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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes o No þ

The number of shares of the registrant’s common stock, which were outstanding as of the close of business on November 1, 2003, was 15,868,432.

Radyne ComStream Inc.
Notes to Condensed Consolidated Financial Statements
(Information for September 30, 2003 and 2002 is Unaudited)

(1)		Unaudited Interim Condensed Consolidated Financial Statements

		In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments necessary, all of which are of a normal recurring nature, to present fairly the Company’s financial position, results of operations and cash flows. For further information, refer to the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002. The results of operations for the nine months ended September 30, 2003 are not necessarily indicative of the results to be expected for the full year.

(2)		Goodwill and Other Intangible Assets

		The Company adopted Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets” on January 1, 2002, the first day of fiscal 2002. Therefore, the amortization of goodwill was suspended effective on that date. The Company also performed its transitional impairment analysis of goodwill as of January 1, 2002, as required by SFAS 142. This analysis yielded an impairment charge of $4.3 million, recorded in fourth quarter 2002 to be effective January 1, 2002 as a cumulative effect of change in accounting principle. The Company had no remaining goodwill on its balance sheet as of December 31, 2002.

(3)		Stock-Based Compensation

		The Company follows the intrinsic value-based method prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations to account for its stock-based compensation plans. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. SFAS No. 123, “Accounting for Stock-Based Compensation,” established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS No. 123. Accordingly, the Company does not recognize compensation expense for any of its stock-based plans because it does not issue options at exercise prices below the market value at date of grant. Had compensation cost for the Company’s stock-based plans been determined consistent with SFAS No. 123, its net earnings (loss) and earnings (loss) per share would have been reduced to the pro forma amounts indicated below:

		The fair value of options granted was estimated on the date of grant with vesting periods ranging from one to three years using the Black-Scholes option-pricing model with the following weighted average assumptions used: no dividend yield, expected volatility of 48 percent - 129 percent, risk free interest rate of 1.5 percent - 6 percent and expected lives of five - nine years. The per share weighted average fair value of stock options granted for the three months ended September 30, 2003 and September 30, 2002 was $1.47 and $1.99 respectively using the Black-Scholes option-pricing model and the assumptions listed above.

		The pro forma data listed above was calculated by retroactively considering the impact of cancellations of stock options by employees effective January 22, 2003. For a full explanation of the cancelled options, please refer to the section below titled “Non-Executive Employee Stock Option Exchange Offer”.

		*Non-Executive Employee Stock Option Exchange Offer*

		On December 23, 2002, the Company offered to exchange certain “out of the money” non-executive employee stock options. As a result of the volatility in the stock market reflecting the current economic climate, many employees held stock options with an exercise price that significantly exceeded the market price of the Company’s common stock. Because the Company believed that these options were not providing the appropriate level of performance incentives, it offered a voluntary option exchange program allowing eligible employees to cancel their current stock options with exercise prices ranging between $6.00 and $8.25 and between $14.00 and $14.63 per share in exchange for a lesser amount of new options that will be granted no earlier than six months and one day after the options are accepted for exchange and canceled by the Company. The participating employees were to receive an amount of new options in accordance with the following exchange ratio schedule, subject to adjustments for any future stock splits, dividends and similar events:

		Executive officers, directors, and non-employees were not eligible for this offer. Additionally, employees who received options within six months and a day of the commencement of the exchange offer were not permitted to participate. The offer expired on January 22, 2003. The Company accepted for exchange, options to purchase an aggregate of approximately 999,615 shares of the Company’s common stock, representing approximately 89% of the shares subject to options that were eligible to be exchanged under the offer. On July 23, 2003, the Company granted, in accordance with the Non-Executive Employee Stock Option Exchange Offer, new options to purchase 496,429 shares of common stock.

(4)		Inventories

Changes to restructuring related liabilities for the nine months ended September 30, 2003 were as follows:

A summary of the reconciliation from basic earnings (loss) per share to diluted earnings (loss) per share follows:

For the three months ended September 30, 2003 and September 30, 2002, our largest customer accounted for less than 8% of the Company’s net sales. The largest customer for the current period was not the same as the largest customer for the prior period.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

For a description of the Company’s significant accounting policies and an understanding of the significant factors that influenced the Company’s performance during the third quarters and nine months ended September 30, 2003 and 2002, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) should be read in conjunction with the Consolidated Financial Statements, including the related notes, appearing in Item 1 of this Report as well as the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

Except for the historical information contained herein, the following discussion includes statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”) and Radyne ComStream claims the protection of the safe-harbor for forward-looking statements contained in the Reform Act. These forward-looking statements are often characterized by the terms “may,” “believes,” “projects,” “expects,” or “anticipates,” and do not reflect historical facts. Specific forward-looking statements contained in the following discussion include, but are not limited to, (i) management’s belief that its ability to utilize certain of its net operating loss and tax credit carryforwards to offset future taxable income within the carryforward periods under existing tax laws and regulations is more likely than not and (ii) the belief that existing cash and cash from operations will be sufficient to meet future operational needs and capital requirements.

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors that could affect our results and cause them to materially differ from those contained in the forward-looking statements include:

•		loss of, and failure to replace, any significant customers;

•		timing and success of new product introductions;

•		product developments, introductions and pricing of competitors;

•		timing of substantial customer orders;

•		availability of qualified personnel;

•		the impact of local political and economic conditions and foreign exchange fluctuations on international sales;

•		performance of suppliers and subcontractors;

•		decreasing or stagnant market demand and industry and general economic or business conditions;

•		availability, cost and terms of capital;

•		our level of success in effectuating our strategic plan;

•		our ability to successfully integrate acquisitions;

•		adequacy of our inventory, receivables and other reserves;

•		other factors to which this report refers or to which our 2002 Annual Report on Form 10-K refers.

•		other factors that the Company is currently unable to identify or quantify, but may arise or become known in the future.

In addition, the foregoing factors may affect generally our business, results of operations and financial position.

Forward-looking statements speak only as of the date the statement was made. Radyne ComStream does not undertake and specifically declines any obligation to update any forward-looking statements.

Radyne ComStream Inc. (the “Company”) designs, manufactures, integrates, installs and sells products, systems and software used in the ground-based portion of satellite communication systems to receive, and transmit data, video, audio and Internet over satellite, microwave and cable communications networks. The Company’s products are used in applications for telephone, data, video and audio broadcast communications, private and corporate data networks, Internet applications, and digital television for cable and network broadcast. Through its network of international offices and service centers, it serves customers in over 80 countries, including customers in the television broadcast industry, international telecommunications companies, Internet service providers, private communications networks, network and cable television and the United States government.

The Company has one operating business segment, the sale, integration and installation of equipment for satellite, microwave and cable communications and television networks.

Sales. Net sales of $15.8 million for third quarter 2003 were up 23% compared to third quarter 2002 net sales of $12.8 million. Net sales for the nine months ended September 30, 2003 were $41.5 million, down 6% compared to net sales of $43.9 million for the same period in 2002. The Company’s annual sales decreased each year from 2000 to 2002 due to declining economic conditions and corporate capital spending and a severe downturn in the telecommunications equipment market. Sales dropped to $10.9 million for the first quarter and have increased each of the next two quarters of 2003 due to an improving economy and increased corporate capital spending.

Gross Profit Margins. Third quarter 2003 gross profits were $7.1 million, 78% greater than the same quarter of 2002 due primarily to increased sales of new, lower cost, higher gross margin products introduced during the second quarter. Gross profit for third quarter 2002 was reduced by a $0.4 million write-down of inventories. Gross profit margins increased to 45% of net sales for third quarter 2003 compared to 31% for third quarter 2002, and to 42% for the nine months ended September 30, 2003 compared to 31% for the same period in 2002. Gross profits for the third quarter and the first nine months of 2003 benefited from cost reductions and other operating changes implemented in the first quarter of 2003, resulting in lower operating overhead compared to the same periods in 2002.

Operating Expenses. Total operating expenses were down 6% and 10% for the three-month and nine-month periods ended September 30, 2003, respectively, compared to the same periods in 2002, excluding $2.1 million in asset impairment and restructuring charges recorded in third quarter 2002. These expense decreases are the result of management’s continued cost control efforts, and for the nine-month period, staff reductions at the end of first quarter 2002. The Company’s headcount was reduced from 259 employees at the beginning 2002 to 205 employees at the end of 2002. Selling, general and administrative expenses for the third quarter and first nine months of 2003 were higher by $109,000 and $182,000, respectively. The year-to-date expense includes approximately $385,000 in costs related to the abandoned tender offer for Wegener Corporation that were expensed during second quarter 2003. The Company reduced research and development expenses by 20% and 28% for the third quarter and first nine months of 2003, respectively, compared to the same periods of 2002 by reducing engineering staff and focusing only on projects with the highest return on investment.

Earnings (Loss) From Operations. Earnings from operations were $2.6 million and $2.4 million for the third quarter and first nine months of 2003, respectively, compared to losses of $2.9 million and $5.2 million for the same periods in 2002. Earnings from operations for the second and third quarters of 2003 have benefited from increases in gross profit margins and lower operating expenses, while the same period in 2002 was negatively impacted by $2.5 million in inventory write-downs, asset impairment and restructuring charges recorded in third quarter 2002.

Income Taxes. The Company recorded an income tax provision of $1.0 million against its deferred tax assets in the third quarter based on pre-tax earnings of $2.6 million for the first nine months of 2003 to reflect utilization of net operating losses. There was no income tax benefit recorded in the first nine months of 2002 and the first quarter of 2003 because the Company incurred operating losses and provided a 100% valuation allowance against the net deferred tax assets arising during these periods. At December 31, 2002, the Company had a valuation allowance of $10.1 million against deferred tax assets related to net operating loss carryforwards of approximately $20,195,000 expiring in

various years through 2022, federal tax credits of $351,000 for utilization against any taxable income and taxes payable in future periods and temporary differences. Due to the losses incurred in 2002 and the first quarter of 2003, the Company has not made any adjustments to the deferred tax asset valuation allowance during the second and third quarters of 2003. To the extent that it continues to experience profitable operations, the Company will evaluate the need for the valuation allowance against its deferred tax assets in future periods.

Net Earnings. Net earnings were $1.6 million, or $0.10 per share on a diluted basis, for the third quarter ended September 30, 2003, compared to a net loss of $2.9 million, or $0.19 per share, for the third quarter of 2002, due to higher sales and gross margins, lower operating expenses and other factors described in the preceding sections of this management, discussion and analysis. Earnings were $1.5 million, or $0.10 per share on a diluted basis, for the first nine months of 2003 compared to a net loss of $9.4 million, or $0.62 per share, for the same period in 2002. In addition to the charges described above, results for the first nine months of 2002 include an impairment charge of $4.3 million, or $0.28 per share, related to the adoption of SFAS 142 recorded in fourth quarter 2002 to be effective January 1, 2002 as a cumulative effect of a change in accounting principle.

Cash and cash equivalents increased $8.1 million during the first nine months of 2003, to $24.4 million at September 30, 2003 from $16.2 million at December 31, 2002. Net cash provided by operating activities for the first nine months of 2003 was $8.1 million, generated mostly by reductions in working capital, excluding cash and cash equivalents, which dropped to $12.6 million at September 30, 2003 from $17.8 million at December 31, 2002. The primary source of this cash flow was a $3.3 million decrease in inventories since the beginning of 2003. Investing activities in 2003 included capital expenditures of approximately $351,000 compared to $1.6 million in 2002. Purchases of capital equipment was sharply curtailed during the first nine months of the year due to the prolonged downturn in the economy. In 2003, cash provided by financing activities was approximately $357,000 compared to $690,000 in 2002. Financing activities included sales of common stock to employees through incentive stock option exercises and the employee stock purchase plan, net of expenses of $390,000 and $749,000 for the nine month periods ending September 30, 2003 and 2002, respectively. The decrease in activities related to employee purchases of stock during the current period was a result, in part, of the lower stock option activity due to the Non-Executive Employee Stock Option Exchange Plan put in place during the first six months of the year and lower stock prices of the Companies securities during the same period. These activities were partially offset by principal payments on capital lease obligations of $33,000 and $59,000 for the nine months ended September 30, 2003 and September 30, 2002, respectively.

There were no significant changes in the Company’s capital structure during the first nine months of 2003. The Company had no long-term debt at September 30, 2003 or December 31, 2002. Stockholders’ equity increased to $39.2 million at September 30, 2003 from $37.3 million at December 31, 2002.

For a description of the Company’s Contractual Obligations and Commitments for the next five years and thereafter, see Item 7 in the Company’s Annual Report on Form 10-K. For a description of the Company’s Obligations Under Capital Leases and Commitments for the next five years and thereafter, see Item 8, Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K. There are no material changes to this information.

Capital expenditures of $0.4 million for first nine months of 2003 were funded through cash provided by operating activities. The Company does not have any material commitments for capital expenditures during the next twelve months.

The Company maintained a credit agreement with a bank that included a line-of-credit of up to $10 million that it allowed to expire on June 1, 2003. The Company is working with this bank and other prospective lenders to

establish a new credit facility to provide additional sources of liquidity for the future. The Company believes that cash and cash equivalents on hand and anticipated future cash flow will be sufficient to meet its obligations as they become due during the next twelve months. However, a significant decrease in its sales would likely affect its working capital amounts and could result in the need for external credit sources.

As part of its business strategy, the Company occasionally evaluates potential acquisitions of businesses, products and technologies. These potential transactions may require substantial capital resources, which, in turn, may require the Company to seek additional debt or equity financing. There are no assurances that the Company will be able to consummate any of these transactions or that it will have the liquidity available to consummate the transactions it desires. For more detailed information, see the Company’s Risk Factors contained in Exhibit 99.1 to the its Annual Report on Form 10-K.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The adoption of SFAS No. 146 did not have a material effect on the Company’s consolidated financial statements.

In November 2002, the FASB issued Interpretation No. 45 (FIN 45), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. Adoption of FIN 45 did not have a material effect on the Company’s consolidated financial statements.

In November 2002, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of EITF Issue No. 00-21 did not have a material effect on the Company’s consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements. Certain of the disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the notes to these condensed consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51. This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. For a public entity with a variable interest in a variable interest entity created before February 1, 2003, the Interpretation is applied to the enterprise no later than the beginning of the first interim or annual reporting period ending after December 15, 2003. The Company has not had any interests in variable interest entities, therefore, application of this Interpretation is not expected to have a material effect on the Company’s consolidated financial statements.

In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149 (“SFAS 149”), Amendment of Statement 133 on Derivative Instruments and Hedging Activities, which amends and clarifies

financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts. SFAS 149 will be effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The provisions of SFAS 149 are to be applied prospectively and did not have a material effect on the Company’s consolidated financial statements.

On May 15, 2003, the Financial Accounting Standards Board issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. The Statement requires issuers to classify as liabilities (or assets in some circumstance) three classes of freestanding financial instruments that embody obligations for the issuer. Generally, the Statement is effective for financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The Company adopted the provisions of the Statement on July 1, 2003. The application of this statement did not have a material effect on the Company’s consolidated financial statements.

The Company is exposed to market risk on its financial instruments from changes in interest rates. It does not use financial instruments for trading purposes or to manage interest rate risk. The Company does not have any derivative financial instruments. As of September 30, 2003, a change in interest rates of 10% over a year’s period would not have a material impact on our interest earnings.

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on such evaluation, the Company’s management has concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective such that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the Securities and Exchange Commission’s rules and forms relating to the Company. The Company’s management has also concluded that the Company’s disclosure controls and procedures are designed to accumulate and communicate the information required to be disclosed by Radyne ComStream to the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. No significant changes were made in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date.

(b) The Registrant filed the following Current Reports on Form 8-K during the three-month period covered by this report and ending September 30, 2003:

•

On July 31, 2003, the Company filed a Current Report on Form 8-K attaching a press release concerning the Company’s earnings and results of operations for the Company’s second fiscal quarter ended June 30, 2003.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

This EMPLOYMENT AGREEMENT (the “Agreement”) is effective as of November 1, 2003 by and between RADYNE COMSTREAM INC., a Delaware corporation (the "Company”) and Robert C. Fitting, an individual (“Executive”).

WHEREAS, the Company desires to retain the services of Executive, and Executive desires to provide services to the Company, in accordance with the terms, conditions and provisions of this Agreement;

NOW THEREFORE, in consideration of the covenants and mutual agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in reliance upon the representations, covenants and mutual agreements contained herein, the Company and Executive agree as follows:

1. Employment. Subject to the terms and conditions of this Agreement, the Company agrees to employ Executive as Chief Executive Officer of the Company, and Executive agrees to diligently perform the duties associated with such positions. Executive will report directly to the Board of Directors. Executive will devote substantially all of his business time, attention and energies to the business of the Company and will comply with the charters, policies and guidelines established by the Company from time to time applicable to its directors and senior management executives.

2. Term. Executive will be employed under this Agreement until December 31, 2005, unless Executive’s employment is terminated earlier pursuant to Section 7. The Agreement will renew for additional periods by mutual agreement of the Company and the Executive.

3. Director Status. For so long as Executive is Chief Executive Officer, the Company shall use commercially reasonable efforts, subject to applicable law and regulations of the New

York Stock Exchange (“NYSE”), to cause Executive to be nominated for election as a director and to be recommended to the stockholders for election as a director. Upon any termination of employment as Chief Executive Officer, Executive will be deemed to have resigned from the Board of Directors, unless within 30 days thereof a majority of the independent directors of the Board (as defined by rules of the NYSE) vote to enable Executive to continue on the Board through the balance of his term.

4. Salary. The Company will pay Executive a base salary at the annual rate of $375,000 per year commencing November 1, 2003. Such salary will increase to $400,000 commencing January 1, 2005. The Executive’s base salary may be raised, but not lowered, without Executive’s consent.

A. Signing Bonus. The Company shall pay Executive a signing bonus of $75,000 on or before November 1, 2003.

B. Bonus. Executive will be entitled to incentive compensation based on the achievement of certain performance targets pursuant to the plan specified in Exhibit A hereto. The bonus will be due and payable in accordance with Exhibit A.

C. Options. The Company hereby grants the Executive options to acquire 150,000 shares, and will grant to Executive, if Executive is employed at the time, an additional 50,000 shares subject to option on November 1, 2004. The options will have an exercise price equal to the fair market value on the date of grant as defined in the plan under which they are granted, and will vest 25% upon grant and 25% on each anniversary of grant.

6. Executive Benefits. During the term of this Agreement, Executive will be entitled to reimbursement of reasonable and customary business expenses. The Company will provide to Executive such fringe benefits and other Executive benefits as are regularly provided by the Company to its senior management; provided, however, that nothing herein shall preclude the Company from amending or terminating any employee or general executive benefit plans or

programs. In addition, the Company shall provide the Executive with the benefits set forth on Exhibit B, which benefits may not be terminated or reduced during the term hereof.

If Executive voluntarily terminates his employment with the Company for Good Reason, or the Company terminates Executive without Cause, then (i) the Company will be obligated to continue to pay Executive salary for two years following termination; (ii) any Bonus due Executive for the year of termination shall be paid subject to Executive’s compliance with this Agreement, including Sections 8 and 9 as provided therein; (iii) the Company shall reimburse Executive for COBRA premiums for the period that the Company is required to offer COBRA coverage as a matter of law; and (iv) any options granted on or after the date hereof shall vest in full, and remain in effect as provided in the applicable plan or agreement.

B. Termination upon Death or Disability. If Executive’s employment is terminated as a result of Executive’s death or Disability, then the Company will be obligated to pay to Executive, his heirs or personal representative, (i) Executive’s then current salary through the Date of Termination, (ii) a pro rated amount of Executive’s bonus for the year, payable at the time set forth in Exhibit A, (iii) Executive’s COBRA premiums for the period that the Company is required to offer COBRA coverage as a matter of law, (iv) Executive’s salary for a period of one year after the event, and, at the one year anniversary of the event, a lump sum equal to Executive’s final annual salary, in each case less any payments made under Company-paid insurance policies, and (v) the Executive’s options granted on or after the date herein shall accelerate and become vested without further action and, to the extent permitted under the plan’s governing documents, Executive or his heirs or personal representative shall have a period of one year from the Date of Termination to exercise such options.

C. Voluntary Termination (Without Good Reason) before December 31, 2005 or Termination for Cause by the Company.

(1) If the Executive resigns without Good Reason, or if the Company discharges Executive for Cause, then the Company will be obligated to pay Executive’s base salary

through the date of termination. No bonus shall be payable. Options shall terminate as provided in the applicable plan or agreement.

(2) Upon voluntary termination without Good Reason by Executive, or a termination for Cause by the Company, the provisions of Section 8 (Restrictive Covenant) shall automatically become applicable for the one-year period set forth therein, without any further payment due Executive. Executive acknowledges and agrees that the compensation herein, including the signing bonus, is adequate consideration for such covenants.

(1) “Cause” shall have the meaning ascribed to it in the Change of Control Agreement (the “Change of Control Agreement”) of Executive dated March 20, 2002,

(2) “Disability” shall mean a disability that results in Executive being medically unable to fulfill his duties under this Agreement for six consecutive months, and

(3) “Good Reason” shall include the following circumstances: (a) if the Company assigns you duties that are materially inconsistent with, or constitute a material reduction of powers or functions associated with, your position, duties, or responsibilities with the Company, or a material adverse change in your titles, authority, or reporting responsibilities, or in conditions of your employment, (b) if your base salary is reduced or the potential incentive compensation (or bonus) to which you may become entitled to at any level of performance by you or the Company is reduced, (c) if the Company fails to cause any successor to expressly assume and agree to be bound by the terms of this Agreement, (d) any termination by the Company of your employment for grounds other than for “Cause,” or (e) if you are required to relocate to an employment location that is more than fifty (50) miles from Phoenix, Arizona.

8. Restrictive Covenant. In consideration of Executive’s employment, Executive agrees to the restrictive covenants set forth in Section 3 of his Change in Control Agreement, which are incorporated herein.

A. It is understood that in the course of Executive’s employment with Company, Executive will become acquainted with Company Confidential Information (as defined below). Executive recognizes that Company Confidential Information has been developed or acquired at great expense, is proprietary to the Company, and is and shall remain the exclusive property of the Company. Accordingly, Executive agrees that he will not, disclose to others, copy, make any use of, or remove from Company’s premises any Company Confidential Information, except as Executive’s duties may specifically require, without the express written consent of the Board of Directors of the Company, during Executive’s employment with the Company and thereafter until such time as Company Confidential Information becomes generally known, or readily ascertainable by proper means by persons unrelated to the Company.

B. Upon any termination of employment, Executive shall promptly deliver to the Company the originals and all copies of any and all materials, documents, notes, manuals, or lists containing or embodying Company Confidential Information, or relating directly or indirectly to the business of the Company, in the possession or control of Executive.

C. “Company Confidential Information” shall mean confidential, proprietary information or trade secrets of Company and its subsidiaries and affiliates including without limitation the following: (1) customer lists and customer information as compiled by Company; (2) Company’s internal practices and procedures; (3) internal Company financial information; (4) supply of materials information, including sources and costs, designs, information on land and lot inventories, and current and prospective projects; (5) strategic planning, manufacturing, engineering, purchasing, finance, marketing, promotion, distribution, and selling activities; (6) all other information which is treated by Company as confidential, include all information having independent economic value to Company that is not generally known to, and not readily ascertainable by proper means by, persons who can obtain economic value from its disclosure or use. Notwithstanding the foregoing provisions, the following shall not be considered “Company Confidential Information”: (i) the general skills of the Executive as an experienced entrepreneur and senior management level employee; (ii) information generally known by senior management executives within the industry in which the Company operates; (iii) persons, entities, contacts or

relationships of Executive that are also generally known in the industry; and (iv) information which becomes available on a non-confidential basis from a source other than Executive which source is not prohibited from disclosing such confidential information by legal, contractual or other obligation.

D. Executive hereby agrees that the periods of time provided for in Sections 8 and 9 and other provisions and restrictions set forth herein are reasonable and necessary to protect the Company and its successors and assigns in the use and employment of the goodwill of the business conducted by Executive. Executive further agrees that damages cannot compensate the Company in the event of a violation of Section 8 or 9 and that, if such violation should occur, injunctive relief shall be essential for the protection of the Company and its successors and assigns. Accordingly, Executive hereby covenants and agrees that, in the event any of the provisions of Section 8 or 9 shall be violated or breached, the Company shall be entitled to obtain injunctive relief against the party or parties violating such covenants, without bond but upon due notice, in addition to such further or other relief as may be available at equity or law. Obtainment of such an injunction by the Company shall not be considered an election of remedies or a waiver of any right to assert any other remedies which the Company has at law or in equity. No waiver of any breach or violation hereof shall be implied from forbearance or failure by the Company to take action thereof. The prevailing party in any litigation, arbitration or similar dispute resolution proceeding to enforce this provision will recover any and all reasonable costs and expenses, including attorneys’ fees.

E. For purposes of Sections 8 and 9, the term “Company” includes Radyne ComStream Inc. and its subsidiaries and affiliates. For purposes hereunder, an affiliate shall be deemed to be any corporation or other business entity in which the Company or its subsidiaries owns a controlling interest.

10. Severability. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under any applicable law, then such provision will be deemed to be modified to the extent necessary to render it legal, valid and enforceable, and if no such modification will make the provision legal, valid and enforceable, then this Agreement will be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties will be construed and enforced accordingly.

11. Assignment by Company. Nothing in this Agreement shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation or entity that assumes this Agreement and all obligations and undertakings hereunder. Upon such consolidation, merger or transfer of assets and assumption, the term “Company” as used herein shall mean such other corporation or entity, as appropriate, and this Agreement shall continue in full force and effect.

12. Entire Agreement. This Agreement, the Change of Control Agreement of Executive, and any agreements concerning stock options or other benefits, embody the complete agreement of the parties hereto with respect to the subject matter hereof and supersede any prior written, or prior or contemporaneous oral, understandings or agreements between the parties that may have related in any way to the subject matter hereof. This Agreement may be amended only in writing executed by the Company and Executive. Notwithstanding the foregoing, nothing in this Agreement is intended to affect any previous agreements pertaining to the grant of options to the Executive, including without limitation, provisions in Executive’s prior Change of Control Agreement, providing for acceleration upon a change-in-control.

13. Governing Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement, shall be governed by and construed in accordance with the internal laws, and not the law of conflicts, of the State of Arizona.

14. Notice. Any notice required or permitted under this Agreement must be in writing and will be deemed to have been given when delivered personally or by overnight courier service or three days after being sent by mail, postage prepaid, at the address indicated below or to such changed address as such person may subsequently give such notice of:


if to Parent or Company:		Radyne ComStream
		3138 E. Elwood
		Phoenix, AZ 85034 8501
		Attention: Chief Financial Officer

with a copy to:		Snell & Wilmer L.L.P.
		One Arizona Center
		400 E. Van Buren Street
		Phoenix, Arizona 85004-0001
		Phone: (602) 382-6252
		Fax: (602) 382-6070
		Attn: Steven D. Pidgeon, Esq.

if to Executive:		Robert C. Fitting
		6035 E. Cholla Lane
		Scottsdale, Arizona 85253
		Phone: (480) 481-9394

15. Arbitration. Any dispute, controversy, or claim, whether contractual or non-contractual, between the parties hereto arising directly or indirectly out of or connected with this Agreement, relating to the breach or alleged breach of any representation, warranty, agreement, or covenant under this Agreement, unless mutually settled by the parties hereto, shall be resolved by binding arbitration in accordance with the Employment Arbitration Rules of the American Arbitration Association (the “AAA”). Any arbitration shall be conducted by arbitrators approved by the AAA and mutually acceptable to Company and Executive. All such disputes, controversies, or claims shall be conducted by a single arbitrator, unless the dispute involves more than $50,000 in the aggregate in which case the arbitration shall be conducted by a panel of three arbitrators. If the parties hereto are unable to agree on the arbitrator(s), then the AAA shall select the arbitrator(s). The resolution of the dispute by the arbitrator(s) shall be final, binding, nonappealable, and fully enforceable by a court of competent jurisdiction under the Federal Arbitration Act. The arbitrator(s) shall award damages to the prevailing party. The arbitration award shall be in writing and shall include a statement of the reasons for the award. The arbitration shall be held in the Phoenix metropolitan area. The arbitrator(s) shall award reasonable attorneys’ fees and costs to the prevailing party.

16. Withholding; Release; No Duplication of Benefits. All of Executive’s compensation under this Agreement will be subject to deduction and withholding authorized or

required by applicable law. The Company’s obligation to make any post-termination payments hereunder (other than salary payments and expense reimbursements through a date of termination), shall be subject to receipt by the Company from Executive of a mutually agreeable release, and compliance by Executive with the covenants set forth in Sections 8 and 9 hereof. If there is any conflict between the provisions of the Change in Control Agreement and this Agreement, such conflict shall be resolved so as to provide the greater benefit to Executive. However, in order to avoid duplication of any monetary benefits, any payments or benefits due hereunder will be reduced by any payments or benefits provided under the Change in Control Agreement.

17. Successors and Assigns. This Agreement is solely for the benefit of the parties and their respective successors, assigns, heirs and legatees. Nothing herein shall be construed to provide any right to any other entity or individual.

18. Legal Counsel. Executive recognizes that Snell & Wilmer LLP is counsel to the Company and has been advised to seek his own counsel to assist him with this Agreement.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.


		RADYNE COMSTREAM INC., a Delaware corporation


		By:		\s\ Ming Seong Lim

		Name:		Ming Seong Lim

		Title:		Chairman of the Board of Directors



		EXECUTIVE: ROBERT C. FITTING


		\s\ Robert C. Fitting, CEO

•

Annual Bonus—Incentive bonus tied to performance against key parameters, principally financial.

Financial performance based upon reported (for year end, audited) pretax earnings, excluding any extraordinary items, compared with annual budget approved by BoD prior to fiscal year commencement. Board will determine acceptable earnings for budget upon significant corporate changes, e.g., acquisitions, board will approve revised budget. Bonus to be paid within 30 days of earnings releases.

•

Earnings of 80%-100% of budget earn a bonus of $5 K for each percentage point of earnings over 80% of budget. i.e., no bonus is earned for 80% of budgeted earnings and $100K is earned for 100% of budgeted earnings

•

Earnings over 100% of budget would earn an additional bonus of 20% of earnings over budget. i.e., if budgeted earnings were $2 M and audited earnings were $3 M, the bonus would be 20% of $1 M or $200 K plus the $100 K for achieving budget.

•

Performance Bonus plan would commence with 2004 and bonus for current year, 2003, will be determined by the BoD based on pretax earnings, excluding extraordinary items as compared to the latest forecast, with a target bonus of $60 K for achieving forecast.

1. Retirement payments of one week of salary and health benefits (COBRA) for each month worked, upon commencement of this agreement with the Company, payable at the normal time for salary installments. Such payments are payable upon termination for any reason.

1. Six weeks paid vacation per year (which may not be carried over or paid if not used).

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control of financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

CERTIFICATION OF THE
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert C. Fitting, the CEO of Radyne ComStream Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Radyne ComStream Inc. on Form 10-Q for the third quarter ended September 30, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Radyne ComStream Inc.

I, Richard P. Johnson, the CFO of Radyne ComStream Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Radyne ComStream Inc. on Form 10-Q for the third quarter ended September 30, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Radyne ComStream Inc.


Delaware		11-2569467
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3138 East Elwood Street, Phoenix, Arizona		85034
(Address of Principal Executive Offices)		(Zip Code)


Part I FINANCIAL INFORMATION
	Item 1. Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
Part II OTHER INFORMATION
	Item 6. Exhibits and Reports On Form 8-K
SIGNATURES
EXHIBIT INDEX
EX-10.1
EX-31.1
EX-31.2
Ex-32


			September 30,			December 31,
			2003			2002

			Unaudited
Assets
Current assets:
	Cash and cash equivalents		$	24,375,545		$	16,229,558
	Accounts receivable - trade, net of allowance for doubtful accounts of $281,471 and $338,904, respectively			10,707,165			10,517,340
	Inventories			7,392,390			10,654,601
	Prepaid expenses and other assets			267,875			567,352
	Deferred tax assets			1,520,309			2,552,549

		Total current assets		44,263,284			40,521,400
Property and equipment, net				2,597,055			3,692,842
Deposits and other intangibles				205,051			192,530

			$	47,065,390		$	44,406,772

Liabilities and Stockholders’ Equity
Current liabilities:
	Current installments of obligations under capital leases		$	17,147		$	37,808
	Accounts payable, trade			2,271,435			1,880,207
	Accrued liabilities			4,181,052			3,899,676
	Customer advance payments			834,036			707,398

		Total current liabilities		7,303,670			6,525,089
Deferred rent				26,777			72,264
Obligations under capital leases, excluding current installments				7,692			19,861
Accrued stock option compensation				477,656			501,073

		Total liabilities		7,815,795			7,118,287

Commitments and contingent liabilities
Stockholders’ equity:
	Common stock; $.001 par value - authorized, 50,000,000 shares			15,504			15,309
	Additional paid-in capital			51,311,216			50,921,603
	Accumulated deficit			(12,077,125	)		(13,625,485	)
	Accumulated other comprehensive loss			—			(22,942	)

		Total stockholders’ equity		39,249,595			37,288,485

			$	47,065,390		$	44,406,772


			Three Months Ended						Nine Months Ended
			September 30,						September 30,

			2003			2002			2003			2002

Net sales			$	15,790,825		$	12,841,172		$	41,462,604		$	43,943,711
Cost of sales				8,654,509			8,407,846			24,028,884			29,887,714
Inventory write-down				—			430,826			—			430,826

		Gross profit		7,136,316			4,002,500			17,433,720			13,625,171

Operating expenses:
	Selling, general and administrative			2,976,611			2,867,389			10,129,861			9,947,761
	Research and development			1,554,561			1,946,917			4,883,462			6,766,673
	Asset impairment charges			—			995,000			—			995,000
	Restructuring charge			—			1,101,889			—			1,101,889

		Total operating expenses		4,531,172			6,911,195			15,013,323			18,811,323

Earnings (loss) from operations				2,605,144			(2,908,695	)		2,420,397			(5,186,152	)
Other (income) expense:
	Interest expense			4,046			12,843			21,633			34,329
	Interest and other income			(55,350	)		(56,908	)		(181,836	)		(146,511	)

Earnings (loss) before income taxes and cumulative effect of change in accounting principle				2,656,448			(2,864,630	)		2,580,600			(5,073,970	)
Income taxes				1,032,240			—			1,032,240			—

Net earnings (loss) before cumulative effect of change in accounting principle				1,624,208			(2,864,630	)		1,548,360			(5,073,970	)
Cumulative effect of change in accounting principle				—			—			—			(4,281,205	)

Net earnings (loss)			$	1,624,208		$	(2,864,630	)	$	1,548,360		$	(9,355,175	)

Earnings (loss) per share:
		Basic	$	0.11		$	(0.19	)	$	0.10		$	(0.62	)

		Diluted	$	0.10		$	(0.19	)	$	0.10		$	(0.62	)

Weighted average common shares outstanding:
		Basic		15,452,238			15,234,693			15,357,610			15,161,804

		Diluted		15,721,470			15,234,693			15,419,281			15,161,804


					Nine Months Ended September 30,

					2003			2002

Cash flows from operating activities:
	Net earnings (loss)				$	1,548,360		$	(9,355,175	)
	Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
				Cumulative effect of change in accounting principle		—			4,281,205
				Loss on disposal of fixed assets		38,337			16,582
				Deferred income taxes		1,032,240			4,406
				Depreciation and amortization		1,414,501			1,413,717
				Asset impairment charge		—			995,000
				Restructuring charge		—			1,101,889
				Increase (decrease) in cash resulting from changes in:
				Accounts receivable, net		(189,825	)		5,727,423
				Inventories		3,262,211			4,897,425
				Prepaid expenses and other current assets		299,477			292,123
				Deposits and other intangibles		(18,821	)		206,582
				Accounts payable, trade		391,228			(1,290,058	)
				Accrued expenses		281,376			(762,703	)
				Taxes payable		—			(78,900	)
				Customer advance payments		126,638			(44,425	)
				Deferred rent		(45,487	)		(58,895	)
				Goodwill		—			(76,219	)
				Purchased Technology		—			200,000
				Accrued stock option compensation		(23,417	)		(736	)

			Net cash provided by operating activities			8,116,818			7,469,241

Cash flows from investing activities:
	Capital expenditures					(350,751	)		(1,615,929	)

			Net cash used in investing activities			(350,751	)		(1,615,929	)

Cash flows from financing activities:
	Net proceeds from sales of common stock to employees					168,946			446,189
	Exercise of stock options					220,862			306,923
	Stock issuance costs, net					—			(4,000	)
	Principal payments on capital lease obligations					(32,830	)		(59,416	)

			Net cash provided by financing activities			356,978			689,696

Net increase in cash and cash equivalents						8,123,045			6,543,008
		Effect of exchange rate changes on cash and cash equivalents				22,942			(4,022	)
Cash and cash equivalents, beginning of year						16,229,558			7,210,937

Cash and cash equivalents, end of quarter					$	24,375,545		$	13,749,923

Supplemental disclosures of cash flow information:
				Cash paid for interest	$	21,633		$	34,329

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þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


o		Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


		Three Months Ended Sept. 30,					Nine Months Ended Sept. 30,

		2003		2002			2003			2002

Net earnings (loss)
	As reported	$	1,624,208	$	(2,864,630	)	$	1,548,360		$	(9,355,175	)
	Pro forma	$	921,657	$	(4,160,365	)	$	(298,982	)	$	(13,242,379	)
Earnings (loss) per share -
	Basic - As reported	$	0.11	$	(0.19	)	$	0.10		$	(0.62	)
	Basic - Pro forma	$	0.06	$	(0.27	)	$	(0.02	)	$	(0.87	)
	Diluted - As Reported	$	0.10	$	(0.19	)	$	0.10		$	(0.62	)
	Diluted - Pro forma	$	0.06	$	(0.27	)	$	(0.02	)	$	(0.87	)


Exercise Price Range		Exchange Ratio

$ 6.00 — $8.25		0.67 shares covered by a new option for every 1 share covered by a cancelled option

$14.00 — $14.63		0.40 shares covered by a new option for every 1 share covered by a cancelled option


	Sept. 30, 2003		Dec. 31, 2002

Wages, vacation and related payroll taxes	$	1,615,711	$	966,223
Professional fees		243,865		212,855
Warranty reserve		954,209		968,818
Restructuring costs		441,868		644,960
Other		925,399		1,106,820

	$	4,181,052	$	3,899,676


		Accrued Lease
		Exit Costs

Balance, December 31, 2002		$	644,960
	Accrual for new activities		—
	Cash payments		(203,092	)

Balance, September 30, 2003		$	441,868


		RADYNE COMSTREAM INC.

		By:		/s/ Richard P. Johnson

				Richard P. Johnson, Vice President and Chief Financial Officer
				(Principal Financial Officer)


Exhibit No.		Exhibit

10.1		Employment Agreement effective November 1, 2003 by and between Registrant and it Chief Executive Officer, Robert C. Fitting

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code


Dated: November 14, 2003

		/s/ Robert C. Fitting

		Robert C. Fitting
		Chief Executive Officer


Dated: November 14, 2003

		/s/ Richard P. Johnson

		Richard P. Johnson
		Chief Financial Officer


	September 30,		December 31,
	2003		2002

Raw materials and components	$	5,824,027	$	8,012,011
Work-in-process		1,367,772		1,836,969
Finished goods		200,591		805,621

	$	7,392,390	$	10,654,601


	September 30,			December 31,
	2003			2002

Machinery and equipment	$	6,051,776		$	5,889,176
Furniture and fixtures		3,986,821			4,009,972
Leasehold improvements		644,630			678,567
Demonstration units		651,174			586,378
Computers and software		915,721			889,319

		12,250,122			12,053,412
Less accumulated depreciation and amortization		(9,653,067	)		(8,360,570	)

	$	2,597,055		$	3,692,842