Unassociated Document

AEROFLEX INCORPORATED

$225,000,000 11.75% Senior Notes due February 15, 2015

On August 7, 2008, we issued 11.75% senior notes due February 15, 2015 (the “Original Notes”) in a transaction exempt from the registration requirements of the Securities Act. As part of the issuance of the Original Notes, holders of the Original Notes were granted benefits pursuant to an exchange and registration rights agreement (the “registration rights agreement”) among us, the initial purchaser and others. To satisfy our obligations under the registration rights agreement, the Original Notes are currently subject to an exchange offer (the “exchange offer”) which commenced on January 22, 2009, pursuant to which holders of Original Notes have the right to exchange the Original Notes for our registered 11.75% senior notes due February 15, 2015 (the “New Notes”) with substantially identical terms. The exchange offer terminates on March 6, 2009, unless extended. The term “Notes,” as used in this prospectus, includes both the Original Notes and New Notes issued in exchange for the Original Notes in the exchange offer.

We pay interest on the Notes on February 15 and August 15 of each year. Interest accrues at a rate of 11.75% per annum. It is anticipated that an interest payment will be made on the Original Notes on February 15, 2009, and the New Notes issued in the exchange offer will bear interest commencing February 16, 2009. Accordingly, holders of the Original Notes who exchange for New Notes will be paid interest on a continuous basis from August 7, 2008, the date of original issuance.

The Notes mature on February 15, 2015. We have the option to redeem all or part of the Notes at any time on or after August 15, 2011 at the redemption prices set forth in this prospectus. In addition, at any time prior to August 15, 2010, we may redeem up to 35% of the aggregate principal amount of the Notes with the proceeds of certain sales of equity securities at 111.75% of the principal amount redeemed, plus accrued and unpaid interest to the date of redemption. In addition, at any time prior to August 15, 2011, we may redeem all or part of the Notes at a price equal to 100% of the principal amount plus the "make-whole" redemption price described in this prospectus. If we undergo certain changes of control, each holder of the Notes may require us to repurchase all or a part of that holder’s Notes at a price of 101% of the principal amount of the Notes, plus accrued and unpaid interest to the date of repurchase.

The Notes are senior unsecured obligations of ours and the guarantors and rank equally with all of our and the guarantors' existing and future senior debt and senior to all of our and the guarantors' existing and future subordinated indebtedness. The Notes and the guarantees are effectively subordinated to all of our and the guarantors' secured debt, including borrowings under our Senior Secured Credit Facility, to the extent of the collateral securing such indebtedness.

The Notes are guaranteed by our existing and future domestic, wholly-owned subsidiaries that guarantee certain of our other indebtedness. Our foreign subsidiaries do not guarantee the Notes.

There is no existing public market for the Notes offered hereby. We do not intend to list the Notes on any securities exchange or seek approval for quotation through any automated trading system.

You should carefully consider the "Risk Factors" beginning on page 9 of this prospectus before purchasing the Notes.

These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed on the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

This prospectus has been prepared for and will be used by Goldman, Sachs & Co. and other affiliates of Goldman, Sachs & Co. in connection with the offers and sales of the Notes in market-making transactions effected from time to time. These transactions may occur in the open market or may be privately negotiated at prices related to prevailing market prices at the time of sales or at negotiated prices. Goldman, Sachs & Co. and its affiliates may act as principal or agent in these transactions. We will not receive any proceeds of such sales.

Goldman, Sachs & Co.

The date of this prospectus is February 11, 2009

TABLE OF CONTENTS

	Page
Prospectus Summary	1

Risk Factors	9

Forward-Looking Statements	22

Ratio of Earnings to Fixed Charges	23

Use of Proceeds	23

Capitalization	24

Unaudited Pro Forma Financial Information	24

Selected Historical Financial Data	30

Management's Discussion and Analysis of Financial Condition and Results of Operations	35

Business	52

Management	68

Executive Compensation	71

Security Ownership of Certain Beneficial Owners and Management	81

Certain Relationships and Related Party Transactions	82

Description of Other Indebtedness	84

Description of the Notes	86

Book-Entry, Delivery and Form	133

Certain U.S. Federal Income and Estate Tax Consequences	136

Plan of Distribution	139

Certain ERISA Considerations	140

Legal Matters	140

Experts	140

Where You Can Find More Information	140

Index to Financial Statements	F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. Goldman, Sachs & Co. is not making an offer of any of these securities in any state or jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus.

PROSPECTUS SUMMARY

This summary highlights important information about our business and about this prospectus. This summary does not contain all of the information that may be important to you. You should carefully read this prospectus in its entirety before making an investment decision. In particular, you should read the section titled "Risk Factors" and the financial statements and notes related to those statements included elsewhere in this prospectus. In this prospectus, unless the context requires otherwise, references to (i) "we," "our," "the Company," “the issuer” or "us" refer, as applicable, to Aeroflex Incorporated and its subsidiaries, (ii) the term "parent" refers to AX Holding Corp., which owns 100% of our capital stock, (iii) the term "parent LLC" refers to VGG Holding LLC, which owns 100% of the parent, (iv) the term "Veritas Capital" refers to The Veritas Capital Fund III, L.P., (v) the term "Golden Gate" refers to Golden Gate Private Equity, Inc., (vi) the term “GS Direct” refers to GS Direct, L.L.C., (vii) the term “Sponsors” refers collectively to affiliates of or funds managed by Veritas Capital, Golden Gate and GS Direct, and (viii) any “fiscal” year refers to the twelve months ended June 30 of the applicable year. For example, “fiscal 2008” refers to our fiscal year ended June 30, 2008.

Our common stock was publicly traded on Nasdaq and we filed periodic and other reports with the Securities and Exchange Commission, or the SEC, until August 2007. On August 15, 2007, we were acquired by our parent pursuant to an agreement and plan of merger, or the merger agreement. As a result of this acquisition, which we refer to as the Acquisition, we became a private company and our SEC filing obligations terminated. As of January 21, 2009, the date of effectiveness of our Registration Statement relating to our exchange offer of New Notes for Original Notes, we again became subject to SEC public reporting requirements.

We issued the Original Notes on August 7, 2008 to Goldman, Sachs & Co. (the “Initial Purchaser”) in a transaction exempt from the registration requirements of the Securities Act. The Initial Purchaser of the Original Notes subsequently resold the Original Notes to qualified institutional buyers in reliance on Rule 144A and to persons outside the United States in reliance on Regulation S under the Securities Act. As part of the issuance of the Original Notes, holders of the Original Notes were granted benefits pursuant to the registration rights agreement between us and the Initial Purchaser. The registration rights agreement obligated us to file a registration statement in connection with the exchange offer of New Notes for Original Notes. The registration statement was declared effective on January 21, 2009 and the exchange offer commenced on January 22, 2009. The exchange offer terminates on March 6, 2009, unless extended. As previously described, the term ”Notes” as used in this prospectus includes both the Original Notes and New Notes issued in exchange for the Original Notes in the exchange offer.

Because we are an affiliate of the Initial Purchaser, the registration rights agreement also obligated us to make a current “market-maker” prospectus, such as this prospectus, generally available to the Initial Purchaser and its affiliates to engage in market-making activities for the Notes. The Initial Purchaser advised us that they presently intend to make a market in the Notes as permitted by applicable law and this prospectus is being delivered in accordance therewith.

As used in this prospectus, we refer to the “Transactions” collectively as (i) the consummation of the Acquisition, (ii) the borrowings entered into in connection with the Acquisition and the application of the proceeds therefrom, and (iii) the equity investments by the Sponsors and certain members of our management.

Use of Non-GAAP Measures

We have included certain non-GAAP financial measures in this prospectus, including income (loss) from continuing operations before interest expense, income taxes, depreciation and amortization (“EBITDA”) and Adjusted EBITDA (as defined herein). We believe that the presentation of EBITDA enhances an investor’s understanding of our financial performance. We use EBITDA for business planning purposes, including to establish budgets and operational goals and manage our business, and in measuring our performance relative to that of our competitors and we use Adjusted EBITDA to determine compliance with certain debt covenants in our Senior Secured Credit Facility debt agreement. We also believe that EBITDA will provide investors with a useful financial metric for assessing the comparability of our operating performance between periods and our ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures because, among other items, it eliminates the significant amortization expense arising from acquired intangible assets established as a part of purchase accounting as a result of the Acquisition.

Adjusted EBITDA is the basis for the calculation of certain covenants in the indentures governing our senior secured credit facilities. We believe EBITDA and Adjusted EBITDA are measures commonly used by investors to evaluate our performance and, in the case of EBITDA, to evaluate the performance of our competitors. EBITDA and Adjusted EBITDA are not presentations made in accordance with U.S. GAAP and our use of the terms EBITDA and Adjusted EBITDA varies from others in our industry. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income (loss), operating income (loss) or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance or operating cash flows as measures of liquidity.

EBITDA and Adjusted EBITDA have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. For example, EBITDA and Adjusted EBITDA:

exclude certain tax payments that may represent a reduction in cash available to us;

do not reflect any cash, capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;

are impacted by reorganization of businesses and other restructuring related charges;

do not reflect changes in, or cash requirements for, our working capital needs; and

do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt.

In calculating Adjusted EBITDA, we add back certain non-cash, non-recurring and other items that are included in EBITDA and/or net income (loss) as required by various covenants in the indenture governing our senior secured credit facilities. Adjusted EBITDA:

does not include share-based employee compensation expense and other non-cash charges;

does not include restructuring, severance and relocation costs incurred to realize future cost savings and enhance our operations;

does not include the impact of Acquisition purchase accounting adjustments; and

does not reflect Company Sale Transaction expenses and merger related expenses, including advisory fees that are being paid to the Sponsors (as defined below) following the consummation of the Acquisition. See “Certain Relationships and Related Party Transactions.”

Our Business

Our business is characterized by the breadth and diversity of our product offerings, customer base, applications and end markets. We believe that we currently have significant market positions in the following product categories in which we compete: (i) radiation hardened, or RadHard, “fabless” semiconductors, (ii) high performance mixed-signal ASICs, (iii) military radio test equipment and (iv) avionics test equipment. We offer a broad array of products, including custom and standard integrated circuits, or ICs, such as databuses, transceivers, microcontrollers and microprocessors, globally to a diverse group of high quality customers. We often design and develop applications through a collaborative process whereby we provide platform-specific and customized, or “spec’d,” products to our customers.

Headquartered in Plainview, New York, we conduct our operations from 16 facilities in the United States, the United Kingdom, France and China and employ more than 2,625 employees as of September 30, 2008.

Corporate Information

We are a corporation organized under the laws of the State of Delaware. Our principal executive offices are located at 35 South Service Road, Plainview, NY 11803, our telephone number is (516) 694-6700 and our website is located at www.aeroflex.com. The contents of our website are not part of this prospectus.

Summary Terms of Notes

The summary below describes the principal terms of the 11.75% senior notes due February 15, 2015. Certain of the terms and conditions described below are subject to important limitations and exceptions.

Issuer	Aeroflex Incorporated

Notes Offered	$225.0 million aggregate principal amount of 11.75% senior notes due February 15, 2015. The form and terms of the Notes are currently subject to an exchange offer.

Maturity Date	February 15, 2015.

Interest Payment Dates	The Notes bear cash interest at the rate of 11.75% per annum (computed on the basis of a 360-day year), payable semi-annually in arrears.

	Payment frequency: every six months on February 15 and August 15 to holders of record on February 1 and August 1, respectively.

	It is anticipated that an interest payment will be made on the Original Notes on February 15, 2009 and the New Notes issued in the exchange offer will bear interest from February 16, 2009. Accordingly, holders of Original Notes who exchange for New Notes will be paid interest on a continuous basis from August 7, 2008, the date of original issuance.

Guarantees	Our obligations under the Notes are unconditionally guaranteed, jointly and severally, by the guarantors and by each of our future domestic subsidiaries.

Ranking	The Notes are unsecured senior obligations of ours and the guarantors and rank equally with all of our and the guarantors' existing and future senior debt and senior to all of our and the guarantors' existing and future subordinated indebtedness. The Notes and the guarantees are effectively subordinated to all of our and the guarantors' secured debt, including borrowings under our Senior Secured Credit Facility, to the extent of the collateral securing such indebtedness.

Optional Redemption	We may, at our option, redeem all or part of the Notes at any time on or after August 15, 2011 at the redemption prices listed under "Description of Notes—Optional Redemption."

	Prior to August 15, 2010, we may, at our option, redeem up to 35% of the original aggregate principal amount of the Notes with the proceeds of certain sales of equity securities at 111.75% of the principal amount, plus accrued and unpaid interest to the date of redemption. See "Description of Notes—Optional Redemption."

	Prior to August 15, 2011, we may, at our option, redeem all or part of the Notes at 100% of the principal amount plus the "make-whole" redemption price set forth under "Description of Notes—Optional Redemption.

Mandatory Repurchase Offer	Upon the occurrence of a change of control (as described under "Description of Notes—Repurchase at the Option of Holders—Change of Control"), we must offer to repurchase the Notes at 101% of the principal amount of the Notes, plus accrued and unpaid interest to the date of repurchase.

Certain Covenants	The Indenture governing the Notes contains certain covenants limiting our ability and the ability of our restricted subsidiaries to, under certain circumstances:

	·	incur additional debt;
	·	pay dividends or make other distributions on, redeem or repurchase, capital stock;

	·	make investments or other restricted payments;
	·	enter into transactions with affiliates;
	·	issue stock of restricted subsidiaries;
	·	sell all, or substantially all, of our assets;
	·	create liens on assets to secure debt; or
	·	effect a consolidation or merger.

	These covenants are subject to important exceptions and qualifications as described in this prospectus under the caption "Description of Notes—Certain Covenants."

Risk Factors	You should carefully consider the information set forth under the caption "Risk Factors" beginning on page 9 of this prospectus.

Summary Historical Financial Data

The following table sets forth our summary historical financial and other operating data. The summary historical financial data presented below for the years ended June 30, 2006 and 2007 and the periods from July 1, 2007 through August 14, 2007 and August 15, 2007 through June 30, 2008 has been derived from our audited financial statements included elsewhere in this prospectus. The summary consolidated financial information for the three month period ended September 30, 2008 has been derived from our unaudited consolidated financial statements for that period, and except as described in the notes thereto, has been prepared on a basis consistent with the audited financial statements, and in the opinion of management, includes all adjustments necessary for a fair presentation of that information for such period. As part of the Acquisition, we entered into the various financing arrangements described herein and, as a result, we now have a different capital structure. Accordingly, the results of operations for periods subsequent to the consummation of the Acquisition and related financing transactions will not necessarily be comparable to prior periods.

The selected consolidated financial data below should be read in conjunction with “Use of Proceeds,” “Capitalization,” “Unaudited Pro Forma Financial Information,” “Selected Historical Financial Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included elsewhere in this prospectus.

	Predecessor									Successor			Successor
							Period			Period
							July 1,			August 15,
							2007			2007			Three Months
							through			through			Ended
	Years Ended June 30,						August 14,			June 30,			September 30,
	2006			2007			2007			2008			2008
	(In thousands)
Operations Statement Data:
Net sales	$	546,243		$	593,146		$	38,221		$	604,991		$	140,845
Cost of sales		284,312			308,969			22,861			352,953			73,486
Gross Profit		261,931			284,177			15,360			252,038			67,359
Selling, general and administrative costs		122,871			129,621			19,031			121,086			31,484
Research and development costs		72,055			76,717			12,178			69,898			17,029
Amortization of acquired intangibles		13,778			13,006			1,692			73,076			17,968
Acquired in-process research and development		-			-			-			24,975			-
Company Sale Transaction expenses		-			30,584			3,717			32,493			-
Operating income (loss)		53,227			34,249			(21,258	)		(69,490	)		878
Other income (expense)
Interest expense		(608	)		(672	)		(275	)		(74,658	)		(21,215	)
Other income (expense)		1,669			152			294			4,617			3,086
Total other income (expense)		1,061			(520	)		19			(70,041	)		(18,129	)
Income (loss) from continuing operations before income taxes		54,288			33,729			(21,239	)		(139,531	)		(17,251	)
Provision (benefit) for income taxes		20,540			24,935			(6,831	)		(38,927	)		(10,354	)
Income (loss) from continuing operations		33,748			8,794			(14,408	)		(100,604	)		(6,897	)
Discontinued operations, net		(5,652	)		(3,868	)		(2,508	)		(4,821	)		-
Cumulative effect of a change in accounting principle, net		(1,137	)		-			-			-			-

Net income (loss)	$	26,959		$	4,926		$	(16,916	)	$	(105,425	)	$	(6,897	)

We have not presented earnings (loss) per share data because all 1,000 shares of common stock outstanding at June 30, 2008 and September 30, 2008 are held by one shareholder.

	Predecessor									Successor			Successor
	Years Ended June 30,						Period July 1, 2007 through August 14,			Period August 15, 2007 through June 30,			Three Months Ended September 30,
	2006			2007			2007			2008			2008
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	10,387		$	13,000		$	45,496		$	54,149		$	73,066
Marketable securities (including non-current portion)		28,332			9,500			-			19,960			18,755
Working capital(1)		199,780			201,603		$	218,072			220,855			216,178
Total assets		633,391			674,936			682,776			1,478,999			1,421,929
Long-term debt (including current portion)		4,165			3,583			3,554			878,811			881,383
Stockholders’ equity		487,670			510,697			506,626			276,648			245,932
Cash Flow Data:
Cash flows from (used in) operating activities		36,697			20,802			11,293		$	8,910			28,510
Cash flows from (used in) investing activities		(42,553	)		(19,113	)		8,406			(1,162,376	)		(3,341	)
Cash flows from (used in) financing activities		3,748			(793	)		12,619			1,209,045			(1,756	)
Other Financial Data:
Depreciation and amortization		30,371			30,142			3,662			93,032			23,497
Capital expenditures		15,365			18,427			1,088			13,179			3,343
EBITDA (unaudited) (2)		85,267			64,543			(17,302	)		28,159			27,461
Adjusted EBITDA (unaudited)(3)														29,083
Ratio of earnings to fixed charges (4)		15.4	x		9.8	x		*			*			*

*	The deficit of earnings to fixed charges was $21.2 million for the period July 1, 2007 through August 14, 2007, $139.5 million for the period August 15, 2007 through June 30, 2008 and $17.3 million for the three months ended September 30, 2008.

(1)	Working capital is defined as current assets less current liabilities.

(2)	As used herein, “EBITDA” represents income (loss) from continuing operations plus (i) interest expense, (ii) provision for income taxes and (iii) depreciation and amortization.

We have included information concerning EBITDA in this prospectus because we believe that such information is used by certain investors, securities analysts and others as one measure of an issuer’s performance and historical ability to service debt. In addition, we use EBITDA when interpreting operating trends and results of operations of our business. EBITDA is also widely used by us and others in our industry to evaluate and to price potential acquisition candidates. EBITDA is a non-GAAP financial measure and should not be considered as an alternative to, or more meaningful than, earnings from operations, cash flows from operations or other traditional GAAP indications of an issuer’s operating performance or liquidity.

The use of EBITDA has limitations as an analytical tool, and you should not consider this measure in isolation, or as a substitute for analysis of our results as reported under GAAP. For additional information regarding our use of EBITDA and limitations on its usefulness as an analytical tool, see “Use of Non-GAAP Measures.”

The following table is a reconciliation of income (loss) from continuing operations to EBITDA for the periods indicated:

	Predecessor							Successor			Successor
	Years Ended June 30,				Period July 1, 2007 through August 14,			Period August 15, 2007 through June 30,			Three Months Ended September 30,
	2006		2007		2007			2008			2008
	(In thousands)
Income (loss) from continuing operations	$	33,748	$	8,794	$	(14,408	)	$	(100,604	)	$	(6,897	)
Interest expense		608		672		275			74,658			21,215
Provision (benefit) for income taxes		20,540		24,935		(6,831	)		(38,927	)		(10,354	)
Depreciation and amortization		30,371		30,142		3,662			93,032			23,497
EBITDA (unaudited)	$	85,267	$	64,543	$	(17,302	)	$	28,159		$	27,461

(3)

The calculation of Adjusted EBITDA is based on the definitions in our debt agreements and is not defined under U.S. GAAP. Our use of the term Adjusted EBITDA may vary from others in our industry. Adjusted EBITDA is not a measure of operating income (loss), performance or liquidity under U.S. GAAP and is subject to important limitations. For additional information regarding our use of Adjusted EBITDA and limitations on its usefulness as an analytical tool, see “Use of Non-GAAP Measures.” A reconciliation of EBITDA to Adjusted EBITDA is as follows:

	Three Months Ended
	September 30, 2008
	Successor Entity

EBITDA (unaudited)	$	27,461
Impact of other non-cash purchase accounting adjustments		97
Company sale transaction expenses and merger and related costs		634
Restructuring expenses (a)		402
Share based compensation (b)		489
Adjusted EBITDA (unaudited)	$	29,083

(a)

Primarily reflects costs associated with the reorganization of our U.K. operations.

(b)

Reflects non-cash share-based employee compensation expense under the provisions of SFAS 123(R), Share-Based Payments.

(4)

In calculating the ratio of earnings to fixed charges, earnings consist of income from continuing operations before income taxes plus fixed charges. Fixed charges consist of interest expense, amortization of deferred financing costs and one-third of rent expense that we believe to be representative of the interest factored in those rentals.

RISK FACTORS

In addition to the other information set forth in this prospectus, you should carefully consider the following factors before deciding to invest in the Notes. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. In such a case, you may lose all or part of your original investment.

Risks Related to the Notes and Our Indebtedness

Our substantial level of indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under the Notes.

We have a significant amount of indebtedness. As of September 30, 2008, we had $881.4 million of debt outstanding, including approximately $519.8 million of secured debt under our Senior Secured Credit Facility, $225.0 million of principal amount of senior notes subject to the exchange offering and $135.2 million of subordinated unsecured debt under our Senior Subordinated Unsecured Credit Facility. Additionally, at September 30, 2008 we were able to borrow an additional $50.0 million under the revolving portion of our Senior Secured Credit Facility.

Our substantial indebtedness could have important consequences to you. For example, it could:

•

make it more difficult for us to satisfy our obligations with respect to the Notes;

•

increase our vulnerability to general adverse economic and industry conditions;

•

require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

•

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

•

place us at a competitive disadvantage compared to our competitors that have less debt; and

•

limit our ability to borrow additional funds.

In addition, our Senior Secured Credit Facility bears interest at variable rates. At September 30, 2008, we had approximately $520 million of variable rate indebtedness under our senior secured credit facility. A 1% increase in such rates would increase our annual interest expense by approximately $5.2 million.

Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt, which could further exacerbate the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the Indenture governing the Notes and our Senior Secured Credit Facility and our Senior Subordinated Unsecured Credit Facility allow us to incur substantial amounts of additional debt, subject to certain limitations. The revolving portion of our Senior Secured Credit Facility permits borrowing of up to $50.0 million thereunder, and these borrowings would be effectively senior to the Notes to the extent of the value of the assets securing such indebtedness. If new indebtedness is added to our and our subsidiaries' current debt levels, the related risks that we and they now face would intensify.

To service our indebtedness and other obligations, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

Our ability to make payments on and to refinance our indebtedness, including the Notes, and to fund working capital needs and planned capital expenditures, will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control.

Our business may not generate sufficient cash flow from operations and future borrowings may not be available to us under our Senior Secured Credit Facility or otherwise in an amount sufficient to enable us to pay our indebtedness, including the Notes, or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness, including the Notes, on or before the maturity thereof. We may not be able to refinance any of our indebtedness, including our Senior Secured Credit Facility, the Notes or our Senior Subordinated Unsecured Credit Facility, on commercially reasonable terms or at all.

In addition, if for any reason we are unable to meet our debt service obligations, we would be in default under the terms of our agreements governing our outstanding debt. If such a default were to occur, the lenders under our Senior Secured Credit Facility could elect to declare all amounts outstanding under our Senior Secured Credit Facility immediately due and payable, and the lenders would not be obligated to continue to advance funds to us. In addition, if such a default were to occur, the Notes and/or any amounts then outstanding under our Senior Subordinated Unsecured Credit Facility would become immediately due and payable. If the amounts outstanding under these debt agreements are accelerated, our assets may not be sufficient to repay in full the money owed to our debt holders, including holders of the Notes.

Your right to receive payments on the Notes is effectively subordinated to the rights of our and the guarantors’ existing and future secured creditors.

Holders of our secured indebtedness and the secured indebtedness of the guarantors will have claims that are prior to your claims as holders of the Notes to the extent of the value of the assets securing that other indebtedness. Notably, we and our subsidiaries, including the guarantors, are parties to our Senior Secured Credit Facility, which is secured by liens on substantially all of our assets and the assets of the guarantors and a pledge of all of our capital stock and all of the capital stock of our domestic subsidiaries. The Notes will be effectively subordinated to all of our secured indebtedness. In the event of any distribution or payment of our assets or any pledged capital stock in any foreclosure, dissolution, winding-up, liquidation, reorganization or other bankruptcy proceeding, holders of secured indebtedness will have prior claims to those of our assets and any pledged capital stock that constitute their collateral. Holders of the Notes will participate ratably with all holders of our unsecured indebtedness that is deemed to be of the same class as the Notes, and potentially with all of our other general creditors, based upon the respective amounts owed to each holder or creditor, in our remaining assets. In any of the foregoing events, there may not be sufficient assets to pay amounts due on the Notes. As a result, holders of the Notes may receive less, ratably, than holders of secured indebtedness.

If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.

Any default under the agreements governing our indebtedness, including a default under our Senior Secured Credit Facility or our Senior Subordinated Unsecured Credit Facility that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness, could make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness (including our Senior Secured Credit Facility and our Senior Subordinated Unsecured Credit Facility), we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under our Senior Secured Credit Facility could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders under our Senior Secured Credit Facility, our Senior Subordinated Unsecured Credit Facility or other debt that we may incur in the future to avoid being in default. If we breach our covenants under our Senior Secured Credit Facility or our Senior Subordinated Unsecured Credit Facility and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under our Senior Secured Credit Facility and/or our Senior Subordinated Unsecured Credit Facility, the lenders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, such as the lenders under our Senior Secured Credit Facility, could proceed against the collateral securing the debt. Because the Indenture governing the Notes, our Senior Secured Credit Facility and our Senior Subordinated Unsecured Credit Facility have customary cross-default provisions, if the indebtedness under the Notes, our Senior Secured Credit Facility, our Senior Subordinated Unsecured Credit Facility or any of our other debt is accelerated, we may be unable to repay or finance the amounts due. See “Description of Other Indebtedness” and “Description of Notes.”

The Indenture governing the Notes, our Senior Secured Credit Facility and our Senior Subordinated Unsecured Credit Facility will impose significant operating and financial restrictions, which may prevent us from capitalizing on business opportunities and taking some actions.

The Indenture governing the Notes, our Senior Secured Credit Facility and our Senior Subordinated Unsecured Credit Facility contain customary restrictions on our activities, including covenants that restrict us and our restricted subsidiaries from:

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incurring additional indebtedness and issuing disqualified stock or preferred stock;

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making certain investments or other restricted payments;

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paying dividends and making other distributions with respect to capital stock, or repurchasing, redeeming or retiring capital stock or subordinated debt;

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selling or otherwise disposing of our assets;

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creating liens on our assets;

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consolidating or merging with, or acquiring, another business, or selling or disposing of all or substantially all of our assets; and

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entering into transactions with our affiliates.

The restrictions in the Indenture governing the Notes, our Senior Secured Credit Facility and our Senior Subordinated Unsecured Credit Facility may prevent us from taking actions that we believe would be in the best interest of our business, and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted. We also may incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility. We may not be granted waivers or amendments to these agreements if for any reason we are unable to comply with these agreements, and we may not be able to refinance our debt on terms acceptable to us, or at all. The breach of any of these covenants and restrictions could result in a default under the Indenture governing the Notes, under our Senior Secured Credit Facility or under our Senior Subordinated Unsecured Credit Facility. An event of default under our debt agreements would permit some of our lenders to declare all amounts borrowed from them to be due and payable.

We may not have the ability to raise the funds necessary to finance any change of control offer required by the Indenture governing the Notes.

Upon the occurrence of certain kinds of change of control events, we will be required to offer to repurchase outstanding Notes at 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. However, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of the Notes or that restrictions in our Senior Secured Credit Facility will not allow such repurchases. Our failure to purchase the tendered Notes would constitute an event of default under the Indenture governing the Notes which, in turn, would constitute a default under our Senior Secured Credit Facility and, if the lenders accelerate the debt under our Senior Secured Credit Facility, a default under our Senior Subordinated Unsecured Credit Facility. In addition, the occurrence of a change of control would also constitute an event of default under our Senior Secured Credit Facility. A default under our Senior Secured Credit Facility would result in a default under the Indenture and under our Senior Subordinated Unsecured Credit Facility, if the lenders accelerate the debt under our Senior Secured Credit Facility.

Moreover, our Senior Secured Credit Facility restricts, and any future indebtedness we incur may restrict, our ability to repurchase the Notes, including following a change of control event. As a result, following a change of control event, we would not be able to repurchase the Notes unless we first repay all indebtedness outstanding under our Senior Secured Credit Facility and any of our other indebtedness that contains similar provisions, or obtain a waiver from the holders of such indebtedness to permit us to repurchase the Notes. We may be unable to repay all of that indebtedness or obtain a waiver of that type. Any requirement to offer to repurchase the outstanding Notes may therefore require us to refinance our other outstanding debt, which we may not be able to do on commercially reasonable terms, if at all. These repurchase requirements may also delay or make it more difficult for others to obtain control of us.

Federal and state statutes allow courts, under certain specific circumstances, to void guarantees and/or require note holders to return payments received from guarantors.

Under current federal bankruptcy law and comparable provisions of state fraudulent transfer or fraudulent conveyance laws, a guarantee may be voided or cancelled, or claims in respect of a guarantee may be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by its guarantee:

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issued the guarantee with the intent to delay, hinder or defraud present or future creditors; or

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received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee; and either

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was insolvent or rendered insolvent by reason of such incurrence; or

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was engaged, or about to engage, in a business or transaction for which the guarantor’s remaining assets constituted unreasonably small capital; or

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intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature (as all of the foregoing terms are defined in or interpreted under the fraudulent transfer or conveyance statutes); or

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was a defendant in an action for money damages, or had a judgment for money damages docketed against it (if, in either case, after final judgment the judgment is unsatisfied).

In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of the guarantor.

A court likely would find that a guarantor did not receive reasonably equivalent value or fair consideration in exchange for its guarantee if the value received by the guarantor were found to be disproportionately small when compared with its obligations under the guarantee or, put differently, it did not benefit, directly or indirectly, from the issuance of the Notes. The measures of insolvency for purposes of fraudulent transfer or conveyance laws will vary depending upon the particular law applied in any proceeding to determine whether a fraudulent transfer or conveyance has occurred. Generally, however, a guarantor would be considered insolvent if:

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the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets; or

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if the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

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it could not pay its debts as they become due.

On the basis of historical financial information, recent operating history and other factors, we believe that each guarantor, after giving effect to its guarantee of the Notes, will not be insolvent, will not have unreasonably small capital for the business in which it is engaged and will not have incurred debts beyond its ability to pay such debts as they mature. We cannot assure you, however, as to what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard.

The Notes are structurally subordinated to all obligations of our non-guarantor subsidiaries.

The Notes are not guaranteed by any of our current or future foreign subsidiaries. As a result of this structure, the Notes are structurally subordinated to all indebtedness and other obligations, including trade payables, of our non-guarantor subsidiaries. The effect of this subordination is that, in the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding involving a non-guarantor subsidiary, the assets of that subsidiary cannot be used to pay you until all other claims against that subsidiary, including trade payables, have been fully paid. As of September 30, 2008, the aggregate total assets (based on book value) of our non-guarantor subsidiaries were $259 million, representing approximately 18% of our total assets. In addition, 24% of our total liabilities were attributable to our non-guarantor subsidiaries as of September 30, 2008. For fiscal 2008, 30% of our net sales was attributable to our non-guarantor subsidiaries. For fiscal 2008, our non-guarantor subsidiaries had a loss from continuing operations of $14.1 million.

Our controlling equity holders may take actions that conflict with your interests.

Substantially all of the voting power of our equity is held by the Sponsors. Accordingly, they control the power to elect our directors and officers, to appoint new management and to approve all actions requiring the approval of the holders of our equity, including adopting amendments to our constituent documents and approving mergers, acquisitions or sales of all or substantially all of our assets. The directors have the authority, subject to the terms of our debt, to issue additional indebtedness or equity, implement equity repurchase programs, declare dividends and make other such decisions about our equity.

In addition, the interests of our controlling equity holders could conflict with your interests. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of our controlling equity holders might conflict with your interests as a Note holder. Our controlling equity holders also may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to you, as holders of the Notes.

There is no public market for the Notes, and we do not know if a market will ever develop or, if a market does develop, whether it will be sustained.

The Notes are a new issue of securities for which there is no existing trading market. Accordingly, we cannot assure you that a liquid market will develop for the Notes, that you will be able to sell your notes at a particular time or that the prices that you receive when you sell the Notes will be favorable.

We do not intend to apply for listing or quotation of the Notes on any securities or stock market, although we intend to apply to list our Notes on the PORTAL Market Trading System. The liquidity of any market for the Notes will depend on a number of factors, including:

• the number of holders of Notes;

• our operating performance and financial condition;

• the market for similar securities;

• the interest of securities dealers in making a market in the Notes; and

• prevailing interest rates.

The Notes were issued to, and we believe the Notes are owned by, a relatively small number of beneficial owners. Goldman, Sachs & Co., or the Initial Purchaser, was the initial purchaser of the Notes pursuant to a purchase agreement among us, the guarantors and Goldman, Sachs & Co., dated August 7, 2008. The Initial Purchaser advised us that they presently intend to make a market in the Notes as permitted by applicable law. However, the Initial Purchaser is under no obligation to do so and may cease their market-making at any time without notice. Accordingly, the market for the Notes may cease to exist. Because we are an affiliate of the Initial Purchaser, the Initial Purchaser is required to deliver a current “market-maker” prospectus, such as this prospectus, and otherwise comply with the registration requirements of the Securities Act in connection with any secondary market sale of the Notes, which may affect their ability to continue market-making activities. By way of this prospectus, we are making a “market-maker” prospectus generally available to the Initial Purchaser to permit it to engage in market-making transactions. However, the exchange and registration rights agreement, dated August 7, 2008, among us, the guarantors and Goldman, Sachs & Co. provides that we may, for valid business reasons, allow the market-maker prospectus to cease to be effective and usable for a period of time as set forth in the exchange and registration rights agreement or as otherwise acceptable to the market-maker. As a result, the liquidity of the secondary market for the Notes may be materially adversely affected by the unavailability of a current “market-maker” prospectus.

Risks Relating to Our Business

A global recession and continued credit tightening could adversely affect us.

Current concerns about a global recession and continued credit tightening, including failures of financial institutions, have initiated unprecedented government intervention in the U.S., Europe and other regions of the world. If these concerns continue or worsen, our customers could experience financial difficulties and as a result modify, delay or cancel plans to purchase our products or services or become unable to make payment to us for amounts due and owing. In addition, our suppliers could experience credit or other financial difficulties that could result in delays in their ability to supply us with necessary raw materials, components or finished products. These conditions may make it extremely difficult for our customers, our suppliers and us to accurately forecast and plan future business activities and could result in an asset impairment. The occurrence of any of these factors could have an adverse effect on our business, financial condition and results of operations.

Instability in financial markets could adversely affect our ability to access capital markets.

In recent months, the volatility and disruption in the capital and credit markets have reached unprecedented levels. If these conditions continue or worsen, there can be no assurance that we will not experience a material adverse effect on our ability to borrow money, including under our Senior Secured Credit Facility, or have access to capital, if needed. Although our lenders have made commitments to make funds available to us in a timely fashion, our lenders may be unable or unwilling to lend money. In addition, if we determine that it is appropriate or necessary to raise capital in the future, the future cost of raising funds through the debt or equity markets may be more expensive or those markets may be unavailable. If we were unable to raise funds through debt or equity markets, it could materially and adversely affect our business, financial condition and results of operations.

If we are unable to implement our business strategy, our future results could be adversely affected.

Our future results of operations will depend in significant part on the extent to which we can implement our business strategy, which depends on our ability to successfully operate each component of our business. Our ability to execute our business strategy is subject to a number of factors, many of which are beyond our control, including those set forth in these “Risk Factors.” If we are unable to successfully implement our strategy, our business, financial condition and results of operations could be adversely affected.

Our industry is highly competitive.

We operate in a highly competitive industry. Current and prospective customers for our products evaluate our capabilities against the merits of our direct competitors. For all of our products, we compete primarily on the basis of both performance and price. Some of our competitors are well-established and have greater market share and manufacturing, financial, research and development and marketing resources than we do. We also compete with emerging companies that are attempting to sell their products in specialized markets, and with the internal capabilities of many of our significant customers, including Honeywell and BAE. There can be no assurance that we will be able to maintain our current market share with respect to any of our products. A loss of market share to our competitors could have a material adverse effect on our business, results of operations and financial condition. In addition, a significant portion of our contracts, including those with the federal government and commercial customers, are subject to commercial bidding, both upon initial issuance and recompetition. If we are unable to successfully compete in the bidding process or if we fail to obtain renewal, our business, results of operations and financial condition could be adversely affected.

Dependence on contract fabrication of semiconductors and outsourcing other portions of our business may adversely affect our ability to bring products to market and damage our reputation.

As part of our efforts to minimize the amount of required capital investment in facilities, equipment and labor and increase our ability to quickly respond to changes in technology and customer requirements, we outsource our semiconductor fabrication processes and certain other manufacturing functions to third parties. If these third parties fail to perform their obligations in a timely manner or at satisfactory quality and cost levels, our ability to bring products to market and our reputation could suffer and our costs could increase. For example, during a market upturn, our contract manufacturers may be unable to meet our demand requirements, which may preclude us from fulfilling our customers’ orders on a timely basis. The ability of these manufacturers to perform is largely outside of our control.

Our industry is characterized by rapid technological change, and if we cannot continue to develop, manufacture and market innovative products that meet customer requirements for performance and reliability, we may lose market share and our net sales may suffer.

The process of developing new high technology products is complex and uncertain, and failure to keep apace of technological development, to develop or obtain appropriate intellectual property and to anticipate customers’ changing needs and emerging technological trends accurately could significantly harm our results of operations. We must make long-term investments and commit significant resources before knowing whether our predictions will eventually result in products that the market will accept. We must accurately forecast volumes, mix of products and configurations that meet customer requirements, and we may not succeed.

Our intellectual property rights may be inadequate to protect our business.

Our patents are of significant importance to us. In addition, we rely on our trademarks, trade secrets, proprietary know-how and concepts. We attempt to protect our intellectual property rights, both in the United States and in foreign countries, through a combination of patent, trademark and trade secret laws, as well as third-party nondisclosure and assignment agreements. Because of the differences in foreign trademark, patent and other laws concerning proprietary rights, our intellectual property rights may not receive the same degree of protection in foreign countries as they would in the United States. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition.

We have applied for patent protection relating to certain existing and proposed products, processes and services. While we generally apply for patents in those countries where we intend to make, have made, use or sell patented products, we may not accurately predict all of the countries where patent protection will ultimately be desirable. If we fail to timely file a patent application in any such country, we may be precluded from doing so at a later date. Furthermore, we cannot assure you that any of our patent applications will be approved. We also cannot assure you that the patents issuing as a result of our foreign patent applications will have the same scope of coverage as our United States patents. The patents we own could be challenged, invalidated or circumvented by others and may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Further, we cannot assure you that competitors will not infringe our patents, or that we will have adequate resources to enforce our patents.

Some of our proprietary technology may have been developed under, or in connection with, U.S. government contracts or other federal funding agreements. With respect to technology developed under such federal funding agreements, the U.S. government may retain a nonexclusive, non-transferable, irrevocable, paid-up license to use the technology on behalf of the United States throughout the world. In addition, the U.S. government may obtain additional rights to such technology, or our ability to exploit such technology may be limited.

We rely on our trademarks, trade names and brand names to distinguish our products and services from the products and services of our competitors, and have registered or applied to register many of these trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products and services, which could result in loss of brand recognition, and could require us to devote resources marketing new brands. Further, we cannot assure you that we will have adequate resources to enforce our trademarks.

We also rely on unpatented proprietary technology. It is possible that others will independently develop the same or similar technology or otherwise obtain access to our unpatented technology. To protect our trade secrets and other proprietary information, we require employees, consultants, advisors and collaborators to enter into confidentiality agreements. We cannot assure you that these agreements will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. If we are unable to maintain the proprietary nature of our technologies, we could be materially adversely affected.

If third parties claim that we infringe upon or misappropriate their intellectual property rights, our net sales, gross margins and expenses could be adversely affected.

We face the risk of claims that we have infringed or misappropriated third parties’ intellectual property rights. Any claims of patent or other intellectual property infringement, even those without merit, could:

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be expensive and time consuming to defend;

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cause us to cease making or using products that incorporate the challenged intellectual property;

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require us to redesign, reengineer, or rebrand our products, if feasible;

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divert management’s attention and resources; and

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require us to enter into licensing agreements in order to obtain the right to use a third party’s intellectual property.

Any licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us could result in our being required to pay significant damages, enter into costly license agreements, or stop the sale of certain products, any of which could adversely affect our net sales, gross margins and expenses and harm our future prospects.

Many patent applications in the United States are maintained in secrecy for a period of time after they are filed, and therefore there is a risk that we could adopt a technology without knowledge of a pending patent application, which technology would infringe a third party patent once that patent is issued.

We rely on sales to federal government entities under prime contracts and subcontracts. A loss or reduction of such contracts, a failure to obtain new contracts or a reduction of sales under such contracts could have a material adverse effect on our business.

We derived approximately 28% of our net sales for fiscal 2008 from contracts with the federal government and its agencies or subcontracts with prime government contractors. The loss or significant curtailment of any of our significant government contracts or subcontracts, or failure to exercise renewal options or enter into new contracts or subcontracts, could have a material adverse effect on our business, results of operations and financial condition. Continuation and the exercise of renewal options on our existing government contracts and subcontracts and new government contracts and subcontracts are, among other things, contingent upon the availability of adequate funding for the various federal government agencies with which we and prime government contractors do business. Changes in federal government spending could directly affect our financial performance. Among the factors that could impact federal government spending and which would reduce our federal government contracting business are:

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a significant decline in, or reapportioning of, spending by the federal government;

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changes, delays or cancellations of federal government programs or requirements;

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the adoption of new laws or regulations that affect companies that provide services to the federal government;

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federal government shutdowns or other delays in the government appropriations process;

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curtailment of the federal government’s use of third-party service firms;

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changes in the political climate, including with regard to the funding or operation of the services we provide; and

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general economic conditions.

While U.S. defense spending has increased significantly in recent years due to greater homeland security and foreign military commitments, these defense spending levels may not be sustainable, particularly with the Iraq-related work. If the new presidential administration were to reorder its budgetary priorities resulting in a general decline in U.S. defense spending, it could cause federal government agencies to reduce their purchases under contracts, exercise their rights to terminate contracts in whole or in part, to issue temporary stop work orders or decline to exercise options to renew contracts, all of which could harm our operations and significantly reduce our future revenues.

Federal government contracts may be terminated by the federal government at any time prior to their completion and contain other unfavorable provisions, which could lead to unexpected loss of sales and reduction in backlog.

Under the terms of federal government contracts, the federal government may unilaterally:

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terminate or modify existing contracts;

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reduce the value of existing contracts through partial termination;

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delay the payment of our invoices by government payment offices;

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audit our contract-related costs; and

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suspend us from receiving new contracts pending resolution of alleged violations of procurement laws or regulations.

The federal government can terminate or modify any of its contracts with us or its prime contractors either for its convenience or if we or its prime contractors default by failing to perform under the terms of the applicable contract. A termination arising out of our default could expose us to liability and have a material adverse effect on our ability to compete for future contracts and subcontracts. If the federal government or its prime contractors terminate and/or materially modify any of our contracts or if any applicable options are not exercised, our failure to replace sales generated from such contracts would result in lower sales and could adversely affect our earnings, which could have a material adverse effect on our business, results of operations and financial condition.

Our backlog as of September 30, 2008 was approximately $271 million, of which approximately 43% represented firm contracts with agencies of the U.S. government or prime defense contractors or subcontractors of the U.S. government. There can be no assurance that any of the contracts comprising our backlog will result in actual sales in any particular period or that the actual sales from such contracts will equal our backlog estimates. Furthermore, there can be no assurance that any contract included in our estimated backlog that generates sales will be profitable.

Our business could be adversely affected by a negative audit or other actions, including suspension or debarment, by the federal government.

As a federal government contractor, we must comply with and are affected by laws and regulations relating to the formation, administration and performance of government contracts. These laws and regulations affect how we do business with the federal government and our prime government contractors, and in some instances, impose added costs on our business. Federal government agencies routinely audit and investigate government contractors. These agencies review each contractor’s contract performance, cost structure and compliance with applicable laws, regulations and standards. Such agencies also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed.

In addition, government contract payments received by us for allowable direct and indirect costs are subject to adjustment after audit by government auditors and repayment to the government if the payments exceed allowable costs as defined in the government contracts.

As a federal government contractor, we are subject to an increased risk of investigations, criminal prosecution, civil fraud, whistleblower lawsuits and other legal actions and liabilities to which companies with solely commercial customers are not subject, the results of which could have a material adverse effect on our operations. If we were suspended or prohibited from contracting with the federal government generally, or any significant federal government agency specifically, if our reputation or relationship with federal government agencies were impaired or if the federal government otherwise ceased doing business with us or significantly decreased the amount of business it does with us, our business, results of operations and financial condition could be materially adversely affected.

Our federal government contracts are subject to competitive bidding, both upon initial issuance and recompetition. If we are unable to successfully compete in the bidding process or if we fail to receive renewal, it could have a material adverse effect on our business, results of operations and financial condition.

A significant portion of our federal government contracts are awarded through a competitive bidding process, including upon renewal, and we expect that this will continue to be the case. There often is significant competition and pricing pressure as a result of this process.

The competitive bidding process presents a number of risks, including the following:

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we must expend substantial funds and time to prepare bids and proposals for contracts, which could detract attention from other parts of our business;

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we may be unable to estimate accurately the resources and cost that will be required to complete any contract we win, which could result in substantial cost overruns; and

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we may encounter expense and delay if our competitors protest or challenge awards of contracts to us, and any such protest or challenge could result in a requirement to resubmit bids on modified specifications or in termination, reduction or modification of the awarded contract.

The government contracts for which we compete typically have multiple option periods, and if we fail to win a contract, we generally will be unable to compete again for that contract for several years. If we fail to win new contracts or to receive renewal contracts upon recompetition, such failure could have a material adverse effect on our business, results of operations and financial condition.

Certain of our products may be controlled by the International Traffic in Arms Regulations, which may adversely affect our financial condition.

We are subject to International Traffic in Arms Regulation, or ITAR. ITAR requires export licenses from the U.S. Department of State for products that have military or strategic applications. During the quarter ended March 31, 2007, we became aware that certain RadHard bidirectional multipurpose transceivers sold by us since 1999 may have been subject to the licensing jurisdiction of the U.S. Department of State in accordance with ITAR. Accordingly, we filed a Voluntary Disclosure with the Directorate of Defense Trade Controls, U.S. Department of State, describing the details of the possible inadvertent misclassification. Simultaneously, we filed a Commodity Jurisdiction request providing detailed information and data supporting our contention that the product is not subject to ITAR and requesting a determination that such product is not ITAR controlled. By letter dated November 15, 2007, we were informed that the U.S. Department of State had determined in response to our Commodity Jurisdiction request, that the product is subject to the licensing jurisdiction of the U.S. Department of State in accordance with ITAR. We requested reconsideration of this determination. On February 7, 2008, we filed an addendum to the above referenced Voluntary Disclosure advising the Directorate of Defense Trade Controls that other products sold by us similar in nature to the transceiver described above may also be subject to ITAR. The Directorate of Defense Trade Controls agreed to extend our time to file such addendum to the Voluntary Disclosure until a decision was rendered with respect to our request for reconsideration of the determination in connection with the above-referenced Commodity Jurisdiction request. On August 5, 2008, we received a letter from the Office of Defense Trade Controls Compliance (“DTCC”) requesting that we provide documentation and/or information relating to our compliance initiatives after November 15, 2007 as well as the results of any product reviews conducted by us, and indicating that a civil penalty against us could be warranted in connection with this matter following the review of such materials. We have provided all of the materials and documentation requested by the DTCC. Our request for reconsideration was denied by the Directorate of Defense Trade Controls on August 19, 2008, which determined that the product is subject to the licensing jurisdiction of the Department of State in accordance with ITAR. Accordingly, on September 18, 2008, we filed an addendum to our Voluntary Disclosure identifying other products that may have been subject to the licensing jurisdiction of the U.S. Department of State in accordance with ITAR but were inadvertently misclassified. At this time it is not possible to determine whether any fines or other penalties will be asserted against us, or the materiality of any outcome.

During May 2008, we became further aware that a certain product sold by our KDI subsidiary may have been inadvertently misclassified as not ITAR controlled. On August 5, 2008, we filed a Voluntary Disclosure with the Directorate of Defense Trade Controls, U.S. Department of State, describing the inadvertent misclassification of this product. At this time it is not possible to determine whether any fines or other penalties will be asserted against us, or the materiality of any outcome.

During November 2008, we became aware that our Hauppauge facility had shipped two ITAR controlled products to a foreign customer, but inadvertently had noted on the requisite paperwork that only one ITAR controlled product was included in the shipment. We intend to file a voluntary disclosure with the Directorate of Defense Trade Controls, U.S. Department of State, informing them of this mistake. At this time it is not possible to determine whether any fines or other penalties will be asserted against us, or the materiality of any outcome.

During January 2009, we became aware that a certain product sold by our Powell subsidiary, for which an ITAR marketing license had been properly issued by the U.S. Department of State, mistakenly was taken out of the country by an employee without first obtaining the required U.S. Customs signature upon departure. We intend to file a voluntary disclosure shortly advising the U.S. Department of State of this mistake. At this time it is not possible to determine whether any fines or other penalties will be asserted against us, or the materiality of any outcome.

In the event that a determination is made that we have violated ITAR with respect to any of the foregoing matters, we may be subject to substantial monetary penalties that we are unable to quantify at this time, and/or a suspension or revocation of our export privileges and criminal sanctions, which may adversely affect our business, results of operations and financial condition.

We are subject to unanticipated market conditions that could adversely affect our available working capital and financial position.

We hold investments that consist of certain auction rate securities, or ARS. Beginning in February 2008, auctions for the resale of ARS have ceased to reliably support the liquidity of these securities. We cannot be certain that liquidity will be restored in the foreseeable future or at all. We may not be able to access cash by selling these securities for which there is insufficient demand without a loss of principal until a future auction for these investments is successful, a secondary market emerges, they are redeemed by their issuer or they mature. These securities are classified as non-current assets. In addition, the value of such investments could potentially be impaired on a temporary or other-than-temporary basis. If it is determined that the value of the investment is impaired on an other-than-temporary basis, we would be required to write down the investment to its fair value and record a charge to earnings for the amount of the impairment. As of September 30, 2008, we held ARS with a par value of $19.9 million and a fair value of $18.7 million.

Our failure to detect unknown defects in our products could materially harm our relationship with customers, our reputation and our business.

Defects could be found in our existing or new products. These defects could result in significant product liability or warranty claims. In addition, any defects found in our products could result in a loss of sales or market share, failure to achieve market acceptance, injury to our reputation, indemnification claims, litigation, increased insurance costs and increased service costs, any of which could discourage customers from purchasing our products and materially harm our business.

General economic conditions could adversely affect our net sales, gross margins and expenses.

Our net sales and gross margins depend significantly on the overall demand for microelectronic products and testing solutions, in the product and service segments in which we compete. Weaker demand for our products and services caused by economic weakness may result in decreased sales, earnings levels or growth rates and problems with the saleability of inventory and realizability of customer receivables. In the past, we have observed effects of global economic downturns in many areas of our business. Delays or reductions in spending for our products could have a material adverse effect on our business, results of operations and financial condition.

As part of our business strategy, we may complete acquisitions or divest non-strategic businesses and product lines and undertake restructuring efforts. These actions could adversely affect our business, results of operations and financial condition.

As part of our business strategy, we engage in discussions with third parties regarding, and enter into agreements relating to, possible acquisitions, ventures and divestitures in order to manage our product and technology portfolios and further our strategic objectives. We also continually look for ways to increase the profitability of our operations through restructuring efforts and to consolidate operations across facilities where synergies exist. In order to pursue this strategy successfully, we must identify suitable acquisition, alliance or divestiture candidates, complete these transactions, some of which may be large and complex, and integrate acquired companies. Integration and other risks of acquisitions can be more pronounced for larger and more complicated transactions, or if multiple acquisitions are pursued simultaneously.

The integration of acquisitions may make the completion and integration of subsequent acquisitions more difficult. However, if we fail to identify and complete these transactions, we may be required to expend resources to internally develop products and technology or may be at a competitive disadvantage or may be adversely affected by negative market perceptions, which may have an adverse effect on our business, results of operations and financial condition.

Acquisitions may require us to integrate different company cultures, management teams and business infrastructures and otherwise manage integration risks. Even if an acquisition is successfully integrated, we may not receive the expected benefits of the transaction.

A successful sale or divestiture depends on various factors, including our ability to effectively transfer assets and liabilities, contracts, facilities and employees to the purchaser, identify and separate the intellectual property to be divested from the intellectual property that we wish to keep and reduce fixed costs previously associated with the divested assets of the business.

Managing acquisitions and divestitures requires varying levels of management resources, which may divert management’s attention from our other business operations. Acquisitions, including abandoned acquisitions, also may result in significant costs and expenses and charges to earnings.

Restructuring activities may result in business disruptions and may not produce the full efficiency and cost reduction benefits anticipated. Further, the benefits may be realized later than expected and the cost of implementing these measures may be greater than anticipated. If these measures are not successful, we may need to undertake additional cost reduction efforts, which could result in future charges. Moreover, we could experience business disruptions with customers and elsewhere if our cost reduction and restructuring efforts prove ineffective and our ability to achieve our other strategic goals and business plans as well as our business, results of operations and financial condition could be adversely affected.

In order to be successful, we must retain and motivate key employees, and failure to do so could seriously harm us.

In order to be successful, we must retain and motivate executives and other key employees, including those in managerial, technical, marketing and information technology support positions. In particular, our product generation efforts depend on hiring and retaining qualified engineers. Attracting and retaining skilled workers and qualified sales representatives is also critical to us. Experienced management and technical, marketing and support personnel in the microelectronics and test solutions industries are in demand and competition for their talents is intense. Employee retention may be a particularly challenging issue following acquisitions or divestitures since we also must continue to motivate employees and keep them focused on our strategies and goals, which may be particularly difficult due to the potential distractions related to integrating the acquired operations or divesting businesses to be sold.

We may be required to make significant payments to members of our management in the event their employment with us is terminated.

We are a party to employment agreements with each of Leonard Borow, our President and Chief Executive Officer, John Buyko, our Executive Vice President and President of our AMS division, John Adamovich, our Chief Financial Officer, Charles Badlato, our Vice President-Treasurer, and Carl Caruso, our Vice President-Manufacturing. In the event we terminate the employment of any of these executives, or in certain cases, if such executives terminate their employment with us, such executives will be entitled to receive certain severance and related payments. The aggregate amount payable by us to Messrs. Borow, Buyko, Adamovich, Badlato and Caruso upon the termination of their respective employment with us is $10.0 million.

We are currently involved in stockholder litigation in connection with the Transactions which may adversely affect our financial condition.

An amended class action complaint was filed against us and our board of directors on June 20, 2007 in the Supreme Court of the State of New York, Nassau County. The complaint alleges that our board breached its fiduciary duties to our stockholders (i) by issuing a preliminary proxy statement on June 5, 2007 in connection with seeking stockholder approval of the Acquisition and (ii) in approving certain amendments, that were allegedly beyond the scope of our corporate power, to our Supplemental Executive Retirement Plan and the employment agreements of defendants Harvey R. Blau, our then Chairman and Chief Executive Officer, and Leonard Borow, our then President and Chief Operating Officer. The plaintiffs sought injunctive relief with respect to the first cause of action, seeking to enjoin the July 26, 2007 special meeting of our stockholders on the grounds that we and our board of directors provided inadequate disclosures, and the recovery of money damages with respect to the second cause of action. The plaintiffs subsequently withdrew their motion for preliminary injunctive relief. On July 9, 2007, we and our board of directors filed a motion to dismiss the amended class action complaint and that motion is currently pending. The July 26, 2007 stockholders meeting went forward and the Company’s stockholders approved the Merger. On August 15, 2007, the Acquisition of the Company was completed. We are currently in settlement discussions with the plaintiffs and have accrued an insignificant liability for the settlement.

Securities litigation can be costly, time-consuming and could divert funds and management and other resources away from our business and operations. While we cannot predict the outcome of this matter and this matter will take time to resolve, damages arising from this stockholder litigation, if it is resolved against us or in connection with any settlement, absent insurance coverage or damages in excess of insurance coverage, could adversely affect our business, results of operations and financial condition.

Our operating results may fluctuate significantly on a quarterly basis.

Our sales and other operating results have fluctuated significantly in the past, and we expect this trend will continue. Factors which affect our results include:

•

the timing, cancellation or rescheduling of customer estimates, orders and shipments;

•

the pricing and mix of products sold;

•

our ability to obtain components and subassemblies from contract manufacturers and suppliers;

•

variations in manufacturing efficiencies; and

•

research and development and new product introductions.

Many of these factors are beyond our control. Our performance in any one fiscal quarter is not necessarily indicative of any financial trends or future performance.

We are exposed to foreign currency exchange rate risks that could adversely affect our business, results of operations and financial condition.

We are exposed to foreign currency exchange rate risks that are inherent in our sales commitments, anticipated sales, and assets and liabilities that are denominated in currencies other than the U.S. dollar. For fiscal 2008, sales of our products to foreign customers accounted for approximately 46% of our net sales. In addition, a portion of our product and component manufacturing, along with key suppliers, are located outside of the United States. Failure to sufficiently hedge or otherwise manage foreign currency risks properly could adversely affect our business, results of operations and financial condition. Furthermore, the recent strengthening of the U.S. dollar associated with the global financial crisis may adversely affect the results of our international operations when those results are translated into U.S. dollars.

Our operations are subject to business interruptions and casualty losses.

Our business is subject to numerous inherent risks, particularly unplanned events such as inclement weather, explosions, fires, terrorist acts, other accidents, equipment failures and transportation interruptions. While our insurance coverage could offset losses relating to some of these types of events, our business, results of operations and financial condition could be materially adversely impacted to the extent any such losses are not covered by our insurance.

Compliance with and changes in environmental, health and safety laws regulating the present and past operations of our business and the business of predecessor companies could increase the costs of producing our products and expose us to environmental claims.

Our business is subject to numerous federal, state, local and foreign laws and regulations concerning environmental, health and safety matters, including those relating to air emissions, wastewater discharges and the generation, handling, use, storage, transportation, treatment and disposal of, or exposure to, hazardous substances. Violations of such laws and regulations can lead to substantial fines and penalties and other civil or criminal sanctions. We incur costs associated with compliance with these laws and regulations and we face risks of additional costs and liabilities including those related to the investigation and remediation of, or claims for personal injuries or property damages associated with, past or present contamination, at current as well as former properties utilized by us and at third-party disposal sites, regardless of fault or the legality of the original activities that led to such contamination.

In addition, future developments, such as changes in laws and regulations or the enforcement thereof, more stringent enforcement or interpretation thereof and claims for property damage or personal injury could cause us to incur substantial losses or expenditures. Although we believe we are materially compliant with all applicable current laws and regulations, any new or modified laws or regulations, or the discovery of any currently unknown non-compliance or contamination, could increase the cost of producing our products, thereby adversely impacting our business, results of operations and financial condition.

We rely on our information technology systems to manage numerous aspects of our business and a disruption of these systems could adversely affect our business.

Our information technology, or IT, systems are an integral part of our business and a serious disruption to our IT systems could significantly limit our ability to manage and operate our business efficiently, which in turn could materially adversely impact our business, results of operations and financial condition. We depend on our IT systems for scheduling, sales order entry, purchasing, materials management, accounting and production functions. Our IT systems also allow us to ship products to our customers on a timely basis, maintain cost-effective operations and provide a high level of customer service. Some of our systems are not fully redundant, and our disaster recovery planning does not account for all eventualities.

In the event that certain of our customers encounter financial difficulties and fail to pay us, it could adversely affect our business, results of operations and financial condition.

We manufacture products to customer specifications and generally purchase raw materials in response to customer orders. In addition, we may commit significant amounts of capital to maintain inventory in anticipation of customer orders. In the event that our customers for whom we maintain inventory experience financial difficulties, we may be unable to sell such inventory at its current profit margin, if at all. In such an event, our gross margins would decline. In addition, if the financial condition of a significant portion of our customer base deteriorates, resulting in an impairment of their ability to pay us amounts owed in respect of a significant amount of outstanding receivables, our financial condition would be adversely affected.

Due to the international nature of our business, political or economic changes could harm our future sales, expenses and financial condition.

Our future sales, costs and expenses could be adversely affected by a variety of international factors, including:

•

changes in a country’s or region’s political or economic conditions;

•

longer accounts receivable cycles;

•

trade protection measures;

•

unexpected changes in regulatory requirements;

•

differing technology standards and/or customer requirements; and

•

import or export licensing requirements, which could affect our ability to obtain favorable terms for components or lead to penalties or restrictions.

For fiscal 2008, sales of our products to foreign customers accounted for approximately 46% of our net sales. As of September 30, 2008, we employed 790 employees overseas. In addition, a portion of our product and component manufacturing, along with key suppliers, is located outside of the United States, and also could be disrupted by some of the international factors described above.

Efforts to comply with the Sarbanes-Oxley Act of 2002 will involve significant expenditures, and non-compliance with the Sarbanes-Oxley Act may adversely affect us.

The Sarbanes-Oxley Act of 2002 and the related rules and regulations promulgated by the Securities and Exchange Commission that are applicable to us as a result of the exchange offering of Notes, have increased the scope, complexity and cost of our corporate governance, reporting and disclosure practices. We expect to experience greater outside and internal costs as a result of our continuing efforts to comply with the Sarbanes-Oxley Act.

We are currently not required to comply with the requirements of Section 404 of Sarbanes-Oxley Act until one year after we file our initial Annual Report on Form 10-K for the fiscal year ended June 30, 2009. We believe that we will be able to timely meet our obligations under Section 404 and that our management will be able to certify as to the effectiveness of our internal control over financial reporting. However, we may identify deficiencies or material weaknesses that we cannot remedy in a timely manner. In such event, we may be unable to receive a positive attestation from our independent registered public accounting firm with respect to our internal control over financial reporting.

FORWARD-LOOKING STATEMENTS

This prospectus contains "forward-looking statements." All statements other than statements of historical fact are "forward-looking" statements for purposes of the U.S. federal and state securities laws. These statements may be identified by the use of forward looking terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "should" or "will" or the negative thereof or other variations thereon or comparable terminology. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance contained in this prospectus under the headings "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this prospectus under the headings "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

•

adverse developments in general business, economic and political conditions domestically or internationally;

•

our ability to remain competitive in the markets we serve;

•

our failure to comply with regulations such as International Traffic in Arms Regulations and any changes in regulations;

•

our inability to continue to develop, manufacture and market innovative products and services that meet customer requirements for performance and reliability;

•

our exposure to foreign currency exchange rate risks;

•

our exposure to auction rate securities and the impact this exposure has on our liquidity;

•

our failure to realize anticipated benefits from completed acquisitions, divestitures or restructurings, or the possibility that such acquisitions, divestitures or restructurings could adversely affect us;

•

the loss of key employees;

•

terrorist acts or acts of war; and

•

other risks and uncertainties, including those listed under the caption "Risk Factors."

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this prospectus are made only as of the date hereof.

RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth our ratio of earnings to fixed charges for the last five fiscal years and for the three months ended September 30, 2008:

	Year Ended June 30,														Three Months Ended September 30,
	2004			2005			2006			2007			2008		2008

Ratio of earnings to fixed charges		7.7	x		8.6	x		15.4	x		9.8	x		*		*

*The ratio was computed by dividing earnings by fixed charges. For this purpose, “earnings” represents income from continuing operations before income taxes plus fixed charges. Fixed charges consist of interest expense, amortization of deferred financing costs and one-third of rent expense that we believe to be representative of the interest factored in those rentals. The deficit of earnings to fixed charges for the year ended June 30, 2008 was $160.8 million and for the three months ended September 30, 2008 was $17.3 million.

USE OF PROCEEDS

This prospectus is delivered in connection with the sale of Notes by Goldman, Sachs & Co. in market-making transactions. We will not receive any proceeds from such transactions.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of September 30, 2008. The information in the table should be read in conjunction with “Selected Historical Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the notes thereto included elsewhere in this prospectus.

	As of September 30, 2008
	Actual
	(in millions)
Cash and cash equivalents	$	73.1
Debt:
Senior Secured Credit Facility	$	519.8
Senior notes		225.0
Senior Subordinated Unsecured Credit Facility		135.2
Other indebtedness		1.4
Total debt		881.4
Stockholder’s equity		245.9
Total capitalization	$	1,127.3

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma financial information is based on our audited and unaudited financial statements included elsewhere in this prospectus, adjusted to illustrate the pro forma effect of the Transactions consummated on August 15, 2007 and the offering of the Notes and the payment of fees and expenses relating thereto. The unaudited pro forma statements of operations for fiscal 2008 and the three months ended September 30, 2008 give effect to the Transactions and the offering of the Notes and the payment of fees and expenses relating thereto as if they had occurred on July 1, 2007. The unaudited pro forma balance sheet as of September 30, 2008 gives effect to the payment of fees and expenses relating to the offering of the Notes as if it had occurred on September 30, 2008. The pro forma effects of the acquisitions of Test Evolution Corporation on October 1, 2007 and Gaisler Research AB on June 30, 2008 are not reflected in the unaudited pro forma statement of operations for fiscal 2008 as the effects are immaterial.

The unaudited pro forma financial information is for informational purposes only and is not intended to represent the results of operations or financial position that we would have reported had the Transactions and the offering of the Notes and the payment of fees and expenses relating thereto been completed as of the dates presented, and should not be taken as representative of our future results of operations or financial position.

The unaudited pro forma financial information should be read in conjunction with the information contained in “Use of Proceeds,” “Capitalization,” “Selected Historical Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the financial statements and related notes included elsewhere in this prospectus.

Aeroflex Incorporated and Subsidiaries

Unaudited Condensed Pro Forma Consolidated Balance Sheet

As of September 30, 2008

(In thousands, except share and per share data)

				Adjustments
	Historical			for the Notes
	Aeroflex			Offering			Pro Forma
Assets
Current assets:
Cash and cash equivalents	$	73,066		$	(500	) (a)	$	72,566
Accounts receivable, less allowance for doubtful accounts of $2,829		110,297			-			110,297
Inventories		136,977			-			136,977
Deferred income taxes		26,460			-			26,460
Prepaid expenses and other current assets		12,445			-			12,445
Total current assets		359,245			(500	)		358,745

Property, plant and equipment, net		101,349			-			101,349
Non-current marketable securities		18,755			-			18,755
Deferred financing costs, net		29,435			-			29,435
Other assets		15,141			-			15,141
Intangible assets with definite lives, net		321,760			-			321,760
Intangible assets with indefinite lives		120,051			-			120,051
Goodwill		456,193			-			456,193
Total assets	$	1,421,929		$	(500	)	$	1,421,424

Liabilities and Stockholder’s Equity
Current liabilities:
Current portion of long-term debt	$	5,570		$	-		$	5,570
Accounts payable		31,882			-			31,882
Advance payments by customers and deferred revenue		18,997			-			18,997
Income taxes payable		2,097			-			2,097
Accrued payroll expenses		25,754			-			25,754
Accrued expenses and other current liabilities		58,767			-			58,767
Total current liabilities		143,067			-			143,067
Long-term debt		875,813			-			875,813
Deferred income taxes		143,491			-			143,491
Defined benefit plan obligations		6,156			-			6,156
Other long-term liabilities		7,470			-			7,470
Total liabilities		1,175,997			-			1,175,997
Stockholder’s equity:
Common stock, par value $.10 per share; authorized 1,000 shares; issued and 1,000 shares		-			-			-
Additional paid-in capital		382,214			-			382,214
Accumulated other comprehensive loss		(23,960	)		-			(23,960	)
Accumulated deficit		(112,322	)		(500	) (a)		(112,822	)
Total stockholder’s equity		245,932			(500	)		245,432
Total liabilities and stockholder’s equity	$	1,421,929		$	(500	)	$	1,421,429

(a)	Reflects the payment of estimated fees and expenses to be incurred in connection with the Notes Offering.

See accompanying notes to unaudited pro forma financial statements.

Aeroflex Incorporated and Subsidiaries

Unaudited Condensed Pro Forma Consolidated Statement of Operations

For the Fiscal Year Ended June 30, 2008

(In thousands)

				Adjustments			Adjustments
	Historical			for the			for the Notes			Pro Forma
	Aeroflex			Transactions			Offering			Aeroflex

Net sales	$	643,212		$	(56	) (a)	$	-		$	643,156
Cost of sales		375,814			258	(b)		-			376,072
Gross profit		267,398			(314	)		-			267,084

Selling, general and administrative costs		140,117			275	(c)		-			139,709
					(840	) (d)		-
					157	(b)
Research and developments costs		82,076			124	(b)		-			82,200
Amortization of acquired intangibles		74,768			7,862	(e)		-			82,630
Acquired in-process research and development		24,975			(24,975	) (f)		-			-
Company sale transaction expenses		36,210			-			-			36,210
		358,146			(17,397	)		-			340,749
Operating income (loss)		(90,748	)		17,083			-			(73,665	)

Other income (expense)
Interest expense		(74,933	)		(15,044	) (g)		-			(89,977	)
Other income (expense), net		4,911			-			(500	) (i)		4,411
Total other income (expense)		(70,022	)		(15,044	)		(500	)		(85,566	)

Income (loss) from continuing operations before income taxes		(160,770	)		2,039			(500	)		(159,231	)
Provision (benefit) for income taxes		(45,758	)		(8,489	) (h)		(185	) (i)		(54,432	)
Income (loss) from continuing operations		(115,012	)		10,528			(315	)		(104,799	)

Income (loss) from discontinued operations, net of tax provision (benefit)		(7,329	)		-			-			(7,329	)
Net income (loss)	$	(122,341	)	$	10,528		$	(315	)	$	(112,128	)

See accompanying notes to unaudited pro forma financial statements.

Aeroflex Incorporated and Subsidiaries

Unaudited Condensed Pro Forma Consolidated Statement of Operations

For the Three Months Ended September 30, 2008

(In thousands)

				Adjustments
	Historical			for the Notes		Pro Forma
	Aeroflex			Offering		Aeroflex

Net sales	$	140,845		$	-	$	140,845
Cost of sales		73,486			-		73,486
Gross profit		67,359			-		67,359
Selling, general and administrative costs		31,484			-		31,484
Research and developments costs		17,029			-		17,029
Amortization of acquired intangibles		17,968			-		17,968
Total operating expenses		66,481			-		66,481
Operating income (loss)		878			-		878
Interest expense		(21,215	)		-		(21,215	)
Other income (expense)		3,086			-		3,086
Total other income (expense)		(18,129	)		-		(18,129	)
Income (loss) before income taxes		(17,251	)		-		(17,251	)
Provision (benefit) for income taxes		(10,354	)		-		(10,354	)
Net income (loss)	$	(6,897	)	$	-	$	(6,897	)

See accompanying notes to unaudited pro forma financial statements.

Notes to Unaudited Condensed Pro Forma Consolidated

Statements of Operations

For the Fiscal Year Ended June 30, 2008

(in thousands)

(a)	To reflect the impact on net sales of the purchase accounting fair value adjustment to deferred revenues for the forty-five days prior to the Acquisition.

Net Sales

(56

)

(b)	To reflect the incremental depreciation expense for the impact of the purchase accounting fair value adjustment to fixed assets for the forty-five days prior to the Acquisition.

Cost of sales	$	258
Selling, general and administrative costs		157
Research and development costs		124
	$	539

(c)	To record annual advisory fees pursuant to the merger agreement entered into in connection with the Acquisition for the forty-five days prior to the Acquisition.

Selling, general and administrative costs

275

(d)

To record the impact of new management employment contracts that were entered into in connection with the Acquisition, including the retirement of the former CEO, the modification of our current President’s (formerly the Company’s Chief Operating Officer) contract and the elimination of the Company’s SERP for the forty-five days prior to the Acquisition.

Selling, general and administrative costs

(840

)

(e)	Reflects the elimination of amortization expense relating to historical acquired intangible assets and the addition of amortization expense relating to acquired amortizable intangible assets of $413.4 million resulting from the Acquisition.

Pro forma amortization	$	82,630
Historical amortization		74,768
Pro forma adjustment	$	7,862

(f)	Reflects the elimination from the pro forma statements of operations of charges that we have recorded in connection with the Acquisition of $25.0 million for In-Process Research and Development.

(g)

Reflects the elimination of historical interest and related expenses, including on mortgage debt that was repaid on August 15, 2007 and the revolving credit facility that was terminated in connection with the Transactions and the addition of interest expense on our Senior Secured Credit Facility, the senior subordinated unsecured term loan and the Notes offered hereby.

	(in thousands)

Pro forma interest expense on our senior secured term loan facility, the senior subordinated unsecured term loan and senior notes:
Cash interest	$	72,428
Paid-in-kind interest		11,340
Amortization of debt issuance costs (1)		4,629
Other interest		1,580
Pro forma interest expense		89,977
Historical interest expense		74,933
Pro forma adjustment	$	15,044

(1) Reflects non-cash interest expense related to capitalized debt issuance costs of $27.9 million that are being amortized over the term of the related facility (six years for the revolving credit facility, seven years for the senior secured term loan and eight years for the senior subordinated unsecured term loan and exchangeable senior unsecured loan).

(h)	Reflects the estimated tax benefit on the pre-tax effect of the pro forma adjustments at our marginal rate of 37%. However, a portion of the interest expense may not be deductible for income tax purposes and would result in a reduction of the income tax benefit indicated.

Provision (benefit) for income taxes

(8,489

)

(i)	Reflects expense for the estimated fees and expenses to be incurred for the registration of the Notes and related tax benefit.

Estimated fees and expenses to be incurred in connection with the Notes Offering	$	500
Tax benefit		(185	)
	$	315

SELECTED HISTORICAL FINANCIAL DATA

The consolidated financial data set forth below as of and for fiscal 2006 and 2007 and the periods from July 1, 2007 through August 14, 2007 and August 15, 2007 through June 30, 2008 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The consolidated financial data for the three months ended September 30, 2008 has been derived from our unaudited consolidated financial statements for that period, and except as described in the notes thereto, has been prepared on a basis consistent with the audited consolidated financial statements and, in the opinion of management, include all adjustments, including usual recurring adjustments, necessary for a fair presentation of that information for such period. The financial data presented for the interim period is not necessarily indicative of the results for the full year. The consolidated financial data set forth below as of and for fiscal 2004 and 2005 have been derived from audited consolidated financial statements that are not included in this prospectus. As part of the Acquisition, we entered into the various financing arrangements described herein and, as a result, we now have a different capital structure. Accordingly, the results of operations for periods subsequent to the consummation of the Acquisition and related financing transactions will not necessarily be comparable to prior periods.

The selected consolidated financial data below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included elsewhere in this prospectus.

	Predecessor															Successor			Successor
	Years Ended June 30,												Period July 1, 2007 through August 14,			Period August 15, 2007 through June 30,			Three Months Ended September
	2004			2005			2006			2007			2007			2008				30, 2008
	(in thousands)
Operations Statement Data:

Net sales	$	404,478		$	452,984		$	546,243		$	593,146		$	38,221		$	604,991		$	140,845
Costs of sales		216,273			238,210			284,312			308,969			22,861			352,953			73,486
Gross Profit		188,205			214,774			261,931			284,177			15,360			252,038			67,359
Selling, general and administrative costs		93,792			111,661			122,871			129,621			19,031			121,086			31,484
Research and development costs		49,813			61,099			72,055			76,717			12,178			69,898			17,029
Amortization of acquired intangibles		7,730			8,896			13,778			13,006			1,692			73,076			17,968
Acquired in-process research and development costs		4,220			2,974			-			-			-			24,975			-
Company Sale Transaction expenses		-			-			-			30,584			3,717			32,493			-
Operating income (loss)		32,650			30,144			53,227			34,249			(21,258	)		(69,490	)		878
Other income (expense) Interest expense		(1,403	)		(895	)		(608	)		(672	)		(275	)		(74,658	)		(21,215	)
Other income (expense)		(1,711	)		1,844			1,669			152			294			4,617			3,086
Total other income (expense)		(3,114	)		949			1,061			(520	)		19			(70,041	)		(18,129	)

Income (loss) from continuing operations before income taxes		29,536			31,093			54,288			33,729			(21,239	)		(139,531	)		(17,251	)
Provision (benefit) for income taxes		11,204			13,663			20,540			24,935			(6,831	)		(38,927	)		(10,354	)
Income (loss) from continuing operations		18,332			17,430			33,748			8,794			(14,408	)		(100,604	)		(6,897	)
Discontinued operations, net		(6,185	)		(389	)		(5,652	)		(3,868	)		(2,508	)		(4,821	)		-
Cumulative effect of a change in accounting principle, net		-			-			(1,137	)		-			-			-			-

Net income (loss)*	$	12,147		$	17,041		$	26,959		$	4,926		$	(16,916	)	$	(105,425	)	$	(6,897	)

*We have not presented earnings (loss) per share data because all 1,000 shares of common stock outstanding at September 30, 2008 and June 30, 2008 is held by one shareholder.

	Predecessor															Successor			Successor
	Years Ended June 30,												Period July 1, 2007 through August 14,			Period August 15, 2007 through June 30,			Three Months Ended September
	2004			2005			2006			2007			2007			2008			30, 2008
	(In thousands)
Balance Sheet Data (at end of period):
Working Capital (1)	$	237,865		$	161,749		$	199,780		$	201,603		$	218,072		$	220,855		$	216,178
Total assets		551,391			589,849			633,391			674,936			682,776			1,478,999			1,421,929
Long-term debt (including current portion)		10,275			4,824			4,165			3,583			3,554			878,811			881,383
Stockholders’ equity		427,097			443,980			487,670			510,697			506,626			276,648			245,932
Cash Flow Data:
Cash flows from (used in) operating activities		24,100			36,611			36,697			20,802			11,293			8,910			28,510
Cash flows from (used in) investing activities		(73,067	)		(117,646	)		(42,553	)		(19,113	)		8,406			(1,162,376	)		(3,341	)
Cash flows from (used in) financing activities		94,421			(4,039	)		3,748			(793	)		12,619			1,209,045			(1,756	)
Other Financial Data:
EBITDA (unaudited) (2)	$	52,695		$	56,300			85,267			64,543			(17,302	)		28,159			27,461
Adjusted EBITDA (unaudited) (3)																				29,083
Ratio of earnings to fixed charges (4)		7.7	x		8.6	x		15.4	x		9.8	x		*			*			*

*	The deficit of earnings to fixed charges was $21.2 million for the period July 1, 2007 through August 14, 2007, $139.5 million for the period August 15, 2007 through June 30, 2008 and $17.3 million for the three months ended September 30, 2008.

(1)	Working capital is defined as current assets less current liabilities.

(2)	As used herein, “EBITDA” represents income (loss) from continuing operations plus (i) interest expense, (ii) provision for income taxes and (iii) depreciation and amortization.

The following table is a reconciliation of income (loss) from continuing operations to EBITDA for the periods indicated:

	Predecessor											Successor			Successor
	Years Ended June 30,								Period July 1, 2007 through August 14,			Period August 15, 2007 through June 30,			Three Months Ended September 30,
	2004		2005		2006		2007		2007			2008			2008
	(In thousands)
Income (loss) from continuing operations	$	18,332	$	17,430	$	33,748	$	8,794	$	(14,408	)	$	(100,604	)	$	(6,897	)
Interest expense		1,403		895		608		672		275			74,658			21,215
Provision (benefit) for income taxes		11,204		13,663		20,540		24,935		(6,831	)		(38,927	)		(10,354	)
Depreciation and amortization		21,756		24,312		30,371		30,142		3,662			93,032			23,497

EBITDA (unaudited).	$	52,695	$	56,300	$	85,267	$	64,543	$	(17,302	)	$	28,159		$	27,461

(3)

	Three Months Ended
	September 30, 2008
	Successor Entity
	(In thousands)

EBITDA (unaudited)	$	27,461
Impact of other non-cash purchase accounting adjustments		97
Company sale transaction expenses and merger related expenses		634
Restructuring costs (a)		402
Share based compensation (b)		489
Adjusted EBITDA (unaudited)	$	29,083

(a)

Primarily reflects costs associated with the reorganization of our U.K. operations.

(b)

Reflects non-cash share-based employee compensation expense under the provisions of SFAS 123(R), Share-Based Payments.

(4)

*	The deficit of earnings to fixed charges was $21.2 million for the period July 1, 2007 through August 14, 2007, $139.5 million for the period August 15, 2007 through June 30, 2008 and $17.3 million for the three months ended September 30, 2008.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The statements in the discussion and analysis regarding our expectations regarding the performance of our business and any forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Forward-Looking Statements” and “Risk Factors.” Our actual results may differ materially from those contained in or implied by any forward-looking statements. You should read the following discussion together with the sections entitled “Risk Factors,” “Unaudited Pro Forma Financial Information,” “Selected Historical Financial Data” and our historical financial statements, including the related notes, appearing elsewhere in this prospectus.

Overview

We are a leading provider of highly specialized microelectronics and test and measurement equipment, primarily to the global aerospace and defense and broadband communications markets. We also design ASICs for CT scan equipment for the medical industry. Founded in 1937, we have developed a substantial intellectual property portfolio that includes more than 150 patents, extensive know-how, years of collaborative research and development with our customers and a demonstrated history in space. We believe that the combination of our leading market positions, complementary portfolio of products, years of experience and engineering capabilities provides us with a competitive advantage and enables us to deliver high performance, high value products to our customers.

The Acquisition

On August 15, 2007, AX Acquisition Corp. (“AX Acquisition”) and the parent entered into a merger agreement with us. At the effective time of the merger, AX Acquisition was merged with and into us. We were the surviving corporation in the merger and became a wholly-owned subsidiary of the parent (referred to in this section as the Acquisition or Company Sale Transaction).

The Acquisition was funded by:

•

equity investments in the parent of approximately $378.4 million by the Sponsors and certain members of our management;

•

borrowings under our Senior Secured Credit Facility, consisting of $525.0 million under our term loan facility;

•

borrowings under our Exchangeable Senior Unsecured Credit Facility, consisting of a $225.0 million term loan facility; and

•

borrowings under our Exchangeable Senior Subordinated Unsecured Credit Facility, consisting of a $120.0 million term loan facility.

On September 21, 2007, we entered into a $120.0 million Senior Subordinated Unsecured Credit Facility to refinance our $120.0 million Exchangeable Senior Subordinated Unsecured Credit Facility. On August 7, 2008, we issued an aggregate of $225.0 million principal amount of 11.75% senior notes due February 15, 2015 to the Initial Purchaser to refinance our $225.0 million Exchangeable Senior Unsecured Credit Facility.

Selected Factors Affecting Our Results of Operations

Our results of operations have been affected by the following factors, which may cause our results of operations for certain periods to not be comparable to other periods. These are not all of the factors that have affected our results of operations.

Acquisition Related Adjustments. In the fiscal year ended June 30, 2008 we recorded charges of $25.0 million for acquired in-process research and development costs and expensed $39.0 million in cost of sales related to an inventory purchase accounting acquisition adjustment. There were no comparable charges for the three months ended September 30, 2008 or in fiscal 2007. In addition, for the fiscal year ended June 30, 2008 and for the three months ended September 30, 2008, revenue was reduced for the impact of a deferred revenue purchase accounting acquisition adjustment by $2.5 million and $97,000, respectively.

Sale Transaction Expenses. In the fiscal years ended June 30, 2008 and 2007, we incurred Company Sale Transaction and related expenses of $41.6 million (including $5.4 million reported in S,G&A), and $30.6 million, respectively, consisting primarily of merger related change of control, severance and other compensation payments, a lawsuit settlement charge, a merger termination fee and legal and other professional fees.

The following table sets forth our historical results of operations as a percentage of net sales for the periods indicated below:

Results of Operations

	Predecessor									Successor			Non-GAAP Combined Predecessor and Successor						Successor

	Years Ended June 30,						Period July 1, 2007 through August 14,			Period August 15, 2007 through June 30,			Year Ended June 30,			Three months ended September			Three months ended September
	2006			2007			2007			2008			2008			30, 2007			30, 2008

Net sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		52.0			52.1			59.8			58.3			58.4			62.5			52.2
Gross profit		48.0			47.9			40.2			41.7			41.6			37.5			47.8
Operating expenses:
Selling, general and administrative costs		22.5			21.8			49.8			20.0			21.8			27.1			22.3
Research and development costs		13.2			12.9			31.9			11.6			12.8			16.2			12.1
Amortization of acquired intangibles		2.5			2.2			4.4			12.1			11.6			8.7			12.8
Acquired in process research and development costs		—			—			—			4.1			3.9			17.3			—
Company sale transaction expenses		—			5.2			9.7			5.4			5.6			24.2			—
Total operating expenses		38.2			42.1			95.8			53.2			55.7			93.5			47.2
		9.8			5.8			(55.6	)		(11.5	)		(14.1	)		(56.0	)		0.6
Other income (expense), net		0.2			(0.1	)		0.0			(11.6	)		(10.9	)		(8.1	)		(12.9	)
Income (loss) from continuing operations before income taxes		10.0			5.7			(55.6	)		(23.1	)		(25.0	)		(64.1	)		(12.3	)
Provision (benefit) for income taxes		3.8			4.2			(17.9	)		(6.5	)		(7.2	)		(18.5	)		(7.4	)
Income (loss) from continuing operations		6.2			1.5			(37.7	)		(16.6	)		(17.8	)		(45.6	)		(4.9	)
Discontinued operations		(1.0	)		(0.7	)		(6.6	)		(0.8	)		(1.1	)		(2.5	)		—
Cumulative effect of change in accounting principle		(0.2	)		—			—			—			—			—			—
Net income (loss)		5.0	%		0.8	%		(44.3	)%		(17.4	)%		(18.9	)%		(48.1	)%		(4.9	)%

Statements of Operations

Refer to Notes 1 and 3 to our annual consolidated financial statements as of June 30, 2008 for details concerning the Acquisition and the Transactions which occurred on August 15, 2007 and the basis upon which such consolidated financial statements are presented. For comparative purposes in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we combined the Predecessor period from July 1, 2007 to August 14, 2007 with the Successor period from August 15, 2007 to June 30, 2008 to form the fiscal year ended June 30, 2008 and we combined the Predecessor period from July 1, 2007 to August 14, 2007 with the Successor period from August 15, 2007 to September 30, 2007 to form the three months ended September 30, 2007. This combination is not a GAAP presentation. However, we believe this presentation is useful as a comparison to the Predecessor fiscal year ended June 30, 2007 and the Successor three months ended September 30, 2008, respectively.

The following table sets forth our net sales and adjusted operating income by business segment and reconciles adjusted operating income to income (loss) from continuing operations before income taxes for the periods indicated.

	For the Fiscal Years Ended									Three Months Ended
	June 30, 2006			June 30, 2007			June 30, 2008			September 30, 2007			September 30, 2008

Net sales:
Microelectronic solutions ("AMS")	$	241,437		$	266,515		$	302,712		$	67,413		$	67,580
Test solutions ("ATS")		304,806			326,631			340,500			72,823			73,265
Net sales	$	546,243		$	593,146		$	643,212		$	140,236		$	140,845

Segment adjusted operating income:
- AMS	$	58,467		$	63,908		$	74,826		$	15,257		$	14,613
- ATS		34,771			38,582			46,634			2,986			9,630
General corporate expense		(15,279	)		(17,727	)		(10,523	)		(2,827	)		(2,696	)
Adjusted operating income		77,959			84,763			110,937			15,416			21,547

Amortization of acquired intangibles
- AMS		(2,134	)		(1,911	)		(44,364	)		(6,536	)		(10,677	)
- ATS		(11,644	)		(11,095	)		(30,404	)		(5,625	)		(7,291	)
Share based compensation
- AMS		(1,488	)		(965	)		(83	)		(83	)		-
- ATS		(1,731	)		(958	)		95			95			-
- Corporate		(3,433	)		(2,161	)		(3,349	)		(1,883	)		(489	)
Restructuring charges
- AMS		-			-			(414	)		-			-
- ATS		(3,214	)		(2,840	)		(10,359	)		(3,809	)		(402	)
One-time lease termination costs
- ATS		-			-			(576	)		(576	)		-
Merger related costs - Corporate		-			-			(5,411	)		(3,501	)		(634	)
Acquired in-process R&D costs
- AMS		-			-			(16,335	)		(15,700	)		-
- ATS		-			-			(8,640	)		(8,640	)		-
Current period impact of acquisition
related adjustments:
Inventory - AMS		-			-			(23,874	)		(7,217	)		-
Inventory - ATS		(1,088	)		-			(15,151	)		(5,240	)		-
Depreciation - AMS		-			-			(1,025	)		(146	)		(286	)
Depreciation - ATS		-			-			(2,882	)		(412	)		(738	)
Depreciation - Corporate		-			-			(193	)		(27	)		(55	)
Deferred revenue - ATS		-			-			(2,510	)		(676	)		(97	)
Sale transaction expenses		-			(30,584	)		(36,210	)		(34,012	)		-
Operating income (loss) (GAAP)		53,227			34,249			(90,748	)		(78,572	)		878

Interest expense		(608	)		(672	)		(74,933	)		(11,411	)		(21,215	)
Other income (expense), net		1,669			152			4,911			39			3,086
Income (loss) from continuing
operations before income taxes	$	54,288		$	33,729		$	(160,770	)	$	(89,944	)	$	(17,251	)

Management evaluates the operating results of the two segments based upon pre-tax operating income, before costs related to restructuring, lease termination charges, amortization of acquired intangibles, share-based compensation, acquired in-process research and development costs, Company Sale Transaction expenses, merger related expenses and the impact of any Acquisition related adjustments.

Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007

Net Sales. Net sales increased to $140.8 million for the three months ended September 30, 2008 from $140.2 million for the three months ended September 30, 2007.

Net sales in the microelectronic solutions (“AMS”) segment increased to $67.6 million for the three months ended September 30, 2008 from $67.4 million for the three months ended September 30, 2007 primarily due to increased sales volume of motion control and integrated circuits combined with additional sales from our acquisition of Gaisler in June 2008 ($1.4 million), offset by reductions in sales of microelectronics modules. Net sales in the test solutions (“ATS”) segment increased to $73.3 million in 2008 from $72.8 million in 2007, partially due to increases in wireless and PXI sales, offset by reductions in sales of radio and synthetic test products. The period ended September 30, 2008 was impacted by a purchase accounting adjustment to deferred revenue which reduced sales by $97,000; while the period ended September 30, 2007, was impacted by a purchase accounting adjustment to deferred revenue which reduced sales by $676,000.

Gross Profit. Gross profit equals net sales less cost of sales. Cost of sales includes materials, direct labor, amortization of capitalized software development costs and overhead expenses such as engineering labor, fringe benefits, depreciation, allocable occupancy costs and manufacturing supplies.

On a consolidated basis, gross margin was 47.8% for the three months ended September 30, 2008 and 37.5% for the three months ended September 30, 2007. In 2007, gross margin was adversely affected by purchase accounting adjustments aggregating $13.4 million which (i) increased cost of sales in the 2007 period for the increase in the recorded value of the Company’s Sale Transaction date inventories by $12.5 million to eliminate manufacturing profits inherent in the inventories at that date; (ii) increase depreciation expense by $271,000 due to acquisition date fair value adjustments and (iii) reduced sales for the quarter by $676,000 related to eliminating selling profits inherent in certain deferred revenues. In 2008, gross margin was adversely affected by (i) increased depreciation expense of $516,000 related to fair value adjustments and (ii) eliminated selling profits inherent in certain deferred revenues which reduced sales for the quarter by $97,000. Ignoring the purchase accounting adjustments, gross margin was 48.2% for the period ended September 30, 2008 and 46.8% for the period ended September 30, 2007.

Three Months
Ended
September 30,			% of					% of					% of
(In thousands)	AMS		sales			ATS		sales			Total		sales

2008	$	32,021		47.4	%	$	35,338		48.2	%	$	67,359		47.8	%
2007	$	25,815		38.3	%	$	26,800		36.8	%	$	52,615		37.5	%

Gross margins in the AMS segment were 47.4% in 2008 and 38.3% in 2007. Gross profit in 2008 was negatively impacted by purchase accounting adjustments of $199,000 versus $7.3 million in 2007. Ignoring the purchase accounting adjustments, gross margins were 47.7% in 2008 and 49.1% in 2007. The decrease in gross margins is principally attributable to lower sales of microelectronic modules and components, partially offset by a small increase in integrated circuit margins, which resulted from improved product mix.

Gross margins in the ATS segment were 48.2% in 2008 and 36.8% in 2007. Gross profit in 2008 was negatively impacted by purchase accounting adjustments of $413,000 versus $6.1 million in 2007. Ignoring the purchase accounting adjustments, gross margins were 48.7% in 2008 and 44.7% in 2007. Gross margins increased principally due to increased sales and margins of our wireless products and increased margins in our synthetic test products due to product mix.

Selling, General and Administrative Costs. Selling, general and administrative (“SG&A”) costs include office and management salaries, fringe benefits, commissions, insurance and professional fees, as well as, merger related expenses. On a consolidated basis SG&A costs decreased 470 basis points as a percentage of sales from the quarter ended September 30, 2007 to the quarter ended September 30, 2008. Excluding merger related expenses ($634,000 in 2008 and $3.5 million in 2007), stock compensation costs ($489,000 in 2008 and $1.9 million in 2007), restructuring costs ($1.6 million in 2007) and a one-time lease termination cost ($575,000 in 2007) the decrease was 20 basis points as a percentage of sales.

Three Months
Ended
September 30,			% of					% of							% of
(In thousands)	AMS		sales			ATS		sales			Corporate		Total		sales

2008	$	10,362		15.3	%	$	17,248		23.5	%	$	3,874	$	31,484		22.4	%
2007	$	10,380		15.4	%	$	19,396		26.6	%	$	8,239	$	38,015		27.1	%

Selling, general and administrative costs remained relatively unchanged in the AMS segment. Selling, general and administrative costs decreased $2.1 million, or 11%, in the ATS segment largely due to restructuring costs ($1.6 million) and one time lease termination fees ($575,000) incurred in 2007.

Corporate general and administrative expenses decreased $4.4 million primarily due to reductions in merger related expenses ($2.9 million) and stock-based compensation ($1.4 million).

Selling, general and administrative expenses decreased 10 basis points, as a percentage of sales, for AMS and decreased 310 basis points for ATS. Ignoring the restructuring costs in 2007 ($1.6 million) and one-time lease termination costs in 2007 ($575,000), the decrease for ATS was 10 basis points. Corporate general and administrative expenses decreased 310 basis points as a percentage of consolidated sales and excluding the merger related expenses and stock compensation costs, the decrease was 10 basis points.

Research and Development Costs. Research and development costs include materials, engineering labor and allocated overhead. On a consolidated basis, research and development expenses decreased 410 basis points as a percentage of sales.

Three Months
Ended
September 30,			% of					% of					% of
(In thousands)	AMS		sales			ATS		sales			Total		sales

2008	$	7,331		10.8	%	$	9,698		13.2	%	$	17,029		12.1	%
2007	$	7,626		11.3	%	$	15,032		20.6	%	$	22,658		16.2	%

AMS segment self-funded research and development costs decreased $295,000, or 4%, primarily due to a shift in resources to focus on manufacturing efforts for integrated circuit products. As a percentage of sales, research and development costs decreased 50 basis points.

ATS segment self-funded research and development costs decreased $5.3 million, or 35%, primarily due to a reduction of $2.1 million in restructuring costs in the UK, combined with reductions related to the completion of the TM500c project and eHSPA product development costs in the wireless business.

Acquired In-Process Research and Development Costs. During the quarter ended September 30, 2007 and in connection with the Company Sale Transaction we recorded and immediately expensed $24.3 million of acquired in-process research and development (“IPR&D”) costs ($15.7 million in the AMS segment and $8.6 million in the ATS segment). There were no comparable costs in the current quarter.

Restructuring costs. The ATS segment incurred restructuring costs of $402,000 in the three months ended September 30, 2008 ($306,000 in cost of sales, $32,000 in S,G&A and $64,000 in R&D) related to further consolidation and reorganization efforts in our UK operations. In comparison, in the three months ended September 30, 2007 the Company incurred total restructuring costs of $3.8 million ($1.6 million in S,G&A and $2.2 million in R&D), which costs also relate to consolidation and reorganization efforts in our UK operations.

Amortization of Acquired Intangibles. Amortization of acquired intangibles increased $5.8 million in 2008 due to the new basis of our intangible assets that was established in connection with the Company Sale Transaction on August 15, 2007. The AMS segment increased $4.1 million and the ATS segment increased $1.7 million.

Company Sale Transaction Expenses. In the three months ended September 30, 2007, we incurred Company Sale Transaction expenses of $34.0 million, consisting primarily of merger related change of control, severance and other compensation payments, a break-up fee related lawsuit settlement charge and legal and other professional fees. There were no comparable costs in the current quarter.

Other Income (Expense). Interest expense was $21.2 million in the three months ended September 30, 2008 and $11.4 million in the three months ended September 30, 2007. The increase is due to the addition of $870 million of debt to finance the purchase of the Company on August 15, 2007. Other income (expense) of $3.1 million for the three months ended September 30, 2008 consisted primarily of $2.3 million of foreign currency gains and $741,000 of interest income and other miscellaneous income, net. Other income (expense) of $39,000 for the three months ended September 30, 2007 consisted primarily of $517,000 of interest income, partially offset by $299,000 of other miscellaneous expenses and $179,000 of foreign currency losses.

Provision for Income Taxes. The income tax benefit was $10.4 million for the three months ended September 30, 2008, an effective income tax rate of 60.0%. We had an income tax benefit of $26.0 million, an effective income tax rate of 28.9% for the three months ended September 30, 2007. The effective income tax rate for the two periods differed from the amount computed by applying the U.S. Federal income tax rate to income before income taxes primarily due to foreign, state and local income taxes and, for 2008, the tax benefit was increased for the utilization of certain foreign net operating loss carry forwards and, for 2007, the tax benefit was decreased for the impact of certain Company Sale Transaction expenses that were not deductible for tax purposes, as well as nondeductible IPR&D. We paid income taxes of $2.1 million in the three months ended September 30, 2008 and $814,000 in the three months ended September 30, 2007.

Income (loss) from Continuing Operations. The loss from continuing operations was $6.9 million for the three months ended September 30, 2008 and $63.9 million for the three months ended September 30, 2007. The loss from continuing operations for the three months ended September 30, 2008 was adversely affected by an increase in interest expense of $9.8 million and an increase in intangible amortization of $5.8 million. The loss from continuing operations for the three months ended September 30, 2007 was adversely affected by $37.5 million of Company Sale Transaction and related expenses (including $3.5 million reported in S,G&A), restructuring charges of $3.8 million, purchase accounting adjustments to inventory, depreciation and deferred revenue totaling $13.7 million and an IPR&D charge of $24.3 million.

Fiscal Year Ended June 30, 2008 Compared to Fiscal Year Ended June 30, 2007

Net Sales. Net sales increased 8% to $643.2 million in fiscal 2008 from $593.1 million in fiscal 2007.

Net sales in the AMS segment increased 14% to $302.7 million in fiscal 2008 from $266.5 million in fiscal 2007 primarily due to sales from our acquisition of MicroMetrics in April 2007 ($9.8 million), and increased sales volume of components (primarily increased demand for customer voice over IP products and isolators), integrated products and motion control products, partially offset by reductions in sales of cellular communications products. Net sales in the ATS segment increased 4% to $340.5 million in fiscal 2008, which includes a reduction of $2.5 million for the current period impact of purchase accounting adjustments to deferred revenue, from $326.6 million in fiscal 2007 primarily due to an increase in PXI sales, partially offset by reduced sales in wireless due to market saturation of certain products and the anticipation of emerging new technologies.

On a consolidated basis, gross margin was 41.6% in fiscal 2008 and 47.9% in fiscal 2007. The reduction in gross margin resulted from the impact of purchase accounting adjustments aggregating $43.4 million in 2008 which (i) increased the value of the Company’s Sale Transaction date inventories by $39.0 million to eliminate manufacturing profits inherent in the inventories at that date; (ii) record Acquisition related depreciation of $1.9 million; and (iii) reduced sales by $2.5 million to eliminate selling profits inherent in certain deferred revenues. Ignoring the purchase accounting adjustments, gross margin in fiscal 2008 was 48.1%. The purchase accounting adjustments related to depreciation and deferred revenues will impact gross margins through 2038 and 2014, respectively. However, the effect of the purchase accounting adjustments to inventory has been fully recognized at June 30, 2008 and, therefore, future gross margins are expected to return to pre-Company Sale Transaction levels.

Fiscal Year Ended June 30,	AMS		% of Net Sales			ATS		% of Net Sales			Total		% of Net Sales
	(In thousands, except percentages)
2008	$	122,808		40.6	%	$	144,590		42.5	%	$	267,398		41.6	%
2007	$	133,863		50.2	%	$	150,314		46.0	%	$	284,177		47.9	%

Gross profit in the AMS segment decreased $11.1 million, or 8%, as the additional gross profit generated by the MicroMetrics acquisition ($3.4 million) and increased sales volumes related to components (largely voice over IP equipment and isolators), integrated products and motion control products were more than offset by the effect of purchase accounting adjustments to inventory ($23.9 million) and depreciation ($708,000). The aforementioned increase in sales had a favorable impact to gross profit; however a change in sales mix combined with the impact of the purchase accounting adjustments to inventory and depreciation reduced gross margins to 40.6% in fiscal 2008 from 50.2% in fiscal 2007. Ignoring the purchase accounting adjustments, the gross margin in fiscal 2008 was 48.7%.

Gross profit in the ATS segment decreased $5.7 million, or 4%, as the additional gross profit generated by higher sales volumes was more than offset by the effect of purchase accounting adjustments that aggregated $18.9 million. The ATS sales increase and a change in sales mix had a favorable impact to gross profit; however, the unfavorable impacts of purchase accounting adjustments to inventory ($15.2 million), depreciation ($1.2 million) and deferred revenue ($2.5 million) reduced gross margins to 42.5% in fiscal 2008 from 46.0% in fiscal 2007. Ignoring the purchase accounting adjustments, the gross margin in fiscal 2008 was 47.6%.

Selling, General and Administrative Costs. Selling, general and administrative costs include office and management salaries, fringe benefits, commissions, insurance and professional fees. On a consolidated basis, these costs decreased 10 basis points as a percentage of sales. Excluding merger related expenses included in selling, general and administrative costs, the decrease was 40 basis points as a percentage of sales.

Fiscal Year Ended June 30,	AMS		% of Net Sales			ATS		% of Net Sales			Corporate		Total		% of Net Sales
	(In thousands, except percentages)
2008	$	42,513		14.0	%	$	78,128		22.9	%	$	19,476	$	140,117		21.8	%
2007	$	42,447		15.9	%	$	67,286		20.6	%	$	19,888	$	129,621		21.9	%

Selling, general and administrative costs remained relatively unchanged in the AMS segment, as an increase due to the acquisition of MicroMetrics ($2.1 million), was offset by lower employee related expenses in other parts of the AMS segment. Selling, general and administrative costs increased $10.8 million, or 16%, in the ATS segment primarily as a result of increases in sales and marketing costs associated with the sales organization structure in the Asia Pacific region combined with an initiative to further develop revenue opportunities for certain radio test set products and a $3.4 million increase in restructuring costs in the U.K.

Corporate general and administrative expenses decreased $413,000 due primarily to lower employee related expenses and professional fees of nearly $5.8 million, partially offset by an increase due to Company Sale Transaction related expenses of $5.4 million, of which $2.1 million is for advisory fees to the Sponsors that will continue to be paid until at least 2013.

Selling, general and administrative expenses decreased 190 basis points, as a percentage of sales, for AMS and due largely to increased restructuring costs, increased 230 basis points for ATS. Corporate general and administrative expenses decreased 30 basis points as a percentage of consolidated sales and excluding the merger related expenses, the decrease was 117 basis points.

Research and Development Costs. Research and development costs include materials, engineering labor and allocated overhead. On a consolidated basis, research and development expenses remained relatively unchanged as a percentage of sales.

Fiscal Year Ended June 30,	AMS		% of Net Sales			ATS		% of Net Sales			Total		% of Net Sales
	(In thousands, except percentages)
2008	$	30,865		10.2	%	$	51,211		15.0	%	$	82,076		12.8	%
2007	$	28,473		10.7	%	$	48,244		14.8	%	$	76,717		12.9	%

AMS segment self-funded research and development costs increased $2.4 million, or 8%, primarily due to development of new technologies for integrated circuit products and for standard product development in microelectronics. As a percentage of sales, research and development costs decreased 50 basis points.

ATS segment self-funded research and development costs increased $3.0 million, or 6%, primarily due to restructuring costs related to further consolidation and reorganization efforts in the UK, combined with increases in wireless eHSPA new product development costs and radio test product development and design.

Acquired In-Process Research and Development Costs. In connection with the Company Sale Transaction we recorded and immediately expensed $24.3 million of acquired in-process research and development (“IPR&D”) costs in fiscal 2008 ($15.7 million in the AMS segment and $8.6 million in the ATS segment). Also in fiscal 2008, in connection with the acquisition of Gaisler Research, AB, we allocated $635,000 of the purchase price to IPR&D. There were no comparable costs in fiscal 2007.

Restructuring costs. The AMS segment incurred restructuring costs of $414,000 in fiscal 2008 ($107,000 in cost of sales, $272,000 in S,G&A and $35,000 in R&D) related to severance for personnel reductions within its IP products division. Restructuring costs in ATS of $10.4 million ($880,000 in cost of sales, $3.5 million in S,G&A and $6.0 million in R&D) relate to further consolidation and reorganization efforts in our UK operations. In comparison, in fiscal 2007 we incurred total restructuring costs of $2.8 million, all of which was reported in the ATS segment as R&D expense.

Amortization of Acquired Intangibles. Amortization of acquired intangibles increased $61.8 million in fiscal 2008 due to the new basis of our intangible assets that was established in connection with the Company Sale Transaction. The AMS segment increased $42.5 million and the ATS segment increased $19.3 million.

Sale Transaction Expenses. In fiscal 2008 and 2007, we incurred Company Sale Transaction expenses of $36.2 million and $30.6 million, respectively, consisting primarily of merger related change of control, severance and other compensation payments, a break-up fee and its related lawsuit settlement charge and legal and other professional fees.

Other Income (Expense). Interest expense was $74.9 million in fiscal 2008 and $672,000 in fiscal 2007. The increase is due to the addition of $870 million of debt to finance the sale of the Company. Other income (expense) of $4.9 million in fiscal 2008 consisted primarily of $2.5 million of foreign currency gains and $2.4 million of interest income and other miscellaneous income, net. Other income (expense) of $152,000 in fiscal 2007 consisted primarily of $876,000 of interest income and $576,000 of other miscellaneous income, net, partially offset by $1.3 million of foreign currency losses.

Provision for Income Taxes. The income tax benefit was $45.8 million, an effective income tax rate of 28.5%, in fiscal 2008. In fiscal 2007 we had income tax expense of $24.9 million, an effective income tax rate of 73.9%. The effective income tax rate for the two periods differed from the amount computed by applying the U.S. Federal income tax rate to income before income taxes primarily due to foreign, state and local income taxes and the impact of certain Company Sale Transaction expenses that were not deductible for tax purposes in fiscal 2008 and 2007, as well as nondeductible IPR&D in fiscal 2008. We paid income taxes of $8.0 million in fiscal 2008 and $28.8 million in fiscal 2007. In May 2008, we received a federal income tax refund of $27.1 million related to the carryback of tax losses for the period July 1, 2007 to August 14, 2007, to fiscal years 2006 and 2007.

Income (loss) from Continuing Operations. The loss from continuing operations in fiscal 2008 was $115.0 million versus income of $8.8 million in fiscal 2007. Income (loss) from continuing operations in fiscal 2008 was adversely affected by the following pre-tax items: $41.6 million of Company Sale Transaction and related expenses (including $5.4 million reported in SG&A), an increase in interest expense of $74.3 million, an increase in restructuring charges of $7.9 million, the current period impact of purchase accounting adjustments to inventory, depreciation and deferred revenue totaling $45.6 million, an IPR&D charge of $25.0 million, and an increase in intangible asset amortization of $61.8 million. Income (loss) from continuing operations in fiscal 2007 was adversely affected by $30.6 million of Company Sale Transaction expenses.

Fiscal Year Ended June 30, 2007 Compared to Fiscal Year Ended June 30, 2006

Net Sales. Net sales increased 9% to $593.1 million in fiscal 2007 from $546.2 million in fiscal 2006. On a consolidated basis, organic growth (defined as net sales for business units in operation throughout fiscal 2007 and fiscal 2006) was 8%.

Net sales in the AMS segment increased 10% to $266.5 million in fiscal 2007 from $241.4 million in fiscal 2006 due to increased sales volume of components, integrated circuits and microelectronic modules. Organic growth in AMS was 9% with the balance due to the addition of sales from our fourth quarter of fiscal 2007 acquisition of MicroMetrics. Net sales in the ATS segment increased 7% to $326.6 million in fiscal 2007 from $304.8 million in fiscal 2006 due to increased volume in radio test.

Gross Profit. On a consolidated basis, gross profit was 47.9% in fiscal 2007 and 48.0% in fiscal 2006.

Fiscal Year Ended June 30,	AMS		% of Net Sales			ATS		% of Net Sales			Total		% of Net Sales
	(In thousands, except percentages)
2007	$	133,863		50.2	%	$	150,314		46.0	%	$	284,177		47.9	%
2006	$	120,492		49.9	%	$	141,439		46.4	%	$	261,931		48.0	%

Gross profit increased $13.4 million, or 11%, and gross margin increased 30 basis points to 50.2% in the AMS segment primarily as a result of the aforementioned increased sales volume and increased margins in our components and microelectronic modules. Gross profit increased $8.9 million, or 6%, in the ATS segment primarily as a result of the increased sales volume in radio test.

Selling, General and Administrative Costs. On a consolidated basis, these costs decreased 60 basis points as a percentage of sales.

Fiscal Year Ended June 30,	AMS		% of Net Sales			ATS		% of Net Sales			Corporate		Total		% of Net Sales
	(In thousands, except percentages)
2007	$	42,447		15.9	%	$	67,286		20.6	%	$	19,888	$	129,621		21.9	%
2006	$	38,540		16.0	%	$	65,619		21.5	%	$	18,712	$	122,871		22.5	%

Selling, general and administrative costs increased $3.9 million, or 10%, in the AMS segment due primarily to a general increase in expenses related to the increase in sales as well as additional expense for MicroMetrics ($646,000), which was acquired during the fourth quarter of fiscal 2007. As a percentage of sales, AMS selling, general and administrative costs decreased 10 basis points. Selling, general and administrative costs increased $1.7 million, or 3%, in the ATS segment primarily as a result of a general increase in expense related to the increase in sales. The ATS segment benefited from restructuring efforts in the U.K. in fiscal 2006. As a percentage of sales, ATS selling, general and administrative costs decreased 90 basis points. Corporate selling, general and administrative expenses increased $1.2 million due primarily to increases in compensation related expenses partially offset by reduced professional fees and share based compensation.

In fiscal 2006, we initiated steps to consolidate three of our United Kingdom operations into one division in our ATS segment. Pursuant to the plan, our manufacturing operations were moved into one facility and we created a shared-services environment for all finance and administrative functions. In connection with this plan, approximately 40 employees were terminated and certain contract positions were eliminated. In fiscal 2006, we recorded charges of $3.2 million primarily for workforce reductions in all departments. During fiscal 2007, we recorded an additional charge of $100,000 for these workforce reductions. The workforce restructuring charges were allocated solely to general and administrative costs.

Research and Development Costs. On a consolidated basis, research and development expenses decreased 30 basis points as a percentage of sales.

Fiscal Year Ended June 30,	AMS		% of Net Sales			ATS		% of Net Sales			Total		% of Net Sales
	(In thousands, except percentages)
2007	$	28,473		10.7	%	$	48,244		14.8	%	$	76,717		12.9	%
2006	$	24,974		10.3	%	$	47,081		15.4	%	$	72,055		13.2	%

Self-funded research and development costs increased $3.5 million, or 14%, in the AMS segment primarily due to the increased development of microelectronic modules and integrated circuits. Research and development costs increased $1.2 million, or 2%, in the ATS segment primarily as a result of restructuring charges of $2.8 million in our Wireless division, partially offset by a general reduction in spending for research and development.

In fiscal 2007, we initiated and completed restructuring activity in our wireless business in the United Kingdom. Pursuant to the plan, 23 employees were terminated, resulting in $1.4 million of severance costs, and certain contract positions were eliminated. We also abandoned a leased facility and recorded a fixed asset impairment charge, which in the aggregate amounted to $1.3 million.

Amortization of Acquired Intangibles. Amortization decreased $772,000, or 6%, to $13.0 million, as a result of certain intangible assets becoming fully amortized.

Company Sale Transaction Expenses. On March 2, 2007, we entered into an agreement and plan of merger (the “terminated merger agreement”) to be acquired by investment entities affiliated with General Atlantic LLC (“General Atlantic”) and Francisco Partners II, L.P. (“Francisco Partners”). The terminated merger agreement contained a provision which stated that in the event we accepted a superior proposal, a breakup fee would be payable by us. On May 25, 2007, we entered into the merger agreement with the parent. The Acquisition was consummated on August 15, 2007. In fiscal 2007 we incurred $30.6 million of Company Sale Transaction expenses, including $22.5 million for the breakup fee.

Other Income (Expense). Interest expense was $672,000 in fiscal 2007 and $608,000 in fiscal 2006. Other income of $152,000 in fiscal 2007 consisted primarily of $876,000 of interest income and $567,000 other miscellaneous income, partially offset by $1.3 million of foreign currency losses. Other income of $1.7 million in fiscal 2006 consisted primarily of $1.1 million of interest income. The decline in interest income was due to the lower balances in cash, cash equivalents and marketable securities primarily due to $17.2 million of stock repurchases and $9.2 million paid for the settlement of the earnout in connection with our acquisition of Racal Instruments Wireless Solutions Group (“RIWS”).

In connection with the Acquisition and the terminated merger agreement, through June 30, 2007 we incurred sale transaction expenses of $30.6 million, including a breakup fee of $22.5 million in the aggregate to General Atlantic and Francisco Partners, which we expensed as incurred in the fiscal 2007 consolidated statement of earnings. The remainder of such expenses primarily consisted of legal and other professional fees.

Provision for Income Taxes. The income tax provision was $24.9 million (an effective income tax rate of 73.9%) in fiscal 2007 and $20.5 million (an effective income tax rate of 37.8%) in fiscal 2006. The effective income tax rate for the two periods differed from the amount computed by applying the U.S. Federal income tax rate to income before income taxes primarily due to foreign, state and local income taxes and, for the year ended June 30, 2007, the impact of $30.6 million of Company Sale Transaction expenses, which were not deductible for tax purposes. We paid $28.8 million during fiscal 2007 and $25.7 million during fiscal 2006 for income taxes.

Income from Continuing Operations. Income from continuing operations for fiscal 2007 was $8.8 million, versus $33.7 million in fiscal 2006. Fiscal 2007 income from continuing operations was adversely affected by $30.6 million of non-tax deductible merger related expenses.

Cumulative Effect of Change in Accounting Principle. We adopted FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (FIN 47) in the fourth quarter of fiscal 2006. The adoption of FIN 47 resulted in the recognition of a fixed asset and asset retirement obligation liability for certain leased premises of $2.4 million each, accumulated depreciation of $1.6 million and an after tax charge of $1.1 million, which is reflected as a cumulative change in accounting principle in our fiscal 2006 consolidated statement of earnings.

Liquidity and Capital Resources

As of September 30, 2008, we had $73.1 million of cash and cash equivalents, $216.2 million in working capital and our current ratio was 2.5 to 1. As of June 30, 2008, we had $54.1 million of cash and cash equivalents, $220.9 million in working capital and our current ratio was 2.4 to 1.

At September 30, 2008, our marketable securities consisted primarily of $19.9 million of auction rate securities. Auction rate securities represent long-term (generally maturities of ten years to thirty-five years from the date of issuance) variable rate bonds tied to short-term interest rates that are reset through an auction process, which occurs every seven to thirty-five days, and are classified as available for sale securities. All but one (with the one security having a carrying value of $1.9 million and a AA rating) of our auction rate securities retain a triple-A rating by at least one nationally recognized statistical rating organization. In addition, certain of our auction rate securities are backed by student loans whose principal and interest are federally guaranteed by the Family Federal Education Loan Program. We have redeemed $26.5 million of auction rate securities at par since February 8, 2008.

Given the high credit quality of our auction rate securities and our intent and ability to hold these securities until liquidity returns to the market or maturity, if necessary, we believe we will recover the full principal amount in the future. However, at September 30, 2008, we concluded that the fair value of our auction rate securities was $18.7 million. Since many auctions are failing and given that there is currently no active secondary market for our investment in auction rate securities, the determination of fair value was based on the following:

· continuing illiquidity;

· lack of action by the issuers to establish different forms of financing to replace or redeem these securities; and

· the credit quality of the underlying securities.

Should credit market disruptions continue or increase in magnitude, we may be required to record a further impairment on our investments or consider that an ultimate liquidity event may take longer than currently anticipated.

Auction rate securities are classified as non-current assets in the accompanying September 30, 2008 and June 30, 2008 consolidated balance sheets.

Our principal liquidity requirements are to service our debt and interest and meet our working capital and capital expenditure needs. As of September 30, 2008, we had $881.4 million of debt outstanding (of which $875.8 million is long-term), including approximately $519.8 million under our senior secured credit facility, $225.0 million unsecured debt under our unsecured senior credit facility and $135.2 million under our senior subordinated unsecured credit facility, including paid-in-kind interest. Additionally, at September 30, 2008 we were able to borrow an additional $50.0 million under the revolving portion of our senior secured credit facility.

The following is a summary of required principal repayments of long-term debt for the next five years and thereafter as of September 30, 2008:

Twelve months ended September 30,	(In thousands)
2009	$	5,570
2010		5,590
2011		5,610
2012		5,635
2013		5,250
Thereafter		853,728
Total	$	881,383

As of September 30, 3008, we are in compliance with all of the covenants contained in our loan agreements. Certain loan covenants are based on Adjusted EBITDA. Adjusted EBITDA is defined as EBITDA adjusted to add back certain non-cash, non-recurring and other items, as required by various covenants in our debt agreements. Our use of the term Adjusted EBITDA may vary from others in our industry. Adjusted EBITDA is not a measure of operating income (loss), performance or liquidity under U.S. GAAP and is subject to important limitations. For additional information regarding our use of Adjusted EBITDA and limitations on its usefulness as an analytical tool, see “Use of Non-GAAP Measures.” A reconciliation of income (loss) from continuing operations, which is a U.S. GAAP measure of our operating results, to Adjusted EBITDA, as defined in our debt agreements, is as follows:

	Year Ended			Three Months Ended			Three Months Ended
	June 30, 2008			September 30, 2007			September 30, 2008
	Combined Predecessor and
	Successor Entities						Successor Entity
	(In thousands)

Income (loss) from continuing operations	$	(115,012	)	$	(63,944	)	$	(6,897	)
Interest expense		74,933			11,411			21,215
Provision (benefit) for income taxes		(45,758	)		(26,000	)		(10,354	)
Depreciation and amortization		96,694			16,964			23,497
EBITDA (unaudited)		10,857			(61,569	)		27,461
Impact of non-cash purchase accounting
adjustments for inventory		39,025			12,457			-
Non-cash purchase accounting adjustments
for in-process research and development		24,975			24,340			-
Impact of other non-cash purchase accounting
adjustments		2,510			676			97
Company sale transaction expenses and merger
related expenses		41,621			37,513			634
Restructuring costs (a)		10,773			3,809			402
Share based compensation (b)		3,337			1,871			489
Other defined items (c)		1,979			-			-
Adjusted EBITDA (unaudited)	$	135,077		$	19,097		$	29,083

(a) Primarily reflects costs associated with the reorganization of our U.K. operations.

(b) Reflects non-cash share-based employee compensation expense under the provisions of SFAS 123(R),

Share-Based Payments.

We expect that cash generated from operating activities and availability under the revolving portion of the senior secured credit facility will be our principal sources of liquidity. Our ability to make payments on and to refinance our indebtedness and to fund working capital needs and planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, including those resulting from the current global recession and continued credit tightening, financial, competitive and other factors that are beyond our control. Based on our current level of operations, we believe our cash flow from operations and available borrowings under our senior secured credit facility will be adequate to meet our liquidity needs for at least the next twelve months. We cannot assure you, however, that our business will generate sufficient cash flow from operations, or those future borrowings will be available to us under our senior secured credit facility in an amount sufficient to enable us to repay our indebtedness or to fund other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before the maturity thereof. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

Cash Flows

For the three months ended September 30, 2008, our cash flow provided by continuing operations was $28.5 million. Our investing activities from continuing operations used cash of $3.3 million, primarily for $3.3 million of capital expenditures. Our financing activities used cash of $1.8 million, primarily to repay indebtedness ($1.3 million).

For fiscal 2008, our cash flow from continuing operations was $26.0 million. Our investing activities from continuing operations used cash of $1.2 billion, primarily for payments of $1.1 billion to predecessor shareholders and option holders, $14.3 million of capital expenditures, purchase of business (net of cash acquired) of $11.1 million and the purchase (net of sales) of marketable securities of $10.5 million. Our financing activities provided cash of $1.2 billion, primarily from borrowings under our credit facilities of $870.0 million on August 15, 2007 and proceeds from the issuance of common stock of $378.4 million, also on August 15, 2007.

In fiscal 2007, our cash flow from continuing operations provided $22.5 million, primarily from our continued profitability offset by increases in accounts receivable ($19.9 million) and inventory ($7.9 million) due to increased sales. In fiscal 2007, our investing activities from continuing operations used cash of $19.0 million, principally for the purchase of MicroMetrics ($10.7 million), the contingent payment in the final determination of the RIWS acquisition amount ($9.2 million), capital expenditures ($18.4 million), partially offset by the proceeds from the sale of marketable securities, net of purchases ($18.8 million). In fiscal 2007, our financing activities from continuing operations used $793,000, principally due to the purchase of treasury stock ($17.2 million), partially offset by the proceeds from the exercise of stock options ($14.2 million).

In fiscal 2006, our cash flow from continuing operations provided $41.3 million, primarily from our continued profitability offset by increases in accounts receivable ($23.9 million) and inventory ($9.0 million) due to increased sales. In fiscal 2006, our investing activities from continuing operations used cash of $42.4 million, principally for net purchases of marketable securities ($28.3 million) and capital expenditures ($15.4 million). In fiscal 2006, our financing activities provided $3.7 million, principally from the proceeds from the exercise of stock options.

Capital Expenditures

Capital expenditures were $3.3 million for the three months ended September 30, 2008. Capital expenditures were $14.3 million, $18.4 million and $15.4 million in fiscal 2008, fiscal 2007 and fiscal 2006, respectively. Our capital expenditures primarily consist of equipment replacements.

Contractual Obligations

The following table summarizes our obligations and commitments to make future payments under debt, and other obligations as of September 30, 2008, assuming the issuance of the Notes as of September 30, 2008:

Payments Due By Period (1)

	(In millions)

			Less Than						After
	Total		1 Year		1 - 3 Years		4 - 5 Years		5 Years

Senior secured credit facility	$	519.8	$	5.3	$	10.5	$	10.5	$	493.5
Senior subordinated unsecured credit facility		225.0		-		-		-		225.0
Subordinated unsecured credit facility		135.2		-		-		-		135.2
Other long-term debt		1.4		0.3		0.7		0.4		-
Operating leases (2)		13.5		4.3		6.4		2.6		0.2
Employment agreements		7.6		3.1		3.4		1.1		-
Advisory fee (3)		11.5		2.2		4.4		4.4		0.5
Total	$	914.0	$	15.2	$	25.4	$	19.0	$	854.4

(1)

Amounts do not include interest payments.

(2)

The Company does not expect any future minimum sub-lease rentals associated with operating lease commitments shown in the above table.

(3)

The annual advisory fee is payable to our Sponsors throughout the term of an advisory agreement, which has an initial term expiring on December 31, 2013 and is automatically renewable for additional one year terms thereafter unless terminated. For purposes of this table we have assumed that such agreement terminates December 31, 2013. The annual fee will be the greater of $2.2 million or 1.8% of adjusted EBITDA for the prior fiscal year, as defined in the agreement.

In the normal course of business, we routinely enter into binding and non-binding purchase obligations primarily covering anticipated purchases of inventory and equipment. None of these obligations are individually significant. We do not expect that these commitments, as of September 30, 2008, will have a material adverse affect on our liquidity.

Qualitative and Quantitative Information About Market Risk

Interest Rate Risk. We are subject to interest rate risk in connection with borrowings under our senior secured credit facility. Although we currently have interest rate swap agreements hedging portions of this debt, these will expire before the borrowings are fully repaid. As of September 30, 2008, we have $519.8 million outstanding under the term-loan portion of our senior secured credit facility, some of which is subject to variable interest rates. Each change of 0.125% in interest rates would result in a $40,000 change in our annual interest expense on the un-hedged portion of the term-loan borrowings and a $63,000 change in our annual interest expense on the revolving loan borrowings, assuming the entire $50.0 million was outstanding. Any debt we incur in the future may also bear interest at floating rates.

Foreign Currency Risk. Foreign currency contracts are used to protect us from exchange rate fluctuation from the time customers are invoiced in local currency until such currency is exchanged for U.S. dollars. We periodically enter into foreign currency contracts, which are not designated as hedges, and the change in the fair value is included in income currently within other income (expense). As of September 30, 2008, we had $2.4 million of notional value foreign currency forward contracts maturing through December 2008. As of June 30, 2008, we had $2.8 million of notional value foreign currency forward contracts maturing through September 2008. Notional amounts do not quantify risk or represent assets or liabilities of the Company, but are used in the calculation of cash settlements under the contracts. The fair value of these contracts at September 30, 2008 and June 30, 2008 was immaterial. If foreign currency exchange rates (primarily the British pound and the Euro) change by 10% from the levels at September 30, 2008, the effect on our comprehensive income would be approximately $20.7 million.

Inflation Risk. Inflation has not had a material impact on our results of operations or financial condition during the preceding three years.

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have material current or future effect upon our financial condition or results of operations.

Seasonality

Historically our net sales and earnings increase sequentially from quarter to quarter within a fiscal year, but the first quarter is typically less than the previous year’s fourth quarter.

Accounting Policies Involving Significant Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the revenues and expenses during the period reported. The following accounting policies require us to make estimates and assumptions based on the circumstances, information available and our experience and judgment. These estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary. If actual results differ significantly from our estimates, our financial statements could be materially impacted.

Revenues and Cost Recognition. We recognize revenue when persuasive evidence of an arrangement exists, the selling price is fixed or determinable, and collectibility of the resulting receivable is reasonably assured.

For arrangements other than certain long-term contracts, revenue (including shipping and handling fees) is recognized when products are shipped and title has passed to the customer. If title does not pass until the product reaches the customer’s delivery site, recognition of the revenue is deferred until that time. Certain of our sales are to distributors which have a right to return some portion of product within up to eighteen months of sale. We recognize revenue on these sales at the time of shipment to the distributor as the returns under these arrangements have been insignificant and can be reasonably estimated. A provision for such estimated returns is recorded at the time sales are recognized.

Long-term contracts are accounted for in accordance with SOP 81-1 “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” We determine estimated contract profit rates and use the percentage-of-completion method to recognize revenues and associated costs as work progresses on certain long-term contracts. We measure the extent of progress toward completion generally based upon one of the following methods (based upon an assessment of which method most closely aligns to the underlying earnings process), (i) the units-of-delivery method, (ii) the cost-to-cost method, using the ratio of contract costs incurred as a percentage of total estimated costs at contract completion (based upon engineering and production estimates), or (iii) the achievement of contractual milestones. Provisions for anticipated losses or revisions in estimated profits on contracts-in-process are recorded in the period in which such anticipated losses or revisions become evident.

Revenue from sales of products where software is other than incidental to their performance, including related software support and maintenance contracts is recognized in accordance with SOP-97-2, “Software Revenue Recognition.” Accordingly, revenue for software is recognized when the software is delivered, provided the requisite criteria for revenue recognition are met.

When a customer purchases software together with post contract support, we allocate a portion of the fee to the post contract support for its fair value based on the contractual renewal rate or the amount the support is sold for on a standalone basis. Post contract support fees are deferred in Advance Payments by Customers and Deferred Revenue and recognized as revenue ratably over the term of the related contract.

Inventories. Inventories are valued at the lower of cost (first-in, first-out) or market. Inventory levels are maintained in relation to expected sales volumes. We periodically evaluate the net realizable value of our inventory. Numerous analyses are applied including lower of cost or market analysis, forecasted sales requirements and forecasted warranty requirements. After taking these and other factors into consideration, such as technological changes, age and physical condition, appropriate adjustments are recorded to the inventory balance. If actual conditions differ from our expectation, then inventory balances may be over or under valued, which could have a material effect on our results of operations and financial condition.

Purchase Accounting and Recoverability of Long-Lived and Intangible Assets. Determining the fair value of certain assets and liabilities acquired in a business combination is judgmental in nature and often involves the use of significant estimates and assumptions. There are various methods used to estimate the value of tangible and intangible assets acquired, such as discounted cash flow and market multiple approaches. Some of the more significant estimates and assumptions inherent in the two approaches include: projected future cash flows (including timing); discount rate reflecting the risk inherent in the future cash flows; perpetual growth rate; determination of appropriate market comparables; and the determination of whether a premium or a discount should be applied to comparables. There are also judgments made to determine the expected useful lives assigned to each class of assets and liabilities acquired. Goodwill is measured as the excess of the cost of acquisition over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed. We perform an assessment of whether there is an indication that goodwill is impaired on an annual basis unless events or circumstances warrant a more frequent assessment. The impairment assessment involves, among other things, an estimation of the fair value of each of our reporting units. This estimate is made by an independent evaluation expert using both a market value approach and an income based approach. Such estimates are inherently subjective, and subject to change in future periods.

In response to changes in industry and market conditions, we could be required to strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses, which could result in the impairment of goodwill and other long lived assets, as well as a reduction in the useful lives of such depreciable or amortizable long lived assets. Impairment charges and the reduction in useful lives could have a material impact on our results of operations and financial condition.

Property, plant and equipment are stated at cost less accumulated depreciation computed on a straight-line basis over the estimated useful lives of the related assets. Leasehold improvements are amortized over the life of the lease or the estimated life of the asset, whichever is shorter. Changes in circumstances such as technological advances or changes to our business model can result in the actual useful lives differing from our estimates. To the extent the estimated useful lives are incorrect, the value of these assets may be over or under stated, which in turn could have a material effect on our results of operations and financial condition.

Long-lived assets other than goodwill are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of any such asset may be impaired. We evaluate the recoverability of such assets by estimating future cash flows. If the sum of the undiscounted cash flows expected to result from the use of the assets and their eventual disposition is less than the carrying amount of the assets, we will recognize an impairment loss to the extent of the excess of the carrying amount of the assets over the discounted cash flow.

If our actual results are not as favorable as the forecasted results used in our impairment reviews of goodwill and other long-lived assets, impairment charges may be necessary which could have a material effect on our results of operations and financial condition.

Restructuring Charges. When we incur a liability related to a restructuring charge, we estimate and record all appropriate expenses. These expenses include severance, retention bonuses, fringe benefits, asset impairment, buyout of leases and inventory write-downs. To the extent that our estimates differ from actual expenses, there could be significant additional expenses or reversals of previously recorded charges in the future.

Income Taxes. Significant judgment is required in determining our worldwide income tax provision. In the ordinary course of a global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Some of these uncertainties arise as a consequence of revenue sharing and cost reimbursement arrangements among related entities, the process of identifying items of revenues and expense that qualify for preferential tax treatment and segregation of foreign and domestic income and expense to avoid double taxation. No assurance can be given that the final tax outcome of these matters will not be different than that which is reflected in our historical income tax provisions and accruals. Such differences could have a material effect on our income tax provision and net earnings in the period in which such determination is made.

We record a valuation allowance to reduce our deferred tax assets to the amount of future tax benefit that is more likely than not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, there is no assurance that sufficient taxable income will be generated in future years or that tax strategies will continue to be prudent. Accordingly, the valuation allowance might need to be increased to cover additional deferred tax assets that may not be realizable. Any increase in the valuation allowance could have a material adverse impact on our income tax provision and net earnings in the period in which such determination is made.

Share-Based Compensation. With the adoption of Statement of Financial Accounting Standard (“SFAS”) No. 123(R) on July 1, 2005, we are required to record the fair value of share based compensation awards as an expense. In order to determine the fair value of stock options on the date of grant, the Company utilizes the Black-Scholes option-pricing model. Inherent in this model are assumptions related to expected stock price volatility, option life, risk-free interest rate and dividend yield. Expected volatilities are based on historical volatility of our shares using daily price observations over a period consistent with the expected life. We used the safe harbor guidance in Staff Accounting Bulletin (“SAB”) 107 to estimate the expected life of options granted during fiscal 2007 and 2006. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods similar to the expected life. While the risk-free interest rate and dividend yield are less subjective assumptions, typically based on factual data derived from public sources, the expected stock price volatility and option life assumptions require a greater level of judgment which makes them critical accounting estimates.

Recently Adopted Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) 157, “Fair Value Measurements,” to clarify the definition of fair value, establish a framework for measuring fair value and expand the disclosures on fair value measurements. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). SFAS 157 also stipulates that, as a market-based measurement, fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability, and establishes a fair value hierarchy that distinguishes between (a) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (b) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

In February 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13.” This FSP amends SFAS 157 to exclude certain leasing transactions accounted for under previously existing accounting guidance. However, this scope exception does not apply to assets acquired and liabilities assumed in a business combination, regardless of whether those assets and liabilities are related to leases.

In February 2008, the FASB issued FSP No. FAS 157-2, “Effective Date for FASB Statement No. 157.” This FSP permits the delayed application of SFAS 157 for nonfinancial assets and nonfinancial liabilities, as defined in this FSP, except for those that are recognized or disclosed at fair value in the financial statements at least annually, until the beginning of our fiscal 2010. As of July 1, 2008, we adopted SFAS 157 (see Note 8), with the exception of its application to nonfinancial assets and nonfinancial liabilities, which we will defer in accordance with FSP No. FAS 157-2. We are currently evaluating the impact on our consolidated financial statements of adopting SFAS 157 at the beginning of fiscal 2010 for such nonfinancial assets and nonfinancial liabilities.

In October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active,” which clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. The FSP is effective upon issuance, including prior periods for which financial statements have not been issued. Revisions resulting from a change in the valuation technique or its application should be accounted for as a change in accounting estimate following the guidance in SFAS 154, “Accounting Changes and Error Corrections.” However, the disclosure provisions in SFAS 154 for a change in accounting estimate are not required for revisions resulting from a change in valuation technique or its application. We adopted SFAS 157 beginning in our fiscal 2009 first quarter. We used these key considerations in evaluating the fair value measurements of our financial assets and recorded a $1.2 million valuation allowance against our auction rate securities.

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” to permit all entities to choose to elect, at specified election dates, to measure eligible financial instruments at fair value. An entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date, and recognize upfront costs and fees related to those items in earnings as incurred and not deferred. SFAS 159 became effective for us as of July 1, 2008. As we did not elect the fair value option for our financial instruments (other than those already measured at fair value in accordance with SFAS No. 157), the adoption of this standard did not have an impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2007, the FASB issued SFAS 141(R), “Business Combinations.” SFAS 141(R) replaces SFAS 141. SFAS 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. The Statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for us for acquisitions consummated on or after July 1, 2009.

In December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51.” SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the impact, if any, the provisions of SFAS 160 will have on our consolidated financial statements.

In March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133.” SFAS 161 requires companies to provide qualitative disclosures about their objectives and strategies for using derivative instruments, quantitative disclosures of the fair values and gains and losses of these derivative instruments in a tabular format, as well as more information about liquidity by requiring disclosure of a derivative contract’s credit-risk-related contingent features. SFAS 161 also requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. We are currently evaluating the disclosure requirements of SFAS 161. As this is a disclosure-only standard, there will be no impact on our consolidated financial statements as a result of its adoption. SFAS 161 becomes effective for our March 2009 interim consolidated financial statements.

In April 2008, the FASB issued FSP FAS No. 142-3, “Determination of the Useful Life of Intangible Assets.” This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142, “Goodwill and Other Intangible Assets.” This FSP also adds certain disclosures to those already prescribed in SFAS 142. FSP 142-3 becomes effective for the annual and interim periods within the year, beginning in our fiscal 2010. The guidance for determining useful lives must be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements must be applied prospectively to all intangible assets recognized as of the effective date.

In June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” This FSP provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. Upon adoption, a company is required to retrospectively adjust its earnings per share data (including any amounts related to interim periods, summaries of earnings and selected financial data) to conform with the provisions in this FSP. Early application of this FSP is prohibited. We have not issued any share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents.

BUSINESS

Company Overview

We are a leading provider of highly specialized microelectronics and test and measurement equipment, primarily to the global aerospace and defense and broadband communications markets. We also design application-specific integrated circuits, or ASICs, for CT scan equipment for the medical industry. Founded in 1937, we have developed a substantial intellectual property portfolio that includes more than 150 patents, extensive know-how, years of collaborative research and development with our customers and a demonstrated history in space, validating the high quality performance of our products. We believe that the combination of our leading market positions, complementary portfolio of products, years of experience and engineering capabilities provides us with a competitive advantage and enables us to deliver high performance, high value products to our customers.

Our business is characterized the breadth and diversity of our product offerings, customer base, applications and end markets. We believe that we currently have significant market positions in the following product categories in which we compete: (i) RadHard “fabless” semiconductors, (ii) high performance mixed-signal ASICs, (iii) military radio test equipment and (iv) avionics test equipment. We offer a broad array of products, including custom and standard ICs such as databuses, transceivers, microcontrollers and microprocessors, globally to a diverse group of high quality customers. Our customers include the five prime defense contractors (Boeing, General Dynamics, Lockheed Martin, Northrop Grumman and Raytheon), as well as BAE, Cisco, Nokia, Motorola and Teradyne. In fiscal 2008, our largest customer represented approximately 8% of our net sales and our largest product offering represented approximately 7% of our net sales.

We believe there are high barriers to entry to the markets in which we compete due to the need for specialized design and development expertise and patents and the significant costs for customers to switch vendors. We often design and develop applications through a collaborative process whereby we provide “spec’d” products to our customers.

As indicated in the tables below, our products are sold to customers who are located primarily in the United States, Europe, Middle East and Asia/Australia and who compete predominantly in the aerospace and defense and the broadband communications markets.

Net Sales by Customer Location	Fiscal 2008			Fiscal 2007			Fiscal 2006
United States		54	%		59	%		58	%
Europe and the Middle East		24	%		26	%		27	%
Asia/Australia		20	%		14	%		13	%
Other Regions		2	%		1	%		2	%

Fiscal 2008 Net Sales by End Market

Aerospace & Defense	59	%

Broadband Communications	30	%

Other (Primarily CT Scan and Automotive)	11	%

We were organized in 1937 and in 1981 became a public company, becoming subject to the requirements to file periodic and other reports with the SEC. On August 15, 2007, we were acquired by our parent company pursuant to an agreement and plan of merger, and, as a result, became a “private” company. Commencing as of January 21, 2009, the date of effectiveness of our registration statement relating to our exchange offering of the Notes, we again became subject to SEC public reporting requirements.

Our Segments

We combine our proprietary technologies with advanced fabrication and manufacturing processes to design, engineer, manufacture and market a diverse range of products through two primary business segments: Aeroflex Microelectronic Solutions, or AMS, and Aeroflex Test Solutions, or ATS. Our business benefits from the diversity provided by our two operating segments with respect to customers, geographies and industries, which limits our exposure to any specific end market, customer or technology. The sales and operating profits of our two industry segments and the indentifiable assets attributable to each segment for each of the three fiscal years in the period ended June 30, 2008 are set forth in Note 17 of Notes to Consolidated Financial Statements.

	AMS	ATS
	Leading provider of RadHard and other ICs and modules for the aerospace and defense and the broadband communications markets	Leading provider of next generation, specialty test and measurement systems for the wireless, military, aerospace, and avionics markets

% of Net Sales for Fiscal 2008	47%	53%

% of Gross Profit for Fiscal 2008	46%	54%

Products	• RF and microwave components	• Wireless test equipment
	• High-reliability datacom/standard and application	• Avionics test equipment
	specific MCMs	• Third party testing services and other (including
	• RadHard fabless semiconductors	automotive)
	• Non-RadHard fabless semiconductors	• Military radio test equipment
	• Integrated microwave assemblies	• Private mobile radio test equipment
	• High-performance mixed signal ASICs	• General purpose test equipment
	• Class K/power management	• Synthetic test equipment
	• High-reliability aerospace motion control

Competitive	• Leadership positions in specialty microelectronic	• Leadership positions in specialty
Advantages	niches within satellite, broadband	communications test niches, including military/
	communications and CT scan markets	private mobile radio, broadband/wireless and
	• Focus on large and growing markets requiring	commercial and military avionics markets
	specialized, highly qualified solutions	• Focus on delivering advanced testing
	• High-performance, high-reliability products	technologies to large and growing markets
	• Pioneer in RF and microwave design and development	• Key patents in RF, wireless design and expertise in frequency
	• Proprietary technologies	synthesis
	• State-of-the-art fabless semiconductor	• Integrated hardware/software design focus
	production capability of scale	• State-of-the-art manufacturing processes
	• Established long-term customer	• Pioneer in synthetic testing market
	relationships	• Established long-term customer
	• High switching costs	relationships

We engineer, manufacture and market a diverse range of products through AMS and ATS.

Product Portfolio (% of Fiscal 2008 Net Sales by Segment)

AMS
RF Components	30	%
RadHard Fabless Semiconductors	14	%
High-Reliability Datacom/Standard & Application Specific MCMs	11	%
Integrated Microwave Assemblies	13	%
High Performance Mixed Signal	8	%
Non-RadHard Fabless Semiconductors	10	%
Class K/Power Management	8	%
High Reliability/Aerospace Motion Control	6	%

ATS
Wireless	20	%
Avionics	19	%
Military Radio	9	%
Third Party Service and Other (1)	14	%
Private Mobile Radio	13	%
General Purpose Test	17	%
Synthetic Test	8	%

(1) Other includes Automotive.

Aeroflex Microelectronic Solutions

AMS is a leading designer and manufacturer of high-performance, high-reliability specialty microelectronics products for satellite, aerospace and defense applications. Satellite components are continually bombarded by energetic plasmas and other forms of radiation in space which can degrade the performance of these electronic components. Our RadHard products are of significant importance to our customers because they are specifically designed to tolerate high radiation-level environments and have proven high performance qualities and a demonstrated history in space. We believe our extensive knowledge of analog, mixed signal and digital semiconductor technology, from the device level to the design and assembly of complete subsystems, enables us to deliver high performance, high value products to our customers.

We operate under a “fabless” semiconductor manufacturing model, outsourcing substantially all semiconductor fabrication activities to commercial foundries, which we believe significantly reduces our capital expenditures and labor costs and enhances our ability to respond quickly with scalability to changes in technology and customer demands. We purchase our semiconductors from a variety of foundries, which utilize our proprietary design specifications and packaging techniques to manufacture our RadHard products. We test our RadHard products in our in-house radiation simulation testing chamber.

In order to help meet the requirements demanded by our customers, AMS’ Plainview, NY and Colorado Springs, CO facilities are space certified and qualified by the DSCC and have been manufacturing Class K products for defense and aerospace programs for over 15 years. Class K device manufacturing provides high quality and reliability for electronic parts through a number of specifications, standards and test methods. The additional requirements that define Class K address the specific needs of space users and are intended to provide more confidence to the customers that the device is of the highest initial quality and that any defective parts have been removed.

AMS offers a broad range of complementary products that provide connectivity among products, including custom and standardized ICs, programmable logic devices, sub-assemblies, multi-function modules, microcontrollers, microprocessors, databuses, transceivers and complex RF, and microwave microelectronics that are used in satellites, communications systems and avionics systems for aircraft and missiles. AMS also designs and manufactures application-specific, high performance analog and mixed signal semiconductors for use in medical, industrial, security and intelligent sensors. Our products are used in over 100 aerospace and defense platforms, including the WGS Satellites, NPOESS, ADHF Satellites, F-16’s modular mission computer, the 777 airliner’s databus, the B-1 flight controls upgrade and the THAAD program, and are widely used in the broadband communications industry and in the medical, industrial and security markets.

For fiscal 2008, AMS generated $302.7 million of net sales and $122.8 million of gross profit.

Aeroflex Test Solutions

ATS is a leading designer, developer, manufacturer and service provider of a broad line of specialized test and measurement equipment. ATS has hardware and software expertise across the aerospace and defense and broadband communications markets and has garnered specific expertise in leading-edge communications standards. ATS products include avionics, communications and general purpose test equipment, instruments and systems which enable our customers to design, build, deploy and manage their products and technologies.

ATS believes that its key strengths include its strong reputation in RF synthesizers, its extensive offering of testing and measurement products and its early stage development in synthetic testing. ATS is a leader in RF and wireless test equipment, with particular capability in WiMax, LTE and EDGE protocols. Our position in RF technology is supported by key intellectual property in the area of high-speed RF synthesis. We believe ATS synthesizers cover all communication frequencies, and that ATS’ proprietary technology enables its products to generate the clean and fast RF signals. With the expected growth of RF testing, increasing numbers of wireless communications equipment will be procured and will require sophisticated testing beforehand. We are poised to take advantage of this growth, as we currently supply an extensive line of wireless test equipment to test RF components.

As technology continues to evolve and “next generation” broadband communications, military and commercial avionics and two-way communications protocols are introduced, equipment manufacturers and network providers require test and measurement products that are compatible with the new technologies as well as products that work with older generation equipment. In addition, wireless companies need test equipment for all stages of development: research and development and conformance testing; production testing; installation and commissioning; monitoring and optimization; and service and maintenance. We have garnered specific expertise in advanced RF and additional wireless technology and have geared our research and development and product development toward such next-generation technologies. Over the years, we have been developing advanced solutions for our customers and of providing a comprehensive collection of test and measurement equipment for all stages of the network life-cycle.

ATS is an early-stage entrant in the developing area of synthetic testing, which we believe has significant growth potential as a new market for test equipment in the commercial and military communications arenas. Synthetic test systems test several attributes through one “box” and can take multiple complex measurements simultaneously, producing the desired results several times faster than traditional “rack and stack” systems.

ATS’ specialty test product portfolio includes wireless test equipment, frequency synthesizers, military radio test equipment, synthetic test equipment, avionics test equipment and other general purpose test equipment. Our products are used by wireless service providers and equipment manufacturers to test wireless handsets and base stations; by radio manufacturers and military, police, fire and emergency response units to test handheld radio units; by satellite manufacturers to test satellite-based communications systems; by avionics manufacturers to design, manufacture, test and maintain both commercial and military avionics systems; and for spectrum analysis and production testing.

For fiscal 2008, ATS generated $340.5 million of net sales and $144.6 million of gross profit.

Industry Overview

Our products predominantly serve the aerospace and defense market and the broadband communications market. In addition, our products serve two key growth markets: the CT scan market and the synthetic test market.

Aerospace and Defense

The aerospace and defense market has experienced significant growth in recent years. Within the aerospace and defense market, our customers predominately fall into four end-markets: (i) defense electronics; (ii) satellite (primarily military); (iii) military communications market (military radio SINCGARS); and (iv) military/civilian avionics (systems for military and commercial aircraft).

Defense Electronics Market

The current defense budget cycle trend began in the mid-1990s under the Clinton Administration and was driven by the need to modernize the military when faced with a significant block of obsolete equipment developed in the 1970s. In addition, after the first Gulf War, there was a desire to transform the military to the next generation of technology to our armed forces. Defense electronics spending has outperformed the broader defense investment budget throughout the current defense spending cycle. The primary driver has been the “digitization” of the U.S. military.

Macro trends that we believe continue to favor us include the “war on terror,” the long-term trend for increased use of electronics in existing platforms and the drive to create a global infrastructure network for the Department of Defense.

Satellite Market

The satellite community’s needs are diverse and consist of two primary segments: commercial (large fixed satellite service providers, such as INTELSAT) and government, which consists of civilian (national/international space agencies, such as NASA) and military (Department of Defense, intelligence agencies and foreign militaries). While our customers are predominately within the military government sub-segment, through our RadHard ICs and MCMs, we have significant access to both the commercial and civilian government satellite markets. Currently, we are benefiting from a trend toward increased spending on military satellite programs and expected growth in the overall satellite market over the next several years as defense spending remains strong and intelligence initiatives, including those related to homeland security and classified applications, continue to drive increased satellite technology development and production.

Government satellite demand originates from both countries that have an established domestic space industry and a record of using satellite technology (i.e., the United States, Europe, China, Japan and India) and countries that have just recently entered the satellite industry by acquiring operations and scientific satellites and developing their own industrial capabilities to manufacture them (i.e., Israel, Brazil and South Korea). Civilian government satellite demand is fueled by increased research funding on global climate changes, Mars explorations and “Return to the Moon” initiatives. Military satellite growth is being driven primarily by the United States through a focus on maintaining U.S. space superiority, recapitalization of Cold War space assets, military demand for more bandwidth, the need for next-generation technology requiring higher power and more processing needs.

Many of the military and aerospace programs run by incumbent prime contractors, such as Hughes, Loral and Raytheon, continue to outsource their high-reliability micro-components to more specialized companies such as us. In an effort to reduce their own production costs and ensure state-of-the-art performance capabilities, satellite manufacturers are outsourcing an increasing amount of their component and subsystems production to global suppliers of high-reliability, RadHard semiconductors and devices. We expect to continue to benefit from this trend toward outsourcing and the movement from component-level outsourcing towards production of MCMs and board and system-level products, which represent a significantly larger proportion of satellite component costs. As a result, our strategy is to continue to increase our revenue share at the customer level and move up the “value chain”.

As a result of the growing satellite market, we believe that the demand for RadHard chips will increase. Satellite components are continually bombarded by energetic plasmas and other forms of radiation which can degrade the performance of these electronic components. Military space and avionics are expected to be the key net sales growth drivers as a result of:

•

increased outsourcing by the defense prime contractors and system houses driven by cost-cutting initiatives;

•

performance and need to assure supplier viability;

•

growth in high-end military satellites with increasing RadHard requirements; and

•

strong “aftermarket”/electronic upgrade sales in the near term due to program delays the resulting need to upgrade or enhance existing platforms and systems.

Military Communications Market

One key area of the military communications market is military radio. Demand is currently being driven by U.S. operations abroad, particularly in Iraq and Afghanistan. Presently, the predominant form of military radio is the SINCGARS system. SINCGARS provides U.S. military personnel with a reliable, secure, easily maintained Combat Net Radio that handles voice and data. Active military operations continue to generate a large requirement for deployable radios. The demand for more capable and effective communication systems has fueled the development of the U.S. military’s next generation multi-service tactical radio for Army FCS, the Joint Tactical Radio System (JTRS). JTRS is a software-defined radio that is expected to be adopted for field use by 2010.

Replacements and upgrades to the current, aging SINCGARS radio system and the eventual roll-out of the JTRS platform are expected to drive demand in the military radio test market. Additional delays in the transition to the JTRS platform are expected to result in even more SINCGARS spending, which demands one test set for approximately every 300 SINCGARS units. In addition, there is a trend for consolidating military testing, requiring the development of a new technology allowing a single testing platform to test multiple types of radios. These drivers are expected to continue to create growth opportunities for the military radio test market.

Military and Commercial Avionics Market

Demand for avionics test systems is driven by upgrades in military and commercial avionics technologies, such as electronics warfare, control and display systems and emerging homeland defense. The military avionics market is currently experiencing budget pressure on new programs due to escalating unit costs, despite strong overall demand driven by continued military operations in Iraq and Afghanistan. Due to the strain on defense spending, older legacy programs are being kept alive instead of deploying replacements. As a result, the average aircraft age is expected to increase, creating the need for more upgrades. New fighter programs and maintenance and upgrades on older platforms are expected to continue to drive the military avionics market.

The commercial avionics market continues to experience the effects of the post-9/11 impact on the consumer airline industry, poor economic conditions, as well as potentially high fuel prices. Due to the prevalence of bankruptcy, efficiency and cost reductions have become top priorities for both low-cost and legacy carriers. Older passenger aircraft are being retired in deference to more efficient aircraft such as the Boeing 787. As the carriers return to profitability, they are expected to increase upgrades and replacements, driving demand for commercial avionics.

Broadband Communications

The broadband communications market is expected to continue to grow, as demand for high-speed access to the internet increases. Growth in the volume of communications traffic and increasing demand for services such as multimedia that require higher data rates and consequently consume greater bandwidth have resulted in more extensive use of the frequency spectrum and are driving the electronics industry to develop more creative and efficient uses of available frequency spectrum. With the continued deployment of next generation wireless infrastructure, we anticipate that equipment spending in the broadband communications market remain strong. In the coming years, we also expect significant broadband growth in emerging markets. Growth in the broadband communications market is expected to drive increased expenditures on infrastructure. Within the broadband communications market, our customers predominately fall into the wireless communications end-market.

Wireless Communications

The desire for more sophisticated, high speed wireless services, satellite radio and television communications and greater bandwidth is helping to fuel the demand for high-speed wireless data services and newer technologies are enabling wireless exchange of data at broadband speeds. Fast growing international wireless markets, particularly in Asia, are also driving next generation infrastructure and equipment spending. ATS maintains strong relationships with leading global wireless equipment vendors and we believe that we are well-positioned to benefit from growing spending levels in these markets. Wireless communications test equipment is produced for base stations and air interfaces, mobile stations, electronic meters and other wireless communications equipment.

RF communications is a sub-segment of wireless communications and a significant area in which we compete. In addition to being a leader in RF test equipment, we also offer a range of RF products. The total available market for RF products is anticipated to expand as developing markets continue to emerge and as data-intensive networks enable new applications, such as music players, gaming and video services. Higher data rate handsets that offer higher functionality often contain multiple radios, thereby increasing the market for RF products. Multiple-input, multiple-output technology, which is used in several future standards to increase data rates, is also expected to increase the RF content of the phone. At the same time, lower-tier handsets that are optimized for emerging markets are driving new subscriber growth, which is also increasing the market for RF products. We believe that we are well-positioned to take advantage of this growth as we currently supply an extensive line of wireless test equipment to test RF components and we have garnered specific expertise in advanced RF and additional wireless technology and have focused our research and development and product development toward such next-generation technologies.

Growth Markets

CT Scan Market

We are also utilizing our expertise in mixed-signal ASICs in CT scan equipment for the medical industry into new markets and new applications. CT scanning equipment is heavily reliant on high-performance semiconductors and other electronic components. Mixed-signal ASICs are high-quality, high performance products that extract low-level signals in high noise environments. When embedded into CT medical imaging machines, this translates to better image quality and lower doses of radiation per scan. We believe these benefits coupled with the decreasing costs per channel, will help drive growth for the overall CT scan market. The trend toward decreasing costs per channel has translated into strong growth in the number of potential uses of CT technology outside of medical environments, including security screening and non-destructive test equipment. Suppliers of ASICs into CT scan machines are expected to directly benefit from the market expansion of such technology. In addition, advances in CT scan technology, growth in procedure volume and demand for CT imaging equipment from more diverse markets like clinical trials, a growing outpatient market, and increased government healthcare expenditures are expected to result in an expansion of the CT scan.

Synthetic Test Market

We are an early entrant in the area of synthetic testing, which we believe has significant growth potential as a relatively new market for test equipment. The synthetic testing market can be categorized into three areas: (i) satellite test-market representing, (ii) Transmit/Receive module market and (iii) military test market, which is the largest. A synthetic test system replaces the traditional “rack and stack” system that requires a separate testing device for each attribute, with a single device that can take multiple complex measurements simultaneously and can complete a series of tests several times faster than a traditional system. The synthetic test standard has been adopted by many other leading commercial market vendors.

The U.S. Department of Defense and U.S. Navy, which instituted NxTest, are responsible for the emergence and growth of synthetic testing. The NxTest initiative is to minimize the size of the test system, thereby reducing hardware and consequently the cost of the system. Synthetic testing also addresses obsolescence issues and provides additional flexibility for easy upgrades.

Our Competitive Strengths

Leading Proprietary Technology Platforms

Our history of technological innovation and product performance has made us a leading supplier to our customers. Our team of 565 engineers works with customers to develop customized solutions and we currently possess a portfolio of more than 150 patents. We pioneered the development of fabless high reliability, RadHard technology and have a history of designing and manufacturing field-tested solutions that meet our military and commercial customers’ stringent performance requirements. Our design and production platform combines design expertise, proprietary intellectual property and a reliable, efficient fabrication/manufacturing processes, including our “fabless” semiconductor manufacturing model. In addition, AMS is taking a leading role in expanding the market for CT scan applications through our ASIC product offerings. ATS holds key intellectual property and specialized knowledge in RF and wireless technology with a focus on leading edge communication protocols. ATS is also a leader in developing synthetic test equipment and has proven expertise in avionics and private mobile radio test equipment.

Strong, Defensible Market Positions

Our proven product performance and long-standing customer relationships have established us as one of the leading suppliers in the majority of the markets in which we compete. Our microelectronics products are key components in over 100 aerospace and defense platforms, and we believe we were the sole source or primary supplier for many of the products that we supply.

High Barriers to Entry and Customer Switching Costs

We are an experienced and well-respected supplier to the aerospace and defense and broadband communications industries. Additionally, we possess a portfolio of over 150 highly specialized patents and our products are often designed into, or “spec’d”, into a customer’s production design, which creates significant switching costs for our customers. Furthermore, strict product performance requirements, Department of Defense certification and proven experience in the harsh operating environment of space create high barriers to entry to new market entrants. The malfunction of a component can lead to the loss of a valuable satellite or missile, causing the industry’s customers to require proven product performance and reliability before specifying inclusion of a vendor’s components into a satellite or missile program’s design. Our expertise and product performance are demonstrated by our receipt of Class K certification from the DSCC, a distinction we have held for over 15 years.

Growing and Diverse End Markets

We serve a diverse group of customers who compete in several end markets. Each of our broad end markets contains several specialized niche markets, each possessing attractive growth dynamics.

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Aerospace and Defense. We are well positioned to gain from increased defense spending and believe that our product niche helps to insulate us from defense budget cuts. Most of AMS’ sales to the U.S. government are for its RadHard high reliability components that are used in a multitude of devices including satellites, missiles and airplanes. There is a strong pipeline of business for both military avionics and classified satellite programs that we believe will help our business to remain stable and profitable even through a challenging federal budget cycle. Spending on defense electronics is the primary driver of our net sales and has historically been stable and growing irrespective of movements in the defense budget. In addition to positive growth trends in defense electronics, we also benefit from strong growth trends in the satellite industry.

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Broadband Communications. Global demand for mobile communication services and for real-time access to diverse types of data continues to increase, which has led to rapid adoption of a wide variety of advanced wireless and wired electronic systems to which our products are critical (e.g., cellular telephones and broadband access). Next-generation technologies are expected to enable new applications, increase RF complexity and require greater RF semiconductor content. In addition, an increasing number of automotive, industrial, military, homeland security, scientific and medical applications use RF, microwave and millimeterwave technology to perform detection, measurement and imaging functions. The wireless communications industry has grown rapidly as a result of worldwide adoption of mobile phones. Subscribers typically upgrade when replacing phones, as a result of which we believe the complexity of phones will likely continue to increase, requiring even more semiconductor content and testing.

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CT Scan. We are a leader in the production of mixed-signal ASICs for the medical CT scan market. We believe that the current high level of performance (i.e., superior image quality with low doses of radiation) and decreasing cost per channel will help drive new applications for ASICs outside traditional medical imaging applications and into areas such as security screening and non-destructive testing equipment. We expect to benefit directly from the expansion of the overall CT scan market, due to our leading market share for mixed-signal ASICs in the medical CT scan market.

Increasing Electronic Content per Satellite and Trend Towards Outsourcing

We benefit directly from the increasing electronic and systems-level content of military systems, particularly within the satellite end market. As we have utilized our intellectual property to move up the “value chain” from producing semiconductors and components to system-level and board-level products, the content we provide on each satellite has increased. From fiscal 2001 to 2003, our average dollar content per satellite was $1.5 million while from fiscal 2004 to 2006, our average dollar content per satellite was approximately $2.5 million and for fiscal 2007 to 2008, our average dollar content per satellite was approximately $4.2 million.

In addition, in an effort to reduce their own production costs and ensure state-of-the-art performance capabilities, satellite manufacturers are outsourcing an increasing amount of their component and subsystems production to global suppliers of high-reliability, RadHard semiconductors and devices. Previously, satellite manufacturers primarily outsourced lower cost semiconductor components, but they are now moving towards outsourcing a broader range of component production, including board- and system-level products that contain significantly more silicon content and represent a larger percentage of component cost. We expect to continue to benefit from this trend towards outsourcing in the future and will seek to increase our content per satellite.

Strong Historical Financial Performance and Free Cash Flow Generation

From fiscal 2003 to fiscal 2008, we increased net sales by a compounded annual growth rate, or CAGR, of 20%. Our “fabless” semiconductor manufacturing process and assembly operations allow us to maintain low capital expenditures (2% as a percentage of net sales for fiscal 2008) and lower labor costs. Historically, our capital expenditure needs have increased due to our growth via acquisitions and not as a result of maintenance and replacement requirements. Our low capital expenditures have resulted in significant operating cash flow.

Diverse, High Quality Customer Base

We have strong and long-standing relationships with top-tier defense, aerospace and broadband customers, including a significant number of defense-related technology companies. Our close customer relationships have enabled us to engage in collaborative product development over multi-year product life-cycles, build our intellectual property portfolio and develop critical product and end-market expertise, resulting in higher switching costs for our customers. We believe our long track record of design successes with our customers further benefits our ability to: (i) solidify our position as a sole source or primary supplier of products to customers across a wide array of programs; (ii) enjoy long multi-year platform relationships; (iii) maximize the effectiveness of our research and development spending; and (iv) minimize our customers’ product development time. Our customers include the five prime defense contractors (Boeing, General Dynamics, Lockheed Martin, Northrop Grumman and Raytheon), as well as BAE, Cisco, Nokia, Motorola and Teradyne. Our products are used by customers in various aerospace and defense and broadband communications programs, providing us with increased revenue diversification and stability. In fiscal 2008, our largest customer represented approximately 8% of our net sales and our largest product offering represented approximately 7% of our net sales, demonstrating the diversity of our customer base and product offerings. In addition to our diverse product base, we believe that we are well-positioned in domestic and international growth markets and believe that our geographic and product diversification helps to reduce the volatility of one particular region or market segment.

Strong and Experienced Management Team

We are led by an experienced, stable and well-respected management team. Since 1991, we have integrated 23 acquisitions. We have increased net sales from $62.7 million in fiscal 1991 to $643.2 million in fiscal 2008, a CAGR of 15%. Our management team has an average of 27 years in the industry and 13 years with us.

Our Business Strategy

We generate sales and cash flow from the sale of microelectronic and test solution products into the aerospace and defense and broadband communications markets. We believe that the key to our future success is a focus on performance, design and manufacturing innovation and continuing to strengthen our long-term customer relationships. To implement our strategy, we intend to do the following:

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Leverage technology and sole source or primary supplier status with customers. Our proprietary technology and strong relationships with our diverse customer base are key drivers of our continued growth. We have a history of providing value to our customers through differentiated products, which are often critical to their end products, and we possess over 150 patents. We have leveraged our proprietary technology and experience to become in our belief the sole source or primary supplier on many of the products that we supply. Further, our products are often “spec’d” into our customers’ product designs. We seek to work with our customers through every aspect of their design processes as they develop new technology platforms, delivering precisely engineered products to our customers’ specifications.

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Continue to focus on our “fabless” semiconductor manufacturing operations. Our expertise is in the state-of-the-art design and engineering of highly specialized microelectronics. Unlike certain of our competitors who have invested in captive semiconductor fabrication facilities, AMS pioneered the use of third-party foundries to produce space qualified, high reliability RadHard ICs. This “fabless” operating model significantly reduces our required capital investment and labor costs and is a key component of our industry-leading capital efficiency. In addition, it allows us to quickly respond to changes in technology and customer product requirements. For the fiscal year ended June 30, 2008, capital expenditures were only 2% of our net sales.

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Increased focus on new product development. We continue to allocate research and development spending toward new products serving large and/or growing markets. We endeavor to introduce new products to the market that allow us to move up to more profitable systems and products. We have transitioned from providing simple components, such as semiconductors, to more integrated products, including board-level and system-level products. Examples of recent new products include ASICs, satellite power subsystems and microwave/RF modules and receivers. For the fiscal year ended June 30, 2008, we invested 13% of our net sales into self-funded research and development efforts. Examples of new product opportunities that we are pursuing are the CT scanning market and the synthetic testing market.

CT scanning equipment is heavily reliant on high performance semiconductors and other electronic components, including mixed-signal ASICs, to produce high quality imaging with low doses of radiation per scan. We believe that these benefits, coupled with decreasing production costs, will help drive growth of the overall CT scan market outside of the traditional medical environments and into markets such as security screening and non-destructive test equipment.

We are also an early entrant in the area of synthetic testing, which has significant growth potential as a relatively new market for test equipment. The U.S. Department of Defense and U.S. Navy, which instituted the next-generation automatic test system program “NxTest,” are responsible for the emergence and growth of synthetic testing. The NxTest initiative is to minimize the size of the test system, thereby reducing hardware and consequently the cost of the system. Synthetic testing also addresses obsolescence issues and provides additional flexibility for easy upgrades.

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Focus on cost management. We plan to continue to improve our fixed cost position by critically examining the profitability of our operations and consolidating operations across facilities where operational synergies exist. In fiscal 2006, we implemented a plan to restructure our European businesses by consolidating a majority of our European manufacturing operations into our Stevenage, England facility. In fiscal 2008, we continued to restructure our European operations by further rationalizing duplicative research and development and selling, general and administrative activities, which recently resulted in the closure of our Burnham, England facility and relocation of its operations to Stevenage, England. In May 2008, we sold our radar system development and manufacturing business, or the Radar Division, which had been operating at a significant loss in each of the last two fiscal years. We will continue to examine our operations for opportunities to further reduce costs, divest non-strategic businesses, increase cash flow and improve our margins.

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Capitalize on shifting defense budget allocations. We are well-positioned to gain from increases in defense electronic spending. Since the beginning of the Iraq war, the defense industry has increased spending on electronics, intelligence gathering operations, satellites and homeland security. If current defense spending on training and procurement were to be reduced, we believe we would continue to benefit from a significant pipeline of business and re-allocation of spending to defense electronics for both military avionics and classified satellite programs that produce stable sales and cash flow. Furthermore, we believe the digitization and networking of the U.S. military and the upgrading of old platforms will continue to drive defense electronics spending growth, even in the face of declining overall defense industry spending.

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Strategic acquisitions. We will continue to seek accretive acquisitions that provide complementary products and services, enhance our intellectual property and customer base, and provide entry into high-growth adjacent markets. We view our acquisition strategy as an extension of our research and development and marketing efforts. Recent strategic acquisitions in both the AMS and ATS segments have broadened and strengthened our product offering and technology portfolio. Since 2002, we have acquired nine businesses and plan to opportunistically continue our disciplined approach to seeking accretive acquisitions.

Products Offered

Aeroflex Microelectronic Solutions

AMS products provide end users in the aerospace and defense, broadband communications and medical equipment, markets with high-precision, high-reliability semiconductors for mission-critical applications. AMS’ broad product portfolio has a longstanding, field-tested history of reliable performance, and is often designed into customers’ product designs.

AMS products, especially RadHard semiconductors, are essential components in government and commercial satellites. These satellites require high-performance and high-reliability components to function properly while simultaneously enduring harsh conditions. In order to meet the requirements demanded by our customers, AMS’ Plainview, NY and Colorado Springs, CO facilities are space certified, and they have been manufacturing Class K products for defense and aerospace programs for over 15 years. AMS products include RF components, high-reliability datacom (standard and application), specific MCMs, RadHard fabless semiconductors automotive, non-RadHard fabless semiconductors, integrated microwave assemblies, high-performance mixed signal ASICs, Class K/power management and high-reliability aerospace motion control.

Satellite manufacturing companies are increasingly outsourcing their component and subsystems production to global suppliers of high-reliability, RadHard semiconductors and devices, such as us. Previously, these satellite companies primarily outsourced lower cost semiconductor components and MCMs, but have begun to outsource a broader range of component production, including board and system level products which contain significantly more silicon content and represent a larger percentage of overall system cost. As we have utilized our intellectual property to move up from producing semiconductors and components to higher-value system-level and board-level products, the content we provide on each satellite has increased. From fiscal 2001 to 2003, our average dollar content per satellite was $1.5 million while from fiscal 2004 to 2006, our average dollar content per satellite was approximately $2.5 million and for fiscal 2007 to 2008, our average dollar content per satellite was approximately $4.2 million We believe that we will continue to benefit from the trend toward outsourcing and the movement from component-level outsourcing toward production of MCMs and board and system level products, which represent a significantly larger proportion of satellite component bill of materials.

AMS products are sold into the aerospace, defense and satellite markets to top-tier industry original equipment manufacturers, or OEMs, and their sub-tier suppliers. AMS products are used in remote sensing, communications and motion control for GEO, Medium Earth Orbiting and Low Earth Orbiting satellites. Radio Frequency Microwave (RFMW) products are also used in military radar, airborne and ground based communication systems, Electronic Warfare programs, Identification Friend or Foe programs and Guidance/Command/Control/Communications programs across multiple platforms.

AMS products also serve two of the three major global providers of CT scanning equipment. AMS’ mixed-signal ASICs are high-quality, high-performance products that extract low-level signals in high-noise environments. When embedded into CT medical imaging machines, this translates to better image quality and lower doses of radiation per scan. We believe these benefits, coupled with the decreasing costs per channel, will help drive growth for the overall CT scan market. The trend toward decreasing costs per channel has translated into strong growth in the number of potential uses of CT technology outside of medical environments, including security screening and non-destructive test equipment. As a key supplier of mixed signal ASICs into CT medical machines, we believe that we are well-positioned to benefit from an increase in the market for this technology.

Aeroflex Test Solutions

ATS’ products include avionics, communications and general purpose test equipment, instruments and systems which enable our customers to design, build, deploy and manage their products and technologies. ATS’ avionic test solutions are used in the design, manufacture, test and maintenance of commercial, civil and military avionics systems. As a leader in avionic testing solutions, ATS equipment provides the stimulus and signals necessary for certification, verification, fault finding and diagnostics of avionics systems on the ground. We also provide customized avionics test solutions to support manual and automatic test equipment for manufacturing, repair and ground support operations.

Our military communications testing systems are primarily used by the U.S. military to test complex voice and data frequency hopping radios and accessories. Our ruggedized packaging makes the system suitable for depot and field maintenance shops.

ATS has over 50 years experience in providing radio test set solutions. We are the leading provider of Terrestrial Trunked Radio (TETRA) and Project 25 (P25) radio test equipment used by major manufacturers, installers, operators and repairers worldwide. TETRA is the global standard for Private Mobile Radio (PMR), used particularly by emergency services, public transport and utilities. P25 is a standard for digital radio communications for use by federal, state/province and local public safety agencies in North America to enable them to communicate with other agencies and mutual aid response teams in emergencies.

We also offer a wide selection of cellular test sets addressing both mobile and base station test applications across an array of wireless standards. Research and development applications include protocol stack development, system integration and interoperability testing.

We also create testing solutions for 3G infrastructure developers and 3G network operators to assist them in debugging new network features, interoperability analysis, regression testing, network stress testing, acceptance testing, quality of service analysis and network performance optimization.

Research and Development

As of September 30, 2008, we had 565 engineers conducting research and development activities at 16 of our facilities.

Our research and development efforts primarily involve engineering and design relating to:

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developing new products;

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improving existing products;

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adapting existing products to new applications; and

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developing prototype components to bid on specific programs.

We emphasize research and development efforts for products in both the AMS and ATS divisions. In AMS, we have geared our research and development capabilities toward continually introducing new, high value products, including the planned introduction of power subsystems and microwave/RF Modules and microreceivers between 2007 and 2009, enabling us to increase the number of our products embedded into modern satellites. In ATS, we are developing technologies that are used in the next generation of wireless infrastructure. Our research and development consists of self-funded research and development as well as research and development we conduct in collaboration with or on behalf of our customers.

Certain product development and similar costs are recoverable under contractual arrangements and those that are not recoverable are expensed in the year incurred. We invested $82.1 million in self-funded research and development for fiscal 2008, $76.7 million for fiscal 2007 and $72.1 million for fiscal 2006.

Our Customers

AMS addresses value-added specialty markets requiring application-specific, custom engineered, high-performance microelectronic solutions. The division has strong relationships with the five prime defense contractors (Boeing, General Dynamics, Lockheed Martin, Northrop Grumman and Raytheon) as well as with several major defense-related technology companies, including Honeywell. AMS customers also include OEMs such as BAE, Cisco and Phillips. The 10 largest AMS customers represented approximately 45% of total AMS fiscal 2008 sales, with no single customer representing more than 8% of total AMS fiscal 2008 sales.

ATS addresses value-added specialty markets requiring application specific, custom engineered, high-performance testing solutions. The division has strong relationships with several major defense-related technology companies, including Lockheed Martin, Northrop Grumman and Teradyne. ATS customers also include OEMs such as AT&T, Nokia, Motorola and Sprint. The top 10 ATS customers represent approximately 41% of total ATS fiscal 2008 sales with no single customer representing more than 11% of total ATS fiscal 2008 sales.

Certain of our customers, BAE and Honeywell, are also our competitors due to their in-house capabilities. On a consolidated basis, our largest customer represented approximately 8% of our fiscal 2008 net sales.

Government Sales

Approximately 28% of sales for fiscal 2008 were to agencies of the U.S. government or to prime defense contractors or subcontractors of the U.S. government. These government contracts have been awarded either on a bid basis or after negotiation. These contracts generally provide for fixed prices and have customary provisions for termination at the convenience of the government without cause.

Marketing

We employ a team-based sales approach to assist our personnel to closely manage relationships at multiple levels of the customer’s organization, including management, engineering and purchasing personnel. This integrated sales approach involves a team consisting of a senior executive, a business development specialist and members of our engineering department. Our use of experienced engineering personnel as part of the sales effort enables close technical collaboration with our customers during the design and qualification phase of new technologies and equipment. We believe that this is critical to the integration of the product into the customer’s equipment. Manufacturers’ representatives and independent sales representatives are also used as needed. As of September 30, 2008, we had 210 sales people employed domestically and internationally.

Backlog

We include in backlog firm purchase orders or contracts providing for the delivery of products and services. Our business has experienced strong growth in our backlog. As of September 30, 2008, our order backlog was approximately $271 million, of which approximately 78% was scheduled to be delivered on or before June 30, 2009. Approximately 57% of our backlog as of September 30, 2008 represented commercial contracts and approximately 43% of this backlog represented firm contracts with agencies of the U.S. government or prime defense contractors or subcontractors of the U.S. government. Generally, government contracts are cancelable with payment to us of amounts which we have spent under the contract together with a reasonable profit, if any, while commercial contracts are not cancelable.

As of June 30, 2008, our order backlog was approximately $251 million. Approximately 59% of this backlog represented commercial contracts and approximately 41% of this backlog represented firm contracts with agencies of the U.S. government or prime defense contractor or subcontractors of the U.S. government.

Competition

For all of our products, we compete primarily on the basis of both performance and price.

AMS primarily competes with large defense-related technology providers, including BAE and Honeywell. In addition, AMS competes with a small number of specialty semiconductor providers, including Actel, Hittite Microwave Corporation and ILC/Data Devices Corporation. We believe we are one of the largest focused providers of specialty microelectronics to our targeted markets and that we are the leading global fabless platform of scale in RadHard semiconductors. In addition, we believe our specialized expertise in RadHard technology, RF and microwave design and development and fabrication expertise provides us with a differentiated technology and pricing position versus our most direct competitors. We characteristically maintain close and longstanding relationships with our customers and maintain sole-source/primary supplier positions with many of our customers. We believe there are high barriers to entry to the markets in which we compete due to the need for specialized design and development expertise and patents and the significant costs for customers to switch vendors. We design and develop applications often through a collaborative process whereby we provide “spec’d” products to our customers.

ATS primarily competes with Agilent and a small number of specialty test and measurement providers, including Anite, Anritsu, Rohde & Schwarz and Spirent. We believe our specialized expertise in high performance RF and wireless testing equipment and our focus on delivery of advanced testing platforms and optimized manufacturing capability provide us with a differentiated position versus our most direct competitors maintain many sole source/primary supplier positions with customers such as Teradyne, Lockheed Martin, and Raytheon.

We also experience significant competition from the in-house capabilities of our current and potential customers, such as BAE and Honeywell.

Patents and Trademarks

In order to protect our intellectual property rights, we rely on a combination of patent, trade secret, copyright and trademark laws and employee and third-party nondisclosure agreements. We consider the protection of our patents, proprietary technology and trademarks to be an important element of our business. We also limit access to and distribution of our proprietary information. While we believe that in the aggregate our patents and trademarks are important to our operations, we do not believe that one or any group of them is so important that its termination would materially affect us.

Manufacturing

We operate under a “fabless” semiconductor manufacturing model, outsourcing substantially all semiconductor fabrication activities to commercial foundries, which significantly reduces our capital expenditures and labor costs and enhances our ability to respond quickly with scalability to changes in technology and customer demands. We purchase our semiconductors from a variety of foundries, which utilize our proprietary design specifications and packaging techniques to manufacture our RadHard products. We test our RadHard products in our in-house radiation simulation testing chamber.

We manufacture products for aerospace and defense programs in compliance with stringent military specifications. Most of our manufacturing plants are ISO-9001 certified, and our Plainview, NY, Hauppauge, NY and Colorado Springs, CO facilities are also certified to the more stringent AS9100 standard.

AMS has nine primary manufacturing facilities throughout the United States and China. AMS’ largest facility, Colorado Springs, CO, designs and develops our RadHard solutions in addition to a broad range of products for avionics and space applications. AMS manufactures advanced MCMs for airborne, space, shipboard, ground based and commercial avionics and telecommunications systems in its Plainview, NY facility. The remaining facilities focus on RFMW and aerospace motion control solutions.

ATS has eight primary manufacturing facilities throughout the United States, Great Britain and France. Its largest facility, Wichita, KS, designs and develops a wide range of test instrumentation for military radio and avionics. ATS’ Stevenage, England facility provides test solutions with expertise in signal generators, signal analyzers, microwaves and automatic test equipment. ATS’ Cambridge, England facilities focus exclusively on wireless system test technologies. The remaining facilities focus on synthetic testing solutions and other broadband communications testing equipment.

Many of the component parts we use in our products are purchased, including semiconductors, transformers, and amplifiers. Although we have several sole source arrangements, all the materials and components we use, including those purchased from a sole source, are readily available and are or can be purchased in the open market. We have no long-term purchase commitments and no supplier provided more than 10% of our raw materials during fiscal 2008.

Our Employees

As of September 30, 2008, we had approximately 2,625 employees, of whom 1,450 were employed in a manufacturing capacity, and 1,175 were employed in engineering, sales, administrative or clerical positions. Approximately 100 of our employees are covered by a collective bargaining agreement. The collective bargaining agreement expires September 30, 2010. We believe that our employee relations are satisfactory.

Regulation

Our operations are subject to various federal, state, local, and foreign environmental laws, ordinances and regulations that limit discharges into the environment, establish standards for the handling, generation, use, emission, release, discharge, treatment, storage and disposal of, or exposure to, hazardous materials, substances and waste, and require cleanup of contaminated soil and groundwater. These laws, ordinances and regulations are complex, change frequently and have tended to become more stringent over time. Many of them provide for substantial fines and penalties, orders (including orders to cease operations) and criminal sanctions for violations. They may also impose liability for property damage and personal injury stemming from the presence of, or exposure to, hazardous substances.

We believe that we are in material compliance with all environmental laws, do not anticipate any material expenditure to meet current or pending environmental requirements, and generally believe that our processes and products do not present any unusual environmental concerns. We are unaware of any existing, pending, or threatened contingent liability that may have a material adverse effect on our ongoing business operations.

Our operations are also governed by laws and regulations relating to workplace safety and worker health and regulations. We believe we are in material compliance with these laws and regulations and do not believe that future compliance with such laws and regulations will have a material adverse effect on our results of operations or financial condition. We also believe that we are in material compliance with all applicable labor regulations.

Government Contracting Regulations

Because we have contracts with the federal government and its agencies, we are subject to audit from time to time for our compliance with government regulations by various agencies, including the Defense Contract Audit Agency (“DCAA”). The DCAA reviews the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. The DCAA has the right to perform audits on our incurred costs on all contracts on a yearly basis. An adverse finding under a DCAA audit could result in the disallowance of our costs under a government contract, termination of a government contract, forfeiture of profits, suspension of payments, fines and suspension and prohibition from doing business with the U.S. government. In the event that an audit by the DCAA results in disallowance of our costs under a contract, we have the right to appeal the findings of the audit under applicable dispute resolution provisions. Approval of submitted yearly contract incurred costs can take from one to three years from the date of submission of the contract costs.

Other governmental agencies, including the Defense Securities Service and the Defense Logistics Agency, may also, from time to time, conduct inquiries or investigations regarding a broad range of our activities.

Our principal products or services do not require any governmental approval, except for the requirement that we obtain export licenses for certain of our products.

Properties and Facilities

Our headquarters are located in Plainview, Long Island, New York, where we have approximately 90,000 square feet of space, including manufacturing space, that is utilized by both AMS and ATS. We believe that our facilities are adequate for our current and presently foreseeable needs and that we will be able to renew or replace our expiring leases on our rental properties on commercially reasonable terms. The following table sets forth information concerning the significant properties owned or leased by us.

Location	Owned/Leased	Approximate Square Footage		Expiration of Lease
Ann Arbor, Michigan	Owned		32,000	N/A
Cambridge, England	Leased		14,000	2011
Colorado Springs, Colorado	Owned		102,000	N/A
Cupertino, California	Leased		16,000	2009
Elancourt, France	Leased		14,000	2009
Frederick, Maryland	Leased		32,000	2011
Gothenburg, Sweden	Leased		5,000	2011
Hauppauge, Long Island, New York	Leased		47,000	2010
Londonderry, New Hampshire	Leased		37,000	2012
Nanjing, China	Leased		10,000	2009
New Century, Kansas	Owned		20,000	N/A
New Century, Kansas	Leased		38,000	2009
Plainview, Long Island, New York	Owned		69,000	N/A
Plainview, Long Island, New York	Leased		21,000	2013
Powell, Ohio	Leased		20,000	2011
Stevenage, England	Owned		142,000	N/A
Sunnyvale, California	Leased		20,000	2012
Whippany, New Jersey	Owned		57,000	N/A
Wichita, Kansas	Owned		156,000	N/A

Legal Proceedings

We are involved in various claims and legal actions that arise in the ordinary course of business. We do not believe that the ultimate resolution of any of these actions will have a material adverse effect on our financial position, results of operations, liquidity or capital resources.

During the quarter ended March 31, 2007, we became aware that certain RadHard bidirectional multipurpose transceivers sold by us since 1999 may have been subject to the licensing jurisdiction of the U.S. Department of State in accordance with the International Traffic in Arms Regulations (“ITAR”). Accordingly, we filed a Voluntary Disclosure with the Directorate of Defense Trade Controls, U.S. Department of State, describing the details of the possible inadvertent misclassification. Simultaneously, we filed a Commodity Jurisdiction request providing detailed information and data supporting our contention that the product is not subject to ITAR and requesting a determination that such product is not ITAR controlled. By letter dated November 15, 2007, we were informed that the U.S. Department of State had determined in response to our Commodity Jurisdiction request, that the product is subject to the licensing jurisdiction of the U.S. Department of State in accordance with ITAR. We requested reconsideration of this determination. On February 7, 2008, we filed an addendum to the above referenced Voluntary Disclosure advising the Directorate of Defense Trade Controls that other products sold by us similar in nature to the transceiver described above may also be subject to ITAR. The Directorate of Defense Trade Controls agreed to extend our time to file such addendum to the Voluntary Disclosure until a decision was rendered with respect to our request for reconsideration of the determination in connection with the above-referenced Commodity Jurisdiction request. On August 5, 2008, we received a letter from the Office of Defense Trade Controls Compliance (“DTCC”) requesting that we provide documentation and/or information relating to our compliance initiatives after November 15, 2007 as well as the results of any product reviews conducted by us, and indicating that a civil penalty against us could be warranted in connection with this matter following the review of such materials. We have provided all of the materials and documentation requested by the DTCC. Our request for reconsideration was denied by the Directorate of Defense Trade Controls on August 19, 2008 which determined that the product is subject to the licensing jurisdiction of the Department of State in accordance with ITAR. Accordingly, on September 18, 2008, we filed an addendum to our Voluntary Disclosure identifying other products that may have been subject to the licensing jurisdiction of the U.S. Department of State in accordance with ITAR but were inadvertently misclassified. At this time it is not possible to determine whether any fines or other penalties will be asserted against us, or the materiality of any outcome.

During May 2008, we became further aware that a certain product sold by our KDI subsidiary may have inadvertently been misclassified as not ITAR controlled. On August 5, 2008, we filed a Voluntary Disclosure with the Directorate of Defense Trade Controls, U.S. Department of State, describing the inadvertent misclassification of this product. At this time, it is not possible to determine whether any fines or other penalties will be asserted against us with respect to the foregoing matters, or the materiality of any outcome.

MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information regarding our board of directors, the board of directors of the parent and the board of managers of the parent LLC. In addition, the table sets forth information regarding our senior management.

Name	Age	Position
Leonard Borow	61	President and Chief Executive Officer; Member of our board of directors, the board of directors of the parent and the board of managers of the parent LLC
John Buyko	48	Executive Vice President and President of Aeroflex Microelectronic Solutions; Member of our board of directors
John Adamovich, Jr.	55	Senior Vice President, Chief Financial Officer, and Secretary
Charles Badlato	50	Vice-President — Treasurer
Carl Caruso	65	Vice-President — Manufacturing
Robert B. McKeon	54	Chairman of our board of directors, the board of directors of the parent and the board of managers of the parent LLC
Hugh Evans	40	Member of our board of directors, the board of directors of the parent and the board of managers of the parent LLC
Ramzi M. Musallam	40	Member of our board of directors, the board of directors of the parent and the board of managers of the parent LLC
Prescott H. Ashe	41	Member of the board of directors of the parent and the board of managers of the parent LLC
Joe Benavides	37	Member of the board of directors of the parent and the board of managers of the parent LLC
Bradley J. Gross	36	Member of the board of directors of the parent and the board of managers of the parent LLC
John D. Knoll	37	Member of the board of directors of the parent and the board of managers of the parent LLC

Leonard Borow is our President and Chief Executive Officer. He has been our employee in various executive positions since November 1989: Chief Executive Officer since August 2007, President since August 2005, Chief Operating Officer since October 1991 and a director since November 1992. Mr. Borow has served as a member of the board of directors of the parent and the board of managers of the parent LLC since August 2007. From February 2004 until August 2005, Mr. Borow was one of our Vice Chairmen and from October 1991 until February 2004, Mr. Borow was our Executive Vice President. Prior to joining us, Mr. Borow was President of Comstron Corporation, a manufacturer of fast switching frequency synthesizers and components, which we acquired in November 1989.

John Buyko has been employed by us in various executive positions since January 1991 and has been our Executive Vice President since December 2006, Vice President since August 2005 and President of our AMS division since September 2001. Mr. Buyko has also served as a member of our board of directors since August 2007. From December 1998 until June 2001, Mr. Buyko was Senior Vice President-Marketing and Sales of AMS.

John Adamovich, Jr. has been employed by us as Senior Vice President and Chief Financial Officer since November 2005 and Secretary since August 2007. From November 2004 until May 2005, Mr. Adamovich was employed by Rainbow Media Enterprises, a subsidiary of Cablevision Systems Corporation, as its Executive Vice President and CFO. From January 1998 until November 2004, Mr. Adamovich was employed by Pall Corporation as its Group Vice President, Treasurer and CFO. From July 1975 until December 1997, Mr. Adamovich was employed by KPMG LLP, becoming a partner in 1986. Mr. Adamovich is licensed as a certified public accountant in the State of New York.

Charles Badlato has been employed by us in various financial positions since December 1987 and has been our Vice President since February 2004 and Treasurer since February 1994. From May 1981 until December 1987, Mr. Badlato was employed by various certified public accounting firms, most recently as an audit manager with Touche Ross & Co. Mr. Badlato is licensed as a certified public accountant in the State of New York.

Carl Caruso has been employed by us as Vice President of Aeroflex Plainview, Inc. since November 1989 and has been our Vice President—Manufacturing since February 1997. Prior to joining us, Mr. Caruso was Vice President of Comstron Corporation, which we acquired in November 1989.

Robert B. McKeon has served as the Chairman of our board of directors, the board of directors of the parent, and the board of managers of the parent LLC since August 2007. Mr. McKeon is the Founder and Chairman of Veritas Capital, a New York-based private equity investment firm he formed in 1992. Prior to forming Veritas in 1992, Mr. McKeon served as the Chairman of Wasserstein Perella Management Partners where he was a founding partner of Wasserstein Perella & Co. in 1988, and was instrumental in raising and managing the group’s $1.1 billion private equity fund. Mr. McKeon currently serves as Chairman of the Board of DynCorp International, Vangent Inc., and McNeil Technologies. Mr. McKeon is a member of the Council on Foreign Relations, The Bretton Woods Committee, and the Center for Strategic & International Studies. Mr. McKeon is also on the Board of Trustees of Fordham University. Mr. McKeon holds a B.S. from Fordham University and an M.B.A. from Harvard Business School.

Hugh Evans has served as a member of our board of directors, the board of directors of the parent and the board of managers of the parent LLC since August 2007. Mr. Evans is a Partner at Veritas Capital. Prior to joining Veritas in 2005, Mr. Evans was a Partner at Falconhead Capital, a middle market private equity firm. While at Falconhead, Mr. Evans was a member of the firm’s investment committee. Prior to Falconhead, Mr. Evans was a Principal at Stonington Partners. Mr. Evans began his private equity career in 1992 at Merrill Lynch Capital Partners, the predecessor firm of Stonington, which was a wholly owned subsidiary of Merrill Lynch. Mr. Evans received an A.B. from Harvard University and an M.B.A. from the University of Chicago Graduate School of Business.

Ramzi M. Musallam has served as a member of our board of directors, the board of directors of the parent and the board of managers of the parent LLC since August 2007. Mr. Musallam is a partner at Veritas Capital, which he has been associated with since 1997. He is a member of the boards of directors of DynCorp International Inc., Vangent, Inc. and several private companies. Mr. Musallam holds a Bachelor’s degree from Colgate University with a major in Economics and Mathematics and an M.B.A. from the University of Chicago Booth School of Business.

Prescott H. Ashe has served as a member of the board of directors of the parent and the board of managers of the parent LLC since August 2007. Since 2000, he has been a Managing Director of Golden Gate Capital. Prior to joining Golden Gate, Mr. Ashe was an investment professional at Bain Capital, which he initially joined in 1991. Prior to Bain Capital, Mr. Ashe was a consultant at Bain & Company. Mr. Ashe received his J.D. from Stanford Law School and his Bachelor of Science in Business Administration from the University of California at Berkeley. He is currently a director of several other private companies in which Golden Gate is an investor.

Joe Benavides has served as a member of the board of directors of the parent and the board of managers of the parent LLC since August 2007. Mr. Benavides is a Principal at Veritas Capital. Prior to joining Veritas Capital, Mr. Benavides was a Managing Director at The Blackstone Group. Prior to Blackstone, Mr. Benavides was most recently a Vice President in the Financial Sponsors Group at Credit Suisse First Boston. Mr. Benavides received a B.S. in Economics with a concentration in Finance from the Georgia Institute of Technology and an M.B.A. in Finance from The Wharton School of the University of Pennsylvania.

Bradley J. Gross has served as a member of the board of directors of the parent and the board of managers of the parent LLC since August 2007. Mr. Gross is a Managing Director in the Principal Investment Area of Goldman, Sachs & Co., where he has led and executed investments in a wide range of industries, including aerospace, consumer products, retail, healthcare, and financial institutions, a position he has held since 2007. Mr. Gross also has experience investing both within and outside the U.S., including positions in both the Hong Kong and Tokyo offices of Goldman, Sachs & Co. He first joined Goldman, Sachs & Co. in 1995. Mr. Gross received a B.A. from Duke University and an M.B.A. from the Stanford University Graduate School of Business. He currently serves on the board of directors of MoneyGram International, Inc., Griffon Corporation, Capmark Financial Group, and several other private companies in which Goldman, Sachs & Co. is an investor.

John D. Knoll has served as a member of the board of directors of the parent and the board of managers of the parent LLC since August 2007. Since 2000, Mr. Knoll has been an employee of Golden Gate Capital, where he serves as a Principal. Prior to Golden Gate, Mr. Knoll worked at Covad Communications as a product manager. Prior to joining Covad, Mr. Knoll was a Consultant with Bain & Company, and worked in its private equity group. Mr. Knoll holds an M.B.A. from Stanford University Graduate School of Business and a M.S. and B.S. in Industrial Engineering from Stanford University. He is currently a director of several other private companies in which Golden Gate is an investor.

Board Composition

The board of directors of the parent and the board of managers of the parent LLC is composed of eight directors. Pursuant to a limited liability company agreement among the Sponsors, certain members of our management and the parent LLC, (i) Veritas Capital has the right to elect four members of the board of directors of the parent and the board of managers of the parent LLC, (ii) Golden Gate has the right to elect two members of the board of directors of the parent and the board of managers of the parent LLC, (iii) GS Direct, an affiliate of Goldman, Sachs & Co., has the right to elect one member of the board of directors of the parent and the board of managers of the parent LLC and (iv) our chief executive officer serves as a member of the board of directors of the parent and the board of managers of the parent LLC during the term of his employment. The rights of Veritas Capital, Golden Gate and GS Direct to elect members of the board of directors of the parent and the board of managers of the parent LLC are subject to such entities holding certain specified percentages of the equity interests of the parent LLC.

We provide director and officers liability insurance for our officers and directors, directors of the parent and managers of the parent LLC.

Compensation Committee Interlocks and Insider Participation

None of our executive officers has a relationship that would constitute an interlocking relationship with executive officers or directors of another entity or insider participation in compensation decisions.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

On August 15, 2007, the date of the Acquisition, we ceased being a public company subject to SEC and NASDAQ rules. Prior to that date, we had a Compensation Committee of our Board of Directors composed solely of independent directors that was responsible for the decisions regarding executive compensation.

Subsequent to the Acquisition, the new Board of Directors, or the “Board,” became responsible for the oversight of our executive compensation programs and policies. The Board is composed of three non-employee directors and two executive officers. The executive officers on the Board are excluded from the decision making process with respect to themselves. Responsibilities of the Board with respect to executive compensation include the suggestion, review and approval of the following items:

Executive compensation strategy and philosophy;

Compensation arrangements for executive management, including salary and bonus;

Design and implementation of our equity incentive program;

Executive benefits and perquisites; and

Any other executive compensation or benefit related items.

General Policies

Our compensation programs are intended to enable us to attract, motivate, reward and retain the management talent required to achieve our corporate objectives, and thereby increase shareholder value. The Board considers that executive compensation should not only be competitive in amount, but also be closely aligned with the long-term interests of the stakeholders which the Board represents while encouraging long-term executive retention. It is our policy to provide incentives to our senior management to achieve both short-term and long-term objectives and to reward exceptional performance and contributions to the development of our business. To attain these objectives, our executive compensation program includes a competitive base salary, an incentive cash bonus and equity-based compensation.

From time to time, the Board may utilize the services of independent consultants to perform analyses and to make recommendations to the Board relative to executive compensation matters. During 2008, the Board was not advised by a compensation consultant regarding compensation matters. No compensation consultant is paid on a retainer basis. The recommendations of the Chief Executive Officer are also solicited by the Board with respect to compensation for named executives other than the Chief Executive Officer. “Named executives” refers to those executive officers named on the Summary Compensation Table that immediately follows this discussion, other than Harvey R. Blau, whose employment with us ceased upon the consummation of the Acquisition.

Base Salary

Each of the named executives is a party to an employment agreement with the Company. Salary is based on an executive’s level of responsibility and experience, individual performance and vulnerability to recruitment by other companies. In 2008, the Board adjusted the base salaries of each executive based on changes in the marketplace, the general cost of living and each executive’s individual performance. The average base salary increase in 2008 for our named executive officers was 5%.

Incentive Bonus Plan

The purpose of the incentive bonus plan is to reward participating executives for achieving the annual goals of the Company which in turn allow it to achieve its long-term goal of enhancing shareholder value. The Board uses Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization, or EBITDA, to measure the performance of the Company. EBITDA is adjusted for certain items that the Board believes are outside of the control of the executives and therefore should not be used as a measurement of achievement. These items include stock-based compensation, certain expenses related to the Acquisition, advisory fees paid to the Sponsors, certain adjustments arising solely as a result of the Acquisition and the impact of fair value adjustments of our assets and liabilities and restructuring costs. Our Chief Executive Officer and Executive Vice President each receive, pursuant to their employment agreements, an annual bonus of between 50% and 150% of his base salary based upon our achievement of certain Adjusted EBITDA targets established by our Board. At the beginning of each fiscal year, the Board establishes a target Adjusted EBITDA based on management projections. Each of the aforementioned executives receives a bonus of 100% of base salary if the target is achieved, 50% of base salary for a minimum acceptable Adjusted EBITDA level and 150% of base salary for achievement of a maximum target Adjusted EBITDA. The Board believes these targets are aggressive but achievable, requiring strong performance and execution. Other named executive officers receive discretionary annual bonuses that are based on this same Adjusted EBITDA target. These bonuses are suggested by the Chief Executive Officer and approved by the Board based not only on the achievement of targets, but also the respective individual’s performance.

Parent LLC Class A Member Interests

In connection with the Merger, certain members of management were invited to invest in parent LLC, which owns all of the common stock of our parent. This permits the executives to share in the increase in the value of the Company and is intended to focus their efforts on our long-term results. The primary equity interest in parent LLC are the Class A member interests, of which a substantial controlling interest is owned by the Sponsors. The Class A member interests include a special distribution of up to 50% of management’s investment pursuant to the limited liability company operating agreement, providing a special incentive to management not available to the Sponsors. As a group, management owns 2.50% of the Class A membership interests.

Parent LLC Class B Member Interests

Certain members of our management have been granted Class B member interests in the parent LLC. Pursuant to the terms of the limited liability company operating agreement governing the parent LLC, the holders of Class B member interests are entitled to receive a percentage of all distributions, if any, made by the parent LLC after (x) the holders of the Class A members in the parent LLC, including the Sponsors, have received a return of their invested capital plus a 12% per annum internal rate of return (compounded annually) on their invested capital and (y) certain members of our management that received Class A interests for their capital contributions to the parent LLC have received a special distribution in the aggregate amount of approximately $3.2 million, together with a 12% per annum internal rate of return (compounded annually). The Class B member interests are intended to provide incentive to management to keep focused on the long-term value of the Company. The member interests were allocated based on the executive’s relative position and responsibilities. These Class B member interests are non-transferable and vest ratably over five years, which provides a retention incentive. If and when fully vested, the Class B shares will represent 8.73% ownership in the parent LLC.

Aeroflex Incorporated Employees’ 401(k) Plan

Generally, all employees based in the United States, including the named executive officers, are eligible to participate in the Aeroflex 401(k) plan after they have completed six months of service. Employees contribute a portion of their salary to the 401(k) plan and the Company matches 50% of the first eight percent of eligible salary an employee contributes to the plan.

Executive Benefits and Perquisites

In order to offer a competitive package to attract and retain strong executives, we provide various benefits and perquisites to certain members of management. These include a deferred compensation plan, leased autos, car expenses or car allowances, ten hours personal use of company jet timeshare (with reimbursement by the employee of the minimum amount of income imputed for such use as determined under applicable Federal and State rules and regulations), an executive medical reimbursement plan and split dollar life insurance agreements. Each executive receives a different package of benefits.

Post-termination Benefits

Certain of the named executives have terms in their employment contracts which provide for payments upon termination. The Chief Executive Officer also receives a consulting agreement for three years following his termination at two-thirds of his salary plus bonus and certain benefits. See “2008 Potential Payments Upon Termination or Change in Control.”

Tax and Accounting Implications

As part of its responsibilities with respect to executive compensation, the Board considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which, in some circumstances, limits the Company’s tax deduction for compensation to certain individuals to $1,000,000 per year. Since the Company was privately held as of December 31, 2008, it was not subject to Section 162(m). In past years, when the Company’s stock was publicly traded and Section 162(m) was applicable, the relevant executives were subject to employment contract terms which required them to defer any compensation in excess of the $1,000,000 to a Deferred Compensation Plan. Such deferral would be payable to the employee upon termination of employment and under certain other circumstances. Once we are subject to Section 162(m) again, we will once again address these limits.

Summary Compensation Table

The following table sets forth information with respect to our Chief Executive Officer, Chief Financial Officer, each of the three other most highly compensated executive officers and the former Chief Executive Officer for fiscal 2008 in each case excluding any pre-Acquisition equity based compensation.

SUMMARY COMPENSATION TABLE

Name and Principal Position	Year		Salary (1)		Bonus ($)		Stock Awards ($) (2)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($) (3)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (4)		All Other Compensation ($) (5)		Total ($)
(a)	(b)		(c)		(d)		(e)		(f)		(g)		(h)		(i)		(j)

Leonard Borow President and Chief Executive Officer		2008 2007	$	522,452 446,406	$	- -	$	3,360,688 -	$	- -	$	658,193 2,057,097	$	45,000 636,723	$	21,734,585 33,464	$	26,320,918 3,173,690
John Buyko Executive Vice President and President of Aeroflex Microelectronic Solutions		2008 2007	$	422,467 340,158	$	- 600,250	$	2,800,573 -		- -	$	532,823 -	$	- -	$	119,050 7,500	$	3,874,913 947,908
John Adamovich, Jr. Senior Vice President, Chief Financial Officer and Secretary		2008 2007	$	437,114 423,534	$	360,000 400,000	$	448,092 -		- -		- -	$	1,183 -	$	68,064 8,800	$	1,314,453 832,334
Charles Badlato Vice-President — Treasurer		2008 2007	$	250,546 251,280	$	180,000 200,250	$	168,034 -		- -		- -	$	4,257 34,053	$	3,167,480 16,580	$	3,770,317 502,163
Carl Caruso Vice-President — Manufacturing		2008 2007	$	285,334 307,549	$	215,000 240,250	$	168,034 -		- -		- -	$	- -	$	666,035 19,486	$	1,334,403 567,285
Harvey R. Blau Former Chairman and Chief Executive Officer		2008 2007	$	89,527 350,792	$	- -	$	- -	$	- -	$	- 2,057,097	$	39,215 532,630	$	6,723,947 30,421	$	6,852,689 2,970,940

(1)	“Salary” includes contributions to our 401(k) Plan by each of the executive officers listed below for fiscal 2008 and 2007, as follows:

Name	2008		2007
Leonard Borow	$	20,500	$	20,500
John Buyko		15,500		15,500
John Adamovich, Jr.		29,115		23,587
Charles Badlato		15,707		15,435
Carl Caruso		19,977		21,409
Harvey R. Blau		-		-

(2)	“Stock Awards” includes the value of parent LLC Class B Member Interests awarded to the named executives. The amounts disclosed are based on the grant date fair value of the entire award as calculated in accordance with SFAS No. 123(R). The Class B member interests vest ratably over five years.

(3)

“Non-Equity Incentive Plan Compensation” includes incentive bonuses payable to the certain executives based on operating results pursuant to their respective employment agreements. The compensation identified in this column for fiscal 2008 was based on the achievement of a targeted level of Adjusted EBITDA, as defined by the employment agreements.

(4)	“Changes in Pension Value and Non-Qualified Deferred Compensation Earnings” for Fiscal 2008 does not reflect earnings on the deferred compensation balances of Messrs. Borow and Blau, as their balances decreased by $35,173 and $28,641, respectively.

(5) “All Other Compensation” for fiscal 2008 includes:

(i) for Mr. Borow, (a) a payment for a covenant not to compete of $3,700,000, made in connection with the Acquisition, (b) a one-time bonus award in connection with the Acquisition of $886,590, (c) a payment of $14,085,887, including interest through June 30, 2008, due in exchange for relinquishing his change in control rights under a Supplemental Executive Retirement Plan that was terminated at the time of the Acquisition, (d) a tax gross-up, on the amount specified in (c) above, of $1,903,130, (e) the $1,112,248 fair value, as calculated in accordance with SFAS No. 123(R), of a discount on the purchase of parent LLC Class A member interests in the form of a special distribution, (f) $25,749 imputed value of a leased automobile, and (g) other compensation and perquisites, none of which individually exceeded $10,000;

(ii) for Mr. Buyko, (a) the $111,225 fair value, as calculated in accordance with SFAS No. 123(R), of a discount on the purchase of parent LLC Class A member interests in the form of a special distribution and (b) other compensation and perquisites, none of which individually exceeded $10,000;

(iii) for Mr. Adamovich, (a) the $55,612 fair value, as calculated in accordance with SFAS No. 123(R), of a discount on the purchase of parent LLC Class A member interests in the form of a special distribution and (b) $12,452 in company matching funds under the Aeroflex Incorporated Employees’ 401(k) Plan;

(iv) for Mr. Badlato, (a) the $22,245 fair value, as calculated in accordance with SFAS No. 123(R), of a discount on the purchase of Parent LLC Class A member interest in the form of a special distribution, (b) a payment of $3,128,276, including interest through June 30, 2008, due in exchange for relinquishing his change in control rights under a Supplemental Executive Retirement Plan that was terminated at the time of the Acquisition, and (c) other compensation and perquisites, none of which individually exceeded $10,000;

(v) for Mr. Caruso, (a) a one-time bonus award in connection with the Acquisition of $648,450, and (b) other compensation and perquisites, none of which individually exceeded $10,000; and

(vi) for Mr. Blau, (a) a severance payment of $4,266,839 in connection with the change in control which occurred as a result of the Acquisition and his subsequent retirement in accordance with his employment agreement, (b) a tax gross-up, on the amount specified in (a) above, of $2,424,028, (c) $26,794 imputed value of a leased automobile, and (d) other compensation and perquisites, none of which individually exceeded $10,000.

Employment Agreements

We are a party to employment agreements with each of our executive officers, the terms of which are set forth below.

Leonard Borow

We are a party to an employment agreement with Mr. Borow, our President and Chief Executive Officer, which expires on August 15, 2012. Mr. Borow currently receives a base salary of $555,000 and an annual bonus of between 50% and 150% of his base salary based upon our achievement of certain EBITDA targets established by our board of directors.

Mr. Borow’s employment agreement provides for a three-year consulting period after the termination of employment by expiration of the contract term, mutual agreement or retirement, during which time Mr. Borow will receive consulting payments in an annual amount equal to two-thirds of his last annual base salary.

In the event that we terminate the employment of Mr. Borow without cause or Mr. Borow terminates his employment for good reason (as defined in the employment agreement), Mr. Borow is entitled to receive his salary, an annual bonus and continuation of health benefits for the remainder of the contract term. For this purpose, the annual bonus will be calculated based on the average of Mr. Borow’s highest annual bonuses for a period not to exceed three years during the fiscal years (for a period not exceeding 10 years) commencing after August 15, 2007. In the event Mr. Borow’s employment is terminated for cause (as defined in the employment agreement), Mr. Borow will not be entitled to any severance benefits other than his salary through the date of termination, unused vacation and any benefits that have vested in accordance with the terms of the applicable award. In the event of Mr. Borow’s death or disability, Mr. Borow or his beneficiary or estate is entitled to receive his salary through the date of termination, unused vacation and any benefits that have vested in accordance with the terms of the applicable award, and Mr. Borow or his beneficiary or estate is also entitled to any annual bonus for the current fiscal year based on our performance, prorated to the date of termination. In the event Mr. Borow’s employment terminates due to retirement, Mr. Borow shall be entitled to his salary through the date of termination, unused vacation, a prorated amount of any annual bonus for the fiscal year in which he retired and any benefits that have vested in accordance with the terms of the applicable award.

Mr. Borow is subject to non-competition and non-solicitation restrictions until the later of (i) August 15, 2012 and (ii) two years following the later of (a) the termination of his employment for any reason and (b) the three-year consulting period. In addition, we will provide Mr. Borow with a tax gross-up payment to cover any excise tax due under Sections 280G and 4999 of the Internal Revenue Code.

John Buyko

We are a party to an employment agreement with Mr. Buyko, our Executive Vice President, which provides for a term of employment ending August 15, 2012. Under the agreement, Mr. Buyko currently receives an annual salary of $450,000 and is eligible to receive an annual bonus of between 50% and 150% of his annual salary based upon the achievement of certain EBITDA targets established by our board of directors. Our board of directors will review Mr. Buyko’s salary annually and may increase (but not decrease without his consent) Mr. Buyko’s salary in its discretion. In the event that we terminate the employment of Mr. Buyko without cause or Mr. Buyko terminates his employment for good reason (as defined in the employment agreement), he is entitled to receive (i) his salary for the remainder of the employment term at the rate in effect immediately prior to such termination, (ii) continuation of health benefits until the earlier of December 31st of the second year following his termination of employment or his commencement of full-time employment with a new employer and (iii) annual bonuses for the remainder of the employment term (including a prorated bonus for any partial fiscal year) equal to the average of the highest annual bonuses for a period not to exceed three years awarded to him during the fiscal years (for a period not exceeding 10 years) commencing after August 15, 2007. In the event that we terminate the employment of Mr. Buyko for cause (as defined in the employment agreement), he is entitled to receive his salary through the date of termination, unused vacation and any benefits that have vested in accordance with the terms of the applicable award. In the event of termination upon Mr. Buyko’s death or disability, Mr. Buyko or his beneficiary or estate is entitled to receive his salary through the date of determination, unused vacation and any benefits that have vested in accordance with the terms of the applicable award, and he is also entitled to any annual bonus for the current fiscal year based on our performance, prorated to the date of termination.

In addition, Mr. Buyko is subject to non-competition and non-solicitation restrictions until the later of (i) the period during which Mr. Buyko is entitled to receive severance payments pursuant to the employment agreement and (ii) one year following the termination of his employment for any reason.

John Adamovich

We are a party to an employment agreement with Mr. Adamovich, our Senior Vice President, Chief Financial Officer and Corporate Secretary, which provides for a term of employment ending December 31, 2009. Under the agreement, Mr. Adamovich currently receives an annual salary of $440,000. In the event that we terminate the employment of Mr. Adamovich within two years following a change in control (as defined in the employment agreement) without cause or Mr. Adamovich terminates his employment for good reason (as defined in the employment agreement), he is entitled to receive (i) a lump sum severance payment, up to the maximum amount deductible under Sections 280G and 4999 of the Internal Revenue Code, of 2.5 times the sum of his base salary and average annual bonuses received for our last three fiscal years, (ii) continuation of health benefits until December 31st of the second year following his termination of employment, and (iii) a pro-rata bonus for the year of termination.

In the event that we terminate the employment of Mr. Adamovich without cause, or if Mr. Adamovich terminates his employment for good reason (as defined in the employment agreement), he is entitled to receive his salary and benefits for one year following termination of employment. In the event of termination upon death or due to disability, Mr. Adamovich or his beneficiary or estate is entitled to receive 50% of his salary for one year following termination of employment.

		Estimated future payouts under						Estimated future payouts under						All other stock awards: Number of shares			All other option awards: Number of securities		Exercise or base price of option
	Grant	non-equity incentive plan awards						equity incentive plan awards						of stock			underlying		awards
Name	date	Threshold		Target		Maximum		Threshold		Target		Maximum		or units			options		($/Sh)
		($)		($)		($)		(#)		(#)		(#)		(#)			(#)
(a)	(b)	(c)		(d)		(e)		(f)		(g)		(h)		(i)			(j)		(k)
Leonard Borow	09/13/07		-		-		-		-		-		-		3.00	%		-		-
John Buyko	09/13/07		-		-		-		-		-		-		2.50	%		-		-
John Adamovich, Jr.	10/26/07		-		-		-		-		-		-		0.40	%		-		-
Charles Badlato	10/26/07		-		-		-		-		-		-		0.15	%		-		-
Carl Caruso	10/26/07		-		-		-		-		-		-		0.15	%		-		-
Harvey R. Blau	-		-		-		-		-		-		-		-			-		-

FISCAL 2008 OPTION EXERCISES AND STOCK VESTED

	Option Awards				Stock Awards
	Number of Shares		Value Realized		Number of Shares		Value Realized
Name	Acquired on Exercise (#)		on Exercise ($)		Acquired on Vesting (#)		on Exercise ($)
(a)	(b)		(c)		(d)		(e)

Leonard Borow		1,710,450		9,317,229		-		-
John Buyko		908,334		4,211,943		-		-
John Adamovich, Jr.		250,000		945,000		5,000		72,500
Charles Badlato		292,659		1,679,002		-		-
Carl Caruso		254,919		1,360,917		-		-
Harvey R. Blau		2,129,653		11,536,690		-		-

	Executive		Registrant		Aggregate			Aggregate		Aggregate
	Contributions in		Contributions		Earnings			Withdrawals/		Balance
Name	Last FY ($)		in Last FY ($)		in Last FY ($)			Distributions ($)		at Last FYE ($)
(a)	(b)		(c)		(d)			(e)		(f)

Leonard Borow	$	-	$	-	$	(35,173	)	$	2,924,840	$	-
John Buyko		-		-		-			-		-
John Adamovich, Jr.		-		50,000		4,211			-		105,648
Charles Badlato		-		-		-			-		-
Carl Caruso		-		-		-			-		-
Harvey R. Blau	$	-	$	-	$	10,574		$	4,278,614	$	-

Year	Percentage
2011		105.875	%
2012		102.938	%
2013 and thereafter		100.000	%

																		Equity
																		incentive
																Equity		plan awards:
					Equity											incentive		Market or
					incentive											plan awards:		payout
					plan awards:									Market		Number of		value of
	Number of		Number		Number of						Number of			value of		unearned		unearned
	securities		of securities		securities						shares or			shares or		shares, units		shares,
	underlying		underlying		underlying						units of			units of		or other		units or
	unexercised		unexercised		unexercised		Option				stock that			stock that		rights that		other rights
	options		options		unearned		exercise		Option		have not			have not		have not		that have
	(#)		(#)		options		price		expiration		vested			vested		vested		not vested
Name	Exercisable		Unexercisable		(#)		($)		date		(#)			($)		(#)		($)
(a)	(b)		(c)		(d)		(e)		(f)		(g)			(h)		(i)		(j)
Leonard Borow		-		-		-		-		-		3.00	%		-		-		-
John Buyko		-		-		-		-		-		2.50	%		-		-		-
John Adamovich, Jr.		-		-		-		-		-		0.40	%		-		-		-
Charles Badlato		-		-		-		-		-		0.15	%		-		-		-
Carl Caruso		-		-		-		-		-		0.15	%		-		-		-
Harvey R.Blau		-		-		-		-		-		-			-		-		-

						Present Value of
				Number of Years		Accumulated		Payments During
Name	Plan Name			Credited Service (#)		Benefit ($)		Last Fiscal Year ($)
(a)	(b)			(c)		(d)		(e)

Leonard Borow		(1	)		30		-	$	-
John Buyko		-			-		-		-
John Adamovich, Jr.		-			-		-		-
Charles Badlato		(1	)		20		-		-
Carl Caruso		-			-		-		-
Harvey R. Blau		(1	)		27		-	$	9,628,630

Name of Beneficial Owner(1)	Percent of Class A Interests(2)			Percent of Class B Interests(2)
Veritas Capital Partners III, L.L.C.(3)(4)		45.1	%		—
Affiliates of Golden Gate Private Equity, Inc.(5)		26.2	%		—
GS Direct(6)		22.0	%		—
Leonard Borow		2.0	%		34.4	%
John Buyko		*			28.7	%
John Adamovich, Jr.		*			4.6	%
Charles Badlato		*			1.7	%
Carl Caruso		*			1.7	%
Robert B. McKeon(7)		45.1	%		—
Hugh Evans		—			—
Ramzi M. Musallam		—			—
Joe Benavides		—			—
Prescott H. Ashe		—			—
John D. Knoll		—			—
Bradley J. Gross		—			—
All executive officers and directors as a group (12 persons)(8)		47.4	%		71.1	%

	PAGE
I N D E X

CONSOLIDATED FINANCIAL STATEMENTS:

Report of Independent Registered Public Accounting Firm		F-2

Consolidated financial statements:

Balance sheets – June 30, 2008 (Successor) and 2007 (Predecessor)		F-3

Statements of operations –		F-4
Fiscal Years Ended June 30, 2007 and 2006 (Predecessor)
Periods from July 1, 2007 to August 14, 2007 (Predecessor)
and August 15, 2007 to June 30, 2008 (Successor)

Statements of stockholder’s equity and comprehensive income (loss) -		F-5
Fiscal Years Ended June 30, 2007 and 2006 (Predecessor)
Periods from July 1, 2007 to August 14, 2007 (Predecessor)
and August 15, 2007 to June 30, 2008 (Successor)

Statements of cash flows –		F-6
Fiscal Years Ended June 30, 2007 and 2006 (Predecessor)
Periods from July 1, 2007 to August 14, 2007 (Predecessor)
and August 15, 2007 to June 30, 2008 (Successor)

Notes to the consolidated financial statements		F-7 – F-49

Quarterly Financial Data (Unaudited)		F-50

Schdule II-Valuation and Qualifying Accounts		F-51

	August 15, 2007			July 1, 2007			Year Ended			Year Ended
	to June 30,			to August 14,			June 30,			June 30,
	2008			2007			2007			2006
	Successor Entity			Predecessor Entity			Predecessor Entity			Predecessor Entity

Net sales	$	604,991		$	38,221		$	593,146		$	546,243
Cost of sales		352,953			22,861			308,969			284,312
Gross profit		252,038			15,360			284,177			261,931

Selling, general and administrative costs		121,086			19,031			129,621			122,871
Research and development costs		69,898			12,178			76,717			72,055
Amortization of acquired intangibles		73,076			1,692			13,006			13,778
Acquired in-process research and development costs		24,975			-			-			-
Company sale transaction expenses		32,493			3,717			30,584			-
		321,528			36,618			249,928			208,704
Operating income (loss)		(69,490	)		(21,258	)		34,249			53,227

Other income (expense)
Interest expense		(74,658	)		(275	)		(672	)		(608	)
Other income (expense), net		4,617			294			152			1,669
Total other income (expense)		(70,041	)		19			(520	)		1,061

Income (loss) from continuing operations before income taxes		(139,531	)		(21,239	)		33,729			54,288
Provision (benefit) for income taxes		(38,927	)		(6,831	)		24,935			20,540
Income (loss) from continuing operations		(100,604	)		(14,408	)		8,794			33,748

Income (loss) from discontinued operations, net of
tax benefit		(4,821	)		(2,508	)		(3,868	)		(5,652	)

Income (loss) before cumulative effect of a change in accounting
principle		(105,425	)		(16,916	)		4,926			28,096

Cumulative effect of a change in accounting principle, net
of tax benefit of $490		-			-			-			(1,137	)

Net income (loss)	$	(105,425	)	$	(16,916	)	$	4,926		$	26,959

													Accumulated
										Additional			Other Comp-			Retained
				Common Stock						Paid-in			rehensive			Earnings			Treasury Stock						Comprehensive
	Total			Shares			Par Value			Capital			Income(Loss)			(Deficit)			Shares			Cost			Income (Loss)
Predecessor Entity:
Balance, June 30, 2005	$	443,980			74,618		$	7,462		$	372,666		$	9,020		$	54,846			4		$	(14	)
Stock issued upon exercise of
stock options, including tax benefit		5,913			691			69			5,844			-			-
Share-based compensation		6,772			-			-			6,772			-			-			-			-
Stock repurchase and retirement		(402	)		(39	)		(4	)		(412	)		-			-			(4	)		14
Other comprehensive income		4,448			-			-			-			4,448			-			-			-		$	4,448
Net income		26,959			-			-			-			-			26,959			-			-			26,959
Balance, June 30, 2006		487,670			75,270			7,527			384,870			13,468			81,805			-			-		$	31,407
Stock issued upon exercise of
stock options, including tax benefit		17,031			1,678			168			16,863			-			-
Share-based compensation		4,126			-			-			4,126			-			-			-			-
Stock repurchase and retirement		(17,234	)		(1,754	)		(176	)		(17,058	)		-			-			-			-
Other comprehensive income		14,906			-			-			-			14,906			-			-			-		$	14,906
Net income		4,926			-			-			-			-			4,926			-			-			4,926
Adjustment related to adoption
of FASB Statement No. 158, net of
tax (Note 14)		(728	)		-			-			-			(728	)		-			-			-			-
Balance, June 30, 2007		510,697			75,194			7,519			388,801			27,646			86,731			-			-		$	19,832
Stock issued upon exercise of
stock options, including tax benefit		13,124			51			5			13,119			-			-
Share-based compensation		214			-			-			214			-			-			-			-
Other comprehensive income		(497	)		-			-			-			(497	)		-			-			-		$	(497	)
Net income (loss) - July 1, 2007 to
August 14, 2007		(16,916	)		-			-			-			-			(16,916	)		-			-			(16,916	)

Adjustments for the effects of the Merger		(506,622	)		(75,245	)		(7,524	)		(402,134	)		(27,149	)		(69,815	)		-			-
		-			-			-			-			-			-			-			-		$	(17,413	)
Successor Entity:
Proceeds from issuance of common stock		378,350			1			-			378,350			-			-			-			-
Share-based compensation		3,123			-			-			3,123			-			-			-			-
Accretion of interest on equity classified
award		193			-			-			193			-			-			-			-
Other comprehensive income		407			-			-			-			407			-			-			-		$	407
Net income (loss) - August 15, 2007 to
June 30, 2008		(105,425	)		-			-			-			-			(105,425	)		-			-			(105,425	)
Balance, June 30, 2008	$	276,648			1		$	-		$	381,666		$	407		$	(105,425	)		-		$	-		$	(105,018	)

							Fiscal Year			Fiscal Year
	August 15, 2007 to			July 1, 2007 to			Ended			Ended
	June 30, 2008			August 14, 2007			June 30, 2007			June 30, 2006
	Successor			Predecessor			Predecessor			Predecessor
	(In thousands)

Net sales	$	893		$	120		$	6,422		$	6,918

Income (loss) from discontinued
operations before income taxes	$	(5,928	)	$	(3,861	)	$	(6,041	)	$	(8,971	)
Income tax (benefit)		(1,107	)		(1,353	)		(2,173	)		(3,319	)
Income (loss) from
discontinued operations	$	(4,821	)	$	(2,508	)	$	(3,868	)	$	(5,652	)

	In thousands

Current assets (excluding cash of $45.5 million)	$	335,252
Property, plant and equipment		111,804
Other assets		16,537
Developed technology		195,500
Customer related intangible assets		211,582
Other acquired intangible assets		6,290
Intangible assets with indefinite lives (tradenames)		122,870
Goodwill		452,791
In-process research and development		24,340
Total assets acquired		1,476,966
Current liabilities		(137,751	)
Long-term liabilities		(220,922	)
Total liabilities assumed		(358,673	)
Net assets acquired	$	1,118,293

	Period from
	July 1, 2007 to			Fiscal Year Ended
	August 14, 2007			June 30, 2007
	(In thousands)

Net sales	$	38,178		$	598,241
Net income (loss)	$	(27,554	)	$	(123,105	)

	(In thousands)
Current assets (excluding cash of $9,000)	$	3,250
Property, plant and equipment		1,147
Tradenames		70
Customer related intangibles		3,190
Goodwill		4,633
Total assets acquired		12,290
Current liabilities		(1,619	)
Long term debt		(8	)
Total liabilities assumed		(1,627	)
Net assets acquired	$	10,663

	Filed Pursuant to Rule 424(b)(3)
	File No. 333-157075

	In thousands

Current assets (excluding cash of $2.7 million)	$	987
Property, plant and equipment		62
Developed technology		2,920
Customer related intangibles		1,650
Tradenames		508
Goodwill		8,261
In-process research and development		635
Total assets acquired		15,023
Current liabilities		(1,076	)
Deferred taxes		(1,280	)
Total liabilities assumed		(2,356	)
Net assets acquired	$	12,667

	June 30, 2008				June 30, 2007
	(Successor)				(Predecessor)
	(In thousands)

	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization

Developed technology	$	198,420	$	29,631	$	87,931	$	47,403
Customer related intangibles		213,232		42,433		12,161		5,915
Non-compete arrangements		6,290		1,012		-		-
Total	$	417,942	$	73,076	$	100,092	$	53,318

	(In thousands)

2009	$	63,475
2010		59,385
2011		58,987
2012		58,718
2013		52,424

	AMS			ATS			Total
	(In thousands)

Balance at July 1, 2006 (predecessor entity)	$	46,688		$	115,778		$	162,466
Acquisition of MicroMetrics		4,633			-			4,633
Final determination of RIWS acquisition earnout
payment		-			9,247			9,247
Adjustment (1)		-			(1,740	)		(1,740	)
Impact of foreign currency translation		-			7,356			7,356
Balance at June 30, 2007 (predecessor entity)		51,321			130,641			181,962
Goodwill adjustment recorded in purchase
accounting from allocation of purchase price (2)		243,456			27,373			270,829
Balance at August 15, 2007 (successor entity)		294,777			158,014			452,791
Acquisition of Test Evolution Corporation		-			1,868			1,868
Acquisition of Gaisler Research, AB		8,261			-			8,261
Impact of foreign currency translation		(268	)		(1,497	)		(1,765	)
Balance at June 30, 2008 (successor entity)	$	302,770		$	158,385		$	461,155

			Year Ended June 30, 2008
	Balance		July 1,		August 15,		July 1,			August 15,					Balance
	June 30,		2007 to		2007 to		2007 to			2007 to					June 30,
	2007		August 14,		June 30,		August 14,			June 30,			Effect of		2008
	Restructuring		2007		2008		2007			2008			foreign		Restructuring
	Liability		Net Additions				Cash Payments						currency		Liability
			Predecessor		Successor		Predecessor			Successor
					(In thousands)
Work force
reduction	$	-	$	3,778	$	3,270	$	(1,186	)	$	(5,850	)	$	-	$	12

Other		-		-		3,230		-			-			12		3,242
Total	$	-	$	3,778	$	6,500	$	(1,186	)	$	(5,850	)	$	12	$	3,254

	June 30,				Estimated
	2008		2007		Useful Life
	(In thousands)				In Years

Land	$	17,120	$	12,078
Buildings and leasehold improvements		30,303		34,629	1 to 40
Machinery and equipment		64,304		120,877	2 to 10
Furniture and fixtures		12,925		20,192	1 to 10
Assets recorded under capital leases		403		6,110	2 to 30
		125,055		193,886
Less accumulated depreciation and
amortization		20,406		112,474
	$	104,649	$	81,412

Year ending June 30,	(In thousands)
2009	$	5,574
2010		5,590
2011		5,610
2012		5,635
2013		5,250
Thereafter		851,152
	$	878,811

				Weighted
				Average
				Exercise
	Shares			Price
	(In thousands)

Outstanding at June 30, 2007		13,003		$	12.37
Granted		-			-
Forfeited		(27	)		19.30
Expired		-			-
Exercised		(51	)		11.39
Cancelled		(3,825	)		18.74
Paid out on Merger		(9,100	)		9.68
Outstanding at August 15, 2007		-

	Unrealized
	Gain (Loss)			Minimum
	on Interest			Pension			Foreign
	Rate Swap			Liability			Currency
	Agreements			Adjustment			Translation			Total
	(net of tax)			(net of tax)			Adjustment			(net of tax)
				(In thousands)

Balance, June 30, 2005	$	(75	)	$	(3,632	)	$	12,727		$	9,020
Annual change		63			(548	)		4,933			4,448
Balance June 30, 2006		(12	)		(4,180	)		17,660			13,468
Annual change		5			(267	)		15,168			14,906
Adjustment related to
initial adoption of SFAS 158		-			(728	)		-			(728	)
Balance, June 30, 2007		(7	)		(5,175	)		32,828			27,646
Predecessor period		-			-			(497	)		(497	)
Adjustments for the effect
of the Merger		7			5,175			(32,331	)		(27,149	)
		-			-			-			-
Successor period		1,411			(6	)		(998	)		407
Balance, June 30, 2008	$	1,411		$	(6	)	$	(998	)	$	407

	August 15, 2007 to			July 1, 2007 to			Fiscal Year Ended			Fiscal Year Ended
	June 30 2008			August 14, 2007			June 30, 2007			June 30, 2006
	Successor			Predecessor			Predecessor			Predecessor
	(In thousands)

Tax at federal statutory rate	$	(48,836	)	$	(7,434	)	$	11,805		$	19,001

Non-deductible acquired in-process research
and development charge		8,744			-			-			-
Undistributed earnings of foreign subsidiaries		(1,265	)		(184	)		(1,342	)		(1,306	)
Increase in valuation allowance		5,420			237			2,772			546
State and local income taxes, net of federal benefit		(1,783	)		(1,256	)		1,951			2,105
Domestic manufacturing credit		(210	)		-			(550	)		(664	)
Non-deductible merger expenses		5,861			1,111			10,704			-
Foreign tax rate differential		931			848			838			221
Research and development credit and deduction		(2,148	)		(53	)		(721	)		(170	)
Settlement of and change in tax contingencies		(3,416	)		-			1,000			353
Other, net		(2,225	)		(100	)		(1,522	)		454
	$	(38,927	)	$	(6,831	)	$	24,935		$	20,540

Balance at June 30, 2007	$	4,421
Gross increase related to tax positions taken
prior to fiscal year		495
Gross decrease related to tax positions taken
prior to fiscal year		(58	)
Reduction as a result of a lapse of the
applicable statute of limitations		(3,853	)

Balance at June 30, 2008	$	1,005

	Before					After
	Application of					Application of
	Statement 158		Adjustments			Statement 158

Deferred income taxes	$	12,261	$	428		$	12,689
Other assets		16,456		(349	)		16,107
Total assets		674,317		79			674,396

Defined benefit plan and other
postretirement plan obligations		16,721		807			17,528
Total liabilities		162,892		807			163,699
Accumulated other comprehensive income		28,374		(728	)		27,646
Total stockholders' equity		511,425		(728	)		510,697
Total liabilities and stockholders' equity		674,317		79			674,396

	SERP
	Years Ended June 30,
	2008			2007			2006


Discount rate		5.00	%		6.25	%		6.25	%
Rate of compensation increase		*			3.00	%		3.00	%

	(In thousands)
2009	$	5,492
2010		4,512
2011		3,187
2012		1,757
2013		764
Thereafter		1,029
Future minimum lease payments	$	16,741

	As of				As of June 30,
	June 30, 2008				2007		2006
	(In thousands)

Total Assets:
AMS	$	754,451			$	229,046	$	186,531
ATS		605,120				404,548		377,190
Corporate		119,428				34,408		59,700
Assets of discontinued operations		-				6,394		9,970
Total assets	$	1,478,999			$	674,396	$	633,391

	August, 15, 2007		July 1, 2007 to		For the Year Ended June 30,
	to June 30, 2008		August 14, 2007		2007		2006
Capital expenditures:	(In thousands)
AMS	$	7,087	$	338	$	9,942	$	6,255
ATS		5,950		501		7,155		8,777
Corporate		142		249		1,330		333
Total capital expenditures	$	13,179	$	1,088	$	18,427	$	15,365

Depreciation and amortization expense:
AMS	$	51,419	$	1,137	$	8,675	$	8,949
ATS		41,060		2,509		21,258		21,249
Corporate		553		16		209		173
Total depreciation and
amortization expense	$	93,032	$	3,662	$	30,142	$	30,371

				Subsidiary			Subsidiary
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated

Net sales	$	-		$	429,372		$	180,832		$	(5,213	)	$	604,991
Cost of sales		-			253,291			104,857			(5,195	)		352,953
Gross profit		-			176,081			75,975			(18	)		252,038
Selling, general and administrative costs		15,584			66,265			39,237			-			121,086
Research and development costs		-			40,097			29,801			-			69,898
Amortization of acquired intangibles		-			63,477			9,599			-			73,076
Acquired in-process R&D costs		-			21,820			3,155			-			24,975
Company sale transaction expenses		32,493			-			-			-			32,493
Operating income (loss)		(48,077	)		(15,578	)		(5,817	)		(18	)		(69,490	)

Other income (expense):
Interest expense		(74,563	)		(95	)		-			-			(74,658	)
Other income (expense), net		1,943			147			2,527			-			4,617
Intercompany charges		81,994			(80,482	)		(1,512	)		-			-
Income (loss) from continuing operations
before income taxes		(38,703	)		(96,008	)		(4,802	)		(18	)		(139,531	)
Provision (benefit) for income taxes		(11,525	)		(28,589	)		1,187			-			(38,927	)
Income (loss) from continuing
operations		(27,178	)		(67,419	)		(5,989	)		(18	)		(100,604	)
Loss from discontinued operations,
net of tax		-			(4,821	)		-			-			(4,821	)
Equity in income (loss) of subsidiaries		(78,247	)		(5,712	)		-			83,959			-
Net income (loss)	$	(105,425	)	$	(77,952	)	$	(5,989	)	$	83,941		$	(105,425	)

							Non-
				Guarantor			Guarantor			Consolidating
	Parent			Subsidiaries			Subsidiaries			Adjustments			Consolidated

Cash flows from operating activities:
Net income (loss)	$	(105,425	)	$	(77,952	)	$	(5,989	)	$	83,941		$	(105,425	)
Loss from discontinued operations, net of tax		-			4,821			-			-			4,821
Income (loss) from continuing operations		(105,425	)		(73,131	)		(5,989	)		83,941			(100,604	)
Changes in operating assets and liabilities and non cash items, included in net income (loss)		95,482			88,036			15,223			(83,941	)		114,800
Net cash provided by (used in) continuing operations		(9,943	)		14,905			9,234			-			14,196
Net cash provided by (used in) discontinued operations		-			(5,286	)		-			-			(5,286	)
Net cash provided by (used in) operating activities		(9,943	)		9,619			9,234			-			8,910
Cash flows from investing activities:
Acquisition of predecessor entity, net of cash acquired		(1,128,915	)		(2,593	)		13,215			-			(1,118,293	)
Payment for purchase of businesses, net of cash acquired		(11,145	)		-			-			-			(11,145	)
Capital expenditures		(142	)		(9,386	)		(3,651	)		-			(13,179	)
Proceeds from the sale of property, plant and equipment		-			52			177			-			229
Purchase of marketable securities		(631,805	)		-			-			-			(631,805	)
Proceeds from sale of marketable securities		611,853			-			-			-			611,853
Net cash provided by (used in) investing activities of continuing operations		(1,160,154	)		(11,927	)		9,741			-			(1,162,340	)
Net cash provided by (used in) discontinued operations		-			(36	)		-			-			(36	)
Net cash provided by (used in) investing activities		(1,160,154	)		(11,963	)		9,741			-			(1,162,376	)
Cash flows from financing activities:
Proceeds from issuance of common stock		378,350			-			-			-			378,350
Borrowings under debt agreements		870,000			-			-			-			870,000
Debt repayments		(5,746	)		(35	)		(302	)		-			(6,083	)
Debt financing costs		(33,222	)		-			-			-			(33,222	)
Amounts paid for withholding taxes on stock option exercises		(14,142	)		-			-			-			(14,142	)
Witholding taxes collected for stock option exercises		14,142			-			-			-			14,142
Net cash provided by (used in) financing activities of continuing operations		1,209,382			(35	)		(302	)		-			1,209,045
Effect of exchange rate changes on cash and cash equivalents		-			-			(1,430	)		-			(1,430	)
Net increase in cash and cash equivalents		39,285			(2,379	)		17,243			-			54,149
Cash and cash equivalents at beginning of period		-			-			-			-			-
Cash and cash equivalents at end of period	$	39,285		$	(2,379	)	$	17,243		$	-		$	54,149

	Quarter												Year Ended
2008	First			Second			Third			Fourth			June 30,
Net sales	$	140,236		$	160,757		$	157,304		$	184,915		$	643,212
Gross profit		52,615			54,633			69,236			90,914			267,398
Income (loss) from continuing operations		(63,944	)		(29,068	)		(15,437	)		(6,563	)		(115,012	)

Column A	Column B		Column C						Column D			Column E
			Additions
						Charged
	Balance at		Charged to			to other						Balance at
	beginning of		costs and			accounts -			Deductions -			end of
Description	period		expenses			describe			describe			period

PERIOD FROM AUGUST 15, 2007
THROUGH JUNE 30, 2008 (SUCCESSOR ENTITY)

Allowance for doubtful accounts	$	1,531	$	1,295		$	-		$	143	(B)	$	2,683

PERIOD FROM JULY 1, 2007
THROUGH AUGUST 14, 2007 (PREDECESSOR ENTITY)

Allowance for doubtful accounts	$	1,589	$	(33	)	$	-		$	25	(B)	$	1,531

YEAR ENDED JUNE 30, 2007:

Allowance for doubtful accounts	$	1,273	$	416		$	25	(A)	$	125	(B)	$	1,589

YEAR ENDED JUNE 30, 2006:

Allowance for doubtful accounts	$	1,118	$	292		$	-		$	137	(B)	$	1,273

INDEX		PAGE

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS		F-53
September 30, 2008 and June 30, 2008


UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS		F-54
Three Months Ended September 30, 2008
Periods from July 1, 2007 to August 14, 2007
and August 15, 2007 to September 30, 2007


UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS		F-55
Three Months Ended September 30, 2008
Periods from July 1, 2007 to August 14, 2007
and August 15, 2007 to September 30, 2007



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS		F-56 – F-81