---

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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 November 1, 2002
|Commission File Number 1-16541                 

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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 Number
|------------------------------------------------------------------------ |  | -----------------------------------------------

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|3790 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)              

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:

|ClassCommon shares, $.01 par value |  | Outstanding as of: November 1, 200245,677,721
|---------------------------------- |  | ---------------------------------------------

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REMEC, Inc.
Form 10-Q
For The Quarterly and Nine Month Periods Ended November 1, 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 |  | 13      
|Item 3.        |  | Qualitative and Quantitative Disclosures About Market Risk                            |  | 18      
|Item 4.        |  | Controls and Procedures                                                               |  | 18      
|PART II        |  | OTHER INFORMATION                                                                     |  |         
|Item 1.        |  | Legal Proceedings                                                                     |  | 19      
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                      |  | 19      
|SIGNITURES     |  | 20                                                                                   
|CERTIFICATIONS |  | 21                                                                                   
|EXHIBITS       |  |                                                                                      
|Exhibit 99.1   |  |                                                                                      
|Exhibit 99.2   |  |                                                                                      

2

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PART IFINANCIAL INFORMATION

Item 1

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

|                                                      |                                                | November 1, 2002 |         | January 31, 2002
|----------------------------------------------------- | ---------------------------------------------- | ---------------- | ------- | ----------------
|
|ASSETS                                                |                                                |                  |         |                 
|Current assets:                                       |                                                |                  |         |                 
|                                                      | Cash and cash equivalents                      |                  | $       | 30,026          
|                                                      | Accounts receivable, net                       |                  |         | 37,670          
|                                                      | Inventories, net                               |                  |         | 42,902          
|                                                      | Deferred income taxes                          |                  |         | 25,201          
|                                                      | Other current assets                           |                  |         | 6,586           
|                                                      |                                                |                  |         |                 
|Total current assets                                  |                                                |                  | 142,385 |                 
|                                                      | Property, plant and equipment, net             |                  |         | 84,926          
|                                                      | Goodwill, net                                  |                  |         | 36,407          
|                                                      | Restricted cash                                |                  |         | 17,049          
|                                                      | Intangibles assets, net                        |                  |         | 7,140           
|                                                      | Other assets                                   |                  |         | 5,144           
|                                                      |                                                |                  |         |                 
|                                                      |                                                | $                | 293,051 |                 
|                                                      |                                                |                  |         |                 
|LIABILITIES AND SHAREHOLDERS' EQUITY                  |                                                |                  |         |                 
|Current liabilities:                                  |                                                |                  |         |                 
|                                                      | Accounts payable                               |                  | $       | 14,435          
|                                                      | Accrued expenses and other current liabilities |                  |         | 24,525          
|                                                      |                                                |                  |         |                 
|Total current liabilities                             |                                                |                  | 38,960  |                 
|Deferred income taxes and other long-term liabilities |                                                |                  | 1,433   |                 
|Shareholders' equity                                  |                                                |                  | 252,658 |                 
|                                                      |                                                |                  |         |                 
|                                                      |                                                | $                | 293,051 |                 
|                                                      |                                                |                  |         |                 

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 |         | Nine months ended |  
|--------------------------------------------------- |  | ------------------ | ------- | ----------------- | -
|
|Net sales                                           |  | $                  | 59,448  |                   | $
|Cost of sales                                       |  |                    | 52,597  |                   |  
|                                                    |  |                    |         |                   |  
|Gross profit                                        |  |                    | 6,851   |                   |  
|Operating expenses:                                 |  |                    |         |                   |  
|Selling, general and administrative                 |  |                    | 10,499  |                   |  
|Research and development, including in-process      |  |                    | 8,846   |                   |  
|Impairment of long-lived assets                     |  |                    | 659     |                   |  
|                                                    |  |                    |         |                   |  
|Total operating expenses                            |  |                    | 20,004  |                   |  
|                                                    |  |                    |         |                   |  
|Loss from operations                                |  |                    | (13,153 | )                 |  
|Write-down of investment                            |  |                    |        |                   |  
|Gain on sale of subsidiary                          |  |                    |        |                   |  
|Interest income and other, net                      |  |                    | 1,185   |                   |  
|                                                    |  |                    |         |                   |  
|Loss before income taxes                            |  |                    | (11,968 | )                 |  
|Credit for income taxes                             |  |                    |        |                   |  
|                                                    |  |                    |         |                   |  
|Net loss                                            |  | $                  | (11,968 | )                 | $
|                                                    |  |                    |         |                   |  
|Net loss per common share:                          |  |                    |         |                   |  
|Basic                                               |  | $                  | (0.26   | )                 | $
|                                                    |  |                    |         |                   |  
|Diluted                                             |  | $                  | (0.26   | )                 | $
|                                                    |  |                    |         |                   |  
|Shares used in computing net loss per common share: |  |                    |         |                   |  
|Basic                                               |  |                    | 45,489  |                   |  
|                                                    |  |                    |         |                   |  
|Diluted                                             |  |                    | 45,489  |                   |  
|                                                    |  |                    |         |                   |  

See
accompanying notes.

4

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

|                                                                            |                                                                         | Nine months ended |        
|--------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ----------------- | -------
|
|OPERATING ACTIVITIES                                                        |                                                                         |                   |        
|Net loss                                                                    |                                                                         | $                 | (28,007
|Adjustments to reconcile net loss to net cash used by operating activities: |                                                                         |                   |        
|Depreciation and amortization                                               |                                                                         |                   | 15,103 
|Gain on sale of facilities                                                  |                                                                         |                   | (1,800 
|Impairment of long-lived assets                                             |                                                                         |                   | 659    
|Write-down of investment                                                    |                                                                         |                   |       
|Gain on sale of subsidiary                                                  |                                                                         |                   |       
|Changes in operating assets and liabilities:                                |                                                                         |                   |        
|                                                                            | Accounts receivable                                                     |                   |        
|                                                                            | Inventories                                                             |                   |        
|                                                                            | Deferred taxes and other current assets                                 |                   |        
|                                                                            | Accounts payable                                                        |                   |        
|                                                                            | Accrued expenses, deferred income taxes and other long-term liabilities |                   |        
|                                                                            |                                                                         |                   |        
|Net cash used by operating activities                                       |                                                                         |                   | (14,174
|INVESTING ACTIVITIES                                                        |                                                                         |                   |        
|Additions to property, plant and equipment                                  |                                                                         |                   | (12,347
|Payment for acquisitions, net of cash acquired                              |                                                                         |                   |       
|Proceeds from sale of subsidiary                                            |                                                                         |                   |       
|Proceeds from sale of facilities                                            |                                                                         |                   | 5,300  
|Other assets                                                                |                                                                         |                   | (1,432 
|                                                                            |                                                                         |                   |        
|Net cash used by investing activities                                       |                                                                         |                   | (8,479 
|FINANCING ACTIVITIES                                                        |                                                                         |                   |        
|Proceeds from sale of common stock                                          |                                                                         |                   | 1,880  
|Debt repayments                                                             |                                                                         |                   |       
|                                                                            |                                                                         |                   |        
|Net cash provided by financing activities                                   |                                                                         |                   | 1,880  
|Effect of exchange rate changes on cash                                     |                                                                         |                   | 1,361  
|                                                                            |                                                                         |                   |        
|Decrease in cash and cash equivalents                                       |                                                                         |                   | (19,412
|Cash and cash equivalents at beginning of period                            |                                                                         |                   | 49,438 
|                                                                            |                                                                         |                   |        
|Cash and cash equivalents at end of period                                  |                                                                         | $                 | 30,026 
|                                                                            |                                                                         |                   |        

See
accompanying notes.

5

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (in thousands, except share data)  (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; nevertheless, the management of REMEC believes that the disclosures herein are adequate to make the information presented not
misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended January 31, 2002,
included in REMEC's Annual Report on Form 10-K/A. In the opinion of management, the interim 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 November 1, 2002, and the results of its operations for the three
and nine month periods ended November 1, 2002 and October 26, 2001. The results of operations for the interim periods ended November 1, 2002, are not necessarily indicative of the
results which may be reported for any other interim period or for the entire fiscal year.

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
due to a variety of factors, including REMEC's success in penetrating the commercial wireless market, risks associated with the cancellation or reduction of orders by significant commercial or defense
customers, trends in the commercial wireless and defense markets, risks of cost overruns and product nonperformance, and other risk 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.

2.    Net Loss Per Share

REMEC calculates earnings per share in accordance with SFAS No. 128, "Earnings per Share." Basic earnings per share is computed using the weighted average
shares outstanding for each period presented. Diluted earnings 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.

Dilutive
securities may include options, warrants, and preferred stock as if converted and restricted stock subject to vesting. Potentially dilutive securities (consisting of stock
options) totaling 43,000 and 157,000 shares for the three and nine months ended November 1, 2002, and 591,000 and 608,000 shares for the three and nine months ended October 26, 2001,
respectively, were excluded from the calculation of diluted earnings per share because of their anti-dilutive effect.

6

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3.    Inventories

Inventories consist of the following (in thousands):

November 1,
2002

January 31,
2002Raw materials

$
30,895

$
30,068Work in progress


12,007


14,246$
42,902

$
44,314


Inventories
related to contracts with prime contractors to the U.S. Government included capitalized general and administrative expenses of $800 and $1,067 at November 1, 2002, and
January 31, 2002, respectively. REMEC had a reserve for obsolete and unusable inventory of $20,031 and $23,221 as of November 1, 2002, and January 31, 2002, respectively.

4.    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 adjustments included in comprehensive income (loss), including foreign currency translation adjustments and unrealized gains and losses on investments, are
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 thousands):

Three months ended

Nine months endedNovember 1,
2002

October 26,
2001

November 1,
2002

October 26,
2001Net loss

$
(11,968
)
$
(6,245
)
$
(28,007
)
$
(21,668
)Change in net unrealized loss on investment


(217
)




(4,884
)

3,665Foreign currency translation adjustment


(216
)

95


1,797


475Comprehensive loss

$
(12,401
)
$
(6,150
)
$
(31,094
)
$
(17,528
)


5.    Acquisition Transactions

ADC Mersum Oy ("Solitra")

On October 26, 2001, REMEC acquired Solitra in Oulu, Finland from ADC Telecommunications, Inc. The Company acquired the assets and assumed all of
the obligations of Solitra's radio frequency (RF) division and 100% of the shares of Solitra in exchange for cash consideration of $51.6 million. Solitra specializes in supplying RF equipment
to the leading OEMs in the mobile wireless infrastructure industry. The addition of Solitra expanded our product portfolio and global footprint, and furthered our engineering expertise within
products currently developed and already supplied for 2.5G and 3G cellular systems. Solitra further expands our presence in Europe and strengthens our relationship with key strategic customers,
especially those located in Scandinavia. The acquisition has been accounted for as a purchase, and accordingly, the total purchase price has been allocated to the acquired assets and liabilities
assumed at their estimated fair values in accordance with the provisions of SFAS 141. The estimated excess of the purchase price over the net tangible assets acquired of approximately
$29.6 million is being carried as intangible assets, including goodwill of $24.8 million. REMEC's consolidated financial statements include the results of Solitra from the date of
acquisition.

7

---

Pacific Microwave Corporation ("PMC")

On March 7, 2001, REMEC acquired substantially all of the assets and assumed all of the obligations of PMC, a privately held microwave electronics
manufacturing company located in the Philippines, in exchange for cash consideration of approximately $23.1 million. PMC specializes in the assembly, manufacture and test of RF, microwave and
millimeter wave gallium arsenide devices, components, subsystem and systems for broadband voice, and data transmission over wireless communications networks. The addition of PMC provided an increase
in our millimeter wave manufacturing capacity. The acquisition has been accounted for as a purchase, and accordingly, the total purchase price has been allocated to the acquired assets and liabilities
assumed at their estimated fair values. REMEC's consolidated financial statements include the results of PMC from the date of acquisition.

Humphrey, Incorporated

On February 26, 2001, REMEC sold substantially all of the operating assets and operations of its wholly owned subsidiary Humphrey, Inc. in exchange
for cash consideration of $13.8 million. The sale of Humphrey resulted in a gain of $7.6 million in the fiscal 2002.

Pro Forma Information

The following unaudited pro forma summary presents the consolidated results of operations of the Company assuming that the acquisition's of Solitra and PMC and
the disposition of Humphrey had occurred on the first day of REMEC's fiscal year ended January 31, 2002. The pro forma condensed consolidated results of operations would be as follows (in
thousands, except per share data):

Nine Months EndedNovember 1,
2002

October 26,
2001Net sales

$
171,999

$
182,472Net loss

$
(28,007
)
$
(21,883
)Net loss per share:Basic

$
(0.62
)
$
(0.49
)Diluted

$
(0.62
)
$
(0.49
)


6.    Information by Segment

During the third quarter of fiscal 2003, we divided our business into two groups for financial reporting purposes: Commercial Wireless (which encompasses our
former Mobile Wireless, Broadband Wireless
and Global Manufacturing groups) and Defense and Space. Not included in the above groups are certain non-operating subsidiaries of REMEC and Nanowave, Inc., a majority owned
subsidiary which designs and produces critical modules and integrated subassemblies for fiber optic and other wireless communications. The Company's reportable segments have been determined based on
the nature of the customers for the products offered. The Company evaluates performance and allocates resources based on profit or loss from operations before interest, other income and income taxes.
Historical segment data has been restated to reflect these changes.

8

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Segment Data (in thousands):

Three months ended

Nine months endedNovember 1,
2002

October 26,
2001

November 1,
2002

October 26,
2001Sales:Commercial Wireless

$
39,602

$
34,280

$
112,985

$
116,470Defense and Space


18,334


15,940


53,347


46,621All other


1,512


2,252


5,667


8,695Consolidated net sales

$
59,448

$
52,472

$
171,999

$
171,786Income (loss) from operations:Commercial Wireless

$
(13,167
)
$
(10,913
)
$
(36,585
)
$
(35,964
)Defense and Space


2,204


1,105


6,382


2,992All other


(2,190
)

(2,243
)

(5,748
)

(5,277
)Consolidated loss from operations

$
(13,153
)
$
(12,051
)
$
(35,951
)
$
(38,249
)Depreciation and amortization:Commercial Wireless

$
3,588

$
3,569

$
11,054

$
10,376Defense and Space


878


675


2,489


2,111All other


446


856


1,560


2,425Consolidated depreciation and amortization

$
4,912

$
5,100

$
15,103

$
14,912


November 1,
2002

January 31,
2002Identifiable assets:Commercial Wireless

$
245,703

$
272,498Defense and Space


29,648


30,354All other


17,700


21,886Consolidated identifiable assets

$
293,051

$
324,738


7.    Restructuring

During the fourth quarter of fiscal 2002, the Company announced that it was undertaking various actions to restructure its operations to improve its overall
financial performance. The Company's restructuring plan included reductions in its overall cost structure, realignment of manufacturing capacity to current levels of demand and the transition of
manufacturing operations to low cost, low tax offshore locations. Part of the restructuring effort also included a reduction in force of approximately 1,100 employees. As a result of this plan,
restructuring related charges of approximately $17.3 million were recognized as operating expenses in fiscal 2002.

9

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The
following table (in thousands) summarizes the balance of the accrued restructuring reserve, which has been included in accrued liabilities at November 1, 2002:

Severance
Costs for
Involuntary
Employee
Terminations

Costs to Exit
Certain Lease
Obligations

Other Costs
Related to
Consolidation of
Facilities

TotalBalance at January 31, 2002

$
707

$
2,208

$
250

$
3,165Restructuring charge activity:Cash


(707
)

(1,034
)

(220
)

(1,961
)Balance at November 1, 2002

$


$
1,174

$
30

$
1,204


The
Company completed the disposal of redundant assets, the facility consolidation and the remaining workforce reductions associated with its restructuring during the third quarter of
fiscal 2003. As of November 1, 2002, the Company continues to believe that its estimates of accrued restructuring costs remain appropriate and adequate to complete these efforts.

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

In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No.141,Business
Combinations, and No. 142,Goodwill and Other Intangible Assets. SFAS 141 requires that the purchase method of
accounting be used for all business combinations closed after June 30, 2001. SFAS 141 also includes guidance on the initial recognition and measurement of goodwill and other intangible
assets arising from business combinations completed after June 30, 2001. SFAS 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives.
SFAS 142 requires that these assets be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives.
Additionally, SFAS 142 requires that goodwill included in the carrying value of equity method investments no longer be amortized.

The
Company has implemented SFAS 141 and SFAS 142 and began applying the new rules on accounting for goodwill and other intangible assets effective February 1, 2002.
The net book value assigned to our assembled workforce intangible asset at November 1, 2002, which totaled approximately $0.5 million has been reclassed and reported as goodwill and will
no longer be amortized effective February 1, 2002.

The
following table presents a roll-forward of goodwill from February 1, 2002 to November 1, 2002 (in thousands):

Goodwill, netBalance at January 31, 2002

$
34,909Reclassification of assembled workforce intangible


500Revaluation of acquisition goodwill


998Balance at November 1, 2002

$
36,407


10

---

The
following table presents reconciliation's of net loss and per share data to what would have been reported had the new rules been in effect for the three and nine months ended
October 26, 2001. (in thousands, except per share data):

|                                            |  | Three Months Ended |         | Nine Months Ended |  
|------------------------------------------- |  | ------------------ | ------- | ----------------- | -
|
|Net loss as reported                        |  | $                  | (11,968 | )                 | $
|Add back goodwill amortization, net of tax  |  |                    |        |                   |  
|                                            |  |                    |         |                   |  
|Adjusted net loss                           |  | $                  | (11,968 | )                 | $
|                                            |  |                    |         |                   |  
|Basic and diluted net loss per share:       |  |                    |         |                   |  
|Reported net loss per share                 |  | $                  | (0.26   | )                 | $
|Goodwill amortization per share, net of tax |  |                    |        |                   |  
|                                            |  |                    |         |                   |  
|Adjusted net loss per share                 |  | $                  | (0.26   | )                 | $
|                                            |  |                    |         |                   |  

Other Intangible Assets

Acquired intangible assets subject to amortization at November 1, 2002 were as follows (in thousands):

Gross Carrying Value

Accumulated Amortization

Net Carrying ValueCore technology

$
9,800

$
3,462

$
6,338Patents and trademark


1,574


772


802$
11,374

$
4,234

$
7,140


Amortization
expense for intangible assets was $448 and $1,151 for the three months and nine months ended November 1, 2002, respectively, and $244 and $732 for the three and nine
months ended October 26, 2001, respectively.

9.    Newly Issued Accounting Standards

In July 2002, FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities." The statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS 146 requires that a liability for costs associated with an exit or disposal activity be recognized when a
liability is incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an entity's commitment to an exit plan.
The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, however, earlier adoption is permissible. We do not intend to early
adopt SFAS 146, and we do not believe adoption will have a material impact on our operations or financial position.

10.  Income Taxes

The credit for income taxes recorded reflects the recognition of the tax benefit associated with REMEC's net operating losses. The Company continued to record tax
benefit for these operating losses through the end of the second quarter of fiscal 2003 on the basis of its forecast which assumes attaining revenue levels and related margins, continuing with cost
cutting measures and implementing tax planning strategies all of which, will ensure the realization of the recorded tax benefits. The

11

---

Company did not record any income tax benefit to its third quarter fiscal 2003 operating results pending an assessment of its ability to realize future tax benefits based on the tax implications of
its planned acquisition of Spectrian. If the Company is unable to achieve its forecasted operating results and complete the implementation of its tax planning strategies, the Company will be required
to review and may need to reduce the carrying value of its deferred tax assets.

11.  Pending Business Combination

On October 29, 2002, REMEC and Spectrian Corporation, a publicly-held designer and manufacturer of single-carrier and multi-carrier
high-power RF amplifiers, announced that the two companies had entered into an amended definitive merger agreement. Pursuant to the terms of the revised merger agreement, each share of
Spectrian common stock will be exchanged for one share of REMEC common stock. This transaction is subject to the approval of REMEC and Spectrian shareholders', as well as customary closing conditions
and regulatory approvals. Spectrian is located in Sunnyvale, California and the transaction is expected to close during REMEC's fourth quarter. As of November 1, 2002, the Company has deferred
approximately $1.3 million of costs incurred in connection with this transaction. Such costs have been included in the balance sheet as other assets, and would have to be written off to other
expense in the event the transaction is not completed.

12

---



Item 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF 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 |    | Nine months ended |   
|--------------------------------- |  | ------------------ | -- | ----------------- | --
|
|Net sales                         |  | 100.0              | %  | 100.0             | % 
|Cost of sales                     |  | 88.5               |    | 86.0              |   
|                                  |  |                    |    |                   |   
|Gross profit                      |  | 11.5               |    | 14.0              |   
|Operating expenses:               |  |                    |    |                   |   
|Selling, general & administrative |  | 17.6               |    | 24.6              |   
|Research and development          |  | 14.9               |    | 12.4              |   
|Impairment of long-lived assets   |  | 1.1                |    |                  |   
|                                  |  |                    |    |                   |   
|Total operating expenses          |  | 33.6               |    | 37.0              |   
|                                  |  |                    |    |                   |   
|Loss from operations              |  | (22.1              | )  | (23.0             | ) 
|Write-down of investment          |  |                   |    |                  |   
|Gain on sale of subsidiary        |  |                   |    |                  |   
|Interest income and other, net    |  | 2.0                |    | 2.0               |   
|                                  |  |                    |    |                   |   
|Loss before income taxes          |  | (20.1              | )  | (21.0             | ) 
|Credit for income taxes           |  |                   |    | (9.1              | ) 
|                                  |  |                    |    |                   |   
|Net loss                          |  | (20.1              | )% | (11.9             | )%
|                                  |  |                    |    |                   |   

Overview

During the third quarter of fiscal 2003, we divided our business into two groups for financial reporting purposes. The Commercial Wireless group, which
encompasses our former Mobile Wireless, Broadband Wireless and Global Manufacturing groups, develops and manufactures high frequency subsystems used in the transmission of voice, video and data
traffic over fixed access and mobile wireless communications networks. 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. Not included in the above groups are certain non-operating subsidiaries of REMEC and Nanowave, Inc., a majority owned subsidiary
which designs and produces critical modules and integrated subassemblies for fiber optic and other wireless communication systems. Historical segment data has been restated to reflect these changes.

Results of Operations

Net Sales and Gross Profit.Net sales were $59.4 million and $172.0 million for the
three and nine months ended November 1, 2002, respectively, representing increases of $6.9 million (13.3%) and $0.2 million (0.1%), respectively, from the comparable prior year
periods. The increase in net sales for both periods presented reflects additional sales of filter products associated with operations acquired in the fourth quarter of the prior fiscal year, the
growth in sales at our Defense and Space segment and contract termination settlements which offset decreased sales of other commercial products owing to continued weak demand from telecommunications
infrastructure customers.

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Gross
profit was $6.9 million and $20.8 million for the three and nine months ended November 1, 2002, respectively, as compared to $7.4 million and
$18.4 million for the comparable prior year periods. For the three months ended November 1, 2002, consolidated gross margin as a percentage of sales decreased to 11.5% from 14.0% in the
comparable prior year period principally as a result of the additional manufacturing overhead costs associated with operations acquired in the prior fiscal year and $1.0 million of inventory
obsolescence charges recorded in the current fiscal year. On a year-to-date basis, gross margin as a percentage of sales increased to 12.1% from 10.7% in the prior year. Prior
year results included reserves for excess inventory of approximately $17.3 million as compared to $1.8 million recorded in the current fiscal year. Excluding the impact of inventory
reserves, gross margins as a
percentage of sales has decreased during the current fiscal year as a result of additional manufacturing overhead costs associated with acquired operations.

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. Results within each of our business segments were as follows:

Commercial Wireless.Net sales were $39.6 million and $113.0 million for the three and nine months ended
November 1, 2002, respectively, representing an increase of $5.3 million (15.5%) and a decrease of $3.5 million (3.0%) from the comparable prior year periods. The increase in
commercial sales during the third quarter of fiscal 2003 resulted from additional sales of filter products associated with operations acquired in the fourth quarter of the prior fiscal year, increased
revenue from manufacturing services and $2.1 million of contract termination settlements, which offset decreased sales of other commercial products. The decline in fiscal
2003 year-to-date sales reflects continued weak demand from telecommunications infrastructure customers. Gross margin as a percentage of sales decreased to 7.9% and 7.0%
for the three and nine months ended November 1, 2002, respectively from 12.3% and 7.3% in the comparable prior year period as a result of the additional manufacturing overhead costs associated
with operations acquired in the prior fiscal year.

Defense and Space.Net sales were $18.3 million and $53.3 million for the three and nine months ended
November 1, 2002, representing increases of $2.4 million (15.0%) and $6.7 million (14.4%), respectively, from the comparable prior year periods. Gross margin as a percentage of
sales increased to 24.5% and 24.8% for the three and nine months ended November 1, 2002, respectively, from 22.8% and 22.2% for the comparable prior year period. The increase in sales is mainly
attributable to increased delivery rates based on customer contract requirements. The increase in gross margins as a percentage of net sales reflects the transitioning of several programs from the
development and low-rate production phase to the higher gross margin full-rate production phase and improved overhead absorption resulting from the overall increase in
production volumes.

Other Sales.Other sales, which are primarily generated at our majority owned Nanowave subsidiary, were $1.5 million
and $5.7 million for the three and nine months ended November 1, 2002, representing decreases of $0.7 million (32.9%) and $3.0 million (34.8%), respectively, from the
comparable prior year periods. The sales decline is attributable to decreased demand for microwave modules for the fiber optic market. For the three and nine months ended November 1, 2002,
gross margin as a percentage of net sales decreased to a negative 51.5% and a negative 6.5%, respectively, from a negative 22.7% and a negative 5.3% in the comparable prior year periods as a result of
the impact on overhead absorption of the decline in production volume and reserves for inventory obsolescence of $1.0 million.

Selling, General and Administrative Expenses.Selling, general and administrative expenses, or SG&A,
were $10.5 million and $31.6 million for the three and nine months ended November 1, 2002, respectively, as compared to $12.9 million and $37.4 million during the
comparable prior year periods. The decrease in SG&A for the three months ended November 1, 2002, reflects the impact of the Company's cost savings initiatives, consisting primarily of headcount
and other payroll related

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reductions, and a $0.6 million reduction of goodwill amortization due to the implementation of FAS 142, which eliminates the requirement to amortize goodwill. The $5.8 million
decrease in SG&A on a year-to-date basis is primarily attributable to the reversal of approximately $1.7 million of accrued employee compensation and professional fees
accruals, a $1.7 million reduction of goodwill amortization due to the accounting change discussed above and the impact of the Company's cost cutting initiatives.

Research and Development Expenses.Research and development expenses were $8.8 million and
$24.5 million for the three and nine months ended November 1, 2002, respectively, as compared to $6.5 million and $19.2 million during the comparable prior year periods. As
a percentage of net sales, research and development expenses increased from 12.4% and 11.2% to 14.8% and 14.2% for the three and nine months ended November 1, 2002, respectively. These
expenditures are almost entirely attributable to operations acquired during the fourth quarter of the preceding fiscal year by REMEC's Commercial Wireless group and reflects increased development
activity associated with new wireless communications product development initiatives that the Company believes are required to meet current and future market and customer requirements.

Impairment of long-lived assets.Results of operations for the three and nine months
ended November 1, 2002 include an asset impairment charge of $0.7 million related to the write-off of leasehold improvements at a facility abandoned by the Company during the
third quarter of fiscal 2003.

Write-Down of Investment.Results of operations for the nine months ended
October 26, 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 nine months ended October 26, 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.

Other Income and Expense, Net.Other income and expense, net, was $1.2 million and
$2.0 million for the three and nine months ended November 1, 2002, respectively, as compared to $1.0 million and $4.5 million during the comparable prior year periods.
Other income and expense for the three and nine months ended November 1, 2002, includes gains of $1.2 million and $1.8 million from the sale of facilities. Excluding this item,
other income, consisting principally of interest income, has decreased during the current year due to the combination of a reduction in the amount funds available for investment and reduced yields on
our investments due to the decline in short-term interest rates from their levels a year ago.

Credit for Income Taxes.The Company did not record any income tax benefit related to its third
quarter fiscal 2003 operating loss as compared to a credit for income taxes of $4.8 million recorded in the comparable prior year period. For the nine months ended November 1, 2002, the
Company recorded a credit for income taxes of $5.9 million as compared to a credit for income taxes of $13.9 million recorded in the comparable prior year period. Pending an assessment
of its ability to realize future tax benefits based on the tax implications of its planned acquisition of Spectrian, the Company will not record any additional tax assets. The credit for income taxes
recorded prior to the third quarter of fiscal 2003 reflected the recognition of the tax benefit associated with REMEC's net operating losses. Realization of this tax asset is conditioned on the return
to profitability assumed in the Company's operating forecast. The operating forecast assumes attaining profitability, and utilizing the previously recorded tax assets, through improving revenues and
gross margins, continuing cost cutting measures and the implementation of certain tax planning strategies. If the Company is unable

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to achieve its forecasted operating results and complete its tax planning efforts, the Company will need to reduce the carrying value of its deferred tax assets.

Liquidity and capital resources

At November 1, 2002, REMEC had $103.4 million of working capital, which included cash and equivalents totaling $30.0 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/A 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 nine months ended November 1, 2002, operations used cash of approximately $14.2 million. The negative operating cash flow during this period was principally the
result of the Company's operating losses and cash used to fund working capital requirements including a $3.9 million increase in accounts receivable arising primarily as a result of
difficulties encountered in converting to our new accounting system.

During
the nine months ended November 1, 2002, $8.5 million was used by investing activities. Investing activities consisted of $12.3 million of capital
expenditures, a net cash inflow of approximately $5.3 million resulting from the cash proceeds received from the sale of certain real property and a net cash outflow of $1.4 million
associated with other assets.

Financing
activities provided approximately $1.9 million during the nine months ended November 1, 2002, primarily as a result of proceeds from the issuance of common stock
by REMEC under its Employee Stock Purchase Plan.

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

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generally accepted accounting principles. If our shipping policies, including the point of title transfer, were to change, materially different results could occur.

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
November 1, 2002, inventories totaled $42.9 million, net of reserves for excess and obsolete inventory of $20.0 million and contract losses of $2.1 million.

Valuation of Goodwill, Intangible and Other Long-Lived Assets.In accordance with
Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets and (SFAS) No. 144, Accounting for Impairment or Disposal 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. In accordance with the provisions of SFAS 142, we discontinued amortization of goodwill and will perform impairment tests at least annually.

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.

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 November 1, 2002, the remaining balance of accrued restructuring costs was $1.2 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 the current year that are expected to provide for the realization of the deferred tax assets
recorded by the Company. The likelihood of a material change in our expected realization of these assets depends on: future taxable income allowing us to deduct tax loss carry-forwards 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. If the Company is unable to generate taxable income in accordance with its forecast or is not able to complete its tax planning strategies it will be
required to review and may need to reduce the carrying value of its net deferred tax asset.

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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 November 1, 2002.

Foreign Currency Exchange Rate.REMEC's earnings and cash flows 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 third 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 4. Controls and Procedures

Evaluation of disclosure controls and procedures.Based on their evaluation as of a date within
90 days of the filing date of this Report, 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-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the "Exchange Act")) 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 Securities and Exchange
Commission rules and forms.

Changes in internal controls.There have been no significant changes in our internal controls or in
other factors that could significantly affect our 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 24, 2002 a purported shareholder derivative lawsuit was filed against REMEC, naming the current directors of the Company as defendants (and
the Company as a nominal defendant), in Superior Court of the State of California, County of San Diego. The lawsuit was filed by the law firm Robbins, Umeda & Fink, LLP as counsel for David
Szalay. The complaint asserts, among other things, that the directors of the Company breached their fiduciary duties by allegedly failing to renegotiate and/or terminate the agreement and plan of
merger and reorganization entered into between Spectrian Corporation and the Company dated as of May 19, 2002. Szalay is seeking an injunction and unspecified damages.

REMEC
believes that the lawsuit is without merit and intends to defend against it vigorously.

Other
than the shareholder derivative lawsuit 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. The resolution of all the litigation
and threatened litigation including the shareholder derivative lawsuit, is not anticipated to have a material adverse effect on the business, results or operations or financial condition of REMEC.

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: |  | December 16, 2002                                                         

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CERTIFICATIONS

I,
Ronald E. Ragland, certify that:



|                        |  |                                                                           
|----------------------- |  | --------------------------------------------------------------------------
|Date: December 16, 2002 |  | /s/RONALD E. RAGLANDRonald E. Ragland Chairman and Chief Executive
Officer

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CERTIFICATIONS

I,
David L. Morash, certify that:



|                        |  |                                                                         
|----------------------- |  | ------------------------------------------------------------------------
|Date: December 16, 2002 |  |                                                                         
|                        |  | /s/DAVID L. MORASHDavid L. Morash Chief Financial and Accounting
Officer

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