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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Mark One)

For the fiscal year ended December 31, 2002

OR

For the transition period from                       to                     

Commission file number: 000-31635

Endwave Corporation

(Exact name of registrant as specified in its charter)

(408) 522-3100

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

None

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

Common Stock, $0.001 par value

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ¨    No x

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

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2002 was approximately $16.3 million. Shares of voting common stock held by directors, executive officers, and by each person who beneficially owns 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The aggregate market value has been computed based on a price of $3.20, which was the closing sale price June 28, 2002 as reported by the Nasdaq National Market.

The number of shares outstanding of the registrant’s common stock as of March 14, 2003 was approximately 9,014,661.

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ENDWAVE CORPORATION

FORM 10-K

December 31, 2002

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Forward-Looking Statements

In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements as defined by federal securities laws. Forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from what is currently anticipated. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in Item 1, “Business,” as well as Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You should carefully review the risks described in this Annual Report on Form 10-K and in other documents we file with the Securities and Exchange Commission. When used in this report, the words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” and similar expressions are generally intended to identify forward-looking statements. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

PART I

We design, manufacture and market RF (radio frequency) subsystems that enable the transmission, reception and processing of high-speed electromagnetic signals in broadband wireless telecommunications systems and other adjacent market product designs requiring similar RF, microwave and millimeter wave technology.

Our products are used primarily in current and next generation “cellular backhaul,” carrier class trunking, point-to-point access, and point-to-multipoint access applications. Our target customers are microwave radio manufacturers and wireless systems integrators (collectively referred to as OEMs) that provide the broadband wireless equipment used by communications service providers to deliver voice, data and video services to business consumers. Original equipment manufacturers (OEMs) that use or have used our products include Allgon Microwave, Stratex Networks, Harris Corporation, Hughes Network Systems, Nera Networks, Nokia, Nortel Networks, P-Com, Siemens AG and Witcom Ltd. In addition to telecommunications applications, our products are used in various other applications and markets. Our target customers in these markets are defense contractors and sub-contractors that design aerospace, defense/weapons, and electronics platforms for various domestic and foreign defense customers. We also supply manufacturers of test and measurement equipment and of various other electronic products for commercial applications. Defense and commercial customers that use or have used our products include Anritsu, Boeing Corporation, Filtronic, Harris Corporation, L-3 Communications, Lockheed Martin, M/A-COM/Tyco, Raytheon, Rockwell International and TASC, a business unit of Northrop Grumman.

We were originally incorporated in California in 1991 and reincorporated in Delaware in 1995. In March 2000, we merged with TRW Milliwave Inc. (“TRW Milliwave”), a RF subsystem supplier that was a wholly-owned subsidiary of TRW Inc. (“TRW”). In connection with the merger, we changed our name from Endgate Corporation to Endwave Corporation. As a result of the merger, we became one of our industry’s largest commercial suppliers of RF subsystems with a substantially increased customer base and design and manufacturing capacity. On October 17, 2000, we successfully completed the initial public offering of our common stock.

As part of our growth strategy, we have made selected acquisitions of related and competitive companies. In September 2002 we acquired the broadband assets of the Fixed Wireless division of Signal Technology Corporation. The acquisition included assets such as customer contracts, equipment, inventory, product designs and other intellectual property, and key personnel needed for the ongoing operation of the business unit. The acquisition added a broad product offering and capability to our product and technology portfolio. The acquisition both expanded relationships with existing customers such as Stratex Networks, Nera Networks and

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other major OEMs, and added several significant new customers to our customer list. In conjunction with the acquisition, we established a Northeast Operation based in Andover, MA to market and provide support to customers and prospective customers in the northeastern region of the United States and Europe. Approximately 12 employees are based in the Andover facility in functional areas including engineering and sales.

In February 2003, we acquired certain assets from the broadband business of Arcom Wireless, Inc., a subsidiary of Dover Corporation. This acquisition was structured as an asset purchase, and included transceiver designs and intellectual property required to manufacture and supply a 58 GHz integrated transceiver product to an existing Endwave customer. No employees from Arcom were retained in connection with this acquisition.

During the past 24 months, we have completed the following asset acquisitions:

We design our products to best satisfy our customers’ technical, inventory, logistical, and cost requirements by using our proprietary technologies, RF design, and manufacturing expertise. We offer a broad range of products at multiple levels of integration that are optimized for a customer’s specific product and performance needs. Our products include RF modules such as power amplifiers, low noise amplifiers, up and down converters, frequency multipliers, oscillators, synthesizers, integrated transceivers, and power amplifier switch combiners used in cellular base stations. Our proprietary circuit and manufacturing technologies enable us to design and manufacture RF subsystems that minimize the use of expensive gallium arsenide and reduce manual labor. We use third-party semiconductor fabrication facilities for the manufacturing of the gallium arsenide and other semiconductor devices, which we design. Designing our own semiconductor devices gives us the flexibility to use technologies best suited for specific applications and eliminates dependence on and limitations of standard, commercially available gallium arsenide devices. We believe our proprietary technologies and processes give us a significant competitive advantage in manufacturing our products in high volume with a path to low per-unit cost.

We also offer build-to-print (BTP) manufacturing services for customer-designed products such as multi-function modules, transceivers and outdoor units (ODUs). BTP services enable us to capture new manufacturing volume for existing customer programs that require no design efforts on the part of Endwave. Although BTP business does not fully utilize all of Endwave’s expertise, particularly RF design, it does allow us to serve the needs of larger customers that have exceeded their internal manufacturing capacities, want to move to an outsourced manufacturing model, or have the need to change suppliers due to product sourcing difficulties or other business reasons, including the departure of existing merchant suppliers. BTP manufacturing opportunities also allow Endwave to capture manufacturing volume and associated revenues without expending the substantial engineering investments typically associated with RF product design effort.

Telecommunications Industry Overview

The telecommunications industry has seen many significant changes and developments over the last few years. The rapid acceptance and broad use of the Internet has created the need for communications networks that are capable of handling large amounts of digital traffic. The widespread use of wireless communications and the desire for mobile, high speed Internet access by consumers and businesses has created needs for communication solutions that have not been met by traditional wire line systems. The continued growth in the use of cellular phones and other wireless communications devices, such as PC and Personal Digital Assistants (PDAs), has created a large market for broadband wireless infrastructure. Developing countries realize that a key requirement

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for their economic growth is the availability of modern communications systems to provide widely available and reliable phone and data services. Rather than installing the traditional wired networks, they often chose cellular networks as the best solution since they are the easiest and fastest to deploy and provide the mobility that so many desire. In such countries where wired infrastructure is unavailable or expensive, the interconnection of the various cell sites is accomplished by the use of microwave radio links. Developing nations such as China and India have created a significant demand for such microwave radio links. In Europe and other developed countries, as new networks are deployed or additional cell sites are installed to handle increased traffic density, these new cell sites are also often connected to the existing networks through the use of microwave radio links. This application, commonly referred to as “cellular backhaul”, has caused the installation of hundreds of thousands of radio links over the last decade. As users desire messaging services and internet access from their cellular phones and PDAs, network integrators and service providers are expected to move to new generations of cellular systems known as 2.5G and 3G (or 3rd generation) systems. Some people predict that these new systems will require as much as three times the number of base stations as first generation systems and that each base station will require higher capacity backhaul to the network. When these next generation systems are deployed, they will create a demand for a large number of new microwave radios. In addition, as spectrums become crowded and cost of bandwidth increases, network operators will require higher performance radios that provide higher capacities and greater spectral efficiency.

Today, businesses and consumers are fueling the need for additional bandwidth in the Internet infrastructure with the growing use of e-mail, audio, and video streaming, corporate data networks, corporate websites, e-commerce, electronic data exchange, customer support, supply chain management and telecommuting. To adequately satisfy these needs, service providers must be able to transport large quantities of data, at high speed to almost any location, often world-wide. Since not all locations are served by high-speed copper wire or fiber optic cable, there is a growing need for broadband wireless access.

Although over the long term we believe these fundamental forces are creating needs for greater capacity in the telecommunications infrastructure and for wireless access to that network, the last two years have been very challenging for the broadband wireless industry, including the service providers, system integrators, OEMs and their suppliers. During this period, new cell phone subscription rates continued to decrease, introduction of 2.5 and 3G networks were delayed, deployment of broadband wireless access systems failed to develop as expected and the situation was made worse by a major slowdown in the U.S. and world economies. Capital expenditures, which had been at unusually high levels for several years, plummeted. Several of the CLECs (Competitive Local Exchange Carrier), including Teligent, WinStar and ART, declared bankruptcy and have recently re-emerged but with limited plans for further network build outs. Although deployment by CLECs of microwave radio systems for high-speed access came to a virtual halt in North America, installation of cellular networks around the world using microwave radio links continued at a somewhat slower, but relatively healthy rate.

The annual production of point-to-point microwave radios in 2002 was approximately 200,000 units and approximately 85% of which were used for cellular backhaul applications. More than 80% of these were in the 10 to 40 GHz frequency range, where our design and manufacturing processes are focused. The production of these point-to-point microwave radios is concentrated in a relatively small number of OEMs. Of the approximately 200,000 radios produced last year, the top 10 manufacturers produced more than 90% of the total. The largest OEM producers include Alcatel, Stratex Networks, Ericsson, Harris, NEC, Nera, Nokia and Siemens. These OEMs are in turn supplied key components and sub-assemblies either by captive internal sources, or by merchant suppliers such as Endwave. Of these external merchant suppliers, Endwave has the significant market share. Several of our competitors are financially weak and several have exited the business in the past two years. Some industry observers believe that the component and sub-assembly supplier base will undergo consolidation, and Endwave in particular has a stated plan to take a leading role in this industry consolidation trend.

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The Challenge

Forecasts for future demand of our products and the products of our customers are uncertain. It is difficult to accurately predict how long the current economic conditions will continue in the United States and other parts of the world, or whether they will improve. Regulatory conditions affecting radio deployments around the world are changing. New spectrums are being allocated and new wireless applications are being created. These uncertain and changing conditions make it very hard for our customers to predict their specific future product requirements with certainty. However, we believe that in order to be successful in the future our customers will need:

Emerging Market Opportunities

New applications for wireless access technologies are developing at both ends of the spectrum. On the lower end of the frequency range at 2.4 GHz and 5.8 GHz, the 802.11 specifications commonly referred to as “Wi-Fi” are becoming a de facto standard for short range wireless computing. Business professionals, students, and mobile professionals are embracing the technology as the method of choice for connecting to the Internet and corporate networks in a mobile setting, and while moving about in office buildings and campuses. Wi-Fi enabled devices are expected to nearly double from 20 million shipments in 2002 to 35 million in 2003, and is expected to represent a $3.7 billion business in 2005. Although Endwave’s core competencies lie at frequency ranges above 10 GHz, we believe that the broad adoption of Wi-Fi technology will create demand for high capacity backhaul links from the WiFi access point back to the local switching office, and similar to the cellular backhaul market, will drive demand for Wi-Fi backhaul in licensed bands that are in Endwave’s frequency regime.

At the higher end of the spectrum, new interest at 70 GHz and 80 GHz is emerging in the form of request for the Federal Communications Commission (“FCC”) to allocate 5 GHz of spectrum in both bands for broadband access. A filing by Loea Communications requesting rulemaking at 70 GHz (71-76 GHz) and 80 GHz (81-86 GHz) has caused many industry leaders to watch this development closely. Cisco Systems, on behalf of Bridgewave, Ceragon Networks, Endwave Corporation, Loea Communications, and Stratex Networks has filed comments with the FCC for proposed rulemaking for these bands. It is expected that the FCC will rule on this matter in the next 6-12 months. If allocated as currently proposed, this spectrum would be well suited to deliver data rates of 1-10 Gbps over distances of approximately 2 kilometers. This distance and data rate capability make the technology well suited to serve the 75% of the 750,000 business buildings that are within 1 mile of the nearest fiber connection and cannot practically access the fiber. Although there is no certainty that spectrum will be allocated at these frequencies, or how it’s allocation may impact the business potential, we are one of a few companies that is capable of designing, developing, testing and manufacturing the RF front end for these high frequency wireless systems.

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Our Solution

As a provider of RF subsystems, we design and manufacture a broad portfolio of products, from RF modules to fully integrated transceivers and outdoor units and strive to provide our customers, original equipment manufacturers and wireless systems integrators, with the products, resources and services that they need to be successful in this changing environment. We provide:

Superior performance through technological leadership.    Technological leadership begins with the people, their capabilities and their experience. We have a large technical team with broad expertise in device physics, semiconductor device design, circuit design, component and/or subsystem design, test engineering and other critical disciplines. Our technical leadership enables us to optimize our products for critical performance factors that are important to our customers. We provide the technology to optimize such key parameters as spectral efficiency, which is the rate at which data can be transmitted in a given segment of the radio frequency spectrum. We have extensive experience in the design of RF devices based on gallium arsenide, the semiconductor material most widely used in broadband wireless access applications as well as other less commonly used RF semiconductor materials. This design expertise gives us the flexibility to optimize our product designs because we are not limited to standard, commercially available semiconductor devices. We use third-party semiconductor fabrication facilities to manufacture the gallium arsenide and other semiconductor devices we design. Our use of third-party semiconductor facilities gives us the flexibility to use the process technology that is best suited for each application and eliminates the need for us to invest in and maintain our own fabrication facilities.

Path to low cost through multiple circuit technologies.    With our proprietary circuit and process technologies, coupled with our world-class manufacturing processes, we are able to provide better solutions related to our customers’ volume and cost requirements. We employ three distinct circuit technologies as appropriate to meet the needs of our customers and their specific project, including traditional Hybrid Microwave Integrated Circuits (HMIC), Monolithic Microwave Integrated Circuits (MMIC), and Flip Chip Integrated Circuits (FCIC). HMICs, have many bond wires that must be individually tested and adjusted, or tuned, during the manufacturing process. Our MMIC circuits eliminate most of the bond wires used in HMICs, allowing us to produce them using automated assembly techniques. Our patented FCIC technology enables us to design and manufacture RF circuits with less gallium arsenide material than a typical MMIC circuit and significantly fewer wire bonds than HMICs. As a result, FCIC circuits lend themselves to high-volume, automated manufacturing processes for applications characterized by very high unit volumes. These circuit advantages, coupled with our award winning “lean manufacturing” process have allowed us to significantly reduce costs.

Short product design cycle.    We have developed an extensive library of RF circuit and device designs that allow us to rapidly and economically combine standard circuits and devices into custom assemblies to quickly satisfy the various performance and frequency requirements of our customers. We have the expertise and facilities to take advantage of traditional circuit manufacturing technologies to rapidly prototype and test a new design. After prototyping in traditional HMIC technology, we can update the design to utilize MMIC, or our proprietary FCIC technology for lower cost and high volume manufacturing. We believe that this ability to migrate from prototype to volume production in a short period of time is an important competitive advantage.

Broad product portfolio.    We offer a range of products at multiple levels of integration, from single function RF modules to integrated transceivers, to address most any customer need. This allows our customers to select the products that best complement their internal capabilities and manufacturing requirements. Our product design capability supports a broad range of frequencies, from 1 GHz to 100 GHz, and addresses multiple market applications. This enables our customers to rapidly design products for new frequencies or applications.

Scalable manufacturing with high volume production capability.    We believe we are one of the largest suppliers of RF subsystems focused on broadband wireless solutions. Our traditional manufacturing approach allows our customers to develop new products in relatively small quantities during the early stages of development. As their design becomes proven and is moved into production, these products can either be

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maintained with traditional assembly approaches, moved into an automated process where volumes justify this transition, or moved to our offshore manufacturing facility. Our advanced assembly and testing capabilities and multiple production lines allow us to rapidly achieve high volume production to meet our customers’ increasing volume demands. We have a long-term gallium arsenide device supply agreement with Velocium, a former wholly-owned subsidiary of TRW which is now an operating unit of Northrop Grumman Space and Mission Systems Corp., which further enhances our manufacturing capabilities and ensures an adequate supply of gallium arsenide devices.

Logistical flexibility.    We provide our customers with a high degree of logistical flexibility through the use of multi-year frame agreements with logistical plans that are tailored to their individual needs. These frame agreements usually cover a variety of products and frequencies, with varying degrees of flexibility on quantities and delivery rates. This allows our customers to rapidly adjust to the changing demands of their market.

High quality.    Our customers, whether focused in telecommunications, defense or other adjacent markets, expend considerable financial and human resource to develop and introduce new products. Understandably, they have high demands for quality and reliability once they’ve completed their development and are preparing to take their product to market. Many customers find it necessary to design their systems so they will operate 99.99% or even 99.999% of the time. Our careful design, advanced manufacturing and ISO 9001 certified facilities are intended to provide the high reliability required for today’s commercial systems.

Our Strategy

Our objective is to be the leading global supplier of RF subsystems for broadband wireless applications. We intend to become the RF subsystem supplier of choice for broadband wireless systems built by the leading companies in telecommunications and other markets. The major elements of our strategy include:

Maintain and expand our strong position in our core market.    The majority of our revenue is derived from production of low and medium data rate radios, in the 10 to 40 GHz frequency range, for use in cellular backhaul systems. Today this represents the largest and one of the most stable portions of the market. We intend to maintain and expand our penetration in these areas, both in terms of current and new customers, customer programs, and frequency ranges.

Extend our technological leadership.    We will continue to invest in “next generation” research and development, maintain our team of the most talented engineers and scientists, and build on our manufacturing technologies.

Provide our customers with increased logistical flexibility.    In this uncertain market, it is difficult for our customers to predict exact products, frequencies and quantities. By developing broader band circuits and by using multi-product, multi-year supply agreements, flexible logistics plans and short manufacturing cycles, we enable our customers to quickly respond to market demands.

Target new frequencies and emerging applications.    We currently offer a wide range of products that support the principal frequency bands currently used for broadband wireless backhaul and access, and defense applications. We intend to offer products for higher data rate radios, new frequency bands and emerging market applications as opportunities arise.

Provide best-in-class manufacturing capability.    Our circuit design, manufacturing and testing processes and continuous improvement programs have helped to bring manufacturing innovations to an industry that has historically utilized labor-intensive manufacturing techniques. We will continue to improve our lean manufacturing methods that have produced significant cost reductions and significantly higher outputs with fewer employed assets.

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Reduce costs through offshore manufacturing.    We have responded to customer and market requirements for lower cost solutions with the establishment of a partnership with a world-class manufacturing facility in Southeast Asia. Within that facility we utilize both a standard contract manufacturing line managed by our partner and an Endwave managed manufacturing line. This partnership and the product manufacturing is managed by our full-time, in-country management team with extensive experience in process engineering and manufacturing management. We draw on the local economy to obtain lower cost of materials, labor, and facilities than is available in the United States.

Maintain rapid design and prototyping capability.    We intend to maintain our ability to rapidly design and prototype new products that meet our customers’ needs. We believe we can achieve this with our multiple design and manufacturing techniques.

Leverage strategic relationship with Velocium.    Our supply agreement with Velocium, a former wholly-owned subsidiary of TRW which is now an operating unit of Northrop Grumman, provides us with a long-term supply of gallium arsenide devices at preferred cost. We believe that our supply of these devices from Velocium is a competitive advantage because the supply of gallium arsenide devices may become constrained in the future as the broadband wireless access market grows. In addition, we have access to Velocium’s research and design expertise in the areas of RF and digital circuit design technologies as well as advanced semiconductor materials. We believe this access represents a significant competitive advantage.

Balance production capacity to market demand.    The demand for RF products is volatile. As the demand varies, we will adjust our manufacturing capacity to meet market demand. We have flexible facilities and equipment so adjusting to changes in market demands is largely a matter of adjusting work force levels accordingly.

Secure new design wins to expand and diversify our customer base.    We intend to use our technology, skilled design teams, short design cycles and manufacturing capability to secure new designs wins with new and existing customers, with special attention to those top 10 microwave radio suppliers who represent over 90% of the total demand.

Use our unique strengths to further penetrate adjacent markets.    We have unique technology, experience, and capabilities in the design of high volume microwave modules and subsystems in the 10 to 100 GHz frequency range. These are attributes that are useful in other adjacent markets such as instrumentation, scientific, automotive radar, security, fiber optics and military systems. We will continue to pursue additional opportunities in these adjacent markets where our technologies are advantageous.

Pursue additional acquisitions where appropriate.    In order to achieve our goal of being the leading global supplier of RF subsystems, we intend to continue to pursue additional acquisition opportunities that are strategically advantageous and financially accretive.

Products

Our products include amplifiers, multipliers, frequency converters, oscillators, frequency synthesizers, integrated transceivers and outdoor units (ODUs) that enable the transmission and reception of data signals in communication applications such as cellular backhaul, broadband wireless access, and network trunking; as well as other adjacent markets requiring these technologies and products. In addition to those products designed and developed by Endwave, we also provide “build-to-print” manufacturing services for products that have been designed by our customers. While the majority of our existing customers are wireless systems integrators and original equipment manufacturers serving the broadband wireless market, a portion of our revenues are derived from customers who use our products to satisfy needs for military, instrumentation, scientific and other adjacent markets.

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Transceivers are our core product offering, representing approximately 85% of our net revenues for 2002. Transceivers are a critical subsystem found in microwave and millimeter wave radios. These subsystems function as the heart of the wireless system by combining transmit and receive functions in a single package, which gets built into the overall radio system. Endwave specializes in high frequency transceivers in the range of 10 GHz to 60 GHz, for point-to-point and point-to-multipoint communications applications.

Customers

We sell our products primarily to global wireless systems integrators and original equipment manufacturers. During 2002 we shipped products to more that 90 different customers. The ten customers that attributed the greatest proportion of our revenues in the year ended December 31, 2002, were:

A relatively limited number of customers have historically accounted for a substantial portion of our sales. For the years ended December 31, 2002 and 2001, sales to our largest customer, Nokia, accounted for 71% and 67% of our total revenue, respectively. For the year ended December 31, 2000, sales to Nokia, Nortel and Hughes Network Systems accounted for 32%, 25% and 21% of total revenue, respectively. There were no other customers that accounted for more than 10% of our revenues.

The rapid and severe downturn for the United States economy and the telecommunications industry, beginning in late 2000, has affected growth in demand for our customers’ products. In addition to the deteriorating domestic economic environment, the worldwide telecommunications market is also experiencing reduced demand. This decreased demand has led to reduced order forecasts from some of our customers. In February 2002, we announced lower than expected revenue outlook for 2002, primarily due to reduced demand and inventory reduction at a major customer. There can be no certainty as to the degree of the severity or duration of this economic downturn or the demand in the telecommunications industry. We also cannot predict the extent and timing, if any, of the impact of the economic downturn in the United States and the worldwide downturn for the telecommunications industry on economies in Asia, Europe and other countries and geographic regions. We also cannot predict whether any significant customer in prior periods will continue to be a significant customer in future periods. We expect that a high percentage of our product sales will continue to be to a rather limited number of customers in the foreseeable future.

Sales

Product sales were $22.1 million, $33.5 million, and $39.8 million for 2002, 2001, and 2000 respectively. Shipments to international customers accounted for 76.6%, 72.6% and 23.4% of total product sales in 2002, 2001 and 2000, respectively. Additionally, many of our customers sell their products, which incorporate components and subsystems sold by us, outside the United States.

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Competition

Competition in the market for RF subsystems for broadband wireless access systems is intense. In the markets for RF modules, transceivers and outdoor units, we primarily compete with, among others, the following merchant suppliers:

In addition to those companies listed above with whom we may compete directly, there are wireless systems integrators, for example, Ericsson, who design and manufacture their own RF subsystems for use in their own broadband radio products. To the extent wireless systems integrators presently, or may in the future, produce their own RF subsystems, we lose the opportunity to gain a customer and the related sales opportunities. Conversely, if they should decide to outsource their requirements, this may significantly expand the market available to Endwave.

We are committed to providing superior product performance, logistical flexibility and manufacturing excellence, as we believe these factors are critical to our customers’ decision to purchase our products. We believe that the cost structure of our products is competitive in each of our target markets. Many factors contribute to the final pricing of our products, including the costs for customer-specific designs, the scale of production, and the logistical arrangements.

We believe we are well positioned to compete effectively in our chosen markets. However, some of our current and potential competitors are substantially larger than us and have greater financial, technical, manufacturing and marketing resources. If we were unable to compete successfully, our future operations and financial results would be harmed.

Backlog

Our order backlog consists of a combination of standard purchase orders, annual purchase agreements and multi-year frame agreements. The large majority of our orders are multi-year frame agreements with major commercial OEMs. These frame agreements usually include an estimate of the expected annual quantities during the contract and include a logistics plan that provides for a monthly rolling forecast of usage from the customer. These forecasts, however, are primarily for material and capacity planning purposes and are subject to significant changes from month to month and quarter to quarter. The logistics plans generally allow the customers a high degree of flexibility in changing, rescheduling or canceling forecasted requirements. Because these customers are only required to take delivery of the “firm” portion of the forecasts, which is usually a month, more or less, they have the ability to significantly change forecasted delivery dates and quantities. For these reasons we believe that backlog is not a reliable indicator of future revenue.

Backlog includes all purchase orders and contracts for products with expected delivery dates through December 31, 2003. Our backlog at March 21, 2003 was approximately $19.2 million as compared to a backlog of $24.4 million as of March 15, 2002. The decrease in backlog is attributable to the more conservative forecasts from our customers for requirements through the rest of 2003. There can be no assurance that the current backlog

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will necessarily lead to actual sales in any future period. Of our current backlog, approximately 60.5% is attributable to orders received from Nokia. If we were to lose this customer or if orders by Nokia or other customers were to decrease or be delayed, our operating results and financial condition would be harmed.

Governmental Regulations

Our products are incorporated into wireless communications systems that are subject to various United States regulations and similar laws and regulations adopted by regulatory authorities in other countries. Regulatory changes, including changes in allocation of available frequency spectrum, could significantly impact our operations by restricting development efforts by our customers, making obsolete current products or increasing the opportunity for additional competition. Changes in, or failure to comply with, applicable domestic and international regulations could have an adverse effect on our business, operating results and financial condition. In addition, the increasing demand for wireless communication has exerted pressure on regulatory bodies worldwide to adopt new standards for these products and services, generally following extensive investigation of and deliberation over competing technologies. The delays inherent in this governmental approval process have caused in the past, and may cause in the future, the cancellation, postponement or rescheduling of installation of communications systems by our customers, which in turn may negatively affect the sale of our products to those customers.

Patents and Intellectual Property Rights

Our success depends, in part, on our ability to protect our intellectual property. We rely primarily on a combination of patent, copyright, trademark and trade secret laws to protect our proprietary technologies and processes. Nevertheless, these measures may not be adequate to safeguard the proprietary technology underlying our products. As of December 31, 2002, we had 36 United States patents issued and 26 foreign patents issued. Our issued patents include those relating to basic circuit and device designs, semiconductors, our proprietary “flip-chip” circuit technology and various circuit and system designs. In addition, we jointly hold seven patents with AT&T pertaining to sectorized communications systems and jointly hold one patent with Superconducting Supertechnologies, Inc. relating to satellite communications. Our issued patents expire between 2013 and 2018. Of all our patents, we consider two patents relating to our flip-chip circuit technology and a patent relating to our YIG oscillator technology to be the most valuable. With regard to our pending patent applications, no patents may be issued as a result of these or any future applications. If they are issued, any patent claims allowed may not be sufficiently broad to protect our technology. In addition, any existing or future patents may be challenged, invalidated or circumvented, and any right granted hereunder may not provide meaningful protection to us. The failure of any patents to provide protection to our technology might make it easier for our competitors to offer similar products and use similar manufacturing techniques.

We generally enter into confidentiality and assignment of rights to inventions agreements with our employees, and confidentiality and non-disclosure agreements with our strategic partners, and generally control access to and distribution of our documentation and other proprietary information. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use our products or technology without authorization, develop similar technology independently or design around our patents. In addition, effective patent, copyright, trademark and trade secret protection may be unavailable or limited outside of the United States, Europe and Japan. We may not be able to obtain any meaningful intellectual property protection in other countries and territories. Additionally, we may, for a variety of reasons, decide not to file for patent, copyright, or trademark protection outside of the United States. We occasionally agree to incorporate a customer’s or supplier’s intellectual property into our designs, in which cases we have obligations with respect to the non-use and non-disclosure of that intellectual property. We also license technology from Velocium, a former wholly-owned subsidiary of TRW which is now an operating unit of Northrop Grumman Space and Mission Systems. There are no limitations on our rights to make, use or sell products we may develop in the future utilizing the technology licensed to us by Velocium, provided that the products are for commercial customers and non-satellite applications.

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Steps taken by us to prevent misappropriation or infringement of our intellectual property or the intellectual property of our customers may not be successful. Moreover, litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of proprietary rights of others, including our customers. Litigation of this type could result in substantial costs and diversion of our resources.

The wireless access industry is characterized by vigorous protection and pursuit of intellectual property rights. We have received, and may receive in the future, notices of claims of infringement of other parties’ proprietary rights. In addition, the invalidity of our patents may be asserted or prosecuted against us. Furthermore, in a patent or trade secret action, we could be required to withdraw the product or products as to which infringement was claimed from the market or redesign products offered for sale or under development. We have also at times agreed to indemnification obligations in favor of our customers and strategic partners that could be triggered upon an allegation or finding of our infringement of other parties’ proprietary rights. These indemnification obligations would be triggered for reasons including our sale or supply to a customer or strategic partner of a product which was later discovered to infringe upon another party’s proprietary rights. Irrespective of the validity or successful assertion of such claims we would likely incur significant costs and diversion of our resources with respect to the defense of such claims. To address any potential claims or actions asserted against us, we may seek to obtain a license under a third party’s intellectual property rights. However, in such an instance, a license may not be available on commercially reasonable terms, if at all.

Research and Development

The goals of our research and development efforts are to reduce the cost and increase the functionality and performance of our products, while adapting them to the specifications required of our customers and of new markets for our products. In addition, substantial efforts have been devoted to the development of efficient manufacturing methods necessary for competitive pricing and improved gross margins of our products, while maintaining high quality standards required by our customers. Other development efforts include expansion of existing product families and initiatives to combine products from our various complementary product lines to create additional functionality.

We believe that our future success will depend on our ability to continue to enhance and cost reduce our existing products, and to develop and introduce new products to maintain our technological leadership and meet a wider range of customer needs. However, as a business we recognize the need to balance research and development spending with running a profitable business and have reduced our research effort accordingly. Our research and development and related engineering expenses were approximately $9.2 million, $14.2 million, and $9.7 million in each of 2002, 2001, and 2000 respectively. The decrease in 2002 spending was primarily the result of staff reductions associated with matching our research and development spending to the current needs of the industry.

Employees

As of December 31, 2002, we had 137 full-time employees, including 80 in manufacturing, 22 in product and process engineering, 15 in sales and marketing and 20 in general and administrative. Our employees are not subject to any collective bargaining agreement with us and we believe that our relations with our employees are good.

Available Information

Our principal executive offices are located at 990 Almanor Avenue, Sunnyvale, California 94085, and our main telephone number is (408) 522-3100. Investors can obtain access to this annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and all amendments to these reports, free of charge, on our website at http://www.endwave.com as soon as reasonably practicable after such filings are

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electronically filed with the SEC. The public may read and copy any material we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site, http://www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Risk Factors

Stockholders or potential investors considering the purchase of shares of our common stock should carefully consider the following risk factors, in addition to other information contained in this Annual Report on Form 10-K. Additional risks and uncertainties not presently known to us or that we currently deem immaterial could also impair our business operations.

We expect to continue incurring operating losses and may not be profitable in the future.

We have not achieved profitability to date and may not achieve or sustain profitability in the future. Our failure to achieve profitability within the time frame that investors expect may cause the market price of our common stock to decline in the future. We had net losses of $31.0 million, $156.7 million and $59.5 million for the years ended December 31, 2002, 2001 and 2000, respectively. While we restructured during 2001, revenues declined further which resulted in an additional restructuring in 2002. There is no guarantee that these restructuring actions will enable the Company to achieve profitability in the future.

As a result of the merger with TRW Milliwave in March 2000, we may be limited in our ability to utilize any of our net operating loss carryforwards generated prior to the merger to offset any future taxable income we may have.

Until the last quarter of 2002, our cost of product revenues has exceeded our product revenues due in part to the historically low volumes of products we have sold and our investments in manufacturing capacity. We may be unable to maintain positive gross margins on product revenues or increase revenues sufficiently to achieve overall profitability.

The development of our technologies and products has required significant expenditures to hire and retain our research and development staff. In addition, many of our major customers typically require high levels of product customization that generally requires the commitment of significant research and development resources. We intend to continue to invest significantly in all areas, including research and development, to execute our business strategy. As a result of these and other factors, we expect to continue to incur significant quarterly losses for at least the next several quarters. If our revenues fail to grow at anticipated rates or if our expenses increase faster than we anticipate, our losses may increase and we may not become profitable.

Because we have a limited operating history, you may have difficulty evaluating our business and future prospects.

We have only limited financial data that you can use to evaluate our future prospects in the broadband wireless access market. Furthermore, because our merger with TRW Milliwave occurred in March 2000, we have a limited operating history as a combined company.

We depend upon a small number of customers, and the loss of any of them, or their failure to sell their systems, would limit our ability to generate revenues.

We depend, and expect to remain dependent, on a small number of wireless systems integrators for sales of our products. If our customers reduce orders for our products, we could lose revenues and suffer damage to our reputation in the industry. In February 2002, we announced lower than expected revenue outlook for 2002,

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primarily due to reduced demand and inventory reduction at a major customer. For the year ended December 31, 2002, sales to Nokia, Stratex Networks, Siemens and accounted for 80.2% of total revenues. For the year ended December 31, 2001, sales to Nokia accounted for 67% of total revenue. For the year ended December 31, 2000, Nokia, Nortel and Hughes Network Systems accounted for 78% of total revenue.

Our customers may not have or use the financial, marketing, technological and other resources necessary to ensure that their solutions will succeed in a marketplace characterized by rapid technological changes and intense competition. For example, communications service providers may insist that wireless systems integrators provide extensive financing for the deployment of large broadband wireless access networks, and our customers may be unwilling or unable to provide the necessary financial resources. If the wireless systems integrators that we supply were not successful in selling their broadband wireless access systems for any reason, our operating results would be harmed.

Until recently, our cost of product revenues has exceeded our product revenues, and because we expect competitive conditions will force us to reduce prices in the future, we must achieve further cost reductions in order to maintain positive gross margins and become profitable.

As a combined company, including results on a pro forma combined basis prior to March 31, 2000, our cost of product revenues has exceeded our revenues and, accordingly, we have reported negative gross margins since inception until the fourth quarter of 2002. If we are not able to continue to reduce our per-unit cost of product revenues to a sufficient degree, we will not become profitable. We expect market conditions, particularly declining prices for competing broadband access solutions, will force us to reduce our prices in the future. In order to reduce these costs, we must migrate our products to designs that require lower cost materials, improve our manufacturing efficiencies and successfully move production to low cost, off shore locations. The combined effects of these actions may not be sufficient to achieve the cost reductions needed to maintain positive gross margins and to achieve profitability.

Our operating results have historically fluctuated significantly and are likely to continue to do so in future periods. These results may fail to meet the expectations of securities analysts or investors, causing our stock price to fall.

Our quarterly and annual operating results are difficult to predict and are likely to continue to fluctuate significantly from period to period. It is likely that our operating results in one or more future quarters may be below the expectation of security analysts and investors. In that event, the trading price of our common stock almost certainly would decline. Our operating results may fluctuate for many reasons, including, but may not limited to: