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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



---



Form 10-Q



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended April 29, 2005



OR



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



For the transition period from
 to
.



Commission File Number 1-16541



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REMEC, INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                      
|-------------------------------------------------------------- |  | -------------------------------------
|California                                                     |  | 95-3814301                           
|(State of other jurisdiction of incorporation or organization) |  | I.R.S. Employer Identification Number
|                                                               | 
|3790 Via De La Valle, Suite 311 Del Mar, California            |  | 92014                                
|(Address of principal executive offices)                       |  | (Zip Code)                           



(858) 842-3000

(Registrants telephone number, including area code)



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



Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x     NO ̈



Indicate number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:



|                             |  |                                
|---------------------------- |  | -------------------------------
|Class                        |  | Outstanding as of: June 2, 2005
|Common Stock, $.01 par value |  | 27,990,517                     



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##### Table of Contents



REMEC, Inc.

Form 10-Q

For The Quarterly Period Ended April 29, 2005



Index



|               |  |                                                                                       |  |         
|-------------- |  | ------------------------------------------------------------------------------------- |  | --------
|               |  |                                                                                       |  | Page No.
|PART I         |  | FINANCIAL INFORMATION                                                                 |  |         
|               |  |                                                                                      
|Item 1.        |  | Financial Statements:                                                                 |  |         
|               |  |                                                                                      
|               |  | Condensed Consolidated Balance Sheets                                                 |  | 3       
|               |  |                                                                                      
|               |  | Condensed Consolidated Statements of Operations                                       |  | 4       
|               |  |                                                                                      
|               |  | Condensed Consolidated Statements of Cash Flows                                       |  | 5       
|               |  |                                                                                      
|               |  | Notes to Condensed Consolidated Financial Statements                                  |  | 6       
|               |  |                                                                                      
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 15      
|               |  |                                                                                      
|Item 3.        |  | Qualitative and Quantitative Disclosures About Market Risk                            |  | 22      
|               |  |                                                                                      
|Item 4.        |  | Controls and Procedures                                                               |  | 22      
|               |  |                                                                                      
|PART II        |  | OTHER INFORMATION                                                                     |  |         
|               |  |                                                                                      
|Item 1.        |  | Legal Proceedings                                                                     |  | 23      
|               |  |                                                                                      
|Item 6.        |  | Exhibits                                                                              |  | 23      
|               | 
|SIGNATURES     |  | 24                                                                                   
|               | 
|CERTIFICATIONS |  |                                                                                      
|               | 
|EXHIBITS       |  |                                                                                      
|               | 
|Exhibit 31.1   |  |                                                                                      
|Exhibit 31.2   |  |                                                                                      
|Exhibit 32.1   |  |                                                                                      



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PART I FINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------



REMEC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)



|                                                      |  |                |         |                          |   |        
|----------------------------------------------------- |  | -------------- | ------- | ------------------------ | - | -------
|                                                      |  | April 29, 2005 |         | Audited January 31, 2005
|ASSETS                                                |  |                |         |                          |   |        
|Current assets:                                       |  |                |         |                          |   |        
|Cash and cash equivalents                             |  | $              | 35,281  |                          | $ | 32,242 
|Short-term investments                                |  |                | 2,564   |                          |   | 4,531  
|Accounts receivable, net                              |  |                | 68,510  |                          |   | 60,501 
|Notes and other receivables                           |  |                | 13,704  |                          |   | 13,858 
|Inventories, net                                      |  |                | 64,998  |                          |   | 70,450 
|Other current assets                                  |  |                | 4,835   |                          |   | 5,224  
|                                                      |  |                |         |                          |   |        
|Total current assets                                  |  |                | 189,892 |                          |   | 186,806
|Property, plant and equipment, net                    |  |                | 69,473  |                          |   | 71,967 
|Restricted cash                                       |  |                |        |                          |   | 9,426  
|Goodwill                                              |  |                | 3,018   |                          |   | 3,018  
|Intangible assets, net                                |  |                | 2,400   |                          |   | 2,572  
|Other assets                                          |  |                | 1,128   |                          |   | 1,134  
|                                                      |  |                |         |                          |   |        
|Total assets                                          |  | $              | 265,911 |                          | $ | 274,923
|                                                      |  |                |         |                          |   |        
|LIABILITIES AND SHAREHOLDERS EQUITY                  |  |                |         |                          |   |        
|Current liabilities:                                  |  |                |         |                          |   |        
|Accounts payable                                      |  | $              | 48,580  |                          | $ | 53,252 
|Accrued expenses and other current liabilities        |  |                | 52,328  |                          |   | 54,554 
|                                                      |  |                |         |                          |   |        
|Total current liabilities                             |  |                | 100,908 |                          |   | 107,806
|Deferred income taxes and other long-term liabilities |  |                | 2,658   |                          |   | 2,612  
|Shareholders equity                                  |  |                | 162,345 |                          |   | 164,505
|                                                      |  |                |         |                          |   |        
|Total liabilities and shareholders equity            |  | $              | 265,911 |                          | $ | 274,923
|                                                      |  |                |         |                          |   |        



See accompanying notes.



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REMEC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share data)



|                                                                                   |  |                    |         |   |               |   |         |  
|---------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ------------- | - | ------- | -
|                                                                                   |  | Three months ended |        
|                                                                                   |  | April 29,2005      |         |   | April 30,2004 |  
|Net sales                                                                          |  | $                  | 112,106 |   |               | $ | 108,001 |  
|Cost of sales                                                                      |  |                    | 91,168  |   |               |   | 90,251  |  
|                                                                                   |  |                    |         |   |               |   |         |  
|Gross profit                                                                       |  |                    | 20,938  |   |               |   | 17,750  |  
|Operating expenses:                                                                |  |                    |         |   |               |   |         |  
|Selling, general and administrative                                                |  |                    | 14,587  |   |               |   | 12,828  |  
|Research and development                                                           |  |                    | 8,908   |   |               |   | 11,683  |  
|Restructuring (reversals)                                                          |  |                    |        |   |               |   | (107    | )
|                                                                                   |  |                    |         |   |               |   |         |  
|Total operating expenses                                                           |  |                    | 23,495  |   |               |   | 24,404  |  
|                                                                                   |  |                    |         |   |               |   |         |  
|Loss from continuing operations                                                    |  |                    | (2,557  | ) |               |   | (6,654  | )
|                                                                                   |  |                    |         |   |               |   |         |  
|Other expense:                                                                     |  |                    |         |   |               |   |         |  
|Other (expense), net and interest income                                           |  |                    | (745    | ) |               |   | (152    | )
|                                                                                   |  |                    |         |   |               |   |         |  
|Loss from continuing operations before income taxes                                |  |                    | (3,302  | ) |               |   | (6,806  | )
|Provision (credit) for income taxes                                                |  |                    | (18     | ) |               |   | 4       |  
|                                                                                   |  |                    |         |   |               |   |         |  
|Net loss from continuing operations                                                |  |                    | (3,284  | ) |               |   | (6,810  | )
|                                                                                   |  |                   
|Income (loss) from discontinued operations including disposals before income taxes |  |                    | 18      |   |               |   | (280    | )
|Income tax provision (credit) from discontinued operations                         |  |                    |        |   |               |   | 9       |  
|                                                                                   |  |                    |         |   |               |   |         |  
|Net income (loss) from discontinued operations, net of taxes                       |  |                    | 18      |   |               |   | (289    | )
|                                                                                   |  |                    |         |   |               |   |         |  
|Net loss                                                                           |  | $                  | (3,266  | ) |               | $ | (7,099  | )
|                                                                                   |  |                    |         |   |               |   |         |  
|Net loss per common share:                                                         |  |                    |         |   |               |   |         |  
|Net loss from continuing operations                                                |  | $                  | (0.12   | ) |               | $ | (0.25   | )
|Net loss from discontinued operations                                              |  |                    |        |   |               |   | (0.01   | )
|                                                                                   |  |                    |         |   |               |   |         |  
|Basic and diluted                                                                  |  | $                  | (0.12   | ) |               | $ | (0.26   | )
|                                                                                   |  |                    |         |   |               |   |         |  
|Shares used in computing net loss per common share*:                               |  |                    |         |   |               |   |         |  
|Basic and diluted                                                                  |  |                    | 27,892  |   |               |   | 27,551  |  
|                                                                                   |  |                    |         |   |               |   |         |  

---

|* | Basic weighted average shares are adjusted and reflect the effect of a 0.446 to 1 exchange resulting from the May 20, 2005 reclassification and redemption.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



See accompanying notes.



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REMEC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)



|                                                                            |  |                    |        |   |               |   |         |  
|--------------------------------------------------------------------------- |  | ------------------ | ------ | - | ------------- | - | ------- | -
|                                                                            |  | Three months ended |       
|                                                                            |  | April 29,2005      |        |   | April 30,2004 |  
|OPERATING ACTIVITIES                                                        |  |                    |        |   |               |   |         |  
|Net loss from continuing operations                                         |  | $                  | (3,284 | ) |               | $ | (6,810  | )
|Adjustments to reconcile net loss to net cash used by operating activities: |  |                    |        |   |               |   |         |  
|Depreciation and amortization                                               |  |                    | 4,665  |   |               |   | 4,806   |  
|Unrealized gain on foreign currency forward contract                        |  |                    | 214    |   |               |   | 2,459   |  
|Changes in operating assets and liabilities:                                |  |                    |        |   |               |   |         |  
|Accounts receivable and other receivables                                   |  |                    | (7,855 | ) |               |   | (10,090 | )
|Inventories                                                                 |  |                    | 5,452  |   |               |   | 4,229   |  
|Other current assets                                                        |  |                    | 389    |   |               |   | (3,051  | )
|Accounts payable                                                            |  |                    | (4,672 | ) |               |   | (11,532 | )
|Accrued expenses, deferred income taxes and other long-term liabilities     |  |                    | (1,198 | ) |               |   | (2,601  | )
|                                                                            |  |                    |        |   |               |   |         |  
|Net cash used by operating activities                                       |  |                    | (6,289 | ) |               |   | (22,590 | )
|                                                                            |  |                   
|INVESTING ACTIVITIES                                                        |  |                    |        |   |               |   |         |  
|Additions to property, plant and equipment                                  |  |                    | (1,999 | ) |               |   | (4,461  | )
|Release of restricted cash                                                  |  |                    | 9,426  |   |               |   | (2      | )
|Proceeds from sale of property, plant and equipment                         |  |                    |       |   |               |   | 3,979   |  
|Short-term investments, net                                                 |  |                    | 1,984  |   |               |   | (3,877  | )
|Other assets                                                                |  |                    | 6      |   |               |   | 487     |  
|                                                                            |  |                    |        |   |               |   |         |  
|Net cash provided (used) by investing activities                            |  |                    | 9,417  |   |               |   | (3,874  | )
|                                                                            |  |                   
|FINANCING ACTIVITIES                                                        |  |                    |        |   |               |   |         |  
|Payments on short term notes payable                                        |  |                    | (982   | ) |               |   |        |  
|Proceeds from issuance of long-term debt                                    |  |                    |       |   |               |   | 321     |  
|Proceeds from sale of common stock                                          |  |                    | 871    |   |               |   | 1,095   |  
|                                                                            |  |                    |        |   |               |   |         |  
|Net cash provided by (used in) financing activities                         |  |                    | (111   | ) |               |   | 1,416   |  
|Increase (decrease) in cash from continuing operations                      |  |                    | 3,017  |   |               |   | (25,048 | )
|Net cash provided by discontinued operations                                |  |                    | 18     |   |               |   | 2,142   |  
|Effect of exchange rate changes on cash                                     |  |                    | 4      |   |               |   | (1,664  | )
|                                                                            |  |                    |        |   |               |   |         |  
|Increase (decrease) in cash and cash equivalents                            |  |                    | 3,039  |   |               |   | (24,570 | )
|Cash and cash equivalents at beginning of period                            |  |                    | 32,242 |   |               |   | 44,628  |  
|                                                                            |  |                    |        |   |               |   |         |  
|Cash and cash equivalents at end of period                                  |  | $                  | 35,281 |   |               | $ | 20,058  |  
|                                                                            |  |                    |        |   |               |   |         |  



See accompanying notes.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



1. Quarterly Financial Statements



The interim condensed consolidated financial statements included herein have been prepared
by REMEC, Inc. (the Company or REMEC) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and footnote disclosures, normally included in
annual financial statements, have been condensed or omitted pursuant to such SEC rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for
the year ended January 31, 2005, included in REMECs Annual Report on Form 10-K/A. In the opinion of management, the condensed consolidated financial statements included herein reflect all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the consolidated financial position of REMEC as of April 29, 2005, and the results of its operations for the three month periods ended April 29, 2005 and April 30, 2004. The results of operations for the
interim period ended April 29, 2005, are not necessarily indicative of the results, which may be reported for any other interim period or for the entire fiscal year.



The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This basis of
accounting contemplates the recovery of the Companys assets and the satisfaction of its liabilities in the normal course of conducting business. During the fiscal year 2005, the Company engaged financial advisors to evaluate alternative
strategies to provide the best value to shareholders, including the disposal of all or a portion of our business units. Further, as detailed in REMECs Annual Report on Form 10-K/A for the year ending January 31, 2005, we entered into an
agreement to sell our Defense & Space group to Chelton Microwave for $260 million cash. Our shareholders approved the transaction on May 18, 2005 and the sale closed on May 20, 2005. Since this transaction required shareholder approval, and it
was not received as of April 29, 2005, Defense & Space was still reported as Continuing Operations. In March 2005, we entered into a definitive agreement to sell selected assets and liabilities of our Wireless Systems business to Powerwave
Technologies, Inc. for 10 million shares of Powerwave common stock and $40 million in cash. Based on Powerwaves closing price on Friday, March 11, 2005, the transaction value is approximately $120 million. The proposed transaction requires
shareholder approval (which has not been obtained as of the filing of this Form 10-Q). Although we will retain certain assets of our Wireless Systems business (namely, the ODU/Transceiver product line and the manufacturing services business), the
completion of this transaction, if approved by our shareholders, will result in REMEC divesting the majority of its operating assets and liabilities.



Consequently, if the sale of Wireless Systems is approved and consummated, the Companys financial and operational viability will become increasingly uncertain. As a
result, in connection with seeking shareholder approval of the aforementioned transaction, the Board of Directors intends to ask Company shareholders to approve and adopt a plan of liquidation, which would be intended to allow for the orderly
disposition of the Companys remaining assets and businesses.



If
shareholders do not approve the proposed sale of the Wireless Systems assets to Powerwave, it is possible that the Company may require additional sources of financing. These additional sources of financing may include bank borrowings or public or
private offerings of equity or debt securities. No assurance can be given that such additional sources of financing will be available on acceptable terms, if at all.



2. Earnings Per Share



The Company calculates net loss per share in accordance with SFAS No. 128, Earnings per Share. Basic net loss per share is computed using the weighted average
shares outstanding for each period presented. The diluted net loss per share is computed using the weighted average shares outstanding plus potentially dilutive common shares using the treasury stock method at the average market price during the
reporting period. As the Company has incurred net losses for all reporting periods presented, there is no difference between basic and diluted net loss per share.



Dilutive securities may include options, warrants, and preferred stock as if converted and restricted stock subject to vesting. Potentially
dilutive securities (which include options) totaling 128,000 and 45,000 shares for the three months ended April 29, 2005 and April 30, 2004, respectively, were excluded from the calculation of loss per share because of their anti-dilutive effect.



Subsequent to April 29, 2005, the Company completed the reclassification of
its common stock to allow for the distribution of proceeds from the proposed merger sale of REMEC Defense & Space Group. Pursuant to the reclassification, which was approved by the shareholders on May 18, 2005, effective May 20, 2005, each share
of its existing common stock converted into a fractional share of common stock, which entitled the shareholder to voting rights and participation in earnings of the Company, and one share of redemption stock, which was automatically redeemed by the
Company. As a result of the reclassification and redemption, each holder of one share of REMECs existing common stock at the close of trading on the Nasdaq National Market on May 20, 2005 was entitled to receive 0.446 of a new share of common
stock (plus $2.80 per share in cash for the redemption share). The reclassification and redemption resulted in a substantial decrease in the number of outstanding shares and thus is reflected retroactively in our per share calculations for all
periods presented.



The net loss per share calculation is based on the weighted
average shares outstanding adjusted as if the reclassification completed on May 20, 2005 (See Note 12) had occurred at the beginning of the periods presented and all common shares outstanding were exchanged at a ratio of 0.446 to 1:



|                                        |  |                      |  |                      |  |            |  |                 
|--------------------------------------- |  | -------------------- |  | -------------------- |  | ---------- |  | ----------------
|                                        |  | As of April 29, 2005 |  | As of April 30, 2004
|                                        |  | Actual               |  | Weighted Average     |  | Actual     |  | Weighted Average
|Number of Common Shares Outstanding     |  | 62,623,046           |  | 62,537,506           |  | 61,928,235 |  | 61,774,151      
|Multiply by 0.446 Conversion factor     |  | 0.446                |  | 0.446                |  | 0.446      |  | 0.446           
|                                        |  |                      |  |                      |  |            |  |                 
|New Number of Common Shares Outstanding |  | 27,929,879           |  | 27,891,728           |  | 27,619,993 |  | 27,551,271      
|                                        |  |                      |  |                      |  |            |  |                 



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3. Shareholders Equity



Stock-Based Compensation



In December 2002, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 148,Accounting for Stock-Based Compensation-Transition and
Disclosure, which (i) amended SFAS No. 123,Accounting for Stock-Based Compensation to add two new transitional approaches when changing from the Accounting Principles Board (APB) Opinion No. 25,Accounting for Stock Issued
to Employees intrinsic value method of accounting for stock-based employee compensation to the SFAS No. 123 fair value method and (ii) amends APB Opinion No. 28,Interim Financial Reporting to call for disclosure of SFAS No. 123 pro forma
information on a quarterly basis. The Company has elected to adopt the disclosure only provisions of SFAS No. 148 and will continue to follow APB Opinion No. 25 and related interpretations in accounting for the stock options granted to its employees
and directors. Accordingly, employee and director compensation expense is recognized only for those options whose price is less than fair market value at the measurement date.



Pro forma information regarding net loss and net loss per share is required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that statement. The pro forma effects of stock-based compensation on net income (loss) and net earnings (loss) per common share have been estimated at the date of grant using
the Black-Scholes option pricing model based on the following weighted average assumptions for the three months ended April 29, 2005 and April 30, 2004: risk-free interest rates of 4% and 4%, respectively, dividend yields of 0%, expected volatility
of 81.4% and 83.7%, respectively, and a weighted average expected life of the option of four and five years, respectively. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no
vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Companys employee stock options and rights
under the employee stock purchase plan have characteristics significantly different from those of traded options, and because changes in the subjective assumptions can materially affect the fair value estimate, in managements opinion, the
existing models do not necessarily provide a reliable single measure of the fair market value of its employee stock options or the rights granted under the employee stock purchase plan.



The following is a summary of the pro forma effects on reported net loss and loss per share for the periods indicated as if the Company had
elected to recognize compensation expense based on the fair value of the options at their grant date as prescribed by SFAS No. 123. For purposes of the pro forma disclosures, the estimated fair value of the options and the shares granted under the
employee stock purchase plan is amortized to expense over their respective vesting or option periods.



Pro forma information is as follows (in 000s, except per share data):



|                                                                                                                                       |  |                    |        |   |               |   |        |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ------------- | - | ------ | -
|                                                                                                                                       |  | Three Months Ended |       
|                                                                                                                                       |  | April 29,2005      |        |   | April 30,2004 |  
|Net loss applicable to common shareholders:                                                                                            |  |                    |        |   |               |   |        |  
|As reported                                                                                                                            |  | $                  | (3,266 | ) |               | $ | (7,099 | )
|Deduct: Stock-based employee compensation expense determined under fair value based method, for all awards, net of related tax
effects |  |                    | (334   | ) |               |   | (317   | )
|                                                                                                                                       |  |                    |        |   |               |   |        |  
|Pro forma                                                                                                                              |  | $                  | (3,600 | ) |               | $ | (7,416 | )
|                                                                                                                                       |  |                    |        |   |               |   |        |  
|Net loss per share:                                                                                                                    |  |                    |        |   |               |   |        |  
|As reported                                                                                                                           |  |                    |        |   |               |   |        |  
|Basic and diluted                                                                                                                      |  | $                  | (0.12  | ) |               | $ | (0.26  | )
|Pro forma                                                                                                                             |  |                    |        |   |               |   |        |  
|Basic and diluted                                                                                                                      |  | $                  | (0.13  | ) |               | $ | (0.27  | )



Stock Options Exercised



During the first quarter of fiscal year 2006, the Company issued a total
of 65,885 shares of common stock (147,725 old shares adjusted by the reclassification and redemption factor of 0.446) upon exercise of stock options by employees. Total proceeds received were $0.4 million.



4. Short-term investments



Statement of Financial Accounting Standards (SFAS) No. 115,Accounting for
Certain Investments in Debt and Equity Securities requires companies to record certain debt and equity security investments at market value. Investments with maturities greater than three months are classified as short-term investments. All of
the Companys short-term investments are classified as available-for-sale and are reported at fair value with any material unrealized gains and losses, net of tax, recorded as a separate component of accumulated other comprehensive income
(loss) within shareholders equity. The Company manages its cash equivalents and short-term investments as a single portfolio of highly marketable securities, all of which are intended to be available for the Companys current operations.
The carrying value of these securities approximates their fair value due to the short maturities of these instruments. As of April 29, 2005 and January 31, 2005, the Company had short-term investments of $2.6 million and $4.5 million, respectively.
Gross realized and unrealized losses on short-term investments were not significant in either of the periods ended April 29, 2005 and April 30, 2004.



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5. Inventories, net



Inventories, net consist of the following (in 000s):



|                 |  |                |        |                  |   |         |     |  |       |        |          |   |        |     |   |         |   |  |   |       
|---------------- |  | -------------- | ------ | ---------------- | - | ------- | --- |  | ----- | ------ | -------- | - | ------ | --- | - | ------- | - |  | - | ------
|                 |  | April 29, 2005 |        | January 31, 2005
|                 |  | Gross          |        | Reserves         |   |         | Net |  | Gross |        | Reserves |   |        | Net
|Raw materials    |  | $              | 55,731 |                  | $ | (12,440 | )   |  | $     | 43,291 |          | $ | 56,153 |     | $ | (13,716 | ) |  | $ | 42,437
|Work in progress |  |                | 15,334 |                  |   |        |     |  |       | 15,334 |          |   | 14,176 |     |   |        |   |  |   | 14,176
|Finished goods   |  |                | 11,703 |                  |   | (5,330  | )   |  |       | 6,373  |          |   | 20,930 |     |   | (7,093  | ) |  |   | 13,837
|                 |  |                |        |                  |   |         |     |  |       |        |          |   |        |     |   |         |   |  |   |       
|                 |  | $              | 82,768 |                  | $ | (17,770 | )   |  | $     | 64,998 |          | $ | 91,259 |     | $ | (20,809 | ) |  | $ | 70,450
|                 |  |                |        |                  |   |         |     |  |       |        |          |   |        |     |   |         |   |  |   |       



REMEC had a reserve for excess and
obsolete inventory of $13.1 million and $15.1 million as of April 29, 2005 and January 31, 2005 respectively. The Company also had additional reserves for anticipated contract losses of $4.7 million and $5.7 million as of April 29, 2005 and January
31, 2005, respectively.



6. Restricted Cash



Restricted cash was zero as of April 29, 2005 compared to $9.4 million at January 31, 2005.
During the first quarter of fiscal year 2006, we paid $8.1 million related to timing differences in our receivable factoring agreement, $0.7 million of cash received by us that was due to Spectrum Controls, Inc., the buyer of our Components product
line, and $0.6 million was money released from escrow previously held as security for a letter of credit.



7. Commitments and Contingencies



Bank Revolving Line of Credit Facility



On July 6, 2004, the
Company extended the term of its existing revolving working capital line of credit with its senior lender to July 5, 2005 and increased the maximum amount of the credit facility to $30 million. The borrowing rate under this credit facility is based
on prime plus 1% with prime being defined as the banks most recently announced per annum prime rate. As of April 29, 2005 the Company has not had any borrowings under this credit facility; however $8.4 million has been used under
letter of credit arrangements, $1.8 million for banking cash management products, $1.3 million has been utilized in connection with foreign currency forward contracts and $18.5 million is used to increase our factoring line. The credit facility is
secured by the Companys domestic trade receivables and inventory and matures July 2005. As of April 29, 2005 the Company was in compliance with the financial covenants contained in this credit facility. The facility is also subject to a
Material Adverse Change clause whereby the bank can subjectively determine that the Company is in default under the credit agreement. The Material Adverse Change is defined as if there (i) occurs a material adverse change in the
business operations, or condition (financial or otherwise) of the Borrower; or (ii) is a material impairment of the prospect of repayment of any portion of the Obligations; or (iii) is a material impairment of the value or priority of Banks
security interests in the Collateral. As of April 29, 2005, Management is not aware of any Material Adverse Change.



Factoring Arrangements



In fiscal year 2004, the Company entered into a factoring arrangement whereby certain of its receivables were sold on a pre-approved, non-recourse basis except in the event of dispute or claim as to price, terms,
quality, material workmanship, quantity or delivery of merchandise. Pursuant to the terms of the arrangement, receivables are sold, net of factoring fees and commissions and net of any credits or discounts available to the Companys customers.
Approximately 27% and 29% of accounts receivable were factored at April 29, 2005 and January 31, 2005, respectively. The Company had $8.1 million of advances from the factor outstanding at January 31, 2005 and no advances as of April 29, 2005. In
compliance with SFAS No. 140 and the terms of the arrangement, proceeds are collected from the financial institution and the receivables are removed from the balance sheet.



In fiscal year 2005, the factoring arrangement limit was increased from $15 million to $25 million, with all other terms and conditions
remaining the same. Late in fiscal year 2005, a foreign subsidiary of the Company entered into a 6 million Euro factoring arrangement whereby certain of its receivables are sold on a pre-approved, non-recourse basis except in the event of dispute or
claim as to price, terms, quality, material, workmanship, quantity or delivery of merchandise. Pursuant to the terms of the arrangement, receivables are sold, net of factoring fees and commissions and net of any credits or discounts available to the
Companys customers. There were no factorings under this facility as of April 29, 2005.



Leases



The Company leases certain
offices and production facilities under non-cancelable agreements classified as operating leases. Certain of these lease agreements include renewal options. At April 29, 2005, future minimum payments under these operating leases were as follows (in
000s):



|                             |  |                 |       
|---------------------------- |  | --------------- | ------
|                             |  | OperatingLeases
|Fiscal 2006                  |  | $               | 7,493 
|Fiscal 2007                  |  |                 | 9,850 
|Fiscal 2008                  |  |                 | 8,900 
|Fiscal 2009                  |  |                 | 8,173 
|Fiscal 2010                  |  |                 | 7,941 
|Thereafter                   |  |                 | 38,983
|                             |  |                 |       
|Total minimum lease payments |  | $               | 81,340
|                             |  |                 |       



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Capital Leases



The Company leases certain machinery and equipment under non-cancelable agreements classified as capital leases. At the end of these agreements, the Company either owns
or can purchase the equipment for $1.00.



The following is a schedule by years
of future minimum lease payments under capital leases together with the present value of the net minimum less payments as of April 29, 2005 (in 000s):



|                                            |  |               |       |  
|------------------------------------------- |  | ------------- | ----- | -
|                                            |  | CapitalLeases |      
|Fiscal 2006                                 |  | $             | 2,154 |  
|Fiscal 2007                                 |  |               | 795   |  
|Fiscal 2008                                 |  |               | 185   |  
|Fiscal 2009                                 |  |               |      |  
|Fiscal 2010                                 |  |               |      |  
|Thereafter                                  |  |               |      |  
|                                            |  |               |       |  
|Total minimum capital lease payments        |  | $             | 3,134 |  
|                                            |  |               |       |  
|Less: Amount representing interest          |  |               | (8    | )
|                                            |  |               |       |  
|Present value of net minimum lease payments |  | $             | 3,126 |  
|                                            |  |               |       |  



Sale-Leaseback Transaction



In January 2002, the Company completed a sale-leaseback transaction of
its Escondido, California facility resulting in a $0.6 million gain on the transaction. Effective upon the closing of the sale, the Company leased the building back from the buyer. The Company deferred the $0.6 million gain and is amortizing it over
the term of the lease. The new lease term provided for a 5-year lease with monthly lease payments totaling approximately $15,000. Under the terms of the lease beginning March 2002, each March thereafter the monthly rent is increased by 3%.



In April 2003, the Company completed a sale-leaseback transaction of its
Kearny Mesa (San Diego), California business campus, resulting in a $0.9 million gain on the transaction. Effective upon the closing of the sale, the Company leased the entire campus back from the buyer. The Company deferred the $0.9 million gain
and is amortizing it over the terms of the leases. The new lease terms provide for a 14-year lease on each of the four buildings with monthly lease payments totaling approximately $165,000. Under the terms of the leases, beginning August 2003 and
each August thereafter, the monthly rent is adjusted based upon a CPI index factor. In place of a security deposit on the properties, the Company provided letters of credit aggregating $3.3 million. The initial term of the letters of credit was two
years with automatic annual renewals thereafter. The amount of the letters of credit may be reduced upon achievement of certain financial performance criteria. The letters of credit are backed by the Companys revolving working capital line of
credit.



Warranty



Warranty reserves are established for costs that are expected to be incurred after the sale
and delivery of a product or service for deficiencies under specific product or service warranty provisions. The warranty reserves are determined as a percentage of revenues based on the actual trend of historical charges incurred over various
periods, excluding any significant or infrequent issues that are specifically identified and reserved.



The following table summarizes the activity related to warranty reserves (000s):



|                                       |  |                    |       |   |               |   |       |  
|-------------------------------------- |  | ------------------ | ----- | - | ------------- | - | ----- | -
|                                       |  | Three months ended |      
|                                       |  | April 29,2005      |       |   | April 30,2004 |  
|Balance at beginning of period         |  | $                  | 8,847 |   |               | $ | 8,565 |  
|Additions to reserve                   |  |                    | 1,080 |   |               |   |      |  
|Usage and release of warranty reserves |  |                    | (692  | ) |               |   | (700  | )
|                                       |  |                    |       |   |               |   |       |  
|Balance at end of period               |  | $                  | 9,235 |   |               | $ | 7,865 |  
|                                       |  |                    |       |   |               |   |       |  



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Indemnifications and Guarantees



Effective January 1, 2003, the recognition provisions of FASB Interpretation No. 45 (FIN 45),Guarantors Accounting and Disclosure
Requirements for Guarantees Including Indirect Guarantees of Others, were adopted, which expands previously issued accounting guidance for certain guarantees. Indemnifications issued or modified during the three months ended April 29, 2005 did
not have a material effect on the consolidated financial statements. A description of the Companys indemnifications and guarantees as of April 29, 2005 is provided below. The Company is unable to reasonably estimate the maximum amount that
could be payable under these arrangements due to the conditional nature of the Companys obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made under these agreements have not had a
material effect on the Companys business, financial condition or results of operations other than certain guaranteed payments made in connection with the customer financing arrangements discussed below.



The Company often designs, develops and manufactures standard off-the-shelf
products and may provide the customer with an indemnification against any liability arising from third-party claims of patent, copyright or trademark infringement based upon the design or manufacturing of such products. The Company cannot determine
the maximum amount of losses that it could incur under this type of indemnification because it often may not have enough information about the nature and scope of an infringement claim until it has been submitted to the Company and, to date, no
claims have been made.



The Company indemnifies its directors and certain of
its current and former officers against third party claims against them in their capacity as directors or officers. Certain of the costs incurred for providing such indemnification may be recovered under various insurance policies.



The Company has guaranteed the performance of two of its wholly-owned subsidiaries under a
bank agreement to purchase accounts receivable from the subsidiary. This guarantee provides that if the customer does not pay the accounts receivable due to the subsidiarys failure to perform the underlying contract, the Company guarantees
that its subsidiary will repay the funds received from the bank. There have been no uncollected accounts receivable to date and none are anticipated. The total amount of the potential obligation at April 29, 2005 is $25.1 million. Management
believes that the likelihood of a payment associated with this guarantee is remote as the failure of the customer to make their required payments to the Company would be a breach of the underlying contract and would subject them to a claim for
damages from the Company.



Litigation



The Companys commitment and contingencies include claims and litigation in the normal
course of business. In the opinion of management, based in part on outside counsel, these matters are not expected to have a material adverse effect on the Companys results of operations and financial position.



On September 29, 2004, three class action lawsuits were filed against the Company and current
and former officers in the United States District Court for the Southern District of California alleging violations of federal securities laws between September 8, 2003 and September 8, 2004 (the Class Period). On January 18, 2005, the
law firm of Milberg Weiss Bershad & Schulman LLP (Milberg Weiss) was appointed Lead Counsel and its client was appointed Lead Plaintiff.



On March 10, 2005, Milberg Weiss filed a Consolidated and Amended Complaint (the Complaint) naming the Company, a former officer and a current officer as
defendants (Defendants). The Consolidated and Amended Complaint asserts, among other things, that during the Class Period, the Defendants made false and misleading statements and failed to disclose material information regarding the
Companys operations and future prospects. The Complaint seeks unspecified damages and legal expenses. On April 19, 2005, REMEC filed a Motion to Dismiss the Consolidated Amended Complaint. REMEC believes that the lawsuit is without merit and
intends to defend against it vigorously.



On November 16, 2004, a civil
complaint was filed in San Diego Superior Court by Cardinal Health 301, Inc. (formerly known as Pyxis Corporation) (Cardinal) against Tyco Electronics Corporation, Thomas & Betts Corporation and the Company alleging breach of
contract and breach of express and implied warranties with regard to certain products sold by the Companys electronic manufacturing services business unit to Pyxis that incorporated allegedly defective components from Tyco and Thomas &
Betts (the Cardinal Complaint).



On March 18, 2005, the court
granted the Companys demurrer to the Cardinal Complaint, allowing Cardinal an opportunity to amend its complaint, which it has done. Cardinals amended complaint includes the previous claims plus adds a claim for breach of the covenant of
good faith and fair dealing. Cardinals amended complaint seeks seven million dollars in damages plus legal expenses. The Companys response to the amended Cardinal Complaint, denying Cardinals claims and asserting a number of
defenses, was filed on April 7, 2005. REMEC believes the lawsuit is without merit and intends to vigorously defend itself in this matter.



Other than the two lawsuits described above, neither REMEC nor any of its subsidiaries is presently subject to any material litigation, nor to REMECs knowledge, is
such litigation threatened against REMEC or its subsidiaries, other than routine actions and administrative proceedings arising in the ordinary course of business, all of which collectively are not anticipated to have a material adverse effect on
the business or financial condition of REMEC.



Environmental Matters



We follow the policy of monitoring our properties for the presence of
hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist, we are not currently aware of any environmental liability with respect to our properties that would have a material effect on our
financial condition, results of operations and cash flows. Further, we are not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure
or the recording of a loss contingency.



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8. Comprehensive Income (Loss)



Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from
non-owner sources. Net income (loss) and other comprehensive income (loss), including foreign currency translation adjustments and unrealized gains and losses on investments, shall be reported, net of their related tax effect, to arrive at
comprehensive income (loss).



The components of comprehensive loss, net of tax,
are as follows (in 000s):



|                                                             |  |                    |        |   |               |   |        |  
|------------------------------------------------------------ |  | ------------------ | ------ | - | ------------- | - | ------ | -
|                                                             |  | Three Months Ended |       
|                                                             |  | April 29,2005      |        |   | April 30,2004 |  
|Net loss from continuing operations                          |  | $                  | (3,284 | ) |               | $ | (6,810 | )
|Net income (loss) from discontinued operations               |  |                    | 18     |   |               |   | (289   | )
|                                                             |  |                    |        |   |               |   |        |  
|Net loss                                                     |  | $                  | (3,266 | ) |               | $ | (7,099 | )
|Change in net unrealized gain (loss) on investment           |  |                    | 17     |   |               |   | (368   | )
|Change in cumulative foreign currency translation adjustment |  |                    | 4      |   |               |   | (1,664 | )
|Change in unrealized gain on foreign currency hedge          |  |                    | 214    |   |               |   | 2,459  |  
|                                                             |  |                    |        |   |               |   |        |  
|Comprehensive loss                                           |  | $                  | (3,031 | ) |               | $ | (6,672 | )
|                                                             |  |                    |        |   |               |   |        |  



9. Discontinued Operations



In accordance with SFAS No. 144, the Company accounts for the results of
operations of a component of an entity that has been disposed or that meets all of the held for sale criteria, as discontinued operations, if the components operations and cash flows have been (or will be) eliminated from the
ongoing operations of the entity as a result of the disposal transaction and the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction. The held for sale
classification requires having the appropriate approvals by our management, Board of Directors and shareholders, as applicable, and meeting other criteria. When all of these criteria are met, the component is then classified as held for
sale and its operations reported as discontinued operations.



At April
29, 2005, the following divestments consisting of the Components product line, the China Network Optimization product line, and Nanowave have been reclassified as discontinued operations.



At April 29, 2005, the Companys Defense and Space group and its Wireless Systems assets do not meet all of the held for
sale criteria and are therefore not classified as discontinued operations. The disposal of these two components was contingent upon obtaining approval of the Companys shareholders which was not obtained by April 29, 2005.



At April 29, 2005, the Companys ODU/Transceiver and manufacturing services assets do
not meet all of the held for sale criteria and are therefore not classified as discontinued operations. Although management has been authorized to seek buyers, the businesses are available for immediate sale, and they are being marketed,
the sale is not probable and may not be completed within one year.



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##### Table of Contents

Discontinued operations reported in the first quarter of fiscal 2006 was $33,000 of income for the earnout on the
Components product line sale, and $15,000 of additional legal expenses associated with the China Network Optimization product line sale.



Discontinued operations for the quarter ended April 30, 2004 were as follows:



|                                                                        |  |                |        |   |            |   |        |       |  |   |        |   |  |   |        |  
|----------------------------------------------------------------------- |  | -------------- | ------ | - | ---------- | - | ------ | ----- |  | - | ------ | - |  | - | ------ | -
|Operating Results Data                                                  |  | Nanowave       |        |   | Components |   |        | China |  |   | Total  |  
|                                                                        |  | (in thousands) |       
|Revenues                                                                |  | $              | 2,056  |   |            | $ | 4,233  |       |  | $ | 1,933  |   |  | $ | 8,222  |  
|Costs and expenses                                                      |  |                | (1,703 | ) |            |   | (4,432 | )     |  |   | (2,299 | ) |  |   | (8,434 | )
|Interest and debt expense                                               |  |                | (68    | ) |            |   |       |       |  |   |       |   |  |   | (68    | )
|                                                                        |  |                |        |   |            |   |        |       |  |   |        |   |  |   |        |  
|Income (loss) before income taxes                                       |  |                | 285    |   |            |   | (199   | )     |  |   | (366   | ) |  |   | (280   | )
|Provision (credit) for income taxes                                     |  |                | 9      |   |            |   |       |       |  |   |       |   |  |   | 9      |  
|                                                                        |  |                |        |   |            |   |        |       |  |   |        |   |  |   |        |  
|Income (loss) from discontinued operations, net of income taxes         |  | $              | 276    |   |            | $ | (199   | )     |  | $ | (366   | ) |  | $ | (289   | )
|                                                                        |  |                |        |   |            |   |        |       |  |   |        |   |  |   |        |  
|Gain/(loss) on disposal of discontinued operations, net of income taxes |  |                |       |   |            |   |       |       |  |   |       |   |  |   |       |  
|                                                                        |  |                |        |   |            |   |        |       |  |   |        |   |  |   |        |  
|Net income (loss) from discontinued operations, net of income taxes     |  | $              | 276    |   |            | $ | (199   | )     |  | $ | (366   | ) |  | $ | (289   | )
|                                                                        |  |                |        |   |            |   |        |       |  |   |        |   |  |   |        |  



10. Information by Segment and
Geographic Region



During the third quarter of fiscal 2003, in order to
more effectively manage its operating structure, the Company reorganized its business into two reportable segments, Commercial and Defense & Space. During the second quarter of fiscal 2005, the Company reorganized and renamed the Commercial
segment, the Wireless Systems segment.



The Wireless Systems segment develops
and manufacturers RF power amplifiers, filters, tower-mounted amplifiers, outdoor radio units, and manufacturing services used in the transmission of voice, video and data traffic over mobile wireless communication networks. These product lines have
similar characteristics regarding (a) competitive pricing pressures, (b) life-cycle cost fluctuations, (c) number of competitors, (d) product differentiation, and (e) size of market opportunity.



The Defense & Space segment provides a broad spectrum of RF, microwave and guidance
products for systems integrated by prime contractors in military and space applications.



The Company evaluates performance and allocates resources based on profit or loss from operations before interest, other income and income taxes. The accounting policies of the reportable segments are the same as
those described in the summary of significant accounting policies.



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##### Table of Contents

Segment and Geographic Area Data (in 000s):



|                                                        |  |                    |         |   |               |   |         |  
|------------------------------------------------------- |  | ------------------ | ------- | - | ------------- | - | ------- | -
|                                                        |  | Three Months Ended |        
|                                                        |  | April 29,2005      |         |   | April 30,2004 |  
|Net Sales:                                              |  |                    |         |   |               |   |         |  
|Wireless Systems                                        |  | $                  | 84,612  |   |               | $ | 84,505  |  
|Defense & Space                                         |  |                    | 27,494  |   |               |   | 23,496  |  
|                                                        |  |                    |         |   |               |   |         |  
|Consolidated net sales                                  |  | $                  | 112,106 |   |               | $ | 108,001 |  
|                                                        |  |                    |         |   |               |   |         |  
|Net income (loss) from continuing operations:           |  |                    |         |   |               |   |         |  
|Wireless Systems                                        |  | $                  | (8,404  | ) |               | $ | (10,519 | )
|Defense & Space                                         |  |                    | 5,120   |   |               |   | 3,709   |  
|                                                        |  |                    |         |   |               |   |         |  
|Consolidated income (loss) from continuing operations   |  | $                  | (3,284  | ) |               | $ | (6,810  | )
|                                                        |  |                    |         |   |               |   |         |  
|Net income (loss) from discontinued operations:         |  |                    |         |   |               |   |         |  
|Wireless Systems                                        |  | $                  | 18      |   |               | $ | (565    | )
|Defense & Space                                         |  |                    |        |   |               |   | 276     |  
|                                                        |  |                    |         |   |               |   |         |  
|Consolidated income (loss) from discontinued operations |  | $                  | 18      |   |               | $ | (289    | )
|                                                        |  |                    |         |   |               |   |         |  
|Net income (loss):                                      |  |                    |         |   |               |   |         |  
|Wireless Systems                                        |  | $                  | (8,386  | ) |               | $ | (11,084 | )
|Defense & Space                                         |  |                    | 5,120   |   |               |   | 3,985   |  
|                                                        |  |                    |         |   |               |   |         |  
|Consolidated income (loss)                              |  | $                  | (3,266  | ) |               | $ | (7,099  | )
|                                                        |  |                    |         |   |               |   |         |  
|Depreciation and amortization:                          |  |                    |         |   |               |   |         |  
|Wireless Systems                                        |  | $                  | 3,598   |   |               | $ | 3,832   |  
|Defense & Space                                         |  |                    | 1,067   |   |               |   | 974     |  
|                                                        |  |                    |         |   |               |   |         |  
|Consolidated depreciation and amortization              |  | $                  | 4,665   |   |               | $ | 4,806   |  
|                                                        |  |                    |         |   |               |   |         |  
|Sales to external customers:                            |  |                    |         |   |               |   |         |  
|United States                                           |  | $                  | 56,153  |   |               | $ | 45,738  |  
|Canada                                                  |  |                    | 16      |   |               |   | 77      |  
|Europe                                                  |  |                    | 39,818  |   |               |   | 39,703  |  
|Asia                                                    |  |                    | 15,962  |   |               |   | 21,412  |  
|All other geographic regions                            |  |                    | 157     |   |               |   | 1,071   |  
|                                                        |  |                    |         |   |               |   |         |  
|Total sales to external customers                       |  | $                  | 112,106 |   |               | $ | 108,001 |  
|                                                        |  |                    |         |   |               |   |         |  



|                                 |  |               |         |                 |   |        
|-------------------------------- |  | ------------- | ------- | --------------- | - | -------
|                                 |  | April 29,2005 |         | January 31,2005
|Identifiable assets:             |  |               |         |                 |   |        
|Wireless Systems                 |  | $             | 223,358 |                 | $ | 233,607
|Defense & Space                  |  |               | 42,553  |                 |   | 41,316 
|                                 |  |               |         |                 |   |        
|Consolidated identifiable assets |  | $             | 265,911 |                 | $ | 274,923
|                                 |  |               |         |                 |   |        
|Tangible assets by area:         |  |               |         |                 |   |        
|United States                    |  | $             | 32,097  |                 | $ | 33,075 
|Europe                           |  |               | 1,233   |                 |   | 1,432  
|Costa Rica                       |  |               | 14,639  |                 |   | 15,842 
|Asia                             |  |               | 21,504  |                 |   | 21,618 
|All other geographic regions     |  |               |        |                 |   |       
|                                 |  |               |         |                 |   |        
|Total tangible assets            |  | $             | 69,473  |                 | $ | 71,967 
|                                 |  |               |         |                 |   |        



Sales are attributed to countries
based on ship-to location of customers.



11. Intangible Assets



Acquired intangible assets subject to amortization at April 29, 2005 were
as follows (in 000s):



|                         |  |                    |       |                         |   |        |                  |  |   |      
|------------------------ |  | ------------------ | ----- | ----------------------- | - | ------ | ---------------- |  | - | -----
|                         |  | GrossCarryingValue |       | AccumulatedAmortization |   |        | NetCarryingValue
|Core technology          |  | $                  | 4,800 |                         | $ | (2,400 | )                |  | $ | 2,400
|Trademark and trade name |  |                    | 111   |                         |   | (111   | )                |  |   |     
|                         |  |                    |       |                         |   |        |                  |  |   |      
|                         |  | $                  | 4,911 |                         | $ | (2,511 | )                |  | $ | 2,400
|                         |  |                    |       |                         |   |        |                  |  |   |      



Amortization expense for intangible
assets was $0.2 million and $0.2 million for the three months ended April 29, 2005 and April 30, 2004, respectively.



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##### Table of Contents

12. Subsequent Events



On May 20, 2005, the Company announced that it had completed the sale of its Defense & Space group to Chelton Microwave for $260 million, less approximately $7
million of post-closing adjustments. The net proceeds to REMEC are expected to be approximately $253 million.



At the same time, the Company completed the reclassification of its common stock to allow the Company to distribute approximately $177 million to its shareholders by converting each share of its existing common stock
into a fractional share of common stock and one share of redemption stock, which will be automatically redeemed by the Company. As a result of the reclassification and redemption, each holder of one share of REMEC common stock at the close of
trading on the Nasdaq National Market on May 20, 2005 will be entitled to receive 0.446 of a share of common stock and $2.80 per share in cash. The common stock issued in the reclassification began trading on the Nasdaq National Market on May 23,
2005 under the symbol REMCD.



The table below reflects an unaudited pro forma
condensed consolidated balance sheet at April 29, 2005 as if the approved and completed sale of REMEC Defense & Space had occurred as of the balance sheet date:



|                                                                             |  |                           |         |                                               |   |         |                               |  |                   |        |  |   |        
|---------------------------------------------------------------------------- |  | ------------------------- | ------- | --------------------------------------------- | - | ------- | ----------------------------- |  | ----------------- | ------ |  | - | -------
|                                                                             |  | Sale of Defense & Space  
|                                                                             |  | CompanyHistorical         |         | HistoricalAssets andLiabilitiesto be Sold (a) |   |         | Other ProFormaAdjustments (b) |  | Company Pro Forma
|                                                                             |  | (unaudited, in thousands)
|Assets                                                                       |  |                           |         |                                               |   |         |                               |  |                   |        |  |   |        
|Current assets:                                                              |  |                           |         |                                               |   |         |                               |  |                   |        |  |   |        
|Cash and cash equivalents                                                    |  | $                         | 35,281  |                                               | $ | 9       |                               |  | $                 | 77,699 |  | $ | 112,989
|Short-term investments                                                       |  |                           | 2,564   |                                               |   |        |                               |  |                   |       |  |   | 2,564  
|Accounts receivable, net                                                     |  |                           | 68,510  |                                               |   | (15,101 | )                             |  |                   |       |  |   | 53,409 
|Notes and other receivables                                                  |  |                           | 13,704  |                                               |   | (1      | )                             |  |                   |       |  |   | 13,703 
|Inventories, net                                                             |  |                           | 64,998  |                                               |   | (9,190  | )                             |  |                   |       |  |   | 55,808 
|Other current assets                                                         |  |                           | 4,835   |                                               |   | (261    | )                             |  |                   |       |  |   | 4,574  
|                                                                             |  |                           |         |                                               |   |         |                               |  |                   |        |  |   |        
|Total current assets                                                         |  |                           | 189,892 |                                               |   | (24,544 | )                             |  |                   | 77,699 |  |   | 243,047
|                                                                             |  |                           |         |                                               |   |         |                               |  |                   |        |  |   |        
|Property, plant and equipment, net                                           |  |                           | 69,473  |                                               |   | (14,991 | )                             |  |                   |       |  |   | 54,482 
|Goodwill, net                                                                |  |                           | 3,018   |                                               |   | (3,018  | )                             |  |                   |       |  |   |       
|Intangible assets, net                                                       |  |                           | 2,400   |                                               |   |        |                               |  |                   |       |  |   | 2,400  
|Other assets                                                                 |  |                           | 1,128   |                                               |   |        |                               |  |                   |       |  |   | 1,128  
|                                                                             |  |                           |         |                                               |   |         |                               |  |                   |        |  |   |        
|Total assets                                                                 |  | $                         | 265,911 |                                               | $ | (42,553 | )                             |  | $                 | 77,699 |  | $ | 301,057
|                                                                             |  |                           |         |                                               |   |         |                               |  |                   |        |  |   |        
|Liabilities and Shareholders Equity                                         |  |                           |         |                                               |   |         |                               |  |                   |        |  |   |        
|Current liabilities:                                                         |  |                           |         |                                               |   |         |                               |  |                   |        |  |   |        
|Accounts payable                                                             |  |                           | 48,580  |                                               |   | (6,335  | )                             |  |                   |       |  |   | 42,245 
|Accrued expenses and other current liabilities                               |  |                           | 52,328  |                                               |   | (6,551  | )                             |  |                   | 27,762 |  |   | 73,539 
|                                                                             |  |                           |         |                                               |   |         |                               |  |                   |        |  |   |        
|Total current liabilities                                                    |  |                           | 100,908 |                                               |   | (12,886 | )                             |  |                   | 27,762 |  |   | 115,784
|Deferred income taxes and other long-term liabilities                        |  |                           | 2,658   |                                               |   | (862    | )                             |  |                   |       |  |   | 1,796  
|Shareholders equity (27,929,879 common and no preferred shares outstanding) |  |                           | 162,345 |                                               |   | (28,805 | )                             |  |                   | 49,937 |  |   | 183,477
|                                                                             |  |                           |         |                                               |   |         |                               |  |                   |        |  |   |        
|Total liabilities and shareholders equity                                   |  | $                         | 265,911 |                                               | $ | (42,553 | )                             |  | $                 | 77,699 |  | $ | 301,057
|                                                                             |  |                           |         |                                               |   |         |                               |  |                   |        |  |   |        

---

|(a) | Reflects the removal from our balance sheet of the assets purchased and the liabilities assumed by Chelton Microwave under the terms of the Merger Agreement.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Reflects, as detailed below, the following pro forma adjustments: (i) the cash received as a result of the sale of REMEC Defense & Space (reduced by $7 million for the change in
the intercompany accounts between REMEC and REMEC Defense & Space and the payment of $4.7 million in transaction expenses), (ii) the accrual of $27.8 million of additional transaction and other certain liabilities arising as a result of the sale
of REMEC Defense & Space (primarily for income taxes and employee costs including compensation expense associated with equity instruments which vested as result of the sale of REMEC Defense & Space, retention bonuses and severance payments),
(iii) the cash exercise of fully vested and accelerated stock options and restricted stock units (RSUs) and (iv) the effect of approximately $177 million cash distributions in the reclassification and redemption as if these events
occurred on April 29, 2005.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                               |  |                                                             |         |                                             |   |                                                |  |                                                        |       |  |                                                         |          |   |  |   |       
|---------------------------------------------- |  | ----------------------------------------------------------- | ------- | ------------------------------------------- | - | ---------------------------------------------- |  | ------------------------------------------------------ | ----- |  | ------------------------------------------------------- | -------- | - |  | - | ------
|                                               |  | Pro Forma Adjustments for the Sale of REMEC Defense & Space
|                                               |  | Mergerconsideration andrelated costs                        |         | Exercise of fullyvested stockoptions &RSUs |   | Exercise ofaccelerated vestingof stock options |  | Redemption ofredeemable stockissued inreclassification |       |  | Total ProFormaAdjustments forthe Sale ofDefense & Space
|                                               |  | (unaudited, in thousands)                                  
|ASSETS                                         |  |                                                             |         |                                             |   |                                                |  |                                                        |       |  |                                                         |          |   |  |   |       
|Current assets:                                |  |                                                             |         |                                             |   |                                                |  |                                                        |       |  |                                                         |          |   |  |   |       
|Cash and cash equivalents                      |  | $                                                           | 249,675 |                                             | $ | 3,677                                          |  | $                                                      | 1,347 |  | $                                                       | (177,000 | ) |  | $ | 77,699
|                                               |  |                                                             |         |                                             |   |                                                |  |                                                        |       |  |                                                         |          |   |  |   |      
|                                               |  |                                                             |         |                                             |   |                                                |  |                                                        |       |  |                                                         |          |   |  |   |       
|Total current assets                           |  |                                                             | 249,675 |                                             |   | 3,677                                          |  |                                                        | 1,347 |  |                                                         | (177,000 | ) |  |   | 77,699
|                                               |  |                                                             |         |                                             |   |                                                |  |                                                        |       |  |                                                         |          |   |  |   |      
|                                               |  |                                                             |         |                                             |   |                                                |  |                                                        |       |  |                                                         |          |   |  |   |       
|Total assets                                   |  | $                                                           | 249,675 |                                             | $ | 3,677                                          |  | $                                                      | 1,347 |  | $                                                       | (177,000 | ) |  | $ | 77,699
|                                               |  |                                                             |         |                                             |   |                                                |  |                                                        |       |  |                                                         |          |   |  |   |       
|LIABILITIES AND SHAREHOLDERS EQUITY           |  |                                                             |         |                                             |   |                                                |  |                                                        |       |  |                                                         |          |   |  |   |       
|Current liabilities:                           |  |                                                             |         |                                             |   |                                                |  |                                                        |       |  |                                                         |          |   |  |   |       
|Accrued expenses and other current liabilities |  |                                                             | 27,762  |                                             |   |                                               |  |                                                        |      |  |                                                         |         |   |  |   | 27,762
|                                               |  |                                                             |         |                                             |   |                                                |  |                                                        |       |  |                                                         |          |   |  |   |       
|Total current liabilities                      |  |                                                             | 27,762  |                                             |   |                                               |  |                                                        |      |  |                                                         |         |   |  |   | 27,762
|                                               |  |                                                             |         |                                             |   |                                                |  |                                                        |       |  |                                                         |          |   |  |   |       
|Effect on shareholders equity                 |  | $                                                           | 221,913 |                                             | $ | 3,677                                          |  | $                                                      | 1,347 |  | $                                                       | (177,000 | ) |  | $ | 49,937
|                                               |  |                                                             |         |                                             |   |                                                |  |                                                        |       |  |                                                         |          |   |  |   |       



- 14 -



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



Overview



REMEC designs and manufactures microwave and millimeter wave subsystems used in the transmission of voice, video and data traffic over wireless communications networks
and provides advanced integrated microwave subsystem solutions for defense and space electronics applications. We manufacture our products at our own plants in Heredia, Costa Rica; Laguna, Philippines; Shanghai, China and Kearny Mesa and Escondido,
California.



We sell our commercial wireless systems products primarily to
OEMs, which in turn integrate our products into wireless infrastructure equipment solutions sold to network service providers. In addition, we also sell certain niche products directly to network service providers. Our Defense & Space RF and
microwave equipment is sold to major U.S. defense prime contractors for integration into larger systems, primarily radar electronic warfare, communications and navigation.



The demand for our products has been affected in the past, and may continue to be affected in the future, by various factors, including, but
not limited to, the following:



| |  |  | the economic and market conditions in the wireless communications markets;
| | - |  | --------------------------------------------------------------------------



| |  |  | the timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to specify, develop or acquire, complete, introduce, market and transition to volume production new products and technologies in a timely manner;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of our products; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the rate at which our present and future customers and end-users adopt our products and technologies in our target markets.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



For these and other reasons, our net revenue in fiscal year 2006 and prior periods may not
necessarily be indicative of future net revenue. From time to time, our key customers place large orders causing our quarterly net revenue to fluctuate significantly. We expect these fluctuations to continue.



Challenges include improving product margins, managing working capital and returning to
profitability. The Company is taking steps we believe are necessary to cut product and infrastructure costs while increasing our base of revenue. Risks include our customers failing to sell wireless communications network solutions that include our
subsystems and integrated components, which would harm our sales and production schedules, and manufacturing processes and may cause fluctuations in our quarterly results.



The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and the related notes included
elsewhere herein. The statements in this report on Form 10-Q that relate to future plans, events or performance are forward-looking statements. Actual results could differ materially from those discussed in forward-looking statements due to a
variety of factors, including REMECs success in penetrating the wireless systems market, risks associated with the cancellation or reduction of orders by significant customers, trends in the wireless market, and other factors and
considerations described in REMECs Annual Report on Form 10-K/A and the other documents REMEC files from time to time with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of
the date hereof. REMEC undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, other than as required by applicable law that may be made to reflect events or circumstances after the date hereof
or to reflect the occurrence of unanticipated events.



Significant recent
developments



During the fiscal year 2005, the Company engaged Needham
& Company, Inc. as financial advisors to evaluate alternative strategies to provide the best value to shareholders, including the disposal of all or a portion of our business units.



In December 2004, we entered into a Merger Agreement to sell our Defense & Space group to Chelton Microwave for $260 million cash,
subject to certain post-closing adjustments and the assumption of certain liabilities. The shareholders approved the Merger Agreement on May 18, 2005. It was previously announced that a substantial portion of the aggregate merger consideration was
to be distributed to our shareholders by redeeming the Redemption Stock immediately after the effective time of the Merger (the Redemption). The Board of Directors determined the amount of the Redemption to be approximately $177 million,
which will be distributed during the second quarter of fiscal 2006.



In March
2005, we entered into a definitive agreement to sell selected assets and transfer certain liabilities of REMECs Wireless Systems business to Powerwave Technologies, Inc. for 10 million shares of Powerwaves common stock and $40 million in
cash. Based on Powerwaves closing price on Friday, March 11, 2005, the transaction value is approximately $120 million. The transaction includes our RF conditioning products, filters, tower-mounted amplifiers and RF power amplifiers. The
transaction also includes our manufacturing facilities in Costa Rica, China and the Philippines, as well as certain employee-related costs, facility lease obligations, and assets and liabilities related to the product lines being acquired. We will
retain certain assets of the Wireless Systems business



- 15 -



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that include the ODU/Transceiver product line and the manufacturing services business. For the three months ended April 29, 2005, these retained businesses
generated approximately $8 million and $14 million of revenues, respectively.



The proposed sale of the Wireless Systems business assets and the completed sale of the Defense & Space business are results of the Companys ongoing review of strategic alternatives to provide the best value to shareholders. The
completion of these transactions will result in REMEC divesting the majority of its operating assets and liabilities. The Wireless Systems sale requires shareholder approval that has not been obtained as of the filing date of this Form 10-Q.



Consequently, if the Wireless Systems sale is approved and consummated, the
Companys financial and operational viability would become increasingly uncertain. As a result, in connection with seeking shareholder approval for the Wireless Systems sale, the Board of Directors intends to ask Company shareholders to approve
and adopt a plan of liquidation, which would be intended to allow for the orderly disposition of the Companys remaining assets and liabilities.



The managements discussion and analysis centers on the continuing operations. The Components and China Network Optimization product lines (Wireless Systems) and
Nanowave (Defense & Space), all of which were divested during fiscal year 2005, are reported as discontinued operations.



Results of Operations as a Percentage of Net Sales



The following table sets forth, as a percentage of total net sales, certain consolidated statement of income data for the periods indicated:



|                                                                                |  |                    |    |  |               |   
|------------------------------------------------------------------------------- |  | ------------------ | -- |  | ------------- | --
|                                                                                |  | Three months ended |   
|                                                                                |  | April 29,2005      |    |  | April 30,2004 |   
|Net sales                                                                       |  | 100.0              | %  |  | 100.0         | % 
|Cost of sales                                                                   |  | 81.3               |    |  | 83.6          |   
|                                                                                |  |                    |    |  |               |   
|Gross profit                                                                    |  | 18.7               |    |  | 16.4          |   
|Operating expenses:                                                             |  |                    |    |  |               |   
|Selling, general & administrative                                               |  | 13.0               |    |  | 11.9          |   
|Research and development                                                        |  | 8.0                |    |  | 10.8          |   
|Restructuring                                                                   |  |                   |    |  | (0.1          | ) 
|                                                                                |  |                    |    |  |               |   
|Total operating expenses                                                        |  | 21.0               |    |  | 22.6          |   
|                                                                                |  |                    |    |  |               |   
|Loss from operations                                                            |  | (2.3               | )  |  | (6.2          | ) 
|Interest income and other, net                                                  |  | (0.6               | )  |  | (0.1          | ) 
|                                                                                |  |                    |    |  |               |   
|Loss from continuing operations before income taxes                             |  | (2.9               | )  |  | (6.3          | ) 
|Provision (credit) for income taxes from continuing operations                  |  |                   |    |  |              |   
|                                                                                |  |                    |    |  |               |   
|Net loss from continuing operations                                             |  | (2.9               | )  |  | (6.3          | ) 
|Loss from discontinued operations including gain (loss) on disposal, net of tax |  |                   |    |  | (0.3          | ) 
|                                                                                |  |                    |    |  |               |   
|Net loss                                                                        |  | (2.9               | )% |  | (6.6          | )%
|                                                                                |  |                    |    |  |               |   



Results of Operations



Three Months ended April 29, 2005 Compared to Three Months ended April
30, 2004



Net Sales and Gross Profit. Net sales for the
three months ended April 29, 2005 increased 3.8%, to $112.1 million as compared to $108.0 million in the year earlier quarter. The increase was attributable to the Defense & Space group. Sales for the Wireless Systems group were essentially flat
this quarter versus the first quarter of fiscal 2005. Gross profit increased 18.0%, to $20.9 million in the first quarter of fiscal 2006 as compared to $17.8 million in the prior year quarter. The increase in gross profit was the result of the
volume increase for Defense & Space, and improved margins in Wireless Systems due to a favorable product mix, lower excess & obsolescence reserves, and other cost reductions. Gross profit as a percentage of net sales increased to 18.7%
during the first quarter of fiscal 2006 as compared to 16.4% during the year earlier quarter.



Segment Information. The following segment information should be read in conjunction with the financial results of each reporting segment as detailed in Note 10 of the Condensed Consolidated Financial
Statements. Results within each of our business segments were as follows:



Wireless Systems. Net sales for the three months ended April 29, 2005 increased by $0.1 million, essentially flat, to $84.6 million as compared to $84.5 million in the year earlier quarter. Increases in
our filters product line due to the ramping up of a



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new program and ODU/Transceivers due to production ramping up were offset by lower customer demand of our RF power amplifiers. Gross profits increased 15.7%,
or $1.7 million for the first three months ended April 29, 2005 versus the same quarter last year. The improved gross profits were due to a favorable product mix, lower excess & obsolescence reserves, and other cost reductions. Our gross profit
for the three months ended April 29, 2005 and the prior year quarter were both favorably impacted from sales of zero cost basis inventory obtained from our 2002 acquisition of Spectrian. These impacts totaled approximately $1.3 million in the first
quarter of fiscal 2006 and $1.2 million in the prior year first quarter. Operating expenses decreased by 4.7% as the result of cost reductions and reduced spending. As a percentage of net sales, operating expenses declined to 24.0% as compared to
25.2% in the prior year quarter. The increased gross profits, coupled with the decrease in our operating costs, resulted in a reduction in the operating loss of our Wireless Systems operation by $2.7 million, to $7.5 million in the first quarter of
fiscal 2006 as compared to a $10.2 million loss in the prior year quarter.



Defense & Space. Net sales increased by $4.0 million, or 17.1%, to $27.5 million in the first quarter of fiscal 2006, while gross profit as a percentage of sales increased from 28.6% in the first
quarter of fiscal 2005 to 29.7% in the first quarter of fiscal 2006. The increase in net sales is primarily attributable to increased delivery rates on production programs and increased sales from new development programs based on customer contract
requirements. The increase in gross profit as a percentage of net sales is a result of decreased direct labor and overhead costs as a percentage of sales. Operating expenses of $3.2 million for the first quarter of fiscal year 2006 were essentially
equal with the first quarter last year. The segments operating income increased by $1.4 million to $5.0 million in first quarter of fiscal year 2006, primarily as a result of the increase in sales, gross profits, and our ability to keep
operating expenses flat.



Selling, General and Administrative
Expenses. Selling, general and administrative expenses, or SG&A, increased from $12.8 million in the first quarter of fiscal 2005 to $14.6 million in the first quarter of fiscal 2006, and as a percentage of net sales, increased from
11.9% in 2005 to 13.0% in 2006. The change in SG&A was primarily due to Sarbanes-Oxley implementation costs and higher audit, legal, and consulting costs.



Research and Development Expenses, Including In-Process. Research and development expenses decreased from $11.7 million in the first quarter of fiscal
2005 to $8.9 million in the first quarter of fiscal 2006, as the result of reduced spending on the FWA product line, which we sold in May 2004, refocusing our spending on growth areas, and reducing costs in other areas. As a percentage of net sales,
research and development expenses decreased from 10.8% in 2005 to 8.0% in 2006.



Other Expenses, Net and Interest Income. Other expenses, net and interest income, increased from $0.2 million in the first quarter of fiscal 2005 to $0.7 million in the first quarter of fiscal 2006. In the first fiscal quarter
of 2005, we experienced a small foreign currency transaction loss at our European operations versus a larger exchange loss of $0.9 million in the first quarter of this year due to fluctuation of the Euro, offset by other income.



Provision (Credit) for Income Taxes. Results for the first quarter of fiscal
2006 and fiscal 2005 reflect an insignificant amount of income taxes.



For the
first quarter of fiscal years 2006 and 2005, we were in a net operating loss position for current tax provision purposes in all jurisdictions in which we operated. Significant items affecting the calculation of the effective tax rate include
establishment of valuation reserves, the large permanent differences arising partly from non-deductible goodwill and merger costs, and the effect of these permanent differences on state income taxes. In addition, we recognized foreign taxes at rates
that are generally lower than the U.S. statutory rate.



LIQUIDITY AND
CAPITAL RESOURCES



At April 29, 2005, we had $89.0 million of working
capital, which included cash, cash equivalents and short-term investments totaling $37.8 million. We also have a $30.0 million revolving working capital line of credit with a bank, which expires in July 2005. The borrowing rate under this credit
facility is based on prime plus 1%, with prime being defined as the banks most recently announced per annum prime rate. Through April 29, 2005, we had no borrowings under this credit facility; however, approximately $8.4 million
has been used under letter of credit arrangements, $1.8 million for banking cash management products, $1.3 million has been utilized in connection with foreign currency forward contracts and $18.5 million is used to increase our factoring line. The
credit facility is secured by the Companys domestic trade receivables and inventory. As of April 29, 2005, we were in compliance with the financial covenants contained in this credit facility. This facility is also subject to a Material
Adverse Change clause whereby the bank can subjectively determine that the Company is in default under the credit agreement. The Material Adverse Change is defined as if there (i) occurs a material adverse change in the business
operations, or condition (financial or otherwise) of the Borrower; or (ii) is a material impairment of the prospect of repayment of any portion of the Obligations; or (iii) is a material impairment of the value or priority of Banks security
interests in the Collateral. We are not aware of any Material Adverse Change to date.



The Company has entered into factoring arrangements whereby certain of its receivables are sold on a pre-approved, nonrecourse basis except in the event of dispute or claim as to price, terms, quality, material
workmanship, quantity or delivery of merchandise. Pursuant to the terms of the arrangement, receivables are sold, net of factoring fees and commissions and net of any credits or discounts available to the Companys customers. In compliance with
SFAS No. 140 and the terms of the arrangement, proceeds are collected from the financial institution and the receivables are removed from the balance sheet.



During the three months ended April 29, 2005, net cash from continuing operations increased by $3.0 million. Cash inflows of $9.4 million from investing activities were
the result of the release of $9.4 million in restricted cash, sales of $2.0 million of short term investments offset by capital expenditures of $2.0 million. Cash outflows during this period was principally the result of cash used by continuing
operations to fund $7.9 million of accounts receivable increases due to higher business activity; reductions in accounts payable and accrued expenses of $5.9 million, partially offset by a reduction in inventory of $5.5 million.



- 17 -



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##### Table of Contents

During the three months ended April 30, 2004, net cash used by continuing operations was $25.0 million. The negative
operating cash flow during this period was principally the result of cash used to fund $10.1 million of accounts receivable increases due to higher business activity; reductions in accounts payable and accrued expenses of $14.1 million. Cash out
flows from investing activities were the result of higher capital expenditures of $4.5 million and short terms investments, offset by proceeds from the sale of a building in Finland.



The Companys cash, cash equivalents, and short-term investment balances as of April 29, 2005 totaled $37.8 million. The cash
burn from operations will increase significantly after losing the strong profit contribution provided by the Defense and Space business. The cash cost of the trailing liabilities, which include taxes on the net gains realized from the sale of
the businesses, lease obligations on vacant and largely vacant buildings, warranty and other costs associated with sold businesses, transaction costs, staff termination obligations and the cost of closing down the Company, cannot be quantified at
this time.



Our future capital requirements will depend upon many factors,
including the cash cost of the trailing liabilities, the proposed sale of the Wireless Systems assets (which is subject to shareholder approval), the nature and timing of orders by OEM customers, the progress of our research and development efforts,
and the status of competitive products. Our principal source of liquidity consists of our existing cash balances and our bank line of credit. If shareholders do not approve the sale of the Wireless Systems assets, it is possible that the Company may
require additional sources of financing in order to capitalize on business opportunities that management believes currently exist. These additional sources of financing may include bank borrowings or public or private offerings of equity or debt
securities. No assurance can be given that such additional sources of financing will be available on acceptable terms, if at all.



Off-Balance Sheet Arrangements



As of April 29, 2005, we did not have any other relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance
or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity,
market or credit risk that could arise if we had engaged in such relationships.



Obligations and Commitments



The following table summarizes
our contractual payment obligations and commitments as of April 29, 2005:



|                     |  |                                        |         |      |   |        |  |      |        |      |   |       |  |            |       |  |   |       |  |   |       
|-------------------- |  | -------------------------------------- | ------- | ---- | - | ------ |  | ---- | ------ | ---- | - | ----- |  | ---------- | ----- |  | - | ----- |  | - | ------
|                     |  | Payment Obligations by Year (in 000s)
|                     |  | Total                                  |         | 2006 |   | 2007   |  | 2008 |        | 2009 |   | 2010  |  | Thereafter
|Operating leases     |  | $                                      | 81,340  |      | $ | 7,493  |  | $    | 9,850  |      | $ | 8,900 |  | $          | 8,173 |  | $ | 7,941 |  | $ | 38,983
|Capital leases       |  |                                        | 3,126   |      |   | 2,146  |  |      | 795    |      |   | 185   |  |            |      |  |   |      |  |   |      
|Purchase obligations |  |                                        | 39,344  |      |   | 39,344 |  |      |       |      |   |      |  |            |      |  |   |      |  |   |      
|                     |  |                                        |         |      |   |        |  |      |        |      |   |       |  |            |       |  |   |       |  |   |       
|                     |  | $                                      | 123,810 |      | $ | 48,983 |  | $    | 10,645 |      | $ | 9,085 |  | $          | 8,173 |  | $ | 7,941 |  | $ | 38,983
|                     |  |                                        |         |      |   |        |  |      |        |      |   |       |  |            |       |  |   |       |  |   |       



We lease certain office and production
facilities under non-cancelable agreements classified as operating leases. In accordance with accounting principles generally accepted in the United States, obligations under these long-term leases are not recorded on the balance sheet as
liabilities until payment is due.



We incur various purchase obligations with
other vendors and suppliers for the purchase of inventory, as well as other goods and services, in the normal course of business. Our purchase obligations are comprised of active and passive components as well as custom-machined parts and castings,
manufacturing and test equipment, computer hardware and information system infrastructure and other purchase commitments made in the ordinary course of business. These obligations are generally evidenced by purchase orders with delivery dates from
four to six weeks from the purchase order date, and in certain cases, supply agreements that contain the terms and conditions associated with these purchase arrangements. We are committed to accept delivery of such materials pursuant to such
purchase orders subject to various contract provisions which may allow us to delay receipt of such order or allow us to cancel orders beyond certain agreed lead times. Such cancellations may or may not include cancellation costs payable by us.



CRITICAL ACCOUNTING POLICIES AND ESTIMATES



The discussion and analysis of our financial condition and results of operations are based
upon our Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires management to make estimates and judgments
that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of any contingent assets and liabilities at the date of our financial statements. On an ongoing basis, we evaluate our estimates, including
those related to bad debts, inventories, impairment of long-lived assets, intangible assets, restructuring costs and income taxes. We base our estimates on historical experience and current developments and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or
conditions.



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Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and
potentially may result in materially different results under different assumptions or conditions. We consider the following accounting policies to be those that are both most important to the portrayal of our financial results and that require the
most subjective judgment.



Revenue Recognition. We derive the
majority of our revenue from product sales and we recognize revenue from these sales upon transfer of title to the product, which generally occurs upon shipment to the customer. In a growing number of instances, our customers are requiring us to
transfer product through an intermediary warehouse. We generally ship to our customers Free on Board shipping point except in the circumstances described above. The Securities and Exchange Commissions Staff Accounting Bulletin
(SAB) No. 101, as superceded by SAB No. 104,Revenue Recognition, provides guidance on the application of accounting principles generally accepted in the United States to selected revenue recognition issues. Revenues associated with the
performance of non-recurring engineering and development contracts are recognized when earned under the terms of the related contract; and revenues for cost-reimbursement contracts are recorded as costs are incurred and include estimated earned fees
in the proportion that costs incurred to date bears to estimated costs. We believe that our revenue recognition policy is consistent with this guidance and in accordance with accounting principles generally accepted in the United States. If our
shipping policies were to change, including the point of title transfer, materially different reported results would be likely. For example, if more customers required transfers through an intermediary warehouse, this would cause an increase to our
inventory levels and delay revenue recognition.



Prospective losses on
contracts, which are accrued for, are based upon the anticipated excess of inventoriable manufacturing costs over the selling price of the remaining units to be delivered. Actual losses could differ from those estimated due to changes in the
ultimate manufacturing costs and contract terms. For example, a delay in realizing cost reductions for a specific product would have a negative impact on our net income for the period.



Allowance for Doubtful Accounts. Allowances for doubtful accounts are based on estimates of losses related to customers
receivable balances. In establishing the appropriate provisions for customer receivables balances, the Company makes assumptions with respect to their future collectibility. The Companys assumptions are based upon individual assessment of a
customers credit quality as well as subjective factors and trends, including the aging of receivables balances. Generally, these individual credit assessments occur at regular reviews during the life of the exposure and consider (a) a
customers ability to meet and sustain their financial commitments; (b) a customers current and projected financial condition; (c) the positive or negative effects of the current or projected industry outlook; and (d) the economy in
general. Once the Company considers all of these factors, a determination is made as to the probability of default. An appropriate provision is made, which takes into account the severity of the likely loss on the outstanding receivable balance
based on the Companys experience in collecting these amounts. In addition to these individual assessments, in general, the Company provides a 5% reserve against all outstanding customer balances that are greater than 60 days past due. The
Companys level of reserves fluctuates depending upon all of the factors mentioned above. Credit losses have historically been within our expectations and the allowances established. At April 29, 2005, accounts receivable totaled $68.5 million,
net of reserves for bad debt of $1.5 million.



Inventory
Adjustments. Inventories are stated at the lower of weighted average cost or market. We review the components of our inventory on a regular basis for excess, obsolete and impaired inventory based on estimated future usage and sales. As a
general rule, stock levels in excess of one years expectation of usage or sales are fully reserved. The likelihood of any material inventory write-down is dependent on customer demand, competitive conditions or new product introductions by us,
or our customers, that vary from our current expectations. The allowance is measured as the difference between the cost of the inventory and market based upon assumptions about future demand and charged to the provision for inventory, which is a
component of our cost of sales. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established
cost basis, in compliance with SAB Topic 5.BB. If future demand were significantly less favorable than projected by management, increases to the reserve would be required. In general, our losses from inventory obsolescence have been within our
expectations and the reserves established. At April 29, 2005, inventories totaled $65.0 million, net of reserves for excess and obsolete inventory of $13.1 million and contract losses of $4.7 million.



Valuation of Goodwill, Intangible and Other Long-Lived Assets. We are required
to assess goodwill impairment in fiscal 2006 using the methodology prescribed by Statement of Financial Accounting Standards (SFAS) No. 142,Goodwill and Other Intangible Assets. SFAS No. 142 requires that goodwill be tested for impairment at
the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests in certain circumstances. Application of the goodwill impairment test requires judgment, including the identification of
reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units and determining the fair value of each reporting unit. Significant judgments required to estimate the fair value of reporting units include
estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit.



The remaining amount of Goodwill on our balance sheet as of April 29, 2005 is
all related to the Defense & Space group, which was sold on May 18, 2005. A goodwill impairment test was performed for the Defense & Space reporting segment as of January 31, 2005 and we did not recognize any goodwill impairment as a result
of performing this annual test.



At January 31, 2005, intangible assets other
than goodwill were evaluated for impairment using undiscounted cash flows expected to result from the use of the assets as required by SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets. No impairment loss was
recognized during fiscal 2005 related to these assets. No impairment test was performed during the first quarter of fiscal year 2006 due to the impending sale of Wireless Systems assets to Powerwave.



Accrued Warranty Costs. Estimated future warranty obligations related to
certain products are charged to operations in the period in which the related revenue is recognized. We establish a reserve for warranty obligations based on historical warranty experience. In general, our warranty costs have been within our
expectations and the reserves established.



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Valuation of Deferred Income Taxes. The Company records an estimated valuation allowance on its significant
deferred tax assets when, based on the weight of available evidence (including the scheduled reversal of deferred tax liabilities, projected future taxable income or loss, and tax-planning strategies), it is more likely than not that some or all of
the tax benefit will not be realized.



Income Tax
Contingencies.Significant judgment is required in determining the Companys worldwide provision for income taxes. In the ordinary course of a global business, there are many transactions for which the ultimate tax outcome is
uncertain. Some of these uncertainties arise as a consequence of intercompany arrangements to share revenue and costs. In such arrangements there are uncertainties about the amount and manner of such sharing, which could ultimately result in changes
once the arrangements are reviewed by taxing authorities. Although the Company believes that the approach to determining the amount of such arrangements is reasonable, no assurance can be given that the final exposure of these matters will not be
materially different than that which is reflected in the Companys historical income tax provisions and accruals.



In evaluating the exposure associated with various tax filing positions, the Company often accrues charges for probable exposures. At April 29, 2005, the Company believes
it has appropriately accrued for probable exposures. To the extent the Company were to prevail in matters for which accruals have been established or be required to pay amounts in excess of these accruals, the Companys effective tax rate in a
given financial statement period could be materially affected.



Recently
Issued Accounting Standards.



In December 2004, the FASB issued SFAS No.
123-R, which replaces SFAS No. 123,Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,Accounting for Stock Issued to Employees. As originally issued, SFAS No. 123 established as preferable a fair-value-based
method of accounting for share-based payment transactions with employees. However, that pronouncement permitted entities to continue applying the intrinsic-value-based model of APB Opinion 25, provided that the financial statements disclosed the pro
forma net income or loss based on the fair-value method. Due to a recent SEC announcement delaying the effective date, the Company will be required to apply SFAS No. 123-R as of February 1, 2006. Thus, the Companys consolidated financial
statements will reflect an expense for (a) all share-based compensation arrangements granted beginning February 1, 2006 and for any such arrangements that are modified, cancelled, or repurchased after that date, and (b) the portion of previous
share-based awards for which the requisite service has not been rendered as of that date, based on the grant-date estimated fair value of those awards.



In December 2004, the FASB issued SFAS No. 153,Exchanges of Nonmonetary Assets, an amendment of APB Opinion 29, Accounting for Nonmonetary Transactions. The
amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured using the estimated fair value of the assets exchanged. SFAS 153 eliminates the narrow exception for nonmonetary exchanges of similar
productive assets, and replaces it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the transaction. This pronouncement is effective for nonmonetary exchanges in fiscal periods beginning after June 15, 2005. Management does not believe that this pronouncement will have a significant effect on its
future financial statements.



In November 2004, the FASB issued SFAS No.
151,Inventory Costsan amendment of ARB No. 43, Chapter 4, which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material. In Chapter 4 of ARB No. 43, paragraph 5 previously
stated that under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and re-handling costs may be so abnormal as to require treatment as current period charges SFAS No. 151 requires
that such items be recognized as current-period charges, regardless of whether they meet the criterion of so abnormal (an undefined term). This pronouncement also requires that allocation of fixed production overhead to the costs of conversion be
based on the normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred in years beginning after June 15, 2005. Management does not believe this pronouncement will have a significant impact on its future
financial statements.



In December 2003, the FASB issued a revision of SFAS No.
132,Employers Disclosures about Pensions and Other Postretirement Benefits. This pronouncement (SFAS No. 132-R) expands employers disclosures about pension plans and other post-retirement benefits, but does not change
the measurement or recognition of such plans required by SFAS No. 87, No. 88. or No. 106. SFAS No. 132-R retains the existing disclosure requirements of SFAS No. 132, and requires certain additional disclosures about defined benefit post-retirement
plans. The defined benefit pension plan of the Companys United Kingdom subsidiary is the Companys only defined benefit post-retirement plan. Except as described in the following sentence, SFAS No. 132-R is effective for foreign pension
plans for fiscal years ending after June 15, 2004; after the effective date, restatement for some of the new disclosures is required for earlier annual periods. Some of the interim-period disclosures mandated by SFAS No. 132-R (such as the
components of net periodic benefit cost, and certain key assumptions) are effective for foreign pension plans for quarters beginning after December 15, 2003; other interim-period disclosures will not be required for the Company until the first
quarter of 2005. The interim-period disclosure requirements, which became effective on January 1, 2004 and December 31, 2004, were adopted by the Company on those dates. The adoption of this pronouncement did not have a material impact on the
Companys results of operations or financial condition.



In May 2003, the
FASB issued SFAS No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how a company classifies and measures certain financial instruments with
characteristics of both liabilities and equity, and is effective for public companies as follows: (i) in November 2003, the FASB issued FASB Staff Position (FSP) FAS 150-03 (FSP 150-3), which defers indefinitely (a) the
measurement and classification guidance of SFAS No. 150 for all mandatory redeemable non-controlling interests in (and issued by) limited-life consolidated subsidiaries, and (b) SFAS No. 150s measurement guidance for other types of mandatory
redeemable non-controlling interests, provided they were created before November 5, 2003; (ii) for financial instruments entered into or modified after May 31, 2003 that are outside the scope of FSP 150-3; and (iii) otherwise, at the beginning of
the first interim period beginning after June 15, 2003. The Company adopted SFAS No. 150 on the aforementioned effective dates. The adoption of this pronouncement did not have a material impact on the Companys results of operations or
financial condition.



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In April 2003, the FASB issued SFAS No. 149,Amendments of Statement 133 on Derivative Instruments and Hedging
Activities, which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133. This pronouncement is
effective for contracts entered into or modified after June 30, 2003 (with certain exceptions), and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on the Companys
consolidated financial statements.



In January 2003, the FASB issued FASB
Interpretation (FIN) No. 46,Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. The primary objectives of FIN No. 46 are to provide guidance on the identification of entities for which control is
achieved through means other than voting rights (variable interest entities, or VIEs), and how to determine when and which business enterprise should consolidate the VIE. This new model for consolidation applies to an entity for which
either: (a) the equity investors do not have a controlling financial interest; or (b) the equity investment at risk is insufficient to finance that entitys activities without receiving additional subordinated financial support from other
parties. In addition, FIN No. 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a VIE make additional disclosures. As amended in December 2003, the effective dates of FIN No. 46 for
public entities that are not small business issuers are as follows: (a) For interests in special-purpose entities: the first period ended after December 15, 2003; and (b) For all other types of VIEs: the first period ended after March 15, 2004.
Management determined that the Company had a VIE and as a result, an entity was consolidated in January 2005, which impacted its consolidated financial statements for fiscal year 2005 as follows:



.



|                  |  |         |       |  
|----------------- |  | ------- | ----- | -
|                  |  | $ 000s |      
|Total Assets      |  | $       | 1,024 |  
|Total Liabilities |  |         | (967  | )
|Equity            |  |         | (57   | )



Other recent accounting pronouncements
issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants and the Securities and Exchange Commission (the SEC), did not or are not believed by management to have a material
impact on the Companys present or future consolidated financial statements.



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|Item 3. | Qualitative and Quantitative Disclosures About Market Risk.
|------- | -----------------------------------------------------------



Interest Rate Risk. In July 2004, we increased our credit facility from $25.0 million to $30.0 million all of which is secured. To the extent of our
borrowings under this facility, we will be exposed to changes in interest rates. Through, April 29, 2005 we have had no borrowings under this credit facility and, therefore, no related exposure to interest rate movement.



At April 29, 2005, our short-term investment portfolio includes fixed-income securities with
a recorded value of approximately $2.6 million. These securities are subject to interest rate risk and might decline in value if interest rates increase. Due to their short-term nature, however, we believe that a hypothetical 100 basis point
increase in interest rates would not materially affect the fair value of the securities in our investment portfolio.



Foreign Currency Exchange Rate Fluctuations. We have operations in Europe, Asia-Pacific and the Americas. As a result, our financial position, results of
operations and cash flows can be affected by fluctuations in foreign currency exchange rates. Many of our reporting entities conduct a portion of their business in currencies other than the entitys functional currency. These transactions give
rise to receivables and payables that are denominated in currencies other than the entitys functional currency. The value of these receivables and payables is subject to changes in exchange rates because they may become worth more or less than
they were worth at the time we entered into the transaction due to changes in exchange rates. Both realized and unrealized gains or losses in the value of these receivables and payables are included in the determination of net income. Realized
foreign currency transaction (losses) totaled $(1.1) million and was zero for the three months ended April 29, 2005 and April 30, 2004, respectively. Unrealized foreign currency gains (losses) totaled $0.2 million and $(0.2) million during the first
quarters of fiscal 2006 and 2005, and are included in other income and expense in the Condensed Consolidated Statements of Operations.



To address increasing revenue growth denominated in foreign currencies and the related currency risks, in the fourth quarter of fiscal year 2004, the Company established
a formal documented program to utilize foreign currency contracts to both mitigate the impact of currency fluctuations on existing foreign currency asset and liability balances as well as to reduce the risk to earnings and cash flows associated with
selected anticipated foreign currency transactions anticipated within 12 months. In accordance with SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities all derivatives are recorded on the balance sheet at fair value.
Changes in the fair value of derivatives that do not qualify, that are not designated for special accounting treatment, or that are not effective as hedges, are recognized currently in earnings.



In fiscal year 2004, the Company began designating and documenting foreign exchange forward
contracts related to forecasted sales as SFAS No. 133 cash flow hedges. The Company calculates hedge effectiveness, excluding time value, at least quarterly. The change in the fair value of the derivative on a spot to spot basis is compared to the
spot to spot change in the anticipated transaction, with the effective portion recorded in other comprehensive income until it is reclassified to revenue together with the anticipated transaction upon revenue recognition. In the event it becomes
probable that additional hedged anticipated transactions will not occur, the gains or losses on the related cash flow hedges will immediately be reclassified from other comprehensive income to other income. April 29, 2005, all outstanding cash flow
hedging derivatives had a maturity of less than 3 months.



The Company manages
the foreign currency risk associated with foreign currency denominated assets and liabilities using foreign exchange forward contracts with maturities of less than 12 months. These contracts are not designated under SFAS No. 133 for special
accounting treatment and changes in their fair value are recognized currently in other income and substantially offset the remeasurement gains and losses associated with the foreign currency denominated assets and liabilities.



Outstanding net foreign exchange forward contracts at April 29, 2005 total $3.6 million (2.8
million Euro) with a weighted average exchange rate of 1.2878.



|Item 4. | Controls and Procedures.
|------- | ------------------------



Evaluation of Disclosure Controls and Procedures. Based on our evaluation during the most recent quarter, the Companys principal executive officer and
principal financial officer have concluded that the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), and internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in SEC rules and forms.



Internal Controls over Financial Reporting. There have been no significant changes in the Companys internal controls or in other factors that could significantly affect the Companys
disclosure controls and procedures subsequent to the date of the previously mentioned evaluation.



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PART IIOTHER
INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------



On September 29, 2004, three class action lawsuits were filed against the Company and current and former officers in the United States District Court for the Southern District of California alleging violations of
federal securities laws between September 8, 2003 and September 8, 2004 (the Class Period). On January 18, 2005, the law firm of Milberg Weiss Bershad & Schulman LLP (Milberg Weiss) was appointed Lead Counsel and its
client was appointed Lead Plaintiff.



On March 10, 2005, Milberg Weiss filed a
Consolidated and Amended Complaint (the Complaint) naming the Company, a former officer and a current officer as defendants (Defendants). The Consolidated and Amended Complaint asserts, among other things, that during the
Class Period, the Defendants made false and misleading statements and failed to disclose material information regarding the Companys operations and future prospects. The Complaint seeks unspecified damages and legal expenses. On April 19,
2005, REMEC filed a Motion to Dismiss the Consolidated Amended Complaint. REMEC believes that the lawsuit is without merit and intends to defend against it vigorously.



On November 16, 2004, a civil complaint was filed in San Diego Superior Court by Cardinal Health 301, Inc. (formerly known as Pyxis
Corporation) (Cardinal) against Tyco Electronics Corporation, Thomas & Betts Corporation and the Company alleging breach of contract and breach of express and implied warranties with regard to certain products sold by the
Companys electronic manufacturing services business unit to Pyxis that incorporated allegedly defective components from Tyco and Thomas & Betts (the Cardinal Complaint).



On March 18, 2005, the court granted the Companys demurrer to the Cardinal Complaint,
allowing Cardinal an opportunity to amend its complaint, which it has done. Cardinals amended complaint includes the previous claims plus adds a claim for breach of the covenant of good faith and fair dealing. Cardinals amended complaint
seeks seven million dollars in damages plus legal expenses. The Companys response to the amended Cardinal Complaint, denying Cardinals claims and asserting a number of defenses, was filed on April 7, 2005. REMEC believes the lawsuit is
without merit and intends to vigorously defend itself in this matter.



Other
than the two lawsuits described above, neither REMEC nor any of its subsidiaries is presently subject to any material litigation, nor to REMECs knowledge, is such litigation threatened against REMEC or its subsidiaries, other than routine
actions and administrative proceedings arising in the ordinary course of business, all of which collectively are not anticipated to have a material adverse effect on the business or financial condition of REMEC.



Items 2 through 5 are not applicable and have been omitted.



|Item 6. | Exhibits
|------- | --------



|               |  |                                                                                                                        
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                            
|               | 
|31.1           |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                    
|               | 
|31.2           |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                    
|               | 
|32.1           |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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SIGNATURES



Pursuant to the requirements of the
Securities and Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|            |  |                                       
|----------- |  | --------------------------------------
|REMEC, Inc.
|            | 
|By:         |  | /s/ Thomas H. Waechter                
|            |  | Thomas H. Waechter                    
|            |  | President and Chief Executive Officer 
|            | 
|            |  | /s/ Winston E. Hickman                
|            |  | Winston E. Hickman                    
|            |  | Chief Financial and Accounting Officer
|            | 
|Date:       |  | June 8, 2005                          



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