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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

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Form 10-Q

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

For the quarterly period ended May 3, 2002

Commission File Number 0-27414

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REMEC, INC.(Exact name of registrant as specified in its charter)

CALIFORNIA(State of other jurisdiction of
incorporation or organization)

95-3814301I.R.S. Employer
Identification Number3790 VIA DE LA VALLE
DEL MAR, CALIFORNIA(Address of principal executive offices)

92014(Zip Code)


(858) 505-3713(Registrant's telephone number, including area code)

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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 month (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 ý    NO o

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

Class

Outstanding as of: May 3, 2002Common shares, $.01 par value

45,312,820


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REMEC, Inc.  Form 10-Q  For The Quarterly Period Ended May 3, 2002

|Index      |  |                                                                                       |  | Page No.
|---------- |  | ------------------------------------------------------------------------------------- |  | --------
|PART I     |  | FINANCIAL INFORMATION                                                                 |  |         
|Item 1.    |  | Condensed Consolidated Unaudited 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 |  | 12      
|PART II    |  | OTHER INFORMATION                                                                     |  |         
|Item 3.    |  | Qualitative and Quantitative Disclosures About Market Risk                            |  | 17      
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                      |  | 17      
|SIGNATURES |  | 18                                                                                   

2

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PART IFINANCIAL INFORMATION

Item 1

REMEC, INC.  CONDENSED CONSOLIDATED BALANCE SHEETS  (in thousands)

|                                                      |  | May 3,
2002 |         | January 31,
2002
|----------------------------------------------------- |  | ----------- | ------- | ----------------
|
|ASSETS                                                |  |             |         |                 
|Current assets:                                       |  |             |         |                 
|Cash and cash equivalents                             |  | $           | 34,413  |                 
|Accounts receivable, net                              |  |             | 43,717  |                 
|Tax refund and other receivables                      |  |             | 14,348  |                 
|Inventories, net                                      |  |             | 44,704  |                 
|Deferred income taxes                                 |  |             | 24,879  |                 
|Other current assets                                  |  |             | 3,998   |                 
|                                                      |  |             |         |                 
|Total current assets                                  |  |             | 166,059 |                 
|Property, plant and equipment, net                    |  |             | 91,875  |                 
|Restricted cash                                       |  |             | 17,049  |                 
|Goodwill, net                                         |  |             | 35,225  |                 
|Intangible and other assets, net                      |  |             | 13,505  |                 
|                                                      |  |             |         |                 
|                                                      |  | $           | 323,713 |                 
|                                                      |  |             |         |                 
|LIABILITIES AND SHAREHOLDERS' EQUITY                  |  |             |         |                 
|Current liabilities:                                  |  |             |         |                 
|Accounts payable                                      |  | $           | 15,420  |                 
|Accrued expenses and other current liabilities        |  |             | 24,985  |                 
|                                                      |  |             |         |                 
|Total current liabilities                             |  |             | 40,405  |                 
|Deferred income taxes and other long-term liabilities |  |             | 7,858   |                 
|Shareholders' equity                                  |  |             | 275,450 |                 
|                                                      |  |             |         |                 
|                                                      |  | $           | 323,713 |                 
|                                                      |  |             |         |                 

See accompanying notes.

3

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REMEC, INC.  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  (unaudited, in thousands, except per share data)

|                                                    |  | Three months ended |       
|--------------------------------------------------- |  | ------------------ | ------
|
|Net sales                                           |  | $                  | 59,063
|Cost of sales                                       |  |                    | 49,130
|                                                    |  |                    |       
|Gross profit                                        |  |                    | 9,933 
|Operating expenses:                                 |  |                    |       
|Selling, general and administrative                 |  |                    | 9,556 
|Research and development                            |  |                    | 7,827 
|                                                    |  |                    |       
|Total operating expenses                            |  |                    | 17,383
|                                                    |  |                    |       
|Loss from operations                                |  |                    | (7,450
|                                                    |  |                    |       
|Other income (expense):                             |  |                    |       
|Write-down of investment                            |  |                    |      
|Gain on sale of subsidiary                          |  |                    |      
|Interest income and other, net                      |  |                    | 178   
|                                                    |  |                    |       
|Loss before credit for income taxes                 |  |                    | (7,272
|Credit for income taxes                             |  |                    | (2,109
|                                                    |  |                    |       
|Net loss                                            |  | $                  | (5,163
|                                                    |  |                    |       
|Net loss per common share:                          |  |                    |       
|Basic                                               |  | $                  | (0.11 
|                                                    |  |                    |       
|Diluted                                             |  | $                  | (0.11 
|                                                    |  |                    |       
|Shares used in computing net loss per common share: |  |                    |       
|Basic                                               |  |                    | 45,217
|                                                    |  |                    |       
|Diluted                                             |  |                    | 45,217
|                                                    |  |                    |       

See accompanying notes.

4

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REMEC, INC.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (unaudited, in thousands)

|                                                                            |                                                                         | Three months ended |        
|--------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------ | -------
|
|OPERATING ACTIVITIES                                                        |                                                                         |                    |        
|Net loss                                                                    |                                                                         | $                  | (5,163 
|Adjustments to reconcile net loss to net cash used by operating activities: |                                                                         |                    |        
|Depreciation and amortization                                               |                                                                         |                    | 5,090  
|Write-down of investment                                                    |                                                                         |                    |       
|Gain on sale of subsidiary                                                  |                                                                         |                    |       
|Changes in operating assets and liabilities:                                |                                                                         |                    |        
|                                                                            | Accounts receivable                                                     |                    |        
|                                                                            | Tax refund and other receivables                                        |                    |        
|                                                                            | Inventories                                                             |                    |        
|                                                                            | Other current assets                                                    |                    |        
|                                                                            | Accounts payable                                                        |                    |        
|                                                                            | Accrued expenses, deferred income taxes and other long-term liabilities |                    |        
|                                                                            |                                                                         |                    |        
|Net cash used by operating activities                                       |                                                                         |                    | (13,514
|INVESTING ACTIVITIES                                                        |                                                                         |                    |        
|Additions to property, plant and equipment                                  |                                                                         |                    | (4,897 
|Payment for acquisitions, net of cash acquired                              |                                                                         |                    |       
|Proceeds from sale of subsidiary                                            |                                                                         |                    |       
|Proceeds from sale of fixed assets                                          |                                                                         |                    | 2,600  
|Other assets                                                                |                                                                         |                    | (126   
|                                                                            |                                                                         |                    |        
|Net cash used by investing activities                                       |                                                                         |                    | (2,423 
|FINANCING ACTIVITIES                                                        |                                                                         |                    |        
|Repayments on credit facilities and long-term debt                          |                                                                         |                    |       
|Proceeds from sale of common stock                                          |                                                                         |                    | 676    
|                                                                            |                                                                         |                    |        
|Net cash provided (used) by financing activities                            |                                                                         |                    | 676    
|Effect of exchange rate changes on cash                                     |                                                                         |                    | 236    
|                                                                            |                                                                         |                    |        
|Decrease in cash and cash equivalents                                       |                                                                         |                    | (15,025
|Cash and cash equivalents at beginning of period                            |                                                                         |                    | 49,438 
|                                                                            |                                                                         |                    |        
|Cash and cash equivalents at end of period                                  |                                                                         | $                  | 34,413 
|                                                                            |                                                                         |                    |        

See accompanying notes

5

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (unaudited)

1.    Quarterly Financial Statements



2.    Earnings Per Share



6

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3.    Inventories



May 3, 2002

January 31, 2002Raw materials

$
31,430

$
30,068Work in progress


13,274


14,246$
44,704

$
44,314




4.    Comprehensive Income



Three Months EndedMay 3, 2002

April 27, 2001Net loss

$
(5,163
)
$
(9,169
)Change in net unrealized gain (loss) on investment


(2,616
)

3,665Foreign currency translation adjustment


236


409Comprehensive loss

$
(7,543
)
$
(5,095
)


5.    Acquisition Transactions



7

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Three Months EndedMay 3, 2002

April 27, 2001(Historical)Net sales

$
59,063

$
73,509Net loss

$
(5,163
)
$
(11,465
)Loss per share:Basic

$
(0.11
)
$
(0.26
)Diluted

$
(0.11
)
$
(0.26
)


6.    Information by Segment



8

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Segment Data (in thousands):

|                               |                                            | Three Months Ended |       
|------------------------------ | ------------------------------------------ | ------------------ | ------
|
|Net sales:                     |                                            |                    |       
|Broadband Wireless             |                                            | $                  | 7,905 
|Mobile Wireless                |                                            |                    | 24,276
|Defense and Space              |                                            |                    | 17,234
|Global Manufacturing           |                                            |                    | 15,401
|All other                      |                                            |                    | 2,315 
|Intersegment revenues          |                                            |                    | (8,068
|                               |                                            |                    |       
|                               | Consolidated net sales                     |                    | $     
|                               |                                            |                    |       
|Income (loss) from operations: |                                            |                    |       
|Broadband Wireless             |                                            | $                  | (5,266
|Mobile Wireless                |                                            |                    | (4,407
|Defense and Space              |                                            |                    | 1,991 
|Global Manufacturing           |                                            |                    | 2,106 
|All other                      |                                            |                    | (1,874
|                               |                                            |                    |       
|                               | Consolidated loss from operations          |                    | $     
|                               |                                            |                    |       
|Depreciation and amortization: |                                            |                    |       
|Broadband Wireless             |                                            | $                  | 405   
|Mobile Wireless                |                                            |                    | 977   
|Defense and Space              |                                            |                    | 775   
|Global Manufacturing           |                                            |                    | 2,082 
|All other                      |                                            |                    | 851   
|                               |                                            |                    |       
|                               | Consolidated depreciation and amortization |                    | $     
|                               |                                            |                    |       

|                     |                                  | May 3, 2002 |         | January 31, 2002
|-------------------- | -------------------------------- | ----------- | ------- | ----------------
|Identifiable assets: |                                  |             |         |                 
|Broadband Wireless   |                                  | $           | 8,543   |                 
|Mobile Wireless      |                                  |             | 74,724  |                 
|Defense and Space    |                                  |             | 33,510  |                 
|Global Manufacturing |                                  |             | 101,911 |                 
|All other            |                                  |             | 105,025 |                 
|                     |                                  |             |         |                 
|                     | Consolidated identifiable assets |             | $       | 323,713         
|                     |                                  |             |         |                 

9

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7.    Restructuring



|                            |      | Write-Down
of
Redundant/
Obsolete
Assets |     | Severance
Costs for
Involuntary
Employee
Terminations |   | Costs to Exit
Certain Lease
Obligations |      | Other Costs
Related to
Consolidation of
Facilities |       | Total |  
|--------------------------- | ---- | ---------------------------------------- | --- | ----------------------------------------------------- | - | --------------------------------------- | ---- | -------------------------------------------------- | ----- | ----- | -
|Balance at January 31, 2002 |      | $                                        | 523 |                                                       | $ | 707                                     |      | $                                                  | 2,208 |       | $
|Utilization of Reserves:    |      |                                          |     |                                                       |   |                                         |      |                                                    |       |       |  
|                            | Cash |                                          |     |                                                      |   |                                         | (114 | )                                                  |       | (323  | )
|                            |      |                                          |     |                                                       |   |                                         |      |                                                    |       |       |  
|Balance at May 3, 2002      |      | $                                        | 523 |                                                       | $ | 593                                     |      | $                                                  | 1,885 |       | $
|                            |      |                                          |     |                                                       |   |                                         |      |                                                    |       |       |  

8.    Goodwill and Other Intangible AssetsAdoption of Statement 142



10

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Three Months EndedMay 3, 2002

April 27, 2001Net loss as reported

$
(5,163
)
$
(9,169
)Add back goodwill amortization, net of tax





606Adjusted net loss

$
(5,163
)
$
(8,563
)Basic and diluted net loss per share:Reported net loss per share

$
(0.11
)
$
(0.21
)Goodwill amortization per share, net of tax





0.01Adjusted net loss per share

$
(0.11
)
$
(0.20
)




Gross
Carrying
Value

Accumulated
Amortization

Net
Carrying
ValueCore technology

$
14,674

$
7,669

$
7,005Trademark and trade name


1,524


644


880$
16,198

$
8,313

$
7,885




Years Ending December 31,2002

$
1,2652003


1,3882004


1,3882005


1,3882006


684Thereafter


1,772$
7,885


9.    Subsequent Event



10.  Legal Proceedings



11

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Item 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Our
business is divided into four groups: Broadband Wireless, Mobile Wireless, Defense and Space and Global Manufacturing. The Broadband Wireless group develops and manufactures microwave products for
fixed access wireless communications infrastructure equipment integrated into wireless networks for high speed voice, video, data and internet services. The Mobile Wireless group develops and
manufactures integrated RF products that improve the performance and cost effectiveness of mobile wireless communications infrastructure equipment. The Defense and Space group provides a broad
spectrum of RF, microwave and guidance products for systems integrated by prime contractors in military and space applications. The Global Manufacturing group provides high volume production of
microwave products, including test and critical hybrid circuits, primarily to the other product groups. Not included in the above groups are certain non operating subsidiaries of REMEC and certain
foreign subsidiaries, including Nanowave, Inc., a majority owned subsidiary which designs and produces custom monolithic integrated circuits, critical modules and integrated subassemblies for
fiber optic and broadband wireless communication systems.

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 endedMay 3, 2002

April 27, 2001Net sales

100.0
%
100.0
%Cost of sales

83.2

92.6Gross profit

16.8

7.4Operating expenses:Selling, general & administrative

16.2

20.4Research and development

13.2

10.5Total operating expenses

29.4

30.9Loss from operations

(12.6
)
(23.5
)Write-down of investment



(15.9
)Gain on sale of subsidiary



12.9Interest income and other, net

0.3

2.9Loss before income taxes

(12.3
)
(23.6
)Credit for income taxes

(3.6
)
(8.0
)Net loss

(8.7
)%
(15.6
)%


Results of Operations

Net Sales And Gross Profit.Net sales were $59.1 million for the three months ended May 3, 2002, and were essentially
unchanged from the comparable prior year period. Gross profit increased 127.2% from $4.4 million for the three months ended April 27, 2001, to $9.9 million for the three months
ended

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May 3, 2002. Consolidated gross margin as a percentage of sales increased from 7.4% in the prior year to 16.8% for the three months ended May 3, 2002. Results for the three months ended
April 27, 2001, included reserves for excess inventory of approximately $7.0 million. The improvement in both gross profit and gross margin as a percentage of sales during the current
year reflects the absence of these charges and a reduction of operating costs associated with the Company's restructuring efforts.

Segment Information.The following segment information should be read in conjunction with the financial results of each reporting segment
as detailed in Note 6 of the Condensed Consolidated Financial Statements. The following segment sales figures exclude intersegment revenues totaling $8.1 million and $15.7 million
for the three months ended May 3, 2002 and April 27, 2001, respectively. Intersegment revenues resulted primarily from sales from the Global Manufacturing group. For purposes of this
discussion, intersegment revenues were eliminated. Results within each of our business segments were as follows:

Broadband Wireless ("BBW").Sales decreased 61.8% from $19.6 million for the three months ended April 27, 2001 to
$7.5 million for the three months ended May 3, 2002. The decline in BBW sales reflects the overall decline in industry demand for point-to-point radios and
transceivers. Gross margin as a percentage of sales decreased from 16.3% for the three months ended April 27, 2001 to 1.8% for the three months ended May 3, 2002. The decrease in gross
margins in the current year is due to decreased overhead absorption resulting from the decline in production volume.

Mobile Wireless.Sales increased 1.7% from $18.7 million for the three months ended April 27, 2001 to $18.9 million
for the three months ended May 3, 2002, primarily as a result of an increase in filter products sales for mobile wireless communications infrastructure equipment which offset declining
masthead and amplifier sales. Gross margins increased from a negative 22.1% for the three months ended April 27, 2001 to a positive 16.2% for the three months ended May 3, 2002. Results
for the three months ended April 27, 2001 include reserves for excess inventory totaling approximately $5.2 million. The improvement in gross margins in the current year is due to the
absence of such costs.

Defense and Space.Sales increased 12.7% from $15.3 million for the three months ended April 27, 2001 to $17.2 million
for the three months ended May 3, 2002. Gross margins as a percentage of sales increased from 22.0% for the period ended April 27, 2001 to 22.5% for the period ended May 3, 2002.
The increase in sales revenue and the increase in gross margins as a percentage of sales reflect increased production volumes based on customer contract delivery requirements.

Global Manufacturing.Sales to external customers increased 117.2% from $6.0 million for the three months ended April 27,
2001 to $13.1 million for the three months ended May 3, 2002. The increase in sales is primarily due to increased demand for consignment and turnkey manufacturing services. Gross margin
as a percentage of sales increased from 11.3% for the three months ended April 27, 2001 to 18.6% for the three months ended May 3, 2002 as a result of improved overhead absorption due to
increased production volume.

Other Sales.Other sales, which are primarily generated at our majority owned Nanowave subsidiary, decreased 42.9% from $4.1 million
for the three months ended April 27, 2001 to $2.3 million for the three months ended May 3, 2002. The sales decline is attributable to decreased demand for microwave modules for
the fiber optic market. Gross margin as a percentage of sales increased to 18.3% for the three months ended May 3, 2002 as a result of a reduction of manufacturing overhead at Nanowave.

Selling, General and Administrative Expenses.Selling, general and administrative expenses, or SG&A, decreased 20.4% from
$12.0 million for the three months ended April 27, 2001 to $9.6 million for the three months ended May 3, 2002. The decrease in SG&A is primarily attributable to the
reversal of approximately $1.7 million of accrued employee compensation and professional fees accruals and a $.6 million reduction of goodwill amortization due to the implementation of
FAS 142 which eliminates the requirement to amortize goodwill. As a percentage of net sales, SG&A expenses decreased from

13

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20.4% for the three months ended April 27, 2001 to 16.2% for the three months ended May 3, 2002 as a result of the factors noted above.

Research And Development Expenses.Research and development expenses increased 26.2% from $6.2 million for the three months ended
April 27, 2001 to $7.8 million for the three months ended May 3, 2002, and as a percentage of net sales, increased from 10.5% for the three months ended April 27, 2001 to
13.2% for the three months ended May 3, 2002. These expenditures are almost entirely attributable to REMEC's Broadband Wireless and Mobile Wireless groups and reflect activity associated with
new wireless communications product development initiatives which the Company believes are required to meet current and future market and customer requirements.

Write-Down Of Investment.Results of operations for the three months ended April 27, 2001 include a $9.4 million
charge to operations representing the write-down of our investment in Allgon AB common stock, which had been acquired in conjunction with our proposed merger with Allgon, to its market
value. Subsequent increases and decreases have been recorded as unrealized gains and losses in other comprehensive income. There was no similar write-down in the current period.

Gain On Sale Of Subsidiary.Results of operations for the three months ended April 27, 2001 include the gain of $7.6 million
from the sale of our Humphrey, Inc. subsidiary. There was no similar gain in the current period.

Interest Income And Other, Net.Interest income and other, net decreased 89.7% from $1.7 million for the three months ended
April 27, 2001 to $0.2 million for the three months ended May 3, 2002. The decrease was due to the combination of a reduction in the amount of funds available for investment and
reduced yields on our investments as short term interest rates declined from their levels of a year ago.

Credit For Income Taxes.The Company recorded a credit for income taxes of $2.1 during the three months ended May 3, 2002 as
compared to a credit of $4.7 million for the comparable period. The credit for income taxes recorded during this fiscal period reflects the recognition of the tax benefit associated with
REMEC's domestic net operating losses.

Liquidity and capital resources

At
May 3, 2002, REMEC had $125.7 million of working capital, which included cash and equivalents totaling $34.4 million. REMEC leases certain office and production facilities
under noncancelable agreements classified as operating leases. In accordance with generally accepted accounting principles, obligations under these long-term leases are not recorded on the
balance sheet as liabilities until payment is due. For further discussion of REMEC's lease obligations, see our Annual Report on Form 10-K for the year ended January 31,
2002. During fiscal 2001, REMEC entered into a security agreement with a bank whereby REMEC agreed to pledge approximately $17.0 million in connection with the collateralization of one of our
facility leases with an affiliate of the bank. The collateral for this lease is included in our balance sheet as restricted cash.

During
the three months ended May 3, 2002, operations used cash of approximately $13.5 million. The negative operating cash flow during the first quarter was principally the result of
cash used to fund working capital requirements, including a $10.0 million increase in accounts receivable arising as a result of difficulties encountered in converting to our new accounting
system.

During
the three months ended May 3, 2002, $2.4 million was used by investing activities consisting of $4.9 million of capital expenditures and a net cash inflow of approximately
$2.6 million resulting from the net cash proceeds received from the sale of certain real property.

14

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Financing
activities provided approximately $0.7 million during the three months ended May 3, 2002, as a result of proceeds from the issuance of common stock by REMEC under its Employee
Stock Purchase Plan and from stock option exercises.

Our
future capital requirements will depend upon many factors, including the nature and timing of orders by OEM customers, the progress of our research and development efforts, expansion of our
marketing and sales efforts, and the status of competitive products. REMEC believes that available capital resources will be adequate to fund its operations for at least twelve months.

CRITICAL ACCOUNTING POLICIES

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 accounting principles
generally accepted in the United States. The preparation of these financial statements requires us 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. Actual results may differ from these estimates under different assumptions or
conditions.

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. We generally ship to our customers "Free on Board" shipping point. The Securities and Exchange Commission's Staff Accounting
Bulletin No. 101, "Revenue Recognition," provides guidance on the application of generally accepted accounting principles to selected revenue recognition issues.
We believe that our revenue recognition policy is consistent with this guidance and in accordance with generally accepted accounting principles. If our shipping policies, including the point of title
transfer, were to change, materially different reported results would be likely.

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. If future demand were significantly less favorable than projected by management, increases to the reserve would be required. At May 3, 2002, inventories totaled
$44.7 million, net of reserves for excess and obsolete inventory of $23.0 million and contract losses of $2.9 million.

Valuation of Goodwill, Intangible and Other Long-Lived Assets.In accordance with Statement of Financial Accounting Standards
(SFAS) No. 121, Accounting for Impairment of Long-Lived Assets, we periodically assess the impairment of goodwill, intangible and other long-lived assets which require
us to make assumptions and judgments regarding the carrying value of these assets. The assets are considered to be impaired if we determine that the carrying value may not be recoverable based upon
our assessment of the following events or changes in circumstances: the asset's ability to continue to generate income from operations and positive cash flow in future periods; any volatility or
significant decline in our stock price and market capitalization compared to our net book value; loss of legal ownership or title to the asset; significant changes in our strategic business objectives
and utilization of the asset(s); and the impact of significant negative industry or economic trends.

15

---

If
assets are considered to be impaired, the impairment we recognize is the amount by which the carrying value of the assets exceeds the fair value of the assets. In addition, we base the useful lives
and related amortization or depreciation expense on our estimate of the period that the assets will generate revenues or otherwise be used by us. If a change were to occur in any of the
above-mentioned factors or estimates, the likelihood of a material change in our reported results would increase.

In
2002, SFAS No. 142 "Goodwill and Other Intangible Assets" became effective and as a result, we no longer amortize goodwill assets. In lieu of amortization, we are required to perform an
initial impairment review of our goodwill in 2002 and an annual impairment review thereafter.

Accrued Restructuring Related Costs.To the extent that exact amounts are not determinable, we have estimated amounts for the direct costs
and liabilities related to our restructuring in accordance with the Emerging Issues Task Force ("EITF") Issue 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)." We recorded a charge for restructuring related costs of $17.3 million during fiscal 2002.
At May 3, 2002, the remaining balance of accrued restructuring costs was $4.7 million. Materially different reported results would be likely if any of the estimated costs or expenses
were different from our estimations or if the approach, timing and extent of the restructuring plans adopted by management were different.

Valuation of Deferred Income Taxes.Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. Management is implementing tax strategies in fiscal 2003, including the carryback of net operating losses that are expected to provide for the realization of the deferred tax
assets generated in fiscal 2002. The likelihood of a material change in our expected realization of these assets depends on: our ability to carry back losses to periods with taxable income, future
taxable income allowing us to deduct tax loss carryforwards against such future taxable income, the effectiveness of our tax planning and strategies among the various tax jurisdictions in which we
operate and any significant changes in the tax treatment received in the foreign jurisdictions in which we operate.

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PART IIOTHER INFORMATION

Item 3. Qualitative and Quantitative Disclosures About Market Risk

Interest Rate Risk.REMEC is exposed to changes in interest rates to the extent of its investments in certain
held-to-maturity securities. Under current REMEC policies, REMEC does not use interest rate derivative instruments to manage exposure to interest rate changes. A hypothetical
100 basis point increase in interest rates in REMEC cash equivalent securities would not materially affect the fair value of these securities at May 3, 2002.

Foreign Currency Exchange Rate.REMEC's earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange
rates. To a certain extent, foreign currency exchange rate movements also affect REMEC's competitive position, as exchange rate changes may affect business practices and/or pricing strategies on
non-U.S. based competitors. The primary foreign currency risk exposure is related to U.S. dollar to British pound and U.S. dollar and British pound to Euro conversions. Considering both
the anticipated cash flows from firm sales commitments and anticipated sales for the next quarter, a hypothetical 10% weakening of the U.S. dollar relative to all other currencies would not materially
adversely affect expected second quarter earnings or cash flows. This analysis is dependent on actual export sales during the next quarter occurring within 90% of budgeted forecasts. The effect of the
hypothetical change in exchange rates ignores the effect this movement may have on other variables including competitive risk. If it were possible to quantify this competitive impact, the results
could well be different than the sensitivity effects described above. In addition, it is unlikely that all currencies would uniformly strengthen or weaken relative to the U.S. dollar. In reality, some
currencies may weaken while others may strengthen. REMEC reviews its position each month for expected currency exchange rate movements

Item 6. Exhibits and Reports on Form 8-K

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SIGNATURES

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

|REMEC, Inc.
(Registrant) |                                                                            | 
|------------------------ | -------------------------------------------------------------------------- | 
|By:                      | /s/RONALD E. RAGLANDRonald E. Ragland
Chairman and Chief Executive Officer | 
|By:                      | /s/DAVID L. MORASHDavid L. Morash
Chief Financial and Accounting Officer   | 
|Date:                    | June 17, 2002                                                              | 

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