FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
      For the fiscal year ended December 31, 1999

                                       OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the transition period from ___________ to ___________

                           Commission File No. 0-8574

                          MICROWAVE POWER DEVICES, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                Delaware                                  13-3622306
     -------------------------------            --------------------------------
     (State or other jurisdiction of            (I.R.S. Employer Identification)
     incorporation or organization)

          49 Wireless Boulevard
          Hauppauge, New York                              11788-3935
----------------------------------------                   ----------
(Address of principal executive offices)                   (Zip Code)

                                 (631) 231-1400
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
                     --------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes |X| No |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|

Aggregate market value of voting stock held by non-affiliates of registrant as
of February 29, 2000: $51,518,265.

Number of shares of Common Stock outstanding as of February 29, 2000: 10,653,507

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement pursuant to Regulation
14A, which statement will be filed not later than 120 days after the end of the
fiscal year covered by this Report, are incorporated by reference in Part III
hereof.

<PAGE>

                          MICROWAVE POWER DEVICES, INC.
                         1999 ANNUAL REPORT ON FORM 10-K

                                TABLE OF CONTENTS

Item No.                                                                    Page
--------                                                                    ----

Part I

         1.  Business .....................................................    3
         2.  Properties ...................................................   14
         3.  Legal Proceedings ............................................   15
         4.  Submission of Matters to a Vote of Security Holders ..........   15

Part II

         5.  Market for Registrant's Common Equity
               and Related Stockholder Matters ............................   15
         6.  Selected Consolidated Financial Data .........................   16
         7.  Management's Discussion and Analysis
               of Financial Condition and Results of Operations ...........   17
         7A. Quantitative and Qualitative Disclosures About Market Risk ...   22
         8.  Financial Statements and Supplementary Data ..................   22
         9.  Changes in and Disagreements with
               Accountants on Accounting and Financial Disclosure .........   23

Part III

         10. Directors and Executive Officers of the Registrant ...........   23
         11. Executive Compensation .......................................   23
         12. Security Ownership of Certain Beneficial Owners and Management   23
         13. Certain Relationships and Related Transactions ...............   23

Part IV

         14. Exhibits, Financial Statements and Reports on Form 8-K .......   23

Signatures ................................................................   24

Exhibit Index .............................................................   25

<PAGE>

                                     PART I

ITEM 1. BUSINESS

General

      Microwave Power Devices, Inc. (the "Company") designs, manufactures and
sells highly linear power amplifiers and related subsystems to the worldwide
wireless telecommunications market. These amplifiers, which are a key component
in wireless base stations and other wireless telecommunications networks,
increase the power of radio frequency ("RF") and microwave signals with low
distortion for both wireless data and voice applications. The Company's wireless
telecommunications products consist of solid-state, RF and microwave, single and
multi-channel power amplifiers that support a broad range of analog and digital
transmission protocols including AMPS, CDMA, TDMA, TACS, GSM, W-CDMA and
cdma2000. These products are marketed to the cellular, personal communications
services ("PCS"), paging and wireless local loop ("WLL") segments of the
wireless telecommunications industry. The Company's largest wireless
telecommunications customers are integrated wireless telecommunications original
equipment manufacturers ("OEMs"). The Company is also pursuing opportunities
with emerging wireless telecommunications infrastructure equipment manufacturers
and service providers.

      In addition to its presence in the wireless telecommunications industry,
the Company designs and manufactures high-power, solid-state amplifiers for
satellite communications and medical applications. The Company also designs and
manufactures amplifiers and other products for the military market.

      The Company is capitalizing on its 32 years of experience developing power
amplifiers for the military market by transitioning that technology to
commercial applications. The Company began devoting substantial resources to the
wireless telecommunications market at the end of 1994. The Company has received
purchase orders from Lucent Technologies, LG Information and Communications,
Ltd. ("LGIC"), Ericsson Wireless Communications Inc., AT&T Wireless Services,
Metricom, Inc. and Unique Broadband Systems, Inc. and, as part of its business
strategy, is actively seeking to expand its business with these and other
integrated wireless telecommunications OEMs, as well as with emerging industry
participants.

      The Company was incorporated in Delaware in July 1991 to acquire the stock
of MPD Technologies, Inc., the Company's operating subsidiary. MPD Technologies,
Inc. was incorporated in New York in 1967.

Forward-Looking Statements

      Certain information contained in this Annual Report on Form 10-K,
including, without limitation, information appearing under Part I, Item 1,
"Business," and Part II, Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," are forward-looking statements
(within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934). Factors set forth under Part I, Item 1,
"Business - Risk Factors," together with other factors that appear with the
forward-looking statements, or in the Company's other Securities and Exchange
Commission filings, including its Registration Statement on Form S-1 dated
September 29, 1995, could affect the Company's actual results and could cause
the Company's actual results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company in this Annual
Report on Form 10-K.

Wireless Telecommunications Industry Background

      Wireless service providers compete in dynamic markets characterized by
evolving industry standards, technologies and applications. In recent years,
there has been a significant increase in the demand for wireless
telecommunications services from business and consumer users worldwide. This
trend has been driven by lower overall subscriber cost requirements, changes in
the regulatory environment that encourage competition and the emergence of new
enabling technologies. Wireless service providers are seeking to increase system
capacity in order to accommodate the growing number of subscribers and their
demands for enhanced services. To increase capacity, these service providers are


                                       3
<PAGE>

investing in infrastructure equipment that provides greater efficiency in the
management of the limited spectrum licensed to them.

      Wireless service has been one of the fastest growing segments of the
wireless telecommunications market. According to consensus estimates from
infrastructure OEMs, there were approximately 425 million wireless subscribers
worldwide at year-end 1999, as compared to approximately 300 million at year-end
1998, 200 million at year-end 1997 and 140 million at year-end 1996. The growth
in wireless communications has required, and will continue to require,
substantial investment by wireless service providers in wireless infrastructure
equipment. Moreover, intensified competition among wireless service providers is
resulting in declining costs to end-users as well as new types of service
offerings. In response to the increase in subscribers, wireless service
providers are taking steps to expand the capacity of their existing systems,
such as incorporating microcellular networks, converting from analog to digital
protocols and implementing adaptive channel allocation.

      Partially in response to concerns about the limited capacity of existing
wireless networks, the Federal Communications Commission ("FCC") began to
allocate spectrum for new wireless services in 1989. This led to the auctioning
of spectrum for PCS, at that time, a new licensed wireless telecommunications
service. PCS proponents believe that increased competition, brought about by the
availability of additional spectrum, will significantly lower rates, leading to
an increase in demand for wireless services. PCS applications may include mobile
telephone services, personal digital services and long distance carrier bypass
of local exchange carriers.

      In many developing countries, where access to the public switch telephone
network ("PSTN") by the general population is significantly less than in
developed countries, the Company believes that wireless telecommunications
systems are the most economic means to provide basic telephone service. The
expense, difficulty and time requirements of building and maintaining a wireless
network are generally less than the cost of building and maintaining a
comparable wireline network. Thus, in many less developed countries, wireless
service may provide the primary service platform for both mobile and fixed
telecommunications applications. In a WLL system, radio systems are used instead
of wireline networks to connect telephone subscribers to the PSTN. The Company
believes that the potential opportunities for wireless telecommunications in
countries without reliable or extensive wireline systems may be even greater
than in countries with developed telecommunications systems. The Company also
believes that in developed countries, market trends such as deregulation and
increased competition for subscribers are leading to the increased use of WLL
systems as an alternative to the existing wireline network.

      The same factors which are driving the growth of wireless
telecommunications services and equipment sales are also creating new market
dynamics for industry participants. The Company believes that competition among
wireless service providers for subscribers will intensify and that future market
growth will be realized primarily through the penetration of the consumer
market. The shift of the customer base from relatively high-usage,
price-insensitive business subscribers to price-sensitive consumer subscribers
is expected to lead to reduced revenue per subscriber. The Company also expects
that increasing competition for subscribers and decreasing revenue per
subscriber will cause wireless service providers to seek the most cost-effective
infrastructure available without sacrificing quality. In addition, the
uncertainty surrounding analog and emerging digital protocols provides an
incentive for service providers to minimize platform and protocol selection
risk. These changing market conditions, the emergence of open hardware standards
and protocols, and new market entrants in the form of PCS providers create an
opportunity for new equipment suppliers to emerge.

      In order to further increase system capacity and add additional services,
a third generation ("3G") of wireless systems is beginning to emerge. These
systems are expected to provide high speed data transmission (at 2 megabytes per
second), wireless internet connectivity and other multi-media capabilities in
the mobile environment, all features driven by the demands of the subscriber.
For systems utilizing cdmaOne technology, the upgrade to 3G is anticipated to be
cdma2000. For GSM/TDMA 3G infrastructure systems, W-CDMA technology is
anticipated to be utilized.


                                       4
<PAGE>

Power Amplification

      Given the large expenditures associated with wireless telecommunications
infrastructure equipment, those wireless service providers that are able to
increase the efficiency and lower the cost of new and existing systems, while
improving reliability, will be positioned to compete most effectively. The
Company believes that the following five factors must be addressed by amplifier
manufacturers in order to compete effectively in this evolving market:

            Linearity. Wireless service providers' ability to manage scarce
            spectrum resources more effectively and accommodate a larger number
            of subscribers is largely dependent on their ability to broadcast
            signals with high linearity, which pertains to the ability of a
            component to amplify a wave form without altering its
            characteristics in undesirable ways. Linear amplifiers allow signals
            to be amplified without introducing spurious emissions that might
            interfere with adjacent channels. Higher linearity increases the
            capacity of wireless systems by enabling a more efficient use of
            analog and digital transmission technologies. In current wireless
            systems, the power amplifier is generally the source of the greatest
            amount of signal distortion. Consequently, obtaining power
            amplifiers with high linearity is critical to wireless service
            providers' ability to improve spectrum efficiency.

            Analog to Digital Transition. Traditional wireless systems, which
            are based on analog technology, are capable of carrying only one
            call per channel. Such systems are being supplanted by digital
            systems, which allow a given channel to carry multiple calls
            simultaneously thereby increasing system capacity. In addition, in
            order to maintain compatibility with existing analog subscriber
            equipment while converting their systems to a digital platform, many
            wireless service providers in the United States are installing dual
            mode systems that support both digital and analog technologies
            simultaneously.

            Multiple Protocols. Current and emerging wireless networks
            throughout the world utilize different protocols. In order to
            address the needs of OEMs and service providers, design and
            development efforts must result in amplifiers that can be used for
            each specific protocol. Current analog protocols include AMPS, TACS
            and NMT, and current cellular and PCS digital protocols include
            CDMA, TDMA and GSM. Digital protocols that are being utilized in
            emerging WLL systems include W-CDMA and cdma2000.

            Multi-Channel Functionality. Single channel amplifiers require a
            separate power amplifier and cavity filter for each channel.
            Multi-channel power amplifiers allow for the simultaneous
            amplification of all channels within a base station. Multi-channel
            power amplifiers require significantly higher linearity compared to
            single channel designs, but do not require separate,
            high-maintenance, tunable cavity filters. This architecture allows
            less space to be allocated to the amplifier in the base station,
            while also reducing deployment and maintenance costs. In addition,
            multi-channel amplification functionality enables adaptive channel
            allocation which instantaneously allocates unused channels between
            cell sites in order to increase system capacity.

            Reliability and Low Maintenance. The Company believes that the power
            amplifier in cell sites historically has been the single most common
            point of equipment failure in wireless telecommunications networks.
            Increasingly reliable power amplifiers will, therefore, improve the
            level of service offered by wireless service providers, while
            reducing their operating costs. In addition, multi-channel
            amplifiers eliminate the need for high-maintenance, tunable cavity
            filters, which should further reduce costs.

      By drawing on its experience in producing high-quality, custom amplifiers
for the military market, the Company has developed the technical capabilities to
achieve high linearity in its amplification products. The Company has developed
products that support a number of existing analog and digital protocols, and is
continuing to develop new products for other protocols. Certain of the Company's
products support both analog and digital protocols in a dual mode format. The
Company has also developed and is supplying multi-channel amplification products
that integrate the functions of multiple power amplifiers and cavity filters
into a single smaller unit. The Company has consistently manufactured highly
reliable amplifiers that conform to stringent military specifications. The
Company has obtained ISO 9001 certification, which the Company believes will
ensure even greater process and quality control.

      The Company uses CAE/CAD and computer-aided modeling, solid-state device
physics, advanced signal processing techniques and digital control systems in
the development of its products. The Company designs amplifiers to be
manufactured in high volumes at low cost. The integration of the Company's
design and production processes is a


                                       5
<PAGE>

key element in the Company's ability to address wireless telecommunications
OEMs' quantity and time to market requirements for power amplification products.

Strategy

      The Company's objective is to be one of the leading independent suppliers
of highly linear power amplification products to wireless telecommunications
OEMs. The Company's strategy incorporates the following key elements:

      Leverage Existing Technological Expertise to Commercial Markets. The
Company has 32 years of engineering experience in the design and production of
power amplifiers for the military market. The Company believes that it has
compiled one of the most extensive design libraries in the solid-state, high
power amplifier industry. The Company intends to continue to adapt its expertise
to various commercial market applications and new product requirements. The
Company believes that its long standing technological capability will allow for
wireless market share growth with a continued nurturing of its satellite,
medical and military product lines.

      Increase Penetration of Leading Integrated Wireless Infrastructure
Equipment Manufacturers. The Company has developed relationships with certain
large integrated wireless telecommunications OEMs. The Company seeks to
capitalize on its existing customer relationships and become a more significant
source of its customers' amplifiers. The Company believes it can achieve this
objective by working closely with OEM customers to develop insight into their
amplification product requirements and to design products that meet their
specific needs.

      Develop Relationships with Emerging Wireless Infrastructure Equipment
Manufacturers. The Company anticipates that emerging wireless infrastructure
equipment manufacturers will make contributions to the growth of the wireless
telecommunications industry, especially in the WLL sector. The Company believes
that its multi-channel power amplifiers will assist these equipment
manufacturers in providing high capacity, low cost per channel products and
continues to sell amplifiers to several emerging wireless infrastructure
equipment manufacturers.

      Develop Products for Multiple Protocols. The Company intends to continue
to invest resources in the research and development of new products for various
protocols. For cellular systems, the Company currently supports the AMPS, TACS,
CDPD and NMT-450 analog protocols, and the CDMA, TDMA and GSM-900 digital
protocols. For PCS systems, the Company currently supports CDMA, TDMA, DCS-1800
and PCS-1900 digital protocols. In addition, the Company is continuing to
develop products that incorporate protocols which the Company believes will
address the needs of established and emerging wireless systems. The Company
believes the development of products for multiple protocols will enable the
Company to benefit from the continuing growth of existing wireless systems and
other emerging wireless telecommunications markets while reducing the risks
associated with relying on the success of one or a limited number of existing or
emerging industry protocols.

      Target Development to Meet Customer Requirements. The Company focuses its
development efforts on markets where it anticipates there to be emerging demand.
The Company coordinates its marketing and development functions by producing
prototypes for these targeted markets toward the goal of being one of the early
suppliers to meet emerging customer requirements. In this way, the Company hopes
to develop additional relationships with worldwide wireless telecommunications
OEMs.

      Provide Support from Product Design through Installation and Operation.
The Company works with its customers throughout the design process to assist
them in refining and developing their amplifier specifications. Once the
specifications have been met and the product delivered, the Company continues to
provide technical support to facilitate system integration, start-up and
continued operation. By providing customer support services from the product
design phase through installation and operation, the Company believes it fosters
increased levels of customer loyalty and satisfaction.


                                       6
<PAGE>

Wireless Technology

      A typical wireless communications system comprises a geographic region
containing a number of cells, each with a base station, which are networked to
form a wireless service provider's coverage area. Each base station or cell site
houses the equipment that transmits and receives telephone calls to and from the
wireless subscriber within the cell and the switching office of the local
wireline telephone system. Currently, such equipment includes a series of
transceivers, power amplifiers, tunable cavity filters and an antenna. In a
single channel system, each channel requires a separate transceiver, power
amplifier and tunable cavity filter. The power amplifier within the base station
receives a relatively weak signal from the transceiver and significantly boosts
the power of the outgoing wireless signal so that it can be broadcast throughout
the cell. The radio power levels necessary to transmit the signal over the
required range must be achieved without distorting the modulation
characteristics of the signal. The signal must also be amplified with linearity
in order to remain in the assigned channel with low distortion or interference
with adjacent channels.

      Conventional cell sites today are macrocells containing high power
amplifiers of 45 watts per channel which are designed to cover a geographic area
typically up to three miles in radius. With 48 channels in a typical base
station and one power amplifier per channel, a conventional analog macrocell's
capacity is typically 1,000 subscribers per cell, or approximately 20
subscribers per analog channel and power amplifier. When the number of
subscribers within the cell exceeds the capacity of the macrocell's equipment,
the cell may be split into several smaller radius microcells in order to add
capacity to a service provider's network. These microcells require less power
and less expensive equipment, but necessitate adding more base stations in the
same geographic area.

      Because the radio frequencies assigned to wireless transmissions are
finite, wireless service providers continuously seek new methods of more
efficiently using frequencies in order to increase the capacity of their
networks. One such method, adaptive channel allocation, instantaneously
allocates unused channels between cell sites across a wireless network to follow
user loading patterns. Commuter density changes during rush hours and traffic
jams are examples of the dynamic nature of user loading patterns. Adaptive
channel allocation allows the wireless service provider to re-allocate unused
channels automatically from less active cell sites to busier adjacent cell sites
as the load moves. A key enabling technology for adaptive channel allocation is
multi-channel amplification, in which all channels are amplified together by a
multi-channel power amplifier rather than each channel using a separate power
amplifier. The multi-channel power amplifier allows instantaneous electronic
channel allocation. Functionally, it provides the same capability as numerous
single channel amplifiers and cavity filters, but its technology permits the
amplification of 2 to 96 channels without adding hardware. Multi-channel power
amplifiers require significantly higher linearity compared to single channel
designs.

      In addition to adaptive channel allocation and multi-channel
amplification, wireless service providers are transitioning from traditional
analog technologies to various digital technologies in order to increase system
capacity and reduce the cost of wireless service. Conversion to digital
transmission is expected to allow up to 10 times as many voice conversations to
occupy the same frequency bands. Significant improvements in power amplifier
linearity permit multiple conversations on a single channel without unacceptable
channel interference.

      A further trend in the development of base stations involves the
transition from narrowband to broadband capabilities. For example, 3G
technology, which will be used for data transmission and internet access, as
well as for voice, is expected to utilize a wide-band 5-20 MHz CDMA signal. This
transition is leading to the reduction in the size of base station equipment.
Size constraints are an important consideration in urban areas, which typically
represent the most capacity constrained regions of existing wireless networks. A
multi-channel power amplifier requires less space than multiple single channel
power amplifiers, facilitating the size reduction of base stations and
potentially lowering the real estate costs associated with establishing base
stations.


                                       7
<PAGE>

Products

      Wireless Telecommunications. The Company designs customized products to
address the specific requirements and protocols of its OEM customers. The
Company produces single channel and multi-channel amplifiers for the wireless
telecommunications market in the 400-3500 MHz frequency bands, with peak power
ranging from 10 watts to 2000 watts. The Company's amplifiers meet linearity
requirements of applicable governmental agencies, industry standards and
customer specifications, as appropriate. The Company increases the efficiency of
its product development efforts by employing modular architectures and
configurable core technologies.

      The product development cycle begins with the prototype phase, with
product typically designed for a particular customer using core technologies.
The Company usually manufactures such prototypes in the engineering lab in order
to help market its products in a timely manner. Low volume production (or the
pre-production phase) of such prototypes has not contributed significantly to
the Company's backlog. If customer demand for such pre-production units is
sufficient, the Company designs additional customized features and implements
high volume production methodologies. The Company believes that the evolution to
the high volume production phase from the prototype phase can be implemented in
most cases within three to six months following the decision to proceed with
high volume production methods. The following tables list the Company's single
channel and multi-channel amplifiers, within the product development cycle,
ranging from the prototype phase to pre-production units to high volume
production products:

      -------------------------------------------------------------------------
                          Single Channel Amplifiers    Multi-Channel Amplifiers
      Wireless System             Protocol                     Protocol
      -------------------------------------------------------------------------
      Analog Cellular:          AMPS                         AMPS
                                CDPD                         N-AMPS
                                                             TACS
                                                             SETACS
                                                             ETACS
                                                             NMT-450

      -------------------------------------------------------------------------
      Digital Cellular:         CDMA                         CDMA
                                TDMA                         TDMA
                                GSM-900                      GSM-900

      -------------------------------------------------------------------------
      PCS:                      CDMA                         CDMA
                                TDMA                         TDMA
                                DCS-1800                     DCS-1800 *
                                PCS-1900                     PCS-1900

      -------------------------------------------------------------------------
      IMT-2000:                 W-CDMA *                     W-CDMA *
                                cdma2000 *                   cdma2000 *

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

      * Products in the prototype phase.

      The Company has used its technological expertise to improve the linearity
of its amplifiers by introducing various compensation techniques. Several of the
Company's single channel amplifiers include linearity correction and
compensation networks. These techniques are combined with digital automatic
error correction circuits to enhance the linearity and performance of the
Company's feed-forward amplifiers. The Company's digital processing techniques
implemented in its feed-forward products allow for simultaneous amplification of
NMT, AMPS, TDMA and CDMA channels.


                                       8
<PAGE>

      The Company's wireless telecommunications amplifiers can be configured as
modules, separate plug-in amplifier units or integrated subsystems, and range in
price from approximately $500 to $40,000. A power amplifier subsystem consists
of multiple cast housings and adds digital signal processing to enhance
linearity. The Company's products are integrated into systems by OEM customers,
and therefore must be engineered to be compatible with industry standards and
with certain customer specifications, such as frequency, power, linearity and
built-in test (BIT) for automatic fault diagnostics.

      Satellite Communications. The Company's solid-state amplifiers are
critical components in the International Maritime Satellite Organization
("INMARSAT") communications system used by commercial and military aircraft. The
INMARSAT communication link is a vast improvement over high frequency oceanic
and continental communications and is becoming the primary communication link
between ground control and in-flight aircraft. INMARSAT allows commercial
aircraft flying over any region in the world to communicate instantaneously. In
addition, weather-related variations in communication transmissions are all but
eliminated. For passengers, INMARSAT means better and more comprehensive
in-flight voice and data service.

      Medical. The Company's primary focus in the medical equipment market is
the production of microwave driver amplifiers for cancer treatment systems. The
Company's amplifiers provide the input signals at 3 GHz to a 10 megawatt, tube
driven klystron amplifier, which controls the intensity of an electron beam and
directs it to an x-ray target. The resultant radiation is then focused to
provide precisely calibrated dosages to exact cancerous locations in the human
body.

      Military. The Company's extensive experience in military amplifiers
includes high-power jammers, communication, radar and other defense oriented
equipment. An example of a military system that incorporated one of the
Company's products was the "Worldwide Color Television" used in the Persian Gulf
War. The Company's amplifier was a primary component of that system, which
injected television and radio signals into the Iraqi communications system. The
Company continues to capitalize on this experience, both by maintaining its
military activities and by developing and producing amplifiers for commercial
applications. The Company also makes air-defense radar environment simulators,
navigational simulators and test equipment, and electronic warfare simulators.

Backlog

      The Company's backlog of orders as of December 31, 1999 and December 31,
1998 was $76.2 million and $123.3 million, respectively, of which, as of
December 31, 1999, approximately $50.8 million is currently scheduled to be
shipped during fiscal 2000. The $76.2 million backlog as of December 31, 1999
included $29.4 million to wireless telecommunications customers, $18.0 million
to satellite communications customers, $5.8 million to medical and other
commercial customers and $23.0 million to military customers. In general, the
Company includes in its backlog only those orders for which it has accepted
purchase orders, some of which may be of a consignment nature. Backlog is not
necessarily indicative of future sales. Moreover, nearly all of the Company's
backlog can be cancelled and/or delayed at any time (including the consignment
orders) without penalty, except, in some cases, for the recovery of the
Company's actual costs up to the date of cancellation. Certain of the purchase
orders comprising backlog set forth product specifications that would require
the Company to complete additional product development. A failure to develop
products meeting such specifications could lead to a cancellation of the related
purchase order. Certain of the purchase orders comprising backlog at December
31, 1999 include product specifications not yet achieved by the Company.

Customers, Sales and Marketing

      The market for wireless infrastructure equipment is primarily concentrated
among a few companies that supply equipment to wireless service providers in
North America and overseas. The Company believes that Ericsson, Lucent,
Motorola, Nokia and Nortel supply the majority of the wireless infrastructure
equipment worldwide. In addition, a number of South Korean infrastructure OEMs
are participating in the wireless infrastructure build-out in that country and
are emerging as providers of wireless infrastructure equipment worldwide. These
equipment manufacturers compete in high-growth, highly competitive market
segments in which technology changes rapidly and numerous industry standards
currently exist and are continuing to evolve. In response to these market
dynamics and as the performance requirements of certain components of wireless
base stations increase, many of these equipment


                                       9
<PAGE>

manufacturers are focusing on their core technologies and competencies and are
relying on independent sources for certain system components, such as power
amplifiers.

      The Company sells wireless power amplification products throughout the
world to a limited number of OEM customers principally through its direct sales
organizations, as well as through its exclusive representative network. The
Company expects that sales of its products will continue to be concentrated
among a limited number of major OEM customers. If the Company were to lose a
major OEM customer or if orders by such OEM customer were to otherwise decrease,
the Company's business, financial condition and results of operations would be
materially adversely affected.

      The Company uses a customer focused, team-based sales approach to address
the high-power amplification needs of its OEM customers. Sales to integrated
wireless telecommunications OEMs require close account management by the
Company. As such, relationships are established at multiple levels of its OEM
customers' organizations, including management, engineering and purchasing
personnel. In addition, the Company's amplifiers require experienced sales and
engineering personnel to match the customer's requirements to the Company's
product capabilities. The Company believes that close technical collaboration
with the OEM customer during the design and qualification phase of new
communications equipment is critical to the integration of its amplification
products into the new base stations. The Company's integrated sales approach
involves a team consisting of a senior executive, a business development
specialist, members of the Company's engineering department and, occasionally, a
local technical sales representative. This sales approach allows the Company's
engineering personnel to work closely with their counterparts at the OEM
customer to assure compliance of the product to the OEM customer's
specification. The Company's executive officers are also involved in certain
aspects of the Company's relationships with its major OEM customers and work
closely with their senior managements. At times, the Company includes a
transistor supplier as part of its sales team when working with a major OEM
customer and will consider including key suppliers in its future sales
presentations.

      To date, the Company has sold its products overseas with the assistance of
independent sales representatives to OEM customers. As of December 31, 1999, the
Company has worldwide relationships with approximately 75 independent sales
representative organizations. The Company's direct sales staff provides
direction and support to its worldwide independent sales representative
organizations. Sales outside of the United States represented 23%, 16% and 24%
of net sales in fiscal 1999, 1998 and 1997 respectively. Sales outside of the
United States are denominated in U.S. dollars in order to reduce the risks
associated with the fluctuations of foreign currency exchange rates.

Manufacturing

      The Company assembles, tests, packages and ships amplifier products at its
manufacturing facility located in Hauppauge, Long Island, New York.
Historically, the volume of the Company's production requirements in the
military markets was not sufficient to justify the implementation of automated
manufacturing processes. Anticipating that sales of its products to the wireless
telecommunications industry would require a significant increase in the
Company's manufacturing capacity, the Company began to introduce automated
manufacturing techniques in the second quarter of 1995. In connection with its
transition to automated manufacturing processes, the Company purchased
computerized surface-mount machinery and related process equipment to support
automated assembly, which were delivered, installed and made fully operational
during the third quarter of 1995. During the fourth quarter of 1997, a second
stencil printer and convection oven for the surface-mount center was put into
service. In the second quarter of 1998, a second automated surface-mount
pick-n-place machine was added. In the first quarter of 1999, the Company added
a third stencil printer and convection oven.

      The Company began introducing automated tuning and testing into its
manufacturing processes in the second half of 1996. Essentially all wireless
production amplifiers are now tuned and tested in an automated fashion, as are
certain satellite, medical and military production amplifiers. As a by-product
of its automated tuning and testing efforts, the Company has been able to
implement statistical process control ("SPC") as well. With SPC in place,
various data measurements are accumulated automatically and can be graphically
displayed in real time. Through continuous feedback, the benefits of SPC are
that corrective actions can be implemented more timely and with more accuracy,
product design ideology can be adjusted accordingly to optimize manufacturing
efficiencies and product performance, and product throughput can be more
effectively measured. The Company expects the implementation of SPC to result in
greater production yields.


                                       10
<PAGE>

      The Company's movement during the past few years into high volume
automated surface-mount production was the result of time-to-market and pricing
demands of the wireless telecommunications industry. Furthermore, the Company
has introduced the automated manufacturing processes described above into its
other product segments much to the benefit of the satellite, medical and
military customers and their associated equipment. As a result, the Company has
begun to leverage its high volume design and production capabilities into its
low and medium volume product lines.

Research and Development

      The Company's research and development efforts are focused on the design
of amplifiers for new protocols, the improvement of existing product
performance, cost reductions and improvements in the manufacturability of
existing products. The Company is continuing to focus heavily on designs that
support continuous flow, high volume production for its wireless
telecommunications products. The Company uses an automated design environment
employing advanced workstations to model overall amplifiers and their associated
circuits.

      The Company has historically devoted a significant portion of its
resources to research and development programs and expects to continue to
allocate significant resources to these efforts. The Company's research and
development expenses in fiscal 1999, 1998 and 1997 were $6.8 million, $6.0
million, and $4.4 million, respectively, and represented 9.6%, 10.7% and 8.4%,
respectively, of net sales. In addition, certain other development costs are
incurred in connection with long-term contracts pursuant to which these costs
are financed, in whole or in part, by the customer. These costs are included in
cost of sales and the related revenues are included in net sales in the
Company's consolidated statements of operations.

      The markets in which the Company and its OEM customers compete are
characterized by rapidly changing technology, evolving industry standards and
continuous improvements in products and services. The Company's future success
depends on its ability to develop in a timely manner new products that compete
effectively on the basis of price and performance and that adequately address
customer requirements. In addition, as is characteristic of the wireless
telecommunications equipment industry, the average sales prices of the Company's
products have historically decreased over the products' lives and are expected
to continue to do so.

Competition

      The ability of the Company to compete successfully depends in part upon
the rate at which OEM customers incorporate the Company's products into their
systems. The Company believes that a substantial majority of the present
worldwide production of power amplifiers is captive within the manufacturing
operations of a small number of wireless telecommunications OEMs and offered for
sale as part of their wireless telecommunications systems. The Company's future
success is dependent upon the extent to which these OEMs elect to purchase from
outside sources rather than manufacture their own amplification products. There
can be no assurance that OEM customers will incorporate the Company's products
into their systems or that, in general, OEM customers will continue to rely, or
expand their reliance, on external sources of supply for their power
amplification products. Since each OEM product involves a separate proposal by
the amplifier supplier, there can be no assurance that the Company's current OEM
customers will not rely upon internal production capabilities or a non-captive
competitor for future amplifier product needs. The Company's major OEM customers
continuously evaluate whether to manufacture their own amplification products or
purchase them from outside sources. These OEM customers and other large
manufacturers of wireless telecommunications equipment could also elect to enter
into the non-captive market and compete directly with the Company. Such
increased competition could materially adversely affect the Company's business,
financial condition and results of operations.

      Most of the Company's competitors have, and potential future competitors
could have, substantially greater technical, financial, marketing, distribution
and other resources than the Company and have, or could have, greater name
recognition and market acceptance of their products and technologies. In
addition, certain of these competitors may already be better established in the
wireless amplification market than the Company. No assurance can be given that
the Company's competitors will not develop new technologies or enhancements to
existing products or introduce new products that will offer superior price or
performance features. To the extent that OEMs increase their reliance on
external sources for their power amplification needs, more competitors could be
attracted to the market.


                                       11
<PAGE>

      The Company expects its competitors to offer new and existing products at
prices necessary to gain or retain market share. The Company expects to
experience significant price competition, which could have a materially adverse
effect on gross margins. Certain of the Company's competitors have substantial
financial resources which may enable them to withstand sustained price
competition or downturns in the power amplification market as well as enabling
them to more aggressively pursue various pre-production opportunities.

      In the military market, the Company competes with certain large OEMs that
design and assemble their own high power amplifiers. However, almost all of
these OEMs are also the Company's customers. The Company believes this is due to
its broad range of solid-state power and frequency capabilities and its 32 year
military industry stature.

Proprietary Technology

      The Company believes that the success of its amplifier business depends
more on its specifications, CAE/CAD design and modeling tools, technical
processes and employee expertise than on patent protection. The Company
generally enters into confidentiality and non-disclosure agreements with its
employees and limits access to and distribution of its proprietary technology.
The Company may in the future be notified that it is infringing certain patent
and/or other intellectual property rights of others. Although there are no such
pending lawsuits against the Company or unresolved notices that the Company is
infringing intellectual property rights of others, there can be no assurance
that litigation or infringement claims will not occur in the future. Through
Republic Electronics, the Company holds one U.S. patent, owns two U.S.
trademarks and has two U.S. patents pending.

      The Company has a U.S. patent (which expires in January 2012) relating to
a windshear radar warning system tester. The Company also has a U.S. patent
pending for this windshear radar warning system tester to be used as a radome
tester as well. The Company's Weather/Windshear Radar Tester (WRT-100) simulates
microbursts, storms and gust fronts in order to test a commercial aircraft's
radar systems signal processing ability to properly display hazard warning
conditions. In addition, the WRT-100 is capable of receiving and recording
antenna patterns in order to evaluate a commercial aircraft's radome
performance. "REPUBLIC" and "MRES 2000" are U.S. registered trademarks of the
Company. The Company also has a U.S. patent pending for a flightline test of
satellite-based airborne navigation systems. This invention relates to the
testing of instrument approach and landing systems which utilize a global
navigation satellite system.

Employees

      As of February 7, 2000, the Company had a total of 378 regular, temporary
and contract employees, including 242 in operations and quality, 94 in
engineering, 10 in sales and marketing and 32 in administration. The Company
believes its future performance will depend in large part on its ability to
attract and retain highly skilled employees. None of the Company's employees are
represented by a labor union and the Company has not experienced any work
stoppages. The Company considers its employee relations to be good.

Risk Factors

      Historically, the Company's revenues have been derived principally from
sales to military markets. The Company only began to focus on commercial markets
in 1992. More specifically, the Company only began to focus on the wireless
telecommunications market in 1994. As a result, the Company is subject to all of
the risks inherent in the operation of a new business enterprise.

      The Company anticipates that sales of its products to relatively few
customers will continue to account for a significant portion of its net sales.
In addition, certain of the purchase orders comprising backlog at December 31,
1999 set forth product specifications not yet achieved by the Company that would
require the Company to complete additional product development. A failure to
develop products meeting such specifications could lead to a cancellation of the
related purchase order. The reduction, delay or cancellation of orders from one
or more significant customers would materially adversely affect the Company's
business, financial condition and results of operations.


                                       12
<PAGE>

      The Company has limited experience in producing and manufacturing its
products on a high volume basis and in contracting for such manufacture.
Manufacture of the Company's products is an extremely complex process, and the
Company may from time to time experience quality problems with products
manufactured on an automated basis internally or by its contract manufacturers.
Furthermore, there can be no assurance that the Company's internal manufacturing
processes will prove sufficient to fulfill the Company's production commitments,
or that contract manufacturers will be able to fulfill any shortfall. If such
problems occur, the Company could experience increased costs, delays,
cancellations or reschedulings of orders or deliveries and product returns and
discounts, any of which could damage relationships with current or prospective
customers and have a material adverse effect on the Company's business,
financial condition and results of operations.

      A large portion of the Company's expenses are fixed and difficult to
reduce. If net sales do not meet the Company's expectations, the fixed nature of
the Company's expenses would exacerbate the effect of any net sales shortfall.
Other factors that may cause the Company's net sales, gross margins and results
of operations to vary significantly from period to period include mix of systems
sold; price discounts or changes; market acceptance and the timing and
availability of new products by the Company or its customers; usage of different
distribution and sales channels; product development, warranty and customer
support expenses; customization of systems; and general economic and political
conditions. All of the above factors are difficult for the Company to forecast,
and these or other factors could materially adversely affect the Company's
business, financial condition and results of operations.

      Wireless telecommunications OEMs have come under increasing price pressure
from cellular and PCS service providers, and the Company expects to experience
downward pricing pressure on its products. In addition, competition among
non-captive suppliers has increased the downward pricing pressure on the
Company's products. As these wireless manufacturers frequently negotiate supply
arrangements far in advance of delivery dates, the Company often must commit to
price reductions for its products before it is aware of how, or if, cost
reductions can be obtained. To offset declining average sales prices, the
Company will attempt in the near term to achieve manufacturing cost reductions
and, in the longer term, to develop new products that can be sold at higher
average sales prices or that can be manufactured at a lower cost. If, however,
the Company is unable to achieve such cost reductions and to develop new
products that can be sold at higher average sales prices or that can be
manufactured at a lower cost, the Company's gross margins will decline, and such
decline will have a material adverse effect on the Company's business, financial
condition and results of operations.

      Despite the risks associated with purchasing components from a limited
number of sources, the Company has made the strategic decision to enter into
arrangements with a select group of limited source suppliers in order to obtain
lower pricing, receive more timely delivery and maintain quality control.
Certain of the Company's limited source suppliers have limited operating
histories and limited financial and other resources and, therefore, may prove to
be unreliable sources of supply. Further, during the past few years, the Company
has begun to purchase key components in large volume. If the Company were unable
to obtain sufficient quantities of components, particularly power transistors,
delays or reductions in product shipments could occur which would have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, delays in filling orders due to limited
availability of components may have a material adverse effect on the Company's
relationships with its OEM customers, which may result in the termination of
material orders from its OEM customers and/or cause a permanent loss of future
sales.

      Sales of power amplifiers to wireless telecommunications OEMs are expected
to account for a majority of the Company's future product sales. The success of
the Company depends to a considerable extent upon the continued growth and
increased availability of cellular, PCS and other wireless telecommunications
services in the United States and internationally. If the wireless
telecommunications market fails to grow or grows more slowly than the Company
currently anticipates, the Company's business, financial condition and results
of operations would be materially and adversely affected.

      The Company's major OEM customers continuously evaluate whether to
manufacture their own amplification products. These OEM customers and other
large manufacturers of wireless telecommunications equipment could elect to
enter into the non-captive market and compete directly with the Company. Also,
the Company's competitors could develop new technologies, make enhancements to
existing products, or introduce new products that could offer superior price or
performance features. Such increased competition could materially adversely
affect the Company's business, financial condition and results of operations.


                                       13
<PAGE>

      Sales of the Company's products outside of the United States are
denominated in United States dollars. An increase in the value of the U.S.
dollar relative to foreign currencies would make the Company's products more
expensive and, therefore, potentially less competitive outside the United
States. The Company may in the future be notified that it is infringing certain
patent and/or other intellectual property rights of others. Although there are
no such pending lawsuits against the Company or unresolved notices that the
Company is infringing intellectual property rights of others, there can be no
assurance that litigation or infringement claims will not occur in the future.

      Regulatory approvals generally must be obtained by the Company in
connection with the manufacture and sale of its products, and by the Company's
customers to operate the Company's products. The United States Federal
Communications Commission ("FCC") has recently adopted new regulations that
impose more stringent RF and microwave emissions standards on the
telecommunications industry. There can be no assurance that, as a result of such
regulations, the Company and its OEM customers will not be required to alter the
manner in which radio signals are transmitted or otherwise alter the equipment
transmitting such signals, which could materially adversely affect the Company's
products and markets. Also, the enactment by federal, state, local or
international governments of new laws or regulations or a change in the
interpretation of existing regulations could effect the market for the Company's
products.

      The Company anticipates that a material portion of its 2000 wireless
product revenue could result from shipments (directly or indirectly) into
countries facing economic uncertainty or political unrest. While the pricing of
such products is in U.S. dollars, the effect of the economic uncertainty or
political unrest could cause a reduction, cancellation or delay in these
wireless product shipments. In addition, financial instability in these
countries could cause currency fluctuations that make these products more
expensive than the customer originally anticipated, which could result in the
reduction, delay or elimination of future orders. These factors could materially
adversely affect the Company's business, financial condition and results of
operations.

      The Company has recently begun to enter into arrangements with its major
OEM customers whereby those customers stock the Company's amplifiers on a
consignment basis until they are consumed in production. Under these
arrangements, the Company receives a forecast each week from the customer
reflecting the customer's future product requirements. These forecasts provide
the Company with a one year forward-look which details the weekly requirements
for the first 26 weeks and the monthly requirements for the remaining six
months. If those product needs do not ultimately meet the Company's expectations
or, conversely, if they substantially exceed those expectations such that the
Company cannot fulfill them, there could be a material adverse effect on the
Company's business, financial condition and results of operations.

ITEM 2. PROPERTIES.

      The Company's operations are located in an 86,000 square foot facility on
7.4 acres of land in Hauppauge, Long Island, New York. The building was
constructed in 1986 and purchased by the Company in June 1992 with the proceeds
from Industrial Development Revenue Bonds ("IDRBs") issued through the Suffolk
County Industrial Development Agency ("SCIDA"). In connection with this
financing, the Company transferred ownership of this facility to the SCIDA at
closing, and immediately leased back the facility for a term equal to the term
of the bonds. The lease provides the Company with a $1.00 buyback option
exercisable at lease end and also permits for transfer of ownership of the
facility back to the Company if it prepays the bonds.

      This facility houses all of the Company's engineering, manufacturing,
quality assurance, sales and marketing and administrative personnel. The plant
has been customized to suit the Company's operations, which includes various
electrical power upgrades. While the current facility is sufficient to support
the Company's anticipated growth into fiscal year 2001, the Company has zoning
approvals and architectural drawings for a 55,000 square foot expansion of its
current facility which the Company believes should be adequate to meet the
Company's presently foreseeable needs.


                                       14
<PAGE>

ITEM 3. LEGAL PROCEEDINGS.

      From time to time, the Company is involved in litigation relating to
claims arising out of its operations in the normal course of business. The
Company is currently not party to any other legal proceedings, the adverse
outcome of which, individually or in the aggregate, management believes would
have a material adverse effect on the financial position or results of
operations of the Company.

      The Company's operations are subject to environmental laws and regulations
which impose limitations on the discharge of pollutants into the air and water
and establish standards for the treatment, storage and disposal of solid and
hazardous wastes. The Company reviews the effects of any new laws and
regulations on its operations and modifies its operations as appropriate. The
Company believes that it is in substantial compliance with all applicable
environmental laws and regulations.

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

      There were no matters submitted to a vote of security holders during the
fourth quarter of 1999.

                                     PART II

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

      The Common Stock of the Company is traded on The Nasdaq Stock Market(R)
("Nasdaq") under the symbol MPDI. On March 1, 2000 there were approximately
2,500 beneficial owners of the Company's Common Stock.

      The following table sets forth the high and low sales prices for the
Company's Common Stock as reported by Nasdaq. Such quotations reflect
interdealer prices without adjustments for retail markups, markdowns, or
commissions and may not necessarily represent actual transactions.

          Calendar Period                      High                Low
          ---------------                      ----                ---

          1999:

          First Quarter......................  13                  6-1/2
          Second Quarter.....................  19-1/8              7-15/16
          Third Quarter......................  22-1/4              7-5/8
          Fourth Quarter.....................  17-1/4              6-1/2
          1998:
          First Quarter......................  9-1/4               4-7/8
          Second Quarter.....................  9                   5-5/8
          Third Quarter......................  6-7/8               2-1/4
          Fourth Quarter.....................  13-1/16             2-1/4

      The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently anticipates that it will retain all future earnings
for the expansion and operation of its business and does not anticipate paying
cash dividends in the foreseeable future. In addition, the Company's credit
facility contains provisions restricting the payment of dividends.


                                       15
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.

      The following selected consolidated financial data as of and for the years
ended December 31, 1999 and 1998, and for the year ended December 31, 1997 have
been derived from, and are qualified by reference to, the Consolidated Financial
Statements of the Company audited by Arthur Andersen LLP, independent public
accountants, included elsewhere in this Annual Report on Form 10-K and should be
read in conjunction with those Consolidated Financial Statements and Notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations. The following selected consolidated financial data as of
December 31, 1997 and as of and for the years ended December 31, 1996 and 1995
have been derived from the Consolidated Financial Statements of the Company
audited by Arthur Andersen LLP, independent public accountants, not included
herein.

<TABLE>
<CAPTION>
                                                                          Year Ended
                                         ---------------------------------------------------------------------------
                                         December 31,    December 31,    December 31,   December 31,    December 31,
                                             1999            1998           1997            1996            1995
                                         ------------    ------------    ------------   ------------    ------------
<S>                                        <C>             <C>            <C>             <C>             <C>
Consolidated Statements of Operations Data:                 (in thousands, except per share data)
Net sales ..........................       $ 70,811        $ 55,774       $ 52,037        $ 47,362        $ 27,302
Cost of sales ......................         58,989          38,482         38,142          41,501          20,122
                                           --------        --------       --------        --------        --------
Gross profit .......................         11,822          17,292         13,895           5,861           7,180
Operating expenses:
   General and administrative ......          4,281           3,877          3,575           3,221           3,091
   Selling .........................          4,533           3,748          3,963           3,720           3,346
   Research and development ........          6,833           5,973          4,367           7,364           4,306
                                           --------        --------       --------        --------        --------
     Total operating expenses ......         15,647          13,598         11,905          14,305          10,743
                                           --------        --------       --------        --------        --------
Income (loss) from operations ......         (3,825)          3,694          1,990          (8,444)         (3,563)
Interest expense, net ..............          1,282           1,185          1,237             948           1,310
Other (income) expense, net ........              8               2            (16)              6              55
                                           --------        --------       --------        --------        --------
Income (loss) before income taxes ..         (5,115)          2,507            769          (9,398)         (4,928)
Provision (benefit) for income taxes         (2,202)            775            189          (3,759)         (1,976)
                                           --------        --------       --------        --------        --------
Net income (loss) ..................       $ (2,913)       $  1,732       $    580        $ (5,639)       $ (2,952)
                                           ========        ========       ========        ========        ========

Net income (loss) per common share:
   Basic ...........................       $  (0.28)       $   0.17       $   0.06        $  (0.54)       $  (0.36)
                                           ========        ========       ========        ========        ========
   Diluted .........................       $  (0.28)       $   0.17       $   0.06        $  (0.54)       $  (0.36)
                                           ========        ========       ========        ========        ========
Common shares used in computing
per share amounts:
   Basic ...........................         10,537          10,380         10,376          10,375           8,172
                                           ========        ========       ========        ========        ========
   Diluted .........................         10,537          10,478         10,465          10,375           8,172
                                           ========        ========       ========        ========        ========

<CAPTION>
                                         December 31,    December 31,    December 31,   December 31,    December 31,
                                             1999            1998           1997            1996            1995
                                         ------------    ------------    ------------   ------------    ------------
<S>                                        <C>             <C>            <C>             <C>             <C>
Consolidated Balance Sheet Data:                                        (in thousands)
Cash and cash equivalents ..........       $    618        $    667       $    687        $  1,149        $    388
Working capital ....................         17,423          21,676         18,183          16,151          24,529
Total assets .......................         47,530          46,875         41,822          38,890          41,227
Total debt .........................         16,179          13,244         13,276          12,789           9,718
Total stockholders' equity .........         20,027          20,781         18,949          18,302          23,941
</TABLE>


                                       16
<PAGE>

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

Overview

      The Company commenced operations in 1967. During the past 32 years, the
Company has designed, manufactured and marketed high-power, solid-state, RF and
microwave power amplifiers and related subsystems for military, medical,
satellite and wireless telecommunications applications.

      The Company historically had been dependent upon the military market as
its principal source of revenue. In 1992, as the military market was declining,
the Company leveraged its military technological leadership position and
increased the scope of its business by entering commercial markets, thereby
broadening its product offerings. In 1994, the Company started producing power
amplifiers for the wireless telecommunications market. The Company now develops
precision high-power amplifiers for a variety of commercial uses.

      The following table summarizes certain key financial information:

<TABLE>
<CAPTION>
           ---------------------------------------------------------------------------------------------------------
                                                                  Change                      Change
                                                        1999       From          1998          From          1997
                                                      ($000s)   prior year      ($000s)     prior year     ($000s)
           ---------------------------------------------------------------------------------------------------------
           <S>                                       <C>              <C>       <C>               <C>      <C>
           Net Sales                                 $ 70,811           27%     $ 55,774             7%    $ 52,037
           ---------------------------------------------------------------------------------------------------------
           Gross Profit                              $ 11,822          (32)%    $ 17,292            24%    $ 13,895
           Gross Profit Margin                           16.7%                      31.0%                      26.7%
           ---------------------------------------------------------------------------------------------------------
           General and Administrative Expenses       $  4,281           10%     $  3,877             8%    $  3,575
           Percentage of Net Sales                        6.0%                       7.0%                       6.9%
           ---------------------------------------------------------------------------------------------------------
           Selling Expenses                          $  4,533           21%     $  3,748            (5)%   $  3,963
           Percentage of Net Sales                        6.4%                       6.7%                       7.6%
           ---------------------------------------------------------------------------------------------------------
           Research and Development Expenses         $  6,833           14%     $  5,973            37%    $  4,367
           Percentage of Net Sales                        9.6%                      10.7%                       8.4%
           ---------------------------------------------------------------------------------------------------------
           Interest Expense                          $  1,282            8%     $  1,185            (4)%   $  1,237
           Percentage of Net Sales                        1.8%                       2.1%                       2.3%
           ---------------------------------------------------------------------------------------------------------
           Provision (Benefit) for Income Taxes      $ (2,202)        (384)%    $    775           310%    $    189
           Effective Tax Rate                             43.0%                     30.9%                      24.6%
           ---------------------------------------------------------------------------------------------------------
</TABLE>


                                       17
<PAGE>

Results of Operations

Fiscal Years Ended December 31, 1999 and December 31, 1998

      Net Sales. The Company derives its revenues principally from the sale of
solid-state, RF and microwave power amplifiers and from the sale of radar
environmental and electronic warfare simulators. Net sales increased by 27% to
$70.8 million in 1999 from $55.8 million in 1998. This sales increase was
primarily due to higher shipments of the Company's commercial products,
partially offset by lower shipments of the Company's military products. Sales of
commercial products increased by 72% to $45.2 million in 1999 from $26.2 million
in 1998, representing 64% and 47%, respectively, of net sales in such years. The
commercial sales increase was predominantly due to higher shipments to one
domestic and one foreign wireless telecommunications OEM, partially offset by
lower shipments to one domestic wireless telecommunications OEM. Sales of
military products decreased by 13% to $25.6 million in 1999 from $29.6 million
in 1998, representing 36% and 53%, respectively, of net sales in such years. The
military sales decrease was predominantly due to lower shipments on a U.S.
Government military program, partially offset by higher shipments to a foreign
military OEM.

      International sales increased by 86% to $16.5 million in 1999 from $8.8
million in 1998, totaling 23% of net sales in 1999 compared to 16% in 1998. The
increase in international sales was primarily due to higher market demand for
foreign wireless telecommunications OEM business and higher shipments of foreign
military products. In 1999, sales to one domestic commercial OEM (Customer B),
one domestic military OEM (Customer F) and one foreign military OEM (Customer D)
accounted for 41%, 9% and 9%, respectively, of the Company's net sales. In 1998,
sales to two domestic military OEMs (Customer F and Customer G) and one domestic
commercial OEM (Customer B) accounted for 26%, 10% and 17%, respectively, of the
Company's net sales.

      The Company has recently begun to enter into arrangements with its major
wireless OEM customer whereby the customer stocks the Company's amplifiers on a
consignment basis until they are consumed in the customer's production process,
at which time revenue is recognized by the Company. Under these arrangements,
the Company receives a forecast each week from the customer reflecting the
customer's estimated future product requirements. These forecasts provide the
Company with a one year forward-look which details the expected weekly
requirements for the first 26 weeks and monthly requirements for the remaining
six months. The Company's business, financial condition and results of
operations could be materially adversely affected if the customer's actual
product needs ultimately are less than the customer's forecasted expectations
or, conversely, if the customer's actual product needs ultimately substantially
exceed the customer's forecasted expectations such that the Company cannot
fulfill them.

      Gross Profit. The Company's cost of sales consists principally of direct
labor, labor overhead, direct material, material overhead, other direct costs
and work-in-process inventory changes from the beginning to the end of a period.
Gross profit decreased by 32% to $11.8 million in 1999 from $17.3 million in
1998. The Company's gross profit margin (gross profit as a percentage of net
sales) also decreased to 16.7% in 1999 from 31.0% in 1998. The decrease in gross
profit margin was primarily due to significant cost overruns, in the fourth
quarter of 1999, which led to corresponding inventory and gross profit margin
adjustments on a number of programs including two foreign military contracts and
one wireless telecommunications program.

      Certain of the Company's inventory costing techniques involve developing a
standard cost which estimates the average, or standard, cost per unit over the
extended manufacturing life cycle of a product. Such costs include labor,
material, other direct costs and related overheads. If the extended
manufacturing life cycle of a product does not materialize or if there is no
reasonable certainty that product maturation will take place within the near
future, write-offs of work-in-process inventory would be required. Such
write-offs could materially adversely affect the Company's gross profit and
results of operations.

      Certain of the purchase orders or contracts comprising backlog at December
31, 1999 set forth product specifications not yet achieved by the Company that
would require the Company to complete additional product development. Failure to
develop products meeting such specifications could lead to the cancellation of
the related purchase orders or contracts. The reduction, delay or cancellation
of orders or contracts from one or more significant customers could materially
adversely affect the Company's business, financial condition and results of
operations.


                                       18
<PAGE>

      There can be no assurances that gross profit margin will improve. If the
Company is not able to reduce its production costs to the extent anticipated, or
to introduce new products with greater gross profit margins, and if average
selling prices decline beyond current expectations, the Company's gross profit
and results of operations could be materially adversely affected. The Company's
gross profit margin may also be affected by a variety of other factors,
including the mix of systems and equipment sold; production, reliability or
quality problems; and price competition.

      General and Administrative Expenses. General and administrative expenses
consist principally of salaries and other expenses for management, finance,
accounting, contracts and human resources as well as legal and other
professional services. General and administrative expenses increased by 10% to
$4.3 million in 1999 from $3.9 million in 1998, representing 6.0% and 7.0%,
respectively, of net sales. The increase in general and administrative expenses
resulted primarily from the costs associated with certain executive and
non-executive employee terminations.

      Selling Expenses. Selling expenses consist principally of salaries and
other expenses for sales and marketing personnel, sales commissions, travel
expenses, advertising and trade shows. Selling expenses increased by 21% to $4.5
million in 1999 from $3.7 million in 1998, representing 6.4% and 6.7%,
respectively, of net sales. The increase in selling expenses resulted primarily
from higher bid and proposal activity (primarily directed toward wireless
telecommunications customers), higher accrued warranty costs (due to the
increased revenue level) and higher bad debt expense.

      Research and Development Expenses. Research and development expenses
consist principally of direct labor, labor overhead, direct material, material
overhead and other direct costs associated with product development. Research
and development expenses increased by 14% to $6.8 million in 1999 from $6.0
million in 1998, representing 9.6% and 10.7%, respectively, of net sales. The
increase in research and development expenses resulted primarily from increased
wireless telecommunications product development. The Company believes that the
continued introduction of new products is essential to its competitiveness,
especially in the wireless telecommunications market, and is committed to
continued investment in research and development.

      Interest Expense. Interest expense consists principally of interest
expended on the Company's credit facility and IDRBs, partially offset by
interest earned on the Company's cash balances. Interest expense increased by 8%
to $1.3 million in 1999 from $1.2 million in 1998, representing 1.8% and 2.1%,
respectively, of net sales.

      Provision for Income Taxes. The Company accounts for income taxes in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." The Company has recorded deferred tax assets for
the benefit of federal income tax loss carryforwards and timing differences
generated in those years, which were reduced by a valuation allowance. This
valuation allowance reduced the deferred tax asset to a net amount which the
Company believed that it would more likely than not realize, based on the
Company's estimates of future earnings and the expected timing of temporary
difference reversals. During 1999, the Company concluded that a valuation
allowance was no longer necessary given its estimates of future earnings and the
expected timing of temporary difference reversals. The Company's effective tax
rate increased to a 43.0% benefit in 1999 from 30.9% in 1998. The 1999 rate was
favorably impacted by the partial recovery of previously reserved deferred tax
assets. Without the benefit of this change in the valuation allowance, the
effective tax rate for 1999 would have been 39.6%. The 1998 rate was also
favorably impacted by the partial recovery of previously reserved deferred tax
assets. Without the benefit of this change in the reserve, the effective tax
rate for 1998 would have been 40.7%. There can be no assurances that the Company
will continue to achieve taxable income in the future.

Fiscal Years Ended December 31, 1998 and December 31, 1997

      Net Sales. Net sales increased by 7% to $55.8 million in 1998 from $52.0
million in 1997. This sales increase was primarily due to higher shipments of
the Company's military products, partially offset by lower shipments of the
Company's commercial products. Sales of military products increased by 120% to
$29.6 million in 1998 from $13.4 million in 1997, representing 53% and 26%,
respectively, of net sales in such years. The military sales increase was
predominantly due to higher shipments on a U.S. Government military program and
higher shipments to a domestic military OEM, partially offset by lower shipments
to other military customers. Sales of commercial products decreased by 32% to
$26.2 million in 1998 from $38.6 million in 1997, representing 47% and 74%,
respectively, of net sales in such years. The commercial sales decrease was
predominantly due to lower shipments to one domestic and one foreign


                                       19
<PAGE>

wireless telecommunications OEM and lower shipments to one domestic satellite
communications OEM, partially offset by higher shipments to other domestic and
foreign wireless telecommunications OEMs.

      International sales decreased by 30% to $8.8 million in 1998 from $12.7
million in 1997, totaling 16% of net sales in 1998 compared to 24% in 1997. The
decrease in international sales was primarily due to lower market demand for
foreign wireless telecommunications OEM business. In 1998, sales to two domestic
military OEMs (Customer F and Customer G) and one domestic commercial OEM
(Customer B) accounted for 26%, 10% and 17%, respectively, of the Company's net
sales. In 1997, sales to two domestic commercial OEMs (Customer B and Customer
C) and one foreign commercial OEM (Customer A) accounted for 33%, 16% and 13%,
respectively, of the Company's net sales.

      Gross Profit. Gross profit increased by 24% to $17.3 million in 1998 from
$13.9 million in 1997. The Company's gross profit margin (gross profit as a
percentage of net sales) also increased to 31.0% in 1998 from 26.7% in 1997. The
increase in gross profit margin was primarily due to a more favorable revenue
mix of higher gross profit margin business in the MPD military versus commercial
product lines, a more favorable revenue mix of higher gross profit margin
business in the Company's single channel versus multi-channel wireless product
line and a lower commercial warranty expense (specifically for the Company's
multi-channel, cellular CDMA wireless product). Despite the above, the following
factors adversely affected the gross profit margin for 1998: (i) the low gross
profit margins the Company experienced on three foreign military OEM contracts
(the result of technical problems and competitive pricing pressures), (ii) the
costs associated with the introduction and pre-production of GSM products and
(iii) the overall low gross profit margin the Company experienced on one of its
single channel, cellular CDMA wireless products (due to a customer-directed slow
down, creating inefficient manufacturing lot sizes).

      General and Administrative Expenses. General and administrative expenses
increased by 8% to $3.9 million in 1998 from $3.6 million in 1997, representing
7.0% and 6.9%, respectively, of net sales. The increase in general and
administrative expenses resulted primarily from higher compensation expenses
associated, in part, with the Company achieving certain fiscal year performance
goals, the costs associated with the settlement of an employee-related lawsuit
and higher professional fees.

      Selling Expenses. Selling expenses decreased by 5% to $3.7 million in 1998
from $4.0 million in 1997, representing 6.7% and 7.6%, respectively, of net
sales. The decrease in selling expenses resulted primarily from lower accrued
warranty costs due to a decrease in wireless warranty requirements, as a
percentage of net sales, from the higher levels experienced in early 1997.

      Research and Development Expenses. Research and development expenses
increased by 37% to $6.0 million in 1998 from $4.4 million in 1997, representing
10.7% and 8.4%, respectively, of net sales. The increase in research and
development expenses resulted primarily from increased wireless
telecommunications product development and, to a lesser extent, increased
military research and development. The Company believes that the continued
introduction of new products is essential to its competitiveness, especially in
the wireless telecommunications market, and is committed to continued investment
in research and development. The Company viewed the lower level of wireless
telecommunications product development in 1997 as a short term solution to
assist in reducing costs to match reduced wireless revenue. Fundamental to this
effort was a planned temporary reallocation (in the first quarter of 1997) of
some of the Company's engineering and technology resources to either revenue
producing or customer-funded product development. This action enabled the
Company to leverage its other commercial and military product lines while
insuring a continued and focused emphasis on critical wireless
telecommunications development projects.

      Interest Expense. Interest expense remained relatively stable at $1.2
million in both 1998 and 1997 but represented 2.1% and 2.3%, respectively, of
net sales.

      Provision for Income Taxes. The Company's effective tax rate increased to
30.9% in 1998 from 24.6% in 1997. The 1998 rate was favorably impacted by the
partial recovery of the previously reserved deferred tax asset resulting from
the Company's improved profitability position as compared to 1997. Without the
benefit of this change in the reserve, the effective tax rate for 1998 would
have been 40.7%. The 1997 rate was also favorably impacted by the partial
recovery of the previously reserved deferred tax asset resulting from the
Company's improved profitability position as compared to 1996. Without the
benefit of this change in the reserve, the effective tax rate for 1997 would
have been 40.2%. The Company will continue to assess the reserved deferred tax
asset each reporting quarter. There can be no assurances that the Company will
continue to achieve taxable income in the future.


                                       20
<PAGE>

Liquidity and Capital Resources

      Since the successful completion its initial public offering in 1995, the
Company has financed its operations and met its capital requirements through the
following two sources: (i) a credit facility and/or (ii) cash provided by
operating activities.

      In March 2000, the Company amended its loan agreement with IBJ Whitehall
Business Credit Corporation ("IBJ"). The loan agreement now provides for a $18.9
million credit facility consisting of a revolving line of credit in the amount
of $13.7 million, a term loan in the amount of $0.9 million and two capital
equipment ("Capex") loan facilities, Capex #1 and Capex #2, in the amounts of
$2.0 million and $2.3 million, respectively. The revolving line of credit and
both the term loan and Capex loans bear interest at annual rates equal to the
prime rate plus 0.50% and the prime rate plus 0.75%, respectively. The credit
facility matures in February 2002 and automatically renews for one-year periods
thereafter, unless terminated by either the Company or IBJ. Aggregate borrowings
under the revolving line of credit are limited by a borrowing base, which is
calculated as the sum of 85% of eligible accounts receivable and 40% of eligible
raw materials and work-in-process inventories (with borrowings based on
aggregate eligible inventory limited to $7.0 million). The term loan requires a
monthly principal payment of $0.05 million. The Capex loans require monthly
principal payments that are recalculated each month based on the prior month's
Capex borrowings, if any, amortized over 60 months. Capex #2 loan borrowings
must occur prior to December 31, 2000. At December 31, 1999, credit facility
borrowings totaled $11.7 million which consisted of a term loan balance of $1.1
million, a Capex #1 loan balance of $2.2 million, a Capex #2 loan balance of
$0.7 million (with $0.8 million of the $2.3 million utilized) and revolving line
of credit borrowings of $7.7 million. In addition, $3.5 million of the revolving
line of credit is committed to the Company's outstanding letters of credit. The
credit facility is subject to customary covenants, including, among other
things, limitations with respect to incurring indebtedness, payment of dividends
and affiliate advances, and a provision for maintaining a certain fixed charge
coverage ratio. At December 31, 1999, the Company did not comply with a certain
covenant requirement, which noncompliance was waived in connection with the
March 2000 amendment.

      Operating activities used net cash of $2.1 million and provided net cash
of $1.9 million in 1999 and 1998, respectively. From December 31, 1998 to
December 31, 1999, accounts receivable increased by $0.1 million, inventory
decreased by $2.8 million, accounts payable and accrued liabilities decreased by
$0.6 million and customer advance payments decreased by $0.9 million. The
decrease in inventory was predominantly due to significant cost overruns, in the
fourth quarter of 1999, which led to corresponding inventory and gross profit
margin adjustments on a number of programs including two foreign military
contracts and one wireless telecommunications program. The decrease in customer
advance payments was primarily due to performance under a contract, for which
advance payments had been received in the fourth quarter of 1997 and in the
second quarter of 1998, from a foreign military OEM. Investing activities, which
consisted primarily of equipment acquisitions, used net cash of $2.3 million and
$1.9 million in 1999 and 1998, respectively. Financing activities, which
consisted predominantly of proceeds from long-term debt, principal payments of
long-term debt, net proceeds from (repayments on) the revolving line of credit
and net proceeds from the exercise of common stock options provided net cash of
$4.4 million and $0.05 million in 1999 and 1998, respectively.

      Capital expenditures were $2.3 million and $1.9 million in 1999 and 1998,
respectively. These expenditures were funded primarily through cash provided by
the Company's credit facility. Principal capital expenditures for 1999 included
the procurement of engineering and manufacturing test equipment (including a
discounted buy-out of an off-balance-sheet lease), a third stencil printer and
convection oven, a tinning machine and an x-ray machine to support the Company's
automated assembly efforts, a manufacturing execution software and hardware
system, enhancements to the Company's CAD systems and sales demonstration
equipment.. The Company expects that 2000 capital expenditures will be financed
by the Company's credit facility, cash provided by operating activities and/or
third party financing sources.

      As of December 31, 1999, the Company had working capital of approximately
$17.4 million, compared to approximately $21.7 million as of December 31, 1998.
Working capital as of December 31, 1999 included approximately $12.2 million and
$16.1 million in accounts receivable and inventory, respectively, compared to
December 31, 1998 working capital which included approximately $12.2 million and
$18.9 million in accounts receivable and inventory, respectively. The Company's
current ratio (ratio of current assets to current liabilities) as of December
31, 1999 was 2.4:1, compared with a current ratio of 2.6:1 as of December 31,
1998. As of December 31, 1999, the Company's debt to equity ratio was 0.8:1,
compared with a debt to equity ratio at December 31, 1998 of 0.6:1.


                                       21
<PAGE>

      The Company believes that cash generated from operations, amounts
available under its credit facility, and/or other third party financing will be
sufficient to fund necessary capital expenditures and to provide adequate
working capital for at least the next 12 months. There can be no assurance,
however, that the Company will not require additional financing prior to such
date to fund its operations, and, if required, that such financing will be
available on commercially reasonable terms. In addition, the Company may require
additional financing after such date to fund its operations.

      YEAR 2000 - The Company did not experience any significant Year 2000
problems. The Company's Year 2000 Readiness Plan addressed three main areas: (a)
information technology systems (including the Company's business systems,
engineering and test equipment, both hardware and software related), (b)
non-information technology systems (including embedded technology such as
microcontrollers, typically found in such equipment as telephone systems, fax
systems, elevators, security systems, HVAC, etc.) and (c) supply chain readiness
or third party issues (including customers as well as inventory and
non-inventory suppliers). The Company's Chief Operating and Financial Officer
had been tasked with overseeing this process and reported periodically to the
Company's Board of Directors. The Company's CEO will monitor any future affects
from Year 2000 issues that may arise, if any, and report such matters to the
Company's Board of Directors.

      Out-of-pocket costs associated with the Company's Year 2000 compliance
proved to be immaterial and were incurred in 1999, as anticipated. No additional
expenses are projected. The Company has not experienced any operational
difficulties relating to Year 2000 issues. For example, there were no spending,
revenue, product returns or accrual patterns that have resulted, to-date, from
the Year 2000. There were no significant information technology projects or
capital spending that were deferred due to Year 2000 preparation. There do not
appear to be any material problems associated with any of the Company's third
party relationships. The Company knows of no reasons for any future Year 2000
related contingency requirements nor does it know of any Year 2000 legal
proceedings against it or any reasons for such a proceeding to commence.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

      The Company's principal financial instrument is long-term debt under a
credit facility (consisting of a revolving line of credit, term loan and two
Capex loan facilities) that provides for interest at the prime rate or the prime
rate plus 0.25% (depending upon the individual credit facility component). The
Company is affected by market risk exposure primarily through the effect of
changes in interest rates on amounts payable by the Company under this credit
facility. A significant rise in the prime rate could materially adversely affect
the Company's business, financial condition and results of operations. At
December 31, 1999, an aggregate principal amount of $11.7 million was
outstanding under the Company's credit facility and represented a weighted
average annual interest rate of 9.3%. If principal amounts outstanding under the
Company's credit facility remained at this year-end level for an entire year and
the prime rate increased or decreased, respectively, by 0.9%, the Company would
pay or save, respectively, an additional $0.1 million in interest in that year.
The Company does not utilize derivative financial instruments to hedge against
changes in interest rates or for any other purpose.

      Where appropriate, the Company requires that letters of credit be provided
on foreign sales. In addition, all transactions by the Company are denominated
in U.S. dollars. As such, the Company has shifted foreign currency exposure onto
its foreign customers. As a result, if exchange rates move against foreign
customers, the Company could experience difficulty collecting unsecured accounts
receivable, the cancellation of existing orders or the loss of future orders.
The foregoing could materially adversely affect the Company's business,
financial condition and results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

      See Item 14 of Part IV of this Report.


                                       22
<PAGE>

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

      None.

                                    PART III

      The information required by Part III (Items 10 through 13) is incorporated
by reference to the captions "Principal Stockholders," "Election of Directors,"
"Management" and "Certain Transactions" in the Company's definitive Proxy
Statement to be filed pursuant to Regulation 14A within 120 days after the end
of the Company's fiscal year covered by this Report.

                                     PART IV

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

      (a)   See Index to Financial Statements immediately following Exhibit
            Index.
      (b)   No reports on Form 8-K have been filed during the fourth quarter of
            1999.
      (c)   Exhibits

            See Exhibit Index immediately following signature pages.


                                       23
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

                          MICROWAVE POWER DEVICES, INC.


                          By  /s/ Alfred Weber
                              --------------------------------
                              Alfred Weber
                              Chairman/Chief Executive Officer

Date: March 21, 2000

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


/s/ Alfred Weber              Chairman/Chief Executive Officer    March 21, 2000
-------------------------     (Principal Executive Officer)
    Alfred Weber


/s/ William J. Moore          Corporate Controller                March 21, 2000
-------------------------     (Principal Financial Officer and
    William J. Moore          Principal Accounting Officer)



/s/ George J. Sbordone        Director                            March 21, 2000
-------------------------
    George J. Sbordone


/s/ Merril M. Halpern         Director                            March 21, 2000
-------------------------
    Merril M. Halpern


/s/ A. Lawrence Fagan         Director                            March 21, 2000
-------------------------
    A. Lawrence Fagan


/s/ David J. Aldrich          Director                            March 21, 2000
-------------------------
    David J. Aldrich


/s/ Warren A. Law             Director                            March 21, 2000
-------------------------
    Warren A. Law


/s/ James S. Silver           Director                            March 21, 2000
-------------------------
    James S. Silver


                                       24
<PAGE>

                                  EXHIBIT INDEX

3.1 -       Certificate of Incorporation of the Company (incorporated by
            reference to Exhibit 3.1 to the Company's Registration Statement on
            Form S-1 dated September 29, 1995 (Registration No. 33-94142)).

3.2 -       By-laws of the Company (incorporated by reference to Exhibit 3.2 to
            the Company's Registration Statement on Form S-1 dated September 29,
            1995 (Registration No. 33-94142)).

10.1 -      Loan and Security Agreement dated as of February 13, 1997 among IBJ
            Schroder Bank & Trust Company, as Lender and Agent, and MPD
            Technologies, Inc. (incorporated by reference to Exhibit 10.1 to the
            Company's Form 8-K dated February 13, 1997 (Commission File No.
            0-8574)).

10.2 -      Indenture of Trust, $4,810,000, Suffolk County Industrial
            Development Agency, 1992 Industrial Development Revenue Bonds (MPD
            Wireless, Inc. Facility - Series A and Series B) dated June 1, 1992
            (incorporated by reference to Exhibit 10.2 to the Company's
            Registration Statement on Form S-1 dated September 29, 1995
            (Registration No. 33-94142)).

10.3 -      Lease Agreement dated as of June 1, 1992 between MPD Wireless, Inc.
            and the Suffolk County Industrial Development Agency (incorporated
            by reference to Exhibit 10.3 to the Company's Registration Statement
            on Form S-1 dated September 29, 1995 (Registration No. 33-94142)).

10.4 -      Registration Rights Agreement dated as of June 29, 1995 among the
            Registrant, Charter Technologies Limited Liability Company, George
            J. Sbordone, Edward J. Shubel, James S. Silver and Lee Leong
            (incorporated by reference to Exhibit 10.4 to the Company's
            Registration Statement on Form S-1 dated September 29, 1995
            (Registration No. 33-94142)).

10.5 -      Microwave Power Devices, Inc. 1995 Stock Option Plan (incorporated
            by reference to Exhibit 10.5 to the Company's Registration Statement
            on Form S-1 dated September 29, 1995 (Registration No. 33-94142)).

10.6 -      Security Control Agreement dated September 5, 1997 between MPD
            Technologies, Inc. and the United States Department of Defense
            (incorporated by reference to Exhibit 10.12 to the Company's Annual
            Report on Form 10-K dated December 31, 1997).

10.7 -      Amendment No. 1 dated as of February 27, 1998 to a Loan and Security
            Agreement dated as of February 13, 1997 among IBJ Schroder Business
            Credit Corporation, as Lender and Agent, and MPD Technologies, Inc
            (incorporated by reference to Exhibit 10.13 to the Company's Annual
            Report on Form 10-K dated December 31, 1997).

10.8 -      Microwave Power Devices, Inc. 1996 Stock Option Plan, Amendment No.1
            (incorporated by reference to Exhibit 4.2 to the Company's Form S-8
            dated July 30, 1998 (Commission File No. 333-60165)).

10.9 -      Change in Control Agreement dated as of March 1, 1999 between
            Microwave Power Devices, Inc. and Fuat Agi (incorporated by
            reference to Exhibit 10.18 to the Company's Annual Report on Form
            10-K dated December 31, 1998).

10.10 -     Change in Control Agreement dated as of March 1, 1999 between
            Microwave Power Devices, Inc. and Larry Konopelko (incorporated by
            reference to Exhibit 10.19 to the Company's Annual Report on Form
            10-K dated December 31, 1998).

10.11 -     Amendment No. 2 dated as of May 19, 1999 to a Loan and Security
            Agreement dated as of February 13, 1997 among IBJ Whitehall Business
            Credit Corporation (formerly known as IBJ Schroder Business Credit
            Corporation), as Lender and Agent, and MPD Technologies, Inc
            (incorporated by reference to Exhibit 10.21 to the Company's
            Quarterly Report on Form 10-Q dated June 30, 1999).

10.12 -     Employment Agreement dated December 2, 1999 between Microwave Power
            Devices, Inc. and Alfred Weber. *

10.13 -     Change in Control Agreement dated as of December 2, 1999 between
            Microwave Power Devices, Inc. and Alfred Weber.*

10.14 -     Agreement dated as of December 2, 1999 between Microwave Power
            Devices, Inc. and Alfred Weber.*


                                       25
<PAGE>

10.15 -     Microwave Power Devices, Inc. 1999 Stock Option Plan.*

10.16 -     Amendment No. 3 dated as of March xx, 2000 to a Loan and Security
            Agreement dated as of February 13, 1997 among IBJ Whitehall Business
            Credit Corporation (formerly known as IBJ Schroder Business Credit
            Corporation), as Lender and Agent, and MPD Technologies, Inc. *

21.1  -     Subsidiaries of the Company (incorporated by reference to the
            Company's Annual Report on Form 10-K dated December 31, 1995
            (Commission File No. 0-8574)).

23.1  -     Consent of Independent Public Accountants. *

27.1  -     Financial Data Schedule. *

* Filed herewith.


                                       26
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                  Page
                                                                                                  ----
<S>                                                                                                <C>
Report of Independent Public Accountants...........................................................F-2

Consolidated Balance Sheets as of December 31, 1999 and 1998.......................................F-3

Consolidated Statements of Operations for the three years ended December 31, 1999..................F-4

Consolidated Statements of Shareholders' Equity for the three years ended December 31, 1999........F-5

Consolidated Statements of Cash Flows for the three years ended December 31, 1999..................F-6

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

Report of Independent Public Accountants on Schedule...............................................S-1

Schedule II........................................................................................S-2
</TABLE>


                                      F-1
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Microwave Power Devices, Inc.:

      We have audited the accompanying consolidated balance sheets of Microwave
Power Devices, Inc. (a Delaware corporation) and subsidiary as of December 31,
1999 and 1998, and the related consolidated statements of operations,
shareholders' equity and cash flows for the three years ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Microwave Power Devices,
Inc. and subsidiary as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the three years ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States.


                                                   ARTHUR ANDERSEN LLP

Melville, New York
March 17, 2000


                                      F-2
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                        AS OF DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                      1999          1998
                                                                                    --------      --------
                                                                                        (in thousands,
                                                                                      except share data)
<S>                                                                                 <C>           <C>
                               ASSETS
CURRENT ASSETS:
   Cash and cash equivalents ..................................................     $    618      $    667
   Accounts receivable, net of allowance for doubtful accounts of $160 and $75,
         respectively .........................................................       12,167        12,178
   Inventories, net ...........................................................       16,062        18,861
   Prepaid expenses and other current assets ..................................          529           476
   Deferred income taxes ......................................................          789         3,426
                                                                                    --------      --------
         Total current assets .................................................       30,165        35,608

PROPERTY, PLANT AND EQUIPMENT, net ............................................        9,614         8,834
INTANGIBLE ASSETS, net ........................................................          247           307
OTHER LONG-TERM ASSETS ........................................................          442           673
DEFERRED INCOME TAXES .........................................................        7,062         1,453
                                                                                    --------      --------
                                                                                    $ 47,530      $ 46,875
                                                                                    ========      ========
                      LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
   Current portion of long-term debt ..........................................     $  1,418      $  1,082
   Accounts payable ...........................................................        7,528         8,970
   Accrued liabilities ........................................................        3,796         2,959
   Customer advance payments ..................................................           --           921
                                                                                    --------      --------
         Total current liabilities ............................................       12,742        13,932
                                                                                    --------      --------

LONG-TERM DEBT ................................................................       14,761        12,162
                                                                                    --------      --------

COMMITMENTS AND CONTINGENCIES (Note 12)

SHAREHOLDERS' EQUITY:
   Preferred stock, $.01 par value; 5,000,000 shares authorized;
          no shares issued or outstanding .....................................           --            --
   Common stock, $.01 par value; 25,000,000 shares authorized;
         10,638,664 and 10,397,520 shares issued and outstanding, respectively           106           104
   Additional paid-in capital .................................................       25,498        23,406
   Notes receivable from shareholders .........................................         (123)         (188)
   Retained earnings (accumulated deficit) ....................................       (5,454)       (2,541)
                                                                                    --------      --------
         Total shareholders' equity ...........................................       20,027        20,781
                                                                                    --------      --------
                                                                                    $ 47,530      $ 46,875
                                                                                    ========      ========
</TABLE>

                 The accompanying notes are an integral part of
                       these consolidated balance sheets.


                                      F-3
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                         Year Ended
                                                        -------------------------------------------
                                                         December 31,   December 31,   December 31,
                                                            1999            1998           1997
                                                            ----            ----           ----
                                                          (in thousands, except per share data)
<S>                                                       <C>           <C>          <C>
NET SALES ...........................................     $ 70,811        $ 55,774       $ 52,037
COST OF SALES .......................................       58,989          38,482         38,142
                                                          --------        --------       --------
      Gross profit ..................................       11,822          17,292         13,895
                                                          --------        --------       --------

OPERATING EXPENSES:
   General and administrative .......................        4,281           3,877          3,575
   Selling ..........................................        4,533           3,748          3,963
   Research and development (Note 2) ................        6,833           5,973          4,367
                                                          --------        --------       --------
                                                            15,647          13,598         11,905
                                                          --------        --------       --------
      Income (loss) from operations .................       (3,825)          3,694          1,990

INTEREST EXPENSE, net ...............................        1,282           1,185          1,237
OTHER (INCOME) EXPENSE, net .........................            8               2            (16)
                                                          --------        --------       --------
      Income (loss) before income taxes .............       (5,115)          2,507            769

PROVISION (BENEFIT) FOR INCOME TAXES ................       (2,202)            775            189
                                                          --------        --------       --------
      Net income (loss) .............................     $ (2,913)       $  1,732       $    580
                                                          ========        ========       ========

PER SHARE INFORMATION (Note 2):
   Net income (loss) per common share:
      Basic .........................................     $  (0.28)       $   0.17       $   0.06
                                                          ========        ========       ========
      Diluted .......................................     $  (0.28)       $   0.17       $   0.06
                                                          ========        ========       ========
   Common shares used in computing per share amounts:
      Basic .........................................       10,537          10,380         10,376
                                                          ========        ========       ========
      Diluted .......................................       10,537          10,478         10,465
                                                          ========        ========       ========
</TABLE>

              The accompanying notes are an integral part of these
                            consolidated statements.


                                      F-4
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                                                 Notes        Retained
                                     Preferred Stock           Common Stock      Additional   Receivable      Earnings
                                  --------------------      ------------------     Paid-in        from      (Accumulated
                                  Shares        Amount      Shares      Amount     Capital    Shareholders     Deficit)       Total
                                  ------        ------      ------      ------     -------    ------------     --------       -----
<S>                                   <C>     <C>           <C>        <C>         <C>         <C>            <C>          <C>
BALANCE, December 31, 1996 ..         --      $     --      10,375     $   104     $ 23,276    $   (225)      $ (4,853)    $ 18,302
   Net income ...............         --            --          --          --           --          --            580          580
   Exercise of stock options          --            --           4          --           30          --             --           30
   Repayment of notes
      receivable from
      shareholders (Note 7) .         --            --          --          --           --          37             --           37
                                  ------      --------      ------     -------     --------    --------       --------     --------

BALANCE, December 31, 1997 ..         --            --      10,379         104       23,306        (188)        (4,273)      18,949
   Net income ...............         --            --          --          --           --          --          1,732        1,732
   Exercise of stock options          --            --          19          --          100          --             --          100
                                  ------      --------      ------     -------     --------    --------       --------     --------

BALANCE, December 31, 1998 ..         --            --      10,398         104       23,406        (188)        (2,541)      20,781
   Net loss .................         --            --          --          --           --          --         (2,913)      (2,913)
   Exercise of stock
      options, including
      income tax benefits of
      $711 ..................         --            --         241           2        2,092          --             --        2,094
   Repayment of notes
      receivable from
      shareholders (Note 7) .         --            --          --          --           --          65             --           65
                                  ------      --------      ------     -------     --------    --------       --------     --------

BALANCE, December 31, 1999 ..         --      $     --      10,639     $   106     $ 25,498    $   (123)      $ (5,454)    $ 20,027
                                  ======      ========      ======     =======     ========    ========       ========     ========
</TABLE>

              The accompanying notes are an integral part of these
                            consolidated statements.


                                      F-5
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                 Year Ended
                                                                  -----------------------------------------
                                                                  December 31,   December 31,   December 31,
                                                                      1999           1998          1997
                                                                    -------        -------        -------
                                                                                (in thousands)
<S>                                                                 <C>            <C>            <C>
OPERATING ACTIVITIES:
  Net income (loss) ...........................................     $(2,913)       $ 1,732        $   580
  Adjustments to reconcile net income (loss) to net cash (used
   in) provided by operating activities:
   Depreciation and amortization ..............................       1,568          1,470          1,211
   Provision for doubtful accounts ............................          85             --             --
   Deferred income taxes ......................................      (2,261)           725            194
   (Gain) loss on sale of property, plant and equipment .......           5             --            (19)
   Changes in operating assets and liabilities:
    Accounts receivable .......................................         (74)        (3,849)          (847)
    Inventories ...............................................       2,799         (1,930)        (2,569)
    Prepaid expenses and other assets .........................         178            460             63
    Accounts payable and accrued liabilities ..................        (605)         3,895            235
    Customer advance payments .................................        (921)          (642)         1,563
                                                                    -------        -------        -------
            Net cash (used in) provided by operating activities      (2,139)         1,861            411
                                                                    -------        -------        -------
INVESTING ACTIVITIES:
  Purchases of property, plant and equipment ..................      (2,265)        (1,937)        (1,337)
  Proceeds from sale of property, plant and equipment .........           5             10             23
                                                                    -------        -------        -------
            Net cash used in investing activities .............      (2,260)        (1,927)        (1,314)
                                                                    -------        -------        -------
FINANCING ACTIVITIES:
  Proceeds from long-term debt ................................       1,659          2,133          2,700
  Principal payments of long-term debt ........................      (1,311)          (896)          (495)
  Net proceeds from (repayments on) revolving credit loans ....       2,587         (1,269)        (1,717)
  Deferred financing costs ....................................         (33)           (22)          (114)
  Repayment of notes receivable from shareholders .............          65             --             37
  Net proceeds from exercise of common stock options ..........       1,383            100             30
                                                                    -------        -------        -------
            Net cash provided by financing activities .........       4,350             46            441
                                                                    -------        -------        -------
DECREASE IN CASH AND CASH EQUIVALENTS .........................         (49)           (20)          (462)
CASH AND CASH EQUIVALENTS, beginning of year ..................         667            687          1,149
                                                                    -------        -------        -------
CASH AND CASH EQUIVALENTS, end of year ........................     $   618        $   667        $   687
                                                                    =======        =======        =======

SUPPLEMENTAL DATA:
  Cash paid for interest ......................................     $ 1,311        $ 1,239        $ 1,302
                                                                    =======        =======        =======
  Cash paid for income taxes ..................................     $   137        $   155        $   104
                                                                    =======        =======        =======
  Non-cash tax benefits from exercise of common stock options .     $   711        $    --        $    --
                                                                    =======        =======        =======
</TABLE>

              The accompanying notes are an integral part of these
                            consolidated statements.


                                      F-6
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1999 and 1998
                      (in thousands, except per share data)

1.    THE COMPANY:

      The Company, headquartered in Hauppauge, Long Island, New York, is
primarily engaged in the engineering and manufacturing of radio frequency and
microwave power amplifiers for commercial and military applications. The Company
currently markets its products to the wireless telecommunications industry and
to the satellite communications, medical and both the U.S. and foreign military
marketplaces.

2.    SIGNIFICANT ACCOUNTING POLICIES:

      Principles of Consolidation

      The consolidated financial statements include the accounts of Microwave
Power Devices, Inc. and its wholly-owned operating subsidiary, MPD Technologies,
Inc. (together, the "Company"). All intercompany balances and transactions have
been eliminated in consolidation.

      Cash and Cash Equivalents

      The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

      Inventories

      Inventories are stated at the lower of cost (using the first-in, first-out
cost method) or net realizable value. Work-in-process associated with fixed
price long-term contracts is valued at the sum of the direct labor, direct
material, other direct costs and related overhead costs incurred under each
contract, less amounts charged to cost of sales.

      Progress Payments

      Progress payments received from customers are offset against inventories
associated with the contracts for which the payments were received (Note 3).
Under contractual arrangements by which progress payments are received from the
U.S. Government, the U.S. Government has a lien title interest in the
inventories identified with related contracts.

      Long-term Contracts

      In accordance with industry practice, all contract-related assets and
liabilities are classified as current, even though certain of these
contract-related assets and liabilities may not be realized within one year.
This practice is reflective of the Company's operating cycle as a contractor
under long-term contracts.

      Property, Plant and Equipment

      Property, plant and equipment is stated at cost less accumulated
depreciation and amortization (Note 4). Depreciation and amortization are
provided using the straight-line method over the estimated useful lives of the
assets which are as follows:

      Building and improvements ..................   7 to 40 years
      Machinery and equipment ....................   3 to 7 years
      Furniture and fixtures .....................   5 to 10 years


                                      F-7
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Intangible Assets

      Intangible assets, net of accumulated amortization of approximately $525
and $432 at December 31, 1999 and 1998, respectively, consist of goodwill, bond
issuance costs and deferred financing costs. Goodwill represents costs in excess
of net assets acquired related to certain acquisitions made by the Company, and
is being amortized over periods of 5 and 10 years. Bond issuance costs are being
amortized over 30 years, which represents the term of the respective underlying
debt agreement. Deferred financing costs are being amortized over the life of
the related credit facility agreements (typically 3 years). During 1999 and
1998, the Company incurred $33 and $22, respectively, in deferred financing
costs associated with a loan agreement (Note 6).

      Long-Lived Assets

      The Company follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." This statement establishes
financial accounting and reporting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of. The effect of the adoption of this standard and
its current application have not been material.

      Revenue Recognition

      Revenue and profits on fixed-price long-term and commercial contracts are
recognized using the unit of delivery method. Profits expected to be realized on
contracts are based on total sales value as related to estimated costs at
completion. These estimates are reviewed and revised periodically throughout the
lives of the contracts, and adjustments to profits resulting from such revisions
are made cumulative to the date of the change. Estimated losses on long-term
contracts-in-progress are recorded in the period in which such losses become
known.

      Research and Development

      Research and development costs are expensed as incurred. Such costs
amounted to $6,833, $5,973 and $4,367 for the years ended December 31, 1999,
1998 and 1997, respectively. Certain other development costs are incurred in
connection with long-term contracts pursuant to which these costs are financed
under related contracts. These costs are included in cost of sales and the
related revenues are included in net sales in the accompanying consolidated
statements of operations.

      Income Taxes

      The Company provides for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under the asset and liability method specified by
SFAS No. 109, the deferred tax amounts included in the balance sheet are
determined based on the difference between the financial statement and tax bases
of assets and liabilities as measured by the enacted tax rates that will be in
effect when these differences reverse. Differences between assets and
liabilities for financial statement and tax return purposes are principally
related to property, plant and equipment, inventories, accrued vacation expense,
accrued warranty costs, real estate taxes, accounts receivable and contract
research and development.


                                      F-8
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Net Income (Loss) Per Common Share

      The Company follows the provisions of SFAS No. 128, "Earnings Per Share."
Basic net income (loss) per common share ("Basic EPS") is computed by dividing
net income (loss) by the weighted average number of common shares outstanding.
Diluted net income (loss) per common share ("Diluted EPS") is computed by
dividing net income (loss) by the weighted average number of common shares and
dilutive common share equivalents then outstanding. SFAS No. 128 requires the
presentation of both Basic EPS and Diluted EPS on the face of the consolidated
statement of operations.

      A reconciliation between the numerator and denominator of Basic EPS and
Diluted EPS is as follows:

<TABLE>
<CAPTION>
                                                                                                Net Income (Loss)
                                                         Net Income (Loss)      Common Shares    Per Common Share
                                                         -----------------      -------------    ----------------

                                                                      For the year ended December 31, 1997
                                                                      ------------------------------------
<S>                                                           <C>                   <C>                <C>
Basic EPS
Net income attributable to common stock                       $   580               10,376             $0.06
Effect of dilutive securities: stock options                       --                   89                --
                                                              -------               ------             -----
Diluted EPS
Net income attributable to common stock and
     assumed option exercises                                 $   580               10,465             $0.06
                                                              =======               ======             =====

                                                                      For the year ended December 31, 1998
                                                                      ------------------------------------
Basic EPS
Net income attributable to common stock                       $ 1,732               10,380             $0.17
Effect of dilutive securities: stock options                       --                   98                --
                                                              -------               ------             -----
Diluted EPS
Net income attributable to common stock and
     assumed option exercises                                 $ 1,732               10,478             $0.17
                                                              =======              =======             =====

                                                                      For the year ended December 31, 1999
                                                                      ------------------------------------
Basic EPS
Net loss attributable to common stock                         $(2,913)              10,537             $(0.28)
Effect of dilutive securities: stock options                       --                   --                --
                                                              -------               ------             ------
Diluted EPS
Net loss attributable to common stock and assumed
     option exercises                                         $(2,913)              10,537             $(0.28)
                                                              =======               ======             ======
</TABLE>

      Diluted EPS for 1997 and 1998 does not include the impact of other stock
options then outstanding as their inclusion would be anti-dilutive. Diluted EPS
for 1999 does not include the impact of stock options then outstanding as their
inclusion would be anti-dilutive.

      Stock-Based Compensation

      The Company follows the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation." This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans. SFAS No. 123
encourages entities to adopt a fair value based method of accounting for stock
compensation plans. However, SFAS No. 123 also permits the Company to continue
to measure compensation costs under pre-existing accounting pronouncements. If
the fair value based method of accounting is not adopted, SFAS No. 123 requires
pro forma disclosures of net income (loss) and net income (loss) per common
share in the notes to financial statements. The Company has elected to provide
the necessary pro forma disclosures (Note 9).


                                      F-9
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Comprehensive Income

      The Company follows the provisions of SFAS No. 130, "Reporting
Comprehensive Income," which requires companies to report all changes in equity
during a period, except those resulting from investment by owners and
distribution to owners, for the period in which they are recognized.
Comprehensive income is the total of net income and all other nonowner changes
in equity (or other comprehensive income) such as unrealized gains or losses on
securities classified as available-for-sale, foreign currency translation
adjustments and minimum pension liability adjustments. Comprehensive and other
comprehensive income must be reported on the face of annual financial
statements. The Company's operations did not give rise to items includible in
comprehensive income which were not already included in net income for the years
ended December 31, 1999, 1998 and 1997. Accordingly, the Company's comprehensive
income is the same as its net income for all periods presented.

      Recently Issued Accounting Standard

      In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." The
Statement establishes accounting and reporting standards for derivative
instruments (including certain derivative instruments embedded in other
contracts) and for hedging activities. SFAS No. 133 is effective for all fiscal
quarters beginning after June 15, 2000 (as amended by SFAS No. 137) and will not
require retroactive restatement of prior-period financial statements. The
Company currently does not use derivative instruments or engage in hedging
activities and, accordingly, does not expect that this statement will have an
impact on its consolidated statements when adopted.

      Use of Estimates

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

      Reclassifications

      Certain prior year financial statement amounts have been reclassified to
conform with the current year's presentation.


                                      F-10
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3.    INVENTORIES, NET:

      At December 31, 1999 and 1998, inventories, net consist of the following:

                                                   1999             1998
                                                   ----             ----
      Raw materials ......................       $ 10,219        $  8,598
      Work-in-process ....................          9,039          14,316
      Finished goods .....................          1,174             296
      Unliquidated progress payments .....         (2,237)         (2,755)
                                                 --------        --------
                                                   18,195          20,455
      Less: Reserves .....................         (2,133)         (1,594)
                                                 --------        --------
                                                 $ 16,062        $ 18,861
                                                 ========        ========

4.    PROPERTY, PLANT AND EQUIPMENT, NET:

      At December 31, 1999 and 1998, property, plant and equipment, net consists
of the following:

                                                   1999             1998
                                                   ----             ----
      Land ...............................       $    937        $    937
      Building and improvements ..........          4,509           4,485
      Machinery and equipment ............         11,372           9,211
      Furniture and fixtures .............            213             201
                                                 --------        --------
                                                   17,031          14,834
      Less: Accumulated depreciation and
          amortization ...................         (7,417)         (6,000)
                                                 --------        --------
                                                 $  9,614        $  8,834
                                                 ========        ========

5.       ACCRUED LIABILITIES:

         At December 31, 1999 and 1998, accrued liabilities consist of the
following:

                                                   1999             1998
                                                   ----             ----
      Accrued payroll, benefits and
         termination costs ...............       $  2,167        $  1,537
      Accrued commissions ................            435             512
      Accrued warranty ...................            925             685
      Other ..............................            269             225
                                                 --------        --------
                                                 $  3,796        $  2,959
                                                 ========        ========


                                      F-11
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6.    LONG-TERM DEBT:

      At December 31, 1999 and 1998, long-term debt consists of the following:

                                                   1999             1998
                                                   ----             ----
      Industrial Development Revenue Bonds (a)   $  4,515        $  4,570
      Loan and security agreement (b) ....         11,664           8,674
                                                 --------        --------
                                                   16,179          13,244
      Less: Current portion ..............         (1,418)         (1,082)
                                                 --------        --------
                                                 $ 14,761        $ 12,162
                                                 ========        ========

(a)   On June 30, 1992, MPD purchased a 7.4 acre parcel of land and an 86,000
      square foot building for use as a corporate headquarters and manufacturing
      operation for $4,295. MPD financed the acquisition with Industrial
      Development Revenue Bonds ("IDRBs") totaling $4,810 issued through the
      Suffolk County Industrial Development Agency ("SCIDA"). The issuance was
      comprised of $490 Series A Bonds at 7.75% and $4,320 Series B Bonds at
      8.5% with interest payable quarterly. The Series A Bonds and the Series B
      Bonds mature on June 30, 2002 and June 30, 2022, respectively, and are
      subject to annual mandatory sinking fund redemptions on June 30 of each
      year beginning with June 30, 1993 and June 30, 2003, respectively. The
      Series B Bonds include a $425 Debt Service Reserve Fund due and payable on
      June 30, 2022. Approximately $442 was in an escrow account in accordance
      with the terms of the IDRBs and is included in long-term assets in the
      accompanying consolidated balance sheets as of both December 31, 1999 and
      1998. Under IDRB terms, MPD transferred ownership of this facility to the
      SCIDA at closing and immediately leased back the facility with a lease
      term equal to the IDRB terms and provided for a one dollar buy-back option
      at lease end.

(b)   On March 17, 2000, the Company amended its loan agreement with IBJ
      Whitehall Business Credit Corporation ("IBJ"). The loan agreement now
      provides for a $18,942 credit facility consisting of a revolving line of
      credit in the amount of $13,750, a term loan in the amount of $900 and two
      capital equipment ("Capex") loan facilities, Capex #1 and Capex #2, in the
      amounts of $2,026 and $2,266, respectively. The revolving line of credit
      and both the term loan and Capex loans bear interest at annual rates equal
      to the prime rate plus 0.50% and the prime rate plus 0.75%, respectively.
      The credit facility matures in February 2002 and automatically renews for
      one-year periods thereafter, unless terminated by either the Company or
      IBJ. Aggregate borrowings under the revolving line of credit are limited
      by a borrowing base, which is calculated as the sum of 85% of eligible
      accounts receivable and 40% of eligible raw materials and work-in-process
      inventories (with borrowings based on aggregate eligible inventory limited
      to $7,000). The term loan requires a monthly principal payment of $50. The
      Capex loans require monthly principal payments that are recalculated each
      month based on the prior month's Capex borrowings, if any, amortized over
      60 months. Capex #2 loan borrowings must occur prior to December 31, 2000.
      At December 31, 1999, credit facility borrowings totaled $11,664, which
      consisted of a term loan balance of $1,050, a Capex #1 loan balance of
      $2,176, a Capex #2 loan balance of $713 (with $792 of the $2,266 utilized)
      and revolving line of credit borrowings of $7,725. In addition, $3,550 of
      the revolving line of credit was committed to the Company's outstanding
      letters of credit. The credit facility is subject to customary covenants,
      including, among other things, limitations with respect to incurring
      indebtedness, payment of dividends and affiliate advances, and a provision
      for maintaining a certain fixed charge coverage ratio. At December 31,
      1999, the Company did not comply with a certain covenant requirement,
      which noncompliance was waived in connection with the March 17, 2000
      amendment.


                                      F-12
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The aggregate annual maturities of long-term debt, at December 31, 1999,
are as follows:

      2000 ...........................................    $ 1,418
      2001 ...........................................      1,273
      2002 ...........................................      9,168
      2003 ...........................................         80
      2004 ...........................................         85
      Thereafter .....................................      4,155
                                                          -------
                        Total ........................    $16,179
                                                          =======

7.    SHAREHOLDERS' EQUITY:

      Notes receivable from shareholders resulted from the issuance of the
Company's common stock and are secured by the pledge of such stock. The notes
bear interest at 8.0% and are due on September 3, 2001. In 1999 and 1997, $65
and $37, respectively, of the outstanding notes receivable from shareholders was
repaid.

8.    INCOME TAXES:

      For the years ended December 31, 1999, 1998 and 1997, the provision
(benefit) for income taxes consists of the following:

                                        1999           1998          1997
                                        ----           ----          ----
      Current:
               Federal ........       $    --        $    --       $    --
               State ..........            --             --            --
                                      -------        -------       -------
                                           --             --            --
                                      -------        -------       -------

      Deferred:
               Federal ........        (1,982)           698           170
               State ..........          (220)            77            19
                                      -------        -------       -------
                                       (2,202)           775           189
                                      -------        -------       -------
                                      $(2,202)       $   775       $   189
                                      =======        =======       =======

The following table reconciles the Federal statutory rate to the Company's
effective income tax rate for the years ended December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                                              1999     1998      1997
                                                              ----     ----      ----
      <S>                                                     <C>      <C>       <C>
      Statutory rate ....................................      34%      34%       34%
      State taxes, net of federal benefit ...............       6        6         6
      Change in valuation allowance on deferred tax asset       3       (9)      (15)
                                                               --       --        --
      Effective Rate ....................................      43%      31%       25%
                                                               ==       ==        ==
</TABLE>


                                      F-13
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      For the years ended December 31, 1999, 1998 and 1997, the deferred income
tax provision (benefit) is related to differences between the financial and tax
bases of assets and liabilities resulting from the following:

                                              1999         1998         1997
                                              ----         ----         ----
      Depreciation ....................     $    66      $    82      $    46
      Inventories .....................        (171)        (203)        (218)
      Accrued vacation expense ........         (48)         (13)         (23)
      Accrued warranty costs ..........         (96)          12         (126)
      Prepaid real estate taxes .......          --           --           (7)
      Accounts receivable .............         (34)          --           --
      Contract research and development         (92)         (92)         (46)
      Other ...........................          18            7           --
      Net operating loss carryforwards.      (1,845)         982          563
                                            -------      -------      -------
                                            $(2,202)     $   775      $   189
                                            =======      =======      =======

      At December 31, 1998, the Company had recorded deferred tax assets for the
benefit of federal income tax loss carryforwards and timing differences
generated in those years, which had been reduced by a valuation allowance. This
valuation allowance reduced the deferred tax asset to a net amount which the
Company believed that it would more likely than not realize, based on the
Company's estimates of future earnings and the expected timing of temporary
difference reversals. During 1999, the Company concluded that a valuation
allowance was no longer necessary given its estimates of future earnings and the
expected timing of temporary difference reversals.

      The tax effects of temporary differences that give rise to significant
portions of the deferred tax asset, net, at December 31, 1999 and 1998, are as
follows:

                                                           1999         1998
                                                           ----         ----
      Depreciation .................................     $  (417)     $  (350)
      Inventories ..................................         902          730
      Accrued vacation expense .....................         338          290
      Accrued warranty costs .......................         370          274
      Prepaid real estate taxes ....................         (54)         (54)
      Accounts receivable ..........................          64           30
      Contract research and development ............          --          (92)
      Tax benefit from the exercise of stock options         711           --
      Net operating loss carryforwards .............       5,937        4,222
                                                         -------      -------
                                                           7,851        5,050
      Less: valuation allowance ....................          --         (171)
                                                         -------      -------
      Deferred tax asset, net ......................     $ 7,851      $ 4,879
                                                         =======      =======


                                      F-14
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9.    STOCK OPTION PLANS:

      In June 1995, the Company adopted the 1995 Stock Option Plan (the "1995
Plan") pursuant to which key employees of the Company and eligible consultants
to the Company are eligible to receive incentive and/or non-qualified stock
options to purchase up to 525 shares of the Company's common stock. The 1995
Plan, which expires on June 26, 2005, is administered by the Compensation
Committee of the Board of Directors. The selection of participants, grant of
options, determination of price and other conditions relating to the exercise of
options are determined by the Compensation Committee of the Board of Directors.

      In March 1996, the Company adopted the 1996 Stock Option Plan (the "1996
Plan"), which was amended in March 1998, pursuant to which key employees of the
Company and eligible consultants to the Company are eligible to receive
incentive and/or non-qualified stock options to purchase up to 975 shares of the
Company's common stock. The 1996 Plan, which expires on March 5, 2006, is
administered by the Compensation Committee of the Board of Directors. The
selection of participants, grant of options, determination of price and other
conditions relating to the exercise of options are determined by the
Compensation Committee of the Board of Directors.

      In December 1999, the Company adopted the 1999 Stock Option Plan (the
"1999 Plan"), subject to stockholder approval, pursuant to which key employees
of the Company and eligible consultants to the Company are eligible to receive
incentive and/or non-qualified stock options to purchase up to 500 shares of the
Company's common stock. The 1999 Plan, which expires on December 2, 2009, is
administered by the Compensation Committee of the Board of Directors. The
selection of participants, grant of options, determination of price and other
conditions relating to the exercise of options are determined by the
Compensation Committee of the Board of Directors.

      Incentive and non-qualified stock options granted under the 1995 Plan,
1996 Plan and 1999 Plan are exercisable for a period of up to 10 years from the
date of grant. Incentive stock options are exercisable at an exercise price
which is not less than the fair market value of the common shares on the date of
the grant, except that the term of an incentive stock option granted, under the
1995 Plan, 1996 Plan and 1999 Plan, to a shareholder owning more than 10% of the
outstanding common shares may not exceed 5 years and its exercise price may not
be less than 110% of the fair market value of the common shares on the date of
the grant. Non-qualified stock options are exercisable at an exercise price
which is not less than the par value of the Company's common stock on the date
of the grant.

      Transactions involving the 1995 Plan, 1996 Plan and 1999 Plan for the
years ended December 31, 1999, 1998 and 1997 are summarized as follows:

<TABLE>
<CAPTION>
                                1995 Plan                       1996 Plan                      1999 Plan
                                ---------                       ---------                      ---------
                          Shares      Option Price      Shares       Option Price       Shares       Option Price
                          ------      ------------      ------       ------------       ------       ------------
<S>                         <C>      <C>                  <C>       <C>                  <C>              <C>
December 31, 1996
Outstanding.............    513      $8.00 - $11.375       49           $11.125           --                 --
Granted.................     25       $2.875 - $9.50      187       $2.875 - $9.50        --                 --
Exercised...............     (4)          $8.00            --              --             --                 --
Cancelled...............    (18)      $8.00 - $10.75       (8)           $2.875           --                 --
                            ---      ---------------      ---      ----------------      ---               ----

December 31, 1997
Outstanding.............    516      $2.875 - $11.375     228      $2.875 - $11.125       --                 --
Granted.................     --            --             208      $6.375 - $7.0625       --                 --
Exercised...............     (8)      $8.00 - $10.75      (10)           $2.875           --                 --
Cancelled...............    (12)           $8.00          (25)       $2.875 - $9.50       --                 --
                            ---      ---------------      ---      ----------------      ---               ----
</TABLE>


                                      F-15
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

<TABLE>
<S>                         <C>      <C>                  <C>      <C>                    <C>             <C>
December 31, 1998
Outstanding.............    496      $2.875 - $11.375     401      $2.875 - $11.125        --                --
Granted.................      1          $10.5625         218      $10.00 - $13.9375      300             $7.00
Exercised...............    (97)     $2.875 - $10.75     (144)     $2.875 - $11.125        --                --
Cancelled...............     --             --            (14)      $2.875 - $10.00        --                --
                            ---      ----------------     ---      -----------------      ---             -----

December 31, 1999
Outstanding.............    400      $2.875 - $11.375     461      $2.875 - $13.9375      300             $7.00
                            ===      ================     ===      =================      ===             =====
</TABLE>

      At December 31, 1999, 392 shares were exercisable and 15 shares were
available for grant under the 1995 Plan, 147 shares were exercisable and 360
shares were available for grant under the 1996 Plan, and no shares were
exercisable and 200 shares were available for grant under the 1999 Plan.

      The Company accounts for these plans under APB No. 25, under which no
compensation cost is recognized for stock options granted with an exercise price
at or above the prevailing market price on the date of the grant. Had
compensation cost for these plans been determined consistent with the fair value
approach required by SFAS No. 123, the Company's net income (loss) and net
income (loss) per common share would have been the following pro forma amounts:

                                                        1999      1998     1997
                                                        ----      ----     ----
      Net income (loss):              As reported     $(2,913)   $1,732   $ 580
                                      Pro forma        (3,379)    1,396      78
      Basic net income (loss)
        per common share:             As reported     $ (0.28)   $ 0.17   $0.06
                                      Pro forma         (0.32)     0.13    0.01
      Diluted net income (loss)
        per common share:             As reported     $ (0.28)   $ 0.17   $0.06
                                      Pro forma         (0.32)     0.13    0.01

      The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted average
assumptions:

                                          1999         1998           1997
                                          ----         ----           ----
      Fair value .................      $  6.21       $  3.49      $  1.94
      Expected life (years) ......          3.8           4.0          4.0
      Risk-free interest rate ....          5.8%          5.7%         6.1%
      Volatility .................          113%           66%          70%
      Dividend yield .............            0%            0%           0%

      The effects of applying SFAS No. 123 in this pro forma disclosure may not
be indicative of future amounts because additional stock option grants are
anticipated in future years.

10. DEFINED CONTRIBUTION PENSION PLAN:

      MPD maintains a defined contribution pension plan which covers
substantially all employees and provides for employee contributions of up to 14%
of their salary, a portion of which is matched by MPD. Contributions by MPD were
$598, $536 and $500, in 1999, 1998 and 1997, respectively.


                                      F-16
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

11.   SEGMENT INFORMATION:

      Effective December 31, 1998, the Company adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information."
Reportable operating segments are determined based on the Company's management
approach. The management approach, as defined by SFAS No. 131, is based on the
way that the chief operating decision maker organizes the segments within an
enterprise for making operating decisions and assessing performance. While the
Company's results of operations are primarily reviewed on a consolidated basis,
the chief operating decision maker also manages the enterprise in two segments:
(i) wireless products and (ii) satellite, medical and military products. The
following represents selected consolidated financial information for the
Company's segments for the years ended December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                                     Satellite, Medical
                                 Wireless Products  and Military Products   Total 1999
                                 -----------------  ---------------------   ----------
      <S>                             <C>                  <C>               <C>
      Net sales ..............        $ 36,979             $ 33,832          $ 70,811
      Gross profit ...........           5,839                5,983            11,822
      Net income (loss) ......          (3,293)                 380            (2,913)
      Assets .................          18,584               28,946            47,530

<CAPTION>
                                                     Satellite, Medical
                                 Wireless Products  and Military Products   Total 1998
                                 -----------------  ---------------------   ----------
      <S>                             <C>                  <C>               <C>
      Net sales ..............        $ 16,986             $ 38,788          $ 55,774
      Gross profit ...........           3,799               13,493            17,292
      Net income (loss) ......          (3,322)               5,054             1,732
      Assets .................          12,492               34,383            46,875

<CAPTION>
                                                     Satellite, Medical
                                 Wireless Products  and Military Products   Total 1997
                                 -----------------  ---------------------   ----------
      <S>                             <C>                  <C>               <C>
      Net sales ..............        $ 26,397             $ 25,640          $ 52,037
      Gross profit ...........           5,048                8,847            13,895
</TABLE>

      The Company has not restated any other prior period information, as it
would be impracticable.


                                      F-17
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      For the years ended December 31, 1999, 1998 and 1997, sales and accounts
receivable as a percentage of net sales and total accounts receivable,
respectively, by geographic area and major customer are as follows:

<TABLE>
<CAPTION>
Geographic Data:                                                               1999       1998       1997
                                                                               ----       ----       ----
Sales:
<S>                                                                             <C>        <C>        <C>
         U.S. Commercial OEMs & Prime Contractors.........................      66%        56%        72%
         U.S. Government..................................................      11%        28%         4%
         Europe...........................................................      13%        10%        10%
         Asia.............................................................       4%         4%        14%
         South America....................................................       6%         2%        --
         Other Foreign (less than 1%).....................................      --         --         --
Accounts Receivable:
         U.S. Commercial OEMs & Prime Contractors.........................      52%        50%        62%
         U.S. Government..................................................       1%        21%         7%
         Europe...........................................................      24%        18%        26%
         Asia.............................................................      --          2%         5%
         South America....................................................      23%         9%        --
         Other Foreign (less than 1%).....................................      --         --         --

<CAPTION>
Major Customers:                                                               1999       1998       1997
                                                                               ----       ----       ----
Sales:
<S>                                                                             <C>        <C>        <C>
         Customer A.......................................................      --         --         13%
         Customer B.......................................................      41%        17%        33%
         Customer C.......................................................      --         --         16%
         Customer D.......................................................       9%        --         --
         Customer E.......................................................      --         --         --
         Customer F.......................................................       9%        26%        --
         Customer G.......................................................      --         10%        --
Accounts Receivable:
         Customer A.......................................................      --         --         --
         Customer B.......................................................      29%        16%        26%
         Customer C.......................................................      --         --         11%
         Customer D.......................................................      16%        --         12%
         Customer E.......................................................      23%        --         --
         Customer F.......................................................      --         18%        --
         Customer G.......................................................      --         13%        --
</TABLE>


                                      F-18
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

12.   COMMITMENTS AND CONTINGENCIES:

      Operating Leases

      Rent expense, including amounts charged to inventory as part of overhead
allocations and the rental of machinery and equipment (on a month-to-month
basis) was $696, $1,270 and $1,487 for the years ended December 31, 1999, 1998
and 1997, respectively.

      Litigation

      In the normal course of business, the Company is a party to various claims
and/or litigation. Management believes that the settlement of all such claims
and/or litigation, considered in the aggregate, will not have a material adverse
effect on the Company's financial position and results of operations.

      Employment, Consulting and Other Agreements

      The Company has an employment agreement with its Chairman, President and
Chief Executive Officer which expires on December 31, 2002 and provides for an
annual base salary of $300. The terms of the agreement are automatically renewed
for successive one year terms. Additionally, the Company had consulting
agreements with two director/shareholders which provided for aggregate annual
compensation of $225. Both consulting agreements were terminated on January 31,
2000. The Company also has agreements with certain individuals which include
certain provisions related to severance and other benefits due upon a change in
control of the Company, as defined in those agreements.

      Letters of Credit

      As of December 31, 1999 and 1998, the Company had outstanding letters of
credit aggregating $3,550 and $3,859, respectively.


                                      F-19
<PAGE>

              REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE

To Microwave Power Devices, Inc.:

      We have audited, in accordance with auditing standards generally accepted
in the United States, the consolidated financial statements of Microwave Power
Devices, Inc. (a Delaware corporation) and subsidiary included in this Form 10-K
and have issued our report thereon dated March 17, 2000. Our audits were made
for the purpose of forming an opinion on the basic financial statements taken as
a whole. The accompanying schedule is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not a part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.


                                                    ARTHUR ANDERSEN LLP

Melville, New York
March 17, 2000


                                      S-1
<PAGE>

                  MICROWAVE POWER DEVICES, INC. AND SUBSIDIARY

                                   SCHEDULE II

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)

  Allowance for     Balance at    Charged to Costs                   Balance at
Doubtful Accounts   January 1,      and Expenses      Deductions    December 31,
-----------------   ----------      ------------      ----------    ------------

      1999              $75            $153               $68           $160

      1998               75              38                38             75

      1997               76             (40)              (39)             75


                                      S-2