U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                  FORM 10-KSB/A
                         AMENDMENT NO. 1 TO FORM 10-KSB
                     ANNUAL REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

FOR FISCAL YEAR ENDED                               COMMISSION FILE NUMBER
SEPTEMBER 30, 1995                                          0-3392

                             WESTERN MICROWAVE, INC.
                             -----------------------
                 (Name of small business issuer in its charter)

           VIRGINIA                                             94-1530593
           --------                                             ----------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)

                   P.O. BOX 94088, SUNNYVALE, CALIFORNIA 94088
                   -------------------------------------------
                    (Address of principal executive offices)

                                 (415) 780-9276
                                 --------------
                            Issuer's telephone number

Securities registered under
Section 12(b) of the Exchange Act:  NONE

Securities registered under
Section  12(g) of the Exchange Act:  COMMON STOCK,  $.10 PAR VALUE

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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
                                                             ---    ---

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of the  registrant's  knowledge,  in  definitive  proxy or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

The issuer's  revenues for its most recent fiscal year ended  September 30, 1995
were $2,153,713.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
issuer on December 26,  1995,  based upon the average bid and ask prices of such
stock on that date was  $1,039,012.  The number of shares of Common stock of the
issuer outstanding as of December 26, 1995 was 1,378,491.

DOCUMENTS INCORPORATED BY REFERENCE:  None

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT:  Yes ___  No  X

                                        1







                                     PART II

         Items 6, 7, 12 and 13 to the Registrant's  Annual Report on Form 10-KSB
for the fiscal year ended  September 30, 1995 are hereby amended and restated in
their entirety as set forth below:

ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS

FINANCIAL CONDITION

Assets.  Total assets as of September 30, 1995  increased  from the beginning of
the fiscal year by approximately  $1.8 million to a total of $7.32 million.  The
increase in total assets is the result of the cash sale,  at fair market  value,
of the assets  associated  with the WMI Business and of certain  other  tangible
assets for  approximately  1.25  million.  The increase in total assets was also
due, in part, to investment income consisting of interest, dividends and capital
gains on the sales of securities of approximately  $582,000. As of September 30,
1995, both trade accounts  receivable and  inventories  were eliminated from the
balance  sheet as a result of such sale.  Net  current  assets  (current  assets
reduced by current  liabilities)  increased by  approximately  $750,000 from the
beginning of the fiscal year reflecting the gain from the sale of assets offset,
in part, by a $500,000 increase in the environmental reserve in fiscal 1995.

Total Stockholders'  Equity.  Total stockholders'  equity as of the close of the
1995 fiscal year increased from  approximately $4.5 million (or $3.24 per share)
at the beginning of the fiscal year to approximately $5.13 million (or $3.73 per
share) at the close of the fiscal year. The increase of  approximately  $647,000
in total  stockholders'  equity for the current fiscal year is the result of the
sale of the WMI Business offset,  in part, by the increase in the  environmental
reserve.  In fiscal 1995, the Company  redeemed 6,100 shares of its Common Stock
at an average cost of $1.50 per share.

Environmental  Liability.  Under the terms of the settlement  agreements entered
into by the  Company in  connection  with the  settlement  of the  environmental
lawsuits,  the  Company has agreed to  undertake  certain  soil and  groundwater
remediation activities at its former headquarters on Reamwood Avenue, Sunnyvale,
California (SEE, ITEM 3, LEGAL PROCEEDINGS - ENVIRONMENTAL CLAIMS).

In fiscal year 1990, the Company established a reserve in the amount of $250,000
to cover the  anticipated  costs and expenses of  conducting  the  environmental
investigation  and  defending  against the  environmental  claims  instituted by
Intersil  and  by the  owner  of the  Former  Headquarters  or  which  might  be
instituted by the California Regional Water Quality Control Board. In the second
quarter of fiscal

                                        2





1992, the legal reserve was increased by $150,000. As a result of the settlement
of the  environmental  lawsuits,  at the  end of  1992  the  legal  reserve  was
converted to a reserve for anticipated environmental clean-up costs.

As a result of the conditional approval of the Company's workplan  contemplating
significant  soil and groundwater  remediation  activities,  in 1993 the Company
increased the reserve for future  environmental  clean-up costs to $500,000.  In
fiscal 1994 and fiscal  1995,  the Company  expensed  all current  environmental
costs which totaled approximately $564,000 for the two year period.

As a result of further  investigation and soil remediation  activities completed
by the  Company at the site in fiscal  1995,  the  Company  determined  that the
existing  $500,000  environmental  reserve would not be adequate to complete the
cleanup.  As a result,  in fiscal 1995,  the Company  increased  the reserve for
future  environmental costs by $500,000 to $1,000,000.  The $500,000 increase in
the  environmental  reserve at the close of the 1995 fiscal  year was based,  in
large part, on the  historical  costs expended by the Company in the clean-up in
fiscal 1994 and 1995. During such two year period,  the Company's clean-up costs
and  expenses  averaged  approximately  $282,000 per year.  Under the  Company's
workplan,  the Company could reasonably expect to continue groundwater treatment
for a  minimum  of two to  three  years at an  annual  cost per year of at least
$250,000. Accordingly, the $1,000,000 reserve at September 30, 1995 was intended
to cover the  anticipated  clean-up  costs of operating a groundwater  treatment
system for a three to four year period.

The  $1,000,000  reserve at  September  30, 1995  represents  management's  best
estimate of the  anticipated  costs and expenses to complete the clean-up of the
site in accordance with the Company's workplan.  However,  there is no assurance
that the  clean-up  of the site can be  completed  for the  reserved  amount and
changes in conditions at the site as the clean-up is undertaken or other unknown
circumstances may result in significant increases in future clean-up costs which
cannot be reasonably  anticipated  by the Company at this time. At September 30,
1995,  the  Company's  total assets  exceeded $7 million,  and,  therefore,  the
Company  believes  that it has more  than  sufficient  assets  to  complete  the
clean-up in the event the  anticipated  costs and expenses  exceed the amount of
the reserve.

Liquidity  and Capital  Resources.  As a result of the sale of the WMI Business,
substantially  all of the  Company's  assets  consist  of  cash  and  marketable
securities.  Pending the resolution of the Company's environmental liability for
the cleanup of the Former Headquarters,  the Company has invested  substantially
all of its current assets in a diversified  portfolio of marketable  securities.
As of September 30, 1995, the portfolio of marketable  securities were valued at
approximately $6.95 million.


                                        3





RESULTS OF OPERATIONS

Sales and Cost of Sales.  For the  approximate  10-month  period ending with the
sale of the WMI Business on July 21, 1995,  the Company  reported total sales of
Approximately  $2.15  million,  a cost of  sales  of 69% and a gross  profit  of
approximately $660,000.  Sales and cost of sales for this partial period were at
levels  substantially  consistent with fiscal 1994. The inability of the Company
to  increase  sales  as a  result  of the  continuing  decline  in  the  defense
electronics  industry  was a  major  factor  in the  decision  of the  Board  of
Directors to sell the WMI Business in fiscal 1995.

Selling, General and Administrative Expenses. Included in total selling, general
and  administrative  expenses for fiscal 1995 were the following  expenses (i) a
$500,000 increase in the environmental  reserve,  (ii) compensation  expense for
Dr. Hefni of $100,000 for  environmental  consulting and $398,000 for management
of the Company's investment portfolio for the four (4) year period 1991-1995 and
(iii)  legal  and  environmental  expenses  attributable  to the clean up of the
Former Headquarters totaling approximately $364,000.

Interest,  Dividends  and  Capital  Gains.  Investment  income for  fiscal  1995
consisting  of interest,  dividends and capital gains on the sales of securities
totaled  $527,928,  an increase of  approximately  $125,000 (or 30%) from fiscal
1994  levels.  In  addition,  in fiscal  1995,  the  Company  realized a gain of
approximately  $961,000  on  the  sale  of  operating  and  business  assets  in
connection  with the  sale of the WMI  Business  and the  sale of the  remaining
tangible assets.

ITEM 7.           FINANCIAL STATEMENTS

The Company's audited  financial  statements for the fiscal year ended September
30, 1995 and for the periods indicated accompany this report as Item 13(a)(1).

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS;
                  OTHER TRANSACTIONS

TRANSACTIONS WITH MICROWAVE ENGINEERING CORPORATION.

During the fiscal year ended  September 30, 1995, the Company engaged in certain
transactions  with  Microwave  Engineering  Corporation  ("MEC"),  the holder of
224,500  shares of the  Company's  Common  Stock (or  16.29% of the  outstanding
Common Stock). James M. Herrmann,  President of MEC, serves as a Director of the
Company.  Dr. Hefni, Chief Executive Officer and a Director of the Company, is a
stockholder and a Director of MEC.


                                        4





The transactions  between the Company and MEC included the preparation by MEC of
the Company's payroll and the Company's  quarterly payroll reports.  MEC did not
charge the Company for this service and no compensation  was paid by the Company
to MEC for such services in fiscal 1995.


                                     PART IV

ITEM 13.          INDEX OF EXHIBITS, FINANCIAL STATEMENTS AND REPORTS
                  ON FORM 8-K

(a)  The following documents are filed as part of this report.

         1. Financial Statements.  The audited financial  statements,  including
         the Notes  thereto,  to be included in Part II, Item 7 which  accompany
         this Report as Item 13(a)1 are as follows:

                  (i)      Consolidated  Balance  Sheet for  Fiscal  Year  Ended
                           September 30, 1995;

                  (ii)     Consolidated  Statements of Earnings for Fiscal Years
                           ended September 30, 1995 and 1994;

                  (iii)    Consolidated  Statement of  Stockholders'  Equity for
                           Fiscal Years ended September 30, 1995 and 1994; and

                  (iv)     Consolidated  Statements  of Cash  Flows  for  Fiscal
                           Years ended September 30, 1995 and 1994.



                                        5





                                   SIGNATURES

In accordance  with Section 13 or 15(d) of the Exchange Act, the  Registrant has
duly caused this Form 10-KSB/A amending its Annual Report on Form 10-KSB for the
fiscal  year  ended  September  30,  1995  to be  signed  on its  behalf  by the
undersigned, thereunto duly authorized.

                                              WESTERN MICROWAVE, INC.
                                              By: Dr. Ibrahim Hefni

                                              /s/ I. Hefni
                                              ----------------------------------
                                              President and Treasurer and
                                                 Chief Executive Officer


Dated:   June 11, 1997

                                        6





                              Financial Statements
                                   Item 13(a)1


                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

                              Financial Statements
                                       and
               Report of Independent Certified Public Accountants

                           September 30, 1995 and 1994






               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors
Western Microwave, Inc.

We  have  audited  the  accompanying   consolidated  balance  sheet  of  Western
Microwave,  Inc.  and  Subsidiary  as of  September  30,  1995,  and the related
consolidated  statements of earnings,  stockholders'  equity, and cash flows for
each of the two years in the period ended  September 30, 1995.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the consolidated financial position of Western Microwave,
Inc. and  Subsidiary as of September 30, 1995, and the  consolidated  results of
their operations and their  consolidated cash flows for each of the two years in
the period ended  September  30, 1995,  in conformity  with  generally  accepted
accounting principles.

As  discussed in Note C to the  financial  statements,  the Company  changed its
method of accounting for investment  securities  during the year ended September
30, 1995.

As  discussed  in Note I to the  financial  statements,  the Company  reached an
agreement in fiscal year 1992 to settle two  environmental  lawsuits  instituted
against  the  Company.  The  Company has agreed to  undertake  certain  soil and
groundwater remediation as part of the settlement. The Company has established a
reserve to cover the anticipated  costs and expenses to complete the clean-up of
the site.  However,  there is no assurance  that the clean-up of the site can be
completed for the reserved amount as unknown  circumstances may occur and result
in significant  increases in future clean-up costs, which cannot be estimated by
the Company.




/s/ Grant Thornton LLP
--------------------------
San Jose, California
December 6, 1995







                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET

                               SEPTEMBER 30, 1995


<TABLE>
<CAPTION>
                                     ASSETS
<S>                                                                                     <C>        
CURRENT ASSETS
    Cash and cash equivalents                                                           $   289,154
    Securities available for sale                                                         6,947,644
    Note receivable                                                                          80,000
    Prepaid expenses                                                                          2,420
                                                                                        -----------
                Total current assets                                                      7,319,218

PROPERTY, PLANT AND EQUIPMENT - AT COST
    Production machinery and test equipment                                                 200,000
    Office furniture and other equipment                                                     61,159
                                                                                            261,159
        Less accumulated depreciation                                                       259,163
                                                                                              1,996

                                                                                        $ 7,321,214

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                                    $   289,203
    Accrued liabilities                                                                   1,895,866
                                                                                        -----------
           Total current liabilities                                                      2,185,069

COMMITMENTS AND CONTINGENCIES                                                                   -

STOCKHOLDERS' EQUITY
    Common stock - $.10 par value; 3,000,000 shares authorized;
        1,405,233 issued, 1,378,491 outstanding                                             137,849
    Capital in excess of par value                                                        4,013,981
    Retained earnings                                                                       984,315
                                                                                        -----------
                Total stockholders' equity                                                5,136,145

                                                                                        $ 7,321,214
                                                                                        ===========

</TABLE>


         The accompanying notes are an integral part of this statement.





                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

                       CONSOLIDATED STATEMENTS OF EARNINGS

                            YEAR ENDED SEPTEMBER 30,


<TABLE>
<CAPTION>

                                                                              1995               1994
                                                                              ----               ----
<S>                                                                         <C>                 <C>       
Sales                                                                       $2,153,713          $2,512,425

Costs of sales                                                               1,493,684           1,919,458
                                                                           -----------         -----------

         Gross profit                                                          660,029             592,967

Selling, general and administrative expenses                                 2,002,157             943,507
Product development expenses                                                       912              10,818
Investment income                                                            (527,928)           (405,487)
Gain on sale of operating business and assets                                (961,087)                 -
Other income                                                                     (323)            (11,675)
                                                                           -----------         -----------
                                                                               513,731             537,163
                                                                           -----------         -----------

         Earnings before income taxes                                          146,298              55,804

Income tax benefit (expense)                                                   192,652               (800)
                                                                           -----------         -----------

         NET EARNINGS                                                         $338,950             $55,004
                                                                           ===========         ===========

Earnings per share of common stock                                         $       .25           $     .04
                                                                           ===========         ===========

Weighted average number of shares of common stock outstanding                1,381,033           1,384,591
                                                                           ===========         ===========

</TABLE>


         The accompanying notes are an integral part of this statement.





                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                     YEARS ENDED SEPTEMBER 30, 1995 AND 1994


<TABLE>
<CAPTION>
                                                                         Capital in
                                                   Common Stock           Excess of     Retained
                                               Shares        Amount       Par Value     Earnings       Total
                                               ------        ------       ---------     --------       -----
<S>              <C>                          <C>         <C>          <C>             <C>         <C>           
Balance, October 1, 1993                      1,384,591   $   138,459  $    4,022,521  $  273,109  $    4,434,089

    Net earnings                                    -             -               -        55,004          55,004
                                            -----------   -----------  --------------  ----------  --------------

Balance, September 30, 1994                   1,384,591       138,459       4,022,521     328,113       4,489,093

    Stock repurchase                             (6,100)         (610)         (8,540)        -            (9,150)

    Fair value adjustment -
        securities available for sale               -             -               -       317,252         317,252

    Net earnings                                    -             -               -       338,950         338,950
                                            -----------   -----------  --------------  ----------  --------------

Balance, September 30, 1995                   1,378,491   $   137,849  $    4,013,981  $  984,315  $    5,136,145
                                            ===========   ===========  ==============  ==========  ==============

</TABLE>



         The accompanying notes are an integral part of this statement.




                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                            YEAR ENDED SEPTEMBER 30,

<TABLE>
<CAPTION>
                                                                                      1995               1994
                                                                                 --------------       ---------
<S>                                                                              <C>               <C>           
Increase  (decrease)  in cash and cash  equivalents
Cash flows from operating activities:
    Net earnings                                                                 $      338,950    $       55,004
    Adjustments to reconcile net earnings to net cash
        provided by operating activities:
           Depreciation                                                                  51,061            55,739
           Deferred income taxes                                                       (211,502)              -
           Gain on sale of securities                                                  (166,286)          (95,338)
           Gain on sale of operating business and assets                               (961,087)              -
           Changes in assets and liabilities:
               Accounts receivable                                                      (97,239)           95,397
               Other receivables                                                         12,719           512,280
               Inventories                                                               53,587             7,650
               Prepaid expenses                                                          24,913            (3,439)
               Accounts payable                                                         170,451           (45,341)
               Accrued liabilities                                                    1,189,912          (185,842)
                                                                                 --------------    --------------
                Net cash provided by operating activities                               405,479           396,110
Cash flows from investing activities:
    Proceeds from sale of operating business and assets                               1,607,873               -
    Purchase of investment securities                                                (3,760,572)       (1,555,264)
    Proceeds from sale of investment securities                                       2,205,104           790,628
    Proceeds from margin loan                                                               -             195,094
    Payment on margin loan                                                             (195,094)              -
    Decrease in other assets                                                             14,962               -
                                                                                 --------------    --------------
                Net cash used in investing activities                                  (127,727)         (569,542)
Cash flows from financing activities:
    Repurchase of Company stock                                                          (9,150)              -
                                                                                 --------------    --------------
                NET INCREASE (DECREASE) IN CASH AND
                   CASH EQUIVALENTS                                                     268,602          (173,432)
Cash and cash equivalents at beginning of year                                           20,552           193,984
                                                                                 --------------    --------------
Cash and cash equivalents at end of year                                         $      289,154    $       20,552
                                                                                 ==============     =============

Supplemental  disclosures  of cash flow  information:
    Cash paid during the year for:
        Income taxes                                                             $          800    $          800

</TABLE>


         The accompanying notes are an integral part of this statement.





                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           SEPTEMBER 30, 1995 AND 1994


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Principles of Consolidation

    The consolidated  financial  statements  include the accounts of the Company
    and its wholly-owned  subsidiary.  All significant intercompany accounts and
    transactions have been eliminated.

    Contract Revenue

    The Company  recognizes  contract  revenue on the  percentage  of completion
    basis using the units of delivery  method.  Anticipated  losses on contracts
    are recognized at the time they are identified.

    Inventories

    Inventories are stated at the lower of cost (first-in,  first-out method) or
    market.

    Property and Equipment

    Property,   plant  and  equipment  are  stated  at  cost.  Depreciation  and
    amortization  are provided by using  straight-line  and accelerated  methods
    over principally five years.

    Cash Equivalents

    For purposes of the  statements  of cash flows,  the Company  considers  all
    highly liquid debt instruments  purchased with a maturity of three months or
    less to be cash equivalents.

    Earnings Per Share

    Earnings per share is based upon the weighted  average number of outstanding
    common shares.

NOTE B - SALE OF OPERATING BUSINESS AND ASSETS

    On July 21, 1995, the Company completed the sale of certain of its operating
    assets  associated  with  the  conduct  of  its  microwave   components  and
    subsystems businesses to ST Microwave Corp. ("ST") of Sunnyvale, California,
    a  subsidiary  of  Signal  Technology  Corporation.  Under  the terms of the
    initial asset purchase agreement and a subsequent  agreement entered into by
    the Company and ST, the Company sold selected equipment,  certain inventory,
    all outstanding accounts receivable,  all intangible assets, the outstanding
    backlog  of  customer  orders  and the  right to  operate  under the name of
    Western   Microwave  for  a  total  net  purchase  price  of   approximately
    $1,150,000.  The Company  recognized a gain of  approximately  $431,000 as a
    result of this transaction.









                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           SEPTEMBER 30, 1995 AND 1994

NOTE B - SALE OF OPERATING BUSINESS AND ASSETS (continued)

    Excluded from the sale to ST were substantially all the Company's electronic
    test equipment and production  machinery,  as well as all assets  associated
    with the  Company's  machine shop  operation.  In  September of 1995,  these
    assets  were  liquidated  by  the  Company  which  resulted  in  a  gain  of
    approximately $530,000 recognized by the Company.

    The Company is currently in the process of considering  various  options for
    the future of the Company.

NOTE C - INVESTMENT SECURITIES

    As of October 1, 1994, the Company adopted FASB 115,  Accounting for Certain
    Investments in Debt and Equity Securities,  which affects the value at which
    certain  investments  are  recorded in the  Company's  consolidated  balance
    sheet. This adoption had no effect on the Company's  consolidated  statement
    of  income  in  1995.  However,  as a  result  of FASB  115,  the  Company's
    investment  securities were  reclassified as investments  available for sale
    and  recorded in the  consolidated  balance  sheet at fair  value,  with net
    unrealized  gains and losses on these  investments  shown as a component  of
    stockholders'  equity.  At October 1, 1994, the net unrealized  holding gain
    was $96,304 (net of tax of $64,202).

    The  amortized  cost,  unrealized  gains and losses,  and fair values of the
    Company's  available-for-sale  securities  held at  September  30,  1995 are
    summarized as follows:

<TABLE>
<CAPTION>
                                                                          Gross         Gross         Estimated
                                                        Amortized      Unrealized    Unrealized         Fair
                                                          Cost            Gains        Losses           Value
                                                          ----            -----        ------           -----
<S>                                                  <C>             <C>             <C>           <C>           
        Equity securities                            $    5,257,212  $    630,942    $   (115,085) $    5,773,069
        Debt securities                                     326,728        12,897             -           339,625
        Cash on deposit with brokers                        834,950           -               -           834,950
                                                     --------------  ------------    ------------  --------------

                                                     $    6,418,890  $    643,839    $   (115,085) $    6,947,644
                                                     ==============  ============    ============  ==============
</TABLE>

    All of the above noted debt securities mature in the year 2015.

    Proceeds  on sales  of  securities  classified  as  available-for-sale  were
    $2,205,104 in 1995. Gains of $205,514 and losses of $39,228 were realized on
    these  sales.  The  Company  uses  the  specific  identification  method  to
    determine the cost of securities sold.








                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           SEPTEMBER 30, 1995 AND 1994


NOTE C - INVESTMENT SECURITIES (continued)

    The Company has entered into certain contracts in which the Company receives
    a payment and agrees to buy shares of specific securities if the holder puts
    the  securities to the Company.  This  obligation  could occur if the market
    price of the  securities  dropped below the option  price.  At September 30,
    1995,  the  aggregate  contract  obligation  to the  Company,  assuming  all
    contracts  were put to the Company would be  $2,295,000.  The market risk to
    the  Company is that if the share  prices of the  securities  subject to the
    options  decline below the option price,  and the holder puts the securities
    to the Company,  the Company  would be required to buy the  securities  at a
    price in excess of market. At September 30, 1995, the Company has recorded a
    liability  for the  amounts  received  on open  contracts  of  $148,018.  At
    September  30, 1995,  the Company has  unrealized  gains of $135,288 on open
    contracts.  The Company has also entered into certain contracts in which the
    Company  receives a payment and agrees to sell shares  (regardless of if the
    Company  owns the shares) of  specific  securities  if the holder  calls the
    securities from the Company. This obligation could occur if the market price
    of the  securities  rises  above the option  price.  The market  risk to the
    Company is that if the share prices of the securities subject to the options
    rises above the option  price and the holder calls the  securities  from the
    Company, the Company would be required to buy the securities at market price
    and sell them at a price  less than  market.  There were no  uncovered  call
    contracts existing at September 30, 1995. At September 30, 1995, the Company
    has  recorded a liability  for the amounts  received  on open  contracts  of
    $21,624.  At September 30, 1995, the Company has unrealized gains of $21,124
    on these open  contracts.  The  Company  records  the  premium  payments  it
    receives from these activities as a liability upon receipt. Unrealized gains
    on open contracts are deferred and not recognized  until the contracts lapse
    or are settled. Unrealized losses on open contracts are not recognized until
    realized,  i.e.,  when the  contract  is either put to the Company or called
    from the Company.

NOTE D - ACCRUED LIABILITIES

    Accrued liabilities consist of the following at September 30, 1995:

           Payroll and other                                     $      706,022
           Environmental clean-up/Litigation (Note J)                 1,000,000
           Deferred income (Note C)                                     169,642
           Other                                                         20,202
                                                                 --------------
                                                                 $    1,895,866
                                                                 ==============

    Accrued  payroll  consists of amounts due the Company's  President and Chief
    Executive Officer ("CEO"),  Dr. Ibrahim Hefni, for services rendered in 1995
    as President and CEO  ($150,000),  Environmental  Consultant  ($100,000) and
    Investment Manager  ($398,000).  The fees for investment  management are for
    fiscal years 1991 through 1995.










                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           SEPTEMBER 30, 1995 AND 1994


NOTE E - INCOME TAXES

    The Company adopted,  effective  October 1, 1993, the Statement of Financial
    Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", issued
    in February  1992.  Under the asset and  liability  approach  for  financial
    accounting  and  reporting  for  income  taxes  specified  by SFAS 109,  the
    following basic principles are applied in accounting for income taxes at the
    date of the  financial  statements:  a) a  current  liability  or  asset  is
    recognized  for the estimated  taxes payable or refundable on income for the
    current year;  b) a deferred tax  liability or asset is  recognized  for the
    estimated  future tax effects  attributable  to  temporary  differences  and
    carryforwards;  c) the  measurement of current and deferred tax  liabilities
    and assets is based on the provisions of the enacted tax law; the effects of
    future  changes  in tax  laws  or  rates  are  not  anticipated;  and d) the
    measurement of deferred taxes is reduced, if necessary, by the amount of any
    tax benefits  that,  based upon available  evidence,  are not expected to be
    realized.

    Certain events and application of the tax laws create temporary  differences
    between the tax basis of an asset or liability  and its  reported  amount in
    the financial statements.  The principal types of differences between assets
    and  liabilities  for  financial  statement  and  tax  return  purposes  are
    unrealized gains on investments,  certain liabilities and net operating loss
    carryforward amounts.

    There was no effect on net  earnings  in 1994 as a result of this  change in
    accounting for income taxes.

    Deferred taxes consist of the following at September 30, 1995:

           Deferred tax assets and (liabilities)
               Environmental reserves                               $  300,000
               Net operating loss carryforward                         104,254
               Unrealized gain on investments                         (211,502)
                                                                    ----------
                                                                       192,752
                Less valuation allowance                              (192,752)
                                                                    ----------
                                                                    $      -
                                                                    ==========

    As of September 30, 1995, management does not believe,  based upon available
    evidence,  that it is more likely than not that the Company  will be able to
    realize any of the net deferred tax assets.








                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           SEPTEMBER 30, 1995 AND 1994


NOTE E - INCOME TAXES (continued)

The following is a reconciliation  of the expected tax expense  (computing using
the  applicable  federal  and  state  statutory  rates) to  actual  tax  expense
(benefit) for the years ended September 30:

<TABLE>
<CAPTION>
                                                                           1995              1994
                                                                      --------------    ---------
           <S>                                                        <C>               <C>           
           Pretax income                                              $      146,298    $      $55,804
                                                                      --------------    --------------

           Tax at federal rate                                                49,741             8,951
           State income tax and other                                         17,951             3,461
           Non taxable income                                                (68,633)          (63,765)
           Change in deferred tax asset valuation allowance                 (191,711)           52,153
                                                                      --------------    --------------

           Actual tax (benefit) expense                               $     (192,652)   $          800
                                                                      ==============    ==============

</TABLE>







                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           SEPTEMBER 30, 1995 AND 1994

NOTE F - COMMON STOCK

    Stock Options

    Options  granted  under the 1981  Incentive  Stock Option Plan ("ISOP") were
    granted to  employees  at fair market  value at the grant date.  All options
    granted  under  the ISOP  vest  cumulatively  over  twenty  equal  quarterly
    installments.  However,  employees may exercise unvested options at any time
    providing  that the  employee  executes a  repurchase  agreement  giving the
    Company the right to repurchase the unvested  shares at cost in the event of
    termination of employment. No shares were subject to repurchase at September
    30, 1995. These options expire, to the extent not exercised, between six and
    ten years from the date of grant.

    In addition,  a non-statutory  stock option plan was adopted in 1983.  These
    options were granted to members of the Board of Directors at the fair market
    value on the date of the grant and expire, to the extent not exercised,  ten
    years from the grant date.

    The 1981 and 1983 stock option plans  terminated  in  accordance  with their
    provisions.  The termination of the plans did not affect outstanding options
    at September 30, 1994.

    The  following  is a summary of stock  option  activity  for the year in the
period ended September 30, 1995:

<TABLE>
<CAPTION>
                                                                                Outstanding Options
                                                                     Aggregate Exercise         Exercise Price
                                                     Number                 Price                  Per Share
                                                     ------                 -----                  ---------
<S>                                                   <C>                  <C>                       <C>  
Balance, September 30, 1994                           3000                 $4,890                    $1.63
   Options canceled                                   3000                  4,890                     1.63
Balance, September 30, 1995                             -                  $   -                     $  -
</TABLE>

    On December 20, 1994, the Board of Directors of the Company granted CEO, Dr.
    Hefni,  a  non-statutory  stock  option to  purchase  150,000  shares of the
    Company's  common  stock  at a  purchase  price of $1.00  per  share,  which
    represented  the fair  market  value of the common  stock at the date of the
    grant. The option was exercisable  immediately and for a period of ten years
    from  the date of the  grant.  The  option  was  granted  to Dr.  Hefni  for
    consideration of his services as President and CEO of the Company during the
    year ended 1994.  Dr.  Hefni did not receive any other  compensation  during
    fiscal 1994.

    Stock Repurchase Program

    On March 10, 1992, the Company  announced its intention to repurchase,  from
    time to time,  in open  market  transactions,  up to  100,000  shares of the
    Company's   Common  Stock.  As  of  September  30,  1995,  the  Company  had
    repurchased  a total of 26,742  shares  pursuant  to such  stock  repurchase
    program.









                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           SEPTEMBER 30, 1995 AND 1994


NOTE G - COMMITMENTS AND CONTINGENCIES

    The Company leased its  manufacturing  and office  facilities  under a lease
    which expired in September 1995.  Under terms of the lease,  the Company was
    obligated to pay property taxes, insurance and maintenance.

    Rent  expense  in  fiscal  1995  and  1994 was  approximately  $151,000  and
    $156,000, respectively.


NOTE H - SALES

    The Company operates in a single industry segment: the design,  development,
    manufacturing and marketing of microwave components and subsystems.  Most of
    the Company's  business  activity is with customers in the defense industry.
    There were no  customers  who  accounted  for more than ten percent of sales
    during 1995 and 1994.

    Net sales for 1995 and 1994 included export sales of approximately  $934,000
    and $780,000, respectively.


NOTE I - RELATED PARTY TRANSACTIONS

    During the fiscal  years  ended  September  30,  1995 and 1994,  the Company
    engaged in  certain  transactions  with  Microwave  Engineering  Corporation
    ("MEC"),  the holder of 224,500 shares of the Company's Common Stock (or 16%
    of the  outstanding  Common  Stock).  James M.  Herrmann,  President of MEC,
    serves as a Director of the Company.  Dr.  Ibrahim  Hefni, a director of the
    Company, is a stockholder and director of MEC.

    The  transactions  between the Company and MEC  included  the  provision  of
    financial consulting  services;  the provision of accounting and bookkeeping
    functions,  including the  preparation  of the  Company's  payroll and other
    accounting  functions for the Company; and the sale by MEC of certain parts,
    supplies,  computer  equipment and other tangible  personal  property to the
    Company.











                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           SEPTEMBER 30, 1995 AND 1994


NOTE J - ENVIRONMENTAL CLAIMS

    Two  environmental  lawsuits were  instituted  against the Company in fiscal
    year 1990. Both lawsuits relate to the alleged  contamination by the Company
    of the soil and  groundwater  at or in the vicinity of the Company's  former
    headquarters  at 1271 Reamwood  Avenue,  Sunnyvale,  California (the "Former
    Headquarters").  The two lawsuits have been  instituted  against the Company
    separately  by Intersil,  Inc.  ("Intersil")  and by the owner of the Former
    Headquarters.

        Suit by Intersil - On September  28, 1990,  Intersil  instituted a civil
        action  in the  United  States  District  Court,  Northern  District  of
        California  pursuant  to  the  Comprehensive   Environmental   Response,
        Compensation and Liability Act ("CERCLA") for  reimbursement of response
        costs incurred and to be incurred by Intersil in response to the release
        or  threatened   release  of  hazardous   substances   from  the  Former
        Headquarters  and  for  a  declaratory  judgment  as  to  the  Company's
        liability for future response  costs.  The action also sought a judgment
        awarding Intersil compensatory  damages,  costs and interest, as well as
        an order requiring that the Company abate the conditions  giving rise to
        the action.  The Intersil suit followed the demand made in May, 1990 for
        not  less  than  $807,831.50  which  represented  approximately  50%  of
        Intersil's  response  costs  incurred as of February 28, 1990.  In 1992,
        Intersil  increased its demand to approximately  $3.7 million.  The suit
        also included claims for negligence,  nuisance,  waste and trespass, all
        as a result of the alleged  release or  threatened  release of hazardous
        substances into the environment by the Company.

        Suit by Former  Landlord  - In  August,  1990,  the owner of the  Former
        Headquarters  instituted  legal  action  against the Company in Superior
        Court of California,  Santa Clara County, for the costs of investigating
        and remedying  suspected toxic  contamination at the site. The complaint
        alleged  that  during  its  occupancy  of the Former  Headquarters,  the
        Company  released or disposed of certain toxic and hazardous  substances
        onto the property resulting in contamination of the groundwater  beneath
        the property. The complaint estimated that the cost of investigation and
        clean-up of the alleged  contamination  exceeded  $200,000.  The owner's
        complaint  also  sought to hold the  Company  liable  for lost  rents in
        excess  of  $30,000  per  month  until  the   clean-up  of  the  alleged
        contamination was completed.  In addition, the owner's complaint alleged
        that the Company damaged the property by failing to properly maintain it
        and by removing  fixtures  and causing  other  damage upon  vacating the
        premises.  The  complaint  estimated  that the costs to be  incurred  to
        repair  the  alleged  damage  would  total  not less than  $50,000.  The
        complaint  also sought to recover for the diminution in the value of the
        property  caused  by all of  the  alleged  actions  of  the  Company  as
        described  above.  Finally,  the complaint  sought  punitive  damages of
        $1,000,000  and payment of the owner's  other  administrative  costs and
        legal expenses.

    The Company retained environmental counsel to defend the Company in both the
    Intersil suit and the  environmental  lawsuit filed by the former  Landlord.
    The primary  liability issue in both lawsuits was whether or not the Company
    was the source of any soil and/or  groundwater  contamination  at the Former
    Headquarters  and, if so, the  allocation of the clean-up  costs at or about
    the site among the contributors.










                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           SEPTEMBER 30, 1995 AND 1994


NOTE J - ENVIRONMENTAL CLAIMS (continued)

    In fiscal  year 1990,  the  Company  established  a reserve in the amount of
    $250,000  to cover the  anticipated  costs and  expense  of  conducting  the
    environmental  investigation  and defending against claims for environmental
    matters  already  instituted  by  Intersil  and by the  owner of the  Former
    Headquarters  or which might be instituted by the California  Regional Water
    Quality Control Board  ("RWQCB").  In the second quarter of fiscal 1992, the
    legal  reserve was  increased by $150,000 and the reserve was converted to a
    reserve for anticipated environmental clean-up costs. As of the close of the
    1992 fiscal year, the balance of the environmental reserve was approximately
    $360,000.

    On July 28, 1992, the Company  announced that it had reached an agreement to
    settle the two  environmental  lawsuits  instituted  against  the Company by
    Intersil and the Former  Landlord.  Definitive  settlement  agreements  were
    executed and exchanged by all parties in November,  1992. Under the terms of
    both settlements,  the Company has agreed to reimburse both Intersil and the
    Former  Landlord  for  certain  costs  alleged  to  have  been  incurred  in
    remediating soil and groundwater  contamination at the Former  Headquarters.
    The costs of both  settlements  were  funded,  in large  part,  by  proceeds
    obtained by the Company's  insurance carriers.  In addition,  as part of the
    settlements,   the  Company  agreed  to  undertake   soil  and   groundwater
    remediation at the Former Headquarters.

    A workplan for remedial action,  including several amendments  thereto,  was
    submitted  by the Company to the RWQCB in early 1993.  In July of 1993,  the
    RWQCB   conditionally   approved  the  Company's   workplan.   The  workplan
    contemplates the installation by the Company of a pilot treatment system for
    the underground removal of chemical contamination in the shallow groundwater
    at the  site  as  well  as  soil  remediation  and  additional  testing  and
    groundwater monitoring at the site.

    In fiscal 1994,  the Company  continued its efforts to obtain final approval
    of a workplan  for  remedial  action from the RWQCB.  Under the terms of the
    settlement  agreements entered into by the Company, the Company was entitled
    to hook in to an existing  groundwater  treatment system being operated on a
    contiguous site. However, after the settlement agreements were executed, the
    operator of the system  advised the Company of its  intention to abandon the
    system and to  implement a passive  treatment  system.  As a result of these
    changes  in   circumstances,   the  Company   experienced   some  delays  in
    implementing groundwater treatment at the site.

    In fiscal 1995,  the Company was fined  $100,000 and ordered to put $250,000
    in an irrevocable account, to be used solely for remediation activities,  by
    the RWQCB for  violating  certain site  clean-up  requirements.  The Company
    believes it has resolved its differences with the RWQCB and is moving toward
    proposing and receiving a final  remediation  plan.  During fiscal 1995, the
    Company  continued its soil  remediation  and  implemented  its  groundwater
    treatment.










                     WESTERN MICROWAVE, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                           SEPTEMBER 30, 1995 AND 1994


NOTE J - ENVIRONMENTAL CLAIMS (continued)

    As a result of the  conditional  approval  of the  Company's  workplan,  the
    Company  increased the reserve for future  environmental  clean-up  costs at
    September 30, 1993 to $500,000. During fiscal 1994, the Company expensed all
    current  environmental  costs with the result  that the  reserve  for future
    environmental  costs at September 30, 1994  remained at $500,000.  In fiscal
    1995, the Company expensed all current environmental costs and increased its
    reserve  for future  environmental  costs by  $500,000  to  $1,000,000.  The
    increase is a result of the Company  determining that more resources will be
    needed to  remediate  the site as a result of work  performed at the site in
    the current  year.  The  $1,000,000  reserve  represents  management's  best
    estimate of the  anticipated  costs and expenses to complete the clean-up of
    the site in accordance  with the Company's  workplan.  However,  there is no
    assurance  that the clean-up of the site can be  completed  for the reserved
    amount and changes in  conditions  at the site as the clean-up is undertaken
    or other unknown circumstances may result in significant increases in future
    clean-up costs which cannot be reasonably anticipated by the Company at this
    time. A range of loss relating to the environmental costs, therefore, cannot
    be determined.