EIP MICROWAVE INC, SB-2, 1997-12-18

EIP MICROWAVE INC
SB-2, 1997-12-18
INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 1997

Registration No.
----------------

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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

DELAWARE 3825 95-2148645

(State or jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or Industrial Identification No.)
organization) Classification Code
Number)

4500 Campus Drive
Suite 219
Newport Beach, California 92660
714-851-3177
(Address and telephone number of
principal executive offices)

1745 McCandless Drive
Milpitas, California 95035
408-945-1477
(Address of principal place of business)

J. Bradford Bishop
1745 McCandless Drive
Milpitas, California 95035
408-945-1477
(Name, address and telephone number of agent for service)

Copies to:
Michael E. Johnson, Esq.,
Bainbridge Group, A Law Corporation
18301 Von Karman Avenue, Suite 410
Irvine, California 92612
714-442-6600

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

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.[ ]

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If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, 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, 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

- --------------------------------------------------------------------------------
Title of each Amount to be Proposed Proposed
class of registered maximum maximum Amount of
securities offering price aggregate registration
to be per share offering price fee
registered
- --------------------------------------------------------------------------------
Common Stock, 4,249,070* $1.00* $4,249,070* $1,253.48*
par value
$0.01
per share
- --------------------------------------------------------------------------------

/*/ Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o). This registration statement is being filed pursuant to
Rule 429(a) and relates to an earlier registration statement (Registration
No. 333-37289). Such earlier registration statement registered 1,699,628
shares and a total combined registration fee of $875.57 was paid in the
following manner: a registration fee of $714.62 was paid upon the filing of
the earlier registration statement on October 6, 1997, and an additional
registration fee of $160.95 was paid upon the filing of amendment no. 1 to
such earlier registration statement.

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 of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.

Pursuant to Rule 429, the prospectus contained in this registration statement
is a "combined prospectus" relating to an earlier registration statement
(Registration No. 333-37289).

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PROSPECTUS
EIP MICROWAVE, INC.

5,948,698 Shares of Common Stock
(Par value, $0.01 per Share)

RIGHTS OFFERING

EIP Microwave, Inc., a Delaware corporation (the "Company"), offers
5,948,698 shares (the "Shares") of its Common Stock, $0.01 par value, at $1.00
per Share to its stockholders of record on November 7, 1997 (the "Record Date")
who reside in states either where state registration of this offering is not
required or, if required, in the judgment of the Company can reasonably be
effected ("Stockholders of Record"). Each Stockholder of Record's right to
subscribe is not transferable. See "Prospectus Summary--The Rights Offering,
- --Method of Exercising Rights" for information on how to subscribe.

The Company's Common Stock is quoted on the NASD's Bulletin Board under the
symbol "EIPM". On December 12, 1997, the closing bid and closing ask prices of
the Company's Common Stock were $1.60 and $1.94, respectively.

THE RIGHTS WILL EXPIRE AT 5:00 P.M., CALIFORNIA TIME, ON JANUARY 5, 1998, UNLESS
EXTENDED BY THE COMPANY. IN NO EVENT WILL THE EXPIRATION DATE BE EXTENDED
BEYOND MARCH 7, 1998. FAILURE TO EXERCISE RIGHTS COULD RESULT IN SUBSTANTIAL
DILUTION TO NON-EXERCISING STOCKHOLDERS. SEE "RISK FACTORS--DILUTION FROM
RIGHTS OFFERING."

The Rights Offering is being made on an any or all basis, which means that
the Company may accept any subscription received even if all 5,948,698 Shares
offered are not purchased. See "Risk Factors--No Minimum Size of Rights
Offering." J. Bradford Bishop, Chairman and Chief Executive Officer of the
Company, and John F. Bishop, Vice Chairman, Secretary and Treasurer of the
Company, both of whom are principal stockholders and members of the Board of
Directors of the Company, have committed to the Company that they will subscribe
for at least $1,360,000 in Common Stock in the Rights Offering if other
stockholders purchase at least $800,000 in Common Stock in the Rights Offering.
See "Risk Factors--Control by Management and Principal Stockholders", and
- --"Dilution from Rights Offering."

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 2 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

- --------------------------------------------------------------------------------
Price to Public Underwriting Proceeds to Issuer
Discounts and (1)
Commissions
- --------------------------------------------------------------------------------
Per Share $1.00 $0 $1.00
- --------------------------------------------------------------------------------
Total: 5,948,698 $5,948,698 $0 $5,948,698
Shares
- --------------------------------------------------------------------------------

(1) Before deducting estimated expenses of the offering of $140,000 payable by
the Company.

The date of this Prospectus is December 18, 1997.

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The Company is a "reporting company," as such term is employed in the Securities
Exchange Act of 1934. It is not listed on any exchange, and its Common Stock is
not eligible for quotation on the NASDAQ SmallCap Market ("NASDAQ") but is
quoted on the NASD's "Bulletin Board." Reports and other information filed by
the Company may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
DC 20549, and at the Regional Offices of the Commission located at 5670 Wilshire
Boulevard, 11th Floor, Los Angeles, CA 90036-3648, 7 World Trade Center, New
York, NY 10048 and Citicorp Center, 500 Madison Street, Suite 1400, Chicago, IL
60661. Copies of such material can be obtained upon written request addressed
to the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, DC 20549, at prescribed rates. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission; the address of
such site is http://www.sec.gov.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission in
Washington, D.C. a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Common Stock offered by this Prospectus. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement and the exhibits listed
in the Registration Statement. The Registration Statement can be examined at
the Public Reference Section of the Securities and Exchange Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and copies may be obtained upon
payment of the prescribed fees.

The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all documents incorporated by reference into this Prospectus that
are not delivered herewith, except the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents).
Requests for such copies should be directed to the Company's principal place of
business: Corporate Investor Communications, Inc., 111 Commerce Road,
Carlstadt, NJ 07072-2586, Attn: Joseph A. Caruso, Tel. (800) 631-8985.

The Company's Common Stock is not listed on any exchange. See "Risk
Factors--Delisting from NASDAQ."

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TABLE OF CONTENTS

Contents Page

Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Rights Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Method of Exercising Rights. . . . . . . . . . . . . . . . . . . . . . . 2
Opportunity to Increase Holdings . . . . . . . . . . . . . . . . . . . . 2
Avoiding Dilution. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Qualified Opinion of Independent Auditor . . . . . . . . . . . . . . . . 2
Default under Bank Line. . . . . . . . . . . . . . . . . . . . . . . . . 2
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Recurring Material Losses and Accumulated Deficit. . . . . . . . . . . . 2
Future Cash Requirements . . . . . . . . . . . . . . . . . . . . . . . . 3
Repayment of Existing Debt . . . . . . . . . . . . . . . . . . . . . . . 3
Dependence on New OEM Relationship . . . . . . . . . . . . . . . . . . . 3
Dependence on Government Contractors . . . . . . . . . . . . . . . . . . 4
Dependence on Key Suppliers. . . . . . . . . . . . . . . . . . . . . . . 4
Uncertainty of Product Development and Introduction. . . . . . . . . . . 4
Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dependence on Key Personnel. . . . . . . . . . . . . . . . . . . . . . . 4
Control by Management and Principal Stockholders . . . . . . . . . . . . 5
Offering Price Not Based on Actual Value . . . . . . . . . . . . . . . . 5
Dividends Not Likely . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Dilution from Rights Offering. . . . . . . . . . . . . . . . . . . . . . 5
Possible Future Dilution . . . . . . . . . . . . . . . . . . . . . . . . 5
No Minimum Size of Rights Offering . . . . . . . . . . . . . . . . . . . 6
Possible Extension of Expiration Date. . . . . . . . . . . . . . . . . . 6
Delisting from Nasdaq. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Limited Trading Volume and Volatility of Stock Price in Public Market. . 6
Market Restrictions on Broker-Dealers. . . . . . . . . . . . . . . . . . 6
Potential Anti-Takeover Effects of Delaware Law. . . . . . . . . . . . . 7
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Determination of Offering Price. . . . . . . . . . . . . . . . . . . . . . . 7
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Rights Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Subscription Expiration Date . . . . . . . . . . . . . . . . . . . . . . 8
Basic Subscription Rights. . . . . . . . . . . . . . . . . . . . . . . . 8
Method of Exercising Rights. . . . . . . . . . . . . . . . . . . . . . . 8
Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Purchase and Sale of Rights . . . . . . . . . . . . . . . . . . . . 9
Delivery of Certificates. . . . . . . . . . . . . . . . . . . . . . 9
Over-Subscription Privilege . . . . . . . . . . . . . . . . . . . . 9
Information Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Market for the Company's Common Stock and Related Stockholder Matters . . . 9
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
General/Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Markets/Principal Customers. . . . . . . . . . . . . . . . . . . . . . . 11
Methods of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . 11
Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Research, Development and Engineering. . . . . . . . . . . . . . . . . . 12
Raw Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Patents, Copyrights, Trademarks and Intellectual Property. . . . . . . . 13
Government Approval of Principal Products. . . . . . . . . . . . . . . . 13

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Effect of Existing or Probable Governmental Regulations. . . . . . . . . 13
Compliance with Provisions on Environmental Protection . . . . . . . . . 13
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Bank Line of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Bishop Family Trust Loan Facility. . . . . . . . . . . . . . . . . . . . 14
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Acquisition Discussions. . . . . . . . . . . . . . . . . . . . . . . . . 14
Management's Discussion and Analysis of Results of Operations and Financial
Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Directors, Executive Officers and Key Employees. . . . . . . . . . . . . 17
Compensation of Directors. . . . . . . . . . . . . . . . . . . . . . . . 18
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 18
Option Grants in Fiscal 1996. . . . . . . . . . . . . . . . . . . . 19
Aggregate Option/SAR Exercises in Fiscal 1996 and FY-End Option/SAR
Values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Interest of Management and Others in Certain Transactions. . . . . . . . . . 20
Commitment of the Bishops to Purchase Common Stock in Rights Offering. . 20
Bishop Family Trust Loan Facility. . . . . . . . . . . . . . . . . . . . 20
Subordinated Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Bridge Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Legal Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Security Ownership of Certain Beneficial Owners and Management . . . . . . 22
Description of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Authorized Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Dividend Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Preemptive Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Dissenter's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Certain Anti-Takeover Provisions . . . . . . . . . . . . . . . . . . . . 25
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Legal Matters and Interests of Counsel . . . . . . . . . . . . . . . . . . . 25
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Change in Accountants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

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PROSPECTUS SUMMARY

THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS.
SEE "RISK FACTORS" BEGINNING ON PAGE 2 FOR A DISCUSSION OF CERTAIN FACTORS TO BE
CONSIDERED IN EVALUATING THE COMPANY AND ITS BUSINESS.

THE COMPANY

EIP Microwave, Inc., a Delaware corporation (the "Company"), is engaged in
the development, manufacture and sale of high frequency microwave and radio
frequency (RF) test and measurement instruments. The Company's principal
executive offices are located at 4500 Campus Drive, Suite 219, Newport Beach, CA
92660, Tel. (714) 851-3177.

The Company recently introduced a new line of microwave frequency counters
which it began distributing in October 1997, on a private label basis worldwide
through an OEM relationship with Hewlett-Packard Company ("Hewlett-Packard").
The Company also recently received a five-year indefinite quantity, fixed price
subcontract from ManTech Systems Engineering Corporation, a government
contractor ("ManTech"), for the supply of RF synthesized signal generators and
RF down converters, with total sales value to the Company that could range from
approximately $3.5 to $20 million. Further, management expects that current
development efforts will result in the introduction of test instrumentation for
the wireless telecommunications market in 1998. The proceeds from the Rights
Offering will assist the Company in meeting the cash requirements to continue
its business and pursue these opportunities through fiscal 1998. See "The
Company--General Products," "--Markets/Principal Customers," "--Methods of
Distribution" and "--Research, Development and Engineering."

THE RIGHTS OFFERING

The Company offers 5,948,698 shares (the "Shares") of its Common Stock,
$0.01 par value, to its stockholders of record on November 7, 1997 (the "Record
Date"), who reside in states either where state registration of this offering is
not required or, if required, in the judgment of the Company can reasonably be
effected ("Stockholders of Record"). The Shares are offered at a purchase price
of $1.00 per Share (the "Subscription Price").

The Rights Offering entitles the Stockholders of Record to subscribe at
the Subscription Price for Shares on the basis of fourteen Shares for each
share of Common Stock held on the Record Date (the "Basic Subscription
Rights"). In addition, each Stockholder of Record may over-subscribe to
purchase as many additional Shares as desired. If there are not sufficient
Shares to honor all over-subscriptions, the available Shares will be
allocated among those who over-subscribe based solely on the number of shares
subscribed for by each over-subscribing holder pursuant to the Basic
Subscription Rights.

The Rights Offering is being made directly by the Company to its
Stockholders of Record. No underwriters are involved. No commissions are being
paid. All net proceeds from subscriptions go directly to the Company in their
entirety.

Common Stock offered 5,948,698 shares
Common Stock to be outstanding
after the offering 6,373,605 shares (1)
Use of proceeds Develop new products, fund working
capital requirements and repay debt.

(1) Assuming all the Shares offered herein are subscribed and sold.

1
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METHOD OF EXERCISING RIGHTS

Stockholders of Record may not transfer their rights to purchase the
Shares. Subscriptions must be made in writing by completing and signing the
enclosed subscription agreement and mailing or delivering it, with a good and
sufficient check for the subscribed amount, to the Company. Completed
subscription agreements and checks must, in any event, be received by the
Company no later than 5:00 P.M., California time, on January 5, 1998, unless
extended by the Company (such date, as it may be extended on one or more
occasions, is referred to herein as the "Expiration Date").

Checks should be made payable to "EIP MICROWAVE, INC." Should the offering
be oversubscribed, the Company will promptly return to subscribers that portion
of their subscription amounts that could not be filled, without any interest.

OPPORTUNITY TO INCREASE HOLDINGS

While brokerage costs and commissions vary among brokerage firms, a $25
minimum cost per transaction is in the lower range of such costs. Based on the
Subscription Price of $1.00, a holder of fewer than twenty-five shares would
lose money in a sale of his present shares. The Rights Offering thus provides
an opportunity for these holders of a few shares to increase their holdings to
an amount which is a commercially marketable number of shares. No broker's
commission is involved in a purchase of shares in the Rights Offering.

AVOIDING DILUTION

Each Stockholder of Record may avoid dilution of his or her percentage
interest in the Company by subscribing for all Shares subject to his or her
Basic Subscription Rights. See "Risk Factors--Dilution from the Rights
Offering."

QUALIFIED OPINION OF INDEPENDENT AUDITOR

The report of Meredith, Cardozo, Lanz & Chiu LLP on the Company's financial
statements for the year ended September 30, 1997, and issued as of November 20,
1997, includes an explanatory paragraph to express substantial doubt regarding
the Company's ability to continue as a going concern. The report of Price
Waterhouse LLP on the Company's financial statements for the year ended
September 30, 1996 has been reissued with dual dates of December 23, 1996 and
October 23, 1997. The reissued report includes an explanatory paragraph to
express substantial doubt regarding the Company's ability to continue as a going
concern. See "Risk Factors--Recurring Material Losses and Accumulated Deficit."

RISK FACTORS

AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, IN ADDITION TO
THE INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS, THE FOLLOWING RISK
FACTORS IN EVALUATING THE COMPANY AND THE COMMON STOCK OFFERED HEREBY. THESE
RISK FACTORS COULD CAUSE ACTUAL RESULTS OR EVENTS TO DIFFER MATERIALLY FROM
THOSE CONTAINED IN ANY FORWARD-LOOKING STATEMENT MADE BY OR ON BEHALF OF THE
COMPANY.

RECURRING MATERIAL LOSSES AND ACCUMULATED DEFICIT

The Company made a profit of $125,000 in the fiscal year ended September
30, 1995, operated at a loss of $493,000 in the fiscal year ended September 30,
1996, and operated at a loss of

2
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$1,290,000 in fiscal year ended September 30, 1997. Net cash used in operations
and investing activities by the Company in the fiscal years ended September 30,
1995, 1996 and 1997, was $85,000, $89,000 and $1,045,000, respectively. At the
end of fiscal year 1996, the Company's retained earnings were $374,000, and
stockholders' equity was $1,227,000. At June 30, 1997, the Company's
accumulated deficit was $916,000, and stockholders' equity was $(63,000). At
September 30, 1996 and 1997, the Company's ratio of interest-bearing
indebtedness to total interest-bearing indebtedness and stockholders' equity was
20% and 105%, respectively. There can be, and is, no assurance that profitable
operations and positive cash flow can be achieved or maintained or that any
funds obtained from the offering described herein will be sufficient to carry
the Company to a time when profitable operations and positive cash flow should
sustain the Company. Continued losses could negatively impact the Company's
working capital and the extension of credit by its lenders and could cause such
lenders to declare a default under the Company's loan agreements, and declare
all outstanding loans immediately due and payable. See "Risk Factors--Repayment
of Existing Debt."

The report of Meredith, Cardozo, Lanz & Chiu LLP on the Company's financial
statements for the year ended September 30, 1997, and issued as of November 20,
1997, includes an explanatory paragraph to express substantial doubt regarding
the Company's ability to continue as a going concern. The report of Price
Waterhouse LLP on the Company's financial statements for the year ended
September 30, 1996 has been reissued with dual dates of December 23, 1996 and
October 23, 1997. The reissued report includes an explanatory paragraph to
express substantial doubt regarding the Company's ability to continue as a going
concern. There can be no assurance that the Company will not continue to incur
significant operating losses or that required additional financing will be
available to meet the Company's business plan in fiscal 1998 and beyond.

FUTURE CASH REQUIREMENTS

The Company believes that borrowings under existing or replacement debt
facilities and proceeds from the Rights Offering in an aggregate amount equal to
approximately $3,500,000 will be necessary to satisfy the Company's cash
requirements for implementing its business plan during the remainder of the
fiscal year ending September 30, 1998. The actual cash resources required will
depend upon numerous factors, including those described under "Risk
Factors--Dependence on New OEM Relationship," "--Dependence on Government
Contractors, " and " --Uncertainty of Product Development and Introduction", and
the cash requirements could be materially greater than $3,500,000. The Company
expects to meet such cash requirements with borrowings under its existing or
replacement debt facilities, and proceeds from the Rights Offering. There is no
assurance that the Company will be successful in obtaining all such capital from
the Rights Offering or from such debt facilities. If the Company is unable to
obtain such capital from the Rights Offering or from such debt facilities on a
timely basis, the Company will be required to significantly curtail its planned
operations and its business, financial condition and results of operations could
be materially adversely affected.

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REPAYMENT OF EXISTING DEBT

At December 12, 1997, the Company had outstanding borrowings in the
aggregate principal amount of $179,000 under its $500,000 bank line of credit
(the "Bank Line") with Silicon Valley Bank ("SVB"), which expires January 31,
1998. All such borrowings are payable in full upon expiration. See "The
Company--Bank Line of Credit." In addition to the Bank Line, the Company has a
$1,450,000 term and revolving advance loan facility with the Bishop Family Trust
which expires in October 1998. At December 12, 1997, the Company had
outstanding borrowings in the aggregate principal amount of $1,350,000 under the
Bishop Family Trust Loan Facility. All such loans are payable in full upon
expiration. See "The Company--Bank Line of Credit" and "--Bishop Family Trust
Loan Facility". There can be no assurance that the Company will be able to
extend, repay or refinance its loans under the Bank Line or the Bishop Family
Trust Loan Facility. The Company is continuing to pursue discussions with other
lenders concerning a replacement working capital facility; however, there can be
no assurance that the Company will be able to obtain a satisfactory working
capital facility. Even if the Company is able to obtain a working capital
facility from another lender, there can be no assurance as to the terms of such
facility; and the terms of such facility could be even less attractive to the
Company than the terms of the existing Bank Line. If the Company is unable to
obtain a satisfactory working capital facility, the Company and its business
could be materially adversely affected. Further, such loans are subject to
various covenants relating to the Company's performance and financial condition.
If the Company does not maintain compliance with such covenants, the lenders
have the right to declare all outstanding amounts immediately due and payable.
There can be no assurance that the Company will be able to maintain compliance
with the covenants under the Bank Line or the Bishop Family Trust Loan Facility.

DEPENDENCE ON NEW OEM RELATIONSHIP

The Company recently introduced a new line of microwave frequency counters
which it began distributing in October 1997, on a private label basis worldwide
through an OEM relationship with Hewlett-Packard Company ("Hewlett-Packard").
The Company expects that this OEM relationship will account for more than 15% of
its revenues in fiscal year 1998. However, Hewlett-Packard is not obligated to
purchase a minimum quantity of products, and the failure of Hewlett-Packard to
purchase the product quantity expected by the Company would have a material,
negative impact upon the Company's business and prospects of profits. There can
be no assurance that the Company will be able to maintain a successful
relationship with Hewlett-Packard and generate revenues or profits from the
relationship.

DEPENDENCE ON GOVERNMENT CONTRACTORS

Approximately 35% of the Company's revenues in the last two fiscal years
have been derived from the sale of products to government contractors. The
Company recently received a five-year indefinite quantity, fixed price supply
subcontract from ManTech Systems Engineering Corporation, a government
contractor ("ManTech"), for the supply of RF synthesized signal generators and
RF down converters, with total sales value to the Company that could range from
approximately $3.5 to $20 million. The Company has received an initial purchase
order under the subcontract in the amount of $227,000. Further production
purchase order releases under the subcontract are subject to satisfactory
completion of field testing of the U.S. Marine Corps' Third Echelon Test Set
(TETS) systems and the Company's components. The Company will incur substantial
expenses in preparing to satisfy its obligations under this subcontract.
However, despite the incurrence of such expenses, this and other subcontracts
with government contractors are subject to cancellation provisions in favor of
the government contractor. The subcontract with ManTech is subject to
termination by ManTech in the event the government terminates its contract with
ManTech. Further, this subcontract can be terminated if the Company's
components do not satisfy field testing requirements or the Company otherwise
defaults under the subcontract. There can be no assurance that such
subcontracts will not be canceled. Further, there can be no assurance that the
Company will receive additional subcontracts from government contractors.

4
<PAGE>

DEPENDENCE ON KEY SUPPLIERS

A number of the Company's products require specialized components currently
available only through single sources of supply. The loss of any of these
sources, or the inability of any such source to meet the Company's production
and quality control requirements, could be detrimental to the Company with
respect to the specific products involved. If any of the Company's single
source suppliers is not able to deliver these specialized components, the
Company would be required to implement alternative supply strategies (such as
changing to one or more other suppliers, which could require product design or
specification changes and would likely cause delays in shipment of the Company's
products) or discontinue sales of the affected products.

UNCERTAINTY OF PRODUCT DEVELOPMENT AND INTRODUCTION

The Company's success depends to a large degree on its ability to develop
and introduce in a timely manner new or updated products which are affordable,
functional in purpose, distinctive in quality and design and tailored to the
purchasing patterns of the Company's customers and potential customers.
Misjudgments as to customer interest in new or updated products could lead to
excess inventories and markdowns and could have a material adverse effect on the
Company's financial condition and results of operations. There can be no
assurance that new products under development will be successfully developed and
introduced. Further, due to the uncertainty associated with any product
development and introduction (such as delays in development and lack of market
acceptance of a new product), there can be no assurances that the Company's
development and introduction efforts will be successful. If products under
development are not successfully introduced, the Company's business, financial
condition and results of operations would be materially adversely effected.

COMPETITION

The markets in which the Company's products are sold have become
increasingly competitive. Most of the Company's principal competitors have
substantially greater financial resources. The Company's results of operations
can be significantly affected by pricing pressures arising from customer demand
and pricing strategies by the Company's competitors, and the timing and market
acceptance of new product introductions by competitors of the Company. There
can be no assurance that pricing pressures will not have a material adverse
effect on the Company, or that the Company's competitors will not succeed in
developing products that would render the Company's technology and products
obsolete and noncompetitive.

DEPENDENCE ON KEY PERSONNEL

The loss of the services of any of the Company's management and other key
employees, for any reason, may have a materially adverse effect on the prospects
of the Company. See "Management--Directors, Executive Officers and Key
Employees."

CONTROL BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS

J. Bradford Bishop, a member of the Board of Directors and Chairman and
Chief Executive Officer of the Company, is the son of John F. Bishop, a member
of the Board of Directors and Vice Chairman, Secretary and Treasurer of the
Company. J. Bradford Bishop and John F. Bishop (together, the "Bishops")
beneficially own 191,400 shares of Common Stock in the aggregate, representing
approximately 45% of the currently outstanding shares of Common Stock (excluding
outstanding options to purchase Common Stock). If outstanding options are
included, the Bishops beneficially own 196,400 shares of Common Stock,
representing approximately 46% of the currently outstanding shares of Common
Stock. In addition, John F. Bishop is a trustee of the Bishop Family Trust,
which has entered into loan facilities providing for up to $1,450,000 in loans
to the Company. See "The Company--Bishop Family Trust Loan Facility." By
virtue of such stock ownership and their position with the Company, the Bishops
may have the practical ability to determine the election of all directors and
control the outcome of substantially all matters submitted to the Company's
stockholders. Such concentration of ownership and lending relationship could
have the effect of making it more difficult for a third party to acquire, or
discourage a third party from seeking to acquire, control of the Company without
the approval of the Bishops. This concentration of ownership would also enable
the Bishops to acquire all Common Stock of the Company with a smaller
incremental investment than would be required of other potential third party
acquirors. Further, the Bishops have committed to the Company that they will
subscribe for at least $1,360,000 in Common Stock in the Rights Offering if
other stockholders purchase at least $800,000 in Common Stock in the Rights
Offering. If other stockholders do not

5
<PAGE>

exercise their Basic Subscription Rights in full, the Bishops could
substantially increase their pro rata ownership of the Company's Common Stock.
See "Risk Factors--Dilution from Rights Offering."

OFFERING PRICE NOT BASED ON ACTUAL VALUE

The price at which the Common Stock is being sold is not based on an
independent valuation of the Company or its assets or other recognized criteria
of investment value. The Subscription Price does not indicate that the Common
Stock has a value of or could be resold at that price. In addition, the
Subscription Price of $1.00 is significantly less than the price at which the
Common Stock has traded at various times during the last twelve months, and
represents a 58% discount to the average closing price of the Common Stock in
the 30 days prior to the Record Date. The effect of the Rights Offering will
likely be to decrease the current market value of the Common Stock. See
"Determination of Offering Price."

DIVIDENDS NOT LIKELY

Dividends have not been paid on the Company's Common Stock in more than six
years. For the foreseeable future it is anticipated that earnings which may be
generated from operations of the Company, if any, will be used to finance the
growth of the Company and repay debt and that cash dividends will not be paid to
holders of the Common Stock. Under the terms of agreements with the Company's
senior and subordinated lenders, the Company may not pay or declare dividends
without the lenders' prior written consent.

DILUTION FROM RIGHTS OFFERING

Stockholders who do not exercise their Basic Subscription Rights will
realize a dilution of their percentage voting interest and ownership interest in
future net earnings, if any, of the Company. The amount of dilution will depend
on the number of shares of Common Stock purchased by other stockholders in the
Rights Offering. The Bishops have committed to the Company that they will
subscribe for at least $1,360,000 in Common Stock in the Rights Offering if
other stockholders purchase at least $800,000 in Common Stock in the Rights
Offering. Assuming the Bishops purchase $1,360,000 of Common Stock and other
stockholders only purchase $800,000 of Common Stock, the Bishops would
beneficially own approximately 60% of the Company's Common Stock, and the
effective percentage ownership of any non-exercising stockholder will be reduced
by approximately 84%. The dilutive impact on non-exercising stockholders will
be even greater if the Bishops or other stockholders purchase additional shares.
If all stockholders fully exercise their Basic Subscription Rights, the
effective percentage ownership of each stockholder will remain unchanged.

POSSIBLE FUTURE DILUTION

In addition to the shares registered for the Rights Offering described
herein, the Company earlier registered 200,000 shares of Common Stock which will
be available for issuance upon exercise of options granted or to be granted
under the Company's Second Amended and Restated 1994 Stock Option Plan.
Further, the Company has the right to issue additional shares of Common Stock to
the Bishop Family Trust in lieu of cash payment of facility fees. See "The
Company--Bishop Family Trust Loan Facility". The issuance of any such
additional shares would dilute the percentage ownership and could dilute the net
tangible book value per share of stockholders of the Company. Further, if
additional financing is required, additional dilution may take place.

NO MINIMUM SIZE OF RIGHTS OFFERING

The Rights Offering is being made on an any or all basis, which means that
the Company may accept any subscription received even if all 5,948,698 Shares
offered are not purchased. Although the Bishops have committed to the Company
that they will subscribe for at least $1,360,000 in Common Stock in the Rights
Offering if other stockholders purchase at least $800,000 in Common Stock in the
Rights Offering, there is no minimum amount of proceeds required for the Company
to consummate the Rights Offering. For example, the Company may realize no
proceeds from the Rights Offering or only a minimal amount of proceeds that
would not result in a material improvement in the Company's ability to meet its
operating objectives. Approximately $610,000 of the funds committed by the
Bishops in the Rights Offering will be used by the Company to repay debt under
the Bishop Family Trust Loan Facility. Proceeds from the purchase of Common
Stock by other stockholders in the Rights Offering may also be used to repay
debt under the Bishop Family Trust Loan Facility. See "Use of Proceeds" and
"The Company--Bishop Family Trust Loan Facility." Even if other stockholders
purchase $800,000 in Common

6
<PAGE>

Stock and the Bishops purchase $1,360,000 in Common Stock in the Rights
Offering, the Company will still need additional funds from the Rights Offering
or other sources to meet its cash needs for fiscal 1998. No assurances can be
given as to the amount of gross proceeds that the Company will realize from the
Rights Offering, or the adequacy of such proceeds to meet the Company's cash
requirements. See "Use of Proceeds," "Plan of Distribution," and "Risk
Factors--Future Cash Requirements."

POSSIBLE EXTENSION OF EXPIRATION DATE

The Company has reserved the right to extend the Expiration Date to as late
as March 7, 1998. Funds deposited in payment of the Subscription Price may not
be withdrawn and no interest will be paid thereon to stockholders.

DELISTING FROM NASDAQ

Previously, the Company's Common Stock was traded on the NASDAQ SmallCap
Market ("NASDAQ"). However, the Company failed to maintain the minimum
standards required by NASDAQ to maintain its listing on NASDAQ. The Common
Stock was suspended from trading and delisted from NASDAQ on June 25, 1997, as a
result of the Company's failure to maintain capital and surplus of at least
$1,000,000. The delisting of the Company's Common Stock from NASDAQ could have
an adverse effect on the market value of the Common Stock. See "Market for the
Company's Common Stock and Related Stockholder Matters."

LIMITED TRADING VOLUME AND VOLATILITY OF STOCK PRICE IN PUBLIC MARKET

The Company's Common Stock is thinly traded and may experience significant
price and volume fluctuations which could adversely affect the market price of
the Common Stock without regard to the operating performance of the Company.
There is no assurance that a more active public market for such securities will
develop after the conclusion of the Rights Offering described herein or, if a
more active trading market develops, that it will be sustained.

MARKET RESTRICTIONS ON BROKER-DEALERS

The Company's Common Stock is covered by a Securities and Exchange
Commission rule that imposes additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5 million or individuals with net worth in excess of $1 million or annual
income exceeding $200,000 or $300,000 jointly with their spouse). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and also
may affect the ability of persons purchasing Shares in this offering to sell
their Shares in the secondary market. Further, the Company's Common Stock is
quoted on an NASD inter-dealer system called the "Bulletin Board" and, following
the Rights Offering, the Company still will not have $4 million in net tangible
assets or $50 million in stockholders' equity, one of which is required for it
to qualify for quotation on NASDAQ, and the Shares are not expected soon to
command a market price of $5 per share, the price required for a
non-NASDAQ-quoted security to escape the trading severities imposed by the
Securities and Exchange Commission on so-called "penny stocks." These trading
severities tend to reduce broker-dealer and investor interest in penny stocks
and could operate (i) to inhibit the ability of the Company's stock to reach a
$4 per share trading price that would make it eligible for quotation on NASDAQ
even should it otherwise qualify for quotation on NASDAQ and (ii) to inhibit the
ability of the Company to use its stock for business acquisition purposes. See
"Market for the Company's Common Stock and Related Stockholder Matters."

POTENTIAL ANTI-TAKEOVER EFFECTS OF DELAWARE LAW

Certain provisions of Delaware law, the Company's Certificate of
Incorporation and its Bylaws could delay, impede or make more difficult a
merger, tender offer or proxy context involving the Company, even if such events
could be beneficial to the interests of the stockholders. Such provisions could
limit the price that certain investors might be willing to pay in the future for
shares of Common Stock. See "Description of Securities--Certain Anti-Takeover
Provisions."

7
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of all 5,948,698 shares of
Common Stock offered by the Company hereby are estimated to be $5,808,698, based
on a Subscription Price of $1.00 per share and after deducting the offering
expenses payable by the Company.

The Company expects that the proceeds of the offering will be used to
develop new products, fund working capital requirements and repay debt. The
Company expects to repay a portion of its Loan Facility with the Bishop Family
Trust in an amount equal to $610,000 from the proceeds from the sale of Common
Stock to the Bishops in the Rights Offering. Further, the Company may repay
additional principal under the Loan Facility to the extent the Company believes
funds are available in excess of its internal cash requirements for fiscal 1998.
See "The Company--Bishop Family Trust Loan Facility". The Company intends to
invest the aggregate net proceeds from this offering in short-term,
investment-grade, interest-bearing securities until such time as funds are
needed.

DETERMINATION OF OFFERING PRICE

The Rights Offering is being conducted by the Company based on the
commitment of the Bishops to subscribe for at least $1,360,000 in Common Stock
in the Rights Offering if other stockholders purchase at least $800,000 in the
Rights Offering. The terms of the Rights Offering were approved by the three
independent members of the Company's Board of Directors (the "Independent
Directors"). The Subscription Price reflects a 58% discount to the average
closing price of the Company's Common Stock in the 30 days prior to the Record
Date. The terms of the Rights Offering were unanimously recommended by the
Independent Directors and approved by the Company's Board of Directors.

The principal factors in the recommendation and approval of the terms of
the Rights Offering were the Company's need for additional capital to continue
development of new products and for working capital purposes, the
nonavailability of such capital from other sources, the opportunity for
stockholders to participate in the financing through the Rights Offering, and
the low participation of stockholders in the Rights Offering through
November 15, 1997 at the prior subscription price of $1.70. The Company has not
sought an independent third party opinion with respect to the value of the
Company or the appropriateness of the Subscription Price. The Subscription
Price has no relation to the market value of the Common Stock of the Company,
the value of the Company's assets or the Company's prospects as a going concern.

PLAN OF DISTRIBUTION

THE RIGHTS OFFERING

The Company offers 5,948,698 shares (the "Shares") of its Common Stock,
$0.01 par value, only to its stockholders of record on November 7, 1997 (the
"Record Date"), who reside in states either where state registration of this
offering is not required or, if required, in the judgment of the Company can
reasonably be effected ("Stockholders of Record"). The Shares are offered at a
purchase price of $1.00 per Share (the "Subscription Price").

The Rights Offering is being made directly from the Company to its
Stockholders of Record. No underwriters are involved. No commissions are being
paid. All net proceeds from subscriptions go directly to the Company in their
entirety.

SUBSCRIPTION EXPIRATION DATE

The Rights Offering will expire at 5:00 P.M., California time, on January
5, 1998, unless extended by the Company (such date, as it may be extended on
one or more occasions, is referred to herein as the "Expiration Date"). In
no event will the Expiration Date be extended beyond March 7, 1998. If the
Company elects to extend the term of the Rights Offering, it will issue a
press release to such effect not later than the first day The Nasdaq National
Market is open for trading following the most recently announced Expiration
Date. Funds provided in payment of the Subscription Price will be held by the
Company, until the closing, which will occur promptly following the
Expiration Date. The subscription for Common Stock in the Rights Offering is
irrevocable once made, and no interest will be paid to subscribing
stockholders. AS DESCRIBED BELOW, SUBSCRIPTIONS MUST BE RECEIVED BEFORE THE
EXPIRATION DATE AFTER WHICH TIME THE RIGHT TO SUBSCRIBE WILL BE VOID AND
VALUELESS.

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<PAGE>

BASIC SUBSCRIPTION RIGHTS

The Rights Offering entitles the Stockholders of Record to subscribe at the
Subscription Price for Shares on the basis of fourteen Shares for each share of
Common Stock held on the Record Date (the "Basic Subscription Rights").
Exercise of the Basic Subscription Rights will also entitle the holders to the
Over-Subscription Privilege described below. See "Plan of Distribution--Method
of Exercising Rights" and "--Over-Subscription Privilege" below.

METHOD OF EXERCISING RIGHTS

To subscribe for Common Stock, a Stockholder of Record should fill in
Section 1 on the Subscription Agreement and sign and transmit it along with the
required payment, in the envelope provided, to the Company at 1745 McCandless
Drive, Milpitas, California 95035. The Subscription Agreement must arrive on or
before the Expiration Date.

PAYMENT. The Subscription Agreement must be accompanied by payment of the
full Subscription Price in U.S. Dollars for all shares. Such payment may be made
by mail. Payment may be made by certified check or bank draft drawn upon a
United States bank, or postal, telegraphic or express money order, payable to
the order of "EIP Microwave, Inc." Sufficient mailing time should be allowed
for the Subscription Agreement and payment to be RECEIVED by the Company before
the expiration of the subscription period at 5:00 P.M., California time,
January 5, 1998, unless extended by the Company (such date, as it may be
extended on one or more occasions, is referred to herein as the "Expiration
Date"), after which time the right to subscribe will be void and valueless.
Payment may also be made by hand delivery to the Company, in cash or by
certified check or bank draft drawn upon a United States bank, or postal,
telegraphic or express money order, payable to the order of "EIP Microwave,
Inc."

The Rights Offering is being made on an any or all basis, which means
that the Company may accept any subscription received even if all 5,948,698
Shares offered are not purchased. The Bishops have committed to the Company
that they will subscribe for at least $1,360,000 in Common Stock in the
Rights Offering if other stockholders purchase at least $800,000 in Common
Stock in the Rights Offering. See "Risk Factors--Control by Management and
Principal Stockholders," "--Dilution from Rights Offering," and "--No Minimum
Size of Rights Offering."

The Company reserves the right to reject any Subscription Agreement and
payment not properly submitted. The Company has no duty to give notification of
defects in any Subscription Agreement and/or payment and will have no liability
for failure to give such notification. The Company will return any Subscription
Agreement and/or payment not properly submitted.

Any questions or requests for assistance concerning the method of
exercising subscription rights or requests for additional copies of this
Prospectus, the Subscription Agreement or the Instructions to the Subscription
Agreement should be directed to the Information Agent at 1-800-631-8985.

PURCHASE AND SALE OF RIGHTS. Subscription rights may not be transferred,
divided, combined, purchased or sold.

DELIVERY OF CERTIFICATES. Certificates for Shares issuable on exercise of
subscription rights will be mailed as soon as practicable after the Expiration
Date.

OVER-SUBSCRIPTION PRIVILEGE. If some stockholders do not fully exercise
all of their Basic Subscription Rights, the remaining Shares will be offered to
those holders of Basic Subscription Rights who wish to acquire more than the
number of shares to which their Basic Subscription Rights entitle them (the
"Over-Subscription Privilege"). Each holder of Basic Subscription Rights who
fully exercises Basic Subscription Rights will be entitled to participate in
such Over-Subscription Privilege and will be asked to indicate on the
Subscription Agreement how many additional shares that stockholder would be
willing to acquire pursuant to the Over-Subscription Privilege. Each
stockholder wishing to exercise its Over-Subscription Privilege must exercise
its Over-Subscription Privilege and

9
<PAGE>

must tender payment for the Shares subscribed for pursuant to the
Over-Subscription Privilege at the time it exercises its Basic Subscription
Rights. If there remain sufficient Shares after the exercise of Basic
Subscription Rights, all over-subscriptions will be honored in full. If there
are not sufficient Shares to honor all over-subscriptions, the available Shares
will be allocated among those who over-subscribe based solely on the number of
shares subscribed for by each over-subscribing holder pursuant to the Basic
Subscription Rights. For example, if after the exercise of the Basic
Subscription Rights (1) there remain 150,000 Shares that were not subscribed for
pursuant to Basic Subscription Rights, (2) two stockholders each indicated that
they wished to acquire Shares through the Over-Subscription Privilege, (3) the
first stockholder oversubscribed for 150,000 Shares and the second stockholder
oversubscribed for 200,000 Shares and each tendered payment for that number of
shares and (4) the first stockholder acquired 100,000 shares pursuant to its
full Basic Subscription Rights and the second stockholder acquired 200,000
shares pursuant to its full Basic Subscription Rights; then the first
stockholder would be entitled to one-third or 50,000 Shares and the second
stockholder would be entitled to two-thirds or 100,000 Shares.

The allocation process may involve a series of allocations in order to
assure that the shares available for over-subscription are distributed
proportionately among all over-subscribing holders. Accordingly, the degree to
which each stockholder's request for Shares pursuant to the Over-Subscription
Privilege will be honored will depend on the number of Shares requested, the
number of shares acquired by the exercise of Basic Subscription Rights and the
total number of Shares available for over-subscription. After the expiration of
the subscription rights, the Company will send notice of the number of Shares
acquired pursuant to the Over-Subscription Privilege to each stockholder that
over-subscribed and promptly remit to such stockholder, without any interest,
any payment tendered for shares not acquired under the Over-Subscription
Privilege.

INFORMATION AGENT

The Company has appointed Corporate Investor Communications, Inc. ("CIC")
as Information Agent for the Rights Offering. Any questions or requests for
additional copies of this Prospectus, the Subscription Agreement or the
Instructions to the Subscription Agreement may be directed to the Information
Agent at the telephone number and address below.

Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, NJ 07072-2586
(201) 896-1900

Or call
Toll Free

(800) 631-8985

The Company will pay the fees and expenses of the Information Agent and has
also agreed to indemnify the Information Agent from certain liabilities in
connection with the Rights Offering.

MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

As of the Record Date, there are 424,907 shares of Common Stock of the
Company owned of record by approximately 244 stockholders.

An additional 200,000 shares of Common Stock of the Company are reserved
for issuance against the exercise of Company stock options.

The following sets forth for each calendar quarter since January 1995, the
range of high and low closing bids for the Company's Common Stock as reported to
the Company by NASDAQ. For the period through June 25, 1997, the Common Stock
was listed on the NASDAQ SmallCap Market under the symbol EIPM. For the period
since June 25, 1997, the Common Stock has been quoted on the NASD Bulletin Board
under the symbol EIPM. These quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions.

10
<PAGE>

Calendar Quarter High ($) Low ($)
---------------- -------- -------
4th quarter 1997
(through
December 12, 1997) 2.75 1.5625

3rd quarter 1997 3.625 1.25
2nd quarter 1997 6.00 1.25

1st quarter 1997 2.00 1.00
4th quarter 1996 5.00 1.00

3rd quarter 1996 6.75 3.50

2nd quarter 1996 7.50 2.00
1st quarter 1996 7.25 2.75

4th quarter 1995 5.50 1.50
3rd quarter 1995 7.75 5.50

2nd quarter 1995 9.25 1.25
1st quarter 1995 7.00 1.75

The Company's stock is quoted on an NASD inter-dealer system called the
"Bulletin Board." While some Bulletin Board stocks are actively traded, they do
not draw the interest of the NASD brokerage community held by NASDAQ stocks or
exchange-listed stocks. The eligibility requirements for listing the Company's
stock on exchanges are generally as high or higher than the requirements for
eligibility for quotation on NASDAQ, and the Company has no present plans to
list its stock on an exchange.

The Company's stock will not be eligible for quotation on the NASDAQ
SmallCap Market ("NASDAQ") unless it meets various NASDAQ requirements, which it
will not meet even if all the Shares offered herein are subscribed. No
assurance can be made that the Common Stock will ever become eligible for
quotation on NASDAQ.

Further, holders of the Shares offered herein face the prospect of an
indefinite period during which the Shares will be subject to trading severities
imposed on Bulletin Board, so-called "penny stocks" (stocks that trade at less
than $5 per share) by regulations of the Securities and Exchange Commission. The
effect of these trading severities is to reduce broker-dealer and investor
interest in trading or owning "penny stocks" and, hence, could inhibit the
ability of the Company's stock to reach a trading level of $4 per share or
higher and thereby become eligible for quotation on NASDAQ even if the Company
meets NASDAQ's assets and stockholders' equity requirements in the future.

THE COMPANY

THE FOLLOWING DISCUSSION CONTAINS TREND INFORMATION AND OTHER FORWARD-LOOKING
STATEMENTS THAT INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. THE ACTUAL RESULTS
OF EIP MICROWAVE, INC. (THE "COMPANY") COULD DIFFER MATERIALLY FROM THE
COMPANY'S HISTORICAL RESULTS OF OPERATIONS AND THOSE DISCUSSED IN THE FORWARD-
LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY INCLUDE, BUT ARE NOT LIMITED TO, THOSE IDENTIFIED UNDER THE HEADING
"RISK FACTORS" ABOVE. DUE TO SUCH RISK FACTORS AND OTHER FACTORS, PAST RESULTS
ARE NOT A RELIABLE PREDICTOR OF FUTURE RESULTS.

GENERAL/PRODUCTS

The Company was incorporated under the laws of the State of Delaware in
1987 under the name EIP Microwave, Inc. The predecessor corporation was
organized under the laws of California in 1961, and merged with the Company in
1987.

11
<PAGE>

The Company is engaged in a single industry segment constituting the
development, manufacture and sale of high frequency microwave and radio
frequency (RF) test and measurement instruments. These instruments include
microwave heterodyne-type automatic frequency counters, microwave and RF pulse
frequency counters, microwave and RF synthesized signal generators, pulse
generators, and downconverters. All of these products are electronic devices
which are used in the design, manufacture and maintenance of microwave and RF
products and systems throughout the world.

Stand-alone microwave frequency counters represented 53% of net sales in
fiscal 1997, 50% of net sales in fiscal 1996 and 64% of net sales in fiscal
1995. The balance of sales in those periods was mainly derived from the
Company's VXIbus-based products. VXIbus is a hardware and software standard for
modular instrumentation. EIP manufactures individual modules in the VXIbus
format that provide various functions, including frequency measurement,
synthesized signal generation, downconversion and modulation. These modules
plug in to standardized racks that supply power and computer resources.

During fiscal 1997, the Company introduced a new line of microwave
frequency counters suitable for use in laboratory, manufacturing and field
service environments. These products are portable and can be operated on their
own internal batteries. The Company began distributing these products in
October 1997, on a private label basis worldwide through an OEM relationship
with Hewlett-Packard Company ("Hewlett-Packard").

The Company designs and manufactures its own YIG (Yitrium iron garnet)
filters, which are a key feature of many EIP microwave products. Additionally,
the Company manufactures hybrid microwave integrated circuits (MICs) and
proprietary microwave subassemblies used in its microwave products. Management
believes that the Company's YIG and MIC capabilities provide its microwave
products with competitively superior performance, protection from overload, and
compact size.

MARKETS/PRINCIPAL CUSTOMERS

The Company has a variety of customers worldwide for its microwave
products, including the military, government agencies, government
subcontractors, the telecommunications industry, the aerospace industry, and
research and development facilities. The primary customers for the Company's RF
products are telecommunication companies. The Company's principal customers,
and the percent of its net sales attributable to such customers, are
Northrup-Grumman (21% in fiscal 1997, 22% in fiscal 1996 and 11% in fiscal
1995) and Marconi (19% in fiscal 1995). Other important customers that provided
less than 10% of revenues to the Company in such periods were Hewlett-Packard
Company, Lockheed Martin, Kelly Air Force, Hughes Aircraft, and Harris
Corporation.

The Company's sales of microwave products to the United States Government
and its contractors comprised approximately 40%, 33%, and 36% of net sales for
the fiscal years 1997, 1996, and 1995, respectively. In September 1997, the
Company received a five-year indefinite quantity, fixed price supply subcontract
from a ManTech Systems Engineering Corporation, a government contractor
("ManTech"), with total sales value to the Company that could range from
approximately $3.5 to $20 million. Foreign sales represented 30% of net sales
in fiscal 1997, 36% of net sales in fiscal 1996, 43% of net sales in fiscal
1995, and 36% of net sales in fiscal 1994.

METHODS OF DISTRIBUTION

The Company has entered into a five-year OEM Agreement with Hewlett-Packard
Company ("Hewlett-Packard"). The Agreement contemplates the worldwide
distribution of the Company's recently developed line of microwave frequency
counters through Hewlett-Packard on a private label basis. The Company began
distributing this new line of products in October 1997.

The Company uses independent manufacturers' representatives for
distribution of its other products in the United States and in foreign
countries. The Company provides service and technical support to its
manufacturers' representatives, and directly to its customers.

12
<PAGE>

From November 1992 until December 1995, the Company's products were
distributed in a number of foreign countries through an exclusive distribution
agreement with Marconi Instruments, a subsidiary of The General Electric
Company, Plc. of England. Foreign sales through Marconi Instruments represented
19% and 16% of net sales in fiscal 1995 and 1994, respectively. The Company has
since established agreements with other independent manufacturers'
representatives in these countries previously covered by Marconi Instruments.

COMPETITION

The Company believes there are three to six competitors in the respective
markets in which it competes; however, reliable data on sales and profits of
most of the Company's competitors is not readily available because the
competitors are either privately held or are separate divisions of large
publicly held companies which do not separately report financial results for
competing divisions.

The markets in which the Company's frequency counters are sold are
well-defined and narrow markets which have become increasingly competitive both
in the United States and abroad. Within these narrow markets, the Company
believes it holds a significant competitive position, generally believed to be
number two or three in market share. The Company encounters competition,
however, from certain firms which are substantially larger and have greater
financial resources than the Company; the market leader is believed to be
Hewlett-Packard. Other companies selling products in the same markets as the
Company include Anritsu, Advantest, Racal, and XL Microwave.

The market for microwave synthesized signal generators is considered to be
larger than the microwave frequency counter market. As the market for this type
of product is still developing, the Company has not been able to determine
market share. At present, the only other known supplier of VXIbus microwave
synthesized signal generators is Giga-tronics.

The Company's VXIbus pulse generator and downconverter are sold primarily
as companion products for integrated systems. Competitors for the pulse
generator include Wavetek and Tektronix. There is no known current direct
competition for the VXIbus downconverter.

Competition is based upon performance, reliability, product design,
availability and price and is characterized by technological change.

RESEARCH, DEVELOPMENT AND ENGINEERING

Management believes that the Company's future success is dependent to a
significant extent upon engineering and new product development. Expenditures
for research, development and engineering during the past three years have
ranged between 21% and 11% of annual net sales. Research, development and
engineering expenditures were $996,000, $978,000 and $742,000, for fiscal years
ended September 30, 1997, 1996, and 1995, respectively. Management expects that
current development efforts will result in the introduction of new test
instrumentation for the wireless telecommunications market in 1998. All of the
Company's research, development and engineering activities have been
Company-funded.

RAW MATERIALS

The principal raw materials used by the Company in its manufacturing
operations include capacitors, resistors, semiconductors, integrated circuits,
transformers, printed circuit boards, display devices, and metal and plastic
cases, most of which are purchased from outside suppliers. For the majority of
materials, the Company has access to many suppliers, and believes that it is not
dependent upon any one supplier, and that adequate alternate sources for its
materials are, for the most part, readily available. There are, however, many
applications which require specialized components currently available, in each
instance, only through a single source of supply. The loss of any of these
sources, or the inability of any such source to meet the Company's production
and quality control requirements, could be detrimental to the Company with
respect to the specific products involved.

EMPLOYEES

The Company had 45 employees at September 30, 1997, 39 of whom were full
time employees, and had 52 employees at September 30, 1996, 49 of whom were full
time employees. The

13
<PAGE>

Company believes that its employee relations are good, but can make no
assurances that it will continue to be able to attract and retain qualified
employees. The Company also has engaged the services of consultants when
appropriate.

PATENTS, COPYRIGHTS, TRADEMARKS AND INTELLECTUAL PROPERTY

The Company holds no patents, trademarks, franchises, concessions or
royalty agreements that have a material importance to or effect on its frequency
counter, pulse counter, synthesized signal generator, pulse generator, or
downconverter product lines. However, the Company has obtained a license from
a third party for digital modulation implementations relating to products under
development by the Company.

The Company relies on trade secrets and technical know-how in order to
maintain its competitive advantage and scientific expertise. It is the practice
of the Company to enter into confidentiality agreements with employees,
consultants, and any third party to whom it discloses confidential information.
There can be no assurance that such confidential information will not be
disclosed, that similar trade secrets or expertise will not be independently
developed, or that access to such information could not be gained inadvertently.

GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS

Government approval is not required for any of the Company's principal
products.

EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS

The Company believes it is in compliance with applicable governmental
regulations. The Company is not aware of any probable governmental regulation
which would have a detrimental or disruptive effect on the Company.

COMPLIANCE WITH PROVISIONS ON ENVIRONMENTAL PROTECTION

The Company does not believe that compliance with federal, state, and local
provisions which have been enacted or adopted regulating the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, will have any material effect upon the capital expenditures,
earnings, or competitive position of the Company.

PROPERTY

The Company leases a 20,331 square foot one story, concrete structure
located in Milpitas, California, which contains production, warehouse and
office facilities. The lease term continues until October 1998, with an
option to renew for an additional three years. The annual rent for the
current term is $226,000 plus applicable real property taxes and insurance.
The Company also leases 361 square feet of space as the Company's corporate
offices located in Newport Beach, California. The lease term continues until
November 1998, with an an annual rent of $4,765. The current facilities are
believed by the Company to be suitable and adequate for its present
requirements.

The Company owns and uses machinery, equipment, and furniture with an
original cost of approximately $5,311,000 at September 30, 1997. The Company
also leases and uses equipment with capital lease obligations of $98,000 at
September 30, 1997. This personal property is believed to be in acceptable
condition.

The Company's management believes the facilities and all machinery and
equipment of the Company are adequately insured to cover loss of equipment or
occupancy privileges.

The Company does not have any investments in real estate, real estate
mortgages or securities of persons primarily engaged in real estate activities,
and has no present policy or limitations with respect to any such future
investments.

BANK LINE OF CREDIT

At December 12, 1997, the Company had outstanding borrowings in the
aggregate principal amount of $179,000 under its bank line of credit (the "Bank
Line") with Silicon Valley Bank ("SVB"). The Bank

14
<PAGE>

Line provides for borrowings up to 60% of eligible accounts receivable, not to
exceed $500,000. Interest is charged at SVB's prime rate plus 5% per annum, and
is payable monthly (13.5% as of December 12, 1997). The Bank Line expires on
January 31, 1998. The Bank Line contains various restrictive covenants
requiring, among other matters, the maintenance of minimum levels of tangible
net worth and certain financial ratios, including a minimum quick ratio and a
maximum debt to net worth ratio, and maximum losses. The Bank Line also
precludes or limits the Company's ability to take certain actions, such as
paying dividends, making loans, making acquisitions or incurring indebtedness,
without the bank's prior written consent. The Bank Line is secured by
substantially all of the Company's assets, and is guaranteed by the Bishops and
the Bishop Family Trust. At December 12, 1997, the Company was in compliance
with the restrictive covenants of the Bank Line.

The Company is continuing to pursue discussions with other lenders
concerning a working capital facility; however, there can be no assurance that
the Company will be able to obtain a satisfactory working capital facility.
Even if the Company is able to obtain a working capital facility from another
lender, there can be no assurance as to the terms of such facility; and the
terms of such facility could be even less attractive to the Company than the
terms of the existing Bank Line. If the Company is unable to obtain a
satisfactory working capital facility, the Company and its business could be
materially adversely affected.

BISHOP FAMILY TRUST LOAN FACILITY

At December 12, 1997, the Company had outstanding borrowings in the
aggregate principal amount of $1,350,000 under a loan and security agreement
(the "Loan Facility") with John F. Bishop and Ann R. Bishop, trustees of the
Bishop Family Trust (the "Bishop Family Trust"). The Loan Facility provides for
a term loan of $1,000,000 and revolving advances up to $450,000. Interest is
charged at the prime rate plus 5% per annum and is payable monthly (13.5% as of
December 12, 1997). The Loan Facility expires on October 15, 1998. The Loan
Facility contains various restrictive covenants requiring, among other matters,
the achievement of profitability on a rolling 3-month basis commencing in August
1998, and the maintenance of minimum revenues from its OEM relationship with
Hewlett-Packard Company commencing in January 1998. The Loan Facility also
precludes or limits the Company's ability to take certain actions, such as
paying dividends, making loans, making acquisitions or incurring indebtedness,
without the Bishop Family Trust's prior written consent. The Loan Facility is
secured by substantially all of the Company's assets. The Bishop Family Trust
has subordinated the Loan Facility to the Bank Line. At December 12, 1997, the
Company was in compliance with the restrictive covenants of the Loan Facility.

Under the terms of the Loan Facility, the Company will be obligated to pay
facility fees of up to $282,000 to the Bishop Family Trust in the manner
described below.

A. A facility fee of $70,500 was fully earned on October 22, 1997 and
will be payable by the Company on January 22, 1998.

B. If the principal amount of the obligations outstanding under the Loan
Facility on January 22, 1998 exceeds $1,000,000, then an additional facility fee
of $70,500 will be fully earned on such date and will be payable by the Company
on January 22, 1998.

C. If the principal amount of the obligations outstanding under the Loan
Facility on April 22, 1998 exceeds $1,000,000, then an additional facility fee
of $141,000 will be fully earned on such date and will be payable by the Company
on April 22, 1998.

15
<PAGE>

The Company will have the right to pay the facility fee in cash or by issuance
of Common Stock. The number of shares of Common Stock issuable as payment for a
facility fee will equal (a) the applicable facility fee divided by (b) the Fair
Market Value (as defined in the Loan Facility) per share of Common Stock on the
date such facility fee is payable to the Bishop Family Trust.

LEGAL PROCEEDINGS

There are no pending legal proceedings to which the Company or its
subsidiary is a party or of which any of their property is the subject. The
Company is not aware of any such legal proceeding contemplated by a governmental
authority.

ACQUISITION DISCUSSIONS

Since 1995, the Company has held discussions with several other companies
with respect to a possible acquisition of certain of the Company product lines
by such other companies. No offers have been made. The Board of Directors will
consider any future acquisition offers made to the Company in light of what
appears to be in the best interest of the Company's stockholders.

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

THE FOLLOWING DISCUSSION CONTAINS TREND INFORMATION AND OTHER FORWARD-LOOKING
STATEMENTS THAT INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE COMPANY'S HISTORICAL RESULTS OF
OPERATIONS AND THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY INCLUDE, BUT ARE NOT LIMITED TO,
THOSE IDENTIFIED UNDER THE HEADING "RISK FACTORS" ABOVE. DUE TO SUCH RISK
FACTORS AND OTHER FACTORS, PAST RESULTS ARE NOT A RELIABLE PREDICTOR OF FUTURE
RESULTS.

IN ADDITION, THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH THE FINANCIAL STATEMENTS AND THE ACCOMPANYING NOTES HEREIN, AND IS
QUALIFIED ENTIRELY BY THE FOREGOING AND BY OTHER MORE DETAILED FINANCIAL
INFORMATION APPEARING ELSEWHERE.

RESULTS OF OPERATIONS

Net sales for fiscal 1997 were $4,739,000, a 27% decrease from fiscal 1996
sales of $6,492,000. The decrease in net sales in fiscal 1997, compared to the
prior year, was primarily attributable to lower export sales of frequency
counters. The 3% decrease in fiscal 1996 net sales, compared to fiscal 1995 net
sales of $6,721,000 was primarily attributable to market softness for the
Company's products. Foreign exchange rate fluctuation did not have a material
impact on net sales or gross profit margins for the last three fiscal years.

The Company's gross profit margin increased in fiscal 1997 to 38%, from 37%
in fiscal 1996. The increase in the fiscal 1997 gross profit margin, compared
to fiscal 1996 was due almost entirely to an improved gross margin for VXIbus
products. An increase in sales of higher gross margin units had a relatively
small impact. The Company's gross profit margin decreased in fiscal 1996 to 37%
from 46% in fiscal 1995. The decrease in the fiscal 1996 gross profit margin,
compared to fiscal 1995, is primarily due to a sales mix shift from higher
margin stand-alone counter products to lower margin VXIbus products and lower
than expected gross profit margin on these VXI products. Each of these factors
had a comparable impact on the decrease in gross profit margin.

Inflation did not have a material effect on revenues nor gross profit
during fiscal years 1997, 1996, or 1995.

16
<PAGE>

Incoming orders for fiscal 1997 were $4,428,000, a 28% decrease from
$6,115,000 for the prior year. Backlog at September 30, 1997, was $441,000, a
42% decrease from $763,000 at September 30, 1996. The decrease in orders and
backlog in fiscal 1997, compared to the prior year, resulted primarily from a
shortfall in domestic and international large order bookings, particularly the
lack of a large VXI order in fiscal 1997, and international base level bookings.
Each of these factors had a comparable impact on the decrease in orders and
backlog.

Incoming orders for the fiscal 1996 year were $6,115,000, a 14% decrease
from $7,127,000 in fiscal 1995 orders. Backlog at September 30, 1996 was
$763,000, a 37% decrease from $1,210,000 at September 30, 1995. The decrease in
orders and backlog in fiscal 1996, compared to the prior year, was primarily due
to a 36% decrease in large government-related orders.

Research, development and engineering expenditures increased 2% to $996,000
in fiscal 1997, from $978,000 in the prior fiscal year. Research, development
and engineering expenditures in fiscal 1996 increased 32% compared to $742,000
in fiscal year 1995. The increases in both years were due to increased new
product development expenditures, primarily to support the development of a new
frequency measurement product introduced in 1997.

Selling, general and administrative expenses decreased 4% in fiscal 1997 to
$2,005,000, compared to $2,084,000 in fiscal 1996. The decrease in selling,
general and administrative expenses was due almost entirely to decreased
commission expense resulting from decreased sales volume. Overall expense
control had a small impact. Selling, general and administrative expenses
decreased 9% in fiscal 1996, compared to $2,289,000 in fiscal 1995, primarily
due to the decrease in commission expense resulting from lower sales volume
(approximately 60% of the change), and a decrease in advertising expenses
(approximately 20% of the change).

In 1996, the Board of Directors waived fees owed to them by the Company
totaling $112,000. In fiscal 1996, the reversal of previously accrued fees was
included in "Interest and other, net" cost and expenses in the statement of
operations, and thereby reduced the net loss for the year ended September 30,
1996.

The Company earned interest and dividend income of $6,000, $26,000, and
$25,000, during fiscal 1997, 1996, and 1995, respectively. The decrease in
interest and dividend income earned in fiscal 1997, as compared to fiscal 1996
and 1995, was primarily due to lower cash balances in fiscal 1997. Also
included in interest and other for fiscal 1997, 1996, and fiscal 1995, are gains
on sales of fixed assets of $1,000, $14,000 and $56,000, respectively.

17
<PAGE>

The Company recorded a net loss of $1,290,000 in fiscal 1997, as compared
to a net loss of $493,000 recorded for the prior year. Gains on sale of capital
equipment of $1,000 reduced the net loss for fiscal 1997. Further, the net loss
for fiscal 1996 reflects a credit of $112,000 due to the waiver of fees owed by
the Company to members of the Board of Directors, and a gain on sale of capital
equipment of $14,000. The increase in losses for fiscal 1997, compared to the
prior year, is primarily due to decreased sales.

As a result of the foregoing, the Company incurred a loss of $1,290,000 in
fiscal 1997, as compared to a loss of $493,000 recorded in fiscal 1996, and
earnings of $125,000 in fiscal 1995.

The Company believes that it will incur costs of addressing Year 2000
issues in amounts of approximately $150,000 in fiscal 1998 and $50,000 in fiscal
1999, for hardware, software, installation, and related training, for a new
business management and accounting system.

FINANCIAL CONDITION

At September 30, 1997, the Company's cash, cash equivalents and short-term
investment balance was $280,000, as compared to $540,000, at September 30, 1996.
The Company's accounts payable balance was $401,000 at September 30, 1997,
compared to $706,000 at September 30, 1996. At September 30, 1997, the Company
had no material commitments for capital expenditures.

Working capital decreased by $681,000 in fiscal 1997, compared to a
decrease of $724,000 in fiscal 1996. The Company's current ratio decreased to
1.01:1 at September 30, 1997, from 1.42:1 at September 30, 1996.

At September 30, 1997, the Company had outstanding borrowings in the
aggregate principal amount of $295,500 under its bank line of credit (the "Bank
Line"), borrowings in the aggregate principal amount of $600,000 under
subordinated notes (the "Subordinated Notes") payable to the Bishops, and
borrowings in the aggregate principal amount of $400,000 under several demand
notes (the "Bridge Loan") to the Bishops. The Subordinated Notes and the Bridge
Loan were repaid on October 15, 1997 with the proceeds from the Loan Facility
with the Bishop Family Trust. See "The Company--Bank Line of Credit"; "Interest
of Management and Others in Certain Transactions--Subordinated Loan"; and
"--Bridge Loans".

Future performance could reduce the total amount of funds available under
the Bank Line and the Loan Facility at any given time.

On November 14, 1997, the Company began a rights offering (the "Rights
Offering"), whereby the Company offered 1,699,628 shares (the "Shares") of its
Common Stock at $1.70 per Share to its stockholders of record on November 7,
1997 (the "Record Date"). Each stockholder of record was entitled to purchase
four Shares for each share of Common Stock of the Company which they owned on
the Record Date (the "Basic Subscription Rights"). Each shareholder of record
also had the opportunity to subscribe for as many additional shares as they
desired. However, if the Shares were oversubscribed, the Shares would be
allocated pro rata based on the number of Shares subscribed to under the Basic
Subscription Rights. The Rights Offering was initially set to expire on
December 15, 1997, unless extended by the Company. The Company has extended the
expiration date for the Rights Offering until

18
<PAGE>

January 5, 1998 at 5:00 P.M., California time, unless further extended by the
Company. The Company has also increased the number of shares offered to
5,948,698, and has lowered the price for each Share to $1.00. The net proceeds
to the Company upon successful completion of the Rights Offering will be used to
develop new products, fund working capital requirements and repay debt.

In addition to cash on hand and funds generated from operations, the Company
believes that borrowings under existing or replacement debt facilities and
proceeds from the Rights Offering in an aggregate amount equal to approximately
$3,500,000 will be necessary to satisfy the Company's cash requirements for
implementing its business plan during the remainder of the fiscal year ending
September 30, 1998. The actual cash resources required will depend upon
numerous factors, including those described under "Certain Factors--Dependence
on New OEM Relationship," "--Dependence on Government Contractors," and
"--Uncertainty of Product Development and Introduction", and the cash
requirements could be materially greater than $3,500,000. There is no assurance
that the Company will be successful in obtaining all such capital from the
Rights Offering or from such debt facilities. If the Company is unable to
obtain such capital from the Rights Offering or from such debt facilities on a
timely basis, the Company will be required to significantly curtail its planned
operations and its business, financial condition and results of operations could
be materially adversely affected.

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth information regarding the directors and
executive officers of the Company, and persons nominated to become directors,
including age, period served as a director, present position with the Company,
and other business experience during the past five years, and any other public
company for which the individual is a director.

NAME AGE POSITION
---- --- --------

J. Bradford 46 Director since 1978. Chairman of the Board and Chief
Bishop (1) Executive Officer of the Company since 1994.
President of the Company from 1990 to 1992.
President of Continental Paper Recycling, and former
Chief Executive Officer, Carson Energy Group, a power
plant development company.

John F. Bishop 73 Director since 1961. Vice Chairman of the Board
(1) since 1994. Treasurer since 1985. Secretary since
1990. Former Chairman of the Board, President, and
Treasurer of Cushman Electronics, Inc., a
manufacturer of test instruments for telephone
communication systems.

Michael E. 37 Director since 1996.
Johnson President, Bainbridge Group, a Law Corporation.
Former counsel, Jones, Day, Reavis & Pogue, a law
firm.

Robert D. 73 Director since 1978.
Johnson Former Vice Chairman and Director, Cushman
(2)(3)(4) Electronics, Inc., and former Director, EIP/Cushman,
Inc.

J. Sidney Webb, 77 Director since 1981.
Jr. (2)(3)(4) Chairman of the Board, The Titan Corporation,
manufacturer of defense and industrial products and
systems; Director, Plantronics, Inc., supplier of
communication headset products and services to users
and providers worldwide.

19
<PAGE>

NAME AGE POSITION
---- --- --------

James N. Cutler, 46 Director Nominee. President and Chief Executive
Jr. Officer of The Cutler Corporation, holding company
for various private businesses. Director, Hollywood
Entertainment Corporation, owner and operator of over
900 domestic video rental superstores; former
Director Arrow Transportation Co., transporter of
bulk liquid chemical products; Trustee, University of
Puget Sound, Tacoma, Washington.

Ivan N. Andres 49 General Manager and Chief Operating Officer of the
Company since December 1997. Vice President,
Marketing and Sales of the Company from 1994 to 1997.
Director of Marketing of On-Demand Environmental
Systems, an air pollution control company, from
1992-1994. Independent consultant from 1991-1992.
Director of Marketing of Acurrel, a microwave
instrumentation company, prior to 1991.

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

(1) J. Bradford Bishop is the son of John F. Bishop.

(2) Member of Compensation Committee.

(3) Member of Audit Committee.

(4) Member of Stock Option Committee.

COMPENSATION OF DIRECTORS

Non-management Directors are paid a monthly retainer of $600, and receive
$600 per day for attendance at Board Meetings. They also receive $200 per day
for committee meetings held on the same day as Board meetings and $400 per day
if held on a separate day. Committee chairmen receive $100 per day in addition
to the above. Directors who are officers of the Company receive no compensation
for service on the Board of Directors or committees thereof.

Accrued and unpaid retainers and fees for non-management Directors as of
February 13, 1996 (the "Accrued Directors Fees") were owed to Messrs. Robert D.
Johnson, James J. Shelton and J. Sidney Webb in amounts equal to approximately
$30,600, $29,100 and $30,900, respectively. As of February 13, 1996, each of
Messrs. Johnson and Webb agreed to waive all Accrued Directors Fees owing to him
in exchange for the grant by the Company of an option to purchase 5,000 shares
of Common Stock of the Company under the terms of the Company's Amended and
Restated 1994 Stock Option Plan, with the exception that such options would be
immediately vested and exercisable and would not terminate upon ceasing to be a
Director or upon death or disability. On February 7, 1996, Mr. Shelton's term of
office as Director expired and, as of February 13, 1996, he agreed to waive all
Accrued Directors Fees owing to him, in exchange for amending his Nonqualified
Stock Option Agreement with the Company to eliminate the requirement that his
options terminate three months after he ceases to be a Director and the
requirement that he continuously serve as a Director of the Company as a
condition to him becoming vested in the options to purchase the remaining 6,667
shares of Common Stock under the Nonqualified Stock Option Agreement.

20
<PAGE>

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth all compensation for services in all
capacities accrued by the Company during the fiscal years ended September 30,
1997, 1996, and 1995, for the Company's Chief Executive Officer and certain of
its most highly compensated executive officers who were serving as such at the
end of the last completed fiscal year. The Company issued no restricted stock
awards and there were no long term incentive plan payouts.

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------------------- ------------
(a) (b) (c) (d) (e) (f) (g)
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND SALARY BONUS ($) OPTIONS ($)
PRINCIPAL POSITION YEAR ($) ($) (1) (#) (5)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J. Bradford Bishop 1997 $ 24,050 $ 0 $ 0 $ 0 $ 0
Chairman, Chief 1996 0 0 0 15,000 (6) 0
Executive Officer 1995 0 0 0 0 0

John F. Bishop 1997 43,550 0 17,085 (3) 0 331
Vice Chairman, 1996 58,500 0 11,853 (3) 0 328
Treasurer and Secretary 1995 75,000 0 25,677 (3) 0 362

Lewis R. Foster (4) 1997 100,732 0 5,337 (2) 40,000 (6) 561
President, and
Chief Operating Officer

Ivan Andres (4) 1997 77,659 2,000 4,225 (7) 0 561
Vice President, 1996 73,819 19,000 6,559 (7) 2,500 (6) 554
Marketing and Sales 1995 73,755 28,000 * (8) 8,000 (6) 530

</TABLE>

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

(1) Amounts in this column include compensation to officers from (a) the
Company's supplemental medical reimbursement plan in which all officers are
eligible to participate, (b) the Company's tax and financial counseling
reimbursement plan in which all officers are eligible to participate, (c)
the Company's legal services reimbursement plan in which the Vice Chairman
is eligible to participate, (d) the payment of car allowances to certain
officers in lieu of providing a company car, (e) the payment of private
club dues for certain officers and (f) contributions by the Company on
behalf of certain officers pursuant to its Retirement/Savings Plan

21
<PAGE>

which qualifies as a thrift plan under Section 401(k) of the Internal
Revenue Code. The type and amount of each perquisite or other personal
benefit which exceeds 25% of the total perquisites and other personal
benefits reported for such officer are identified in a footnote.

(2) On behalf of Mr. Lewis R. Foster, the Company paid $4,200 in car allowances
and contributed $1,028 under the Retirement/Savings Plan in fiscal 1997.

(3) On behalf of Mr. J.F.Bishop, the Company paid $7,429 under the supplemental
reimbursement plan and $7,691 under the Legal Services Reimbursement Plan
in fiscal 1997, paid $7,522 under the supplemental medical reimbursement
plan and paid $4,006 for private club dues in fiscal 1996, and paid $12,776
under the legal services reimbursement plan in fiscal 1995. Amounts do not
include non-cash compensation to Mr. J.F.Bishop in the form of expenses
related to personal use of a Company-supplied automobile, which amount did
not exceed 10% of the cash compensation of Mr. J.F. Bishop.

(4) Mr. Lewis R. Foster's employment terminated on December 16, 1997 and Mr.
Ivan Andres was appointed General Manager and Chief Operating Officer on
such date.

(5) Amounts in this column consist of payments by the Company of premiums for
term life insurance.

(6) Options to purchase common stock awarded under the Company's Second Amended
and Restated 1994 Stock Option Plan.

(7) On behalf of Mr. Andres, the Company paid $4,200 in car allowances in
fiscal 1997, and $4,200 in car allowances and contributed $2,305 under the
Retirement/Savings Plan in fiscal 1996.

(8) Perquisites and personal benefits provided to the named executive officer
under various Company programs did not exceed $50,000 or 10% of such
individual's salary and bonus.

OPTION GRANTS IN FISCAL 1997. The following table provides
information on options granted under the Company's Second Amended and
Restated 1994 Stock Option Plan in fiscal 1997 to the named executive
officers:

INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------
Number of % of Total
Securities Options Exercise or
Underlying Granted to Base
Name Options Employees in Price Expiration
Granted (#) Fiscal Year (1) ($/Sh) Date
- ---------------------------------------------------------------------------

J. Bradford ---- ---- ---- -----
Bishop

John F. Bishop ---- ---- ---- ----

Lewis R. 40,000(2) 100% $4.75 11/20/06
Foster

Ivan Andres ---- ---- ----- ----
- ---------------

(1) Percentage based on grants to employees during the last fiscal year of
options to purchase 40,000 shares of Common Stock.

(2) The options granted to Mr. Foster became exercisable with respect to
one-fourth of such shares on October 16, 1997. As a result of Mr.
Foster's departure from the Company, no further options will become
exercisable.

22
<PAGE>

AGGREGATE OPTION EXERCISES IN FISCAL 1997 AND FY-END OPTION VALUES. The
following table provides information regarding option exercises in fiscal 1997
by the named executive officers and the value of such officers' unexercised
options at September 30, 1997:

Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options
Options at at FY-End ($)
FY-End (#) (1)
Shares ------------- -------------
Acquired Value Exercisable Exercisable
Name on Realized (E)/ (E)/
Exercise ($) Unexercisable Unexercisable
(#) (U) (U)
- --------------- -------- -------- ------------- -------------
J. Bradford ---- ---- 5,000 (E) $0 (E)
Bishop ---- ---- 10,000 (U) $0 (U)

John F. Bishop ---- ---- ---- ----

Ivan Andres ---- ---- 2,100 (E) $0 (E)
6,800 (U) $0 (U)

Lewis R. Foster(2) ---- ---- 40,000 (U) $0 (U)
- -----------------

(1) The options at fiscal year end were not in-the-money based on a fair
market value per share of Common Stock of $2.72, which represents the
mean between the bid and asked prices of a share on the NASDAQ System
at the close of business on September 30, 1997.

23
<PAGE>

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

COMMITMENT OF THE BISHOPS TO PURCHASE COMMON STOCK IN RIGHTS OFFERING

J. Bradford Bishop, Chairman and Chief Executive Officer of the Company,
and John F. Bishop, Vice Chairman, Secretary and Treasurer of the Company, both
of whom are principal stockholders and members of the Board of Directors of the
Company (the "Bishops") have committed to the Company that they will purchase
$1,360,000 in Common Stock by exercise of Rights distributed to them if other
stockholders purchase at least $800,000 in Common Stock upon exercise of Rights
distributed to them (the "Commitment"). Thus, the Bishops' subscription for
Shares in the Rights Offering is conditional, whereas subscriptions by other
stockholders are unconditional. In order to avoid being diluted in the Rights
Offering, other stockholders will be required to submit unconditional
subscription agreements prior to the expiration date.

In the opinion of management and the disinterested members of the Board of
Directors, the terms of the Commitment are fair and reasonable and as favorable
to the Company as those which could be obtained from unrelated third parties.

BISHOP FAMILY TRUST LOAN FACILITY

The Company has entered into a Loan Facility with the Bishop Family Trust.
See "The Company--Bishop Family Trust Loan Facility" above.

In the opinion of management and the disinterested members of the Board of
Directors, the terms of the Loan Facility are fair and reasonable and as
favorable to the Company as those which could be obtained from unrelated third
parties.

SUBORDINATED LOAN

The Company entered into Subordinated Loan Agreement dated as of December
16, 1996 with J. Bradford Bishop, Chairman and Chief Executive Officer of the
Company, and John F. Bishop, Vice Chairman, Treasurer and Secretary of the
Company (together, the "Bishops"). The Bishops advanced $600,000 to the Company
under the Subordinated Loan Agreement. Interest accrued thereon at 8% per
annum, payable quarterly. In connection with the Subordinated Loan Agreement,
the Company issued warrants to the Bishops to purchase 90,000 shares of Common
Stock at $3.00 per share. The Subordinated Loan Agreement terminated on
October 15, 1997, and all principal thereunder was repaid in full on such date
with the proceeds from the Loan Facility with the Bishop Family Trust. As
consideration for the early repayment of such obligations, the warrants issued
to the Bishops were canceled on October 15, 1997.

In the opinion of management and the disinterested members of the Board of
Directors, the terms of the Subordinated Loan Agreement, including the warrants
to be issued thereunder, were fair and reasonable and as favorable to the
Company as those which could be obtained from unrelated third parties.

BRIDGE LOANS

The Company has received several bridge loans from the Bishops payable on
demand (the "Bridge Loans"), which amounted to $400,000, plus interest, on
October 15, 1997. Interest accrued thereon at 10% per annum. All principal of
the Bridge Loans was repaid in full on such date with the proceeds from the Loan
Facility with the Bishop Family Trust.

In the opinion of management and the disinterested members of the Board of
Directors, the terms of the Bridge Loans were fair and reasonable and as
favorable to the Company as those which could be obtained from unrelated third
parties.

EMPLOYMENT AGREEMENT

On October 1, 1995, the Company entered into an Employment Agreement with
John F. Bishop, Vice-Chairman of the Board, Treasurer and Secretary of the
Company, whereby Mr. Bishop will provide his services for a monthly salary of
$6,500 for an initial term of two years. On the first day of each month, the
initial term is automatically

24
<PAGE>

extended for an additional month, unless either party notifies the other in
writing of his or its desire not to extend the term. In the event the Company
elects not to extend the term or there is a change in control of the Company
(the date of such event is referred to as the "Transition Date"), Mr. Bishop
will continue to perform services for the Company for a three month transition
period and the Company will maintain his compensation and other benefits for the
three month transition period and an additional twenty-one months. Should Mr.
Bishop become permanently disabled, the Company shall pay to him fifty percent
(50%) of the agreed salary for the remainder of the term. Effective January 1,
1997, Mr. Bishop agreed to reduce his monthly salary to $3,250 until the
Transition Date. In addition to the foregoing compensation, the Company will
provide Mr. Bishop with a private office, secretarial and administrative
assistance, office equipment and supplies and other facilities and services
suitable to his position. Mr. Bishop is also entitled to all employee benefits
provided to senior management personnel of the Company and to participate in the
Company's medical reimbursement plan which is supplemental to the medical plan
covering all employees, the tax and financial counseling reimbursement plan and
the legal reimbursement plan provided by the Company as well as Company paid
life insurance.

In addition to his monthly compensation, Mr. Bishop is entitled under the
Employment Agreement to the full and unrestricted use of the currently provided
1989 Mercedes Benz Model 560 automobile or its successor automobile if replaced
at any time prior to the end of his employment term. The Company provides all
gasoline, maintenance, repair and insurance with respect to the automobile
during the term of the Agreement. In consideration for Mr. Bishop's prior
agreement to reduce his monthly salary to $1 per month for the period from
February 1992 through July 1992 and the deduction of $217 per month from his
monthly salary for the period from August 1992 through October 1995, the Company
granted to Mr. Bishop the right to acquire the automobile with full credit for
the foregone salary totaling $56,846. Mr. Bishop has the right to acquire the
automobile at any time during the two months immediately preceding the end of
his employment term. If the automobile's Kelly Blue Book value is in excess of
$56,846, Mr. Bishop shall pay to the Company the difference at the time Mr.
Bishop acquires the automobile. If the value of the automobile is less than
$56,846, the Company shall pay the difference to Mr. Bishop at the time he
acquires the automobile. In the event that Mr. Bishop's employment is terminated
prior to the end of his employment term, he shall have the right to acquire the
automobile at that time. In the event of Mr. Bishop's death, the right to
acquire the automobile shall be exercisable by Mr. Bishop's widow or the
executor of his estate.

The Company may terminate the Employment Agreement only if Mr. Bishop were
to be convicted of a felony, if he willfully fails to fulfill his duties, if he
commits gross negligence in the performance of his duties, if he intentionally
misappropriates significant funds of the Company or if he dies. Mr. Bishop may
terminate the agreement at any time on thirty days notice to the Company.

Under the Employment Agreement, Mr. Bishop may not disclose confidential
information of the Company at any time. This provision survives termination of
the Employment Agreement. Mr. Bishop is further prohibited from soliciting
employees or customers of the Company for at least one (1) year following
termination of the Employment Agreement.

LEGAL COUNSEL

Bainbridge Group, a Law Corporation ("Bainbridge Group") provides ongoing
legal services for the Company. Michael E. Johnson, a director of the Company,
is President of Bainbridge Group. In the opinion of management and the
disinterested members of the Board of Directors, the terms of the relationship
between the Company and Bainbridge Group are fair and reasonable and as
favorable to the Company as those which could be obtained from unrelated third
parties. The Company obtains legal services from an affiliate at rates normally
charged to a third party.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of the Record Date, certain information
as to the Common Stock of the Company beneficially owned, directly or
indirectly, by each person who is known to the Company to beneficially own more
than 5% of the outstanding Common Stock, by each director, by each nominee for
director, by each executive officer named in the Summary Compensation Table, and
by all executive officers and directors of the Company as a group. The persons
named hold sole voting and investment power with respect to the shares shown
opposite their respective names, unless otherwise indicated. (Note -- "Direct"
means Common Stock held individually, or held in joint tenancy or as community
property with spouse. "Indirect" means Common Stock held

25
<PAGE>

by spouse as separate property, or held of record by the stockholder for the
benefit of another person, or held of record by the stockholder as trustee of a
trust.)

Amount of Nature of
Name and Address of Beneficial Beneficial Percent
Beneficial Owner Ownership Ownership of Class
- -------------------- --------- ---------- --------

CEDE & Company 186,100 Indirect(1) 43.80%
Depository Trust Company
7 Hanover Square
New York, New York 10004

John F. Bishop (2) 128,927 Indirect (3) 30.34%

J. Bradford Bishop (2) 62,473 Indirect (4) 15.69%
5,000 Direct (6)

J. Sidney Webb (2) 800 Indirect (5) 3.60%
15,000 Direct (6)

Robert D. Johnson (2) 200 Indirect (7) 3.46%
15,000 Direct(6)

Michael E. Johnson (2) 3,333 Direct (6) *

Lewis R. Foster 10,000 Direct (6) 2.30%

Ivan Andres (2) 3,700 Direct (6) *

James N. Cutler, Jr. 1,000 Direct *

All Executive Officers 244,433 --- 52.35%
and Directors as a Group
(7 persons)(8)

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

* Less than 1% of the class

(1) CEDE & Company is a nominee of the Depository Trust Company, which is a
wholly owned subsidiary of the New York Stock Exchange, Inc. CEDE disclaims
any beneficial interest in shares of the Company's Common Stock held in
its name.

(2) The mailing address for such individual is in care of EIP Microwave, Inc.,
1745 McCandless Drive, Milpitas, CA 95035.

(3) Consists of (i) 118,260 shares held by J.F. Bishop and his spouse as
trustees of the Bishop Family Trust, and (ii) 10,667 shares held by J.F.
Bishop as trustee for the benefit of certain of his children.

(4) Consists of (i) 22,473 shares held by J.B. Bishop and his spouse as
trustees of a revocable trust, and (ii) 40,000 shares held by J.B. Bishop
and his spouse as trustees of the Bishop 1993 Children's Trust.

(5) Held by J.S. Webb as trustee of the Webb Family Trust.

(6) Consists of shares for which the named individual has the right to acquire
beneficial ownership within 60 days after the Record Date by exercise of
options granted under the Company's Second Amended and Restated 1994 Stock
Option Plan.

(7) Held by R.D. Johnson and his spouse as trustees of the Robert D. Johnson
and Dorothy A. Johnson Trust.

26
<PAGE>

(8) Total includes the shares indirectly held by Messrs. J.F. Bishop, J.B.
Bishop, J.S. Webb and R.D. Johnson as trustees, as noted above.

DESCRIPTION OF SECURITIES

The following description of the securities of the Company and certain
provisions of the Company's Certificate of Incorporation and Bylaws is a summary
and is qualified in its entirety by the provisions of the Certificate of
Incorporation and Bylaws, which have been filed as exhibits to the Company's
Registration Statement.

AUTHORIZED STOCK

The Company is authorized to issue 10,000,000 shares of Common Stock, $0.01
par value. As of the date of this Prospectus the Company had 424,907 shares of
Common Stock issued and outstanding.

VOTING RIGHTS

Holders of the shares of Common Stock are entitled to one vote per share on
all matters submitted to a vote of the stockholders. Except as described in the
following paragraph, shares of Common Stock do not have cumulative voting
rights, which means that the holders of a majority of the shares voting for the
election of the board of directors can elect all members of the board of
directors.

As a Delaware corporation doing business in California, the Company is
subject to certain provisions of the California General Corporation law (the
"California Law") if certain property, payroll and sales factors are met and
more than 50% of the Common Stock is held of record by persons having addresses
in California (excluding shares held by broker-dealers, banks or other
nominees). The Company believes that it meets the statutory test for
applicability of certain provisions of California Law to the Company. One of
these provisions, Section 708, entitles a stockholder to cumulate his or her
votes at an election of directors. Accordingly, with respect to the election of
directors only, if one or more stockholders give notice at the Annual Meeting
before the voting of their intention to cumulate their votes, all stockholders
entitled to vote shall have the right to so cumulate their votes and to give one
candidate, who has been nominated prior to the voting, a number of votes equal
to the number of directors to be elected multiplied by the number of votes to
which his or her shares are entitled, or to distribute such votes among two or
more such candidates on the same principle in such proportions as each
stockholder may determine. If such vote is not conducted by cumulative voting,
stockholders may vote in favor of all nominees, withhold their votes as to all
nominees, or vote in favor of specific nominees and withhold their votes as to
other nominees.

DIVIDEND RIGHTS

Holders of record of shares of Common Stock are entitled to receive
dividends when and if declared by the board of directors out of funds of the
Company legally available therefor. The Company does not anticipate paying
dividends in the near future.

LIQUIDATION RIGHTS

Upon any liquidation, dissolution or winding up of the Company, holders of
shares of Common Stock are entitled to receive a pro rata share of the assets of
the Company available for distribution to stockholders.

PREEMPTIVE RIGHTS

Holders of Common Stock do not have any preemptive rights to subscribe for
or to purchase any stock, obligations or other securities of the Company.

DISSENTER'S RIGHTS

Under current Delaware law, a stockholder is afforded dissenters' rights
which if properly exercised may require the corporation to repurchase its
shares. Dissenters' rights commonly arise in extraordinary transactions such as
mergers, consolidations, reorganizations, substantial asset sales, liquidating
distributions, and certain amendments to the Company's certificate of
incorporation.

27
<PAGE>

CERTAIN ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation and Bylaws contain provisions
that could delay, defer or prevent a change in control of the Company. The
Company has a classified Board of directors. The Board is divided into three
classes, each class consisting of two directors. There is one vacancy in the
class whose term expires at the 1998 Annual Meeting. The terms of directors in
the two remaining classes expire at the 1999 Annual Meeting and the 2000 Annual
Meeting, respectively. Further, the Bylaws set forth procedures for the
nomination of director candidates by the Board of Directors or stockholders, and
require that a stockholder give specified notice of its intent to nominate a
director candidate at least 90 days prior to the Annual Meeting.

The Company's Certificate of Incorporation restricts the ability of the
Company to engage in specified transactions with any interested person. An
"interested person" is defined to include any individual or entity who is the
beneficial owner of 10% or more of the Common Stock. Such transactions are
prohibited, unless the transaction is approved by (i) the holders of two-thirds
of the outstanding shares of Common Stock and a majority of such shares not held
by the interested person, or (ii) a majority of the directors who are
unaffiliated with the interested person and who were directors prior to the time
the interested person became an interested person (or are successors to such
directors). Other requirements may also be applicable for certain transactions.

TRANSFER AGENT

ChaseMellon Shareholder Services, L.L.C. serves as the transfer agent of
the Company.

LEGAL MATTERS AND INTERESTS OF COUNSEL

The validity of the authorization and issuance of the securities offered
hereby will be passed upon for the Company by Bainbridge Group, a Law
Corporation, of Irvine, California. Bainbridge Group also provides ongoing legal
services for the Company. Michael E. Johnson, President of Bainbridge Group, is
a director of the Company and is the holder of options to purchase 10,000 shares
of common stock of the Company.

EXPERTS

The consolidated balance sheet of EIP Microwave, Inc. and subsidiary as of
September 30, 1997, and the consolidated statements of operations, stockholders'
equity (deficiency) and cash flows for the year then ended, have been included
herein and in the Registration Statement in reliance upon the report of
Meredith, Cardozo, Lanz & Chiu LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

The report of Meredith, Cardozo, Lanz & Chiu LLP covering the
aforementioned financial statements contains an explanatory paragraph. The
explanatory paragraph states the Company has incurred significant recent losses
from operations and will need to obtain additional financing to meet its
business plans for fiscal 1998 and beyond. These conditions raise substantial
doubt about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

The consolidated balance sheet of EIP Microwave, Inc. and subsidiaries as
of September 30, 1996, and the consolidated statements of operations and
retained earnings (accumulated deficit), stockholders' equity and cash flows for
the years ended September 30, 1996 and 1995, have been included herein and in
the Registration Statement in reliance upon the report of Price Waterhouse LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

The report of Price Waterhouse LLP covering the aforementioned financial
statements contains an explanatory paragraph. The explanatory paragraph states
the Company has incurred significant recent losses from operations and may need
to obtain additional financing to meet its business plans for fiscal 1998 and
beyond that raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

28
<PAGE>

CHANGE IN ACCOUNTANTS

The Company engaged Meredith, Cardozo, Lanz & Chiu LLP as its new
independent accountants as of October 9, 1997.

On October 9, 1997, EIP Microwave, Inc. (the "Company") dismissed Price
Waterhouse LLP as its independent accountants. The reports of Price Waterhouse
LLP on the financial statements for the years ended September 30, 1995 and 1996
contained no adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principle, except that
their reissued report on the financial statements for the year ended
September 30, 1996, which was dual dated December 23, 1996 and October 23, 1997
includes an explanatory paragraph to express substantial doubt regarding the
Company's ability to continue as a going concern. The Company's Audit Committee
participated in and approved the decision to change independent accountants. In
connection with its audits for the two most recent fiscal years and through
October 9, 1997, there have been no disagreements with Price Waterhouse LLP on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of Price Waterhouse LLP would have caused them to make
reference thereto in their report on the financial statements for such years.
Price Waterhouse LLP furnished the Company with a letter addressed to the
Securities and Exchange Commission stating that it agrees with the statements in
this paragraph.

INDEMNIFICATION

Under Delaware corporation law, a corporation is authorized to indemnify
officers, directors, employees and agents who are made or threatened to be made
parties to any civil, criminal, administrative or investigative suit or
proceeding by reason of the fact that they are or were a director, officer,
employee or agent of the corporation or are or were acting in the same capacity
for another entity at the request of the corporation. Such indemnification
includes expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such persons if they acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation or, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful. In the case of any action or suit by or in the right of the
corporation against such persons, the corporation is authorized to provide
similar indemnification, provided that, should any such persons be adjudged to
be liable for negligence or misconduct in the performance of duties to the
corporation, the court conducting the proceeding must determine that such
persons are nevertheless fairly and reasonably entitled to indemnification. To
the extent any such persons are successful on the merits in defense of any such
action, suit or proceeding, Delaware law provides that they shall be indemnified
against reasonable expenses, including attorney fees. A corporation is
authorized to advance anticipated expenses for such suits or proceedings upon an
undertaking by the person to whom such advance is made to repay such advances if
it is ultimately determined that such person is not entitled to be indemnified
by the corporation. Indemnification and payment of expenses provided by
Delaware law are not deemed exclusive of any other rights by which an officer,
director, employee or agent may seek indemnification or payment of expenses or
may be entitled to under any by-law, agreement, or vote of stockholders or
disinterested directors. In such regard, a Delaware corporation is empowered
to, and may, purchase and maintain liability insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation.

Article Ninth of the Company's Certificate of Incorporation eliminates, to
the fullest extent permitted by law, the personal liability of directors for
monetary damages in certain instances for breach of a director's fiduciary duty
of care. Article IX of the Company's Bylaws provides that (i) each director,
officer and employee of the Company shall be indemnified by the Company to the
fullest extent authorized by Delaware law subject to certain limitations,
(ii) each indemnitee is entitled to be paid by the Company for its expenses in
defending proceedings in advance of final determination, (iii) the right of
indemnification provided therein shall not be exclusive, (iv) the Company is
authorized to enter into contracts with any director, officer, employee or agent
of the Company which provide for indemnification equivalent to or greater than
provided in Article IX, and (v) the Company is required to maintain insurance to
the extent reasonably available to protect itself and any such director,
officer, employee or agent.

29
<PAGE>

mandatory indemnification protection in excess of that provided by Delaware
corporation law. The Indemnification Agreements provide certain procedures
relating to indemnification and advancement of expenses.

In addition, the Company currently carries limited insurance coverage for
its directors and officers. The Indemnification Agreements provide protections
beyond those currently available from the Company's existing director's and
officer's liability insurance.

As a result of the foregoing, the Company may, at some future time, be
legally obligated to pay judgments (including amounts paid in settlement) and
expenses in regard to civil or criminal suits or proceedings brought against one
or more of its officers, directors, employees or agents, as such, with respect
to the Company.

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.

30
<PAGE>

EIP MICROWAVE, INC.

Index to Financial Statements for the
Years ended September 30, 1997 and 1996

Contents Page

Report of Independent Auditors........................................... F-2

Report of Independent Accountants........................................ F-3

Financial Statements.....................................................

Consolidated Balance Sheets as of September 30, 1997 and 1996............ F-4

Consolidated Statements of Operations for the Years Ended
September 30, 1997, 1996 and 1995....................................... F-5

Consolidated Statements of Stockholders' Equity (Deficiency) for
the Years Ended September 30, 1997, 1996 and 1995....................... F-5

Consolidated Statements of Cash Flows for the Years Ended
September 30, 1997, 1996 and 1995....................................... F-6

Notes to Financial Statements........................................... F-7

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and
Stockholders of EIP Microwave, Inc.

We have audited the accompanying consolidated balance sheet of
EIP Microwave, Inc. and subsidiary as of September 30, 1997, and the related
consolidated statements of operations, stockholders' equity (deficiency), and
cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits. The consolidated financial statements of EIP Microwave, Inc. and
subsidiary as of September 30, 1996 and for the years ended September 30,
1996 and 1995 were audited by other auditors whose report as of October 23,
1997 included an explanatory paragraph that described conditions that raise
substantial doubt about the Company's ability to continue as a going concern.

We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated 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 audit provides 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
EIP Microwave, Inc. and subsidiary as of September 30, 1997, and the results
of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company has incurred significant recent
losses from operations and will need to obtain additional financing to meet
its business plans for fiscal 1998 and beyond. These conditions raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.

/s/ MEREDITH, CARDOZO, LANZ & CHIU LLP

MEREDITH, CARDOZO, LANZ & CHIU LLP
San Jose, California
November 20, 1997

F-2
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of EIP Microwave, Inc.

In our opinion, the accompanying consolidated balance sheets
and the related consolidated statements of operations, stockholders' equity
and cash flows present fairly, in all material respects, the financial
position of EIP Microwave, Inc. and its subsidiary at September 30, 1996 and
1995, and the results of their operations and their cash flows for each of
the three years in the period ended September 30, 1996, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company has incurred significant recent
losses from operations and may need to obtain additional financing to meet
its business plans for fiscal 1998 and beyond that raise substantial doubt
about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.

/s/ PRICE WATERHOUSE LLP

PRICE WATERHOUSE LLP
San Jose, California
December 23, 1996, except for the third paragraph of Note 1, the second
paragraph of Note 6 and Note 9, which are as of October 23, 1997.

F-3
<PAGE>

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data) September 30, September 30,
1997 1996

ASSETS

Current assets:
Cash and cash equivalents $ 250 $ 216
Short-term investments 30 324
--------------------------
280 540

Accounts receivable, net 405 686
Inventories 1,023 1,067
Prepaid expenses 62 59
--------------------------
Total current assets 1,770 2,352

Property and equipment, net 590 631
--------------------------
$2,360 $2,983
--------------------------
--------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
Accounts payable $ 401 $ 706
Accrued liabilities 629 546
Advanced payments from customers - 190
Bank borrowings 296 185
Notes payable to affiliates 400 -
Current portion of obligations under
capital leases 34 34
--------------------------
Total current liabilities 1,760 1,661
--------------------------

Long term notes payable to affiliates 600 -
Long term obligations under capital leases 63 95
--------------------------
Total liabilities 2,423 1,756
--------------------------

Commitments and contingencies (Note 5)

Stockholders' equity (deficiency):
Common stock, $.01 par value;
authorized -10,000,000 shares;
424,907 issued and outstanding 5 5
Additional paid-in capital 848 848
Retained earnings (accumulated deficit) (916) 374
--------------------------
Total stockholders' equity (deficiency) (63) 1,227
--------------------------
$2,360 $2,983
--------------------------
--------------------------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

F-4
<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended September 30, 1997 1996 1995
(In thousands except per share data)

<S> <C> <C> <C>
Net sales $ 4,739 $ 6,492 $ 6,721
-------------------------------------

Cost and expenses:
Cost of sales 2,955 4,064 3,646
Research, development and engineering 996 978 742
Selling, general and administrative 2,005 2,084 2,289
Interest and other, net 73 (141) (81)
-------------------------------------
Total costs and expenses 6,029 6,985 6,596
-------------------------------------

Net income (loss) before income tax (1,290) (493) 125
Income tax provision - - -
-------------------------------------
Net income (loss) $(1,290) $ (493) $ 125
-------------------------------------
-------------------------------------

Net income (loss) per share $ (3.04) $ (1.16) $ 0.30
-------------------------------------
-------------------------------------

Weighted average common shares outstanding 425 423 423
-------------------------------------
-------------------------------------

<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
Retained
Additional Earnings
Common Stock Paid-in (Accumulated
(Dollars in thousands) Shares Amount Capital Deficit) Total

<S> <C> <C> <C> <C> <C>
Balance at September 30, 1994 423,307 $ 5 $ 844 $ 742 $1,591
Net income - - - 125 125
-------------------------------------------------------

Balance at September 30, 1995 423,307 5 844 867 1,716
Stock issues 1,600 - 4 - 4
Net income - - - (493) (493)
-------------------------------------------------------

Balance at September 30, 1996 424,907 5 848 374 1,227
Net income - - - (1,290) (1,290)
-------------------------------------------------------

Balance at September 30, 1997 424,907 $ 5 $ 848 $ (916) $ (63)
-------------------------------------------------------
-------------------------------------------------------

</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

F-5
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash

For the years ended September 30, 1997 1996 1995
(Dollars in thousands)

<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,290) $ (493) $ 125
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 167 147 220
(Gain) loss on the sale of capital equipment (118) (50) (146)
Change in assets and liabilities:
Accounts receivable, net 281 378 (350)
Inventories 44 66 (149)
Prepaid expenses and other assets (3) 45 (36)
Accounts payable (305) 96 83
Accrued liabilities 83 (130) 65
Advanced payments from customers (190) 190 -
----------------------------
Cash provided by (used in) operating activities (1,331) 249 (188)
----------------------------

Cash flows from investing activities:
Purchase of short-term investments - (213) (11)
Sale of short-term investments 294 208 -
Capital expenditures (168) (394) (41)
Proceeds from the sale of capital equipment 160 61 155
----------------------------
Cash (used in) provided by investing activities 286 (338) 103
----------------------------

Cash flows from financing activities:
Proceeds from bank borrowings 111 185 -
Proceeds from notes payable to affiliates 1,000 - -
Proceeds from sales of common stock to employees - 4 -
Repayment of obligations under capital leases (32) (10) -
----------------------------
Cash provided by financing activities 1,079 179 -
----------------------------

Increase (decrease) in cash and equivalents 34 90 (85)
Cash and equivalents at beginning of period 216 126 211
----------------------------
Cash and equivalents at end of period $ 250 $ 216 $ 126
----------------------------
----------------------------

Supplemental information:

Interest paid $ 31 $ 13 $ 1
Equipment acquired pursuant to capital leases - $ 124 -

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

F-6
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997

NOTE 1. THE COMPANY AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY

The Company is engaged in a single industry segment constituting the
development, manufacture, and sale of high frequency microwave and radio
frequency (RF) test and measurement instruments. The Company's standalone
microwave frequency counters represented 53% of net sales in 1997, 50% of net
sales in 1996, and 64% of net sales in 1995. Substantially all of its
activities are conducted in the United States, and the Company has no foreign
manufacturing operations nor material amounts of foreign assets. Export
sales, principally to customers in Western Europe and Pacific Rim countries,
as a percent of net sales were approximately 30% in 1997, 36% in 1996, and
43% in 1995. Profit margins are similar on foreign and domestic sales.
Direct sales to the United States government and its contractors as a percent
of net sales were approximately 40% in 1997 (20% to one government
subcontractor), 33% in 1996 (22% to one government subcontractor), and 36% in
1995 (11% to one government subcontractor).

LIQUIDITY

As shown in the accompanying consolidated financial statements, the
Company incurred a loss from operations for the year ended September 30, 1997
of $1,290,000 and has experienced significant fluctuations in operating
results in the past. The fiscal 1998 operating plan includes the release of
a new frequency measurement product and other new products. To the extent
that product development is delayed or the new product introductions do not
achieve sufficient market acceptance, the Company's financial position and
results of operations will be adversely impacted. The Company's fiscal 1998
operating plan also assumes additional financing will be necessary to fund
its 1998 operations (see notes 6 and 7).

The Company has incurred significant recent losses from operations and
additional financing will be required for the Company to meet its business
plan for fiscal 1998 and beyond. There can be no assurance that the Company
will not incur additional losses until its recently introduced and existing
products generate significant revenues. The accompanying consolidated
financial statements have been prepared assuming the Company will continue as
a going concern. The Company's business plan for fiscal 1998 involves three
key operating objectives: (1) increasing the manufacture and shipment of
microwave frequency counters to Hewlett-Packard Company for distribution on a
private label basis worldwide through an OEM relationship; (2) completing
field testing of the Company's RF synthesized signal generators and RF down
converters under its five-year indefinite quantity, fixed price subcontract
with ManTech Systems Engineering Corporation, and preparing for shipment of
production quantities of these products in the fourth fiscal quarter of 1998;
and (3) completing current development efforts and introducing new test
instrumentation for the wireless telecommunications market. Management
believes that it can successfully implement these key operating objectives.
The Company's ability to generate sufficient cash to support its business
plan during the 1998 fiscal year depends on the ability of management to
obtain additional debt and equity financing, through the Rights Offering and
other capital sources. Management is currently pursuing additional debt
financing. If the Company is unable to obtain such financing, it will be
required to reduce discretionary spending in order to maintain its operations
at a reduced level. Management believes that it will be able to reduce
discretionary spending if required. The accompanying financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.

PRINCIPLES OF CONSOLIDATION

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

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.

F-7
<PAGE>

SHORT-TERM INVESTMENTS

Short-term investments, consisting of publicly traded preferred stocks
and government bonds, are stated at fair value. The Company has adopted
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"). SFAS 115 requires
companies to classify investments in debt and equity securities with readily
determinable fair values as "held-to-maturity", "available for sale", or
"trading" and establishes accounting and reporting requirements for each
classification. The Company classifies all securities held as available for
sale. Securities classified as available for sale are reported at their fair
market value with unrealized gains and losses reported as a separate
component of stockholders' equity. Such unrealized gains and losses were
immaterial as of September 30, 1997 and 1996. The Company's government bonds
have a maturity of one year or less. Publicly traded preferred stocks are
considered highly liquid and are classified as short-term investments.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, cash equivalents
and short-term investments and trade accounts receivable. The Company places
its cash, cash equivalents and short-term investments in a variety of
financial instruments such as certificates of deposit and marketable equity
securities.

The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its
customers. The Company maintains an allowance for uncollectible accounts
receivable based upon the expected collectibility of all accounts receivable
balances. At September 30, 1997, the accounts receivable balances from three
customers represented 14%, 12%, and 8% of net trade receivables.

INVENTORIES

Inventories are stated at the lower of standard cost, which approximates
actual cost (determined on a first-in, first-out basis), or market.

PROPERTY AND EQUIPMENT

Purchased property and equipment are stated at cost and are depreciated
using the straight-line method over lives ranging from three to eight years.
Self-constructed demonstrator products are stated at their standard
manufacturing cost.

REVENUE RECOGNITION AND WARRANTY

Sales are recognized at the time of shipment provided no significant
obligations remain and collectibility is probable. The Company provides for the
estimated costs of fulfilling its warranty obligation at the time the related
sale is recorded.

INCOME TAXES

The Company utilizes an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequence of events that have been recognized in the Company's financial
statements or tax returns.

NET INCOME (LOSS) PER SHARE

The calculation of net income (loss) per share is based upon the weighted
average number of common and common equivalent shares outstanding during the
year. As a result of the losses incurred in fiscal 1997 and 1996, the common
equivalent shares were antidilutive and, accordingly, were excluded from the
computation of loss per share for those years. Common stock equivalents were
not materially dilutive for the year ended September 30, 1995.

F-8
<PAGE>

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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS.

In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Only the disclosure requirements of this standard were adopted
by EIP for the year ending September 30, 1997, and therefore there was no impact
on EIP's consolidated financial position or results of operations.

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
SFAS 128 which is effective for the Company's fiscal year ending September 30,
1998, redefines earnings per share under generally accepted accounting
principles. Under the new standard, primary earnings per share is replaced by
basic earnings per share, and fully diluted earnings per share is replaced by
diluted earnings per share. The adoption of SFAS 128 is not expected to have a
material impact on the Company since earnings per share reported under
Accounting Principles Board Opinion No. 15 approximates diluted earnings per
share, which will be reported under SFAS 128.

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Standards No. 129 ("SFAS 129"), "Disclosure of Information about
Capital Structure", SFAS 129 requires disclosure of certain information related
to the Company's capital structure and is not anticipated to have a material
impact on the Company's financial position or results of operations.

In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income."
SFAS 130 establishes standards for reporting comprehensive income and its
components in a financial statement that is displayed with the same prominence
as other financial statements. Comprehensive income as defined includes all
changes in equity (net assets) during a period from nonowner sources. Examples
of items to be included in comprehensive income, which are excluded from net
income, include foreign currency translation adjustments and unrealized
gain/loss on available-for-sale securities. The disclosure prescribed by SFAS
must be made beginning with the first quarter of 1998.

In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information". This statement establishes standards for
the way companies report information about operating segments in annual
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The Company
has not yet determined the impact, if any, of adopting this new standard. The
disclosures prescribed by SFAS 131 are effective in 1998.

F-9
<PAGE>

NOTE 2. CONSOLIDATED BALANCE SHEET DETAIL

(Dollars in thousands) September 30,
1997 1996
Accounts receivable:
Trade $ 455 $ 736
Less - allowance for doubtful accounts (50) (50)
----------------------
$ 405 $ 686
----------------------
----------------------

Inventories:
Raw materials $ 531 $ 719
Work-in-process 452 320
Finished goods 40 28
----------------------
$ 1,023 $ 1,067
----------------------
----------------------

Property plant and equipment:
Machinery and equipment $ 3,093 $ 3,121
Computer equipment and software 1,047 1,054
Demonstrator equipment 306 337
Furniture, fixtures and other fixed assets 865 807
----------------------
5,311 5,319
Less: accumulated depreciation (4,721) (4,688)
----------------------
$ 590 $ 631
----------------------
----------------------

Accrued liabilities:
Salaries, wages and benefits $ 297 $ 215
Board of Directors fees and expenses 116 77
Legal and accounting 89 14
Accrued interest - affiliates 49 -
Commissions 25 83
Warranty 21 53
Other 32 104
----------------------
$ 629 $ 546
----------------------
----------------------

NOTE 3. EMPLOYEE BENEFIT PLANS

RETIREMENT PLAN

The Company has a Retirement/Savings Plan which qualifies as a thrift plan
under Section 401(k) of the Internal Revenue Code. All employees who have
completed three months of service on or before the semiannual entry period are
eligible to participate in the Retirement Plan. The Retirement Plan allows
participants to contribute up to 12% of their earnings to the Retirement Plan
and deduct this amount from their wages for federal income tax purposes. The
Company will contribute 50 cents for each dollar contributed by the employee up
to 3% of total wages. Company contributions in fiscal years 1997, 1996, and
1995, totaled $39,000, $49,000, and $38,000, respectively.

INCENTIVE COMPENSATION

The Company has an incentive compensation plan which provides for awards of
bonuses to officers and key employees based principally on achieving stipulated
Company financial objectives. In making specific awards, consideration is given
to the individual's contribution to the success of the Company, to the success
and performance of the unit or department of which the individual is a member,
and to the achievement of individual performance goals established at the
beginning of the fiscal year. The formula for computing bonuses has been
subject to annual modification and may in the future be again modified at the
discretion of the Board of Directors. No bonuses were awarded for fiscal years
1997 and 1996. Bonuses of $61,000 were awarded for fiscal 1995 results.

F-10
<PAGE>

STOCK APPRECIATION RIGHTS PLAN

On November 11, 1992, the Board of Directors adopted a Stock Appreciation
Rights Plan ("SAR Plan"). The SAR Plan provides for the award of appreciation
rights ("SARs") to officers and key management employees of the Company
entitling such participants to receive the increase, if any, in the value of one
share of Company common stock from the date of the award to the date(s) of
valuation established at the time of the award. Generally, SARs are deemed
vested in five equal annual installments. Each award vested will be paid in
cash on a scheduled payment date. During fiscal 1997, 1996, and 1995, no SARs
were awarded. A total of 760, 2,760, and 2,760 SARs were vested during fiscal
1997, 1996, and 1995, respectively. A total of 4000, and 960 SARs were canceled
during fiscal 1997 and 1995, respectively, leaving an aggregate of 760 SARs
outstanding at September 30, 1997. The Company accrues a compensation liability
over the vesting period based on the increase in the market value of the common
stock over the award price. The liability recorded in fiscal 1997, 1996 and
1995 was $2,000, $8,000 and $20,000, respectively.

STOCK OPTION PLAN

FASB Statement 123, "Accounting for Stock-Based Compensation", requires the
Company to provide pro forma information regarding net income and earnings per
share as if compensation cost for the Company's stock option plans had been
determined in accordance with the fair value based method prescribed in FASB
Statement 123. The Company estimates the fair value of stock options at the
grant date by using the Black-Scholes option pricing-model with the following
weighted average assumptions used for grants in 1996, 1995, and 1994,
respectively: dividend yield of 0; expected volatility of 211%, 198%, and 139%;
risk-free interest rates of 5.79%, 5.73%, and 5.72%; and expected lives of four
years for the plan options.

Under the accounting provisions of FASB Statement 123, the Company's net
(loss) income and (loss) earnings per share would have been increased/reduced to
the pro forma amounts indicated below. Pro forma results for 1997 may not be
indicative of pro forma results in future periods because the pro forma amounts
do not include pro forma compensation cost for options granted prior to October
1, 1996.

September 30,
-----------------------------------------------
1997 1996 1995
------------- ------------- ----------

Net (loss) income:
As reported $ (1,290,000) $ (493,000) $ 125,000
------------- ------------- ----------
------------- ------------- ----------
Pro forma $ (1,311,000) $ (493,000) $ 125,000
------------- ------------- ----------
------------- ------------- ----------
Primary (loss) earnings
per share:
As reported $ (3.04) $ (1.16) $ 0.30
------------- ------------- ----------
------------- ------------- ----------
Pro forma $ (3.08) $ (1.16) $ 0.30
------------- ------------- ----------
------------- ------------- ----------

F-11
<PAGE>

A summary of the status of the Company's stock option plan as of September 30,
1997, 1996, and 1995, and changes during the years ended on those dates is
presented below:

Options Outstanding
--------------------------------------------------------------------------------
September 30, 1997 September 30, 1996 September 30, 1995
------------------- ------------------ ------------------
Weighted-Average Weighted-Average Weighted-Average

Shares Exercise Price Shares Exercise Price Shares Exercise Price
------- -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 95,400 $ 3.039 59,500 $ 2.375 -- $ --
Granted 50,000 4.750 37,500 4.030 59,500 2.375
Exercised -- -- (1,600) 2.375 -- --
Cancelled (13,000) 2.721 -- -- -- --
------- -------- ------ -------- ------ --------

Outstanding at
end of year 132,400 $ 3.727 95,400 $ 3.039 59,500 $ 2.375
------- -------- ------ -------- ------ --------
------- -------- ------ -------- ------ --------

Options exercisable
at year-end 49,765 24,299 --
------- ------ ------
------- ------ ------

Weighted-average
fair value of
options granted
during the year $ 4.750 $ 4.030 $ 2.375
-------- -------- --------
-------- -------- --------

<CAPTION>
The following table summarizes information about stock options outstanding at September 30, 1997:

Options Outstanding Options Exercisable
-------------------------------------------------------------- ------------------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at 9/30/97 Contractual Life Exercise Price at 9/30/97 Exercise Price
- --------------- ------------ ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$2.375 47,900 7.5 Years $ 2.375 29,532 $ 2.375
$3.875 19,500 8.3 Years $ 3.875 11,900 $ 3.875
$4.263 15,000 8.3 Years $ 4.263 5,000 $ 4.263
$4.750 50,000 9.1 Years $ 4.750 3,333 $ 4.750
------- -------- ------ --------
132,400 $ 3.707 49,765 $ 3.082
------- -------- ------ --------
------- -------- ------ --------
</TABLE>

NOTE 4. INCOME TAXES

Deferred tax assets (liabilities) are summarized as follows:

(Dollars in thousands) 1997 1996 1995

Net operating loss carryforwards $ 1,613 $ 1,104 $ 1,016
Tax credit carryforwards 124 106 106
Inventory and other valuation reserves 229 221 190
---------------------------
Gross deferred tax asset 1,966 1.431 1,312
---------------------------
Gross deferred tax liability - - -
---------------------------
Deferred tax asset valuation allowance 1,966 (1,431) (1,312)
---------------------------
Net deferred tax asset $ - $ - $ -

F-12
<PAGE>

The Company provides a valuation allowance for deferred tax assets when it
is more likely than not that some portion or all of the deferred tax asset will
not be realized.

The U.S. net operating loss carryforward of approximately $4,400,000 at
September 30, 1997, expires by fiscal year 2011 if not offset against taxable
income. The amount of and the benefit from net operating losses that can be
carried forward may be impaired in certain circumstances. Events which may
cause changes in the Company's tax carryovers include, but are not limited to, a
cumulative ownership change of more than 50% over a three-year period.

NOTE 5. COMMITMENTS AND CONTINGENCIES

The Company has signed a lease for 20,331 square feet in a building located
in Milpitas, California, for an initial term of three years ending October 31,
1998. The lease provides for rentals of $226,000 and $19,000 for fiscal years
1998 and 1999 plus applicable real property taxes and insurance, and contains
one three year renewal option. Future lease commitments for the next five
fiscal years for all other leases as of September 30, 1997 were as follows (in
thousands):

Fiscal Year Ending September 30, Capital Leases Operating Leases
-------------------------------- -------------- ----------------

1998 $ 40 $ 33
1999 28 24
2000 26 22
Thereafter 21 19
----- -----
Total minimum lease payments 115 $ 98
-----
-----
Less amount representing interest (18)
-----
Present value of minimum lease payments 97
Less current portion (34)
-----
Long-term lease obligation $ 63
-----
-----

The Company also leases certain equipment on a month-to-month basis. Total
rental expense under all operating leases was $254,000, $258,000, and $300,000,
in fiscal years 1997, 1996, and 1995, respectively.

On October 1, 1995, the Company entered into an Employment Agreement (the
"Agreement") with John F. Bishop, Vice-Chairman of the Board, Treasurer, and
Secretary of the Company, whereby Mr. Bishop will provide his services for a
monthly salary of $6,500 for an initial term of two years. On the first day of
each month, the initial term is automatically extended for an additional month,
unless either party notifies the other in writing of his or its desire not to
extend the term. In the event the Company elects not to extend the term or
there is a change in control of the Company (the date of such event is referred
to as the "Transition Date"), Mr. Bishop will continue to perform services for
the Company for a three month transition period and the Company would maintain
his compensation and other benefits for the three month transition period and an
additional twenty-one months. Effective January 1, 1997, Mr. Bishop has agreed
to reduce his monthly salary to $3,250 until the Transition Date. The Agreement
also allows Mr. Bishop the use of an automobile and the right to receive title
to the automobile, arising out of his agreement to forgo $56,846 of salary in
prior years. Maintenance, insurance and gasoline costs for the automobile and
an office location are also part of the Agreement. The corporate office is
currently located in Newport Beach, California, leased at a monthly rate of
$1,320 on a month-to-month basis.

NOTE 6. BANK BORROWINGS

At September 30, 1996, the Company had a bank line of credit ("line") which
provided for borrowings up to $500,000, not to exceed 60% of eligible accounts
receivable. The balance outstanding was $185,000 as of September 30, 1996. The
line bears interest at the bank's prime rate plus 3% per annum, provided that
the interest rate in effect each month shall not be less than 10% per annum, and
is payable monthly (11.25% as of September 30, 1996). The line contains various
restrictive covenants requiring, among other matters, the maintenance of minimum
levels of tangible net worth and profitability and certain financial ratios,
including minimum quick ratio and maximum debt to net worth ratio. The line
also precludes or limits the Company in taking certain actions, such as paying
dividends,

F-13
<PAGE>

making loans, making acquisitions or incurring indebtedness, without the bank's
prior written consent. The line is secured by substantially all of the
Company's assets. As of November 15, 1996, the bank extended the maturity date
of the line to January 15, 1997 and amended certain restrictive covenants, but
limited borrowings to the $185,000 outstanding.

On January 15, 1997, the bank line was revised to provide for borrowings up
to $500,000. At September 30, 1997, the outstanding borrowings were $296,000.
As of October 23, 1997, the Company was not in compliance with the restrictive
covenants of the line, as so amended. In the event that the Company is unable
to maintain compliance with financial covenants, J. Bradford Bishop, the
Chairman and Chief Executive Officer of the Company, and John F. Bishop, the
Vice Chairman, Treasurer and Secretary of the Company (the "Bishops") have
agreed to finance up to $500,000 of working capital (in addition to funds
provided under the subordinated loan facility (note 7)) on terms acceptable to
the Bishops and the Company to replace the line of credit.

NOTE 7. SUBORDINATED LOAN AGREEMENT AND BRIDGE LOANS

The Company entered into a Subordinated Loan Agreement dated as of December
16, 1996 with J. Bradford Bishop, Chairman and Chief Executive Officer of the
Company, and John F. Bishop, Vice Chairman, Treasurer and Secretary of the
Company (together, the "Bishops"). The Bishops advanced $600,000 to the Company
under the Subordinated Loan Agreement. Interest accrued thereon at 8% per
annum, payable quarterly. In connection with the Subordinated Loan Agreement,
the Company issued warrants to the Bishops to purchase 90,000 shares of Common
Stock at $3.00 per share. The Subordinated Loan Agreement terminated on October
15, 1997, and all obligations thereunder were repaid in full on such date with
the proceeds from the Loan Facility with the Bishop Family Trust (Note 8). As
consideration for the early repayment of such obligations, the warrants issued
to the Bishops were canceled on October 15, 1997.

The Company has received several bridge loans from the Bishops payable on
demand (the "Bridge Loans"), which amounted to $400,000, plus interest, on
September 30, 1997. Interest accrued thereon at 10% per annum. The principal
amount of the Bridge Loans were repaid in full on October 15, 1997, with the
proceeds from the Loan Facility with the Bishop Family Trust.

NOTE 8. SUBSEQUENT EVENT

On October 15, 1997, the Company entered into a loan and security agreement
(the "Loan Facility") with John F. Bishop and Ann R. Bishop, trustees of the
Bishop Family Trust (the "Bishop Family Trust"). The Loan Facility provides for
a term loan of $1,000,000 and revolving advances up to $450,000. Interest is
charged at the prime rate plus 5% and is payable monthly (13.5% as of October
15, 1997). The Loan Facility expires on October 15, 1998. The Loan Facility
contains various restrictive covenants requiring, among other matters, the
achievement of profitability on a rolling 3-month basis commencing in August
1998, and the maintenance of minimum revenues from its OEM relationship
commencing in January 1998. The Bishop Family Trust also precludes or limits
the Company's ability to take certain actions, such as paying dividends, making
loans, making acquisitions or incurring indebtedness, without the Bishop Family
Trust's prior written consent. The Loan Facility is secured by substantially
all of the Company's assets. The Bishop Family Trust has subordinated the Loan
Facility to the Bank Line. At October 15, 1997, the Company was in compliance
with the restrictive covenants of the Loan Facility.

Under the terms of the Loan Facility, the Company will be obligated to pay
facility fees of up to $282,000 to the Bishop Family Trust in the manner
described below.

A. A facility fee of $70,500 was fully earned on October 22, 1997 and
will be payable by the Company on January 22, 1998.

F-14
<PAGE>

Future performance and levels of capital expenditures could reduce the
total amount of funds available under the Bank Line and the Loan Facility at any
given time.

NOTE 9. BOARD OF DIRECTORS' FEES

During fiscal 1996, the Board of Directors waived fees owed to them by the
Company totaling $112,000. The reversal of previously accrued fees was included
in "Interest and other, net" cost and expenses in the statement of operations,
and thereby reduced the net loss for the year ended September 30, 1996.

F-15
<PAGE>

APPENDIX I

FORM OF SUBSCRIPTION AGREEMENT

(PLEASE CAREFULLY REVIEW THE ATTACHED INSTRUCTIONS)

EIP Microwave, Inc.
Subscription Agreement

This Subscription Agreement (the "Subscription Agreement") represents a
subscription to acquire the number of shares (the "Shares") of common stock of
EIP Microwave, Inc. (the "Company") set forth below at a subscription price of
$1.00 per share for the total subscription price set forth below. The
registered owner named below is entitled to subscribe for the Shares pursuant to
subscription rights granted to stockholders upon the terms and conditions set
forth in the related Prospectus. For each Share subscribed for, the
subscription price of $1.00 must be forwarded directly to EIP Microwave, Inc.

The subscription rights expire at 5:00 p.m., California time, on
January 5, 1998, unless extended by the Company. No subscription agreements
will be accepted thereafter.

Stockholder Name: _________________________

Stockholder Address: _________________________

Number of shares owned
by Stockholder on
November 7, 1997: _________________________

Number of shares subject
to Basic Subscription Rights:
(number of shares shown
above x 14) _________________________

SECTION 1 - Subscription and Signature

I hereby irrevocably subscribe for the number of Shares indicated below, on
the terms specified in the related Prospectus.

A. Basic Subscription: _____________ shares
B. Over-Subscription: _____________ shares (No more than
5,948,698 less
the number
subscribed for
in A.)
C. Total subscription (A + B): _____________ shares
D. Total cost (C x $1.00): $____________

Signature of Telephone
Stockholder: ______________________________ Number: (____)________________

SECTION 2 - Address for delivery of stock certificate if different from above.
_____________________________________
_____________________________________
_____________________________________

A-1
<PAGE>

INSTRUCTIONS FOR USE OF SUBSCRIPTION AGREEMENT
----------------------
CONSULT THE INFORMATION AGENT, YOUR
BANK OR BROKER AS TO ANY QUESTIONS

Each stockholder of EIP Microwave, Inc. (the "Company") has the right to
subscribe for fourteen Shares for each full share of common stock of the
Company (the "Basic Subscription Rights") owned of record at the close of
business on November 7, 1997 (the "Record Date"). The number of Shares you
are entitled to subscribe for appears on the front of the Subscription
Agreement or can be calculated by multiplying the number of shares of common
stock owned of record on the record date by fourteen. The subscription price
is $1.00 for each Share. You may also subscribe for Shares pursuant to an
over-subscription privilege (the "Over-Subscription Privilege"). To exercise
your rights, you must complete the appropriate sections of the Subscription
Agreement. If you wish to exercise your rights for the Over-Subscription
Privilege, you must do so by no later than 5:00 p.m., California time, on
January 5, 1998, unless extended by the Company. Rights may be exercised only
through the Company.

To exercise your rights please complete and return the Subscription
Agreement.

1. Complete "SECTION 1--Subscription and Signature."

A. Basic Subscription Rights. Enter the number of shares you intend to
purchase under your Basic Subscription Rights. The maximum number of
shares you may purchase on basic subscription appears on the front of
the Subscription Agreement or can be calculated by multiplying the
number of shares of common stock owned of record on the record date by
fourteen.

B. Over-Subscription Privilege. Enter the number of shares you desire to
purchase under your Over-Subscription Privilege. The
Over-Subscription Privilege is available only if you exercised all of
your Basic Subscription Rights. The maximum number of shares that you
can purchase pursuant to the Over-Subscription Privilege is 5,948,698
shares less the number of shares you purchased on Basic Subscription
Rights. The number of shares that will actually be purchased by you
will be subject to allotment if there are not enough shares remaining
after the Basic Subscription Rights to completely fill all requests
for purchases on over-subscription.

C. Total Subscription. Enter the total number of shares you want to
purchase in the offer. This number is the sum of the number of shares
you are purchasing on Basic Subscription Rights plus the number of
shares you desire to purchase under the Over-Subscription Privilege.

D. Total cost. Enter the total cost of your subscription. Your total
cost is the dollar number obtained when you multiply the number of
shares shown under total subscription by $1.00, the subscription price
per share.

2. Sign the Subscription Agreement in the space provide at the bottom of
Section 1. Include your daytime telephone number in the space provided.

3. Enclose the executed Subscription Agreement, together with a check or money
order made payable to "EIP Microwave, Inc." in the amount of the total cost
(Item D. of Section 1) in the envelope provided. If you use your own
envelope, address it to EIP Microwave, Inc., 1745 McCandless Drive,
Milpitas, California 95035-8024. You may also personally deliver your
Subscription Agreement and payment to EIP Microwave, Inc., at the same
address.

4. Mail or deliver your executed Subscription Agreement and payment for the
total cost on a timely basis so that it is received by the Company by no
later than 5:00 p.m., California time, on January 5, 1998 unless extended
by the Company (such date, as it may be extended on one or more occasions,
is referred to herein as the "Expiration Date"). If the Company has not
received your Subscription Agreement and payment for the total cost by 5:00
p.m., California time, on the Expiration Date, you will not be entitled to
purchase shares pursuant to the rights. Accordingly, if you are sending
your executed Subscription Agreement and payment by mail, please allow
sufficient time for them to be received by the Company prior to 5:00 p.m.,
California time, on the Expiration Date.

A-2
<PAGE>

The Rights Offering is being made on any or all basis, which means that the
Company may accept any subscription received even if all 5,948,698 Shares
offered are not subscribed for in the Rights Offering. J. Bradford
Bishop, Chairman and Chief Executive Officer of the Company, and John F.
Bishop, Vice Chairman, Secretary and Treasurer of the Company, both of whom
are principal stockholders and members of the Board of Directors of the
Company, have committed to the Company that they will purchase $1,360,000
in Common Stock by exercise of Rights distributed to them if other
stockholders purchase at least $800,000 in Common Stock upon exercise of
Rights distributed to them.

The Company reserves the right to reject any subscription agreement and
payment not properly submitted. The Company has no duty to give
notification of defects in any subscription agreement and/or payment and
will have no liability for failure to give such notification. The Company
will return any subscription agreement and/or payment not properly
submitted.

Stockholders should carefully review the related Prospectus prior to making
an investment decision with respect to the rights referred to in this
Subscription Agreement.

5. Information Agent. The address, telephone and telecopier numbers of the
Information Agent are as follows:

Corporate Investor Communications, Inc. ("CIC")
111 Commerce Road
Carlstadt, NJ 07072-2586
Telephone: (201) 896-1900
or Toll Free: (800) 631-8985
Telecopier: (201) 896-0910

A-3
<PAGE>

PART II

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Consistent with Article IX of the Company's Bylaws, the Company has entered
into individual Indemnification Agreements with its directors and officers. The
Indemnification Agreements, among other things, provide mandatory
indemnification protection in excess of that provided by Delaware corporation
law. The Indemnification Agreements provide certain procedures relating to
indemnification and advancement of expenses.

To the extent of the indemnification rights provided by the Delaware
statutes and provided by the Company's charter, bylaws and indemnification
agreements, and to the extent of the Company's abilities to meet such
indemnification obligations, the officers, directors and agents of the Company
would be beneficially affected.

II-1
<PAGE>

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following are all expenses of this issuance and distribution. There are
no underwriting discounts or commissions.

- -------------------------------------------------------
Item Amount (1)
- -------------------------------------------------------
SEC Registration fees $1,263
- -------------------------------------------------------
Blue sky fees $4,000
- -------------------------------------------------------
Printing $10,000
- -------------------------------------------------------
Transfer Agent $1,000
- -------------------------------------------------------
Information Agent $7,000
- -------------------------------------------------------
Legal $95,000
- -------------------------------------------------------
Accounting $15,000
- -------------------------------------------------------
Miscellaneous $6,737
- -------------------------------------------------------
TOTAL $140,000
- -------------------------------------------------------

(1) Estimate

RECENT SALES OF UNREGISTERED SECURITIES

On April 10, 1997 the Company issued warrants to purchase 90,000 shares
of its Common Stock to John F. Bishop and J. Bradford Bishop (together, the
"Bishops") in consideration for the loan of $600,000 by the Bishops to the
Company pursuant to the Subordinated Loan Agreement. These warrants were
canceled on October 15, 1997. See "Interests of Management and Others in
Certain Transactions--Subordinated Loan."

The Company issued debt securities to Silicon Valley Bank evidencing cash
loans of up to $500,000. See "The Company--Bank Line." The Company also
issued debt securities to the Bishops evidencing cash loans of up to $1,000,000,
and such loans have been repaid with the proceeds of the Bishop Family Trust
Loan Facility. See "Interests of Management and Others in Certain
Transactions--Subordinated Loan" and "--Bridge Loans." In addition, the Company
issued debt securities to the Bishop Family Trust evidencing cash loans through
November 7, 1997 of $1,350,000. See "The Company--Bishop Family Trust Loan
Facility." No underwriting discounts or commissions were paid in connection
with the issuance of the foregoing debt securities.

The securities were not registered under the Securities Act of 1933 in
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act or by Regulation D of the Commission.

II-2
<PAGE>

EXHIBITS

Filed as part of this Form SB-2 Registration Statement or incorporated by
reference are the following exhibits.

Exhibit
Number

3(a) Company's Certificate of Incorporation, filed on April 29, 1987,
and Certificate of Amendment of Certificate of Incorporation,
filed February 8, 1993, previously filed on February 12, 1993, as
Exhibit 3(a) to Form 10-QSB Quarterly Report for quarter ended
December 31, 1992, and incorporated herein by reference.

3(b) Company's Bylaws, previously filed June 25, 1987 (File No.
0-5351), as Exhibit 3(b) to Form 8-K, and incorporated herein by
reference.

5(a) Opinion of Bainbridge Group, a Law Corporation, as to the
legality of the securities covered by the Form SB-2 Registration
Statement.

10(a) Standard Form Lease dated August 18, 1995, by and between Berg &
Berg Developers, as landlord, and the Company, as tenant,
covering the Company's manufacturing facility located at 1745
McCandless Drive, Milpitas, California, previously filed on
December 29, 1995, as Exhibit 10(a) to Form 10-KSB Annual Report
for fiscal year ended September 30, 1995 (the "1995 Annual
Report"), and incorporated herein by reference.

10(b) Loan and Security Agreement dated March 10, 1992, between the
Company and Silicon Valley Bank, previously filed on May 14,
1992, as Exhibit 10(a) to Form 10-Q Quarterly Report for quarter
ended March 31, 1992, and incorporated herein by reference.

10(c) Amendment to Loan Agreement dated December 20, 1994, between the
Company and Silicon Valley Bank, previously filed on December 29,
1994, as Exhibit 10(h) to the 1994 Annual Report, and
incorporated herein by reference.

10(d) Loan Modification Agreement dated as of November 27, 1995,
between the Company and Silicon Valley Bank, previously filed on
December 29, 1995, as Exhibit 10(i) to the 1995 Annual Report,
and incorporated herein by reference.

10(e) Loan Modification Agreement dated as of June 28, 1996, between
the Company and Silicon Valley Bank, previously filed on August
13, 1996, as Exhibit 10(a) to Form 10-QSB Quarterly Report for
quarter ended June 30, 1996, and incorporated herein by
reference.

10(f) Loan Modification Agreement dated as of November 15 , 1996
between the Company and Silicon Valley Bank, previously filed on
December 30, 1996, as Exhibit 10(f) to Form 10-KSB Annual Report
for fiscal year ended September 30, 1996 (the "1996 Annual
Report"), and incorporated herein by reference.

10(g) Loan Modification Agreement dated as of January 15, 1997, between
the Company and Silicon Valley Bank, previously filed on May 13,
1997, as Exhibit 10(a) to Form 10-QSB Quarterly Report for
quarter ended March 31, 1997, and incorporated herein by
reference.

10(h) Loan Modification Agreement dated as of March 5, 1997, between
the Company and Silicon Valley Bank, previously filed on May 13,
1997, as Exhibit 10(a) to Form 10-QSB Quarterly Report for
quarter ended March 31, 1997, and incorporated herein by
reference.

10(i) Loan Modification Agreement dated as of November 13, 1997,
between the Company and Silicon Valley Bank.

10(j) Loan and Security Agreement dated as of October 15, 1997, between
the Company and the Bishop Family Trust, previously filed on
November 14, 1997, as Exhibit 10 (i) to Form SB-2/A Registration
Statement (No. 333-37289), and incorporated herein by reference.

II-3
<PAGE>

10(k) Fixed Price Subcontract dated August 15, 1997, between the
Company and ManTech Systems Engineering Corporation, previously
filed on November 14, 1997, as Exhibit 10 (j) to Form SB-2/A
Registration Statement (No. 333-37289), and incorporated herein
by reference.

*10(l) Employment Agreement dated as of October 1, 1995, between the
Company and John F. Bishop, previously filed on December 29,
1995, as Exhibit 10(k) to the 1995 Annual Report, and
incorporated herein by reference.

*10(m) Amendment dated November 20, 1996 to Employment Agreement between
the Company and John F. Bishop, previously filed on December 30,
1996, as Exhibit 10(i) to the 1996 Annual Report, and
incorporated herein by reference.

*10(n) Company's medical reimbursement plan (entitled "Full Medical
Coverage") covering certain officers, previously filed on
December 23, 1981 (File No. 0-5351), as Exhibit 10(o) to
Form 10-K Annual Report for fiscal year ended September 30,
1981, and incorporated herein by reference.

*10(o) Company's Tax and Financial Counseling reimbursement plan
covering officers, previously filed on December 23, 1981 (File
No. 0-5351), as Exhibit 10(p) to Form 10-K Annual Report for
fiscal year ended September 30, 1981, and incorporated herein by
reference.

*10(p) Written description of EIP Bonus Plan for Fiscal 1997, previously
filed on December 30, 1996, as Exhibit 10(l) to the 1996 Annual
Report, and incorporated herein by reference.

*10(q) Second Amended and Restated 1994 Stock Option Plan, previously
filed on December 30, 1996, as Exhibit 10(n) to the 1996 Annual
Report, and incorporated herein by reference.

*10(r) Non-qualified Stock Option Agreement-Form, previously filed on
December 29, 1995, as Exhibit 10(v) to the 1995 Annual Report,
and incorporated herein by reference.

*10(s) Incentive Stock Option Agreement-Form, previously filed on
December 29, 1995, as Exhibit 10(w) to the 1995 Annual Report,
and incorporated herein by reference.

10(t) Indemnification Agreement dated July 15, 1992, between the
Company and J. Bradford Bishop, previously filed on December 20,
1992, as Exhibit 10(n) to Form 10-KSB Annual Report for fiscal
year ended September 30, 1992 (the "1992 Annual Report"), and
incorporated herein by reference.

10(u) Indemnification Agreement dated July 15, 1992, between the
Company and Robert D. Johnson, previously filed on December 20,
1992, as Exhibit 10(o) to the 1992 Annual Report for fiscal year
ended September 30, 1992, and incorporated herein by reference.

10(v) Indemnification Agreement dated July 15, 1992, between the
Company and James J. Shelton, previously filed on December 20,
1992, as Exhibit 10(p) to the 1992 Annual Report for fiscal year
ended September 30, 1992, and incorporated herein by reference.

10(w) Indemnification Agreement dated July 15, 1992, between the
Company and J. Sidney Webb, Jr., previously filed on December 20,
1992, as Exhibit 10(q) to the 1992 Annual Report for fiscal year
ended September 30, 1992, and incorporated herein by reference.

10(x) Indemnification Agreement dated July 15, 1992, between the
Company and John F. Bishop, previously filed on December 23,
1993, as Exhibit 10(m) to Form 10-KSB Annual Report, for fiscal
year 1993 (the "1993 Annual Report"), and incorporated herein by
reference.

- ------------------------
* Management contract or compensatory plan or arrangement.

II-4
<PAGE>

10(y) Indemnification Agreement dated February 13, 1996, between the
Company and Michael E. Johnson, previously filed on May 9, 1996,
as Exhibit 10(a) to Form 10-QSB Quarterly Report for quarter
ended March 31, 1996, and incorporated herein by reference.

10(z) Indemnification Agreement dated February 19, 1997, between the
Company and Lewis R. Foster, previously filed on May 13, 1997, as
Exhibit 10(c) to Form 10-QSB Quarterly Report for quarter ended
March 31, 1997, and incorporated herein by reference.

10(aa) Indemnification Agreement dated February 19, 1997, between the
Company and Ivan Andres, previously filed on May 13, 1997, as
Exhibit 10(d) to Form 10-QSB Quarterly Report for quarter ended
March 31, 1997), and incorporated herein by reference.

10(bb) OEM Purchase Agreement effective on May 28, 1997, previously
filed on August 14, 1997, as Exhibit 10(a) to Form 10-QSB
Quarterly Report for quarter ended June 30, 1997, and
incorporated herein by reference.

16 Letter dated November 13, 1997 from Price Waterhouse LLP to the
Securities and Exchange Commission, previously filed on November
14, 1997, as Exhibit 16 to Form 8-K/A Current Report, and
incorporated herein by reference.

21 Subsidiaries of the Company, previously filed on December 30,
1996, as Exhibit 21 to the 1996 Annual Report, and incorporated
herein by reference.

23(a) Consent of Bainbridge Group, a Law Corporation, to the reference
to it as counsel who has passed upon certain information
contained in the Prospectus.

23(b) Consent of Meredith, Cardozo, Lanz & Chiu LLP.

23(c) Consent of Price Waterhouse LLP.

UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company 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 Company of expenses incurred or paid by a
director, officer or controlling person of the Company 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, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of 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.

II-5
<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Milpitas, California on December 18, 1997.

EIP MICROWAVE, INC.

By: /s/ J. Bradford Bishop
----------------------------------
J. Bradford Bishop
Chairman and Chief Executive Officer

In accordance with the requirements of the Securities Act of 1933, this
amendment to the registration statement was signed by the following persons in
the capacities and on the dates indicated.

December 18, 1997 /s/ J. Bradford Bishop
------------------------
J. Bradford Bishop
Chairman of the Board, Chief Executive Officer and
Director
(Principal Executive Officer)

December 18, 1997 /s/ John F. Bishop
------------------------
John F. Bishop
Vice Chairman, Treasurer, Secretary, and Director
(Principal Financial Officer)

------------------------
Michael E. Johnson
Director

December 18, 1997 /s/ Robert D. Johnson
------------------------
Robert D. Johnson
Director

December 18, 1997 /s/ J. Sidney Webb
------------------------
J. Sidney Webb
Director

December 18, 1997 /s/ E. O. Bince
------------------------
E. O. Bince
Controller (Principal Accounting Officer)

II-6

<PAGE>

INDEX TO EXHIBITS

Exhibit No. Description
- ----------- -----------

5(a) Opinion of Bainbridge Group, a Law Corporation, as to the
legality of the securities covered by the Form SB-2 Registration
Statement.

10(i) Loan Modification Agreement dated as of November 13, 1997,
between the Company and Silicon Valley Bank.

23(a) Consent of Bainbridge Group, a Law Corporation, to the reference
to it as counsel who has passed upon certain information
contained in the Prospectus.

23(b) Consent of Meredith, Cardozo, Lanz & Chiu LLP

23(c) Consent of Price Waterhouse LLP.

<PAGE>
EXHIBIT 5(a)

BAINBRIDGE GROUP

December 18, 1997

EIP Microwave, Inc.
4500 Campus Drive
Suite 219
Newport Beach, California 92660

Gentlemen:

In connection with the preparation and filing of a Form SB-2 Registration
Statement under the Securities Act of 1933, to be filed by EIP Microwave, Inc.
for the purpose of registering 4,249,070 shares of its Common Stock (the
"Shares") to be offered to its stockholders of record on a date to be selected
by its board of directors prior to the effective date of the Registration
Statement, we have acted as counsel to EIP Microwave, Inc. (the "Company") in
the preparation of the Form SB-2 Registration Statement. We advise you that we
are familiar with the originals or copies, certified or otherwise identified to
our satisfaction, of documents, corporate records, or other instruments relating
to the incorporation of the Company and the authorization and the issuance of
the Shares, including the following:

(a) Certificate of Incorporation of the Company;

(b) By-laws of the Company;

(c) Corporate proceedings and filings reflected in the minutes of the
Company as certified to by the secretary of the Company;

(d) Specimen certificates representing the Shares; and

(e) The Form SB-2 Registration Statement relating to the Shares and to be
filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended.

Based solely on the foregoing, we are of the opinion that:

1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.

2. The Company has corporate power to conduct the business now being
conducted and is duly authorized and in good standing to do business in the
jurisdiction in which its ownership of property or the conduct of its business
legally requires that authorization.

3. The Company has an authorized capitalization as set forth in the
Registration Statement, and the Shares conform to the statements concerning them
in the Registration Statements.

4. The Shares have been duly and validly authorized. The Shares, when
issued, will be legally issued, fully paid and non-assessable.

5. No consent, approval, authorization, or other order of any regulatory
authority or third party is

<PAGE>

legally required for the valid issuance of the Shares other than the order
making effective the registration of the Shares, which order must be issued
by the Securities and Exchange Commission, and other than similar action to
be taken by the state securities regulatory agencies of states which
require registration of, or filings with respect to, the Shares in those
states.

6. The consummation of the offering and sale of the Shares as
contemplated in the Registration Statements will not result in a breach of any
of the terms and provisions of, or constitute a default under, any notes,
indenture, mortgage, deed of trust, or other agreement or instrument to which
the Company to its knowledge is now a party, or the Certificate of
Incorporation of the Company.

7. We do not know, and you have advised us that you do not know, of any
legal or governmental proceeding pending or threatened to which the Company is a
party, or of which the property of the Company is the subject, of a character
required to be disclosed in the Registration Statements that is not disclosed
and properly described in this document; and you and we do not know of any
contracts of a character to be disclosed in the Registration Statement that are
not disclosed, filed and properly summarized in such document.

8. The Registration Statement and any further amendments and supplements
made by the Company prior to the effective date of the Form SB-2 Registration
Statement comply as to form in all material respects with the requirements of
the Securities Act of 1933, as amended, and the applicable rules and regulations
of the Securities and Exchange Commission. We have no reason to believe that
the Registration Statement contains any untrue statement of a material fact or
omits to state any material fact required to be stated in the document or
necessary to make the statements in it not misleading.

We hereby consent to the filing of this opinion as Exhibit 5(a) to the
Form SB-2 Registration Statement to be filed by the Company on or about December
18, 1997.

Sincerely,

BAINBRIDGE GROUP

/s/ MICHAEL E. JOHNSON
_____________________________
Michael E. Johnson, President

<PAGE>
EXHIBIT 10(i)

LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement is entered into as of November 13, 1997,
by and between EIP Microwave, Inc. ("Borrower") whose address is 1745 McCandless
Drive, Milpitas, CA 95035, and Silicon Valley Bank ("Silicon") whose address is
3003 Tasman Drive, Santa Clara, CA 95054.

1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other obligations which may be
owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant to, among
other documents, a Loan and Security Agreement, dated March 10, 1992 (including
the Schedule thereto), as amended from time to time, (the "Loan Agreement"). The
Loan Agreement provided for, among other things, a Credit Limit in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the
"A/R Facility"). The A/R Facility has been modified pursuant to, among other
documents, a Loan Modification Agreement, dated November 15, 1996, pursuant to
which, among other things, the Credit Limit was decreased to One Hundred Eighty
Five Thousand and 00/100 Dollars ($185,000.00) and further modified by a Loan
Modification Agreement, dated January 15, 1997, pursuant to which, among other
things, the Credit Limit was increased to Five Hundred Thousand and 00/100
Dollars ($500,000.00). Defined terms used but not otherwise defined herein shall
have the same meanings as in the Loan Agreement.

Hereinafter, all obligations owing by Borrower to Silicon shall be referred to
as the "Obligations."

2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Obligations is
secured by the Collateral as described in the Loan Agreement. Additionally,
repayment of the Obligations shall be guaranteed by John F. Bishop and Ann R.
Bishop, individually and as Trustees of the Bishop Family Trust and John
Bradford Bishop and Nancy Ann Bishop, individually and as Trustees of the Bishop
1992 Family Trust (each, a "Guarantor") pursuant to six (6) Unconditional
Guaranty agreements (each, a "Guaranty") to be executed concurrently herewith.

Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Obligations shall be referred
to as the "Security Documents". Hereinafter, the Security Documents, together
with all other documents evidencing or securing the Obligations shall be
referred to as the "Existing Loan Documents".

3. DESCRIPTION OF CHANGE IN TERMS.

A. MODIFICATION(S) TO LOAN AGREEMENT (AND SCHEDULE THERETO).

1. The Maturity Date set forth in Section 5.1 is hereby deleted and
replaced with January 31, 1998.

2. The Letter of Credit Sub-Limit set forth in Section 1.1 is hereby
deleted and replaced with "Intentionally Omitted". Accordingly,
Silicon shall no longer issue or cause to issue Letters of Credit
on behalf of Borrower under such facility.

3. The first sentence of Section 1.2 entitled "Interest Rate" is
hereby amended to read in its entirety as follows:

Effective as of the date hereof, a rate equal to the "Prime Rate"
in effect from time to time, plus five (5.00) percentage points
per annum.

4. The paragraph entitled "Financial Covenants (Section 4.1)" is
hereby deleted and replaced with the following:

Borrower will comply with the following covenants.

QUICK ASSET RATIO: Borrower shall maintain, on a monthly
basis, beginning with the month ended October 31, 1997 a
ratio of "Quick Assets" to current liabilities of not less
than 0.40 to 1.00.

TANGIBLE NET WORTH: Borrower shall maintain, on a monthly
basis, beginning with the month ended October 31, 1997, a
tangible net worth of not less than $790,000.00.

DEBT TO TANGIBLE NET WORTH: Borrower shall maintain, on a
monthly basis, beginning with the month ended October 31,
1997, a ratio of total liabilities to tangible net worth of
not more than 2.10 to 1.00.

PROFITABILITY: Borrower shall be profitable (after taxes)
on a monthly basis with an allowance for losses not to
exceed $295,000.00 for the month ended October 31, 1997,
$120,000.00 for the month ending November 30, 1997 and
$215,000.00 for the month ending December 31, 1997.

5. The first paragraph of the section entitled "Credit Limit
(Section 1.1)" is hereby amended to read in its entirety as
follows:

An amount not to exceed the lesser of: (i) $500,000.00 at any one
time outstanding or (ii) 60% of the Net Amount of Borrower's
accounts, which Silicon in its discretion deems eligible for
borrowing.

6. The third paragraph of the section entitled "Credit Limit
(Section 1.1)" is hereby amended in part as follows:

2
<PAGE>

Accounts owing from account debtors outside the United States
shall be deemed eligible for borrowing; provided that such
accounts are (1) covered by credit insurance satisfactory to
Silicon, less any deductible; or (2) supported by letter(s) of
credit which shall be assigned to Silicon and be acceptable to
Silicon in its sole discretion.

7. Paragraph 2 of the section of the Schedule to the Loan Agreement
entitled "Other Covenants: (Section 4.1)" is hereby deleted and
replaced with the following

Borrower shall at all times comply with the following:

a. Deliver monthly an aged list of accounts receivable and
an aged list of accounts payable, together with a
Borrowing Base Certificate to Silicon, showing invoice
date, payment terms, address listings for each account
debtor and due dates, within ten (10) days after the
end of each month.

b. Deliver to Silicon at the time of each advance and/or
paydown request or if no advance or paydown is
requested, at least once per week, a Daily Transaction
Report.

c. Deliver promptly upon the issuance thereof, copies of
each credit memorandum issued by Borrower exceeding
$1,000.00.

d. Deliver monthly internally prepared financial
statements, together with a compliance certificate to
Silicon, within thirty (30) days after the end of each
month, in form that Silicon shall specify, signed by an
authorized officer of Borrower, certifying that as of
the end of such month Borrower was in full compliance
with all the terms and conditions of the Loan
Agreement.

e. Deliver promptly upon receipt of notice thereof, a
report of any legal actions pending or threatened
against Borrower or any subsidiary that could result in
damages or costs to Borrower or any subsidiary of
$100,000.00 or more.

f. Deliver such budgets, sales projections, operating
plans or other financial information as Silicon may
reasonably request from time to time.

g. Silicon shall have the right to perform accounts
receivable audits of Borrower's book and records as
Silicon shall reasonably deem appropriate, however, not
less than on a quarterly basis. Borrower's deposit
account will be debited for the audit expense and a
notification will be mailed to Borrower.

8. The following paragraphs are hereby incorporated into the Loan
Agreement:

LOCKBOX. Borrower shall maintain a lockbox account (the
"Lockbox") with Silicon and shall cause all Borrower's accounts
receivable collections to be remitted directly to the Lockbox.
Silicon will transfer good funds in the Lockbox to a cash
collateral account (the "Cash Collateral Account"). Borrower
hereby grants Silicon a security interest in the Lockbox and Cash
Collateral Account to secure the Obligations. Silicon shall have
exclusive possession, dominion, and control over the Lockbox and
Cash Collateral Account. Borrower may request that funds in the
Cash Collateral Account either be released to Borrower or applied
to pay the Obligations; PROVIDED that each such request shall be
in writing and shall be accompanied by a fully completed Daily
Transaction Report in the form heretofore provided by Silicon to
Borrower and FURTHER PROVIDED that Silicon may at any time and
from time to time in its sole and absolute discretion apply any
and all funds in the Lockbox or Cash Collateral Account toward
payment of the Obligations in such order of priority as shall be
determined by Silicon.

3
<PAGE>

COLLATERAL ACCOUNT. Borrower shall open and maintain with
Silicon an account (the "Collateral Account") into which all
funds received by Borrower from account debtors shall immediately
be deposited. Borrower shall direct all account debtors to mail
or deliver all checks or other forms of payment for amounts owing
to Borrower to a post office box designated by Silicon, over
which Silicon shall have exclusive and unrestricted access.
Silicon shall collect the mail delivered to such post office box,
open such mail, and endorse and credit all items to the
Collateral Account. Borrower shall direct all account debtors or
other persons owing money to Borrower who make payments by
electronic transfer of funds to wire such funds directly to the
Collateral Account. Borrower shall hold in trust for Silicon all
amounts that Borrower receives despite the directions to make
payments to the post office box or Collateral Account, and
immediately deliver such payments to Silicon in their original
form as received from the account debtor, with proper
endorsements for deposit into the Collateral Account. Borrower
irrevocably authorizes Silicon to transfer to the Collateral
Account any funds that have been deposited into any other
accounts or that Silicon has otherwise received. Borrower shall
not establish or maintain any accounts with any person other than
Silicon except for accounts opened in the ordinary course of
business from which all funds are transferred on a daily basis to
the Collateral Account. Silicon shall have all right, title and
interest in all of the items from time to time in the Collateral
Account and their proceeds. Silicon shall have the right from
time to time in its sole discretion to apply all amounts in the
Collateral Account against outstanding Obligations of Borrower.
At such time, neither Borrower nor any person claiming through
Borrower shall have any right in or control over the use of, or
any right to withdraw any amount from, the Collateral Account,
which shall be under the sole control of Silicon.

COLLATERAL MONITORING FEE. One Thousand ($1,000.00) per month
shall be payable in arrears (prorated for any partial calendar
month at the beginning and termination of this Agreement).

9. Notwithstanding Borrower's existing default under the "Negative
Covenants" section by virtue of Borrower incurring $1,450,000.00
in additional debt without the prior consent of Silicon, Silicon
agrees to waive such default, PROVIDED such additional debt be
subordinated to Silicon on terms and form acceptable to Silicon.

10. The section entitled "Subordinated Debt" is hereby amended to
read in its entirety as follows:

Subordinated Debt shall mean indebtedness which is subordinated
to Silicon, in form and substance acceptable to Silicon and from
the following Creditor: John F. Bishop and Ann R. Bishop as
Trustees of the Bishop Family Trust.

B. WAIVER OF COVENANT DEFAULTS.

1. Silicon hereby waives Borrower's existing default under the Loan
Agreement by virtue of Borrower's failure to comply with the
Tangible Net Worth covenant as of the month ended September 30,
1997, the Profitability covenant as of the quarters ended June
30, 1997 and September 30, 1997 and the default which occurred as
a result of Borrower's failure to comply with the Negative
Covenants as described above. Silicon's waiver of Borrower's
compliance of these covenants shall apply only to the foregoing
periods. Accordingly, for the month ended October 31, 1997,
Borrower shall have been in compliance with these covenants, as
amended herein.

Silicon's agreement to waive the above-described default (1) in
no way shall be deemed an agreement by the Silicon to waive
Borrower's compliance with the above-described covenants as of
all other dates and (2) shall not limit or impair the Silicon's
right to demand strict performance of these covenants as of all
other dates and (3) shall not limit or impair the Silicon's right
to demand strict performance of all other covenants as of any
date.

4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.

4
<PAGE>

5. PAYMENT OF LOAN FEE. Borrower shall pay to Silicon a fee in the amount of
Five Hundred and 00/100 Dollars ($500.00) (the "Loan Fee") plus all
out-of-pocket expenses.

6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees, as of the date hereof, that it has no defenses against the
obligations to pay any amounts due under the Existing Loan Documents.

7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Obligations,
Silicon is relying upon Borrower's representations, warranties, and
agreements, as set forth in the Existing Loan Documents. Except as
expressly modified pursuant to this Loan Modification Agreement, the terms
of the Existing Loan Documents remain unchanged and in full force and
effect. Silicon's agreement to modifications to the existing Obligations
pursuant to this Loan Modification Agreement in no way shall obligate
Silicon to make any future modifications to the Obligations. Nothing in
this Loan Modification Agreement shall constitute a satisfaction of the
Obligations. It is the intention of Silicon and Borrower to retain as
liable parties all makers and endorsers of Existing Loan Documents, unless
the party is expressly released by Silicon in writing. No maker, endorser,
or guarantor will be released by virtue of this Loan Modification
Agreement. The terms of this paragraph apply not only to this Loan
Modification Agreement, but also to all subsequent loan modification
agreements.

8. GENERAL WAIVER. In consideration of Silicon entering into this Agreement,
Borrower, releases and forever discharges Silicon from any claim,
liability, obligation, action and cause of action, whether known or unknown
which any of them, or any predecessor of them, now owns or holds by reason
of any matter done, omitted or suffered to be done, prior to the date of
this Agreement. This release runs in favor of Silicon, its parent,
affiliate and subsidiary corporations, participant banks (if any) its
present and former officers, employees, agents, affiliates, and successors
in interest. In furtherance of the release contained in this section,
Borrower waives such rights as might otherwise exist pursuant to California
Civil Code Section 1542, which provides:

"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."

Borrower further warrants, represents and agrees: (i) that it has executed this
Agreement and release with full knowledge of any rights it may have with respect
to Silicon and the other parties released; (ii) that Borrower has received
independent legal advice with respect to the matters set forth above and the
rights and assertive rights arising out of said matters; and (iii) that Borrower
has not relied upon any statement of fact or omission to state a fact by
Silicon, or by any one acting on behalf of Silicon, with respect to the matters
covered by this Agreement and release, and underlying disputes between the
parties, except for those acts represented by Silicon as set forth in this
Agreement.

9. JURY TRIAL WAIVER. Silicon and Borrower hereby waive the right to any jury
trial in any action, proceeding, counterclaim or cause of action brought by
either Silicon or Borrower against the other. (INITIAL HERE _______________)

10. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrower's payment of the Loan Fee and delivery of fully
executed Guaranty agreements by the above-named Guarantors.

This Loan Modification Agreement is executed as of the date first written
above.

BORROWER: SILICON:

EIP MICROWAVE, INC. SILICON VALLEY BANK

By: /s/ Lewis R. Foster By: /s/ Christine L. Caywood
------------------------- ------------------------------
Name: Lewis R. Foster Name: Christine L. Caywood
Title: President Title: Vice President

<PAGE>

EXHIBIT 23(a)

BAINBRIDGE GROUP

December 18, 1997

EIP Microwave, Inc.
4500 Campus Drive
Suite 219
Newport Beach, California 92660

Gentlemen:

The undersigned is named in a Form SB-2 Registration Statement of EIP
Microwave, Inc., a Delaware corporation (the "Company"), which registration
statement filed with the Securities and Exchange Commission in connection with a
rights offering of 5,948,698 shares of Common Stock of the Company to its
stockholders. The capacity in which the undersigned is named in such SB-2
Registration Statement is that of counsel to the Company and as a person who has
given an opinion on the validity of the securities being registered and upon
other legal matters concerning the registration or offering of the securities
described therein.

The undersigned hereby consents to being named in such SB-2 Registration
Statement in the capacity therein described.

Sincerely,

BAINBRIDGE GROUP

/s/ Michael E. Johnson
--------------------------------
Michael E. Johnson, President

<PAGE>

Exhibit 23 (b)

CONSENT OF INDEPENDENT AUDITORS

We consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of our report dated November 20, 1997,
relating to the financial statements of EIP Microwave, Inc., which appears in
such Prospectus. We also consent to the references to us under the heading
"Experts" in such Prospectus.

/s/ MEREDITH, CARDOZO, LANZ & CHIU LLP

MEREDITH, CARDOZO, LANZ & CHIU LLP
San Jose, California
December 15, 1997

<PAGE>

Exhibit 23(c)
CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of our report dated December 23, 1996,
except for the third paragraph of Note 1 and the second paragraph of Note 6
and Note 9, which are as of October 23, 1997, relating to the financial
statements of EIP Microwave, Inc., which appears in such Prospectus. We also
consent to the references to us under the heading "Experts" in such
Prospectus.

/s/ PRICE WATERHOUSE LLP

PRICE WATERHOUSE LLP
San Jose, California
December 15, 1997