                                                                       $ 29,190,714      10,231,617
                                                                                       ============    ============

                          Liabilities and Stockholders' Capital Deficiency

Current liabilities:
     Note payable under line of credit agreement                                       $  8,000,000       5,000,000
     Note payable                                                                         7,000,000              -- 
     Current installments of obligations under capital leases                               124,891         109,258
     Accounts payable, trade                                                              3,291,915         667,202
     Accounts payable, affiliate                                                              8,150          16,062
     Accrued expenses                                                                     9,140,341         901,032
     Taxes payable                                                                               --          38,720
                                                                                       ------------    ------------

                 Total current liabilities                                               27,565,297       6,732,274

Notes payable to affiliates                                                              15,618,272              -- 
Note payable under line of credit agreement                                                      --       4,500,000
Obligations under capital leases, excluding current installments                             88,588          93,543
Accrued stock option compensation                                                         1,155,477              -- 
Taxes payable                                                                                    --          55,861
                                                                                       ------------    ------------

                 Total liabilities                                                       44,427,634      11,381,678
                                                                                       ------------    ------------

Commitments,  contingent  liabilities and subsequent  events (notes 2, 8, 9, 10,
     13, 17, 18 and 19)

Stockholders' capital deficiency:
     Common stock; $.002 par value - authorized, 20,000,000 shares; issued and
        outstanding, 5,931,346 shares at December 31, 1998 and 1997                          11,862          11,862
     Additional paid-in capital                                                           5,694,806       5,694,806
     Accumulated deficit                                                                (20,943,588)     (6,816,643)
     Notes receivable from stockholders                                                          --         (40,086)
                                                                                       ------------    ------------

                 Total stockholders' capital deficiency                                 (15,236,920)     (1,150,061)
                                                                                       ------------    ------------

                                                                                       $ 29,190,714      10,231,617
                                                                                       ============    ============
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>

                              RADYNE COMSTREAM INC.

                      Consolidated Statements of Operations


<TABLE>
<CAPTION>
                                                                             Six-month
                                             Year ended     Year ended       period ended    Year ended
                                             December 31,   December 31,     December 31,     June 30,
                                                1998            1997            1996            1996
                                            ------------    ------------    ------------    ------------
<S>                                         <C>               <C>              <C>             <C>      
Net sales                                   $ 21,111,704      13,446,852       4,905,059       3,829,523
Cost of sales                                 15,808,459       8,022,262       4,052,433       2,559,350
                                            ------------    ------------    ------------    ------------

                 Gross profit                  5,303,245       5,424,590         852,626       1,270,173
                                            ------------    ------------    ------------    ------------

Operating expenses:
     Selling, general and administrative       5,531,213       4,242,138       1,437,971       1,843,576
     Research and development                  4,296,268       2,262,066         808,025       1,794,823
     Stock option compensation expense         1,155,477              --              --              -- 
     In-process research and development       3,909,000              --              --              -- 
     Restructuring costs                       3,100,000              --              --              -- 
     Asset impairment charge                     262,935              --         421,000              -- 
                                            ------------    ------------    ------------    ------------

                 Total operating expenses     18,254,893       6,504,204       2,666,996       3,638,399
                                            ------------    ------------    ------------    ------------

Loss from operations                         (12,951,648)     (1,079,614)     (1,814,370)     (2,368,226)

Other (income) expense:
     Interest expense, net                     1,198,777         677,102         255,604         256,871
     Other                                       (23,480)             --              --              -- 
                                            ------------    ------------    ------------    ------------

Net loss                                    $(14,126,945)     (1,756,716)     (2,069,974)     (2,625,097)
                                            ============    ============    ============    ============

Basic net loss per common share             $      (2.38)          (0.35)          (0.55)          (0.70)
                                            ============    ============    ============    ============

Diluted net loss per common share           $      (2.38)          (0.35)          (0.55)          (0.70)
                                            ============    ============    ============    ============

Weighted average number of common
     shares outstanding                        5,931,346       5,012,664       3,750,699       3,742,227
                                            ============    ============    ============    ============
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>

                              RADYNE COMSTREAM INC.

           Consolidated Statements of Stockholders' Capital Deficiency

       Years ended December 31, 1998 and 1997, the six-month period ended
               December 31, 1996 and the year ended June 30, 1996

<TABLE>
<CAPTION>
                                                                                                            Notes         
                                                       Common Stock         Additional                    receivable      
                                                -------------------------     paid-in     Accumulated        from    
                                                   Shares        Amount       capital       Deficit      stockholders      Total
                                                -----------   -----------   -----------   -----------    ------------   -----------
<S>                                               <C>         <C>             <C>         <C>                 <C>       <C>         
Balances, June 30, 1995                           3,729,721   $     7,459       545,842      (364,856)            --        188,445

Shares issued to Merit Microwave                     20,000            40        39,960            --             --         40,000

Net loss                                                 --            --            --    (2,625,097)            --     (2,625,097)
                                                -----------   -----------   -----------   -----------    -----------    -----------

Balances, June 30, 1996                           3,749,721         7,499       585,802    (2,989,953)            --     (2,396,652)

Additional shares issued to Merit Mircrowave         10,000            20        19,980            --             --         20,000

Net loss                                                 --            --            --    (2,069,974)            --     (2,069,974)
                                                -----------   -----------   -----------   -----------    -----------    -----------

Balances, December 31, 1996                       3,759,721         7,519       605,782    (5,059,927)            --     (4,446,626)

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

Promissory notes received in connection
     costs of $335,696                                   --            --            --            --        (40,086)       (40,086)

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

Balances, December 31, 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

Net loss                                                 --            --            --   (14,126,945)            --    (14,126,945)
                                                -----------   -----------   -----------   -----------    -----------    -----------

Balances, December 31, 1998                       5,931,346   $    11,862     5,694,806   (20,943,588)            --    (15,236,920)
                                                ===========   ===========   ===========   ===========    ===========    ===========
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

                              RADYNE COMSTREAM INC.

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                        Six-month
                                                                        Year ended      Year ended     period ended     Year ended
                                                                       December 31,    December 31,    December 31,      June 30,
                                                                           1998            1997            1996            1996
                                                                       ------------    ------------    ------------    ------------
<S>                                                                    <C>               <C>             <C>             <C>        
Cash flows from operating activities:
     Net loss                                                          $(14,126,945)     (1,756,716)     (2,069,974)     (2,625,097)
     Adjustments to reconcile net loss to net cash used in
        operating activities:
           Loss on disposal of assets                                       961,069           2,122              --              -- 
           Depreciation and amortization                                  1,041,088         454,183         177,535         276,913
           Asset impairment charge                                          262,935              --         421,000              -- 
           Write-off of in-process research and development               3,909,000              --              --              -- 
           Increase (decrease) in cash resulting from changes in:
              Accounts receivable                                          (915,154)        374,459      (2,450,031)        251,806
              Prepaid expenses and other current assets                    (179,931)         26,222         (73,872)         73,581
              Employee relocation incentives and advances                        --              --              --         112,353
              Inventories                                                 2,833,811      (3,398,560)       (840,691)       (247,843)
              Deposits and other                                            242,787         (34,338)         (7,650)             -- 
              Accounts payable, trade                                      (985,095)       (138,077)        339,848        (113,243)
              Accounts payable, affiliate                                   113,682        (420,300)        436,362              -- 
              Accrued expenses                                            1,932,071         (25,924)        545,990        (253,337)
              Accrued stock option compensation                           1,155,477              --              --              -- 
              Taxes payable                                                 (94,581)        (28,487)        (24,053)        (56,063)
                                                                       ------------    ------------    ------------    ------------

                    Net cash used in operating activities                (3,849,786)     (4,945,416)     (3,545,536)     (2,580,930)
                                                                       ------------    ------------    ------------    ------------

Cash flows from investing activities:
     Capital expenditures                                                  (543,630)       (593,072)       (255,118)       (388,770)
     Purchase of Comstream, net of cash acquired                        (10,007,369)             --              --              -- 
                                                                       ------------    ------------    ------------    ------------

                 Net cash used in investing activities                  (10,550,999)       (593,072)       (255,118)       (388,770)
                                                                       ------------    ------------    ------------    ------------

Cash flows from financing activities:
     Net borrowings from notes payable under line of credit
        agreement                                                         3,000,000       7,506,180       1,993,820              -- 
     Payments on notes payable under line of credit agreement            (4,500,000)             --              --              -- 
     Proceeds from notes payable to affiliates                           15,618,272       4,600,000       6,600,000       3,052,912
     Payments on note payable to affiliate                                       --     (11,200,000)     (4,594,696)             -- 
     Net proceeds from sale of common stock                                      --       5,053,281              --              -- 
     Payments received on promissory notes issued in connection                  -- 
        with common stock                                                    40,086              --              --              -- 
     Principal payments on capital lease obligations                        (72,309)        (37,769)        (12,953)        (84,350)
                                                                       ------------    ------------    ------------    ------------

                    Net cash provided by financing activities            14,086,049       5,921,692       3,986,171       2,968,562
                                                                       ------------    ------------    ------------    ------------

Net increase (decrease) in cash                                            (314,736)        383,204         185,517          (1,138)

Cash and cash equivalents, beginning of period                              569,692         186,488             971           2,109
                                                                       ------------    ------------    ------------    ------------

Cash and cash equivalents, end of period                               $    254,956         569,692         186,488             971
                                                                       ============    ============    ============    ============

Supplemental disclosures of cash flow information:
     Cash paid for interest                                            $    568,812         687,626          72,258           3,996
                                                                       ============    ============    ============    ============

Supplemental disclosures of noncash investing and financing activities:
     In December 1996, the Company issued an additional  10,000 shares of common
        stock in conjunction with the asset purchase from Merit Microwave, Inc.
     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>

See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>

                              RADYNE COMSTREAM INC.

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997


(1)  Organization and Acquisition

     Radyne  Corp.,  a New York  corporation,  ("Radyne")  was  incorporated  on
     November  25,  1980.  On  August  12,  1996,  Radyne  became a  90.6%-owned
     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.

     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.  The Note is  convertible  into Radyne
     common stock under certain circumstances.  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 has been 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.

     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.

     In March 1999, Radyne changed its name to Radyne Comstream Inc.

     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.




                                      F-7
<PAGE>


     The  following  summary,  prepared  on a  pro  forma  basis,  combines  the
     consolidated  results of operations  (unaudited) as if the  acquisition had
     taken place on January 1, 1997.  Such pro forma amounts are not necessarily
     indicative of what the actual results of operations  might have been if the
     acquisition had been effective on January 1, 1997:

                                             Years ended December 31,
                                             ----------------------
                                               1998          1997
                                             ---------     --------
                                       (In thousands, except per share data)

     Net Sales                               $  50,965       69,369
                                             =========     ========

     Gross profit                            $  13,788       28,723
                                             =========     ========

     Net loss                                $ (19,497)      (6,826)
                                             =========     ========

     Net loss per common share               $   (3.29)       (1.36)
                                             =========     ========

(2)  Liquidity

     The Company has  incurred  significant  losses  from  operations  and has a
     stockholders'  accumulated  deficit of $20.9 million and a working  capital
     deficiency  of $8.8  million at  December  31,  1998 and has been unable to
     generate a positive  cash flow from  operations.  These matters raise doubt
     about the  Company's  ability to continue as a going  concern.  Stetsys Pte
     Ltd, the  Company's  majority  stockholder,  has  confirmed its ability and
     intent to provide such  working  capital as may be necessary to ensure that
     the  Company  will  continue to operate  for a  reasonable  period into the
     future.  Since  August  1996,  the  Company has been  dependent  on STPL to
     provide cash for  day-to-day  operations.  Management  believes  that, as a
     result of the  acquisition  of  Comstream  and the  resultant  increase  in
     revenues,  the  Company  can begin to  generate  profits.  Management  also
     believes  that  with the  rights  offering  (see  note 19)  expected  to be
     finalized in the second  quarter of 1999,  and through  additional  funding
     sources,  the  Company  will be a  viable  going  concern.  Therefore,  the
     accompanying  consolidated financial statements have been prepared assuming
     the Company will continue as a going concern.

(3)  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.

                                                                     (Continued)

                                      F-8
<PAGE>

     (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.

     (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)  Designs and Drawings

          Amortization   of  designs  and  drawings   was  computed   using  the
          straight-line  method over an  estimated  useful life of four to seven
          years.  During  1996,  the  Company  recognized  a design and  drawing
          impairment charge of $421,000,  with no associated tax benefit. 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.

     (h)  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.

     (i)  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.

                                                                     (Continued)


                                      F-9
<PAGE>


     (j)  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.

     (k)  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.

     (l)  Research and Development

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

     (m)  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.

     (n)  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.


                                                                     (Continued)

                                      F-10
<PAGE>

     (o)  Net Loss Per Common Share

          Basic loss per share is computed by dividing loss  available to common
          stockholders   by  the   weighted-average   number  of  common  shares
          outstanding  for the  period.  Diluted  loss per  share  reflects  the
          potential  dilution  that could occur if  securities  or  contracts to
          issue  common  stock were  exercised  or  converted to common stock or
          resulted  in the  issuance  of common  stock  that then  shared in the
          earnings or loss of the Company. Assumed exercise of outstanding stock
          options and  warrants  for all  periods  have been  excluded  from the
          calculations  of diluted net loss per common  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.

     (p)  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.

     (q)  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.

     (r)  Segment Reporting

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

     (s)  Reclassifications

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


                                                                     (Continued)

                                      F-11
<PAGE>

(4)  Inventories

     Inventories at December 31 consist of the following:

                                                1998              1997
                                            ------------      ------------

     Raw materials and components           $  6,065,751         2,605,397
     Work-in-process                           4,319,338         1,124,929
     Finished goods                              546,858         1,950,594
                                            ------------      ------------
                                              10,931,947         5,680,920
     Valuation allowance                      (1,551,469)         (291,000)
                                            ------------      ------------

                                            $  9,380,478         5,389,920
                                            ============      ============


(5)  Property and Equipment

     Property and equipment at December 31 consist of the following:

                                                         1998           1997
                                                     -----------    -----------

     Machinery and equipment                         $ 3,598,732      1,298,715
     Furniture and fixtures                            2,661,195        373,548
     Leasehold improvements                              312,425             --
                                                     -----------    -----------
                                                       6,572,352      1,672,263
     Less accumulated depreciation and amortization   (1,038,707)      (349,712)
                                                     -----------    -----------

     Property and equipment, net                     $ 5,533,645      1,322,551
                                                     ===========    ===========


(6)  Accrued Expenses

     Accrued expenses at December 31 consist of the following:

                                                       1998         1997
                                                    ----------   ----------

     Wages, vacation and related payroll taxes      $1,355,316      486,840
     Interest                                          803,929      183,968
     Professional fees                                 378,817       85,500
     Warranty reserve                                  679,964      105,000
     Severance                                       1,282,761           --
     Lease buyout (notes 9 and 15)                   2,443,110           --
     Other                                           2,196,444       39,724
                                                    ----------   ----------

     Total accrued expenses                         $9,140,341      901,032
                                                    ==========   ==========


                                                                     (Continued)


                                      F-12
<PAGE>


(7)  Notes Payable

     In 1997,  the Company had a note payable  under a line of credit  agreement
     with a  bank  that  permitted  outstanding  borrowings  of  $4,500,000.  At
     December 31, 1997,  outstanding borrowings against the line were $4,500,000
     plus accrued  interest.  In 1998,  the Company  repaid the note and accrued
     interest with proceeds from affiliated debt (note 16).

     The  Company  has a  $20,500,000  credit  agreement  with a  bank  expiring
     September  29, 1999.  STPL has issued a  nonbinding  letter of awareness in
     connection with this credit agreement.  Borrowings under the line of credit
     bear  interest at a  fluctuating  rate equal to LIBOR or the bank's  Quoted
     Rate plus 1 percent  per  annum  (6.125  percent  and 6.938  percent  as of
     December 31, 1998 and 1997,  respectively).  At December 31, 1998 and 1997,
     outstanding  borrowings  against the line were  $8,000,000 and  $5,000,000,
     respectively, plus accrued interest. This credit facility is an uncommitted
     line of credit which the bank may modify or cancel without prior notice. As
     of December 31, 1998,  the Company  violated  one debt  covenant  which was
     waived by the bank.

     In  connection  with the  purchase of  Comstream,  the  Company  executed a
     $7,000,000  note payable to the former owner of  Comstream.  The note bears
     interest  at a rate of 8.0 percent per annum and is payable in full on July
     15, 1999.  At any time prior to July 15,  1999,  the holder of the note has
     the option to convert 20% of the original  principal balance into shares of
     the  Company's  common stock and at any time after July 15, 1999,  prior to
     payment  in full,  the  holder of the note has the  option to  convert  the
     outstanding  balance into shares of the Company's common stock at $3.73 per
     share.

(8)  Obligations Under Capital Leases

     The Company leases  machinery and equipment under capital leases.  The cost
     and  accumulated  depreciation  of the equipment was $501,494 and $181,645,
     respectively,  at  December  31,  1998  and is  included  in  property  and
     equipment in the accompanying  balance sheets and is being depreciated over
     the estimated useful lives of the machinery and equipment.

     Payments on capital lease  obligations  due after  December 31, 1998 are as
     follows:

        1999                                                         $  131,807
        2000                                                             55,516
        2001                                                             37,498
        2002                                                              9,952
                                                                     ----------

        Total minimum lease payments                                    234,773
        Less amount representing interest at rates of 4.6% to 12.3%     (21,294)
                                                                     ----------

        Present value of minimum lease payments                         213,479
        Less current installments                                       124,891
                                                                     ----------

        Capital lease obligations due after one year                 $   88,588
                                                                     ==========



                                                                     (Continued)

                                      F-13
<PAGE>


(9)  Commitments

     Rent expense was approximately $517,853,  $94,000,  $44,000 and $95,000 for
     the years ended  December  31, 1998 and 1997,  the  six-month  period ended
     December 31, 1996, and the year ended June 30, 1996. Future minimum rentals
     under leases after December 31, 1998 are as follows:

          1999                              $  1,701,129
          2000                                 1,636,703
          2001                                 1,646,834
          2002                                 1,712,539
          2003                                 1,919,934
          Thereafter                           4,797,014
                                            ------------
                                            $ 13,414,153
                                            ============

     Prior to October 15, 1998,  Comstream  leased two  buildings  (of different
     size) from the same landlord.  As a result of the  acquisition of Comstream
     by Radyne, Radyne assumed the lease for the larger building.  Subsequent to
     October 15, 1998, and in an effort to reduce operating costs, management of
     the Company  negotiated  a buyout of that lease for  $2,000,000  plus other
     costs, including rent payments through March 1999, and executed a new lease
     for the smaller  second  building  leased by Comstream.  Additionally,  the
     Company negotiated a cost reimbursement of $1,265,000 from the former owner
     of Comstream.  The recovery is recorded as other  receivable as of December
     31, 1998. The $2,000,000  cash buyout is due in two equal  installments  of
     $1,000,000  on March 1, 1999 and  September 1, 1999.  At December 31, 1998,
     $2,443,000 of the costs are included in accrued expenses.

     The  Company   generally  has  commitments   with  certain   suppliers  and
     subcontract  manufacturers to purchase certain components and estimates its
     non-cancelable  obligations to be approximately $5,000,000 to $8,000,000 at
     any give time.

(10) Income Taxes

     Income tax expense amounted to $0 for the years ended December 31, 1998 and
     1997, the six-month  period ended December 31, 1996 and the year ended June
     30, 1996. The actual tax expense  (benefit) for these periods  differs from
     "expected" tax expense for those periods as follows:

<TABLE>
<CAPTION>
                                                                 Six-month
                                  Year ended     Year ended     period ended   Year ended
                                  December 31,   December 31,   December 31,    June 30,
                                     1998           1997           1996           1996
                                  -----------    -----------    -----------    -----------
<S>                               <C>               <C>            <C>            <C>      
Computed "expected" tax expense   $(4,803,000)      (597,000)      (704,000)      (893,000)
State tax benefit                    (541,000)       (64,000)       (75,000)       (95,000)
Change in valuation allowance       5,190,000        613,000        775,000        988,000
Other adjustments                     154,000         48,000          4,000             --
                                  -----------    -----------    -----------    -----------

         Total                    $        --             --             --             --
                                  ===========    ===========    ===========    ===========
</TABLE>


                                                                     (Continued)

                                      F-14
<PAGE>

     Deferred tax assets at December 31 consisted of the following:

                                                    1998            1997
                                                ------------    ------------

     Deferred tax assets:
       Cumulative tax effect of net operating
         loss carryforwards                     $  8,459,000       4,620,000
       Tax credits                                   155,000         210,000
       Temporary differences                       3,734,000        (107,000)
       Valuation allowance                       (12,348,000)     (4,723,000)
                                                ------------    ------------

                                                $         --              --
                                                ============    ============

     The net  change  in the  total  valuation  allowance  for the  years  ended
     December 31, 1998 and 1997 was  $7,625,000 and $613,000,  respectively.  At
     December 31, 1998,  the Company has net  operating  loss  carryforwards  of
     approximately  $22,608,000  expiring  in  various  years  through  2013 and
     general business credit carryforwards of $155,000 expiring in various years
     through 2004 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, 1998 and 1997.

(11) Significant Customers and Export Sales

     During 1998, no customers represented greater than 10 percent of net sales.
     During 1997, one customer  represented  14.5 percent of net sales.  For the
     six-month  period ended December 31, 1996, two customers  represented  15.6
     percent and 18.3 percent of net sales. During the year ended June 30, 1996,
     one customer represented 12.7 percent of net sales.

     Export sales were 50 percent,  55 percent, 66 percent and 50 percent of net
     sales for the years ended December 31, 1998 and 1997, the six-month  period
     ended  December 31, 1996,  and the year ended June 30, 1996,  respectively.
     Export sales are comprised of the following:

                                                      Six-month 
                          Year ended   Year ended    period ended   Year ended 
                         December 31,  December 31,  December 31,    June 30,
                             1998         1997           1996         1996
                          ----------   ----------    ------------   ---------- 
     Europe                   63%           13%           --            38%
     Latin America            18%           22%           37%           --
     Asia                     14%           58%           46%           46%
     Other                     5%            7%           17%           16%
                             ---           ---           ---           ---

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


     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   75%  of  1998  net  sales.
     Information concerning the breakout of sales by these two product lines for
     periods prior to 1998 is not available.


                                                                     (Continued)

                                      F-15
<PAGE>

(12) Loss Per Share

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

<TABLE>
<CAPTION>
                                                Years ended             Six-month        Year   
                                                December 31,           period ended     ended   
                                       -----------------------------   December 31,    June 30,
                                           1998             1997           1996          1996
                                       ------------     ------------   ------------   ----------
<S>                                    <C>                <C>            <C>          <C>        
     Income (loss) available to
         common stockholders           $(14,126,945)      (1,756,716)    (2,069,974)  (2,625,097)
                                       ============     ============   ============   ==========

     Basic EPS-weighted average
         shares outstanding               5,931,346        5,012,664      3,750,699    3,742,227
                                       ============     ============   ============   ==========

     Basic loss per share              $      (2.38)            (.35)          (.55)        (.70)
                                       ============     ============   ============   ==========

     Basic EPS-weighted average
         shares outstanding               5,931,346        5,012,664      3,750,699    3,742,227

     Effect of dilutive securities               --               --             --           --
                                       ------------     ------------   ------------   ----------

     Dilutive EPS-weighted average
         shares outstanding               5,931,346        5,012,664      3,750,699    3,742,227
                                       ============     ============   ============   ==========

     Diluted loss per share            $      (2.38)            (.35)          (.55)        (.70)
                                       ============     ============   ============   ==========

     Stock options not included in
         diluted EPS since
         antidilutive                       691,559          169,818         72,563           --
                                       ============     ============   ============   ==========
</TABLE>

(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  $31,690,
     $30,230, $8,576 and $11,606 for the years ended December 31, 1998 and 1997,
     the six-month  period ended  December 31, 1996, and the year ended June 30,
     1996,  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 $30,450 for the period October 15, 1998 through December
     31, 1998. Each participant

                                                                     (Continued)

                                      F-16
<PAGE>

     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 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.

     Rights  Offering - In November  1996,  the Board of Directors  approved the
     distribution   to   stockholders,   other  than  the  Company's   principal
     stockholder,  ST, of subscription  rights for the purchase of up to 215,833
     shares of the  Company's  common  stock at a price of $2.50 per share.  The
     Board of Directors further approved the distribution of subscription rights
     to an affiliate of ST to purchase up to 2,040,000  shares of the  Company's
     common  stock at a price of $2.50 per share.  This Rights  Offering  became
     effective on May 12, 1997 and was  concluded in June 1997.  ST's  affiliate
     exercised  1,976,000  of its rights and  individuals  associated  with such
     affiliate  exercised  another 34,000. An additional 51,525 rights issued to
     stockholders other than ST were exercised.  In a related offering under the
     Company's  Incentive  Stock Option Plan,  110,100  shares of the  Company's
     common stock were purchased by employees at $2.50 per share. Total proceeds
     received from the Rights  Offering were partially  offset by  approximately
     $336,000 of  associated  costs.  The  proceeds  from the  exercise of these
     rights were used, in part, to satisfy notes payable to affiliates  shown on
     the accompanying consolidated balance sheet at December 31, 1996.

     At December 31, 1997,  the Company had 690,665  options  outstanding  at an
     exercise price of $2.50 per share.  30,500 options were  exercisable at the
     rate of 25  percent on each of the first  four  anniversaries  of the grant
     date and expire on the tenth  anniversary  of the grant date. The remaining
     660,165  options  have been  allocated  among a group of 30 key  employees.
     These options carry the right to a cash bonus of $1.72 per purchased share,
     payable upon exercise.  These options became  exercisable,  if and when the
     Company's earnings before interest and taxes (calculated  without regard to
     any  charge  for  compensation  paid or  payable  under the Plan)  exceeded
     certain levels. In October 1998, as a result of the Comstream  acquisition,
     the  restrictions  were deemed  satisfied and the Company  accelerated  the
     vesting of these 660,165 options. The Company recorded compensation expense
     of $1,155,477 to account for the cash bonus associated with these options.

     At December 31, 1998,  the Company had  1,205,957  options  outstanding  at
     exercise prices ranging from $2.50 to $3.125 per share.


                                                                     (Continued)

                                      F-17
<PAGE>


     The  Company  applies  APB  Opinion  25 in  accounting  for its  Plan,  and
     accordingly, no compensation cost has been recognized for its stock options
     in the  consolidated  financial  statements.  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 loss and loss per share would
     have been reduced to the pro forma amounts indicated below:

                                                        December 31,
                                               ------------------------------
                                                    1998             1997
                                               --------------   -------------

     Net loss                 As reported      $ (14,126,945)   $ (1,756,716)
                              Pro forma        $ (14,883,359)   $ (2,028,121)
     Loss per Share-Basic     As reported      $       (2.38)   $       (.35)
                              Pro forma        $       (2.51)   $       (.40)
     Loss per Share-Diluted   As Reported      $       (2.38)   $       (.35)
                              Pro forma        $       (2.51)   $       (.40)


     The full impact of  calculating  compensation  cost for stock options under
     SFAS No. 123 is not  reflected in the pro forma net loss amounts  presented
     above  because  compensation  cost is reflected  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 105 percent -
     118 percent,  risk free interest rate of 6.125 percent - 5.87 percent,  and
     expected lives of five years.

     A summary of the aforementioned stock plan activity follows:

                                                                     Weighted
                                                                     Average
                                                                    Price Per
                                                    Number            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
                                                  ==========          =====


                                                                     (Continued)

                                      F-18
<PAGE>

     A summary of stock options granted at December 31, 1998 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         12/31/98          Contractual Life            Price            12/31/98            Price
          ---------------        -----------        ----------------          ---------        -----------          --------
<S>                                <C>                    <C>                 <C>                  <C>              <C> 
        $      2.50                  676,957              1 years                  2.50            591,957              2.50
        $      2.50                    6,500              2 years                  2.50              3,250              2.50
        $   2.50 to 3.125            522,500              3 years                  2.91            130,375              2.90
                                 -----------                                  ---------         ----------          --------

                                   1,205,957                                  $    2.82            725,582          $   2.57
                                 ===========                                  =========         ==========          ========
</TABLE>

(15) 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 technical,  sales and
     administrative  staff. The remaining $2,000,000 was comprised of $1,300,000
     for  the  lease  buyout  discussed  in  note 9 and  $700,000  of  leasehold
     improvements  that were  abandoned  upon  movement to a new building in San
     Diego,  California.  At December 31,  1998,  the  remaining  balance in the
     accrued expenses  related to the  restructuring  costs comprises  remaining
     termination benefits and costs associated with the lease buyout.

(16) Related Party Transactions

     Sales to a  subsidiary  of STPL for the years ended  December  31, 1998 and
     1997, the six-month  period ended December 31, 1996 and the year ended June
     30, 1996 were $50,000, $152,500, $307,300 and $311,600, respectively.

     Sales to Agilis Communication Technologies Pte Ltd ("Agilis"), an affiliate
     of ST, amounted to $65,000,  $540,000,  $375,000 and $118,900 for the years
     ended December 31, 1998 and 1997,  the six-month  period ended December 31,
     1996 and the year ended June 30, 1996, respectively.

     Prior to 1997,  a  former  majority  stockholder  of the  Company  provided
     management  services  to the  Company,  for which it  charged  the  Company
     $60,000 and $120,000 for the six-month  period ended  December 31, 1996 and
     the year ended June 30, 1996, respectively.

     Interest  expense on notes  payable to affiliates  was $581,000,  $148,000,
     $205,900 and $248,400 for the years ended  December 31, 1998 and 1997,  the
     six-month  period ended December 31, 1996 and the year ended June 30, 1996,
     respectively,  of which $581,000,  $0 and $152,400 were included in accrued
     expenses in the  accompanying  balance sheet as of December 31, 1998,  1997
     and 1996, respectively.

     During 1998, an ST affiliate  made loans of $5,618,272 to the Company.  The
     loans bear  interest at rates  ranging from 6.625  percent to 6.844 percent
     per annum with the  principal and accrued  interest due in March 2000.  The
     proceeds  of the  loans  were used in part by the  Company  to repay a note
     payable under a line of credit  agreement which was outstanding at December
     31, 1997 (note 7).

                                                                     (Continued)

                                      F-19
<PAGE>

     During August 1998 the Company  executed a note to ST for  $10,000,000  the
     proceeds of which were used for the purchase of Comstream.  This note bears
     interest at a rate of 6.375 percent per annum.  The note,  plus any accrued
     interest, is due March 31, 2000.

     The Company had notes  receivable  from  stockholders  totaling  $40,086 at
     December 31, 1997.  These notes had an interest  rate of 4 percent and were
     paid in June 1998.

(17) Contingencies

     The Internal  Revenue Service is currently  conducting  examinations of the
     Company with respect to income tax for the calendar year ended December 31,
     1995. The State of California Board of Equalization is currently conducting
     examinations  with  respect to personal  property tax and sales tax for the
     calendar years ended December 31, 1995, 1996 and 1997. The examinations are
     currently  in process  and  management  does not expect a material  adverse
     effect  on  the  financial  position  of the  Company  resulting  from  the
     resolutions of the examinations. Accordingly, no provision has been made in
     the accompanying consolidated financial statements for losses, if any, that
     might ultimately result from the examinations.

     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.

(18) Year 2000 Problem

     In 1998,  the Company  developed a plan to deal with the Year 2000 problem.
     The plan provides for the  conversion  efforts to be completed by September
     30, 1999.  The Year 2000 problem is the result of computer  programs  being
     written  using two digits rather than four to define the  applicable  year.
     The Company has identified all internal  mission critical systems and plans
     to begin remediation efforts,  consisting of system upgrades, in the second
     quarter of 1999. The Company has also  determined that its core products do
     not contain  date-sensitive  components;  however,  the Company  expects to
     begin communicating with its customers on the status of its products in the
     second  quarter of 1999.  Management  is currently  assessing 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.  The Company does not believe  expenditures  to be Year
     2000 compliant will cost in excess of $100,000,  and is expensing all costs
     associated with these systems  changes as the costs are incurred.  However,
     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  problems will not be material to the
     Company.

(19) Subsequent Events

     In January and February 1999, the Company had additional  draws on the line
     of credit  totaling  $1,500,000  at interest  rates  ranging  from 5.97% to
     6.06%.


                                                                     (Continued)

                                      F-20
<PAGE>

     In January  1999,  the  Company  filed a Form S-2 with the  Securities  and
     Exchange  Commission to register a rights  offering of 4,745,076  shares of
     common stock at a price of $3.73 per share. Each stockholder of record will
     be entitled to purchase  four shares of common  stock for every five shares
     currently owned.

(20) Quarterly Financial Data - Unaudited

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

<TABLE>
<CAPTION>
                                                    First        Second      Third      Fourth
                                                   Quarter       Quarter    Quarter     Quarter       Total
                                                   -------       -------    -------     -------       -----
<S>                                                <C>             <C>        <C>        <C>          <C>   
     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      13,788       18,255
                                                   =========      ======      =====     =======      =======
         Loss before interest expense              $    (312)     (1,529)      (357)    (10,754)     (12,952)
                                                   =========      ======      =====     =======      =======
               Net loss                            $    (490)     (1,727)      (550)    (11,360)     (14,127)
                                                   =========      ======      =====     =======      =======

     Basic loss per common share                   $    (.08)       (.29)      (.09)      (1.92)       (2.38)
                                                   =========      ======      =====     =======      =======
     Diluted loss per common share                 $    (.08)       (.29)      (.09)      (1.92)       (2.38)
                                                   =========      ======      =====     =======      =======

     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
                                                   =========      ======      =====     =======      =======
         Income (loss) before interest expense     $    (302)       (341)       248        (684)      (1,080)
                                                   =========      ======      =====     =======      =======
                 Net income (loss)                 $    (474)       (504)        86        (865)      (1,757)
                                                   =========      ======      =====     =======      =======

     Basic loss per common share                   $    (.13)       (.11)       .01        (.12)        (.35)
                                                   =========      ======      =====     =======      =======
     Diluted loss per common share                 $    (.13)       (.11)       .01        (.12)        (.35)
                                                   =========      ======      =====     =======      =======
</TABLE>


                                                                     (Continued)

                                      F-21
<PAGE>


                                Radyne Comstream
                 Schedule II - Valuation and Qualifying Accounts
      For the Years ended December 31, 1998 and 1997, the six-month period
                            ended December 31, 1996
                      And the year ended December 31, 1996


<TABLE>
<CAPTION>
                                       Balance at    Charged to     Charged to               Balance at
                                      Beginning of    costs and       other                    end of
                                        Period        expenses       accounts   Deductions     period
                                      -----------     ---------     ---------   ----------    ---------
<S>                                   <C>               <C>         <C>           <C>         <C>    
     Allowance for doubtful
     Receivables:

     Year ended December 31, 1998     $    15,000       155,000     462,815 *          --       632,815
                                      ===========     =========     =========     =======     =========

     Year ended December 31, 1997     $    13,000         2,000            --          --        15,000
                                      ===========     =========     =========     =======     =========

     Six-month period ended
          December 31, 1996           $    13,000            --            --          --        13,000
                                      ===========     =========     =========     =======     =========

     Year ended June 30, 1996         $    13,829            --            --         829        13,000
                                      ===========     =========     =========     =======     =========



     Reserve for obsolescence:

     Year ended December 31, 1998     $   291,000     1,260,469            --          --     1,551,469
                                      ===========     =========     =========     =======     =========

     Year ended December 31, 1997     $   486,000            --            --     195,000       291,000
                                      ===========     =========     =========     =======     =========

     Six-month period ended
          December 31, 1996           $    76,907       409,093            --          --       486,000
                                      ===========     =========     =========     =======     =========

     Year ended June 30, 1996         $                  76,907            --          --        76,907
                                      ===========     =========     =========     =======     =========
</TABLE>


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