MCE COMPANIES INC, S-1/A, 2000-10-13

MCE COMPANIES INC
S-1/A, 2000-10-13
ELECTRONIC COMPONENTS, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 13, 2000

REGISTRATION NO. 333-42360
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--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 3 TO

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

MCE COMPANIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
MICHIGAN 3679 38-3260790
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

310 DINO DRIVE
ANN ARBOR, MICHIGAN 48103
(734) 426-1230
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

JOHN L. SMUCKER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
310 DINO DRIVE
ANN ARBOR, MICHIGAN 48103
(734) 426-1230
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
J. MICHAEL BERNARD, ESQ. JOHN A. BURGESS, ESQ.
DYKEMA GOSSETT PLLC STUART R. NAYMAN, ESQ.
400 RENAISSANCE CENTER HALE AND DORR LLP
DETROIT, MICHIGAN 48243-1668 405 LEXINGTON AVENUE
(313) 568-6800 NEW YORK, NEW YORK 10174
(212) 937-7200
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), please check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
---------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
---------------

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
---------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO PRICE PER AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED(1) SHARE(2) OFFERING PRICE(2) FEE(3)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, without par value.......... 6,325,000 shares $13.00 $82,225,000 --
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes 825,000 shares to cover underwriter over allotments.

(2) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457(a) under the Securities Act of 1933, as amended.

(3) A registration fee of $36,960 was paid at the time of the initial filing of
this registration statement and an additional $3,012 was paid at the time of
the filing of Amendment No. 1 based on an estimate of the then aggregate
offering price.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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--------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE
THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED OCTOBER 13, 2000

[MCE COMPANIES, INC. LOGO]

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

5,500,000 SHARES

COMMON STOCK
--------------------------------------------------------------------------------

This is the initial public offering of MCE Companies, Inc. We are offering
5,500,000 shares of our common stock. No public market currently exists for our
shares. We anticipate that the initial public offering price will be between
$11.00 and $13.00 per share. Our common stock has been approved for quotation on
the Nasdaq National Market under the symbol "MCEI".

INVESTING IN OUR COMMON STOCK INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE 8.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND TO MCE
PUBLIC COMMISSIONS COMPANIES
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>

We have granted the underwriters the right to purchase up to 825,000 additional
shares to cover over-allotments.

DEUTSCHE BANC ALEX. BROWN
BANC OF AMERICA SECURITIES LLC
CIBC WORLD MARKETS

THE DATE OF THIS PROSPECTUS IS , 2000.
<PAGE> 3

MCE COMPANIES, INC. (LOGO)

Diodes & Ferrite Isolators, Circulators,
Chip Capacitors & Amplifiers
(Picture) (Picture)
Vector Modulators, Film Products;
PIN Diode Attenuators Resistors
& Switches (Picture)
(Picture)
RF, Microwave & Integrated
Millimeter Wave RF Subsystems
Subsystems (Picture)
(Picture)
Coaxial Attenuators, Programmable
Terminations, Adapters Components
& DC Blocks & Subsystems
(Picture) (Picture)
</TABLE>

The products shown above are representative of the devices, components and
subsystems which are designed, manufactured and sold by MCE Companies. These
products are described in "Products" beginning on page 44.
<PAGE> 4

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this
prospectus. You should carefully read the entire prospectus before making an
investment decision.

OUR BUSINESS

We design, manufacture and market a broad range of devices, components and
subsystems that are used throughout wireless and broadband infrastructure
equipment and related test equipment applications. We sell products that operate
over the full range of frequencies commonly used in wireless communications
transmission, including radio frequencies, microwave frequencies and millimeter
wave frequencies. We refer to this range of frequencies as RF. Our customers use
our products to control, condition and enhance RF signals for use in their
wireless and broadband infrastructure equipment.

Worldwide demand for voice, data and video services has required
communications service providers to offer their customers greater connectivity,
mobility and bandwidth. The rapid growth in the wireless communications industry
has led to substantial investments in infrastructure equipment to support the
build-out of communications networks. We sell our products to the original
equipment manufacturers, or OEMs, of these networks and related test equipment
OEMs, as well as to RF subsystems manufacturers. We also focus our sales efforts
on OEMs using RF products in emerging communications infrastructure applications
such as broadband access and fiber optic networking.

We believe that the following factors place us in a strong competitive
position within the growing market for wireless communications infrastructure
equipment:

- our broad product offering and benefits of scale in a highly fragmented
industry;

- our strong design and manufacturing capabilities, particularly at high
frequencies and high power levels;

- our expertise in the integration of devices and components into
subsystems; and

- our ability to rapidly and cost-effectively respond to the design and
production requirements of our globally oriented OEM customers.

We are a technology based, market driven organization, and we place
significant value on developing our customer relationships and responding to our
customers' needs. Our largest customers for the six months ended June 30, 2000
were Agilent Technologies, Flextronics International, Forem / Allen Telecom, LM
Ericsson, Lucent Technologies and Motorola.

We market our products worldwide through a direct sales force of
approximately 45 personnel based at our five operating units and at the parent
company. Our sales force works closely with a global network of over 90
independent sales representative firms to better cover and respond to our
customers. Our direct sales force routinely integrates engineering and product
line support from our operating units to address specific customer requirements
and provide custom-engineered design solutions. We also employ a select number
of independent distributors to market our higher volume products.

We seek to become the leading independent supplier of RF devices,
components and subsystems to OEM customers serving the wireless communications,
broadband access and fiber optic networking infrastructure markets. We intend to
achieve this objective by implementing the following key elements of our
strategy:

- expanding our technological expertise in and continuing our focus on RF
devices, components and subsystems for wireless communications;

3
<PAGE> 5

- developing and enhancing customer relationships, particularly with major
wireless infrastructure OEMs;

- focusing on growth opportunities in emerging communications technologies
and markets;

- growing through strategic acquisitions; and

- expanding our international presence.

Since our acquisition of Inmet Corporation in June 1994, we have completed
the following four strategic acquisitions:

- Weinschel Corporation which we acquired on November 30, 1995;

- KDI/Triangle Corporation which we acquired on July 23, 1996;

- Metelics Corporation which we acquired on March 16, 1998; and

- DML Microwave Limited which we acquired on July 30, 1999.

Through these acquisitions, we have assembled a company with a strong
heritage in the RF industry that dates back to the industry's formative years.
KDI and Weinschel were established in the 1950s and DML, Inmet and Metelics were
established in the 1970s. Our heritage contributes to our strong reputation and
the brand recognition of our operating units. We believe that our heritage,
combined with our technical expertise, breadth of products and benefits of
scale, positions MCE favorably in the fragmented RF devices, components and
subsystems industry.
-------------------------

We were incorporated in the State of Michigan in October 1995 to be the
parent of Inmet and other acquired businesses. Our principal executive office
are located at 310 Dino Drive, Ann Arbor, Michigan 48103. Our telephone number
is (734) 426-1230. Our web site is located at www.mcecompanies.com. The
information contained on our web site does not constitute a part of this
prospectus.

4
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Common stock offered by MCE Companies..... 5,500,000 shares
Common stock to be outstanding after the
offering................................ 26,600,480 shares
Use of proceeds........................... To repay indebtedness, to redeem preferred stock and for
working capital and other general corporate purposes,
including acquisitions. See "Use of Proceeds" for more
detailed information.
Proposed Nasdaq National Market symbol.... MCEI
</TABLE>

The number of shares of common stock to be outstanding upon completion of
this offering is based on the number of shares outstanding as of September 30,
2000, but excludes:

- 1,104,700 shares of common stock issuable upon the exercise of an
outstanding stock option granted pursuant to our 1996 stock option plan
at an exercise price of approximately $0.65 per share;

- 3,777,200 shares of common stock issuable upon the exercise of warrants
at an exercise price of $0.0001 per share;

- 3,800,000 shares of common stock issuable upon exercise of outstanding
stock options granted pursuant to our 2000 stock incentive plan at an
exercise price equal to the initial public offering price; and

- 2,800,000 shares of common stock reserved for future option grants and
restricted stock awards under our 2000 stock incentive plan.

As of September 30, 2000, 4,000 shares of redeemable preferred stock were
outstanding. We will use a portion of the proceeds of this offering to redeem
all of these shares of redeemable preferred stock.

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

DML is a registered trademark of DML, INMET is a registered trademark of
Inmet Corporation, METELICS MC and design are registered trademarks of Metelics
Corporation, WEINSCHEL is a registered trademark of Weinschel Corporation, KDI
and KDI/TRIANGLE are trademarks of KDI/Triangle Corporation, SMARTSTEP is a
trademark of Weinschel and the MCE logo and MCE are trademarks of MCE Companies,
Inc. All other trademarks or trade names referred to in this prospectus are the
property of their respective owners.

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

Unless otherwise indicated, all information in this prospectus assumes:

- that the underwriters have not exercised their option to purchase 825,000
additional shares;

- the filing of restated articles of incorporation, increasing our
authorized common stock to 100,000,000 shares and increasing our
authorized undesignated preferred stock to 10,000,000 shares, effective
prior to the date of this prospectus; and

- the 99-for-one stock dividend of the common stock, pursuant to which 99
shares of common stock are distributed for each share of common stock
outstanding, effective prior to the consummation of this offering.

5
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- ---------------------
CONSOLIDATED STATEMENT OF 1995 1996 1997 1998 1999 1999 2000
OPERATIONS DATA: ------- -------- -------- -------- -------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales....................... $ 5,282 $ 35,332 $ 65,418 $ 61,764 $ 64,647 $29,579 $46,141
Gross profit.................... 2,874 13,060 26,197 25,224 23,790 12,850 19,525
Write-off of acquired in-process
research and development...... -- -- -- 6,000 -- -- --
Income (loss) from operations... 1,017 3,423 9,896 (1,171) 728 2,146 5,432
Redeemable warrant expense...... -- -- 6,242 -- 250 126 1,912
Net income (loss)............... 373 1,195 (955) (4,457) (1,891) 271 (130)
Net income (loss) available to
common shareholders........... 373 960 (1,500) (5,020) (2,474) (18) (429)

Income (loss) per common share:
Basic......................... $ 0.03 $ 0.05 $ (0.08) $ (0.24) $ (0.12) $ (0.00) $ (0.02)
Diluted....................... $ 0.03 $ 0.05 $ (0.08) $ (0.24) $ (0.12) $ (0.00) $ (0.02)

Shares used in per share
calculations:
Basic......................... 12,446 18,950 19,301 20,644 20,946 20,922 21,032
Diluted....................... 12,446 20,581 19,301 20,644 20,946 20,922 21,032
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
---------------------
AS OF DECEMBER 31, PRO FORMA
--------------------------------------------------- AS
CONSOLIDATED BALANCE SHEET 1995 1996 1997 1998 1999 ACTUAL ADJUSTED(1)
DATA: ------- -------- -------- -------- -------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents....... $ 580 $ 911 $ 149 $ 129 $ 177 $ 192 $ 20,956
Working capital(2).............. 3,562 10,883 6,464 8,095 10,772 10,241 35,545
Total assets.................... 13,843 36,782 34,438 59,460 69,981 78,798 102,908
Long term debt(3)............... 8,651 17,522 5,817 28,304 36,663 36,601 2,716
Redeemable and convertible
warrants and preferred
stock......................... -- 4,242 10,709 10,952 13,435 15,486 --
Warrants........................ -- -- -- -- -- -- 18,091
Total shareholders' equity...... 3,215 4,883 3,416 3,319 1,114 754 74,235
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- ---------------------
1995 1996 1997 1998 1999 1999 2000
OTHER DATA: ------- -------- -------- -------- -------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities.................... $ 639 $ 634 $ 10,869 $ 1,323 $ 1,221 $ 1,128 $ 1,191
Cash flows from investing
activities.................... (6,413) (11,579) 341 (23,460) (11,202) (1,365) (1,158)
Cash flows from financing
activities.................... 6,174 11,277 (11,972) 22,117 10,029 283 (10)
Adjusted EBITDA(4).............. 1,584 5,132 12,444 8,145 7,970 4,286 8,077
</TABLE>

6
<PAGE> 8

------------
(1) The as adjusted balance sheet data as of June 30, 2000 gives effect to:

- the issuance and sale of the 5,500,000 shares of common stock offered by us
at an assumed initial public offering price of $12.00 per share after
deducting the estimated underwriting discounts and commissions and
estimated offering expenses;

- the repayment of all of our debt, excluding a $2.7 million note;

- the redemption of our redeemable preferred stock;

- the amendment to our redeemable warrants to eliminate the holders' put and
cash conversion rights and the warrants' resulting reclassification as
warrants within shareholders' equity and the charge of $6.3 million to the
accumulated deficit for the increase in the fair value of the redeemable
warrants;

- the amendment to our convertible warrants to eliminate the holders' cash
conversion rights and the warrants' resulting reclassification as warrants
within shareholders' equity;

- the net increase in shareholders' equity of $3.6 million related to the tax
benefit of the $12.5 million charge resulting from the option outstanding
under the 1996 stock option plan becoming exercisable in connection with
the closing of this offering; and

- the decrease to shareholders' equity for the loss on extinguishment of debt
of $2.0 million and the accretion of the redeemable preferred stock of
$288,000.

(2) The calculation of working capital as of December 31, 1996 includes the
reclassification of our revolving line of credit, in the amount of $7.2
million, from a current liability to long term debt for purposes of
consistency with the other periods presented.

(3) Long term debt includes the current portion thereon and also includes
borrowings outstanding under our revolving line of credit.

(4) In addition to income from operations, net income and cash flows, we use
Adjusted EBITDA to evaluate our operating performance. Adjusted EBITDA is
calculated as follows:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------- ----------------
1995 1996 1997 1998 1999 1999 2000
------ ------ ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)........................... $ 373 $1,195 $ (955) $(4,457) $(1,891) $ 271 $ (130)
Interest expense and other.................. 451 1,458 1,440 2,025 3,203 1,249 2,343
Income tax expense (benefit)................ 193 770 3,435 823 (834) 500 1,307
Depreciation................................ 124 996 1,399 1,688 2,017 944 1,215
Amortization................................ 443 713 883 2,066 2,530 1,196 1,430
Redeemable warrant expense.................. -- -- 6,242 -- 250 126 1,912
Restructuring and impairment charges and
inventory write-off....................... -- -- -- -- 2,695 -- --
Write-off of acquired in-process research
and development........................... -- -- -- 6,000 -- -- --
------ ------ ------- ------- ------- ------ ------
Adjusted EBITDA............................. $1,584 $5,132 $12,444 $ 8,145 $ 7,970 $4,286 $8,077
====== ====== ======= ======= ======= ====== ======
</TABLE>

This measure is calculated differently by other companies and, therefore, it
may not be comparable to other similarly titled measures presented by other
companies. We have presented Adjusted EBITDA because we use it to evaluate
our operating performance and because investors commonly use it to analyze a
company's operating performance. You should not consider Adjusted EBITDA to
be a substitute for income from operations, net income, cash flows or other
measures of financial performance prepared in accordance with generally
accepted accounting principles.

7
<PAGE> 9

RISK FACTORS

This offering involves a high degree of risk. You should carefully consider
the risks and uncertainties and the other information in this prospectus before
deciding whether to invest in shares of our common stock. Any of the following
risks could cause the trading price of our common stock to decline.

RISKS RELATED TO OUR BUSINESS

WE DEPEND ON TWO CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR SALES, THE LOSS OF
EITHER OF WHICH COULD HARM OUR FINANCIAL CONDITION AND LIMIT OUR ABILITY TO
SUSTAIN AND GROW OUR REVENUES.

Sales to Lucent and Ericsson account for a significant portion of our
revenues. Direct sales to Lucent represented 14.6% of our net sales in 1999 and
15.8% of our net sales in the six months ended June 30, 2000. Direct sales to
Ericsson represented 7.1% of our net sales in 1999 and 9.0% of our net sales in
the six months ended June 30, 2000. We expect that our sales to Lucent and
Ericsson will continue to account for a significant portion of our revenues for
the foreseeable future. Our current arrangements with Lucent and Ericsson do not
require them to purchase our products in the future. We experienced a reduction
in, and a delay of, orders from Lucent in 1998 and in 1999. Our sales to Lucent
in 1997 were extraordinarily high due to non-recurring sales of retrofit
subsystems. In addition, the reduction in, and delay of, orders from Lucent in
1998 and 1999 was primarily the result of a general decline in industry
activity, due in part to the Asian financial downturn. As a result, in 1998,
sales to Lucent were $9.4 million less than in 1997 and, in 1999, sales to
Lucent were $2.7 million less than in 1998. However, the industry is currently
experiencing significant growth. Direct sales to Lucent represented $9.4 million
of our net sales in 1999 and $7.3 million of our net sales in the six months
ended June 30, 2000. We believe our sales to Lucent will continue to track
industry trends. If we were to lose Lucent or Ericsson as a customer or if
orders by Lucent or Ericsson were to be delayed, reduced or canceled, our
financial condition and operating results would be adversely affected.

WE DEPEND ON COMMERCIAL OEMS OF WIRELESS COMMUNICATIONS INFRASTRUCTURE EQUIPMENT
TO OUTSOURCE PRODUCTION OF DEVICES, COMPONENTS AND SUBSYSTEMS AND OUR RESULTS OF
OPERATIONS COULD BE NEGATIVELY AFFECTED IF THEY SHIFT PRODUCTION IN-HOUSE.

Currently, OEMs of wireless infrastructure communications equipment obtain
their RF devices, components and subsystems by either developing them internally
or by buying products from third-party vendors. We have historically generated
significant revenues through sales of products to these OEMs. If these OEMs
increase their internal production of RF devices, components and subsystems or
manufacture these products exclusively in-house rather than purchasing these
products from third parties, our revenues would decrease and our financial
condition would be harmed.

IF WE FAIL TO INTRODUCE NEW PRODUCTS IN A TIMELY AND COST-EFFECTIVE MANNER OR IF
OUR EXISTING PRODUCTS BECOME OBSOLETE, OUR ABILITY TO SUSTAIN AND INCREASE OUR
REVENUES COULD SUFFER.

The markets for our products are characterized by frequent new product
introductions, rapid changes in engineering and application of RF technologies,
evolving industry standards and constant changes in customer requirements and
preferences. If technologies supported by our products become obsolete or fail
to gain widespread commercial acceptance, our business and financial condition
could be harmed. Our success in penetrating commercial markets will also depend
on our ability to successfully introduce new products. If we are unable to
design, manufacture and market new products for existing or emerging markets

8
<PAGE> 10

successfully, our ability to sustain and increase revenues will be impaired. Our
future success will depend in part on our ability to:

- enhance the functionality and price competitiveness of our existing
products in a timely and cost-effective manner;

- identify, develop and achieve market acceptance of new products that
address new technologies and meet customer needs in wireless
communications markets; and

- continue to apply our expertise and technologies to existing and emerging
commercial wireless and communications markets.

DECLINING AVERAGE SELLING PRICES FOR OUR PRODUCTS COULD ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS.

Many of our customers are under continuous pressure to reduce costs. As a
result, we expect to continue to experience downward pricing pressure on our
products. Our customers frequently negotiate supply arrangements well in advance
of delivery dates, requiring us to commit to price reductions before we can
determine whether corresponding cost reductions can be achieved. To offset
declining average sales prices, we must achieve manufacturing cost reductions
and, with respect to selected products, obtain orders for higher volume. If we
are unable to offset declining average selling prices, our gross margins will
decline. This decline could have a material adverse effect on our results of
operations.

OUR BUSINESS STRATEGY IS DEPENDENT ON THE SUCCESSFUL ACQUISITION AND INTEGRATION
OF NEW BUSINESSES AND TECHNOLOGIES. IF WE DO NOT SUCCESSFULLY ACQUIRE AND
INTEGRATE NEW BUSINESSES AND TECHNOLOGIES, OUR REVENUE GROWTH MAY SLOW AND OUR
RESULTS OF OPERATIONS MAY BE NEGATIVELY AFFECTED.

In the past, we have grown primarily by acquiring complementary companies,
businesses, technologies, products and services. We evaluate potential
acquisition opportunities from time to time, including those that could be
material in size and scope. As part of our business strategy, we intend to
continue to broaden and deepen our product lines and our design, engineering,
manufacturing and distribution capabilities through strategic acquisitions. Over
the past six years we have acquired five companies. These and any future
acquisitions we make will be accompanied by the risks commonly encountered in
acquisitions and integrations of companies which include, among other things:

- potential exposure to unknown liabilities of acquired companies;

- potentially adverse short term effects on our operating results;

- loss of productivity due to the diversion of our management's attention;

- dependence on hiring key personnel for the continued success of acquired
businesses;

- the continued availability of attractive acquisition opportunities, as
well as the potential that competitors may bid up to higher levels the
prices for attractive acquisition candidates;

- the difficulty and expense of assimilating the operations and personnel
of the companies, especially if the acquired operations are
geographically distant; and

- new acquisitions may not meet sales targets or be profitable.

Any of these factors could adversely affect our business. The failure to
successfully acquire and integrate new businesses or technologies would slow our
anticipated growth.

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<PAGE> 11

Additionally, the failure to successfully integrate a new business or
technology once acquired could result in higher operating costs than
anticipated, negatively impacting our business and operating results.

We currently have no arrangements or agreements for any strategic
acquisition.

THE AMORTIZATION OF GOODWILL OR OTHER INTANGIBLE ASSETS RESULTING FROM
ACQUISITIONS COULD MATERIALLY IMPAIR OUR OPERATING RESULTS.

The accounting treatment for any acquisition may result in significant
goodwill or the incurrence of significant in-process research and development
charges relative to the acquisition. We may have difficulty determining the
appropriate amortization period for acquired goodwill. Additionally, we may be
unable to realize the full value of our existing goodwill or additional goodwill
acquired in an acquisition. If the amount of goodwill and in-process research
and development charges in connection with any acquisition are substantial, the
application of purchase accounting could materially adversely affect our
operating results throughout the amortization period. For example, in the first
quarter of 1998, we recorded a $6.0 million charge associated with the estimated
fair value of purchased in-process research and development costs acquired in
the Metelics acquisition.

WE MAY FINANCE FUTURE ACQUISITIONS BY THE INCURRENCE OF INDEBTEDNESS WHICH MAY
AFFECT OUR RESULTS OF OPERATIONS OR THE ISSUANCE OF EQUITY SECURITIES WHICH MAY
BE DILUTIVE TO EXISTING SHAREHOLDERS.

We may incur indebtedness or issue equity securities to pay for any future
acquisitions. The incurrence of indebtedness could affect our results of
operations. The issuance of equity securities could be dilutive to our existing
shareholders.

THE TIMING, CANCELLATION OR RESCHEDULING OF CUSTOMER ORDERS AND SHIPMENTS, AND
OF OUR ABILITY TO FILL SUCH ORDERS AND MAKE SHIPMENTS, MAY CAUSE FLUCTUATIONS IN
OUR QUARTERLY OPERATING RESULTS, CAUSING OUR STOCK PRICE TO DECLINE.

Our net sales and operating results have varied substantially from quarter
to quarter. Our quarterly operating results are likely to vary significantly in
the future based upon a number of factors related to our industry and the
markets for our products. The primary factors contributing to the variance of
our quarterly operating results include:

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

- our ability to obtain raw materials, components and subassemblies from
contract manufacturers and suppliers on a timely basis; and

- cancellation or delays in customer orders in anticipation of the
introduction into the marketplace of a new technology.

We have little or no control over many of these factors. Our performance in
any one fiscal quarter is not necessarily indicative of any fiscal trends or
future performance. In addition, our failure to meet or exceed the expectations
of securities analysts or investors due to the variance of our quarterly
operating results could cause our stock price to decline.

OUR RELIANCE ON SUPPLIERS AND CONTRACT MANUFACTURERS TO DELIVER PRODUCTS MAY
CAUSE A SIGNIFICANT DELAY IN OUR ABILITY TO FILL ORDERS WHICH COULD
SIGNIFICANTLY HARM OUR BUSINESS AND OPERATING RESULTS.

We rely on contract manufacturers and suppliers for selected raw materials,
devices and components used in the production of our products. We generally
contract with these third parties by purchase order on an as needed basis and we
do not have long term contracts with

10
<PAGE> 12

any of them. Although we generally use standard parts and components for our
products, several of our components, such as electro-mechanical relays, selected
diodes and capacitors, are currently available only from a limited number of
suppliers. If we are unable to obtain sufficient allocations of these
components, our production and shipment of related products will be delayed, we
may lose customers and our operating results will be affected.

Third party assemblers and manufacturers may stop manufacturing our
products at any time. Our third-party assemblers and manufacturers may not be
able to achieve and maintain acceptable production yields in the future. To the
extent our third-party assemblers or manufacturers suffer failures or defects,
we could experience lost revenues, increased costs, and delays in, cancellations
or rescheduling of orders or shipments. The loss of one or more of our
third-party assemblers or manufacturers or any delay or reduction in supply of
one or more of our products will impact our ability to fulfill customer orders
and could damage our relationships with our customers, either of which would
significantly harm our business and operating results.

OUR BACKLOG MAY NOT RESULT IN FUTURE SALES WHICH COULD CAUSE A REDUCTION IN OUR
EXPECTED REVENUE GROWTH.

Our backlog primarily represents accepted product purchase orders for our
devices, components and subsystems, with the exception of certain annual
purchase orders placed by a major OEM customer at our facility in Whippany, New
Jersey. We only include these annual purchase orders in backlog to the extent we
believe that the products will be delivered within ten weeks. Our backlog is not
necessarily indicative of our future sales. In addition, our customers may
cancel or defer orders without significant penalty. Cancellations of pending
purchase orders or termination or reduction of in-process purchase orders could
materially harm our operating results. We do not believe that our backlog as of
any particular date is representative of actual sales for any succeeding period,
and we do not know whether our current order backlog will necessarily lead to
sales in any future period.

OUR ACCEPTANCE OF BLANKET PURCHASE ORDERS MAY INCREASE RISKS OF COST OVERRUNS
AND HARM OUR OPERATING RESULTS.

A significant portion of our business consists of filling blanket purchase
orders which provide for a predetermined fixed price for the products we make
for periods of up to one year. In accepting these blanket purchase orders, we
typically make pricing commitments to our customers based upon our expectation
of our costs in designing, manufacturing and delivering the products ordered.
Manufacture of our products is a complex process. We face risks of cost overruns
or order cancellations if we fail to achieve forecasted product design and
manufacturing efficiencies or if products cost more to produce or deliver than
expected. Manufacturing expenses can rise due to increased costs of raw
materials, components, labor or other factors. We may have cost overruns in the
future which could harm our results of operations.

SIGNIFICANT CHARGES AGAINST EARNINGS HAVE IN THE PAST REDUCED AND MAY IN THE
FUTURE REDUCE OUR REPORTED EARNINGS.

We have incurred in the past and may incur in the future significant
non-recurring charges relating to our business. Assuming an initial public
offering price of $12.00 per share, we will incur the following separate
non-cash charges:

- The first charge arises as a result of our issuance in 1996 of warrants
to purchase shares of our common stock which granted the redeemable
warrantholders the put rights to demand repurchase of the warrants. As a
result of changes in the fair value of these warrants, we will incur
approximately $6.3 million of non-tax deductible, non-cash

11
<PAGE> 13

redeemable warrant expense, a portion of which will be incurred in the third
quarter of 2000 and the remainder effective upon the consummation of this
offering. In connection with this offering, the redeemable warrantholders have
agreed to terminate their put rights and cash conversion rights under the
warrants. After the consummation of this offering, there will be no
further charges arising from changes in the fair value of these warrants.

- The second charge arises as a result of our issuance in 1996 of an
incentive stock option. We will incur a one-time charge of approximately
$12.5 million of non-cash compensation expense ($8.9 million on an
after-tax basis) associated with this incentive stock option.

We may in the future incur charges against earnings similar to those
described above.

WE SELL A SIGNIFICANT PORTION OF OUR PRODUCTS TO INTERNATIONAL CUSTOMERS AND
RELY HEAVILY ON INTERNATIONAL SUPPLIERS AND MANUFACTURERS, WHICH EXPOSES US TO
RISKS THAT MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

A significant portion of our direct sales and sales through our
distributors were to international purchasers. Approximately 31.2% of our 1999
net sales and approximately 33.8% of our net sales in the six months ended June
2000 were to customers located outside of the United States. If demand for our
products in international markets decreases, it could have a materially adverse
effect on our results of operations. In addition, our business strategy
contemplates focusing our sales activity outside of the United States where we
believe significant market opportunities exist. Consequently, we expect that our
international sales will continue to expand and account for a significant
percentage of our net sales for the foreseeable future. In addition, we use
international third party assemblers and manufacturers for selected products.

Due to our sales to international purchasers and our reliance on
international third party assemblers and manufacturers, we are subject to the
risks of conducting business outside the United States. As a result, we are
subject to a variety of risks, including:

- a greater difficulty of administering business globally;

- compliance with multiple and potentially conflicting regulatory
requirements such as export requirements, tariffs and other barriers;

- differences in intellectual property protections;

- longer accounts receivable cycles; and

- export control restrictions.

WE MAY ENCOUNTER DIFFICULTIES IN MANAGING OUR GROWTH WHICH COULD ADVERSELY
AFFECT OUR BUSINESS AND HARM OUR RESULTS OF OPERATIONS.

We are experiencing a period of rapid growth in the size and complexity of
our business and in the expansion of our product lines and customer base, which
has placed, and is expected to continue to place, significant demands on our
management and other resources. To the extent we are successful in implementing
our acquisition strategy, our resulting growth will place further demands on
management and on our internal controls. To accommodate this growth, we must
implement a variety of new and upgraded operational and financial systems, and
we must motivate and effectively manage our employees. Our current systems,
procedures and controls may not be adequate to support our operations. In
addition, our Vice President-Operations and Chief Operating Officer, Stephen W.
Shpock -- who is responsible for managing, among other things, our product and
process planning and development, our strategic direction for manufacturing,
research and engineering and our technical and operational capabilities -- only
recently joined us in June 2000. If we fail to improve our operational,
financial and management information systems, or fail to effectively motivate or
manage our new and future employees, our business could be harmed.
12
<PAGE> 14

IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL,
WE MAY BE UNABLE TO PURSUE BUSINESS OPPORTUNITIES OR DEVELOP OUR PRODUCTS.

We believe that our future success will depend in large part upon our
continued ability to recruit, hire, retain and motivate highly skilled
technical, marketing and managerial personnel, who are in great demand. The
continued growth and success of our business is particularly dependent upon the
continued services of our senior management, including John L. Smucker, our
President, Stephen W. Shpock, our Vice President-Operations and Chief Operating
Officer, Jon E. Carlson, our Vice President-Finance and Chief Financial Officer,
and Kevin P. Kearns, Francis S. Kwan, Michael D. Snyder, Timothy E. Solomon and
Robert L. Stephens, all of whom are presidents or directors of our subsidiaries.
The loss of the services of one or more of these key individuals could adversely
effect our business, financial condition and results of operations. Except for
Messrs. Smucker, Kearns and Kwan, with whom we have written employment
agreements which contain limited noncompetition provisions, and except for
Messrs. Shpock and Carlson, with whom we have written agreements which contain
limited noncompetition provisions, we do not have written employment or
non-competition agreements with our senior management.

OUR LIMITED ABILITY TO PROTECT OUR PROPRIETARY INFORMATION AND TECHNOLOGY ALONG
WITH THE POSSIBILITY OUR PRODUCTS COULD INFRINGE ON THE INTELLECTUAL PROPERTY
RIGHTS OF OTHERS MAY ADVERSELY AFFECT OUR ABILITY TO COMPETE.

Our future success and ability to compete is dependent in part upon our
proprietary information and technology. Although we hold several patents, we
rely on a combination of trade secrets, copyright and trademark laws and
employee and third-party nondisclosure agreements to establish and protect our
proprietary technology. We generally enter into confidentiality and/or license
agreements with our key employees and strategic partners, as well as with other
selected customers and potential customers, and limit access to and distribution
of our proprietary information. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy or otherwise obtain or use our
products or technology. The laws of some countries do not protect our
proprietary rights to the same extent as do the laws of the United States.

In addition, although we attempt to avoid infringing known proprietary
rights of third parties, we may be subject to legal proceedings and claims for
alleged infringement by us or our licensees of third-party proprietary rights,
such as patents, trade secrets, trademarks or copyrights, from time to time in
the ordinary course of business. As a result of these claims, we may be required
to stop our use of infringing processes, cease the manufacture, use and sale of
infringing products, expend significant resources to develop non-infringing
technology or obtain licenses to the infringing technology or pay significant
monetary damages.

RISKS RELATED TO OUR INDUSTRY

OUR GROWTH DEPENDS ON THE GROWTH OF THE INFRASTRUCTURE FOR WIRELESS
COMMUNICATIONS AND BROADBAND CONNECTIVITY. IF THIS MARKET DOES NOT CONTINUE TO
GROW, OR GROWS AT A SLOW RATE, DEMAND FOR OUR PRODUCTS WILL DIMINISH.

Our success depends on the continued growth of the communications industry
in general and the market for wireless infrastructure and broadband connectivity
components in particular. The market for these infrastructure products may not
continue to grow at historical rates, if at all. Even if the demand for
infrastructure grows, we will need to complete new product designs that meet the
needs of our customers at a rate consistent with the growth of the market. Our
product and process development efforts may not be successful and we may suffer
a material adverse effect to our business.

13
<PAGE> 15

THE ADOPTION OF, AND THE TIMING OF THE ADOPTION OF, INDUSTRY STANDARDS MAY
NEGATIVELY IMPACT WIDESPREAD MARKET ACCEPTANCE OF OUR PRODUCTS.

The increasing demand for wireless communications and broadband
connectivity has exerted pressure on standards bodies worldwide to adopt new
standards for these products, generally following extensive investigation of,
and deliberation over, competing technologies. The failure of new standards to
be approved, as well as the delays inherent in the standards approval process,
may in the future cause the cancellation, postponement or rescheduling of the
installation of communications systems by our customers. The failure to adopt
new standards, as well as potential delays in the adoption of new standards, may
in the future have a material adverse effect on the sale of products by us and
on our business.

INTENSE COMPETITION IN OUR INDUSTRY COULD PREVENT US FROM INCREASING REVENUES
AND SUSTAINING PROFITABILITY.

The markets for our products are extremely competitive and are subject to
rapid change. We believe that the principal competitive factors affecting the
markets for our products include technical performance, quality, quick response,
technology and price. Price competition is intense and downward pressure on
pricing generally occurs over the life of a product. We believe that we compete
favorably in our markets. However, our competitors may develop new technologies
or enhancements to existing products or introduce new products that will offer
superior price or performance features. We believe that to remain competitive in
the future we will need to continue to invest significant financial resources in
research and development and to continue to demonstrate our ability to provide
custom solutions through the design and manufacture of cost-effective and
quality devices, components and subsystems. We compete primarily with other
suppliers of high-performance RF communications products used in wireless
communications infrastructure equipment. We also compete with communications
equipment manufacturers who manufacture RF components internally.

We expect increased competition from existing competitors, from a number of
companies that may enter the RF products market, and from companies that may
offer new or emerging technologies in the future. In addition, many of our
current and potential competitors have significantly greater financial,
technical, manufacturing and marketing resources than we have. As a result, our
current and potential customers may decide not to buy from us due to their
concerns about our size, financial stability, name recognition or market
acceptance for our products and technologies. Our failure to successfully
compete in our markets would have a material adverse effect on our business.

CHANGES IN, OR THE FAILURE BY US TO MANUFACTURE PRODUCTS IN COMPLIANCE WITH,
APPLICABLE DOMESTIC AND INTERNATIONAL REGULATIONS COULD HARM OUR BUSINESS.

Our products are incorporated into wireless communications systems that are
subject to regulation domestically by the Federal Communications Commission and
outside the United States by other government agencies. Although the equipment
operators are responsible for compliance with such regulations, regulatory
changes, including changes in the allocation of available frequency spectra,
could harm our operations by restricting development efforts by our customers,
rendering current products obsolete or increasing the opportunity for additional
competition. Changes in, or the failure by us to manufacture products in
compliance with, applicable domestic and international regulations could harm
our business.

14
<PAGE> 16

IF ELECTROMAGNETIC WAVES CARRIED THROUGH WIRELESS COMMUNICATIONS EQUIPMENT OR
THE USE OF BERYLLIUM OXIDE SUBSTRATES IN COMMUNICATIONS EQUIPMENT IS DETERMINED
OR PERCEIVED TO CREATE A SIGNIFICANT HEALTH RISK, THE MARKET FOR THESE PRODUCTS
WOULD BE HARMED.

News reports have asserted that power levels associated with hand held
cellular telephones and wireless infrastructure equipment may pose certain
health risks. In addition, we currently design and manufacture several products
which use Beryllium Oxide substrates for resistive materials. Beryllium Oxide is
a known health hazard and carcinogen in the event of significant exposure or in
the event it enters or is otherwise absorbed into the human body in sufficient
quantities. The potential for health risks arising from the use of products
containing Beryllium Oxide substrates has been of particular concern to several
environmental interest groups in Europe.

If it were determined or perceived that electromagnetic waves carried
through wireless communications equipment create a significant health risk or
that the use of Beryllium Oxide substrates in communications equipment creates a
significant health risk, the market for these products would be materially
adversely affected, which would have a material adverse effect on our business.
Moreover, if wireless communications systems or other systems or devices that
rely on or incorporate our products are determined or alleged to create a
significant health risk, we could be named as a defendant and held liable in
product liability lawsuits commenced by individuals alleging that our products
harmed them, which could have a materially adverse effect on our financial
condition and results of operations.

RISKS RELATED TO THIS OFFERING

OUR STOCK PRICE MAY BE EXTREMELY VOLATILE.

Our common stock has never been sold in a public market and an active
trading market for our common stock may not develop or be sustained upon the
completion of this offering. We are negotiating the initial public offering
price of the common stock with the underwriters. However, the initial public
offering price may not be indicative of the prices that will prevail in the
public market after the offering, and the market price of the common stock could
fall below the initial public offering price. Investors should read the
"Underwriting" section for a discussion of the factors considered in determining
the initial public offering price.

After completion of this offering, the market price of our common stock
could fluctuate widely in response to the various factors, including, but not
limited to, the following:

- actual or anticipated variations in operating results;

- announcements of technological innovations, new products or new services
by us, our competitors or our customers;

- changes in financial estimates or recommendations by stock market
analysts regarding us, our competitors, our industry or our customers;

- announcements by us, our competitors or our customers of significant
acquisitions, strategic partnerships, joint ventures or capital
commitments;

- additions or departures of key personnel; and

- future equity or debt offerings or our announcements of these offerings.

In addition, in recent years, the stock market in general, and the Nasdaq
National Market and the securities of technology companies in particular, have
experienced extreme price and volume fluctuations. These fluctuations have often
been unrelated or disproportionate to the operating performance of individual
companies. These broad market fluctuations may materially adversely affect our
stock price, regardless of our operating results.
15
<PAGE> 17

MANAGEMENT HAS BROAD DISCRETION IN HOW IT INVESTS OR SPENDS THE PROCEEDS OF THIS
OFFERING AND WE MAY INVEST OR SPEND THE PROCEEDS OF THIS OFFERING IN WAYS WITH
WHICH INVESTORS MAY NOT AGREE AND IN WAYS THAT MAY NOT YIELD FAVORABLE RETURNS.

We will retain broad discretion over the use of proceeds from this
offering. Shareholders may not deem the actual uses desirable and our use of the
proceeds may not yield a significant return or any return at all. We intend to
use the proceeds from this offering to repay indebtedness, redeem preferred
stock and for working capital and other general corporate purposes, including
potential acquisitions. Our actual uses of the proceeds of this offering may
vary substantially from our currently planned uses.

SOME OF OUR EXISTING SHAREHOLDERS CAN EXERT CONTROL OVER US AND THEY MAY NOT
MAKE DECISIONS THAT REFLECT THE INTERESTS OF OUR OTHER SHAREHOLDERS.

After this offering, our officers, directors and principal shareholders
will together control approximately 57.8% of our outstanding common stock and
approximately 64.4% of our common stock on a fully diluted basis. As a result,
these shareholders, if they act together, will be able to exert a significant
degree of influence over our management and affairs and will control matters
requiring shareholder approval, including the election of all of our directors
and approval of significant corporate transactions. In addition, this
concentration of ownership may delay or prevent a change in control and might
affect the market price of our common stock. In addition, the interests of these
shareholders may not always coincide with the interests of our other
shareholders.

OUR ARTICLES OF INCORPORATION AND BYLAWS AND MICHIGAN LAW CONTAIN PROVISIONS
THAT MAY DELAY OR PREVENT A CHANGE OF CONTROL.

Provisions of our articles of incorporation and bylaws and Michigan law may
discourage potential acquisition proposals, delay or prevent a change of control
and prevent changes in our management. These provisions could limit the price
that investors might be willing to pay in the future for shares of our common
stock. In addition, our board of directors has the authority to issue up to
10,000,000 shares of preferred stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the shareholders. The issuance of
preferred stock, while providing flexibility in connection with possible
financings or acquisitions or other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of our
outstanding voting stock.

FUTURE SALES OF OUR COMMON STOCK BY EXISTING SHAREHOLDERS MAY DEPRESS OUR STOCK
PRICE.

Once a trading market develops for our common stock, many of our
shareholders will have an opportunity to sell their common stock for the first
time. Sales of a substantial number of shares of common stock in the public
market after this offering, or the threat that substantial sales might occur,
could cause the market price of our common stock to decrease. These factors
could also make it difficult for us to raise capital by selling additional
equity securities.

WE DO NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK.

We currently intend to retain any future earnings for funding growth and,
therefore, do not anticipate paying any dividends in the foreseeable future.

INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.

We expect the initial public offering price per share to be substantially
higher than the net tangible book value per share of our common stock. The as
adjusted net tangible book value of a share of common stock purchased at an
assumed initial public offering price of $12.00 per share will be only $1.60.
Additional dilution may be incurred if holders of options to purchase our common
stock, whether currently outstanding or subsequently granted, exercise their
options.

16
<PAGE> 18

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to future events or our future financial
performance. In some cases, forward-looking statements can be identified by
terminology such as "may," "will," "should," "expect," "anticipate," "intend,"
"plan," "believe," "estimate," "potential" or "continue," the negative of these
terms or other comparable terminology. These statements involve a number of
risks and uncertainties. Actual events or results may differ materially from any
forward-looking statement as a result of various factors, including those we
discuss in "Risk Factors" and elsewhere in this prospectus.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by law, we undertake
no obligation to update publicly any forward-looking statements for any reason
after the date of this prospectus to conform these statements to actual results
or to changes in our expectations. Before investing in our common stock, you
should be aware that the occurrence of the events described under "Risk Factors"
and elsewhere in this prospectus could have a material adverse effect on our
business, operating results and financial condition.

17
<PAGE> 19

USE OF PROCEEDS

We estimate that our net proceeds from the sale of 5,500,000 shares of
common stock in this offering will be approximately $60.4 million, at an assumed
initial public offering price of $12.00 per share and after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses. If the underwriters exercise their over-allotment option in full, we
estimate that our net proceeds will be approximately $69.6 million.

The principal purposes of this offering are to obtain additional capital,
to create a public market for our common stock, and to facilitate our future
access to the public capital markets.

We anticipate using a portion of the net proceeds from this offering to
repay debt incurred and redeem preferred stock issued to finance certain prior
acquisitions as follows:

- To pay in full our senior secured indebtedness, due August 2004, which
totaled $28.1 million as of June 30, 2000, with $5.1 million of this
indebtedness due under our revolving line of credit bearing interest at
9.75% per year and with $23.0 million of this indebtedness due under our
term loan bearing interest at 10.125% per year. As of June 30, 2000,
Comerica Bank held $18.8 million of our senior secured indebtedness and
National City Bank of Michigan/Illinois, an affiliate of National City
Capital Corporation, held $9.3 million.

- To pay in full our senior subordinated indebtedness, which totaled $7.5
million as of June 30, 2000, with $3.5 million of this indebtedness due
July 2001 at a coupon interest rate of 12% per year and with $4.0 million
of this indebtedness due July 2004 at a coupon interest rate of 8% per
year. As of June 30, 2000, National City Capital Corporation held $4.4
million of our senior subordinated indebtedness, Great Lakes Capital
Investments held $384,000, Hanifen Imhoff Mezzanine Fund held $1.3
million and Rocky Mountain Mezzanine Fund held $1.4 million.

- To redeem in full our 4,000 shares of redeemable preferred stock, the
redemption price of which totaled $4.0 million as of June 30, 2000. As of
June 30, 2000, National City Capital Corporation held shares representing
$2.6 million of redemption value and Hanifen Imhoff Mezzanine Fund held
shares representing $1.4 million of redemption value.

We will use the remainder of the net proceeds for working capital and other
general corporate purposes, including potential strategic acquisitions. While we
consider strategic acquisitions from time to time, we currently have no
arrangements or agreements for any acquisition.

Pending the use of the net proceeds for the above purposes, we intend to
invest the remaining net proceeds from this offering in short term, investment
grade, interest-bearing securities.

18
<PAGE> 20

The following table summarizes the estimated use of all net proceeds based
upon the data set forth above (in thousands):

<TABLE>
<S> <C>
Acquisition-related financing:
Repayment of senior secured indebtedness(1)............... $ 28,116
Repayment of senior subordinated indebtedness(1).......... 7,500
Redemption of redeemable preferred stock(2)............... 4,000
--------
39,616
Remainder -- working capital and other general corporate
purposes.................................................. 20,764
--------
Total use of net proceeds................................... $ 60,380
========
</TABLE>

------------
(1) Represents outstanding amounts as of June 30, 2000. Excludes accrued
interest.

(2) Excludes dividends that will accrue from July 1, 2000 to the actual
date of redemption.

Each of National City Capital Corporation, Great Lakes Capital Investments,
Hanifen Imhoff Mezzanine Fund and Rocky Mountain Mezzanine Fund are our
affiliates by virtue of their beneficial ownership of warrants exercisable for
our common stock and, in the case of National City Capital Corporation and Great
Lakes Capital Investments, by virtue of the fact that William H. Schecter serves
as one of our directors and as the President of National City Capital
Corporation and as a principal of Great Lakes Capital Investments.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock. We
have paid dividends on our redeemable preferred stock. We do not anticipate
paying any cash dividends on our capital stock in the foreseeable future. Future
dividends, if any, will be determined by our board of directors after taking
into account various factors, including our financial condition, operating
results, current and anticipated cash needs and plans for expansion. Our ability
to pay dividends will also depend on applicable provisions of Michigan law and
restrictions contained in our debt agreements, including restrictions which may
be contained in our proposed new unsecured $50.0 million line of credit which we
anticipate will be effective shortly after this offering.

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<PAGE> 21

CAPITALIZATION

The following table shows our capitalization as of June 30, 2000:

- on an actual basis;

- on a pro forma basis to give effect to:

- the charge of $6.3 million to earnings (and the resulting increase in
the accumulated deficit) for the increase in the fair value of the
redeemable warrants;

- the amendment to the redeemable warrants to eliminate the holders' put
rights and cash conversion rights and the warrants' reclassification
as warrants within shareholders' equity; and

- the amendment to the convertible warrants to eliminate the holders'
cash conversion rights and the warrants' resulting reclassification as
warrants within shareholders' equity; and

- on a pro forma as adjusted basis to give effect to:

- the issuance and sale of the 5,500,000 shares of common stock offered
by us at an assumed initial public offering price of $12.00 per share
after deducting the estimated underwriting discounts and commissions
and estimated offering expenses;

- the repayment of all of our debt, excluding a $2.7 million note, and
the resulting increase in the accumulated deficit for the loss on
extinguishment of debt of $2.0 million;

- the redemption of our redeemable preferred stock for $4.0 million and
the resulting accretion of the redeemable preferred stock of $288,000;

- the increase in the accumulated deficit for the after-tax charge of
$8.9 million and the increase to additional paid-in capital for the
$12.5 million pre-tax charge, both of which result from the option
outstanding under the 1996 stock option plan becoming exercisable in
connection with the closing of this offering; and

- the increase in the number of authorized shares of common stock and
preferred stock.

The following table does not include:

- 1,104,700 shares of common stock subject to outstanding options at an
exercise price of approximately $0.65 per share;

- 2,800,000 shares of common stock reserved for future option grants and
restricted stock awards under our 2000 stock incentive plan.

20
<PAGE> 22

You should read this table in conjunction with our consolidated financial
statements and related notes included elsewhere in this prospectus and the other
financial information contained in this prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 192 $ 192 $ 20,956
======= ======== ========
Short term debt:
Current portion of long term debt......................... $ 4,540 $ 4,540 $ --
Long term debt:
Borrowings under revolving line of credit................. 5,116 5,116 --
Senior debt, less current portion......................... 21,176 21,176 2,716
Subordinated notes, net of $1,731,000 unamortized
discount............................................... 5,769 5,769 --
------- -------- --------
Total long term debt................................... 36,601 36,601 2,716
Redeemable warrants......................................... 5,222 -- --
Redeemable preferred stock, $1,000 per share liquidation
value, 4,000 shares authorized, issued and outstanding
less unamortized discount of $288,000 (actual and pro
forma); no shares authorized, issued or outstanding (pro
forma as adjusted)........................................ 3,712 3,712 --
Convertible warrants........................................ 6,552 -- --
Shareholders' equity:
Common stock, $0.01 stated value, 34,000,000 shares
authorized (actual and pro forma), 21,100,480 shares
issued and outstanding (actual and pro forma);
100,000,000 shares authorized (pro forma as adjusted)
and 26,600,480 shares issued and outstanding (pro forma
as adjusted)........................................... 211 211 266
Warrants.................................................. -- 18,091 18,091
Preferred stock, without par value, no shares authorized
(actual and pro forma); 10,000,000 shares authorized,
no shares issued or outstanding (pro forma as
adjusted).............................................. -- -- --
Additional paid-in capital................................ 8,832 8,832 81,696
Accumulated deficit....................................... (7,951) (14,268) (25,480)
Accumulated other comprehensive income.................... (338) (338) (338)
------- -------- --------
Total shareholders' equity............................. 754 12,528 74,235
------- -------- --------
Total capitalization........................................ $52,841 $ 52,841 $ 76,951
======= ======== ========
</TABLE>

21
<PAGE> 23

DILUTION

Our pro forma net tangible book value as of June 30, 2000 (after giving
effect to the increase in fair value of the redeemable warrants and the
amendments to the redeemable warrants and convertible warrants) was
approximately $(19.2) million, or $(0.91) per share. Pro forma net tangible book
value per share represents the amount of our total tangible assets reduced by
the amount of our total liabilities divided by the total number of shares of
common stock outstanding. After giving effect to our sale of 5,500,000 shares of
common stock offered by this prospectus, based upon an assumed initial public
offering price of $12.00 per share, and after deducting estimated underwriting
discounts and commissions, estimated offering expenses payable by us, use of
proceeds therefrom and related accounting adjustments, our net tangible book
value as adjusted at June 30, 2000 would have been $42.5 million, or $1.60 per
share. This represents an immediate increase in net tangible book value of $2.51
per share to existing shareholders and an immediate dilution of $10.40 per share
to new investors purchasing shares at the assumed initial public offering price.
Dilution is determined by subtracting pro forma as adjusted net tangible book
value per share after this offering from the assumed initial public offering
price per share. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $12.00
Pro forma net tangible book value per share as of June 30,
2000 (after giving effect to the increase in fair value
of the redeemable warrants and the amendments to the
redeemable warrants and convertible warrants).......... $(0.91)
Increase in pro forma net tangible book value per share
attributable to new investors.......................... 2.51
------
Pro forma net tangible book value as adjusted per share
after this offering....................................... 1.60
------
Dilution per share to new investors......................... $10.40
======
</TABLE>

The following table sets forth, on an as adjusted basis as of June 30,
2000, the difference between the number of shares of common stock purchased from
us, the total consideration received by us, and the average price per share paid
by existing shareholders and by new investors purchasing shares in this offering
(based upon an assumed initial public offering price of $12.00 per share before
deducting estimated underwriting discounts and commissions and estimated
offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders.... 21,100,480 79.3% $ 9,043,000 12.1% $ 0.43
New investors............ 5,500,000 20.7 66,000,000 87.9 $ 12.00
---------- ----- ------------ ----- -------
Total............... 26,600,480 100.0% $ 75,043,000 100.0% $ 2.82
========== ===== ============ =====
</TABLE>

If the underwriters' over-allotment option is exercised in full, the number
of shares held by new investors will increase to 6,325,000, or 23.1% of the
total shares of common stock outstanding after this offering.

The above discussion does not assume the exercise of the stock option
outstanding as of June 30, 2000. In the event that we issue additional shares of
common stock in the future, purchasers of common stock in this offering may
experience further dilution. As of June 30, 2000, there were:

- 1,104,700 shares of common stock issuable upon the exercise of an
outstanding incentive stock option granted under our 1996 stock option
plan, at an exercise price of approximately $0.65 per share; and
22
<PAGE> 24

- 3,777,200 shares of common stock issuable upon the exercise of the
outstanding warrants, for an aggregate purchase price of $377.72.

To the extent outstanding options and warrants are exercised, or new
options or rights are issued under our stock plans, new investors will
experience further dilution.

Assuming the exercise in full of the outstanding option and warrants for
1,104,700 and 3,777,200 shares, respectively, our pro forma as adjusted net
tangible book value at June 30, 2000 would be $1.37 per share, representing an
immediate increase in net tangible book value of $2.28 per share to our existing
shareholders and an immediate decrease in the net tangible book value per share
of $10.63 to new investors.

Assuming the exercise in full of the outstanding option for 1,104,700
shares and warrants for 3,777,200 shares and based on the assumed initial public
offering price of $12.00 per share before deducting underwriting discounts and
commissions and estimated offering expenses, the percentage of shares purchased
by existing shareholders would decrease to 67.0% and by new investors (including
the option and warrantholders) would increase to 33.0%, and the percentage of
total consideration paid by existing shareholders would decrease to 10.9% and by
new investors (including the option and warrantholders) would increase to 89.1%.

23
<PAGE> 25

SELECTED CONSOLIDATED FINANCIAL DATA

The following tables present our selected consolidated financial data. You
should read this information in conjunction with our consolidated financial
statements and related notes and the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section included elsewhere in
this prospectus. The consolidated statement of operations data for the years
ended December 31, 1997, 1998 and 1999 and the consolidated balance sheet data
as of December 31, 1998 and 1999 have been derived from our consolidated
financial statements that have been audited by Ernst & Young LLP, independent
auditors, and that are included elsewhere in this prospectus. The consolidated
statement of operations data for the years ended December 31, 1995 and 1996 and
the consolidated balance sheet data as of December 31, 1995, 1996 and 1997 have
been derived from our consolidated financial statements that have been audited
by Ernst & Young LLP, but that are not included in this prospectus. The
consolidated statement of operations data for the six months ended June 30, 1999
and 2000 and the consolidated balance sheet data as of June 30, 2000 have been
derived from our unaudited consolidated financial statements that are included
elsewhere in this prospectus. In our opinion, our unaudited consolidated
financial statements include all adjustments, consisting of normal recurring
adjustments, which are necessary for a fair presentation of the results for the
unaudited periods. You should not rely on interim results as being indicative of
results that we may expect for the full year.

In June 1994, our founding shareholders acquired Inmet. Since then, we have
completed the following four strategic acquisitions:

<TABLE>
<S> <C> <C>
- Weinschel November 30, 1995
- KDI July 23, 1996
- Metelics March 1, 1998
- DML July 30, 1999
</TABLE>

We have accounted for each acquisition using the purchase method of
accounting. Our financial statements include the results of operations of the
acquired businesses for the periods subsequent to the effective date of
acquisition.

24
<PAGE> 26

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- -----------------
1995 1996 1997 1998 1999 1999 2000
------- -------- -------- -------- -------- ------- -------
CONSOLIDATED STATEMENT OF OPERATIONS DATA: (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.................................... $ 5,282 $ 35,332 $ 65,418 $ 61,764 $ 64,647 $29,579 $46,141
Cost of products sold........................ 2,408 22,272 39,221 36,540 40,857 16,729 26,616
------- -------- -------- -------- -------- ------- -------
Gross profit................................. 2,874 13,060 26,197 25,224 23,790 12,850 19,525

Selling, general and administrative
expenses................................... 1,172 7,560 13,095 15,146 16,093 7,823 10,661
Research and development..................... 242 1,364 2,323 3,183 3,552 1,685 2,002
Amortization................................. 443 713 883 2,066 2,530 1,196 1,430
Write-off of acquired in-process research and
development................................ -- -- -- 6,000 -- -- --
Restructuring and impairment charges......... -- -- -- -- 887 -- --
------- -------- -------- -------- -------- ------- -------
Income (loss) from operations................ 1,017 3,423 9,896 (1,171) 728 2,146 5,432

Interest expense and other................... 451 1,458 1,440 2,025 3,203 1,249 2,343
Redeemable warrant expense................... -- -- 6,242 -- 250 126 1,912
Other expense (income)....................... -- -- (266) 438 -- -- --
------- -------- -------- -------- -------- ------- -------
Income (loss) before income taxes............ 566 1,965 2,480 (3,634) (2,725) 771 1,177
Income tax expense (benefit)................. 193 770 3,435 823 (834) 500 1,307
------- -------- -------- -------- -------- ------- -------
Net income (loss)............................ 373 1,195 (955) (4,457) (1,891) 271 (130)

Preferred stock dividends.................... -- (141) (320) (320) (320) (160) (160)
Accretion of discount on preferred stock..... -- (94) (225) (243) (263) (129) (139)
------- -------- -------- -------- -------- ------- -------
Net income (loss) available to common
shareholders............................... $ 373 $ 960 $ (1,500) $ (5,020) $ (2,474) $ (18) $ (429)
======= ======== ======== ======== ======== ======= =======
Income (loss) per common share:
Basic...................................... $ 0.03 $ 0.05 $ (0.08) $ (0.24) $ (0.12) $ (0.00) $ (0.02)
Diluted.................................... $ 0.03 $ 0.05 $ (0.08) $ (0.24) $ (0.12) $ (0.00) $ (0.02)
Shares used in per share calculations:
Basic...................................... 12,446 18,950 19,301 20,644 20,946 20,922 21,032
Diluted.................................... 12,446 20,581 19,301 20,644 20,946 20,922 21,032
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------- AS OF
1995 1996 1997 1998 1999 JUNE 30, 2000
CONSOLIDATED BALANCE SHEET DATA: ------- -------- -------- -------- -------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents.................... $ 580 $ 911 $ 149 $ 129 $ 177 $ 192
Working capital(1)........................... 3,562 10,883 6,464 8,095 10,772 10,241
Total assets................................. 13,843 36,782 34,438 59,460 69,981 78,798
Long term debt(2)............................ 8,651 17,522 5,817 28,304 36,663 36,601
Warrants and preferred stock................. -- 4,242 10,709 10,952 13,435 15,486
Total shareholders' equity................... 3,215 4,883 3,416 3,319 1,114 754
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- -----------------
1995 1996 1997 1998 1999 1999 2000
OTHER DATA: ------- -------- -------- -------- -------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities......... $ 639 $ 634 $ 10,869 $ 1,323 $ 1,221 $ 1,128 $ 1,191
Cash flows from investing activities......... (6,413) (11,579) 341 (23,460) (11,202) (1,365) (1,158)
Cash flows from financing activities......... 6,174 11,277 (11,972) 22,117 10,029 283 (10)
Adjusted EBITDA(3)........................... 1,584 5,132 12,444 8,145 7,970 4,286 8,077
</TABLE>

25
<PAGE> 27

------------
(1) The calculation of working capital as of December 31, 1996 includes the
reclassification of our revolving line of credit, in the amount of $7.2
million, from a current liability to long term debt for purposes of
consistency with the other periods presented.

(2) Long term debt includes the current portion thereon and also includes
borrowings outstanding under our revolving line of credit.

(3) In addition to income from operations, net income and cash flows, we use
Adjusted EBITDA to evaluate our operating performance. Adjusted EBITDA is
calculated as follows:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------- ---------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)...................................... $ 373 $1,195 $ (955) $(4,457) $(1,891) $ 271 $ (130)
Interest expense and other............................. 451 1,458 1,440 2,025 3,203 1,249 2,343
Income tax expense (benefit)........................... 193 770 3,435 823 (834) 500 1,307
Depreciation........................................... 124 996 1,399 1,688 2,017 944 1,215
Amortization........................................... 443 713 883 2,066 2,530 1,196 1,430
Redeemable warrant expense............................. -- -- 6,242 -- 250 126 1,912
Restructuring and impairment charges and inventory
write-off............................................ -- -- -- -- 2,695 -- --
Write-off of acquired in-process research and
development.......................................... -- -- -- 6,000 -- -- --
------ ------ ------- ------- ------- ------ ------
Adjusted EBITDA........................................ $1,584 $5,132 $12,444 $ 8,145 $ 7,970 $4,286 $8,077
====== ====== ======= ======= ======= ====== ======
</TABLE>

This measure is calculated differently by other companies and, therefore, it may
not be comparable to other similarly titled measures presented by other
companies. We have presented Adjusted EBITDA because we use it to evaluate our
operating performance and because investors commonly use it to analyze a
company's operating performance. You should not consider Adjusted EBITDA to be a
substitute for income from operations, net income, cash flows or other measures
of financial performance prepared in accordance with generally accepted
accounting principles.

26
<PAGE> 28

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with
our consolidated financial statements and notes included elsewhere in this
prospectus. The discussion in this prospectus contains forward-looking
statements that involve risks, uncertainties and assumptions, such as statements
of our plans, objectives, expectations and intentions. The cautionary statements
made in this prospectus should be read as being applicable to all related
forward-looking statements wherever they appear in this prospectus. Our actual
results may differ materially from those discussed here. Factors that could
cause or contribute to the differences include those discussed in "Risk
Factors," as well as those discussed elsewhere in this prospectus.

OVERVIEW

In June 1994, our founding shareholders acquired Inmet and, in October
1995, formed MCE Companies to be the parent company for Inmet and other acquired
businesses. Since then, we have completed the following strategic acquisitions:

<TABLE>
<S> <C> <C>
- Weinschel November 30, 1995
- KDI July 23, 1996
- Metelics March 16, 1998
- DML July 30, 1999
</TABLE>

We have accounted for our acquisitions using the purchase method of
accounting. Our financial statements include the results of operations of the
acquired businesses for the periods subsequent to the effective date of the
acquisitions. As part of our strategy, we intend to continue to broaden and
deepen our product lines and our design, engineering, manufacturing and
distribution capabilities through additional strategic acquisitions.

We value our customer relationships. We manage these key relationships
through our internal sales staff and independent representatives. In 1999, we
made approximately 93% of our net sales through these direct channels. We
augment these direct sales with sales through independent distributors. Sales
through independent distributors accounted for approximately 7% of our net sales
in 1999. Direct sales to Lucent and Ericsson accounted for a significant portion
of our total net sales in 1998, 1999 and the six months ended June 30, 2000.
Direct sales to Lucent represented 19.7% of net sales in 1998, 14.6% of net
sales in 1999 and 15.8% of net sales in the six months ended June 30, 2000.
Direct sales to Ericsson represented 0.2% of net sales in 1998, 7.1% of net
sales in 1999 and 9.0% of net sales in the six months ended June 30, 2000. Sales
to Lucent and Ericsson consist of a variety of devices, components and
subsystems which are sold in connection with multiple programs and to various
operating facilities within their respective organizations. We anticipate that
sales to these two customers will continue to account for a substantial portion
of our net sales for the foreseeable future.

We recognize revenue and related product return and warranty expense when
goods are shipped to customers. We maintain reserves for estimated product
returns, warranty expenses and bad debt expenses. Historically, these related
expenses have not been material and we do not expect any of these expenses to
increase significantly in the future.

Cost of products sold includes materials, direct labor and overhead
expenses such as manufacturing engineering labor, fringe benefits, manufacturing
supplies, allocable occupancy costs, depreciation and utilities.
27
<PAGE> 29

Selling expenses consist primarily of salaries, commissions and related
expenses for personnel engaged in marketing, sales and customer support
functions, as well as costs associated with trade shows, promotional activities,
advertising and public relations. General and administrative expenses consist
primarily of salaries and related expenses for executive, finance, accounting,
information technology and human resources personnel and professional fees.

Research and development expenses consist primarily of salaries and related
expenses for personnel engaged in research and development activities, material
costs for prototype and test units and other expenses related to the design and
development of our products. We expense all of our research and development
costs as they are incurred. Generally, our research and development efforts are
conducted in direct response to the requirements of a customer. We expect our
research and development expenses to increase both in dollar amount and as a
percentage of net sales in the future as a result of the growing needs of our
existing customers and our expanding base of customers.

Whippany Restructuring Plan

In the fourth quarter of 1999, we adopted a restructuring plan to
streamline our Whippany, New Jersey operation and to improve future operating
performance. Product line profit trends indicated that several component
products manufactured at the facility were not achieving satisfactory financial
results. In addition, as a result of our management conducting a strategic
analysis of the products in question, we concluded that these products would not
be manufactured in sufficient quantities to support a competitive position in
the marketplace. As a result, we decided to focus our resources at the Whippany
operation on products with a stronger competitive position and growth outlook.
The major elements of the restructuring plan included creating a separate
operating plan for our resistor products with dedicated management resources, a
reduction in the number of products produced at Whippany, the closing of a
leased satellite production facility and a work force reduction of approximately
35% of the personnel at Whippany. The aggregate cost for the implementation of
the restructuring plan was approximately $2.7 million. The 1999 statement of
operations includes restructuring and impairment charges of $887,000, which
consists of $444,000 of cost associated with the work force reduction and
$443,000 of cost associated with the closing of a leased facility. In addition,
cost of products sold in 1999 included a $1.8 million charge related to the
write down of inventory for the discontinued products. In 1999, revenue on the
discontinued products was approximately $2.5 million.

Warrants and Options

In connection with our previous acquisition financing activities, we
granted warrants to purchase a total of 3,777,200 shares of our common stock to
several investors in connection with our issuance to them of subordinated debt
and redeemable preferred stock. Of these warrants, warrants to purchase
1,034,028 shares of common stock are redeemable and contain a put option that
gives the holder of these warrants the right to sell these warrants to us for
cash. As a result, the redeemable warrants were classified as a liability on our
balance sheet. In addition, this put option required us to charge to earnings
any increase or decrease in the fair value of these redeemable warrants during
any period where there is a change in warrant value. The fair value of the
redeemable warrants is directly attributable to the fair value of MCE Companies,
Inc. As a result of increases in the fair value of the redeemable warrants, we
charged $6.2 million to earnings in 1997, $250,000 in 1999 and $1.9 million in
the six months ended June 30, 2000. There was no charge in 1998. We will incur
additional charges in the periods subsequent to June 30, 2000 to reflect changes
in the fair value of redeemable warrants. Assuming that this offering is
consummated in the fourth quarter of 2000 and based on an assumed initial public
offering price of $12.00 per share, we will incur

28
<PAGE> 30

non-cash non-tax deductible charges of approximately $6.3 million subsequent to
June 30, 2000 a portion of which will be incurred in the third quarter of 2000
and the remainder effective upon the consummation of this offering. Effective on
the consummation of this offering the redeemable warrants will be amended to
eliminate their put rights and cash conversion rights. As a result, these
warrants will be reclassified as warrants within shareholders' equity upon the
consummation of this offering. There will be no future accounting effect arising
from changes in fair value of these reclassified warrants.

In December 1996, we granted an incentive stock option to purchase
1,104,700 shares of common stock. The exercise price for this option is
approximately $0.65 per share. This option will become exercisable upon the
closing of this offering. As a result, we will incur a one-time, non-cash
compensation charge in the quarter in which this offering is consummated.
Assuming that this offering is consummated in the fourth quarter of 2000 and
based on an assumed initial public offering price of $12.00 per share, we will
incur a $12.5 million non-cash compensation expense ($8.9 million on an
after-tax basis) in the fourth quarter.

RESULTS OF OPERATIONS

The following table sets forth selected statement of operations data
expressed as a percentage of net sales for the periods indicated.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------- --------------
1997 1998 1999 1999 2000
----- ----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales........................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of products sold............................ 60.0 59.2 63.2 56.6 57.7
----- ----- ----- ----- -----
Gross profit..................................... 40.0 40.8 36.8 43.4 42.3

Selling, general and administrative expenses..... 20.0 24.5 24.9 26.4 23.1
Research and development......................... 3.6 5.2 5.5 5.7 4.3
Amortization..................................... 1.3 3.3 3.9 4.0 3.1
Write-off of acquired in-process research and
development.................................... -- 9.7 -- -- --
Restructuring and impairment charges............. -- -- 1.4 -- --
----- ----- ----- ----- -----
Income (loss) from operations.................... 15.1 (1.9) 1.1 7.3 11.8

Interest expense and other....................... 2.2 3.3 5.0 4.2 5.1
Redeemable warrant expense....................... 9.5 -- 0.4 0.4 4.1
Other expense (income)........................... (0.4) 0.7 -- -- --
----- ----- ----- ----- -----
Income (loss) before income taxes................ 3.8 (5.9) (4.3) 2.7 2.6

Income tax expense (benefit)..................... 5.3 1.3 (1.4) 1.8 2.9
----- ----- ----- ----- -----
Net income (loss)................................ (1.5)% (7.2)% (2.9)% 0.9% (0.3)%
===== ===== ===== ===== =====
</TABLE>

29
<PAGE> 31

Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999

Net Sales. Net sales increased 56.0% to $46.1 million for the six months
ended June 30, 2000 from $29.6 million for the first six months of 1999. Net
sales for the first six months of 2000 include revenues of $8.7 million
generated by DML, which we acquired in July 1999. The balance of the sales
increase reflected primarily strong demand for a broad range of our devices,
components and subsystems driven by the growing wireless infrastructure market.
The increased net sales reflected primarily increased unit volume. Approximately
$1.2 million of sales in the first six months of 2000 were last run sales of
products that we will no longer produce at our Whippany, New Jersey facility. We
produced these products on a last run basis to ensure that our customers'
requirements were satisfied. We do not expect these last run sales to recur in
the future.

Gross Profit. Gross profit increased 51.9% to $19.5 million for the six
months ended June 30, 2000 from $12.9 million for the first six months of 1999.
This increase reflected primarily the increase in net sales. Gross margin
decreased to 42.3% in the first six months of 2000 from 43.4% for the first six
months of 1999. This reduction in gross margin was due principally to the impact
of the inclusion of DML in the 2000 period. Because DML operates in a highly
competitive product sector, we expect this impact to continue.

Selling, General and Administrative. Selling, general and administrative
expenses increased 36.3% to $10.7 million for the six months ended June 30, 2000
from $7.8 million for the six months ended June 30, 1999. This increase
reflected primarily the addition of DML (approximately $750,000), increased
incentive compensation expense (approximately $960,000) and increased sales
commissions (approximately $332,000). As a percentage of net sales, selling,
general and administrative expenses decreased to 23.1% for the six months ended
June 30, 2000 from 26.4% in the six months ended June 30, 1999. This decrease is
due primarily to higher sales volume.

Research and Development. Research and development expenses increased
18.8% to $2.0 million for the six months ended June 30, 2000 from $1.7 million
for the comparable period in 1999. This increase was due principally to the
addition of DML (approximately $275,000). As a percentage of net sales, research
and development expenses decreased to 4.3% for the six months ended June 30,
2000 from 5.7% for the six months ended June 30, 1999. This decrease is due
primarily to higher sales volume.

Amortization. Amortization of goodwill and other intangible assets
increased to $1.4 million for the six months ended June 30, 2000 from $1.2
million for the six months ended June 30, 1999. This increase resulted from
amortization of intangibles arising from the DML acquisition.

Interest Expense and Other. Interest expense and other increased to $2.3
million for the six months ended June 30, 2000 from $1.2 million for the first
six months of 1999. This increase resulted principally from higher average
borrowings, higher interest rates and foreign currency transaction losses of
$222,000 in 2000. The higher average borrowings reflect primarily the debt we
incurred to acquire DML.

Redeemable Warrant Expense. Redeemable warrant expense of $1.9 million,
representing the estimated increase in the fair value of the redeemable
warrants, was charged during the six months ended June 30, 2000, as compared to
$126,000 during the six months ended June 30, 1999.

Income Tax Expense. Income tax expense as a percentage of income before
tax, excluding the non-deductible redeemable warrant expense and non-deductible
goodwill amortization, decreased to 34.0% for the six months ended June 30, 2000
from 37.2% for the first six months of 1999. Effective January 1, 1998, we
established a foreign sales corporation. As a result of our use of this foreign
sales corporation, we received an income tax benefit of
30
<PAGE> 32

$137,000 for the six months ended June 30, 2000. The United States government
has indicated that the tax benefit derived from the use of foreign sales
corporations will be eliminated in the fourth quarter of 2000. Therefore, it is
unlikely that this tax benefit will continue beyond the 2000 tax year.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Net Sales. Net sales increased 4.7% to $64.6 million in 1999 from $61.8
million in 1998. Our 1999 results included revenues of $6.8 million generated by
DML after we acquired it in July 1999 and a full year of Metelics. The
additional revenue from DML and Metelics was partially offset by a decline in
sales of subsystems, reflecting a temporary delay in the introduction of a next
generation wireless base station by one of our major customers.

Gross Profit. Gross profit decreased by 5.7% to $23.8 million in 1999 from
$25.2 million in 1998. The decrease in gross profit reflected primarily the
impact of a $1.8 million inventory write-off associated with the restructuring
of our Whippany, New Jersey operation, along with our reduced sales volume which
was partially offset by the inclusion of DML and Metelics as outlined above.
Gross margin in 1999 was 36.8%, compared to 40.8% in 1998. The reduction in
gross margin resulted principally from the Whippany inventory restructuring
charge and our reduced sales volume.

Selling, General and Administrative. Selling, general and administrative
expenses increased 6.3% to $16.1 million in 1999 from $15.1 million in 1998.
This increase reflects primarily the additional costs at DML (approximately
$784,000) and a full year of expense at Metelics. As a percentage of net sales,
selling, general and administrative expenses increased to 24.9% in 1999 from
24.5% in 1998.

Research and Development. Research and development expenses increased
11.6% to $3.6 million in 1999 from $3.2 million in 1998. This increase reflects
primarily the addition of DML (approximately $186,000) and the addition of
engineering personnel across our operating units. As a percentage of net sales,
research and development expenses increased to 5.5% in 1999 from 5.2% in 1998.

Amortization. Amortization of goodwill and other intangible assets
increased to $2.5 million in 1999 from $2.1 million in 1998. This increase
resulted from a full year of amortization in 1999 of intangibles arising from
the Metelics acquisition, compared to ten months of amortization in 1998, and
from amortization of intangibles arising from the July 1999 acquisition of DML.

Write-off of Acquired In-Process Research and Development. In 1998, we
recorded a $6.0 million charge for the write-off of in-process research and
development costs in connection with our acquisition of Metelics. This was a
one-time, non-cash, non-deductible charge.

Interest Expense and Other. Interest expense and other increased to $3.2
million in 1999 from $2.0 million in 1998. The increase reflects primarily the
result of higher average borrowings and higher interest rates in 1999. The
higher average borrowings reflect primarily the debt we incurred to acquire DML.

Redeemable Warrant Expense. Redeemable warrant expense of $250,000 was
charged in 1999. There was no charge in 1998.

Income Tax Expense. Income tax expense as a percentage of income before
tax, excluding the non-deductible redeemable warrant expense in 1999 and the
non-deductible write-off of acquired in-process research and development in
1998, decreased to 33.6% in 1999 from 34.7% in 1998. Our income tax benefit from
the use of our foreign sales

31
<PAGE> 33

corporation, decreased to $134,000 in 1999 from $224,000 in 1998 due to lower
export sales in 1999 compared to 1998.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

Net Sales. Net sales decreased 5.6% to $61.8 million in 1998 from $65.4
million in 1997. This decrease was primarily due to subsystem sales that were
above expectations in 1997 reflecting principally a non-recurring sale of
retrofit subsystems to a major OEM customer. We also believe our sales in 1998
were adversely affected by the economic slowdown in the Asian markets and
reduced credit availability to wireless service providers which purchase
infrastructure equipment from our OEM customers. The inclusion of Metelics,
which was acquired in March 1998 and had net sales of approximately $9.5
million, partially offset this decrease.

Gross Profit. Gross profit decreased by 3.7% to $25.2 million in 1998 from
$26.2 million in 1997. This decrease resulted from lower sales volumes as
outlined above. Gross margin increased to 40.8% in 1998 from 40.0% in 1997.

Selling, General and Administrative. Selling, general and administrative
expenses increased 15.7% to $15.1 million in 1998 from $13.1 million in 1997.
The increase resulted principally from the addition of Metelics (approximately
$2.3 million). As a percentage of net sales, selling, general and administrative
expenses increased to 24.5% in 1998 from 20.0% in 1997.

Research and Development. Research and development expenses increased
37.0% to $3.2 million in 1998 from $2.3 million in 1997. This increase resulted
principally from higher prototype development costs and the addition of Metelics
(approximately $225,000). As a percentage of net sales, research and development
expenses increased to 5.2% in 1998 from 3.6% in 1997.

Amortization. Amortization of goodwill and other intangible assets
increased to $2.1 million in 1998 from $883,000 in 1997. This increase resulted
primarily from the March 1998 acquisition of Metelics.

Interest Expense and Other. Interest expense and other increased to $2.0
million in 1998 from $1.4 million in 1997. This was the result of higher average
borrowings, partially offset by lower interest rates in 1998 compared to 1997.
The higher average borrowings primarily reflect debt we incurred to acquire
Metelics.

Redeemable Warrant Expense. There was no redeemable warrant expense
charged in 1998, compared to $6.2 million charged in 1997.

Income Tax Expense. Income tax expense as a percentage of income before
tax, excluding the non-deductible redeemable warrant expense in 1997 and the
non-deductible write-off of acquired in-process research and development related
to the acquisition of Metelics in 1998, decreased to 34.7% in 1998 from 39.4% in
1997. This decrease reflected primarily the $224,000 income tax benefit of our
foreign sales corporation which became effective January 1, 1998.

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<PAGE> 34

SELECTED QUARTERLY OPERATING RESULTS

The following table sets forth a summary of our unaudited consolidated
results of operations for each of our eight most recent quarters ended June 30,
2000. The information for each of these quarters is unaudited and has been
prepared on a basis consistent with our annual audited consolidated financial
statements appearing elsewhere in this prospectus. This information includes all
adjustments, consisting only of normal recurring adjustments, that we considered
necessary for a fair presentation of this information when read in conjunction
with our consolidated financial statements and related notes appearing elsewhere
in this prospectus. Results of operations for any quarter are not necessarily
indicative of the results for a full year or any future periods.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1999 1999
------------- ------------ --------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net sales.............................. $15,518 $15,509 $14,710 $14,869
Cost of products sold.................. 9,513 9,642 8,310 8,419
------- ------- ------- -------
Gross profit........................... 6,005 5,867 6,400 6,450

Selling, general and administrative
expenses.............................. 3,763 3,735 3,819 4,004
Research and development............... 806 874 803 882
Amortization........................... 571 603 598 598
Restructuring and impairment charges... -- -- -- --
------- ------- ------- -------
Income (loss) from operations.......... 865 655 1,180 966

Interest expense and other............. 613 585 623 626
Redeemable warrant
expense............................... -- -- 63 63
------- ------- ------- -------
Income (loss) before income taxes...... 252 70 494 277

Income tax expense (benefit)........... 88 19 300 200
------- ------- ------- -------
Net income (loss)...................... $ 164 $ 51 $ 194 $ 77
======= ======= ======= =======
Income (loss) per common share:
Basic................................. $ 0.00 $ (0.00) $ 0.00 $ 0.00
Diluted............................... $ 0.00 $ (0.00) $ 0.00 $ 0.00

PERCENTAGE OF NET SALES:
Net sales.............................. 100.0% 100.0% 100.0% 100.0%
Cost of products sold.................. 61.3 62.2 56.5 56.6
------- ------- ------- -------
Gross profit........................... 38.7 37.8 43.5 43.4

Selling, general and administrative
expenses.............................. 24.2 24.1 26.0 26.9
Research and development............... 5.2 5.6 5.5 5.9
Amortization........................... 3.7 3.9 4.1 4.0
Restructuring and impairment charges... -- -- -- --
------- ------- ------- -------
Income (loss) from operations.......... 5.6 4.2 7.9 6.6

Interest expense and other............. 4.0 3.8 4.2 4.2
Redeemable warrant expense............. -- -- 0.4 0.4
------- ------- ------- -------
Income (loss) before income taxes...... 1.6 0.4 3.3 2.0

Income tax expense (benefit)........... 0.5 0.1 2.0 1.5
------- ------- ------- -------
Net income (loss)...................... 1.1% 0.3% 1.3% 0.5%
======= ======= ======= =======

<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1999 1999 2000 2000
------------- ------------ --------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net sales.............................. $16,430 $18,638 $20,654 $25,487
Cost of products sold.................. 10,258 13,870 12,343 14,273
------- ------- ------- -------
Gross profit........................... 6,172 4,768 8,311 11,214
Selling, general and administrative
expenses.............................. 3,809 4,461 4,951 5,710
Research and development............... 886 981 991 1,011
Amortization........................... 646 688 682 748
Restructuring and impairment charges... -- 887 -- --
------- ------- ------- -------
Income (loss) from operations.......... 831 (2,249) 1,687 3,745
Interest expense and other............. 922 1,032 1,059 1,284
Redeemable warrant
expense............................... 63 61 410 1,502
------- ------- ------- -------
Income (loss) before income taxes...... (154) (3,342) 218 959
Income tax expense (benefit)........... (7) (1,327) 283 1,024
------- ------- ------- -------
Net income (loss)...................... $ (147) $(2,015) $ (65) $ (65)
======= ======= ======= =======
Income (loss) per common share:
Basic................................. $ (0.01) $ (0.10) $ (0.01) $ (0.01)
Diluted............................... $ (0.01) $ (0.10) $ (0.01) $ (0.01)
PERCENTAGE OF NET SALES:
Net sales.............................. 100.0% 100.0% 100.0% 100.0%
Cost of products sold.................. 62.4 74.4 59.8 56.0
------- ------- ------- -------
Gross profit........................... 37.6 25.6 40.2 44.0
Selling, general and administrative
expenses.............................. 23.2 23.9 24.0 22.4
Research and development............... 5.4 5.3 4.8 4.0
Amortization........................... 3.9 3.7 3.3 2.9
Restructuring and impairment charges... -- 4.8 -- --
------- ------- ------- -------
Income (loss) from operations.......... 5.1 (12.1) 8.1 14.7
Interest expense and other............. 5.6 5.5 5.1 5.0
Redeemable warrant expense............. 0.4 0.3 2.0 5.9
------- ------- ------- -------
Income (loss) before income taxes...... (0.9) (17.9) 1.0 3.8
Income tax expense (benefit)........... (0.0) (7.1) 1.3 4.1
------- ------- ------- -------
Net income (loss)...................... (0.9)% (10.8)% (0.3)% (0.3)%
======= ======= ======= =======
</TABLE>

33
<PAGE> 35

LIQUIDITY AND CAPITAL RESOURCES

To date, we have financed our operations with cash from operations. In
addition, we have financed our acquisitions with borrowings under lines of
credit and term loans, the issuance of subordinated debt, warrants and the
private issuance of redeemable preferred stock and common stock. At June 30,
2000 we had $10.2 million of working capital, which included cash and cash
equivalents of $192,000.

Our operating activities provided cash of $1.3 million in 1998, $1.2
million in 1999 and $1.2 million in the six months ended June 30, 2000.
Contributing to cash provided by operating activities in 1998, our net loss of
$4.5 million was more than offset by the non-cash write-off of acquired
in-process research and development charge of $6.0 million. Contributing to cash
provided by operating activities in 1999, our net loss of $1.9 million was more
than offset by non-cash depreciation and amortization of $4.5 million.
Contributing to cash provided by operating activities for the six months ended
June 30, 2000, our net loss of $130,000 was more than offset by non-cash
depreciation, amortization, and redeemable warrant expense of $4.6 million.

Our investing activities used cash of $23.5 million in 1998, $11.2 million
in 1999 and $1.2 million in the six months ended June 30, 2000. In 1998, we used
cash of $21.5 million to fund our acquisition of Metelics and $2.0 million to
purchase manufacturing equipment and other fixed assets. In 1999, we used cash
of $7.7 million to acquire DML, $1.9 million to fund the expansion of our Ann
Arbor manufacturing facility and the construction of our principal executive
offices and $1.6 million to purchase manufacturing equipment. In the six months
ended June 30, 2000, we used cash of $1.2 million to purchase manufacturing
equipment.

Our financing activities provided cash of $22.1 million in 1998 and $10.0
million in 1999 and used cash of $10,000 in the six months ended June 30, 2000.
In 1998, cash provided by financing activities primarily resulted from proceeds
of a $20.0 million acquisition line of credit used to acquire Metelics and $3.0
million from our revolving credit line. This was partially offset by repayments
of long term debt of $536,000 and dividends paid to our preferred shareholders
of $320,000. In 1999, cash provided by financing activities primarily resulted
from the proceeds of a $25.0 million term note, $2.7 million from a mortgage
note and $4.0 million of proceeds from the issuance of subordinated debt and
warrants. We used a portion of the proceeds from the $25.0 million term note to
repay the $20.0 million acquisition line of credit and $1.9 million of term
notes. In the six months ended June 30, 2000, cash used in financing activities
primarily consisted of $2.0 million of repayments on the term note, offset by
$1.8 million in proceeds from the revolving credit line and $400,000 in proceeds
from the issuance of common stock to selected employees in March and April 2000.

In July 1999, we obtained a $12.0 million secured revolving line of credit
and a $25.0 million secured term loan. The facilities were used to refinance
debt related to our prior acquisitions. The interest rate on these facilities is
based, at our election, at a Eurodollar rate plus a margin or a prime rate plus
a margin. At June 30, 2000, $5.1 million was outstanding on the revolving line
of credit, at an interest rate of 9.75% per year, and $23.0 million was
outstanding on the term loan, at an interest rate of 10.125% per year. We expect
to use a portion of the proceeds of this offering to repay these facilities in
full.

We have a commitment letter from the same two banks holding our $12.0
million revolving line of credit facility and our $25.0 million term loan
facility to replace these facilities with a one-year, unsecured $50.0 million
line of credit. Each draw on this line of credit will be subject to approval by
the banks. This new facility is expected to be effective shortly after the
consummation of this offering and the payment in full of the prior facilities.
We intend to use this facility primarily to fund future acquisitions. The
interest rate on this new facility will be

34
<PAGE> 36

based, at our election, at the prime rate, the federal funds rate plus one
percent, or the Eurodollar rate plus one and one-half percent.

In 1996 in connection with our acquisition of KDI, we issued subordinated
debt with an initial face amount of $3.5 million and a coupon interest rate of
12% per year. We also issued redeemable preferred stock with an initial
redemption value of $4.0 million and a stated dividend of 8% per year. In 1999,
in connection with our acquisition of DML, we issued subordinated debt with an
initial face amount of $4.0 million and a coupon interest rate of 8% per year.
In connection with these subordinated debt and redeemable preferred stock
issuances, we issued warrants to purchase an aggregate of 3,777,200 shares of
our common stock, for a nominal purchase price. The fair value of the 1996
warrants was allocated to the subordinated debt and redeemable preferred stock
issued in 1996 as original issuance discount and the fair value of the 1999
warrants was allocated to the subordinated debt issued in 1999 as original
issuance discount. We expect to use a portion of the proceeds of this offering
to repay our subordinated indebtedness in full and to redeem our redeemable
preferred stock.

In November 1999 we issued a mortgage note with an initial principal amount
of $2.7 million at an interest rate of 7.5% per year. This note is secured by
real estate assets at our Ann Arbor facilities. We anticipate that our long term
debt following this offering will consist solely of this mortgage note. A
balloon payment of $2.5 million is due on this note in November 2004.

We currently anticipate that our cash generated from operations and our
available credit facility will provide sufficient liquidity to support our
operations, capital expenditures and scheduled debt repayments for the next
twelve months, although no assurance can be given in this regard. In the future,
if we need additional capital to grow our business, or acquire other businesses
to broaden and deepen our product lines and better serve the needs of our
customers, we may seek to sell additional equity or debt securities or secure
additional lines of credit, which may result in dilution to our shareholders.

RECENT ACQUISITIONS

In March 1998, we acquired Metelics for $26.8 million, consisting of the
payment of $20.9 million in cash, the issuance of 1,636,400 shares of our common
stock and $871,000 of acquisition costs. This acquisition was accounted for as a
purchase and, accordingly, the purchase price was allocated to the assets
purchased and the liabilities assumed based upon the estimated fair values at
the date of acquisition. The excess of the purchase price over the fair value of
net assets acquired was $11.1 million and was recorded as goodwill in March
1998, which is being amortized on a straight-line basis over 15 years.

In the first quarter of 1998, we recorded a $6.0 million charge associated
with the estimated fair value of purchased in-process research and development
costs acquired in the Metelics acquisition because technological feasibility had
not been established and the in-process technology had no future alternative
uses. Metelics' in-process research and development value consisted of twelve
primary product programs. Our estimated additional cost to complete these
research projects was approximately $1.4 million compared to our current
aggregated actual and estimate cost to complete of $1.3 million. We incurred
estimated expenses of $767,000 in 1998, and $649,000 in 1999. We incurred actual
related expenses of $420,000 in 1998, $535,000 in 1999 and are expecting to
incur $310,000 in 2000 and $70,000 in 2001. For a more detailed discussion of
this charge, you should refer to note 2 of the notes to our consolidated
financial statements appearing elsewhere in this prospectus.

35
<PAGE> 37

In July 1999, we acquired DML for $7.7 million, consisting of the payment
of $7.3 million in cash and $429,000 of acquisition costs. The transaction was
accounted for as a purchase and, accordingly, the purchase price was allocated
to the assets purchased and the liabilities assumed based upon the estimated
fair values at the date of acquisition. The excess of the purchase price over
the fair value of net assets acquired was $5.3 million and was recorded as
goodwill in August 1999, which is being amortized on a straight-line basis over
15 years.

In addition, our agreement to purchase DML included an earn-out arrangement
under which we are required to pay the prior owner an additional amount (payable
in British pounds sterling) based on DML's profitability through March 31, 2000.
Our June 30, 2000 balance sheet includes $4.0 million in other accrued expenses
related to this expected earn-out payment which reflects our estimate of the
amount due to the prior owner. This amount was recorded as additional goodwill
during the six months ended June 30, 2000. We do not expect the actual payment
to differ materially from this accrual. In April 2000, we secured a British
pound denominated forward contract to cover the liability for this earn-out,
which expires July 31, 2000. We purchased this contract to ensure that our
obligation for the DML earn-out payment does not increase as the result of
changes in foreign currency exchange rates. Any gain or loss on this forward
contract will be reflected in our consolidated statement of operations, as the
contract does not qualify for hedge accounting.

We regularly evaluate potential strategic acquisitions as part of our
strategy to broaden and deepen our product lines. In the future, we may need
significant capital to finance these acquisitions. Consequently, our future
liquidity requirements will depend upon acquisitions which we may pursue. There
can be no assurance that capital will be available to fund these investments. If
we do not consummate any additional acquisitions, we expect that cash from
operations will continue to provide sufficient working capital to support
operations and to repay our debt. There can be no assurance, however, that we
will not require additional financing to fund our operations, and, if required,
that such financing will be available on commercially reasonable terms.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to market risk with regard to foreign exchange and interest
rates. We analyze the effect of these risks on our balance sheet, results of
operations and cash flows.

Our earnings are affected by changes in interest rates because some of our
outstanding debt was issued under agreements containing variable interest rates.
A 1% change in interest rates would have changed interest expense and the net
loss before income taxes by approximately $184,000 in 1998 and $239,000 in 1999.
Our sensitivity analysis does not consider the effects of the reduced or
increased level of overall economic activity that could result from a change in
interest rates. Further, upon a significant change in interest rates, we would
likely take actions to further mitigate our interest rate exposure. Upon the
completion of this offering, we anticipate that our outstanding debt will
consist solely of a fixed rate mortgage note.

Our earnings are also affected by fluctuations in the value of the U.S.
dollar as compared to pounds sterling in the United Kingdom as a result of DML's
operations. The result of an average 5% change in the value of the U.S. dollar
relative to the pound sterling would have resulted in a change in our 1999 net
loss of approximately $11,000.

EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133"). We expect to adopt SFAS No.
133 effective January 1, 2001. SFAS No. 133 will require us to recognize all
derivatives on the balance sheet at fair

36
<PAGE> 38

value. We do not anticipate that the adoption of SFAS No. 133 will have an
effect on our results of operations or financial position based on our current
holdings and operations.

In December 1999, the SEC issued SAB 101, Revenue Recognition, ("SAB 101")
which provides guidance on the recognition, presentation and disclosure of
revenue in financial statements filed. SAB 101 outlines the basic criteria that
must be met to recognize revenue and provides guidance for disclosures related
to revenue recognition policies. We believe that our revenue recognition policy
is in compliance with the provisions of SAB 101 and that the adoption of SAB 101
will have no effect on our financial position or results of operations.

In March 2000, the FASB issued FASB Interpretation No. 44, Accounting for
Certain Transactions involving Stock Compensation, an interpretation of APB
Opinion No. 25 ("Interpretation No. 44"). We are required to adopt
Interpretation No. 44 in July 2000 which provides guidance on accounting for
certain transactions and provisions of stock option plans. The accounting for
our outstanding stock option plans and related grants thereunder will not be
impacted by the adoption of Interpretation No. 44 in July 2000. Interpretation
No. 44 will be applied prospectively to new awards granted or modifications of
outstanding awards.

37
<PAGE> 39

BUSINESS

OVERVIEW

We design, manufacture and market a broad range of devices, components and
subsystems that are used throughout mobile and fixed wireless infrastructure
equipment and related test equipment applications. Our products are also used in
wireless broadband access, fiber optic networking, radar and satellite
applications. We sell products that operate over the full range of RF
frequencies, including radio frequencies, microwave frequencies and millimeter
wave frequencies. Our customers use our products to control, condition and
enhance RF signals. Our products range from basic devices, such as diodes and
resistors, to components, such as variable and fixed attenuators, direct
current, or DC, blocks and terminations, couplers and dividers, ferrite
isolators and circulators, up to complex multifunction subsystems, such as
amplifiers and multi-path switch and power combiner/divider subassemblies.

The rapid growth in the wireless communications industry has led to
substantial investments in infrastructure equipment to support the build-out of
communications networks. We sell our products primarily to the OEMs of these
networks. These OEMs are increasingly focusing on technology integration, system
design and deployment and choosing to outsource the production of devices,
components and subsystems to a limited number of qualified suppliers.

INDUSTRY BACKGROUND

Increasing Demand for Wireless and Broadband Communications Services

Worldwide demand for voice, data and video services has led communications
service providers to offer greater connectivity, mobility and bandwidth and is
leading to large-scale investments in communications infrastructure. Additional
factors, including deregulation, demand for increased connection quality and the
proliferation of data and Internet applications, are also driving communications
service providers to upgrade and expand existing networks and build new networks
based on emerging technologies.

Worldwide deregulation of telecommunications services is a leading
contributor to the rapid growth and investment in the wireless communications
industry. Deregulation in Europe and the United States has allowed for
competition against state controlled monopolies in Europe and against incumbent
local exchange and long distance carriers in the United States. Deregulation has
led to more competition and pricing declines, which in turn has increased demand
and the investment in networks to support such demand. Deregulation of mobile
wireless communications services, matched with technological innovations, has
also led to large-scale investment in redundant wireless networks.

Demand for high speed Internet access and mobility, fueled by technological
advances in commercially available and inexpensive personal communication
devices has also accelerated the growth of wireless and broadband services. In
response, wireless networks are carrying greater amounts of traffic as
subscriber penetration and per subscriber minutes of use increase. International
Data Corporation, an independent market research firm, estimates that the
installed base of worldwide wireless subscribers will grow from 427 million in
1999 to 1.1 billion by 2003. As wireless communications continue to develop in
terms of both usage and breadth of applications, we believe that service
providers will increasingly need to invest in voice and data network capacity.

Demand for wireless data applications, including short messaging, Internet
access services, and local area network connectivity, is also growing rapidly
and using more network capacity. IDC projects that the number of wireless data
subscribers in the United States will increase from 2.9 million in 1999 to 34.3
million in 2003 and that mobile handheld device
38
<PAGE> 40

sales will increase from 7.4 million units in 1999 to 45.4 million units in
2004. This projected growth is leading OEMs to develop next generation wireless
networks designed specifically to carry both voice and broadband data traffic.

Global standards for improvements to existing networks and for third
generation, or 3G, wireless networks feature increased capacity and data speeds
that permit wireless transmission of integrated voice and broadband data traffic
at speeds in excess of 380 Kbps with mobile applications and in excess of 2 Mbps
with fixed wireless applications. This technology can be implemented with new
infrastructure or as an equipment overlay to existing digital wireless networks
and, in the case of full 3G, requires the deployment of entirely new base
stations. We believe that wireless service providers will begin to upgrade their
networks to next generation standards over the next few years. As a result, we
expect OEMs to deploy next generation infrastructure and handsets, and to begin
to develop 3G infrastructure and handsets.

The growth of data traffic is also leading to significant investment in
broadband local loop and wireless access equipment. This growth in data traffic
is largely the result of Internet traffic, which is projected by IDC to grow
from 240 million users in 1999 to 602 million users by 2003. To support the
demand for data connectivity, service providers are investing in new high
capacity fiber optic cable, broadband coaxial cable, fixed-wireless systems and
mobile-wireless communication networks. Of note, the signal processing and other
electronic components supporting the higher bandwidth fiber optic
systems -- with bandwidth capacity now reaching over 1.6 Tbps on a single
strand -- are using RF-based technologies, which has created a new market for
high frequency RF devices, components and subsystems.

In contrast to the scalable capacity over fiber strands, capacity on
wireless networks is relatively more constrained given spectrum limitations.
Cellular networks generally use frequencies in the 850 MHz frequency range,
personal communication services, or PCS, and its sister technologies in Europe
and Asia operate in the 1.8-1.9 GHz range, and fixed wireless technologies,
including multi-channel, multi-point distribution systems, or MMDS, which
operate at 2.5 GHz and local multi-point distribution systems, or LMDS, which
operate at 24, 28 and 38 GHz. In an effort to address the increasing demand for
wireless communications, wireless OEMs are developing systems capable of greater
capacity over existing bandwidth constraints and regulatory authorities are
making available higher, less congested frequencies. Systems operating at these
higher frequencies require more powerful RF subsystems in order to achieve the
same signal coverage as lower frequency systems. In addition, service providers
are often demanding higher power products to resolve interference problems at
the lower, highly congested frequencies. As initial network coverage
requirements are met with higher frequency, higher power systems, subsequent
infrastructure investments and resulting network density increases are
complemented by frequency reuse techniques, allowing two or more closely spaced
customers to use the same channel. This technique facilitates growth in network
capacity as infrastructure density is increased. The RF equipment designed for
use at high frequencies and/or high power levels, as well as for frequency
reuse, must have higher performance characteristics and tighter operating
tolerances than are required for existing cellular and PCS networks.

Increasing Need for Wireless Communications Test Equipment

In addition to expanding infrastructure capacity, OEMs and service
providers are under increased pressure to improve the quality and reliability of
wireless services in an effort to compete for new customers and reduce existing
customer turnover. Network testing procedures are essential to the quality
improvement process. OEMs, supported by high speed, automated and complex test
instrumentation, are increasingly engaged in the use of laboratory test
simulation techniques to replicate the environmental and voice/data traffic
conditions encountered in wireless networks. These techniques allow OEMs and
service providers to better predict

39
<PAGE> 41

system performance under actual use conditions and initiate design solutions to
optimize the quality of RF transmissions. The test equipment market segment is
also driven by the needs of OEMs to increase manufacturing throughput and system
optimization by employing test automation at higher speeds and levels of
precision. In addition, service providers are scheduling more frequent and
technically advanced testing techniques to maintain equipment at peak
performance levels. Finally, as an alternative to measurement of systems by
field technicians, infrastructure equipment designs now often include self
diagnostic test functions to automatically perform routine evaluations on system
integrity and signal quality. These test equipment products use high-grade
versions of similar devices and components used within wireless infrastructure,
but with specification parameters that are typically an order of magnitude
higher in performance than the systems they measure.

Wireless Infrastructure OEMs Increasingly Relying on Qualified Suppliers

In a typical wireless communications system, the principal functional
blocks are the RF subsystem, which receives, amplifies and transmits signals,
and the signal processor, which encodes and decodes digitized signals. Since the
RF subsystem receives the signal, interfaces with the signal processor, and
amplifies and transmits the signal, a system's performance and signal quality
are significantly affected by the performance of the RF subsystem.
Communications service providers typically rely on large OEMs for RF systems,
namely Ericsson, Lucent, Motorola, Nokia and Nortel Networks. Each of these
companies is capable of delivering complete systems, installation and financing
packages to service providers. While service providers are requiring RF products
to support higher performance and reliability, OEMs are focusing on system level
design and technology integration and have limited resources devoted to the
design of RF devices, components and subsystems themselves. We believe that OEMs
are therefore increasingly relying on third party suppliers that offer economies
of scale to contain costs for RF devices, components and subsystems.

Challenges Facing OEMs

OEMs are focusing on the following challenges to improve their competitive
position and profitability:

Shorter time to market. Intense competition and the resulting need to
adopt new technologies are forcing OEMs to develop and launch products in
the shortest time possible.

Higher performance and more reliable systems. OEMs are facing
increased demands from communications service providers for greater
bandwidth and network capacity. System reliability is another key
performance requirement due to the high costs of lost customer revenues,
equipment downtime and the maintenance of communications networks.

Reduced costs. Communications service providers seek to minimize both
the up-front equipment acquisition costs as well as ongoing operating costs
as they upgrade their networks. OEMs must, as a result, offer a better
value proposition.

As OEMs develop more sophisticated systems that operate at higher
frequencies and use higher power levels, we believe that they will increasingly
depend on third party suppliers who can design and manufacture devices,
components and subsystems with correspondingly higher tolerances and
capabilities. In addition, OEMs must possess the ability to rapidly integrate
new technologies into their products and to react to unexpected increases in
demand that arise from large short-notice orders. Consequently, OEMs are
increasingly relying on third party value-added device, component and subsystems
suppliers that have the engineering and technological expertise to design, and
the production capacity to supply, this broad range of solutions.

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<PAGE> 42

At the same time, we believe that the RF device, component and subsystem
industry remains highly fragmented, having developed around entrepreneurs and
scientists who pioneered many of the original technologies years ago for
military applications. Many of the smaller suppliers have historically focused
on military applications, which, in contrast to the highly cost conscious
commercial market, are generally priced at a margin over cost. In the face of
this fragmented industry structure, OEMs are increasingly seeking to reduce
their vendor relationships to a select few. We believe that these conditions
combine to make it essential for OEMs to retain device, component and subsystem
suppliers with sufficient scale, scope and capacity to quickly respond to their
global needs.

We believe that it is critical for suppliers in this highly competitive OEM
market for RF devices, components and subsystems to:

- offer their OEM customers rapid response turnaround in design,
engineering and production of cost-effective and high-quality solutions;

- provide a wide range of products and possess broad technology,
engineering and process expertise across a range of frequencies, power
levels, interfaces and form factors;

- possess expertise in device and component integration and subsystems,
which enables reductions in parts count, size and cost of equipment; and

- maintain sufficient scale to support worldwide distribution, product
delivery and service, as well as a sufficient capital base to carry
inventory levels necessary to effectively satisfy the needs of their
customers.

OUR SOLUTION

We design, manufacture and market a broad range of devices, components and
subsystems used throughout mobile and fixed wireless infrastructure equipment
and related test equipment applications. Our products are also used in wireless
broadband access, fiber optic networking, radar and satellite applications. The
key elements of our solution include:

Broad Product Offering and Benefits of Scale

We offer our customers a broad array of standard products, ranging from
simple devices and components to more complex subsystems. By combining our broad
range of products with our ability to design and manufacture specialized
products, we believe we are well-positioned to meet our customers' unique
requirements. In addition, we believe that we possess sufficient expertise and
scale in a highly fragmented industry to support large OEMs in their long-term
business relationships.

Strong Design and Manufacturing Capabilities Particularly at Higher
Frequencies and Higher Power Levels

As a result of the long heritage of our businesses in the RF industry and
the depth of our design, engineering and manufacturing expertise, we are able to
effectively address complex design requirements and the advanced material and
manufacturing processes and tighter tolerances associated with semiconductor,
amplifier and passive RF product specifications. Our expertise in these areas
help us support the continued expansion of our product offering to higher
frequencies (currently, up to 50 GHz), higher power levels (currently, up to
1,000 watts) and higher levels of complexity to support our customers' high
network capacity and frequency reuse requirements.

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<PAGE> 43

Integration Expertise

We design high performance subsystems over a broad range of RF frequencies
which requires sophisticated integration of devices and components. By
effectively and efficiently integrating a number of required functions into a
single subsystem, we are able to improve performance and reliability, and reduce
cost through reduction in product size and device, component and parts count. In
addition, we are able to enhance performance through optimal partitioning,
matching device characteristics and implementing functional elements. Finally,
we are able to provide customized and tightly integrated mechanical and
electrical interfaces to match specific OEM equipment requirements.

Price and Product Performance

We design our products to provide the price-performance, quality,
reliability and delivery requirements demanded by our customers. We draw upon
and allocate production demands across our varied manufacturing facilities. We
also have the capacity to source and assemble many of our components
internationally from a number of suppliers and contract manufacturers, including
our third party assembly operations in Mexico and our contract manufacturing
relationships in China and the Philippines, to ensure that we manufacture our
products cost-effectively without sacrificing product quality. In addition, we
are increasingly using a standard set of interchangeable parts in the design of
components and subsystems that allows us to achieve less costly and faster
turnaround time in product engineering and manufacturing.

Responsiveness and Flexibility for Globally Oriented Customers

We believe our design and engineering competencies, our breadth of standard
products and our manufacturing capabilities in our five facilities, augmented by
our third party assembly and manufacturing relationships, enable us to design
new products and manufacture them in large volumes, with a short turnaround time
required to meet the rapidly changing needs of our customers. We also have the
capability to deliver our products globally either directly or through our
network of independent representatives and distributors. These capabilities
allow us to better address the pricing, volume, and on-demand delivery
requirements of our globally oriented OEM customers. In addition, our technical
advisory board, consisting of six individuals with expertise in RF technology,
assists our staff of approximately 65 research, development and engineering
personnel in maintaining our strong design, engineering and manufacturing
capabilities by providing us with technical advice relating to the design and
evolution of RF devices, components and subsystems.

Test and Measurement Grade Components

As the wireless communications market continues to grow, the needs of OEMs
of wireless infrastructure equipment for test and measurement products also
increase. We offer a specialized, high performance range of products suited for
precision test instrumentation and measurement applications. These products are
high-grade versions of similar devices and components manufactured by us and
used within wireless infrastructure, but with specification parameters that are
typically an order of magnitude or higher in performance than the systems they
measure. Our products are well-suited for this market due to our experience in
designing and manufacturing high performance RF devices, components and
subsystems for other applications.

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<PAGE> 44

OUR STRATEGY

We seek to become the leading independent supplier of RF devices,
components and subsystems to OEM customers serving the wireless communications,
broadband access and fiber optic networking infrastructure markets. Our strategy
to achieve this objective includes the following key elements:

Expand Our Technological Expertise in and Continue Our Focus on Devices,
Components and Subsystems for Wireless Communications

We believe that our engineering expertise, particularly in semiconductor
design, and the packaging of high frequency, high power, RF components and
subsystems, along with our in-house wafer fabrication and manufacturing
capabilities allow us to provide our customers with quick, flexible and
customized solutions. In support of this strategy, we intend to expand our
technological expertise in the design and manufacture of high performance and
high quality devices, components and subsystems which operate at the full range
of RF frequencies commonly used in wireless communications transmission. We
intend to continue to increase our investment in engineering and technical
support staff additions, in advanced circuit design tools and equipment, and in
facility upgrades to support product range expansions.

Develop and Enhance Customer Relationships Particularly with Major
Infrastructure OEMs

We have developed significant customer relationships with several
customers, including three of the five largest OEMs of wireless infrastructure
equipment. We intend to continue our focus on developing and enhancing
significant customer relationships, particularly with OEMs of wireless
infrastructure equipment. We intend to continue to increasingly use technically
oriented marketing personnel to gain early access to the product development
processes of existing and potential customers. By participating in a customer's
product development process, we are better able to apply our engineering and
manufacturing competencies to solve the customer's problems and to have our
products designed into the customer's system. In addition, we believe that our
expertise in a wide variety of devices and components and our ability to
integrate these products into subsystems often leads to opportunities for the
sale of additional products to existing customers.

Focus on Emerging Communications Technologies and Markets

Our current areas of focus on emerging communications markets include
broadband access, wireless data and fiber optic networking applications. We
intend to continue focusing our resources on these and other emerging
communications technologies and markets. We intend to leverage our core
competencies in communications and other applications as we target these
opportunities. We believe that our focus on emerging communications technologies
and markets provides us with an opportunity to further develop our relationships
with OEM customers serving the broadband access market.

Grow through Strategic Acquisitions

We intend to continue to broaden and deepen our product lines and our
design, engineering, manufacturing and distribution capabilities through
internal growth and strategic acquisitions. To date, we have completed five
acquisitions. We believe that strategic acquisitions of companies with
complementary core competencies will play an important role in our ability to
offer breadth of technological expertise and products and will provide us with
the opportunity to benefit from potential synergies in our design, engineering,
manufacturing and distribution capabilities. While we consider strategic
acquisitions from time to time, we currently have no arrangements or agreements
for any acquisition.

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<PAGE> 45

Expand International Presence

We intend to continue our expansion of international design, manufacturing
and sales activity in an effort to gain greater access to those markets outside
the United States where we believe significant market opportunities exist. In
addition to our five design and manufacturing facilities located in the United
States and in the United Kingdom, we have established third party assembly
operations in Mexico and third party contract manufacturing relationships in
China and in the Philippines. We are in the process of opening an office in
China to support our proposed sourcing, assembly and design activities for sales
in China and worldwide. We believe that our international presence will assist
us in strengthening business relationships with globally oriented OEMs.

PRODUCTS

Our products operate over the full range of frequencies commonly used in
wireless communication applications. We offer products that control, condition
and enhance RF signals, operate from direct current to 50 GHz and are capable of
handling average power levels up to 1,000 watts. Our products are typically used
in wireless and broadband infrastructure equipment to reduce or amplify RF power
levels, redirect, distribute or detect RF signal paths, filter unwanted RF
signals and protect system equipment. In addition to a core set of products used
in mobile and fixed wireless infrastructure equipment and related test
equipment, our products are also widely used in broadband access, radar and
satellite applications. We also offer products manufactured to military and high
reliability, or hi-rel, specifications.

We design and manufacture products in the following principal categories:

Devices. Our basic devices include diodes, capacitors and resistive
film products. The selling prices of our devices generally range from $0.60
to $140.

Components. Components are typically more complex than devices. Our
components include continuously variable, programmable digitally stepped
attenuators and fixed coaxial attenuators, terminations, coaxial adapters,
DC blocks, equalizers, couplers, dividers, ferrite isolators and phase
shifters. The selling prices of our components generally range from $5 to
$1,000.

Subsystems. Our custom-designed, complex, multifunction subsystems
integrate two or more devices and components. Our subsystems include
amplifiers and integrated function subassemblies. The selling prices of our
subsystems generally range from $500 to $20,000.

Devices

Our devices consist principally of diodes and resistive film products:

Diodes. Diodes are signal-conditioning semiconductor devices used in
RF switching, attenuating, mixing, phase shifting, tuning, detecting and
signal multiplying applications. Diodes are used extensively in components,
wireless infrastructure equipment in test and measurement instrumentation.
While we offer standard devices for general equipment use, our expertise is
in high performance and custom-engineered diodes for demanding
applications. We market our diodes principally under the "Metelics" brand
name.

Resistive Film Products. Resistive film products include chip
resistors, attenuators, terminations and thick and thin film components
that dissipate applied RF energy in the form of heat. We have extensive
experience in processing virtually all resistive materials together with a
wide variety of substrate materials that are specifically suited for use at

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<PAGE> 46

frequencies used in wireless communication systems. We market our resistive
film products principally under the "KDI/Triangle" brand name.

The following table provides information with respect to selected devices
currently marketed by us.

<TABLE>
<CAPTION>
PRODUCT PRODUCT FEATURES TYPICAL APPLICATIONS
------- ---------------- --------------------
<S> <C> <C>
Diodes: High power; low loss; high Used in mobile base stations and
Step Recovery, PIN, isolation; up to 40 GHz; microwave radios, signal conditioning,
Schottky and Tunnel various microwave packages; switches, phase shifters, limiters,
Diodes chip forms and beam-lead attenuators, frequency tuning; high
configurations; silicon and frequency multipliers used in
GaAs; up to 4" wafers telecommunication test equipment;
mixers and detectors used in
measurement instruments
Resistive Film Products: Thin and thick film; Used in wireless infrastructure
Chip Resistors, Nichrome, Tantalum Nitride components and systems such as mobile
Attenuators and and Tin Oxide; surface mount base stations for power level control,
Terminations Beryllium Oxide and Aluminum impedance matching of system
Nitride substrates; 0.25 to components and signal termination
1,000 watts; up to 18 GHz
</TABLE>

Components

Components are typically more complex products than devices. Our components
consist principally of coaxial components, programmable components and ferrite
isolators:

Coaxial Components. Coaxial components are generally configured with
connectors for attachment to other wireless equipment components, antennas,
system or test equipment connections. These products include attenuators
and terminators, DC blocks, bias tees, couplers and dividers, gain
equalizers and between series adapters. We offer an extensive range of
product types ranging from utility grade products used in infrastructure
applications to high-reliability designs used in space applications. We
also supply precision grade products used in test and measurement
applications. Our coaxial products include fixed and variable attenuators
and terminations. We also produce nearly every type of standard connector
used in the RF equipment industry, as well as certain non-standard types.
We market our coaxial components principally under the "Inmet,"
"KDI/Triangle," and "Weinschel" brand names.

Programmable Components. These components are switchable or variable
setting products with an analog, digital or computer interface. Our
programmable products are used extensively in test and measurement
instrumentation and system equipment. Test equipment employs our
programmable components to evaluate and simulate conditions found in many
types of wireless communication systems, cable modems and various other
systems. We have experience with programmable phase shifter designs and
provide a wide variety of design approaches and solutions for various
applications, such as mobile base station amplifiers, smart antennas and
fiber optic networking applications. We market programmable components
principally under the "Weinschel" and "KDI/ Triangle" brand names.

Ferrite Isolators. Ferrite isolators act as a one-way valve to RF,
microwave frequency and millimeter frequency signals. They are used mainly
in radio transmitters found at mobile base stations where they allow the
transmitter to operate efficiently while

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<PAGE> 47

providing protection from reverse power usually found in fault conditions.
This reverse isolation reduces the interference between transmitters at the
base station site, which is a key factor as more bandwidth capacity is
required. Our ferrite products are available at all the standard mobile
base station frequency bands and power levels. We market ferrite isolators
principally under the "DML" brand name.

The following table provides information with respect to selected
components currently marketed by us.

<TABLE>
<CAPTION>
PRODUCT PRODUCT FEATURES TYPICAL APPLICATIONS
------- ---------------- --------------------
<S> <C> <C>
Coaxial: Up to 1,000 watts, up to 50 Used in signal conditioning, power
Fixed Attenuators and GHz, all popular connector level control, impedance matching and
Terminations types; convection or improvement of system components and
conduction cooled, low subsystems, signal termination and
passive modulation designs test applications
Programmable: Step Solid-state and electro- Used in test equipment, including
Variable Attenuators mechanically switched spectrum analyzers, signal generators,
designs operating at up to mobile base station and data
30 GHz; up to 10 bits; communications analyzers and
variety of input drive simulation systems; also used in
options including computer multipurpose systems and phased array
bus interface antennas
Programmable: Changes phase and Used to tune base station amplifiers,
Vector Modulator attenuation simultaneously, phased array and mobile communication
0-18 dB, 0-360 degrees, up smart antennas
to 2.5 GHz
Ferrite Isolators Single and dual junction Used in mobile base station antenna
isolators; options for and amplifier applications to protect
monitor ports, coupler ports transmitters, system subassemblies and
and integrated loop antenna subsystems and provide channel
isolation
</TABLE>

Subsystems

Our subsystems are custom-designed, complex, multifunction products that
integrate two or more devices or components. Our extensive product line of
devices and components allows us to satisfy many of our customers' subsystems
requirements. In addition, we have incorporated customer-furnished proprietary
technology and designs into our subsystems.

Our current subsystem offerings consist principally of amplifiers and
integrated function subassemblies.

Amplifiers. Amplifiers range from low-cost, low-noise amplifiers for
improving the receive performance of a radio link to high power amplifiers
to boost the power, and hence the range, of an existing system. Our
amplifiers operate at all standard mobile frequency bands and power levels
and are suitable for linear/analog, global system for mobile
communications, or GSM, code division multiple access, or CDMA, or time
division multiple access, or TDMA, systems. We also produce amplifiers for
military systems such as radar transponders and pulsed amplifiers, as well
as satellite

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<PAGE> 48

down-converter systems for laboratory test applications. We market our
amplifiers principally under the "DML" brand name.

Integrated Function Subsystems. Integrated function subsystems
consist of signal switching and combining subassemblies, including those
with integrated low-noise amplifiers and signal monitoring functions,
switchable filter cavities, and multi-path attenuation subsystems. Our
integrated function subsystems are used in three primary applications:
mobile base station performance enhancement; infrastructure equipment-
signal routing; and test simulation of mobile communication networks. We
are highly experienced in tightly integrated high density microwave and
millimeter wave circuit design and packaging. We also have experience
producing subsystems offering high power handling or output levels, fast
switching speeds, and a variety of control interfaces. We market our
integrated function subsystems principally under the "KDI/Triangle" and
"Weinschel" brand names.

The following table provides information with respect to selected
subsystems currently marketed by us.

<TABLE>
<CAPTION>
PRODUCT PRODUCT FEATURES TYPICAL APPLICATIONS
------- ---------------- --------------------
<S> <C> <C>
Amplifier: A variety of types including rugged, Integrated into OEM products, such
Low Noise and High Power waterproof, low cost and miniature as filters and diplexers; certain
types; high power types, with output types used in base station antenna
levels exceeding 100 watts towers; high power types used
primarily in laboratory test
applications

Integrated Function: SmartStep Direct current to 26.5 GHz; Used for test laboratory simulation
Multi-path Attenuator solid-state and electro- mechanically of signal fading in mobile systems,
Subsystems switched design; serial and parallel PCS, MMDS fixed wireless systems,
bus interface and cable modem testing

Integrated Function: High channel to channel signal Used for signal distribution and
High Power Switch Combiner isolation; PIN diode switched; power routing, channel combining and
Matrix handling to 200 watts; non-blocking boosting mobile base station
(any input to any output path in any capacity; smart antennas and
combination) repeaters; certain types used in
base station built-in test
subsystems to perform self
diagnostics on transmit/receive
equipment

Integrated Function: Operates to 30 GHz (expandable to 38 Used in signal routing and
Multicoupler Low Noise GHz); 16- channel transmit and switching of channels to customer
Amplifier/Switch and Antenna receive points; PIN diode switched, premise equipment in broadband
Feed with integrated low noise amplifier access LMDS; supports frequency
reuse to increase system data rates
and capacity
</TABLE>

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<PAGE> 49

CUSTOMERS

Our customers include a broad range of OEMs of communications
infrastructure equipment, including several of the largest OEMs in this market.
We also sell to numerous other OEMs and distributors. We serve our customers
through our internal sales staff and our independent sales representative
organizations.

The following is a list of our largest customers, each of which accounted
for at least 2% of our net sales in 1999.

<TABLE>
<S> <C>
Agilent Technologies Lucent Technologies
Forem/Allen Telecom Motorola
Hughes Space & Communications Raytheon Company
LM Ericsson Rockwell International
Lockheed Martin Corporation
</TABLE>

Sales to customers in the United States accounted for approximately 68.6%
of our net sales in 1999 and approximately 66.2% of our net sales for the six
months ended June 30, 2000.

SALES AND MARKETING

We focus our sales and marketing efforts on wireless communications
infrastructure OEMs and related test equipment OEMs. We also focus our direct
marketing resources on RF subsystem manufacturers and on OEMs developing
communication infrastructure equipment that use RF products for broadband
access, wireless data and fiber optic networking applications. We increasingly
seek to leverage our customer relationships and our product line breadth across
our operating units in order to further increase sales.

We market our products worldwide through a direct sales force of
approximately 45 sales personnel based at our five operating units and at the
parent company. Our sales force works closely with a global network of over 90
independent sales representative firms to better cover and respond to our
customers. The sales personnel at the parent company focus on marketing our
products to targeted markets and customers, including the OEMs of wireless
infrastructure equipment and the OEMs of emerging technologies, such as wireless
broadband access and fiber optic networking applications. The sales personnel in
our operating units focus on marketing specific products and managing our DML,
Inmet, KDI, Metelics and Weinschel brands. In addition, our direct sales force
routinely integrates engineering and product line support from our operating
units to address specific customer requirements and provide custom-engineered
design solutions. We also employ a select number of independent distributor
organizations to market our higher volume products.

One of the key elements of our business strategy is to continue our
expansion of international sales activity in strategic markets outside of the
United States where we believe significant market opportunities exist. Our July
1999 acquisition of United Kingdom-based DML increased presence with European
customers, particularly Ericsson.

BACKLOG

Our backlog was approximately $32.8 million as of June 30, 2000 and $13.1
million as of June 30, 1999. We include in our backlog all accepted product
purchase orders, with the exception of certain annual purchase orders placed by
a major OEM customer at our facility in Whippany, New Jersey. We only include
the annual purchase orders from this major OEM customer in backlog to the extent
we believe that the ordered products will be delivered within ten weeks. Of the
$32.8 million backlog as of June 30, 2000, approximately $2.1 million represents
purchase orders from this customer. In addition, we do not expect to fill
approximately $4.7 million of our $32.8 million of June 30, 2000 backlog by
December 31,

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<PAGE> 50

2000. Product orders in our backlog are subject to changes in delivery schedules
or to cancellation at the option of the purchaser without significant penalty.
Our backlog may vary significantly from time to time depending upon the level of
capacity available to satisfy unfilled orders. Accordingly, although useful for
scheduling production, backlog as of any particular date may not be a reliable
indicator of sales for any future period.

MANUFACTURING

We currently have four design and manufacturing facilities in the United
States and one facility in the United Kingdom. In addition, we have established
third party assembly operations in Mexico and third party contract manufacturing
relationships in China and the Philippines. We are in the process of opening a
representative office in Nanjing, China.

The following table provides information with respect to our manufacturing
facilities.

<TABLE>
<CAPTION>
LOCATION PRODUCTS CERTIFICATIONS, ETC.
-------- -------- --------------------
<S> <C> <C>
Ann Arbor, Michigan Adapters, attenuators and terminations, Pursuing ISO 9001
resistors, equalizers, DC blocks and bias certification;
tees, custom designed components, and other compliant with
products several military
specification
standards

Frederick, Maryland Step/programmable attenuators, attenuators Certified ISO 9001;
and terminations, power dividers, connectors compliant with
and connector systems, SmartStep components several military and
and subsystems, custom designed components hi-rel space
and subsystems, and other products qualification
specification
standards

Southend-on-Sea, Essex, United Ferrite isolators, amplifiers, and other Certified ISO 9001
Kingdom communications subsystems

Sunnyvale, California Schottky diodes, varactor diodes, PIN Compliant with
diodes, custom designed products and several military
integrated subassemblies, and other specification
products; Silicon and Gallium Arsenide standards; maintains
products manufactured in a wafer fabrication clean room
facility facilities

Whippany, New Jersey Surface mount microwave components, coaxial Certified ISO 9001;
dividers and couplers, resistors, maintains clean room
attenuators and terminations, step and facilities
voltage controlled programmable components,
custom designed components and subsystems,
and other products
</TABLE>

At present, our operating units perform all final manufacturing, assembly,
testing and packaging operations at their respective manufacturing facilities.
We believe that we will have sufficient manufacturing capacity for the
foreseeable future given our existing facilities and our outsourcing
capabilities. We use skilled permanent and, in some cases, contract personnel in
the manufacture of our products. We perform quality assurance tests on the
manufacturing processes, purchased items, work-in-process and finished products.

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<PAGE> 51

International Manufacturing

In 1997, we began assembling products in Reynosa, Mexico (on the Texas
border) pursuant to a shelter services agreement with a third party provider
which permits us to use this third party's manufacturing facility and its
employees. We currently assemble and process high volume connector and resistor
subassemblies and components at this facility. We have contract manufacturing
relationships with third parties located in Shanghai, China, principally for
high volume surface mount packages using diodes, and in Manila, Philippines,
principally for assembly, testing and tuning of selected complex RF components.
We generally contract with these third parties by purchase order on an as needed
basis.

In addition, we are in the process of opening a representative office in
Nanjing, China to support our proposed sourcing, assembly and design activities
for sales in China and worldwide.

SUPPLIERS

We attempt to use standard parts and components that are available from
multiple vendors. We select suppliers based on quality, price, delivery,
industry acceptance and location. We generally order components from our
suppliers and contract manufacturers by purchase order on an as-needed basis.
Most of the parts and components used in our products are available from
multiple sources. However, in certain cases, we have made the strategic decision
to select limited source suppliers in order to obtain lower pricing, receive
more timely delivery and maintain quality control. We have from time to time
experienced difficulty in obtaining some parts and components. Any inability to
obtain timely deliveries of acceptable quality and quantity of products, or any
other circumstance that would require us to seek alternative contract
manufacturers or suppliers, could delay our ability to deliver our products to
our customers which, in turn, could have a material adverse effect on our
business and results of operations.

RESEARCH AND DEVELOPMENT

We generally conduct our research and development efforts in direct
response to the unique requirements of a customer. We are actively engaged in
developing a variety of new products related to emerging communications
technologies and markets where we can leverage our core competencies in
communications and other applications. Our current areas of focus include
broadband access, wireless data and fiber optic networking applications.

In addition, we have a technical advisory board, comprised of six
individuals with expertise in RF technology. This board assists our staff of
approximately 65 research, development and engineering personnel in maintaining
our superior design, engineering and manufacturing capabilities by providing us
with technical advice relating to the design and evolution of RF devices,
components and subsystems. All members of our technical advisory board are
professors or research scientists affiliated with the Electrical Engineering and
Computer Sciences Department at the University of Michigan. Dr. George I.
Haddad, former Chairman of the Department and a member of our board of
directors, has chaired our technical advisory board since its inception.

COMPETITION

The markets for our products are extremely competitive and are
characterized by rapid change. The principal competitive factors affecting the
markets for our products include technology, price, technical performance,
quality, ability to design and produce unique customer solutions, and quick
response. Price competition is intense and downward pressure on pricing
generally occurs over the life of a product. Several of our competitors and
potential competitors have significantly greater financial, marketing, technical
and other competitive
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<PAGE> 52

resources than us and have greater name recognition and market acceptance of
their products and technologies. Our competitors include M/A Com, Inc. (a
division of Tyco International, Inc.) and REMEC, Inc. We also compete with
communications equipment manufacturers who manufacture RF devices and components
internally such as Agilent Technologies, Inc. and Anritsu Company.

We believe that we compete favorably in our markets. However, our
competitors may develop new technologies or enhancements to existing products or
introduce new products that will offer superior price or performance features.
We believe that to remain competitive in the future we will need to continue to
invest significant financial resources in research and development responsive to
our customers' requirements and to continue to demonstrate our ability to
provide customer solutions through the design and manufacture of cost-effective
and quality devices, components and subsystems.

INTELLECTUAL PROPERTY

Although we hold several patents applicable to our products, we do not
believe that these patents are material to the operation of our business. In
order to protect our intellectual property rights, we rely on a combination of
trade secret, copyright and trademark laws and employee and third-party
nondisclosure agreements, as well as limiting access to and distribution of
proprietary information. We generally enter into confidentiality and/or license
agreements with our key employees and strategic partners, as well as with other
selected customers and potential customers seeking proprietary information, and
limit access to and distribution of our proprietary information. The steps taken
by us to protect our intellectual property rights may not be adequate to prevent
misappropriation of our technology or to preclude competitors from independently
developing such technology. Furthermore, third parties may assert infringement
claims against us in the future. Any litigation, whether or not resolved in
favor of us, could result in significant expense to us and could divert
management and other resources.

In the event a third party were successful in a claim that one of our
products infringed its proprietary rights, we may be required to discontinue the
use of certain processes, cease the manufacture, use and sale of infringing
products, expend significant resources to develop non-infringing technology or
obtain licenses to the infringing technology. Moreover, we may suffer
significant monetary damages, which could include treble damages. Under these
circumstances, a license may not be available to us on reasonable terms or at
all. In the event of a successful claim against us and our failure to develop or
license a substitute technology on commercially reasonable terms, our financial
condition and results of operations could be materially adversely affected.

GOVERNMENT REGULATION

A substantial portion of our products is incorporated into wireless
telecommunications systems that are subject to regulation in the United States
by the FCC and outside the United States by other government agencies. Although
the equipment operators and not us are responsible for compliance with these
regulations, regulatory changes, including changes in the allocation of
available frequency spectrum, may restrict our customer's development efforts,
render our products obsolete or increase competition. As a result, changes in,
or the failure by us to manufacture products in compliance with, applicable
domestic and international regulations could have a materially adverse effect on
our business. In addition, the increasing demand for wireless and satellite
telecommunications has exerted pressure on regulatory bodies worldwide to adopt
new standards for such products, generally following extensive investigation of
and deliberation over competing technologies. In addition, because of our
participation in the defense industry, we are subject to audit from time to time
for our compliance with government regulations by various agencies.
51
<PAGE> 53

We are also subject to a variety of local, state and federal governmental
regulations relating to the storage, discharge, handling, emission, generation,
manufacture and disposal of toxic or other hazardous substances used to
manufacture our products. The failure to comply with current or future
regulations could result in the imposition of substantial fines on us,
suspension of production, alteration of our manufacturing processes or cessation
of operations.

EMPLOYEES

As of June 30, 2000, we employed 647 persons, including 481 in
manufacturing and operations, 67 in research, development and engineering, 44 in
sales and marketing and 55 in management and support functions. We believe our
future performance will depend in large part on our ability to attract and
retain highly skilled employees. None of our full-time employees is represented
by a labor union and we have not experienced any work stoppage. We consider our
employee relations to be good.

PROPERTIES

We own our principal executive offices, consisting of approximately 4,500
square feet located in Ann Arbor, Michigan. The following table provides
information relating to our manufacturing facilities.

<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FOOTAGE OWNED/LEASED
-------- -------------- ------------
<S> <C> <C>
Ann Arbor, Michigan.................... 24,000 Owned
Frederick, Maryland.................... 35,000 Leased (expires January 31, 2011)
Southend on Sea, Essex, United Kingdom
(main facility)...................... 20,000 Leased (expires March 14, 2010)
Southend on Sea, Essex, United Kingdom
(machine shop)....................... 1,000 Leased (expires March 31, 2003)
Sunnyvale, California.................. 20,000 Leased (expires September 14,
2002)
Whippany, New Jersey................... 56,000 Owned
</TABLE>

We believe that our existing facilities are adequate to meet our current
needs and that suitable additional or alternative space will be available on
commercially reasonable terms as needed.

DML leases property located in Shoeburyness, Essex, United Kingdom, which
is subleased to a third party for a term which corresponds to the term of DML's
prime lease with its landlord. In addition, KDI leases a facility located in
East Hanover, New Jersey, with 15,000 square feet, which was vacated by KDI in
connection with its recent reorganization. This lease expires on January 31,
2002. KDI is attempting to sublease this property for the remainder of the term.

After the consummation of this offering, a $2.7 million real estate
mortgage note with a balloon payment of $2.5 million due in November 2004 will
remain outstanding and continue to be secured by a mortgage covering our
principal executive offices and our manufacturing facility, both located in Ann
Arbor, Michigan.

LEGAL PROCEEDINGS

As a result of liabilities assumed by KDI in connection with our
acquisition of the KDI business in 1996, KDI is named as a potentially
responsible party liable for cleanup of two

52
<PAGE> 54

known environmental matters. We are negotiating with the EPA and the New Jersey
Department of Environmental Protection to resolve KDI's financial responsibility
for these matters. Based on analysis and information provided by consultants and
attorneys, we have provided reserves of $305,000 to cover estimated future costs
related to these matters.

With the exception of these actions, we are not a party to any material
legal proceedings. However, we may from time to time become a party to various
legal proceedings arising in the ordinary course of our business.

53
<PAGE> 55

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following are our executive officers and directors. Ages are as of June
30, 2000.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John L. Smucker...................... 56 President and Chief Executive Officer; Director
Stephen W. Shpock.................... 40 Vice President -- Operations and Chief Operating Officer
Jon E. Carlson....................... 38 Vice President -- Finance, Chief Financial Officer,
Secretary and Treasurer
Kurt W. Brown........................ 41 Vice President -- Compliance and Human Resources
Geoffrey D. Smith.................... 41 Vice President -- Marketing
John K. Cannon....................... 67 Director
Michael J. Endres.................... 52 Director
Dr. George I. Haddad................. 65 Director
David R. Meuse....................... 55 Director
William H. Schecter.................. 58 Director
</TABLE>

Executive Officers

JOHN L. SMUCKER, a co-founder of MCE Companies, has served as our President
and as one of our directors since our incorporation in October 1995. Mr. Smucker
also served as the President of Inmet from June 1994 to October 1995. In
addition, Mr. Smucker has served as Chairman of Inmet since October 1995 and as
Chairman of each of Weinschel, KDI, Metelics and DML since their respective
acquisitions. From 1980 to 1990, Mr. Smucker was a Vice President engaged in
securities sales for Goldman, Sachs & Co.

STEPHEN W. SHPOCK joined us in June 2000 as Vice President-Operations and
Chief Operating Officer. Before joining us, Mr. Shpock held several positions
with Litton-Electron Devices Division from January 1988 to May 2000, including
Vice President and General Manager from August 1996 to May 2000, Deputy General
Manager from 1995 to 1996, and Director of Engineering from 1992 to 1995.

JON E. CARLSON has served as our Vice President-Finance, Chief Financial
Officer and Treasurer since November 1998 and as our Secretary since August
2000. Prior to joining MCE Companies, Mr. Carlson held several positions in
finance at Ford Motor Company from June 1989 to November 1998, including
Manager -- Vehicle Line Profit Analysis in Ford's Truck Vehicle Center from
January 1997 to November 1998.

KURT W. BROWN has served as our Vice President-Compliance and Human
Resources since November 1997. Mr. Brown also serves as Vice President-Finance
and Administration, Secretary and Treasurer of Weinschel, a position he has held
since our acquisition of Weinschel in November 1995. From October 1987 to
November 1995, Mr. Brown held several positions with Weinschel's predecessors,
including Vice President of Finance and Administration from 1990 through
November 1995.

GEOFFREY D. SMITH has served as our Vice President-Marketing since November
1997. Mr. Smith also served as Vice President-Marketing of Weinschel, a position
he held since our acquisition of Weinschel in November 1995 through June 2000.
From 1992 through November 1995, Mr. Smith served as Vice President-Marketing
for Weinschel's predecessor.

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<PAGE> 56

Directors

JOHN K. CANNON has served as one of our directors since our incorporation
in October 1995. He also served as a director and as the Secretary of Inmet from
1994 to 1995. Mr. Cannon was a Partner with the law firm of Dykema Gossett PLLC,
our primary outside legal counsel, until his retirement in July 1995. Mr. Cannon
also served as our Secretary from October 1995 to August 2000.

MICHAEL J. ENDRES, a co-founder of MCE Companies, has served as one of our
directors since October 1996. Mr. Endres is a principal of Stonehenge Holdings,
Inc., an investment management and merchant banking firm, which he co-founded in
1999. Prior to joining Stonehenge Holdings, Mr. Endres served as the chief
executive officer of Banc One Capital Partners Corporation, the merchant banking
arm of Banc One Capital Corporation, from 1990 to 1999. Mr. Endres is a member
of the board of directors of Worthington Industries, a diversified steel
processor.

DR. GEORGE I. HADDAD has served as one of our directors and as the chairman
of our technical advisory board since October 1996. Dr. Haddad is the Robert J.
Hiller Professor of Electrical Engineering and Computer Sciences at the
University of Michigan and Director of the Center for High Frequency
Microelectronics. Dr. Haddad joined the College of Engineering faculty at the
University of Michigan in 1963, where he served as Director of the Electron
Physics Laboratory from 1969 to 1975, as Director of the Solid-state Electronics
Laboratory from 1986 to 1991 and as the Chairman of the University of Michigan's
Electrical Engineering and Computer Sciences Department from 1975-1986 and
1991-1997.

DAVID R. MEUSE, a co-founder of MCE Companies, has served as one of our
directors since our incorporation in October 1995. Mr. Meuse also served as a
director of Inmet from 1994 to 1995. Mr. Meuse is a principal of Stonehenge
Holdings, Inc., which he co-founded in 1999. Prior to joining Stonehenge
Holdings, Mr. Meuse served as the chairman and chief executive officer of Banc
One Capital Holdings, Inc., the holding company for the investment banking,
brokerage and insurance operations of Bank One Corporation, from 1990 to 1999.
Mr. Meuse is a member of the board of directors of Sportsworld Media Group, plc,
in the United Kingdom.

WILLIAM H. SCHECTER has served as one of our directors since October 1996.
Mr. Schecter is the Chairman of National City Capital Corporation a position he
has held since 1989. Prior to his appointment to the position of Chairman, Mr.
Schecter served as the President of the brokerage subsidiary of National City
Corporation. Mr. Schecter is a member of the board of directors of the Boykin
Lodging Company, a real estate investment trust.

Our executive officers are appointed annually following the annual meeting
of shareholders and serve at the discretion of our board of directors. There are
no family relationships among any of our directors or executive officers.

COUNCIL OF PRESIDENTS

Effective April 1, 2000, we established a council of presidents consisting
of the chief executive officers of our operating units. Currently, the members
of the council are Kevin P. Kearns, Francis S. Kwan, Michael D. Snyder, Timothy
E. Solomon and Robert L. Stephens. The purpose of the council is to assist in
establishing the strategic and tactical direction of MCE Companies, to address
on-going management issues of MCE Companies and to assist our approximately 65
person research, development and engineering staff. Our council of presidents
advises our management on issues of importance at the operating units and in the
markets in which the operating units do business. Our executive officers are
also active members of the council of presidents.

55
<PAGE> 57

We expect each member of our council of presidents to make significant
contributions to our business and, although none of them is an executive officer
of MCE Companies, we consider each of them to be a key employee:

KEVIN P. KEARNS, age 45, has served as Managing Director of DML since
1997. Mr. Kearns has degrees in physics and business management and has
worked in the RF field as a designer and manager for more than 20 years.

DR. FRANCIS S. KWAN, age 53, has served as President of Metelics since
1990 and in other capacities at Metelics since 1987. Dr. Kwan holds a Ph.D.
in electrical engineering from Cornell University and has worked in the RF
industry for more than 20 years.

MICHAEL D. SNYDER, age 60, has served as President of KDI since 1996
and in other capacities at KDI's predecessor since 1982. Mr. Snyder is an
electrical engineer and has worked in the RF field in positions of
engineering manufacturing, and marketing for his entire career.

TIMOTHY E. SOLOMON, age 48, has served as President of Inmet since
1995 and in other capacities at Inmet and its predecessor since 1990. Mr.
Solomon has worked in the RF field since 1978 in managerial and marketing
positions.

ROBERT L. STEPHENS, age 50, has served as President of Weinschel and
its predecessor since 1990 and in other capacities with Weinschel's
predecessor, including Chief Financial Officer, since 1988.

BOARD OF DIRECTORS

Our board of directors currently consists of six directors. Our board of
directors is divided into three classes, each of whose members serves for a
staggered three-year term, as follows:

- Class I, whose term will expire at the annual meeting of shareholders to
be held in 2002, consists of Messrs. Endres and Schecter;

- Class II, whose term will expire at the annual meeting of shareholders to
be held in 2003, consists of Messrs. Cannon and Haddad; and

- Class III, whose term will expire at the annual meeting of shareholders
to be held in 2001, consists of Messrs. Meuse and Smucker.

At each annual meeting of shareholders, a class of directors will be
elected for a three-year term to succeed the directors of the same class whose
terms are then expiring. Any additional directorships resulting from an increase
in the number of directors will be distributed among the three classes so that,
as nearly as possible, each class will consist of one-third of our directors.

BOARD COMMITTEES

Our board of directors has a compensation committee and an audit committee.
Both committees were established in October 1996.

The compensation committee consists of Messrs. Cannon, Endres and Meuse.
The compensation committee makes recommendations regarding our stock option and
incentive plans, our management bonus plans and all matters concerning executive
compensation.

The audit committee consists of Messrs. Cannon, Endres and Schecter. The
audit committee approves our independent auditors, reviews with the auditors the
scope and results of the annual auditing engagement and any non-audit services
to be performed by the independent auditors, and evaluates our internal audit
and control functions.

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<PAGE> 58

DIRECTOR COMPENSATION

All members of our board of directors are reimbursed for travel and other
expenses associated with board and committee meetings, but otherwise serve in
their capacities as directors without cash compensation. In addition, all
members of our board of directors are eligible to participate in our 2000 stock
incentive plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No interlocking relationship exists between the board of directors or the
compensation committee and the board of directors or the compensation committee
of any other company, nor has any interlocking relationship existed in the past.

EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation paid
by us during the year ended December 31, 1999 to our Chief Executive Officer and
to each of our other executive officers whose total salary plus bonus exceeded
$100,000 for services rendered in all capacities during 1999. We refer to these
individuals as the named executive officers in this prospectus.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
ALL OTHER
SALARY BONUS COMPENSATION
NAME AND PRINCIPAL POSITION ($) ($) ($)
--------------------------- ------- ------ ------------
<S> <C> <C> <C>
John L. Smucker.......................................... 250,000 36,350 --
President and Chief Executive Officer
Jon E. Carlson........................................... 125,000 13,000 4,826
Vice President -- Finance, Chief Financial Officer and
Treasurer
Kurt W. Brown............................................ 110,500 16,163 6,630
Vice President -- Compliance and Human Resources
Geoffrey D. Smith........................................ 107,250 15,687 4,290
Vice President -- Marketing
</TABLE>

The amounts in the column entitled "All Other Compensation" consist of
contributions made by us to the named executive officer's 401(k) plan account.

The table above excludes Mr. Shpock, our Vice President-Operations and
Chief Operating Officer, who joined us in June 2000. Mr. Shpock's base annual
salary for 2000 is $200,000.

Option Grants in Last Fiscal Year

We did not grant stock options to any of the named executive officers in
1999.

57
<PAGE> 59

Aggregate Fiscal Year-end Option Values

The following table contains information for each of the named executive
officers regarding the number of shares subject to both exercisable and
unexercisable stock options, as well as the value of unexercisable in-the-money
options, as of December 31, 1999. None of the named executive officers exercised
stock options in 1999.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------------ -------------------------
<S> <C> <C>
John L. Smucker.......................... 0/1,104,700 $ 0/3,048,972
Jon E. Carlson........................... -- --
Kurt W. Brown............................ -- --
Geoffrey D. Smith........................ -- --
</TABLE>

The calculation of the value of the unexercised in-the-money options held
by Mr. Smucker at the end of 1999 which were unexercisable is based upon the
difference between the exercise price and the per share fair market value of our
common stock at year end as determined by our board of directors. The weighted
average exercise price for this option is approximately $0.65 per share. In
addition, these unexercised in-the-money options held by Mr. Smucker at the end
of 1999 will become immediately exercisable upon the completion of this
offering.

EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS

Employment Agreement -- John L. Smucker

On December 30, 1996, we entered into an employment agreement with Mr.
Smucker. The employment agreement became effective as of January 1, 1997 and
expires on December 31, 2001. The agreement provides for an initial annual
salary of $250,000, which may be increased by the board of directors, and such
bonuses as may be awarded from time to time at the discretion of the board of
directors. Effective January 1, 2000, the compensation committee recommended,
and our board of directors approved, an increase in Mr. Smucker's annual salary
to $290,000. This increase was due to our growth since January 1997 and the
salaries currently paid to Mr. Smucker's peers in our industry. Mr. Smucker is
entitled to receive 100% of his salary for the remainder of the term of the
agreement if his employment is terminated without cause, as defined in the
agreement. The agreement also contains provisions which restrict Mr. Smucker
from competing with us through the earlier of the first anniversary of
termination of his employment with us or December 30, 2001. However, the
noncompetition provisions in the agreement end immediately if his employment is
terminated by us without cause.

Severance Agreements

Prior to this offering, we entered into severance agreements with Mr.
Smucker, our President, Mr. Shpock, our Vice President-Operations and Chief
Operating Officer, and Mr. Carlson, our Vice President-Finance and Chief
Financial Officer. These agreements provide that each of these executive
officers is entitled to twelve months of severance pay and other specified
benefits, as well as the acceleration of options and the lapse of restrictions
on restricted stock awards, in the event of his termination of employment
without cause or in the event of a material and adverse change in his
responsibilities, adverse change in his base compensation or material change in
the location of his employment. In addition, these executive officers would be
entitled to the acceleration of options and the lapse of restrictions on
restricted stock awards upon a change of control of MCE Companies.

58
<PAGE> 60

STOCK PLANS

1996 Stock Option Plan

Our board of directors adopted our 1996 stock option plan in October 1996
and our shareholders approved the plan in April 1997. As originally adopted, the
1996 stock option plan provided for the granting of options to purchase up to
2,209,400 shares of common stock to our key employees and non-employee members
of our board of directors on those terms and conditions as may be determined by
our compensation committee. Effective July 20, 2000, our board of directors
amended the 1996 stock option plan to provide that the total amount of common
stock on which options may be granted shall not exceed 1,104,700 shares.
Consequently, as of the date of this prospectus, no additional options are
available for grant under the 1996 stock option plan. As of the date of this
prospectus, one option is outstanding under the 1996 stock option plan for the
purchase of 1,104,700 shares of common stock for an exercise price of
approximately $0.65 per share.

2000 Stock Incentive Plan

Our 2000 stock incentive plan was adopted by our board of directors in July
2000 and approved by our shareholders in August 2000. The plan will become
effective upon consummation of this offering. The aggregate number of shares of
common stock reserved for issuance under the 2000 stock incentive plan is
6,600,000 shares.

Options granted under the 2000 stock incentive plan may be either options
intended to qualify as incentive stock options under the Internal Revenue Code,
or non-qualified stock options. The 2000 stock incentive plan also permits the
granting of stock appreciation rights in connection with the grant of stock
options, and the grant of restricted stock awards, performance shares and annual
incentive awards. Stock options and stock awards may be granted under the 2000
stock incentive plan to all employees and non-employee directors and consultants
to MCE Companies, or of any present or future subsidiary or parent of MCE
Companies.

The 2000 stock incentive plan is administered by our compensation
committee. The compensation committee has the authority to determine exercise
prices applicable to the option, the eligible employees, directors and
consultants to whom options may be granted, the number of shares of common stock
subject to each option and the extent to which options may be exercisable. The
compensation committee also has the authority to determine the recipients and
the terms of grants of stock appreciation rights, restricted stock awards,
performance share awards and annual incentive awards under the 2000 stock
incentive plan.

Upon consummation of this offering, we will grant non-qualified options to
acquire an aggregate of approximately 3,750,000 shares of common stock to
substantially all of our full-time employees, as well as non-qualified options
to acquire 50,000 shares of common stock to our five non-employee directors, at
an exercise price equal to the initial public offering price. Each of these
options will have a ten year term. In addition, none of these options will be
exercisable prior to the first anniversary of the consummation of this offering.
Thereafter, each of these options will be exercisable in installments, with 25%
of the shares subject to each option becoming exercisable on the first
anniversary of the consummation of this offering and with an additional 25% of
the shares subject to each option becoming exercisable on each subsequent
anniversary. The following table sets forth information concerning the number of
shares underlying the options to be granted to our executive officers and to
specified groups.

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<PAGE> 61

OPTIONS TO BE GRANTED IN CONNECTION WITH THIS OFFERING

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING OPTIONS
NAME AND PRINCIPAL POSITION GRANTED
--------------------------- --------------------
<S> <C>
John L. Smucker............................................. 75,000
Stephen W. Shpock........................................... 75,000
Jon E. Carlson.............................................. 75,000
Kurt W. Brown............................................... 40,000
Geoffrey D. Smith........................................... 40,000
All executive officers as a group (5 persons)............... 305,000
All directors who are not executive officers as a group (5
persons).................................................. 50,000
All employees, who are not executive officers as a group.... 3,445,000
</TABLE>

LONG TERM INCENTIVE PLAN AWARDS

We established our net worth appreciation reward program to reward
management at MCE Companies, Inmet, KDI and Weinschel for long term growth based
on an annual net worth objective for each company. Under the net worth
appreciation reward program, a cash bonus pool is created at the end of each
year of the program based upon a percentage of net income for each of MCE
Companies, Inmet, KDI and Weinschel, with awards made to the management of each
company if the company achieve the requisite net worth objectives. The bonus
pool is then allocated among the participants of the relevant companies pro rata
in accordance with their W-2 compensation.

The net worth appreciation reward program established at each of MCE,
Inmet, Weinschel, and KDI had an initial term of five years, with Inmet's
terminating on December 31, 1999, Weinschel's terminating on December 31, 2000
and MCE's and KDI's terminating on December 31, 2001. After the five year term
of each net worth appreciation reward program, the amounts accrued generally
vest and, upon the election of either the participant or MCE, are payable in one
lump sum installment or in equal quarterly installments over three years. We
have discontinued the net worth appreciation reward program for the period
beginning after December 31, 1999. However, the participants in the net worth
appreciation reward program will continue to receive payments for the awards
accrued under their respective programs with respect to the period through
December 31, 1999.

The following table sets forth information concerning awards for the year
ended December 31, 1999 to our named executive officers under the net worth
appreciation reward program.

LONG TERM INCENTIVE PLANS AWARDS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
ESTIMATED FUTURE
PAYOUTS UNDER
NON-STOCK PRICE-
NUMBER OF PERFORMANCE BASED PLANS
SHARES, OR OTHER PERIOD ----------------
UNITS OR UNTIL MATURATION MAXIMUM
NAME OTHER RIGHTS OR PAYOUT ($)
---- ------------ ---------------- ----------------
<S> <C> <C> <C>
John L. Smucker....................... -- -- --
Jon E. Carlson........................ $ 8,750 2000 $34,750
Kurt W. Brown......................... $10,260 2001 $48,919
Geoffrey D. Smith..................... $ 9,958 2001 $47,450
</TABLE>

Mr. Smucker is not eligible to participate in the net worth appreciation
reward program.

60
<PAGE> 62

Mr. Carlson participated in MCE's net worth appreciation reward program.
All of the awards accrued through December 31, 1999 will be paid to Mr. Carlson
in 2000 in connection with the termination of the program.

Messrs. Brown and Smith participated in Weinschel's net worth appreciation
program. All of the awards accrued through December 31, 1999 will be paid to
Messrs. Brown and Smith in 2001 in connection with the termination of the
program.

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<PAGE> 63

CERTAIN TRANSACTIONS

ISSUANCES OF SECURITIES

In July 1996, we entered into a purchase agreement with National City
Capital Corporation and Hanifen Imhoff Mezzanine Fund to obtain financing for
the acquisition of KDI. Pursuant to this agreement, we issued:

- redeemable preferred stock in the aggregate principal amount of $4.0
million due 2002, with $2,560,000 issued to National City Capital
Corporation and $1,440,000 to Hanifen Imhoff Mezzanine Fund;

- senior subordinated debt in the aggregate principal amount of $3.5
million due 2001, with $2,240,000 issued to National City Capital
Corporation and $1,260,000 to Hanifen Imhoff Mezzanine Fund,
respectively; and

- warrants to purchase 1,838,272 shares of common stock to National City
Capital Corporation and 1,034,028 shares to Hanifen Imhoff Mezzanine
Fund, with an aggregate exercise price of $287.23.

In July 1999, we entered into a purchase agreement with National City
Capital Corporation, Great Lakes Capital Investments and Rocky Mountain
Mezzanine Fund to obtain working capital financing. Pursuant to this agreement,
we issued:

- senior subordinated debt in the aggregate principal amount of $4.0
million due 2004, with $2,176,000 issued to National City Capital
Corporation, $384,000 to Great Lakes Capital Investments and $1,440,000
to Rocky Mountain Mezzanine Fund; and

- warrants to purchase 492,266 shares of common stock issued to National
City Capital Corporation, 86,870 shares to Great Lakes Capital
Investments and 325,764 shares to Rocky Mountain Mezzanine Fund, with an
aggregate exercise price of $90.49.

We anticipate using a portion of the proceeds of this offering to repay the
outstanding senior subordinated debt and to redeem the outstanding redeemable
preferred stock.

Effective upon the consummation of this offering, the warrantholders will
terminate all put rights to require us to repurchase the warrants for cash and
all cash conversion rights under the warrants.

William H. Schecter, who is one of our directors and a member of our audit
committee, serves as the President of National City Capital Corporation and as a
principal of Great Lakes Capital Investments.

As a condition to the closing of the July 1996 purchase agreement Messrs.
Smucker (our President and director), Ronald D. Brooks, Endres (our director)
and Meuse (our director) entered into investor subscription agreements with us
which required each of them to contribute to us, from time to time in cash, an
amount not to exceed $125,000 in exchange for the issuance of our common stock
if required by us to pay any dividend on the redeemable preferred stock or any
interest payment on the senior subordinated debt issued to National City Capital
Corporation and Hanifen Imhoff Mezzanine Fund. In connection with our July 1999
purchase agreement we agreed with National City Capital Corporation and Hanifen
Imhoff Mezzanine Fund to amend our July 1996 purchase agreement to, among other
things, authorize the termination of these investor subscription agreements.
Effective August 2000, these investor subscription agreements were terminated.
We have not required any contributions from these investors under these investor
subscription agreements.

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<PAGE> 64

PRINCIPAL SHAREHOLDERS AND WARRANTHOLDERS

The following table sets forth as of September 30, 2000, and as adjusted to
reflect the sale of the shares of common stock offered hereby, summary
information with respect to beneficial ownership of the common stock by:

- each person known to us to be the beneficial owner of more than 5% of the
outstanding shares of our common stock;

- each of our named executive officers;

- each of our directors;

- each of the persons who holds warrants to purchase shares of our common
stock; and

- all of our directors and executive officers as a group.

Except as indicated in the table or footnotes below, and subject to
applicable community property laws, the persons named below have sole voting and
investment power with respect to all shares of common stock beneficially owned
by them.

Applicable percentage ownership in the table is based on 21,100,480 shares
of common stock outstanding as of September 30, 2000 and 26,600,480 shares
outstanding immediately following the completion of this offering. Beneficial
ownership is determined in accordance with the rules of the SEC. Shares of
common stock subject to options or warrants that are presently exercisable or
exercisable within 60 days of September 30, 2000 are deemed outstanding for the
purpose of computing the percentage ownership of the person or entity holding
options or warrants, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person or entity.

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<PAGE> 65

Unless otherwise indicated below, each person or entity named below has an
address in care of MCE Companies' principal executive offices at 310 Dino Drive,
Ann Arbor, Michigan 48103.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE
OWNED PRIOR BENEFICIALLY OWNED
TO THE OFFERING AFTER THE OFFERING
-------------------- --------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
------------------------ ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
5% Shareholders, Warrantholders, Directors:
John L. Smucker(1)................................ 4,444,500 20.0% 4,444,500 16.0%
Ronald L. Brooks(2)............................... 3,339,800 15.8 3,339,800 12.6
Michael J. Endres(3).............................. 3,339,800 15.8 3,339,800 12.6
David R. Meuse(4)................................. 3,339,800 15.8 3,339,800 12.6
Timbertop Investments II, Limited
Partnership(4)................................. 3,339,800 15.8 3,339,800 12.6
William H. Schecter(5)............................ 2,417,408 10.3 2,417,408 8.3
National City Capital Corporation(5).............. 2,330,538 9.9 2,330,538 8.1
James S. Chapman(6)............................... 1,438,800 6.8 1,438,800 5.4
Edward C. Brown(7)(8)............................. 1,359,792 6.1 1,359,792 4.9
Hanifen Imhoff Mezzanine Fund, LP(7).............. 1,034,028 4.7 1,034,028 3.7
Rocky Mountain Mezzanine Fund II, LP(8)........... 325,764 1.5 325,764 1.2
Great Lakes Capital Investments I, LLC(5)......... 86,870 * 86,870 *
Other Directors and Executive Officers:
John K. Cannon.................................... 207,500 * 207,500 *
Kurt W. Brown..................................... 200,000 * 200,000 *
George I. Haddad.................................. 104,000 * 104,000 *
Geoffrey D. Smith................................. 60,000 * 60,000 *
Jon E. Carlson(9)................................. 15,000 * 15,000 *
Stephen W. Shpock................................. -- -- -- --
All directors and executive officers as a group
(10 persons)(10)............................... 14,128,008 54.4% 14,128,008 44.9%
</TABLE>

------------
* Less than 1%

(1) Includes 500,000 shares owned by a limited liability company of which Mr.
Smucker is the manager, and 1,104,700 shares covered by an incentive stock
option granted to Mr. Smucker which will be exercisable immediately upon
the completion of this offering.

(2) Includes 530,000 shares owned by Mr. Brooks' children, as to which he
disclaims beneficial ownership. The address of Mr. Brooks is c/o Stonehenge
Holdings, Inc., 150 E. Gay St., 24th Floor, Columbus, Ohio 43215.

(3) Includes 1,000,000 shares owned by a limited partnership of which Mr.
Endres is a general partner and has shared power to vote and dispose of
such shares. The address of Mr. Endres is c/o Stonehenge Holdings, Inc.,
150 E. Gay St., 24th Floor, Columbus, Ohio 43215.

(4) The shares of common stock beneficially owned by Mr. Meuse consist solely
of 3,339,800 shares owned of record by Timbertop Investments II, Limited
Partnership. Mr. Meuse serves as the general partner of Timbertop and has
shared power to vote and dispose of these shares. The address of each of
Mr. Meuse and Timbertop is c/o Stonehenge Holdings, Inc., 150 E. Gay St.,
24th Floor, Columbus, Ohio 43215.

(5) The shares of common stock beneficially owned by Mr. Schecter consist of
the 2,330,538 shares and 86,870 shares, all of which are issuable upon
exercise of the warrants held by National City Capital Corporation and
Great Lakes Capital Investments, respectively. Mr. Schecter serves as the
President of National City Capital Corporation and as a principal of Great
Lakes Capital Investments. Mr. Schecter has shared power to vote and
dispose of the shares underlying the warrants held by National City Capital
Corporation and Great Lakes Capital Investments. The address of each of Mr.
Schecter, National City Capital Corporation, Great Lakes Capital
Investments is c/o National City Capital Corporation, 1965 East Sixth
Street, Cleveland, Ohio 44114.

(6) The address of Mr. Chapman is c/o Banc One Capital Funding, 150 E. Gay St.,
22nd Floor, Columbus, Ohio 43215.

(7) The shares of common stock beneficially owned by Hanifen Imhoff Mezzanine
Fund consist of the 1,034,028 shares of common stock issuable upon exercise
of the warrants held by it. Hanifen Imhoff Capital Partners, LLP,

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<PAGE> 66

as the general partner of Hanifen Imhoff Mezzanine Fund, shares beneficial
ownership of the warrants held by Hanifen Imhoff Mezzanine Fund. Edward C.
Brown, as the holder of the majority voting interest in Hanifen Imhoff
Capital Partners, has shared powers to vote and dispense of the shares
underlying the warrants held by Hanifen Imhoff Mezzanine Fund. Mr. Brown
disclaims beneficial ownership of the shares underlying the warrants held
by Hanifen Imhoff Mezzanine Fund except to the extent of his pecuniary
interest in the shares underlying the warrants. The address of these
entities and Mr. Brown is c/o Rocky Mountain Capital Partners, LP 1125 17th
Street, Suite 2260, Denver, Colorado 80202.

(8) The shares of common stock beneficially owned by Rocky Mountain Mezzanine
Fund consist of the 325,764 shares of common stock issuable upon exercise
of the warrants held by it. Rocky Mountain Capital Partners, LLP, as the
general partner of Rocky Mountain Mezzanine Fund, shares beneficial
ownership of the warrants held by Rocky Mountain Mezzanine Fund. Edward C.
Brown, as the holder of the majority voting interest in Rocky Mountain
Capital Partners, has shared power to vote and dispose of the shares
underlying the warrants held by Rocky Mountain Mezzanine Fund. Mr. Brown
disclaims beneficial ownership of the warrants held by Rocky Mountain
Mezzanine Fund except to the extent of his pecuniary interest in the shares
underlying the warrants. The address of these entities is c/o Rocky
Mountain Capital Partners LP, 1125 17th Street, Suite 2260, Denver,
Colorado 80202.

(9) Includes 6,000 shares owned by Mr. Carlson's children. Mr. Carlson
disclaims beneficial ownership of these shares.

(10) Includes 2,417,408 shares beneficially owned by Mr. Schecter issuable upon
exercise of the warrants held by National City Capital Corporation and
Great Lakes Capital Investments.

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<PAGE> 67

DESCRIPTION OF CAPITAL STOCK

Our articles of incorporation provide for total authorized capital stock of
100,000,000 shares of common stock and 10,000,000 shares of preferred stock,
without par values.

Prior to this offering, after giving effect to the 99-for-one stock
dividend on the common stock effected prior to this offering, there were
outstanding:

- 21,100,480 shares of common stock held of record by 96 shareholders;

- 4,000 shares of redeemable preferred stock;

- warrants to purchase 3,777,200 shares of common stock; and

- an option to purchase an aggregate of 1,104,700 shares of common stock.

In addition to the 5,500,000 shares of common stock we are selling in this
offering, we will grant options to purchase 3,800,000 shares of common stock
under our 2000 stock incentive plan effective upon the consummation of this
offering at a per share purchase price equal to the initial public offering
price. After our redemption of the redeemable preferred stock, no other shares
of preferred stock will be designated or issued.

The following is a summary of our articles of incorporation, our bylaws and
our warrants, copies of which are included as exhibits to the registration
statement of which this prospectus is a part.

COMMON STOCK

Subject to the rights of any holder of our preferred stock, each holder of
common stock is entitled to one vote per share for the election of directors as
well as on other matters, to dividends when, as and if declared by our board of
directors, and upon liquidation to share in our net assets pro rata in
accordance with such shareholder's holdings. Holders of common stock do not have
cumulative voting rights. Accordingly, holders of a majority of the shares of
common stock entitled to vote in any election of directors may elect all of the
directors standing for election. The common stock has no preemptive, redemption,
conversion or subscription rights. The rights, preferences and privileges of
holders of common stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock which we may
designate and issue in the future.

PREFERRED STOCK

Our articles of incorporation authorize the issuance of preferred stock.
Our board of directors has the power, without further action by the
shareholders, to divide any and all shares of preferred stock into series and to
fix and determine the relative rights and preferences of the preferred stock,
such as the designation of series and the number of shares constituting such
series, dividend rights, redemption and sinking fund provisions, liquidation and
dissolution preferences, conversion or exchange rights and voting rights, if
any. Issuances of preferred stock by our board of directors may result in such
shares having senior dividend and/or liquidation preferences to the holders of
shares of common stock and may dilute the voting rights of such holders.
Issuances of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, adversely affect the voting rights of holders of our common stock.
In addition, the issuance of preferred stock could make it more difficult for a
third party to acquire a majority of our outstanding voting stock. Preferred
stock could thus be issued quickly with terms calculated to delay or prevent a
change in control of MCE Companies or make removal of our management more
difficult. Additionally, the issuance of preferred stock may have the effect of
decreasing the market price of our common stock. Accordingly, the issuance of
preferred

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<PAGE> 68

stock may be used as an anti-takeover device without further action on the part
of our shareholders. We have no present plans to issue any shares of preferred
stock.

WARRANTS AND REGISTRATION RIGHTS

In July 1996, in connection with certain financing activities, we issued
warrants, with an exercise price of $0.0001 per share, to purchase 1,838,272
shares of common stock to National City Capital Corporation and 1,034,028 shares
to Hanifen Imhoff. In addition, in July 1999, in connection with certain other
financing activities, we issued warrants, with an exercise price of $0.0001 per
share, to purchase 492,226 shares of common stock to National City Capital
Corporation, 86,870 shares to Great Lakes Capital Investments and 325,764 shares
to Rocky Mountain Mezzanine Fund. These warrants expire on the sixth anniversary
of the payment of our senior subordinated indebtedness, which we expect to occur
on the closing of this offering, and are subject to customary anti-dilution
provisions. Holders of these warrants have customary registration rights with
respect to the shares underlying the warrants, including up to four demand
registrations, as well as piggyback registration rights.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

Our articles of incorporation provide that our directors will not be
personally liable for monetary damages to MCE Companies for breaches of their
fiduciary duty as directors, however they remain liable for the amount of a
financial benefit received by them to which they are not entitled, intentional
infliction of harm on the corporation or its shareholders, other violations of
the Michigan Business Corporation Act, or an intentional violation of criminal
law. This provision would have no effect on the availability of equitable
remedies or non-monetary relief, such an injunction or rescission for breach of
the duty of care. In addition, the provision applies only to claims against a
director arising out of his role as a director and not in any other capacity
(such as an officer or employee) Further, liability of a director for violations
of the federal or state securities laws will not be limited by this provision.

In addition, our articles of incorporation and bylaws provide that we will
indemnify our directors and officers to the fullest extent authorized by
Michigan law against all expenses and liabilities reasonably incurred in
connection with service for or on our behalf.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF OUR CHARTER DOCUMENTS AND MICHIGAN LAW

Charter Documents

Provisions of our articles of incorporation and bylaws may have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of us. These provisions are
expected to discourage coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to acquire control of MCE Companies to first
negotiate with us. These provisions may limit the price investors might be
willing to pay in the future for our common stock. These provisions include:

- division of the board of directors into three separate classes;

- removal of members of the board of directors only for cause;

- prohibitions on shareholder actions by written consent;

- restrictions on the ability of our shareholders to call special meetings;

- requirement of advance notice by a shareholder of a proposal or director
nomination to be presented at any annual or special meeting of
shareholders; and

- amendment by the board of directors of our bylaws without shareholder
approval.

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<PAGE> 69

Michigan Law -- Chapter 7A and 7B

Upon the effectiveness of this offering, we will be subject to the
provisions of Chapter 7A and 7B Michigan Business Corporation Act.

Chapter 7A limits our ability to enter into business combinations with a
beneficial owner of our shares entitled to 10% or more of the voting power of us
without the affirmative vote of 90% of the votes of each class of stock entitled
to vote, and not less than 2/3 of each class of stock entitled to vote
(excluding voting shares owned by such 10% owner), voting as a separate class.

We have taken action to opt-in to the provisions of Chapter 7A. We have,
however, exempted from the application of Chapter 7A business combinations with
any subsidiary of MCE Companies or with any 10% owner as of the consummation of
the offering and any business combination which is approved by a majority of the
"continuing directors" (basically, any director in office before a business
combination who is not a 10% owner or its affiliate) is exempt. The foregoing
opt-in provisions expire nine months after the date of this prospectus unless
renewed by our board of directors.

Chapter 7B provides that, unless a corporation's articles of incorporation
or bylaws provide that Chapter 7B does not apply, "control shares" of a
corporation acquired in a control share acquisition have no voting rights except
as granted by the stockholders of the corporation. "Control shares" are shares
which, when added to shares previously owned by a shareholder, increase such
shareholder's ownership of voting stock to more than 20% but less than 33 1/3%,
or more than 33 1/3% but less than a majority, or more than a majority, of the
votes to which all of the capital stock of the corporation is entitled to vote
in the election of directors. A control share acquisition must be approved by
the affirmative vote of a majority of all shares entitled to vote excluding
voting shares owned by the acquirer and specified officers and directors.

Our bylaws currently contain provisions pursuant to which MCE Companies
will be subject to Chapter 7B effective on the first day on which we have 100 or
more shareholders of record. While our board of directors has no present plan to
do so, our board of directors may, in its sole discretion, elect not to be
subject to Chapter 7B in the future by amending our bylaws.

TRANSFER AGENT

The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company, whose address is 40 Wall Street, New York, NY 10005,
and whose telephone number is (212) 936-5100.

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<PAGE> 70

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have outstanding 26,600,480
shares of common stock, assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options. Of these shares, all of the
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act unless such shares are purchased
by "affiliates" as that term is defined in Rule 144 of the Securities Act. In
general, affiliates include officers, directors or 10% stockholders.

LOCK UP AGREEMENTS

Our officers and directors and some of our other shareholders, who will
hold an aggregate of 19,628,760 shares of common stock upon completion of this
offering, have agreed that they will not sell or otherwise dispose of any of
their shares for a period of 180 days after the date of this prospectus without
the prior written consent of Deutsche Bank Securities Inc. Deutsche Bank
Securities Inc., however, may in its sole discretion, at any time and without
notice, release all or any portion of the shares subject to lock-up agreements.
Deutsche Bank Securities Inc. does not have any current plans to effect such a
release.

In addition, 21,100,480 shares of common stock outstanding are "restricted
securities" within the meaning of Rule 144. Restricted securities may be sold in
the public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities
Act, which are summarized below. Sales of the restricted securities in the
public market, or the availability of such shares for sale, could adversely
affect the market price of our common stock.

Taking into account the lock-up agreements, and assuming Deutsche Bank
Securities Inc. does not release security holders from these agreements, the
number of shares that will be available for sale in the public market under the
provisions of Rule 144, 144(k) and 701 will be as follows:

- beginning on the date of this prospectus, the 5,500,000 shares sold in
this offering and an additional 1,310,220 shares held by current
stockholders will be immediately available for sale in the public market;

- beginning 90 days after the date of this prospectus, approximately 56,000
shares will be eligible for sale;

- after 90 days but prior to 180 days after the date of this prospectus,
approximately 55,700 shares will be eligible for sale pursuant to Rule
144;

- beginning 180 days after the date of this prospectus, approximately
24,510,660 shares will be eligible for sale, including approximately
1,104,700 shares subject to vested options and warrants to purchase
3,777,200 shares of common stock; and

- at various times thereafter upon the expiration of applicable holding
periods, shares will become eligible for sale.

STOCK OPTIONS AND WARRANTS

We have 1,104,700 shares of common stock subject to an outstanding option
granted pursuant to our 1996 stock option plan which will become exercisable in
full upon the closing of this offering. We also have outstanding warrants to
purchase 3,777,200 shares of common stock which will become exercisable in full
upon the closing of this offering. The optionholder and the warrantholders have
agreed that they will not sell or otherwise dispose of any of the underlying
shares for a period of 180 days after the date of this prospectus without the
prior written consent of Deutsche Bank Securities Inc. In addition, we have
6,600,000 shares of our common stock available for future grant pursuant to our
2000 stock incentive plan, with

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<PAGE> 71

options to acquire 3,800,000 shares of common stock outstanding effective upon
the closing of this offering, none of which are exercisable prior to the first
anniversary of the closing of this offering. Shares underlying the outstanding
option exercisable upon the closing of this offering are subject to the 180-day
lockup. We intend to register, prior to the expiration of the lock-up, all of
the shares of common stock reserved for issuance under our 1996 stock option
plan and our 2000 stock incentive plan. This registration will permit the resale
of shares by non-affiliates in the public market without restriction beginning
on expiration of the lock-ups.

RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of:

- one percent of the number of shares of common stock then outstanding,
which will equal approximately 266,005 shares immediately after this
offering; or

- the average weekly trading volume of the common stock on the Nasdaq
National Market System during the four calendar weeks preceding the sale.

Sales under Rule 144 are also subject to other requirements regarding the
manner of sale, notice filing and the availability of current public information
about us.

RULE 144(K)

Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to sell
these shares under Rule 144(k) without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.

RULE 701

Rule 701 permits our employees, directors, officers, consultants or
advisors who purchased shares from us in connection with a written compensatory
plan or contract before the effective date of this offering to resell such
shares in reliance on Rule 144 but without compliance with specific
restrictions. Rule 701 provides that affiliates may sell their Rule 701 shares
under Rule 144 without complying with the holding period requirement and that
non-affiliates may sell shares in reliance on Rule 144 without complying with
the holding period, public information, volume limitation or notice provisions
of Rule 144.

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UNDERWRITING

Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives, Deutsche Bank
Securities Inc., Banc of America Securities LLC and CIBC World Markets Corp.,
have severally agreed to purchase from MCE Companies the following respective
number of shares of common stock:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Deutsche Bank Securities Inc................................
Banc of America Securities LLC .............................
CIBC World Markets Corp. ...................................
---------
Total.............................................. 5,500,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the
underwriters to purchase the shares of common stock offered by this prospectus
are subject to the prior satisfaction of various conditions, including the
absence of any material adverse change in our business and the receipt of
certificates, opinions and letters from us, and that the underwriters will
purchase all shares of the common stock offered by this prospectus, other than
those covered by the over-allotment option described below, if any of these
shares are purchased.

The underwriters propose to offer the shares of common stock to the public
at the initial public offering price set forth on the cover of this prospectus
and to dealers at a price that represents a concession not in excess of $
per share under the public offering price. The underwriters may allow, and these
dealers may re-allow, a concession of not more than $
per share to other dealers. After the initial public offering, representatives
of the underwriters may change the offering price and other selling terms.

We have granted to the underwriters an option, exercisable not later than
30 days after the date of this prospectus, to purchase up to 825,000 additional
shares of common stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus. The underwriters may exercise this option only to cover
over-allotments made in connection with the sale of the common stock offered by
this prospectus. To the extent that the underwriters exercise this option, each
of the underwriters will become obligated, subject to conditions, to purchase
approximately the same percentage of additional shares of common stock as the
number of shares of common stock to be purchased by it in the above table bears
to the total number of shares of common stock offered by this prospectus. We
will be obligated, pursuant to the option, to sell these additional shares of
common stock to the underwriters to the extent the option is exercised. If any
additional shares of common stock are purchased, the underwriters will offer the
additional shares on the same terms as those on which the 5,500,000 shares are
being offered.

The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is % of the initial public offering price. MCE
Companies has agreed to pay the underwriters the following fees, assuming either
no exercise or full exercise by the underwriters of the underwriters'
over-allotment option:

<TABLE>
<CAPTION>
TOTAL FEES
---------------------------------------------------------------
WITHOUT EXERCISE OF WITH EXERCISE OF
FEE PER SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
------------- --------------------- ---------------------
<S> <C> <C> <C>
Fees paid by MCE
Companies................. $ $ $
</TABLE>

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<PAGE> 73

In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $1,000,000.

MCE Companies has agreed to indemnify the underwriters against specified
types of liabilities, including liabilities under the Securities Act, and to
contribute to payments the underwriters may be required to make in respect of
any of these liabilities.

Each of our directors, our officers, certain shareholders and certain
holders of options to purchase our stock, has agreed not to offer, sell,
contract to sell or otherwise dispose of, or enter into any transaction that is
designed to, or could be expected to, result in the disposition of any shares of
our common stock or common stock issuable upon exercise or conversion of
options, warrants or convertible securities held by these persons for a period
of 180 days after the date of this prospectus without the prior written consent
of Deutsche Bank Securities Inc. This consent may be given at any time without
public notice. We have entered into a similar agreement with the representatives
of the underwriters.

The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain, or otherwise affect the
market price of our common stock.

The underwriters may over-allot shares of our common stock in connection
with this offering, thus creating a short position for their own account. Short
sales involve the sale by the underwriters of a greater number of shares than
they are committed to purchase in the offering. A short position may involve
either "covered" short sales or "naked" short sales. Covered short sales are
sales made in an amount not greater than the underwriters' overallotment option
to purchase additional shares in the offering described above. The underwriters
may close out any covered short position by either exercising their
overallotment option or purchasing shares in the open market. In determining the
source of shares to close the covered short position, the underwriters will
consider, among other things, the price of shares available for purchase in the
open market as compared to the price at which they may purchase shares through
the overallotment option. Naked short sales are sales in excess of the
overallotment option. The underwriters must close out any naked short position
by purchasing shares in the open market. A naked short position is more likely
to be created if the underwriters are concerned that there may be downward
pressure on the price of the shares in the open market after pricing that could
adversely affect investors who purchase in the offering.

Accordingly, to cover these short sale positions or to stabilize the market
price of our common stock, the underwriters may bid for, and purchase, shares of
our common stock in the open market. These transactions may be effected on the
Nasdaq National Market or otherwise. Additionally, the representatives, on
behalf of the underwriters, may also reclaim selling concessions allowed to an
underwriter or dealer. Similar to other purchase transactions, the underwriters'
purchases to cover the syndicate short sales or to stabilize the market price of
our common stock may have the effect of raising or maintaining the market price
of our common stock or preventing or mitigating a decline in the market price of
our common stock. As a result, the price of the shares or our common stock may
be higher than the price that might otherwise exist in the open market. The
underwriters are not required to engage in these activities and, if commenced,
may end any of these activities at any time.

At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 385,000 shares for our employees (including
employees who serve as a director and as executive officers), directors,
customers, vendors (including Dykema Gossett PLLC, our legal counsel, and
certain of its attorneys) and other third parties. The number of shares of our

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<PAGE> 74

common stock available for sale to the general public will be reduced to the
extent these reserved shares are purchased. Any reserved shares which are not so
purchased will be offered by the underwriters to the general public on the same
basis as the other shares offered by this prospectus. The reserved shares are
not subject to a lock-up agreement.

PRICING OF THIS OFFERING

Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock will
be determined by negotiation among us and the representatives of the
underwriters. Among the factors to be considered in determining the public
offering price will be:

- prevailing market conditions;

- our results of operations in recent periods;

- the present stage of our development;

- the market capitalizations and stages of development of other companies
that we and the representatives of the underwriters believe to be
comparable to us; and

- estimates of our business potential.

The estimated initial public offering price range set forth on the cover of
this preliminary prospectus is subject to change as a result of market
conditions and other factors.

LEGAL MATTERS

Certain legal matters related to this offering will be passed upon for MCE
Companies by Dykema Gossett PLLC, Detroit, Michigan, and for the underwriters by
Hale and Dorr LLP, New York, New York.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1998 and 1999 and for each of the three
years in the period ended December 31, 1999 as set forth in their report. We
have included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.

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WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1, including
exhibits, schedules and amendments filed with this registration statement, under
the Securities Act with respect to the common stock to be sold under this
prospectus. Prior to the offering we were not required to file reports with the
SEC. This prospectus does not contain all the information set forth in the
registration statement. For further information about our company and the shares
of common stock to be sold in the offering, please refer to the registration
statement. Statements made in this prospectus concerning the contents of any
contract, agreement or other document filed as an exhibit to the registration
statement are summaries of the terms of contract, agreements or documents.
Complete exhibits have been filed with the registration statement.

The registration statement and exhibits may be inspected, without charge,
and copies may be obtained at prescribed rates, at the SEC's Public Reference
facility maintained by the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-732-0330. The registration statement and other
information filed with the SEC is available at the web site maintained by the
SEC on the worldwide web at www.sec.gov.

We intend to furnish our shareholders with annual reports containing
financial statements audited by our independent accountants and quarterly
reports for the first three quarters of each fiscal year containing unaudited
financial statements.

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MCE COMPANIES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-3
Consolidated Balance Sheets................................. F-4
Consolidated Statements of Operations....................... F-6
Consolidated Statements of Cash Flows....................... F-7
Consolidated Statements of Redeemable Preferred Stock,
Convertible Warrants and Shareholders' Equity............. F-8
Notes to Consolidated Financial Statements.................. F-9
</TABLE>

F-1
<PAGE> 77

[THIS PAGE INTENTIONALLY LEFT BLANK]

F-2
<PAGE> 78

REPORT OF INDEPENDENT AUDITORS

Board of Directors
MCE Companies, Inc.

We have audited the consolidated balance sheets of MCE Companies, Inc. and
subsidiaries as of December 31, 1998 and 1999, and the related consolidated
statements of operations, redeemable preferred stock, convertible warrants and
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MCE
Companies, Inc. and subsidiaries at December 31, 1998 and 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.

/s/ Ernst & Young LLP

March 3, 2000
Detroit, Michigan

F-3
<PAGE> 79

MCE COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1998 1999 2000
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................................... $ 129 $ 177 $ 192
Accounts receivable:
Trade, net of allowance for doubtful accounts of
$127, $124 and $124 as of December 31, 1998 and
1999 and June 30, 2000............................. 8,075 11,403 14,106
Other................................................ 171 1,881 1,701
------- ------- -------
8,246 13,284 15,807
Inventories:
Finished products.................................... 2,562 1,507 2,166
Products in process.................................. 2,622 3,385 6,687
Raw materials........................................ 6,434 6,277 7,512
------- ------- -------
11,618 11,169 16,365

Refundable income taxes................................. 1,132 1,704 836
Other current assets.................................... 295 305 418
Deferred taxes.......................................... 1,404 1,472 1,472
------- ------- -------
Total current assets...................................... 22,824 28,111 35,090
Property and equipment:
Land.................................................... 763 1,173 1,173
Buildings and leasehold improvements.................... 3,165 5,049 5,077
Machinery and equipment................................. 9,091 10,965 11,688
Furniture and fixtures.................................. 498 714 910
------- ------- -------
13,517 17,901 18,848
Accumulated depreciation................................ (4,050) (5,896) (6,994)
------- ------- -------
9,467 12,005 11,854
Goodwill, net of accumulated amortization of $3,474,
$5,005 and $5,922 at December 31, 1998 and 1999 and June
30, 2000................................................ 15,846 19,527 22,104
Other intangibles, net of accumulated amortization of
$963, $2,013 and $2,574 at December 31, 1998 and 1999
and June 30, 2000....................................... 11,110 10,189 9,628
Other assets.............................................. 213 149 122
------- ------- -------
Total assets.............................................. $59,460 $69,981 $78,798
======= ======= =======
</TABLE>

F-4
<PAGE> 80

<TABLE>
<CAPTION>
PRO FORMA
SHAREHOLDERS'
DECEMBER 31, EQUITY AT
------------------ JUNE 30, JUNE 30,
1998 1999 2000 2000
------- ------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
LIABILITIES, REDEEMABLE PREFERRED STOCK, CONVERTIBLE
WARRANTS AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 3,123 $ 4,420 $ 6,207
Accrued compensation and other benefits........... 2,723 3,417 3,981
Accrued income taxes.............................. -- 105 284
Customer advances................................. 2,094 2,400 2,318
Accrued earn-out payments......................... 500 -- 3,809
Other accrued expenses............................ 2,418 2,707 3,710
Current portion of long term debt................. 3,871 4,290 4,540
------- ------- -------
Total current liabilities........................... 14,729 17,339 24,849

Borrowings under revolver........................... 2,993 3,326 5,116
Senior debt, less current portion................... 18,015 23,444 21,176
Subordinated notes.................................. 3,425 5,603 5,769
Other long term liabilities......................... 2,280 2,488 2,576
Redeemable warrants................................. 3,060 3,310 5,222
Deferred taxes...................................... 3,747 3,232 3,072
------- ------- -------
Total liabilities................................... 48,249 58,742 67,780

Redeemable preferred stock, authorized, issued and
outstanding 4,000 shares, aggregated redemption
value of $4,000 less discount of $690, $427 and
$288 at December 31, 1998 and 1999 and June 30,
2000.............................................. 3,310 3,573 3,712 $ --

Convertible warrants................................ 4,582 6,552 6,552

Shareholders' equity:
Common stock, $0.01 stated value:
Authorized shares -- 34,000,000
Issued and outstanding shares -- 20,909,000,
20,970,000 and 21,100,480 at December 31, 1998
and 1999 and June 30, 2000...................... 209 210 211 211
Additional paid-in capital........................ 8,287 8,455 8,832 8,832
Accumulated deficit............................... (5,048) (7,522) (7,951) (8,239)
Accumulated other comprehensive income (loss)..... (129) (29) (338) (338)
------- ------- ------- -------
Total shareholders' equity.......................... 3,319 1,114 754 $ 466
------- ------- ------- =======
Total liabilities, redeemable preferred stock,
convertible warrants and shareholders' equity..... $59,460 $69,981 $78,798
======= ======= =======
</TABLE>

See accompanying notes.
F-5
<PAGE> 81

MCE COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- ------------------
1997 1998 1999 1999 2000
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............................. $65,418 $61,764 $64,647 $29,579 $46,141
Cost of products sold................. 39,221 36,540 40,857 16,729 26,616
------- ------- ------- ------- -------
Gross profit.......................... 26,197 25,224 23,790 12,850 19,525
Selling, general and administrative
expenses............................ 13,095 15,146 16,093 7,823 10,661
Research and development.............. 2,323 3,183 3,552 1,685 2,002
Amortization.......................... 883 2,066 2,530 1,196 1,430
Write-off of acquired in-process
research and development............ -- 6,000 -- -- --
Restructuring and impairment
charges............................. -- -- 887 -- --
------- ------- ------- ------- -------
Income (loss) from operations......... 9,896 (1,171) 728 2,146 5,432
Interest expense and other............ 1,440 2,025 3,203 1,249 2,343
Redeemable warrant expense............ 6,242 -- 250 126 1,912
Other expense (income)................ (266) 438 -- -- --
------- ------- ------- ------- -------
Income (loss) before income taxes..... 2,480 (3,634) (2,725) 771 1,177
Income tax expense (benefit).......... 3,435 823 (834) 500 1,307
------- ------- ------- ------- -------
Net income (loss)..................... (955) (4,457) (1,891) 271 (130)

Preferred stock dividends............. (320) (320) (320) (160) (160)
Accretion of discount on preferred
stock............................... (225) (243) (263) (129) (139)
------- ------- ------- ------- -------
Net income (loss) available to common
shareholders........................ $(1,500) $(5,020) $(2,474) $ (18) $ (429)
======= ======= ======= ======= =======
Income (loss) per common share:
Basic............................... $ (0.08) $ (0.24) $ (0.12) $ (0.00) $ (0.02)
======= ======= ======= ======= =======
Diluted............................. $ (0.08) $ (0.24) $ (0.12) $ (0.00) $ (0.02)
======= ======= ======= ======= =======
</TABLE>

See accompanying notes.
F-6
<PAGE> 82

MCE COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------ -----------------
1997 1998 1999 1999 2000
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ (955) $ (4,457) $ (1,891) $ 271 $ (130)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation.............................................. 1,399 1,688 2,017 944 1,215
Amortization.............................................. 883 2,066 2,530 1,196 1,430
Redeemable warrant expense................................ 6,242 -- 250 126 1,912
Write-off of acquired in-process research and
development............................................. -- 6,000 -- -- --
Gain on sale of instrument product line................... (266) -- -- -- --
Restructuring and impairment charges and related inventory
write-off............................................... -- -- 2,695 -- --
Deferred income taxes..................................... (547) (466) (235) -- --
NWARP expense............................................. 585 268 185 -- --
Non-cash interest and other............................... 226 88 486 50 606
Changes in operating assets and liabilities:
Accounts receivable..................................... 1,546 492 (2,789) (1,240) (4,402)
Inventories............................................. (1,859) (89) 526 360 (5,317)
Prepaid expenses........................................ (25) 61 (107) 7 (91)
Customer advances....................................... 4,928 (2,530) 306 278 (82)
Income tax receivable................................... -- -- (473) 1,004 1,056
Payments for restructuring.............................. -- -- (62) -- 175
Accounts payable, accrued expenses and other............ (1,288) (1,798) (2,217) (1,868) 4,819
-------- -------- -------- ------- -------
Net cash provided by operating activities................... 10,869 1,323 1,221 1,128 1,191

INVESTING ACTIVITIES
Acquisition of DML Microwave Limited........................ -- -- (7,692) -- --
Acquisition of Metelics, net of cash acquired............... -- (21,501) -- -- --
Purchases of property and equipment......................... (1,840) (1,972) (1,624) (452) (1,194)
Purchases of land and buildings............................. -- -- (1,901) (913) (4)
Proceeds from sale of property and equipment................ 2,181 13 15 -- 40
-------- -------- -------- ------- -------
Net cash provided by (used in) investing activities......... 341 (23,460) (11,202) (1,365) (1,158)

FINANCING ACTIVITIES
Change in the line of credit and other short term debt...... (7,205) 2,993 333 1,208 1,790
Payments of long term debt.................................. (6,955) (536) (21,886) (1,598) (2,018)
Proceeds from long term debt................................ 2,425 20,000 27,734 664 --
Proceeds from issuance of subordinated debt and warrants.... -- -- 4,000 -- --
Proceeds from issuance of common stock...................... 103 -- 168 169 378
Redemption of common stock.................................. (20) (20) -- -- --
Payment of dividends on preferred stock..................... (320) (320) (320) (160) (160)
-------- -------- -------- ------- -------
Net cash provided by (used in) financing activities......... (11,972) 22,117 10,029 283 (10)
Effect of exchange rate changes on cash..................... -- -- -- -- (8)
-------- -------- -------- ------- -------

Net increase (decrease) in cash............................. (762) (20) 48 46 15
Cash at beginning of period................................. 911 149 129 129 177
-------- -------- -------- ------- -------
Cash at end of period....................................... $ 149 $ 129 $ 177 $ 175 $ 192
======== ======== ======== ======= =======
</TABLE>

See accompanying notes.
F-7
<PAGE> 83

MCE COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK,
CONVERTIBLE WARRANTS AND SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
---------------------------------------------------------
ACCUMULATED
REDEEMABLE ADDITIONAL RETAINED OTHER
PREFERRED CONVERTIBLE COMMON PAID-IN EARNINGS COMPREHENSIVE
STOCK WARRANTS STOCK CAPITAL (DEFICIT) INCOME (LOSS) TOTAL
---------- ----------- ------ ---------- --------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997............. $2,842 $ -- $193 $3,217 $ 1,472 $ -- $ 4,882
Net loss for 1997..................... -- -- -- -- (955) -- (955)
Minimum pension liability adjustment
(net of taxes of $32)............... -- -- -- -- -- (49) (49)
-------
Total comprehensive income (loss)..... (1,004)
Issuance of common stock
(33,400 shares)..................... -- -- -- 103 -- -- 103
Redemption of common stock (33,900
shares)............................. -- -- -- (20) -- -- (20)
Amendment of warrant agreement........ -- 4,582
Dividend on preferred stock........... -- -- -- -- (320) -- (320)
Accretion of discount on preferred
stock............................... 225 -- -- -- (225) -- (225)
------ ------ ---- ------ ------- ----- -------
Balance at December 31, 1997........... 3,067 4,582 193 3,300 (28) (49) 3,416
Net loss for 1998..................... -- -- -- -- (4,457) -- (4,457)
Minimum pension liability adjustment
(net of taxes of $54)............... -- -- -- -- -- (80) (80)
-------
Total comprehensive income (loss)..... (4,537)
Issuance of common stock
(1,636,400 shares).................. -- -- 16 5,007 -- -- 5,023
Redemption of common stock (33,900
shares)............................. -- -- -- (20) -- -- (20)
Dividend on preferred stock........... -- -- -- -- (320) -- (320)
Accretion of discount on
preferred stock..................... 243 -- -- -- (243) -- (243)
------ ------ ---- ------ ------- ----- -------
Balance at December 31, 1998........... 3,310 4,582 209 8,287 (5,048) (129) 3,319
Net loss for 1999..................... -- -- -- -- (1,891) -- (1,891)
Minimum pension liability adjustment
(net of taxes of $60)............... -- -- -- -- -- 89 89
Currency translation adjustments...... -- -- -- -- -- 11 11
-------
Total comprehensive income (loss)..... (1,791)
Issuance of common stock (61,000
shares)............................. -- -- 1 168 -- -- 169
Issuance of convertible warrant --
Series B............................ -- 1,970 -- -- -- --
Dividend on preferred stock........... -- -- -- -- (320) -- (320)
Accretion of discount on preferred
stock............................... 263 -- -- -- (263) -- (263)
------ ------ ---- ------ ------- ----- -------
Balance at December 31, 1999........... 3,573 6,552 210 8,455 (7,522) (29) 1,114
Net loss for six months ended June 30,
2000 (unaudited).................... -- -- -- -- (130) -- (130)
Currency translation adjustments
(unaudited) (net of taxes of
$160)............................... -- -- -- -- -- (309) (309)
-------
Total comprehensive income (loss)
(unaudited)......................... (439)
Issuance of common stock (130,500
shares) (unaudited)................. -- -- 1 377 -- -- 378
Dividend on preferred stock
(unaudited)......................... -- -- -- -- (160) -- (160)
Accretion of discount on preferred
stock (unaudited)................... 139 -- -- -- (139) -- (139)
------ ------ ---- ------ ------- ----- -------
Balance at June 30, 2000 (unaudited)... $3,712 $6,552 $211 $8,832 $(7,951) $(338) $ 754
====== ====== ==== ====== ======= ===== =======
</TABLE>

See accompanying notes.
F-8
<PAGE> 84

MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

MCE Companies, Inc. and its wholly owned subsidiaries (the "Company")
designs, manufactures and markets a broad range of devices, components and
subsystems that are used throughout mobile and fixed wireless infrastructure
equipment and related test equipment applications. The Company's products are
also used in wireless broadband access, fiber optic networking, radar and
satellite applications. The Company's products operate over the full range of RF
frequencies that are commonly used in wireless communications transmissions.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts and
operations of the Company. Intercompany accounts and transactions have been
eliminated in consolidation.

UNAUDITED INTERIM FINANCIAL INFORMATION

The interim financial information at June 30, 2000 and for the six months
ended June 30, 1999 and 2000 is unaudited but, in the opinion of management,
includes all adjustments, consisting of normal recurring adjustments, which the
Company considers necessary for a fair presentation of the financial position
and results of operations for the interim periods. The results for the six
months ended June 30, 2000 are not necessarily indicative of results for the
full year.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

In the second quarter of 1999, the Company favorably resolved an
outstanding warranty claim with a customer. The impact of reducing the warranty
related reserve of $211,000 was recorded as a decrease to cost of products sold
in 1999.

INVENTORIES

Inventories are carried at the lower of cost or market using the first in,
first out (FIFO) method. Generally, the Company maintains inventory excess and
obsolescence reserves for raw material and finished goods inventory in excess of
the most recent twenty-four months usage.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation is computed over the
estimated useful lives of the related assets using the straight-line method for
financial reporting purposes. Estimated useful lives assigned to the building,
machinery and equipment, and furniture and fixtures range from 20-40 years, 3-7
years, and 5-10 years, respectively. Leasehold improvements are depreciated over
the remaining life of the respective leases.

F-9
<PAGE> 85
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GOODWILL AND OTHER INTANGIBLE ASSETS

At December 31, the goodwill and other intangible assets, which resulted
from acquisitions of the subsidiaries, consist of the following (in thousands):

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1998 1999 JUNE 30, 2000
----------- ------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Goodwill........................................... 10-20 years $19,320 $24,532 $28,026
Accumulated amortization........................... (3,474) (5,005) (5,922)
------- ------- -------
Goodwill, net................................ $15,846 $19,527 $22,104
======= ======= =======

Developed technology............................... 10 years $ 4,000 $ 4,000 $ 4,000
Assembled work force............................... 10 years 900 900 900
Tradename.......................................... 10 years 800 800 800
Customer list...................................... 14 years 6,000 6,000 6,000
Other.............................................. 5-6 years 373 502 502
------- ------- -------
12,073 12,202 12,202
Accumulated amortization........................... (963) (2,013) (2,574)
------- ------- -------
Other intangibles, net....................... $11,110 $10,189 $ 9,628
======= ======= =======
</TABLE>

During 1998, the Company recorded additional goodwill of $500,000, which
related to additional consideration paid to the former owners of Weinschel
Corporation pursuant to the terms of the purchase agreement under an earn-out
provision running through December 31, 1998. The additional consideration was
paid to the former owners during 1999.

Intangible assets are periodically reviewed for impairment based on an
assessment of future cash flows to ensure that they are appropriately valued.
Intangible assets are amortized on a straight-line basis over their estimated
useful lives.

ADVERTISING EXPENSES

The cost of advertising is expensed as incurred. The Company incurred
advertising expenses of approximately $497,000, $610,000 and $527,000 in 1997,
1998 and 1999, respectively, which have been included in selling, general and
administration expenses in the accompanying financial statements.

STOCK-BASED COMPENSATION

The Company has a stock option plan (the "1996 Stock Option Plan") that
provides for the granting of a fixed number of shares to key employees including
employees who are directors of the Company and non-employee directors of the
Company on such terms and conditions as may be determined by the compensation
committee of the board of directors. The Company accounts for stock options in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25).

CUSTOMER ADVANCES

Customer advances represent amounts received by the Company from one of its
major customers. Such amounts will be applied against accounts receivable or
paid on demand as requested by the customer.

F-10
<PAGE> 86
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

The Company recognizes revenue, estimated product returns and estimated
warranty expense when goods are shipped to customers.

INTEREST EXPENSE AND OTHER

Interest expense and other includes interest cost on outstanding
borrowings, the amortization of original issuance discounts and debt issuance
costs. For the six months ended June 30, 2000, it also includes foreign currency
transaction losses.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

Assets and liabilities of the Company's wholly owned subsidiary located in
the United Kingdom, whose functional currency is pound sterling, are translated
at year-end exchange rates. Income and expense items are translated at the
average rates of exchange prevailing during the year. The adjustment resulting
from translating the financial statements of the subsidiary is reflected as a
separate component of other comprehensive income. Transaction gains or losses
are reported in statement of operations, under the caption "Interest expense and
other" and such losses approximated $222,000 (unaudited) during the six months
ended June 30, 2000.

EFFECT OF ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133"). The Company expects to
adopt SFAS No. 133 effective January 1, 2001. SFAS No. 133 will require the
Company to recognize all derivatives on the balance sheet at fair value. The
Company does not anticipate that the adoption of this SFAS will have a
significant effect on its results of operations or financial position based on
its current holdings and operations.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 SAB 101, Revenue Recognition, which provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements filed with the SAB 101 outlines the basic criteria that must be met
to recognize revenue and provides guidance for disclosures related to revenue
recognition policies. The Company is required to adopt SAB 101 in the fourth
quarter of 2000. The Company believes that its revenue recognition policy is in
compliance with the provisions of SAB 101 and that the adoption of SAB 101 will
not have an effect on its financial position or results of operations.

In March 2000, the FASB issued FASB Interpretation No. 44, Accounting for
Certain Transactions involving Stock Compensation, an interpretation of APB
Opinion No. 25 ("Interpretation No. 44"). The Company is required to adopt
Interpretation No. 44 on July 1, 2000, which provides guidance on accounting for
certain transactions and provisions of stock option plans. The accounting for
the Company's outstanding stock options plans and related grants thereunder,
will not be impacted by the adoption of Interpretation No. 44 on July 1, 2000.
Interpretation No. 44 will be applied prospectively to new awards granted or
modifications of outstanding awards.

F-11
<PAGE> 87
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. ACQUISITIONS

METELICS

In March of 1998, the Company acquired all the outstanding common stock of
Metelics Corporation ("Metelics") for cash and 1,636,400 shares of the Company's
common stock totaling $26.8 million (including direct costs of making the
acquisition). The acquisition has been accounted for using the purchase method.

Metelics operates exclusively in the microwave test and communication
industries and designs, manufactures and markets advanced microwave diodes for
electronics applications primarily for original equipment manufacturers. The
Company recognized a $6.0 million charge in the first quarter of 1998 associated
with the estimated fair value of purchased in-process research and development
("IPR&D") costs acquired in the Metelics acquisition because technological
feasibility had not been established and the in-process research and development
had no future alternative uses. Metelics' IPR&D value is comprised of twelve
primary product programs. These products include the introduction of certain new
technologies capable of addressing greater power and higher frequency demands.
Metelics' IPR&D programs, although in various stages of completion, were
approximately 40% complete on a weighted average basis at the date of
acquisition. Of the twelve projects in-process, the Company anticipated that
seven would be released in 1998 and five would be released in 1999. Actual
releases were: 1998 - three; 1999 - five; 2000 - two; and another two are
expected in 2001. The Company expensed $955,000 for their IPR&D projects in 1998
and 1999 and anticipates expenses of approximately $310,000 in 2000 and $70,000
in 2001. Although the expenses have been incurred at a slower pace than
originally anticipated, the total costs approximate the initial estimates. It is
management's expectation that the acquired IPR&D will be successfully developed;
however, there can be no assurance that commercial viability of these products
will be achieved.

F-12
<PAGE> 88
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The purchase price of Metelics is composed of and allocated to estimated
fair values as follows (in thousands):

<TABLE>
<S> <C>
Purchase price:
Cash...................................................... $20,900
Issuance of common stock.................................. 5,023
Acquisition costs......................................... 871
-------
Total cost................................................ 26,794
Less:
Net tangible assets acquired at fair value............. 2,406
Identifiable intangibles:
Developed technology................................. 4,000
Assembled work force................................. 900
Tradename............................................ 800
Customer list........................................ 6,000
Other................................................ 150
Deferred taxes related to identifiable intangibles... (4,562)
Write-off of acquired in-process research and
development........................................... 6,000
-------
Goodwill.................................................... $11,100
=======
</TABLE>

DML

In July 1999, the Company acquired all of the outstanding common stock of
Densitron Microwave Limited for cash of L4.5 million ($7.3 million). In addition
$429,000 of acquisition costs were incurred. Subsequent to the purchase the
company changed its name to DML Microwave Limited ("DML").

The transaction was accounted for as a purchase and, accordingly, the
purchase price was allocated to the assets purchased and the liabilities assumed
based upon the estimated fair values at the date of acquisition. The excess of
the initial purchase payment over the fair value of net assets acquired was
approximately L3.3 million ($5.3 million) and was recorded as goodwill, which is
being amortized on a straight-line basis over 15 years. Under the terms of the
purchase agreement, the former owners of DML provided the Company with a L1.0
million ($1.7 million) (unaudited) as of June 30, 2000 note receivable in lieu
of accounts receivable as of the acquisition date. The note receivable is
included in "Accounts receivable -- Other" in the accompanying balance sheet.

During the six month period ended June 30, 2000, the Company recorded
additional goodwill of L2.5 million ($4.0 million) (unaudited) which related to
additional consideration to be paid to the former owners of DML pursuant to the
terms of the purchase agreement's earnout provision. The related amount due is
included in "Other accrued expenses" in the accompanying June 30, 2000 balance
sheet. The additional consideration, which is payable in pounds, is expected to
be paid to the former owners during 2000. In April 2000, the Company entered
into a forward contract to purchase 1.395 million British pounds for $2.172
million US dollars to ensure that the cash obligation for the DML earn-out does
not increase as a result of changes in currency exchange rate fluctuations. As
of June 30, 2000, the Company recorded a loss of $54,000 (unaudited) in order to
mark to market the forward contract, which is included in "Interest expense and
other" in the accompanying statement of operations. The forward contract expires
on July 31, 2000.

F-13
<PAGE> 89
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DML operates exclusively in the microwave test and communication industries
and principally manufactures customer developed advanced microwave isolators and
circulators for wireless base-station applications primarily for original
equipment manufacturers.

The results of operations of Metelics and DML have been included in the
accompanying financial statements since the dates of their acquisitions.

PRO FORMA (UNAUDITED)

The following represents unaudited pro forma consolidated results of
operations assuming the DML acquisition occurred on January 1 for each period
presented, and the Metelics acquisition occurred on January 1, 1998 after giving
effect to certain purchase accounting adjustments, including the amortization of
intangible assets and goodwill and interest expense on the acquisition debt (in
thousands). The Metelics IPR&D charge has been excluded from all periods
presented.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ------------------
------------------ ACTUAL
1998 1999 1999 2000
------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales................................ $74,850 $73,194 $36,834 $46,141
Net income(loss)......................... 482 (2,470) 840 (429)

Basic and diluted income (loss) per
share.................................. $ (0.00) $ (0.15) $ 0.01 $ (0.02)
</TABLE>

These unaudited pro forma results are presented for comparative purposes
only. They are not necessarily indicative of what would have occurred had the
acquisition actually been made on the dates indicated or of future results of
operations.

3. LONG TERM DEBT AND OTHER CREDIT ARRANGEMENTS

Long term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1998 1999 2000
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revolver.......................................... $ 2,993 $ 3,326 $ 5,116
Mortgage and construction note.................... -- 2,734 2,716
Mortgage note..................................... 829 -- --
Note payable to bank.............................. 1,057 -- --
Acquisition line of credit........................ 20,000 -- --
Term loan......................................... -- 25,000 23,000
Series A subordinated notes, net of $75, $45 and
$30 unamortized discount at December 31, 1998
and 1999, and June 30, 2000 respectively........ 3,425 3,455 3,470
Series B subordinated notes, net of $1,852 and
$1,701 unamortized discount at December 31, 1999
and June 30, 2000, respectively................. -- 2,148 2,299
------- ------- -------
28,304 36,663 36,601
Less current portion.............................. (3,871) (4,290) (4,540)
------- ------- -------
$24,433 $32,373 $32,061
======= ======= =======
</TABLE>

At December 31, 1998 the Company had available a revolving credit note (the
"Revolver") which was issued by a bank. The Revolver provided for borrowings by
the Company of up to

F-14
<PAGE> 90
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$12,100,000. Borrowings were limited to 85% of eligible domestic and 75% of
eligible foreign accounts receivable and 40% of eligible inventory not to exceed
$6,000,000. Under the terms of the original agreement, the Revolver was to
mature on April 30, 1999. On March 24, 1999, the bank extended the Revolver's
maturity date to April 30, 2000. On July 29, 1999 the Revolver was replaced with
a revolving credit facility that provides for borrowings up to $12,000,000 with
a maturity date of July 1, 2004. Borrowing limits are consistent with terms of
the previous Revolver.

On February 5, 1999, the Company entered into a mortgage and construction
loan agreement with a bank, which allowed the Company to borrow up to $2,000,000
on a long term basis to finance the development of a corporate headquarters and
the expansion of the Ann Arbor facility. In November 1999, the Company entered
into a mortgage note for $2,738,000, which was used to pay off the outstanding
mortgage and construction loan and a previous note payable. This mortgage note
is payable in monthly installments of $20,000 including interest at 7.5% through
November 2004, with a balloon payment of $2,509,000 due November 2004, and is
secured by the land and building of the Ann Arbor facility.

The Company had an acquisition line of credit (the "Acquisition Line")
which provided for borrowings up to $20,000,000 in 1998. The Acquisition Line
matured on January 31, 1999 at which time the balance outstanding converted to a
term loan. During 1999, the term loan was refinanced making an additional
$5,000,000 of borrowings available. The term loan is payable in quarterly
installments beginning February 1, 2000, as follows: installments
1-3 -- $1,000,000; installments 4-15 -- $1,250,000; and installments
16-19 -- $1,750,000.

In 1996 and 1999 the Company issued the Series A and Series B subordinated
notes, due in 2001 and 2004, respectively. The notes were issued with
convertible warrants (Note 4). The values assigned to the warrants were recorded
as a discount to the subordinated notes. The discounts on the Series A and
Series B subordinated notes are being amortized through July 2001 and July 2004,
respectively, using the interest method. Such amortization is included in
interest expense. Interest is payable quarterly at 12% on the Series A
subordinate note. Interest accretes quarterly on the Series B subordinate note
at 8% and cash interest is payable beginning in 2002 through maturity.

Maturities of long term debt are as follows as of June 30, 2000 (in
thousands):

<TABLE>
<S> <C>
2000...................................................... $ 2,271
2001...................................................... 8,541
2002...................................................... 5,045
2003...................................................... 5,549
2004...................................................... 16,926
-------
38,332
Discount on subordinated notes............................ (1,731)
-------
$36,601
=======
</TABLE>

Borrowings under the Revolver and the term loan are secured by virtually
all the domestic assets of the Company presently owned and acquired in the
future and certain stock of the foreign subsidiaries of the Company are not
subject to other liens.

The Company has certain interest rate options on the advances on the
Revolver and the term loan of a Eurodollar rate plus a margin as defined in the
agreement. The effective rate in place at December 31, 1999 was 8.5%.

F-15
<PAGE> 91
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has available standby letters of credit of $5,000,000 and a
swing line up to $5,000,000 to handle daily activity. Advances on the swing line
and letters of credit reduce available borrowings under the revolving credit
facility.

The Company's various debt agreements include, among other things,
covenants relative to net worth and liabilities to net worth ratios. The Company
was in compliance with all financial covenants of the agreements at December 31,
1999. The Company is subject to specified restrictions on paying dividends to
common shareholders under terms of the debt agreements.

The Company paid interest of $1,750,000, $1,778,000 and $2,642,000 during
1997, 1998, and 1999, respectively.

In 1999, the Company incurred $3,204,000 in interest of which approximately
$40,000 was capitalized as part of the cost of the corporate headquarters and
expanding the Ann Arbor facility.

4. PREFERRED STOCK AND WARRANTS

The following summarizes the transactions related to the redeemable and
convertible warrants since their date of issuance (in thousands, except share
data).

<TABLE>
<CAPTION>
CONVERTIBLE WARRANTS
REDEEMABLE WARRANTS -----------------------------------------
-------------------- SERIES A SERIES B
SHARES AMOUNTS SHARES AMOUNTS SHARES AMOUNTS
---------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997..... 2,872,300 $1,400 -- $ -- -- $ --
Increase in fair value of
redeemable warrants through
October 22, 1997............. -- 5,759 -- -- -- --
Amendment to redeemable
warrants..................... (1,838,300) (4,582) 1,838,300 4,582 -- --
Increase in fair value of
redeemable warrants from
October 23, 1997 to December
31, 1997..................... -- 483 -- -- -- --
---------- ------ --------- ------ --------- ------
Balance at December 31, 1997
and 1998..................... 1,034,000 3,060 1,838,300 4,582 -- --
Increase in fair value in
1999......................... -- 250 -- -- -- --
Issuance of Series B
convertible warrants......... -- -- -- -- 1,313,000 1,970
---------- ------ --------- ------ --------- ------
Balance at December 31, 1999... 1,034,000 3,310 1,838,300 4,582 1,313,000 1,970
Increase in fair value for the
six months ended June 30,
2000 (unaudited)............. -- 1,912 -- -- -- --
---------- ------ --------- ------ --------- ------
Balance at June 30, 2000
(unaudited).................. 1,034,000 $5,222 1,838,300 $4,582 1,313,000 $1,970
========== ====== ========= ====== ========= ======
</TABLE>

In 1996, in connection with an acquisition, the Company issued subordinated
notes with a face amount of $3,500,000, 4,000 shares of non-voting Series A
Preferred Stock, and warrants to purchase 2,872,300 shares of the Company's
common stock for aggregate proceeds of

F-16
<PAGE> 92
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$7,500,000. The proceeds were allocated to the subordinated notes ($3,352,000),
Series A Preferred Stock ($2,758,000) and warrants ($1,400,000) based on the
instruments' fair values.

In 1999, in connection with the purchase of DML, the Company issued
subordinated notes with a face amount of $4,000,000 and warrants to purchase
1,313,000 shares of the Company's common stock subject to certain reductions
described below for aggregate proceeds of $4,000,000. The proceeds were
allocated to the subordinated notes ($2,030,000) and warrants ($1,970,000) based
on the respective instruments' fair value.

The discounts on the Series A and Series B subordinated notes will be
accreted using the interest method over the five-year life of the notes.

REDEEMABLE WARRANTS

At June 30, 2000, the Company had reserved 1,034,000 shares that are
issuable under the terms of the warrants. These warrants contain a put option
allowing the holder to sell the warrants to the Company at the greater of the
fair value of the underlying Company's common stock or an amount based on a
multiple of cash flow (as defined in the agreement) (the "Redeemable Warrants").
The Redeemable Warrants have an exercise price of $0.0001 per share, are
exercisable at any time after July 2001 or the occurrence of specified events,
including an initial public offering, and will expire generally in 2007. The
Redeemable Warrants have been classified as liabilities in the accompanying
balance sheets since they give the holder a choice of settlement in either cash
or common stock. Increases or decreases in the fair value of the Redeemable
Warrants are recorded as increases or decreases in the liability and charged to
earnings in the period of change. The Redeemable Warrants are redeemable by the
holders for cash upon a change of control, a sale of substantially all assets or
an initial public offering for the greater of the fair value of the underlying
Company's common stock or an amount based on a multiple of cash flows (as
defined in the agreement).

CONVERTIBLE WARRANTS

Series A

In October 1997, the Company and the holder of certain Redeemable Warrants
to purchase 1,838,300 shares of the Company's common stock agreed to eliminate
the holder's right to put the warrants to the Company for cash. The warrants, as
amended (the "Series A Convertible Warrants"), were valued at their fair value,
$4,582,000, on the date of amendment. The Series A Convertible Warrants have an
exercise price of $0.0001 per share, are exercisable at any time after July 2001
or the occurrence of specified events, including an initial public offering, and
will expire generally in 2007. Under the terms of the Series A Convertible
Warrants, effective July 2002, the number of the Company's common shares
issuable increases each quarter by 0.32% of the number of common shares then
outstanding. The Series A Convertible Warrants are redeemable by the holders for
cash upon a change of control, a sale of substantially all assets or an initial
public offering for the greater of the fair value of the underlying Company's
common stock or an amount based on a multiple of cash flows (as defined in the
agreement).

Series B

In July 1999, the Company issued Series B subordinated notes and Series B
convertible warrants to purchase 1,313,000 of the Company's common stock (the
"Series B Convertible Warrants"). The Series B Convertible Warrants were valued
at $1,970,000. The Series B

F-17
<PAGE> 93
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Convertible Warrants have an exercise price of $0.0001 per share, are
exercisable at any time after July 2004 or the occurrence of specified events,
including an initial public offering, and will expire generally in 2009. The
Series B Convertible Warrants are redeemable by the holders for cash upon a
change of control, a sale of substantially all assets or an initial public
offering for the greater of the fair value of the underlying Company's common
stock or an amount based on a multiple of cash flows (as defined in the
agreement). The Series B Convertible Warrants include a provision which reduces
the Company's shares from 1,313,000 to 904,900 if the Company completes certain
transactions, including an initial public offering, as defined in the
agreements, by July 2001.

PREFERRED STOCK

In 1996, in connection with an acquisition, the Company issued 4,000 shares
of Series A redeemable preferred stock (the "Series A Preferred Stock") with a
face value of $4,000,000 and an assigned value of $2,758,000. The Series A
Preferred Stock originally required annual dividend payments of 8% and a
redemption in July 2002. The $1,242,000 related discount is being accreted as a
charge to retained earnings (which reduces income available to common
shareholders for earnings per share calculations) through July 2002 using the
interest method. In October 1998, the Company and the holders of the Series A
Preferred Stock agreed to increase the stated annual dividend payment to 16%
effective July 2002 and to eliminate the mandatory redemption requirement except
upon a change of control, a sale of substantially all assets or an initial
public offering.

5. INCOME TAXES

Deferred taxes reflect the net effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
income tax purposes. Significant components of the Company's deferred tax assets
and liabilities as of December 31, 1998 and 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Deferred tax assets:
Accrued pension benefits.................................. $ 350 $ 289
Compensation accrual...................................... 719 865
Warranty accrual.......................................... 208 111
Accrued other liabilities................................. 184 187
Inventory................................................. 901 293
Restructuring accrual..................................... -- 123
Net operating loss carryforwards.......................... -- 554
Other..................................................... 40 40
------- -------
Total deferred tax assets................................... 2,402 2,462
Deferred tax liabilities:
Intangible assets......................................... 4,018 3,521
Depreciation.............................................. 660 616
Other..................................................... 67 85
------- -------
Total deferred tax liabilities.............................. 4,745 4,222
------- -------
Net deferred tax liability.................................. $(2,343) $(1,760)
======= =======
</TABLE>

F-18
<PAGE> 94
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Components of the provisions for income taxes are as follows (in
thousands):

<TABLE>
<CAPTION>
1997 1998 1999
------ ------ -----
<S> <C> <C> <C>
Current payable (benefit):
Federal............................................... $3,338 $1,057 $(680)
State................................................. 644 232 82
------ ------ -----
3,982 1,289 (598)
------ ------ -----
Deferred expense (credit):
Federal............................................... (478) (358) 23
State................................................. (69) (108) 55
Foreign............................................... -- -- (314)
------ ------ -----
(547) (466) (236)
------ ------ -----
$3,435 $ 823 $(834)
====== ====== =====
</TABLE>

The Company paid income taxes of $3,832,000, $2,876,000 and $1,042,000 in
1997, 1998 and 1999, respectively.

The Company's provision for income taxes differed from the amount computed
by applying the statutory income tax rate to income as follows (in thousands):

<TABLE>
<CAPTION>
1997 1998 1999
------ ------- -----
<S> <C> <C> <C>
Computed at the federal statutory rate of 34%........... $ 843 $(1,235) $(927)
Goodwill amortization................................... -- 208 304
Redeemable warrant expense.............................. 2,122 -- 85
In-process research and development..................... -- 2,040 --
Foreign sales corporation............................... -- (224) (134)
State income tax, net of federal tax benefits........... 368 153 (313)
Other................................................... 102 (119) 151
------ ------- -----
$3,435 $ 823 $(834)
====== ======= =====
</TABLE>

Tax loss carryforwards with a value of approximately $213,000 generated by
DML have no expiration date. State tax loss carryforwards of $341,000 expire in
2006.

6. DEFINED BENEFIT PENSION PLAN

The Company has an obligation under a defined benefit pension plan, which
existed before the date of the acquisition of its subsidiary in Whippany, New
Jersey and covers

F-19
<PAGE> 95
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

certain of its employees. The participants and benefits of the plan were frozen
in 1993. The plan assets are invested in equity and fixed income funds.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1998 1999
------- ------
(IN THOUSANDS)
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year..................... $ 1,852 $2,015
Interest cost............................................. 132 135
Actuarial loss (gain)..................................... 137 (216)
Benefits paid............................................. (106) (93)
------- ------
Benefit obligation at end of year........................... $ 2,015 $1,841
======= ======
Change in plan assets:
Fair value of plan assets at beginning of year.............. $ 643 $ 934
Actual return on plan assets.............................. 76 19
Company contributions..................................... 321 200
Benefits paid............................................. (106) (93)
------- ------
Fair value of plan assets at end of year.................... $ 934 $1,060
======= ======

Funded status of the plan (under-funded).................... $(1,081) $ (781)
Unrecognized net actuarial loss........................... 216 66
------- ------
Accrued benefit cost........................................ $ (865) $ (715)
======= ======
Amounts recognized for pension benefits in the consolidated
balance sheets consist of:
Pension liability......................................... $(1,081) $ (781)
Accumulated other comprehensive income (pretax)........... 216 66
------- ------
Net amount recognized....................................... $ (865) $ (715)
======= ======
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998 1999
----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Components of net periodic cost:
Interest cost............................................. $130 $132 $135
Expected return on plan assets............................ (47) (73) (85)
---- ---- ----
Benefit cost................................................ $ 83 $ 59 $ 50
==== ==== ====
</TABLE>

The discount rate used in determining the actuarial present value of the
projected benefit obligation was 6.75% and 7.75% as of December 31, 1998 and
1999, respectively. The expected long term rate of return on assets used in
determining the pension expense was 9%.

401(K) PLANS

The Company maintains 401(k) plans for the benefit of substantially all
employees. The Company matches up to 7% of the employees' compensation, as
defined. The Company contributed $703,000, $743,000 and $924,000 in 1997, 1998
and 1999, respectively. The

F-20
<PAGE> 96
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

employees of Metelics were part of a separate 401(k) plan for which the Company
contributed $85,000 in 1998. In early 1999, the Metelics plan was merged into
the Company's 401(k) plan.

MANAGEMENT INCENTIVE PROGRAM

The Company has implemented a Net Worth Appreciation Reward Program
("NWARP") to reward certain members of management for achieving certain long
term growth goals of the Company. Cash awards under these plans vest beginning
five years from their inception (1999-2001).

Management may be granted awards if accumulated measurement goals are
subsequently met. The Company records compensation expense for the NWARP in the
period awarded.

The Company expensed approximately $585,000, $268,000 and $185,000 under
the terms of these plans as of December 31, 1997, 1998 and 1999, respectively.

Effective January 1, 2000, the Company's management elected to cease future
awards under the NWARP.

7. LEASES

The Company leases buildings under various operating leases, which expire
through June 2004. Future rent under non-cancelable building operating leases is
as follows as of December 31, 1999 (in thousands):

<TABLE>
<S> <C>
2000........................................................ $ 825
2001........................................................ 810
2002........................................................ 619
2003........................................................ 439
2004........................................................ 443
Thereafter.................................................. 2,792
------
$5,928
======
</TABLE>

Rent expense was approximately $839,000, $1,003,000 and $1,016,000 in 1997,
1998 and 1999, respectively.

8. COMMITMENTS AND CONTINGENCIES

As a result of liabilities assumed by KDI/Triangle Corporation ("KDI") in
connection with the acquisition of the KDI business in 1996, KDI is named as a
potentially responsible party liable for cleanup of two known environmental
matters. While federal law does provide for joint and several liability on each
responsible party, the Company's share of the total waste which may have been
disposed of at the site is relatively small and, in most such situations,
government agencies and courts have imposed liability in an amount reasonably
related to the amount of waste contributed by a party. KDI is negotiating with
the EPA and New Jersey Department of Environmental Protection to resolve its
financial responsibility for these matters. Based on analysis and information
provided by consultants and attorneys, the Company has provided reserves of
$305,000 to cover estimated future costs related to these matters. The Company
does not believe the above matter will have a material adverse effect on its
consolidated financial position or results of operations or cash flows.

F-21
<PAGE> 97
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

With the exception of these actions, the Company is not a party to any
material legal proceedings. However, the Company may from time to time become a
party to various legal proceedings arising in the ordinary course of its
business.

9. 1996 STOCK OPTION PLAN

In October 1996, the Company's board of directors established the 1996
Stock Option Plan which provides for granting options to acquire up to 2,209,400
shares of common stock.

In December 1996, the Company granted an option to acquire 1,104,700 shares
of common stock with an exercise price of $0.649 per share under the terms of
the 1996 Stock Option Plan. The option expires in December 2001. The exercise
price of the shares under the option was equal to 110% of the estimated fair
value of the Company's common stock on the date of grant. The option vests and
becomes exercisable only in the event that specified rates of return on
investments are achieved by the Company's shareholders through certain events
including an initial public offering. As such, the stock option was not
exercisable at any time through or at June 30, 2000.

The Company has elected to follow APB 25 Accounting for Stock Issued to
Employees and related interpretations in accounting for its employee stock
awards. As such, the Company will record compensation expense for the above
stock option based on the difference between its exercise price and the fair
market value of the Company's common stock on the date the option becomes
exercisable.

Pro forma information regarding net income and earnings per share is
required by Statement No. 123, as if the Company had accounted for its employee
stock options under the fair value method. The 1997, 1998 and 1999 pro forma
information regarding net income and earnings per share required by Statement
No. 123 does not differ from reported amounts, as there was no stock option
activity during such years.

Effective July 20, 2000, the Company's board of directors amended the 1996
Stock Option Plan to provide that the total amount of common stock on which
options may be granted shall not exceed 1,104,700 shares. Thus, no additional
options are available for grant under the 1996 Stock Option Plan.

10. FINANCIAL INSTRUMENTS AND NONCASH TRANSACTIONS

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of accounts receivable. Direct
sales to Lucent for 1997, 1998 and 1999 approximated 32.9%, 19.7% and 14.6%,
respectively, of total net sales. For the six months ended June 30, 1999 and
2000, direct sales to Lucent approximated 17.2% (unaudited) and 15.8%
(unaudited), respectively, of total net sales. Direct sales to Ericsson for 1999
and for the six months ended June 30, 2000 approximated 7.1% (unaudited) and
9.0% (unaudited), respectively, of total net sales.

F-22
<PAGE> 98
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Sales to customers by geographic area are as follows:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
-------------------- ------------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
United States................................... 79% 79% 69% 78% 66%
Europe.......................................... 12% 14% 22% 14% 26%
Asia............................................ 7% 4% 6% 5% 5%
Other........................................... 2% 3% 3% 3% 3%
</TABLE>

Customers with accounts receivable in excess of 10% of total accounts
receivable are as follows (in thousands):

<TABLE>
<CAPTION>
PERCENT OF
TOTAL ACCOUNTS RECEIVABLE
---------------------------
DECEMBER 31,
------------ JUNE 30,
1998 1999 2000
---- ---- --------
(UNAUDITED)
<S> <C> <C> <C>
Lucent...................................................... 21.3% 9.9% 7.6%
Ericsson.................................................... 0.2 14.3 8.6
Motorola.................................................... 11.6 2.6 1.2
</TABLE>

The Company does not require collateral or other security from its
customers.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash, the amount due under the line of credit,
redeemable warrants and debt approximate their fair values. The fair values of
the Company's long term debt are estimated based on current incremental
borrowing rates for similar types of borrowing arrangements.

NONCASH TRANSACTIONS

The following sets forth noncash financing and investing activities (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
Issuance of common stock as partial consideration for the
acquisition of Metelics................................... $5,043
------
</TABLE>

There were no noncash activities in the years ended December 31, 1997 and
1999 and for the six months ended June 30, 1999 and 2000.

F-23
<PAGE> 99
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. EARNINGS PER SHARE

Historical basic and diluted income (loss) per share (in thousands, except
share and per share data):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------ -----------------------
1997 1998 1999 1999 2000
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator
Net income (loss)................... $ (955) $ (4,457) $ (1,891) $ 271 $ (130)
Series A preferred stock dividend... (320) (320) (320) (160) (160)
Accretion of discount on preferred
stock............................. (225) (243) (263) (129) (139)
---------- ---------- ---------- ---------- ----------
Numerator for basic and diluted income
(loss) per share -- income (loss)
available to common shareholders.... $ (1,500) $ (5,020) $ (2,474) $ (18) $ (429)
========== ========== ========== ========== ==========
Denominator for basic and diluted
income (loss) per share
Weighted average shares............. 19,300,600 20,644,200 20,946,100 20,921,700 21,031,800
========== ========== ========== ========== ==========
Basic and diluted income (loss) per
share............................... $ (0.08) $ (0.24) $ (0.12) $ (0.00) $ (0.02)
========== ========== ========== ========== ==========
</TABLE>

The stock option granted in 1996 and outstanding through June 30, 2000 for
the purchase of 1,104,700 shares of common stock (Note 10) has been excluded
from the above weighted average shares since its exercisability is contingent
upon the Company completing a private sale, public offering, merger or share
exchange.

The warrants outstanding in 1997, 1998 and 1999 and the six months ended
June 30, 1999 and 2000 are excluded from the diluted loss per share, as they are
anti-dilutive.

F-24
<PAGE> 100
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the calculation of pro forma loss available
to common shareholders as if the initial public offering occurred as of the
first day of the period presented (in thousands, except for share and per share
data) (unaudited):

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1999 2000
------------ ----------------
<S> <C> <C>
Numerator:
Net loss.................................................. $ (1,891) $ (130)
Redeemable warrant charge................................. (8,229) (6,317)
Stock option charge....................................... (12,539) (12,539)
Early extinguishment of debt.............................. (2,218) (1,993)
Impact on taxes of the above adjustments.................. 3,608 3,608
----------- -----------
Pro forma net loss........................................ (21,269) (17,371)
Accretion of discount on preferred stock upon
conversion............................................. (690) (427)
----------- -----------
Net loss available to common shareholders................... $ (21,959) $ (17,798)
=========== ===========
Denominator:
Historical weighted average shares........................ 20,946,100 21,031,800
Shares used in public offering to repay debt and redeem
preferred stock........................................ 2,949,395 3,627,741
----------- -----------
Pro forma weighted average shares......................... 23,895,495 24,659,541
=========== ===========
Pro forma basic and diluted income (loss) per share......... $ (0.92) $ (0.72)
=========== ===========
</TABLE>

The redeemable warrant charge reflects the charge to earnings for the
increase in the fair value of the Redeemable Warrants coinciding with this
offering. The stock option charge represents the number of shares exercisable
upon completion of the initial public offering of 1,104,700 at the difference
between the exercise price of $0.649 per share and the Company's assumed initial
public offering price of $12.00 per share. The early extinguishment of debt
represents the elimination of the unamortized discount on the series A and
series B subordinate debt and the elimination of the deferred financing costs on
the debt which will be paid off with the proceeds from the initial public
offering. The accretion of the preferred stock reflects the accretion of the
remaining discount upon the mandatory redemption of the preferred stock upon
completion of the initial public offering.

The pro forma weighted average share information assumes the issuance of
shares of common stock by the Company in connection with this
offering sufficient to repay outstanding debt and redeem the Series A Preferred
Stock.

The options outstanding under the 1996 Stock Option Plan and the 2000 stock
incentive plan and the Redeemable and Convertible Warrants have been excluded
from the pro forma weighted average shares, as they are anti-dilutive.

F-25
<PAGE> 101
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. SALE OF INSTRUMENT PRODUCT LINE

In November 1997, the Company sold assets and manufacturing rights related
to certain Instrument Products ("Products") for a cash payment of $419,000 and
future royalty fees for Product sales. The royalty agreement requires a minimum
aggregated royalty equal to $400,000 over the next five years. At December 31,
1998 and 1999, the net present value of the note receivable related to the
minimum royalty payments, which is included in other assets, was $164,000 and
$96,000, respectively. At December 31, 1999, the current portion of the note
receivable was $80,000 and was included in other accounts receivable. The
Company recognized a gain of $266,000 on the sale in 1997, which is included in
"Other expense (income)" in the accompanying statement of operations. Net sales
and the gross margin on products for 1997 were $2,461,000 and $1,449,000,
respectively.

13. REPORTING FOR BUSINESS SEGMENTS

Statement of Financial Accounting Standards No. 131 (Statement No. 131),
"Disclosures about Segments of an Enterprise and Related Information", requires
public enterprises to present specific segment information according to how
management internally evaluates the operating performance of its business units.
The Company's management evaluates the operating performance of its business
units individually. However, under the aggregation criteria of Statement No.
131, the Company will continue to report as a single segment.

Revenue (all to unaffiliated customers) and income amounts for each of the
three years ended December 31, 1999, and identifiable assets at the end of each
year, were as follows from the United States and the United Kingdom operations
(in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------- SIX MONTHS ENDED
1997 1998 1999 JUNE 30, 2000
------- ------- ------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales:
United States................... $65,418 $61,764 $57,800 $37,452
United Kingdom.................. -- -- 6,847 8,689
Operating profit:
United States................... 9,896 (1,609) 399 4,779
United Kingdom.................. -- -- 329 653
Income (loss) before income taxes:
United States................... 2,480 (3,634) (2,633) 1,224
United Kingdom.................. -- -- (92) (47)
Assets:
United States................... 34,438 59,460 56,252 61,457
United Kingdom.................. -- -- 13,729 17,341
</TABLE>

14. RESTRUCTURING AND IMPAIRMENT

In the fourth quarter of 1999, the Company adopted a restructuring plan to
streamline its Whippany, New Jersey operation and improve future operating
performance. Product line profit trends indicated that several component
products manufactured at the facility were not achieving satisfactory financial
results. In addition, as a result of management conducting a strategic analysis
of the products in question, the Company concluded that these products would not
be manufactured in sufficient quantities to support a competitive position in
the

F-26
<PAGE> 102
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

marketplace. As a result, the Company decided to focus its resources at the
Whippany operation on products with a stronger competitive position and growth
outlook. The major elements of the restructuring plan included creating a
separate operating plan for the resistor products with dedicated management
resources, a reduction in the number of products at the location, the closing of
a leased satellite production facility and a work force reduction of
approximately 35% of the personnel at the Whippany operation. The work force
reduction of 76 positions represent 65 production personnel and 11
administration personnel. In accordance with FASB Statement No. 112, the cost of
the employee terminations have been recorded pursuant to the Company's
pre-existing severance policy which provides for post employment termination
benefits based upon an individual's job classification and years of service with
the Company. The aggregate cost for the implementation of the restructuring plan
charged to the statement of operations during the fourth quarter of 1999 was as
follows (in thousands):

<TABLE>
<S> <C>
Severance................................................... $ 444
Exit cost of facility....................................... 316
Impairment of equipment and leasehold improvements.......... 127
------
Restructuring and impairment................................ 887
Inventory write-off......................................... 1,808
------
$2,695
======
</TABLE>

That portion of the aggregate restructuring costs related to the write down
to fair value of various inventory products withdrawn from active sale due to
the adopted product rationalization plan has been reflected as a component of
cost of products sold in 1999. In 1999, revenue on the products discontinued
approximated $2.5 million (unaudited) in 1999.

At December 31, 1999, the Company had made $62,000 of payments against the
restructuring reserve leaving a remaining accrual of $698,000 of which $316,000
is included in "Other accrued expenses" and $382,000 is included in "Accrued
compensation and other benefits" in the accompanying balance sheet.

During the six month period ended June 30, 2000, the Company applied
$175,000 (unaudited) of payments against the restructuring reserve leaving a
remaining accrual of $523,000 (unaudited) of which $237,000 (unaudited) is
included in "Other accrued expenses" in the accompanying balance sheet and
$286,000 (unaudited) is included in "Accrued compensation and other benefits" in
the accompanying balance sheet. As of June 30, 2000, the Company had achieved
significant progress on the planned work force reduction which it expects to
complete in the first quarter of 2001.

15. SUBSEQUENT EVENTS (UNAUDITED)

INITIAL PUBLIC OFFERING

In July 2000, the Company's board of directors approved the filing of a
Registration Statement with the Securities and Exchange Commission permitting
the Company to sell Common Stock to the public. Prior to completion of the
initial public offering, the Company's Articles of Incorporation will be amended
to authorize 100,000,000 shares of Common Stock and 10,000,000 shares of
Preferred Stock.

F-27
<PAGE> 103
MCE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STOCK DIVIDEND

In July 2000, the Company's board of directors approved a stock dividend of
99 shares of common stock for every one share of outstanding common stock. This
stock dividend will be effected prior to the date of this offering. All shares
and per share amounts in these financial statements have been adjusted to give
effect to this stock dividend.

2000 STOCK INCENTIVE PLAN

The Company's 2000 stock incentive plan was adopted by the Company's board
of directors in July 2000 and approved by the shareholders in August 2000 and
will become effective upon consummation of this offering. The aggregate number
of shares of common stock reserved for issuance under the 2000 stock incentive
plan is 6,600,000 shares. The Company anticipates that options will be granted
to acquire an aggregate of approximately 3,650,000 shares of common stock to
substantially all of the full-time employees and the five non-employee directors
effective upon the consummation of this offering at an exercise price equal to
the initial public offering price.

The Company's compensation committee administers the 2000 stock incentive
plan. The compensation committee has the authority to determine exercise prices
applicable to the option, the eligible employees, directors and consultants to
whom options may be granted, the number of shares of common stock subject to
each option and the extent to which options may be exercisable. The compensation
committee also has the authority to determine the recipients and the terms of
grants of stock appreciation rights, restricted stock awards, performance share
awards and annual incentive awards under the 2000 stock incentive plan.

AMENDMENT TO REDEEMABLE WARRANTS AND CONVERTIBLE WARRANTS

Upon consummation of the initial public offering, the redeemable warrants
will be amended to eliminate the holders' put right and cash conversion rights
and the convertible warrants will be amended to eliminate the holders' cash
conversion rights. As such, each will be classified as warrants within
shareholders' equity.

PRO FORMA SHAREHOLDERS' EQUITY

The Pro Forma Shareholders' Equity as of June 30, 2000 reflects the
redemption of the Series A Preferred Stock and the related increase to
accumulated deficit for the accretion of the Series A Preferred Stock of
$288,000.

F-28
<PAGE> 104

Background Photo

MCE
COMPANIES, INC. (LOGO)

<TABLE>
<S> <C>
Inmet (Logo) Metelics (Logo)

DML (Logo) Weinschel (Logo)

KDI/Triangle (Logo)
</TABLE>
<PAGE> 105

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF
COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE
OF OUR COMMON STOCK.
---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 8
Forward-Looking Statements.............. 17
Use of Proceeds......................... 18
Dividend Policy......................... 19
Capitalization.......................... 20
Dilution................................ 22
Selected Consolidated Financial Data.... 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 27
Business................................ 38
Management.............................. 54
Certain Transactions.................... 62
Principal Shareholders and
Warrantholders........................ 63
Description of Capital Stock............ 66
Shares Eligible for Future Sale......... 69
Underwriting............................ 71
Legal Matters........................... 73
Experts................................. 73
Where You Can Find Additional
Information........................... 74
Index to Consolidated Financial
Statements............................ F-1
</TABLE>

UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT BUY, SELL OR TRADE IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

[MCE COMPANIES, INC. LOGO]

5,500,000 SHARES

COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
BANC OF AMERICA SECURITIES LLC
CIBC WORLD MARKETS
PROSPECTUS
, 2000
<PAGE> 106

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of common stock being registered.

<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 39,972
NASD Fee.................................................... 15,641
Nasdaq National Market Listing Fee.......................... 95,000
Printing and Engraving Expenses............................. 150,000
Legal Fees and Expenses..................................... 325,000
Accounting Fees and Expenses................................ 325,000
Blue Sky Fees and Expenses.................................. 15,000
Transfer Agent and Registrar Fees and Expenses.............. 3,500
Miscellaneous............................................... 30,887
----------
Total............................................. $1,000,000
==========
</TABLE>

------------
* To be filed by amendment

The registrant will bear all of the expenses shown above.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Sections 561 through 571 of the Michigan Business Corporation Act provide
for indemnification of directors and officers acting in good faith and in a
manner they reasonably believe to be in, or not opposed to, the best interest of
a company or its shareholders (and, with respect to a criminal proceeding, if
they have no reasonable cause to believe their conduct to be unlawful). This
indemnification may be made against:

(a) expenses (including attorneys' fees), judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit or
proceeding (other than an action by, or in the right of, the company)
arising by reason of the fact that they were serving as a director,
officer, employee or agent of the Registrant (or some other entity at the
Registrant's request), and

(b) expenses (including attorneys' fees) and amounts paid in
settlement actually and reasonably incurred in connection with a
threatened, pending or completed action or suit by, or in the right of, the
company.

A director or officer is not entitled to indemnification if the director or
officer is found liable to the company and an appropriate court determines that
he or she is not otherwise fairly and reasonably entitled to indemnification.

The Michigan Business Corporation Act requires indemnification for expenses
to the extent that a director or officer is successful in defending against any
such action, suit or proceeding. The Michigan Business Corporation Act requires
in general that the indemnification provided for in (a) and (b) above be made
only on a determination by a majority vote of a quorum of the board of directors
comprised of members who were not parties to or threatened to be made parties to
such action. In certain circumstances, the Michigan Business Corporation Act
further permits advances to cover such expenses before a final determination
that indemnification is permissible, upon receipt of (1) a written affirmation
by the director or officer of his or her good faith belief that he or she has
met the applicable standard of
II-1
<PAGE> 107

conduct set forth in the Michigan Business Corporation Act, and (2) a written
undertaking by or on behalf of the director or officer to repay such amounts
unless it shall ultimately be determined that he or she is entitled to
indemnification and a determination that the facts then known to those making
the advance would not preclude indemnification. The Registrant's articles of
incorporation provide the same indemnification rights as the Michigan Business
Corporation Act.

The Registrant's articles of incorporation and bylaws provide that the
Registrant will indemnify its directors and officers to the fullest extent
authorized by Michigan law against all expenses and liabilities reasonably
incurred in connection with service for or on behalf of the registrant.

The Registrant's articles of incorporation provide that no director shall
be personally liable to the registrant or its shareholders for damages for any
action taken or any failure to take action. However, a director or officer will
remain liable for (a) the amount of a financial benefit received by a director
or officer to which he or she is not entitled, (b) intentional infliction of
harm on the corporation or its shareholders, (c) other violations of the
Michigan Business Corporation Act, or (d) an intentional violation of criminal
law.

The Michigan Business Corporation Act permits the Registrant to purchase
insurance on behalf of its directors and officers against liabilities arising
out of their positions with us, whether or not such liabilities would be within
the indemnification provisions of the Michigan Business Corporation Act. Under
an insurance policy maintained by the Registrant, the directors and officers of
the Registrant are insured, within the limits and subject to the limitations of
the policy, against (a) their expenses in connection with the defense of claims,
actions, suits or proceedings brought against them by reason of being or having
served as directors and officers of the Registrant and of certain other
entities, and (b) liabilities which might be imposed as a result of these
claims, actions, suits or proceedings.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to officers and directors pursuant to the foregoing provisions,
the Registrant has been informed that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.

The Underwriting Agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify directors and officers of the
Registrant against certain liabilities, including liabilities under the
Securities Act. Reference is made to the Form of Underwriting Agreement filed as
Exhibit 1.1 hereto.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Stock Dividend

The Registrant effected a 99-for-one stock dividend of its common stock in
the form of a stock dividend of 99 shares of common stock to be paid on each
share of common stock outstanding prior to this offering. In connection with
such stock dividend, the Registrant issued to its shareholders of record prior
to this offering an aggregate of 20,889,475 shares of common stock. All common
share and per share amounts herein have been adjusted to reflect the stock
dividend.

Sale of Securities

In the three years preceding the filing of this Registration Statement, the
Registrant has issued the following securities that were not registered under
the Securities Act:

(a) In December 1997, the registrant issued an aggregate of 33,400
shares of common stock, at a purchase price of approximately $3.07 per
share to four new employees of the

II-2
<PAGE> 108

Registrant. The sales of shares to the four individuals were undertaken in
compliance with the registration exemption provided by Section 4(2) of the
Securities Act.

(b) In March 1998, the Registrant issued an aggregate of 1,636,400
shares of common stock to the 20 former shareholders of Metelics, which was
valued by negotiation to equal approximately $3.07 per share pursuant to an
acquisition agreement. This issuance was effected pursuant to the
registration exemption afforded by Regulation D and/or Section 4(2) of the
Securities Act.

(c) In May 1999, the Registrant issued an aggregate of 61,000 shares
of common stock, at a purchase price of approximate $2.76 per share, to 9
employees of the Registrant. This issuance was effected pursuant to the
registration exemption afforded by Section 4(2) of the Securities Act.

(d) In July 1999, the Registrant issued to National City Capital
Corporation, Great Lakes Capital Investments I, LLC and Rocky Mountain
Mezzanine Fund II, LP (1) senior subordinated debt in the aggregate
principal amount of $4.0 million due July 2004, with the principal amount
of $2,176,000, $384,000 and $1,440,000 issued to National City Capital
Corporation, Great Lakes Capital Investment and Rocky Mountain Mezzanine
Fund, respectively, and (2) warrants to purchase an aggregate of 904,900
shares of common stock for an aggregate purchase price of $90.49, with
warrants for 492,266 shares issued to National City Capital Corporation,
86,870 shares issued to Great Lakes Capital Investment and 325,764 shares
issued to Rocky Mountain Mezzanine Fund (provided that these warrants are
exercisable for additional shares if this offering does not occur by July
28, 2001). The issuance of this senior subordinated debt and these warrants
was effected pursuant to a written agreement. This issuance was effected
pursuant to the registration exemption afforded by Section 4(2) of the
Securities Act.

(e) In March 2000, the Registrant issued an aggregate of 80,700 shares
of common stock, at a purchase price of approximately $2.76 per share, to
13 employees of the Registrant. This issuance was effected pursuant to the
registration exemption afforded by Regulation D and/or Section 4(2) of the
Securities Act.

(f) In April 2000, the Registrant issued an aggregate of 49,800 shares
of common stock, at a purchase price of approximately $2.90 per share, to 7
employees of the Registrant. This issuance was effected pursuant to the
registration exemption afforded by Regulation D and/or Section 4(2) of the
Securities Act.

No underwriters were involved in the foregoing sales of securities. All of
the foregoing securities are deemed restricted securities for the purposes of
the Securities Act.

ITEM 16. EXHIBITS

(A) EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following exhibits are filed with this Registration Statement:

II-3
<PAGE> 109

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.2* Settlement Agreement with Releases, dated June 18, 1997,
among the Registrant, KDI/Triangle Corporation, KDI D/H
Corporation and IDK TRI-EL Corp. (formerly known as
KDI/triangle Electronics, Inc.) (involving Asset Purchase
Agreement, dated May 31, 1996).
2.3* Agreement and Plan of Merger, dated as of March 16, 1998,
among the Registrant, MCE Acquisition No. 1, Inc. and
Metelics Corporation (the Registrant agrees to furnish
supplementally a copy of any omitted schedule to the
Commission upon request).
2.4* Agreement, dated June 29, 1999, among Densitron
International PLC, DML Microwave Limited (now known as MCE
Microwave Limited) and the Registrant.
3.1# Articles of Incorporation of the Registrant, as amended.
3.2# Form of Restated Articles of Incorporation of the
Registrant.
3.3* Bylaws of the Registrant, as amended.
3.4# Form of Restated Bylaws of the Registrant.
4.1# Specimen Stock Certificate representing the Common Stock.
4.2* Credit Agreement, dated as of July 29, 1999, by and among
the Banks signatory thereto, Comerica Bank, as the Agent for
the Banks, and the Registrant, as amended by Amendment No.
1, dated as of September 30, 1999, and Amendment No. 2,
dated as of December 31, 1999.
4.3* Amended and Restated Note, Warrant and Preferred Stock
Purchase Agreement, dated as of July 21, 2000, by and among
the Registrant, National City Capital Corporation and
Hanifen Imhoff Mezzanine Fund, L.P.
4.4* Senior Subordinated Note and Warrant Purchase Agreement,
dated as of July 28, 1999, among the Registrant, Rocky
Mountain Mezzanine Fund II, L.P., Great Lakes Capital
Investments I, LLC and National City Capital Corporation, as
amended by the First Amendment thereto, dated as of July 21,
2000.
4.5 Amended and Restated Warrant, dated October 17, 1997, issued
by the Registrant to National City Capital Corporation, as
amended by the First Amendment thereto dated as of October
13, 2000.
4.6 Amended and Restated Warrant, dated October 17, 1997, issued
by the Registrant to Hanifen Imhoff Mezzanine Fund, L.P., as
amended by the First Amendment thereto dated as of October
13, 2000.
4.7 Warrant, dated July 28, 1999, issued by the Registrant to
National City Capital Corporation, as amended by the First
Amendment thereto dated as of October 13, 2000.
4.8 Warrant, dated July 28, 1999, issued by the Registrant to
Great Lakes Capital Investments I, LLC., as amended by the
First Amendment thereto dated as of October 13, 2000.
4.9 Warrant, dated July 28, 1999, issued by the Registrant to
Rocky Mountain Mezzanine Fund II, L.P., as amended by the
First Amendment thereto dated as of October 13, 2000.
4.10 Registration Rights Agreement, dated as of July 23, 1996,
among the Registrant, Hanifen Imhoff Mezzanine Fund, L.P.
and National City Capital Corporation, as amended by the
First Amendment thereto dated as of October 17, 1997, and by
the Second Amendment thereto dated as of October 13, 2000.
</TABLE>

II-4
<PAGE> 110

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.11 Registration Rights Agreement, dated as of July 28, 1999,
among the Registrant, Rocky Mountain Mezzanine Fund II,
L.P., Great Lakes Capital Investments I, LLC and National
City Capital Corporation, as amended by the First Amendment
thereto dated as of October 13, 2000.
5.1 Opinion of Dykema Gossett PLLC regarding the validity of the
securities being registered.
10.1# MCE Companies, Inc. 1996 Stock Option Plan, as amended by
Amendment No. 1 thereto dated as of July 20, 2000.
10.2* Incentive Stock Option Agreement, dated as of December 10,
1996, by and between the Registrant and John L. Smucker.
10.3# Employment Agreement, dated as of December 30, 1996, as
amended by Amendment No. 1 thereto dated August 15, 2000,
between the Registrant and John L. Smucker.
10.4* Stockholder Agreement, dated as of July 23, 1996, among the
Registrant, National City Capital Corporation, Hanifen
Imhoff Mezzanine Fund, L.P. and the other shareholders of
the Registrant, as amended by the First Amendment thereto
dated as of June 30, 1998, and by the Second Amendment
thereto dated as of July 28, 1999.
10.5* 1996 Net Worth Appreciation Reward Program (re Inmet).
10.6* 1996 Net Worth Appreciation Reward Program (re Weinschel).
10.7* 1997 Net Worth Appreciation Reward Program (re KDI).
10.8* Promissory Note, dated November 19, 1999, issued by Inmet
Corporation in favor of the Bank of Ann Arbor.
10.9+ MCE Companies, Inc. 2000 Stock Incentive Plan.
10.10+ Severance Compensation Agreement, dated September 15, 2000,
between the Registrant and John L. Smucker
10.11+ Severance Compensation Agreement, dated September 15, 2000,
between the Registrant and Stephen W. Shpock
10.12+ Severance Compensation Agreement, dated September 15, 2000,
between the Registrant and Jon E. Carlson
21.1* Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Dykema Gossett PLLC (contained in the opinion
filed as Exhibit 5.1 hereto).
24.1* Powers of Attorney (see signature page).
27.1* Financial Data Schedule.
</TABLE>

------------
* Previously filed with initial filing of this Registration Statement.

# Previously filed with Amendment No. 1 to this Registration Statement.

+ Previously filed with Amendment No. 2 to this Registration Statement.

(B) FINANCIAL STATEMENT SCHEDULES

The financial statement schedules have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

II-5
<PAGE> 111

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described above or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The Registrant hereby undertakes:

(1) to provide to the underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchasers.

(2) that for purposes of determining any liability under the
Securities Act, the information omitted from the form of Prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of Prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective; and

(3) that for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-6
<PAGE> 112

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has duly caused this Amendment No. 3 to the Registration
Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Ann Arbor, State of Michigan on October 13,
2000.

MCE COMPANIES, INC.

By: /s/ JOHN L. SMUCKER
------------------------------------
John L. Smucker,
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act, this Amendment No. 3 to
the Registration Statement has been signed by the following persons in the
capacities indicated on October 13, 2000.

<TABLE>
<CAPTION>
TITLE
-----
<S> <C>
/s/ JOHN L. SMUCKER President, Chief Executive Officer
----------------------------------------------------- and Director (principal executive officer)
John L. Smucker

/s/ JON E. CARLSON Vice-President -- Finance and Treasurer
----------------------------------------------------- (principal financial officer and principal
Jon E. Carlson accounting officer)

* Director
-----------------------------------------------------
John K. Cannon

* Director
-----------------------------------------------------
Michael J. Endres

* Director
-----------------------------------------------------
Dr. George I. Haddad

* Director
-----------------------------------------------------
David R. Meuse

* Director
-----------------------------------------------------
William H. Schecter

*By: /s/ JOHN L. SMUCKER
------------------------------------------------
John L. Smucker,
Attorney-in-Fact
</TABLE>

II-7
<PAGE> 113

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.
2.1* Asset Purchase Agreement, dated as of May 31, 1996, among
KDI/Triangle Corporation, the Registrant, KDI D/H
Corporation and KDI/triangle Electronics, Inc, as amended by
Amendment No. 1, dated as of June 28, 1996, Amendment No. 2,
dated as of July 12, 1996, Amendment No. 3, dated as of July
19, 1996, and Amendment No. 4, dated as of August 1, 1996
(the Registrant agrees to furnish supplementally a copy of
any omitted schedule to the Commission upon request).
2.2* Settlement Agreement with Releases, dated June 18, 1997,
among the Registrant, KDI/Triangle Corporation, KDI D/H
Corporation and IDK TRI-EL Corp. (formerly known as
KDI/triangle Electronics, Inc.) (involving Asset Purchase
Agreement, dated May 31, 1996).
2.3* Agreement and Plan of Merger, dated as of March 16, 1998,
among the Registrant, MCE Acquisition No. 1, Inc. and
Metelics Corporation (the Registrant agrees to furnish
supplementally a copy of any omitted schedule to the
Commission upon request).
2.4* Agreement, dated June 29, 1999, among Densitron
International PLC, DML Microwave Limited (now known as MCE
Microwave Limited) and the Registrant.
3.1# Articles of Incorporation of the Registrant, as amended.
3.2# Form of Restated Articles of Incorporation of the
Registrant.
3.3* Bylaws of the Registrant, as amended.
3.4# Form of Restated Bylaws of the Registrant.
4.1# Specimen Stock Certificate representing the Common Stock.
4.2* Credit Agreement, dated as of July 29, 1999, by and among
the Banks signatory thereto, Comerica Bank, as the Agent for
the Banks, and the Registrant, as amended by Amendment No.
1, dated as of September 30, 1999, and Amendment No. 2,
dated as of December 31, 1999.
4.3* Amended and Restated Note, Warrant and Preferred Stock
Purchase Agreement, dated as of July 21, 2000, by and among
the Registrant, National City Capital Corporation and
Hanifen Imhoff Mezzanine Fund, L.P.
4.4* Senior Subordinated Note and Warrant Purchase Agreement,
dated as of July 28, 1999, among the Registrant, Rocky
Mountain Mezzanine Fund II, L.P., Great Lakes Capital
Investments I, LLC and National City Capital Corporation, as
amended by the First Amendment thereto, dated as of July 21,
2000.
4.5 Amended and Restated Warrant, dated October 17, 1997, issued
by the Registrant to National City Capital Corporation, as
amended by the First Amendment thereto dated as of October
13, 2000.
4.6 Amended and Restated Warrant, dated October 17, 1997, issued
by the Registrant to Hanifen Imhoff Mezzanine Fund, L.P., as
amended by the First Amendment thereto dated as of October
13, 2000.
4.7 Warrant, dated July 28, 1999, issued by the Registrant to
National City Capital Corporation, as amended by the First
Amendment thereto dated as of October 13, 2000.
4.8 Warrant, dated July 28, 1999, issued by the Registrant to
Great Lakes Capital Investments I, LLC., as amended by the
First Amendment thereto dated as of October 13, 2000.
</TABLE>

<PAGE> 114

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.9 Warrant, dated July 28, 1999, issued by the Registrant to
Rocky Mountain Mezzanine Fund II, L.P., as amended by the
First Amendment thereto dated as of October 13, 2000.
4.10 Registration Rights Agreement, dated as of July 23, 1996,
among the Registrant, Hanifen Imhoff Mezzanine Fund, L.P.
and National City Capital Corporation, as amended by the
First Amendment thereto dated as of October 17, 1997, and by
the Second Amendment thereto dated as of October 13, 2000.
4.11 Registration Rights Agreement, dated as of July 28, 1999,
among the Registrant, Rocky Mountain Mezzanine Fund II,
L.P., Great Lakes Capital Investments I, LLC and National
City Capital Corporation, as amended by the First Amendment
thereto dated as of October 13, 2000.
5.1 Opinion of Dykema Gossett PLLC regarding the validity of the
securities being registered.
10.1# MCE Companies, Inc. 1996 Stock Option Plan, as amended by
Amendment No. 1 thereto dated as of July 20, 2000.
10.2* Incentive Stock Option Agreement, dated as of December 10,
1996, by and between the Registrant and John L. Smucker.
10.3# Employment Agreement, dated as of December 30, 1996, as
amended by Amendment No. 1 thereto dated August 15, 2000,
between the Registrant and John L. Smucker.
10.4* Stockholder Agreement, dated as of July 23, 1996, among the
Registrant, National City Capital Corporation, Hanifen
Imhoff Mezzanine Fund, L.P. and the other shareholders of
the Registrant, as amended by the First Amendment thereto
dated as of June 30, 1998, and by the Second Amendment
thereto dated as of July 28, 1999.
10.5* 1996 Net Worth Appreciation Reward Program (re Inmet).
10.6* 1996 Net Worth Appreciation Reward Program (re Weinschel).
10.7* 1997 Net Worth Appreciation Reward Program (re KDI).
10.8* Promissory Note, dated November 19, 1999, issued by Inmet
Corporation in favor the Bank of Ann Arbor.
10.9+ MCE Companies, Inc. 2000 Stock Incentive Plan.
10.10+ Severance Compensation Agreement, dated September 15, 2000,
between the Registrant and John L. Smucker
10.11+ Severance Compensation Agreement, dated September 15, 2000,
between the Registrant and Stephen W. Shpock
10.12+ Severance Compensation Agreement, dated September 15, 2000,
between the Registrant and Jon E. Carlson
21.1* Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Dykema Gossett PLLC (contained in the opinion
filed as Exhibit 5.1 hereto).
24.1* Powers of Attorney.
27.1* Financial Data Schedule.
</TABLE>

------------
* Previously filed with initial filing of this Registration Statement.

# Previously filed with Amendment No. 1 to this Registration Statement.

+ Previously filed with Amendment No. 2 to this Registration Statement.