CINCINNATI MICROWAVE INC, 424B1, 1995-08-25

CINCINNATI MICROWAVE INC
424B1, 1995-08-25
SEARCH, DETECTION, NAVAGATION, GUIDANCE, AERONAUTICAL SYS

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<PAGE> 1
Filed pursuant to Rule 424(b)(1)

CINCINNATI MICROWAVE, INC. [LOGO]

4,000,000 COMMON SHARES

Of the 4,000,000 Common Shares offered hereby, 1,000,000 Common Shares are
being sold by Cincinnati Microwave, Inc. ("Cincinnati Microwave" or the
"Company") and 3,000,000 Common Shares are being sold by the Selling
Shareholder. The Company will not receive any of the proceeds from the sale of
Common Shares by the Selling Shareholder. The Company's Common Shares are traded
on the Nasdaq National Market under the symbol CNMW. On August 24, 1995, the
last reported sales price of the Common Shares on the Nasdaq National Market was
$18.625 per share. See "Price Range of Common Shares."

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING
ON PAGE 4.
------------------------

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

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

<TABLE>
<CAPTION>
Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount(1) Company(2) Shareholder
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............. $18.00 $0.99 $17.01 $17.01
Total(3)............... $72,000,000 $3,960,000 $17,010,000 $51,030,000
<FN>

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

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $441,000. The
Company has agreed to pay all of the expenses of the Selling Shareholder in
connection with the Offering.
(3) The Company and the Selling Shareholder have granted to the Underwriters a
30-day option to purchase up to 600,000 additional Common Shares solely to
cover over-allotments, if any. Of these Common Shares, up to 150,000 may be
purchased from the Company and up to 450,000 may be purchased from the
Selling Shareholder. If the Underwriters exercise this option in full, the
Price to Public will total $82,800,000, Underwriting Discount will total
$4,554,000, Proceeds to Company will total $19,561,500 and the Proceeds to
Selling Shareholder will total $58,684,500. See "Underwriting."
</TABLE>
The Common Shares are offered by the Underwriters named herein, subject to
receipt and acceptance by them and subject to their right to reject any order in
whole or in part. It is expected that delivery of the certificates representing
such shares will be made against payment therefor at the office of Montgomery
Securities on or about August 30, 1995.
------------------------

MONTGOMERY SECURITIES RONEY & CO.

August 24, 1995
<PAGE> 2

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"SEC") a registration statement under the Securities Act of 1933 (the
"Securities Act") with respect to the Common Shares offered hereby. This
Prospectus does not contain all of the information set forth in the registration
statement and the exhibits and schedules thereto (together with all amendments,
the "Registration Statement"). For further information with respect to the
Company and such Common Shares, reference is hereby made to the Registration
Statement. The Registration Statement can be inspected without charge at the
office of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies may be obtained therefrom at prescribed rates.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the SEC. Such reports,
proxy statements and other information can be inspected and copied at the public
reference facilities of the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as the following SEC Regional Offices: 7
World Trade Center, Suite 1300, New York, NY 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies can be
obtained from the SEC by mail at prescribed rates. Requests should be directed
to the SEC's Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Company's Common Shares are quoted on the Nasdaq
National Market and reports and other information concerning the Company may
also be inspected and copied at the offices of The Nasdaq Stock Market, Inc.,
9513 Key West Avenue, Rockville, Maryland 20850.

INCORPORATION OF DOCUMENTS BY REFERENCE

The following documents have been filed by the Company with the SEC (File
No. 0-13136) and are incorporated herein by reference:

(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 25, 1994.

(2) The Company's Quarterly Reports on Form 10-Q for the periods ended
April 2, 1995 and July 2, 1995.

All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this Offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.

The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Requests for such documents should be submitted to the
Secretary of the Company, at the Company's executive offices at One Microwave
Plaza, Cincinnati, Ohio 45249-8236 or by telephone at (513) 489-5400.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON SHARES
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON SHARES ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE EXCHANGE ACT. SEE "UNDERWRITING."

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Company's Consolidated Financial
Statements and Notes thereto, appearing elsewhere in or incorporated by
reference into this Prospectus. Except as otherwise noted, all information in
this Prospectus assumes no exercise of the Underwriters' over-allotment option.

THE COMPANY

Cincinnati Microwave, Inc. designs, manufactures and markets ultrahigh
frequency and microwave wireless communications products. The Company's
principal product line since its inception has been radar warning detectors. The
Company has become a leader in the radar warning detector market by combining
its experience in ultrahigh frequency and microwave wireless technology,
including digital signal processing, with its high volume manufacturing
capabilities. In 1993, the Company introduced its first digital spread spectrum
cordless telephone and its first wireless data modem for use on Cellular Digital
Packet Data ("CDPD") networks. Both of the new product lines leverage the
Company's wireless and digital signal processing expertise and high volume, low
cost manufacturing capabilities.

The Company markets its products both under the ESCORT(R) brand name through
direct advertising and as an OEM supplier. The Company's strategy for entering
new markets is to align with companies that have established sales leadership
and market positions. This strategy is designed to provide broader access to the
end user. Several major suppliers of consumer telephones market the Company's
digital spread spectrum cordless telephones on a private label basis. The
Company has established marketing arrangements with five major cellular service
providers to sell its wireless data modems.

THE OFFERING

<TABLE>
<S> <C>
Common Shares offered by the Company........................ 1,000,000 shares
Common Shares offered by the Selling Shareholder............ 3,000,000 shares
Common Shares outstanding after the Offering................ 15,155,415 shares(1)
Use of Proceeds............................................. To reduce indebtedness and for working
capital and general corporate purposes
Nasdaq National Market Symbol............................... CNMW
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
-------------------------------------------------------- -----------------------
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER JUNE 26, JULY 2,
31, 1990 29, 1991 27, 1992 26, 1993 25, 1994 1994 1995
-------- -------- -------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... $63,720 $48,292 $51,339 $58,461 $64,708 $ 26,042 $32,665
Gross profit...................... 21,189 15,129 13,520 18,683 14,349 8,534 9,239
Operating loss.................... (3,576) (5,330) (7,426) (3,084) (10,024) (2,665) (2,160)
Net loss.......................... (5,551) (8,821) (6,440) (1,284) (10,260) (2,324) (1,365)
Net loss per share................ $ (0.54) $ (0.85) $ (0.59) $ (0.12) $ (0.94) $ (0.21) $ (0.10)
Weighted average number of shares
outstanding..................... 10,291 10,355 10,919 10,691 10,880 10,852 13,936
</TABLE>

<TABLE>
<CAPTION>
JULY 2, 1995
---------------------------
ACTUAL AS ADJUSTED(2)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................................... $ 28 $ 9,684
Total assets......................................................................... 38,001 47,657
Short-term debt...................................................................... 9,663 2,750
Long-term lease obligations.......................................................... 962 962
Long-term debt....................................................................... -- --
Shareholders' equity................................................................. 15,559 32,128

<FN>
---------------

(1) Based upon Common Shares outstanding as of August 9, 1995. Does not include
3,026,871 Common Shares which underlie outstanding warrants and stock
options.

(2) Adjusted to give effect to the sale of 1,000,000 Common Shares offered by
the Company hereby, at the public offering price of $18.00 per share, and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Capitalization."

</TABLE>
------------------------

The Company's executive offices are located at One Microwave Plaza, Cincinnati,
Ohio 45249-8236. Its telephone number is (513) 489-5400.

3
<PAGE> 4

RISK FACTORS

Prior to purchasing the Common Shares offered hereby, prospective investors
should carefully consider, together with the other information contained herein,
each of the following risk factors which could, individually or in the
aggregate, have a material adverse effect on the Company's business, financial
condition, including working capital, and results of operations.

HISTORICAL LOSSES; VARIABILITY OF OPERATING RESULTS; SEASONALITY

The Company has not been profitable since 1988. In 1994, the Company
experienced a severe supply shortage of inductors, a critical component of its
digital spread spectrum cordless telephone, and, as a result, the Company's
factory production schedule and cost to fill customer orders were materially and
adversely affected. In addition, several competing radar warning detector
manufacturers announced significant price reductions in the fourth quarter of
1994. In order to maintain its radar warning detector market position, the
Company reacted to this development by introducing a major promotional program
for its retail customers for the month of December. As a result of these events,
the Company's operating results were significantly worse than anticipated.

The Company's future operating results may vary significantly from period
to period as a result of a number of factors, including the volume and timing of
orders received during the period, the timing of new product introductions by
the Company and its competitors, decline in demand for the Company's products,
the impact of price competition on the Company's average selling prices, the
availability and pricing of components for the Company's products, changes in
product or distribution channel mix and product returns. Many of these factors
are beyond the Company's control. The Company's failure to introduce new,
competitive products consistently and in a timely manner could adversely affect
operating results for one or more product cycles. In addition, from time to
time, a significant portion of the Company's sales are derived from a limited
number of customers, the loss of one or more of which could adversely impact
operating results.

The Company must plan production, order components and undertake its
development, sales and marketing activities and other commitments months in
advance. Accordingly, any shortfall in net sales in a given quarter may have a
disproportionately adverse impact on the Company's operating results due to an
inability to adjust expenses or inventory during the quarter to match the level
of net sales for the quarter. Excess inventory could also result in cash flow
difficulties as well as expenses associated with inventory writeoffs.

The Company's business is highly seasonal with a large portion of sales
occurring during the third and, particularly, the fourth quarters. The Company's
inability to supply its products to its customers during the second half of the
year would adversely affect the Company's business, financial condition and
results of operations. In addition, the results of the Company's operations are
subject to changes in consumer demand associated with general economic
conditions and to changes in consumer preferences.

As a result of the foregoing, there can be no assurance that the Company
will be able to achieve profitability or that difficulties will not occur in the
future and adversely affect the Company's business, financial condition,
including working capital, and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

COMPONENT SHORTAGES; RELIANCE ON SOLE OR LIMITED SOURCE SUPPLIERS

4
<PAGE> 5

manufacture and deliver products and, as a result, had a significant adverse
effect on the Company's business, financial condition, including working
capital, and results of operations. Since part of the Company's strategy is to
shorten product development and introduction cycles, occasions may arise in the
future where the Company's ability to produce products outpaces its suppliers'
ability to supply components. There can be no assurance that the Company can
continue to obtain adequate supplies or obtain such supplies at their historical
cost levels. The Company has no guaranteed supply arrangements with any of its
sole or limited source suppliers, does not maintain an extensive inventory of
components, and customarily purchases sole or limited source components pursuant
to purchase orders placed from time to time in the ordinary course of business.
Moreover, the Company's suppliers may, from time to time, experience production
shortfalls or interruptions which impair the supply of components to the
Company. There can be no assurance that such shortages will not occur in the
future and adversely affect the Company's business, financial condition,
including working capital, and results of operations.

DEPENDENCE ON RADAR WARNING DETECTORS; RELIANCE ON NEW PRODUCTS

Historically, the Company has derived substantially all of its net sales
and all of its operating profits from radar warning detectors. Radar warning
detectors accounted for 79%, 86%, 72% and 80% of the Company's total net sales
for 1992, 1993, 1994 and the first six months of 1995, respectively. The radar
warning detector market has matured and is declining, and competition in this
market is intense. The Company's strategy is to reduce its dependence on radar
warning detectors by developing new products, entering new markets and utilizing
its capabilities in the design and mass production of ultrahigh frequency and
microwave wireless communications products; however, there can be no assurance
that the Company's strategy will be successful.

The Company has developed and introduced two new products: digital spread
spectrum cordless telephones with enhanced range, clarity and security compared
to traditional cordless telephones, and a line of wireless data modems to
transmit data over CDPD networks. The Company believes that its digital spread
spectrum cordless telephones are vital to its future success. To date, the
Company's digital spread spectrum cordless telephone product line has not been
profitable and the Company believes that future profits, if any, will depend on
the success of next generation models which have been introduced recently. The
commercial success of the Company's digital spread spectrum cordless telephone
products is dependent upon strategic relationships with key OEM customers.
Certain of these customers currently possess, or may acquire, the capability to
develop, design and manufacture their own digital spread spectrum cordless
telephone products. Moreover, the success of the wireless data modems is
dependent upon the development, deployment and commercial success of CDPD
networks. A consortium of cellular service providers is presently building CDPD
networks to provide wireless data transfer service, but there can be no
assurance that the networks will be deployed nationally and, if so deployed,
that they will be successful. To date, the Company has sold only a limited
number of its wireless data modem units. There can be no assurance that the
Company will be successful in identifying, developing, manufacturing and
marketing new products, that the Company will not experience difficulties that
could delay or prevent the successful development, introduction and marketing of
these products, or that its new products and product enhancements will
adequately meet the requirements of the marketplace and achieve market
acceptance.

CUSTOMER CONCENTRATION

As the Company's sales mix continues to shift from direct retail business
to OEM and reseller business, the Company expects that sales to certain of its
OEM and reseller customers will account for a material percentage of its net
sales in the foreseeable future and believes that its financial results will
depend in significant part upon the success of these customers as well as the
Company's business with these customers. Although the composition of the group
comprising the Company's important customers may vary from period to period, the
loss of a significant customer or any reduction in orders by any significant
customer may have a material adverse affect on the Company's business, financial
condition, including working capital, and results of operations. The Company's

5
<PAGE> 6

ability to increase its sales in the future will depend in part upon its ability
to obtain orders from new customers as well as the financial condition and
success of its customers and the general economy, of which there can be no
assurance.

SHORT PRODUCT LIFE CYCLES

The market for the Company's products is characterized by frequent new
product introductions and rapid product obsolescence. These factors typically
result in short product life cycles. The Company must continually monitor
industry trends and choose new technologies and features to incorporate into its
products. Each new product cycle presents opportunities for current or
prospective competitors of the Company to gain market share. Life cycles of
individual products are typically characterized by steep declines in sales,
pricing and margins toward the end of a product's life, the precise timing of
which may be difficult to predict. As new products are planned and introduced,
the Company attempts to monitor closely the inventory of older products and to
phase out their manufacture in a controlled manner. Nevertheless, the Company
could experience unexpected reductions in sales volume and prices of older
generation products as customers anticipate new products. These reductions could
give rise to charges for obsolete or excess inventory. To the extent that the
Company is unsuccessful in managing product transitions, its business, financial
condition, including working capital, and results of operations could be
materially and adversely affected.

GOVERNMENT REGULATION

Existing, pending or future legislation prohibiting the use, possession or
sale of radar warning detectors or future legislation by states increasing speed
limits could have a material adverse effect on the Company's business.
Currently, there are two jurisdictions in the United States which have specific
prohibitions against the use, possession or sale of radar warning detectors in
automobiles. In addition, two other jurisdictions prohibit the use of radar
warning detectors in large commercial vehicles only and, in January 1994, the
Federal Highway Administration enacted a regulation banning radar warning
detectors from commercial vehicles weighing over 18,000 pounds, from buses
carrying 16 or more passengers and from trucks transporting hazardous materials
on highways funded by the Federal Government. This is, in effect, a ban on use
of such radar warning detectors in all large trucks and buses. Additionally, a
bill currently pending in Congress would eliminate the existing federal
requirement that states comply with national maximum speed limit provisions
before receiving certain federal funds. This bill has passed the Senate and, if
enacted, is likely to result in higher speed limits in some states.

COMPETITION

All markets in which the Company participates are highly competitive, and
many current or prospective competitors, including several of the Company's
significant OEM customers, are substantially larger and possess significantly
greater financial, marketing and technical resources than the Company. The
market for high performance cordless telephones, such as those manufactured by
the Company, is relatively new. Competition in this segment currently is based
primarily on product performance, features and price. The market for wireless
data modems is still developing, and there are current or prospective
competitors who are substantially larger than the Company and possess
significantly greater financial, marketing and technical resources. There can be
no assurance that the Company will be able to compete successfully in either of
these markets.

The market for radar warning detectors is highly competitive, has matured
and is declining. As the market has moved toward lower priced products,
competition has been based primarily on price and, to a lesser degree, product
quality, availability and performance. Lower than expected demand for the
Company's radar warning detectors, coupled with intense price competition in the
radar warning detector market, adversely affected the Company's fourth quarter
1994 results. A recurrence of these conditions would have a material adverse
effect on the business, financial condition, including working capital, and
results of operations of the Company.

6
<PAGE> 7

DEPENDENCE ON KEY PERSONNEL

The success of the Company is dependent in large part on key management and
technical personnel, especially Jacques A. Robinson, its President and Chief
Executive Officer, and John W. Noland, its Executive Vice President and Chief
Operating Officer. The loss of the services of any of these key personnel could
have a material adverse effect on the Company. Many of the Company's key
personnel would be difficult to replace, and most are not subject to employment
or noncompetition agreements. There can be no assurance that the Company will be
successful in retaining such personnel. In addition, the Company's success
depends significantly upon its ability to continue to attract and retain
qualified management, manufacturing, technical, sales and support personnel for
its operations. There may be only a limited number of persons with the requisite
skills to serve in these positions, and it may become more difficult for the
Company to hire such personnel. Competition for such personnel is intense, and
there can be no assurance that the Company will be successful in attracting or
retaining such personnel. The failure to attract or retain such persons would
materially adversely affect the Company's business, financial condition,
including working capital, and results of operations.

INTELLECTUAL PROPERTY

Although the Company has protected its technologies and products by patent,
copyright, trademark and trade secret laws to the extent that it believes
necessary, the Company's intellectual property rights may be subject to
infringement. There can be no assurance that the Company's measures to protect
its proprietary rights will deter or prevent unauthorized use of the Company's
technology. Furthermore, the laws of certain countries may not protect the
Company's proprietary rights to the same extent as do the laws of the United
States. In addition, the Company may, from time to time, become subject to legal
claims asserting that the Company has violated intellectual property rights of
third parties. In the event a third party were to sustain a valid claim against
the Company and in the event any required license were not available on
commercially reasonable terms, the Company's business, financial condition,
including working capital, and results of operations could be materially and
adversely affected. Litigation, which could result in substantial costs to and
diversion of resources of the Company, may also be necessary to enforce
intellectual property rights of the Company or to defend the Company against
claimed infringement of the rights of others.

VOLATILITY OF STOCK PRICE

The trading price of the Company's Common Shares is subject to wide
fluctuations in response to the Company's operating results, announcements of
technological innovations or new products by the Company or its competitors,
general conditions in the market, changes in earnings estimates by analysts,
failure to meet the revenues or earnings estimates of analysts or other events
or factors. The public stock markets have experienced price and trading volume
volatility in recent months. This volatility has significantly affected the
market prices of securities of many high technology companies for reasons
frequently unrelated to the operating performance of the specific companies. The
market price for the Company's Common Shares has been highly volatile. Future
announcements concerning the Company or its competition, including the results
of technological innovations, new commercial products, government regulations,
developments concerning proprietary rights, component shortages, litigation or
public concern with respect to the Company or its products and other factors
including those described above, may have a significant impact on the market
price of the Common Shares. See "Price Range of Common Shares."

7
<PAGE> 8

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
1,000,000 Common Shares offered by the Company are estimated to be $16.6 million
based upon the offering price of $18.00 per share and after deducting estimated
offering expenses. The Company will not receive any proceeds from the sale of
Common Shares by the Selling Shareholder.

The Company intends to use a portion of the net proceeds to pay off the
then outstanding indebtedness under its revolving bank credit facility (which
was $10.9 million at August 13, 1995). This indebtedness bears interest at a
rate of the prime rate plus 1 1/4% (10% on August 13, 1995), and was incurred
for working capital purposes. $4.0 million of the revolving credit facility
matures on September 30, 1995 and the remaining $7.0 million of such credit
facility matures on June 30, 1996. The Company intends to use the remainder of
the net proceeds for working capital and general corporate purposes. Pending
their use, the proceeds will be placed in short-term, investment grade
securities.

PRICE RANGE OF COMMON SHARES

The Common Shares are traded on the Nasdaq National Market under the symbol
CNMW. The following table sets forth for the periods indicated the high and low
sales prices for the Common Shares as reported on the Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1993
First Quarter............................................ 3 3/8 21/16
Second Quarter........................................... 3 1/2 1 7/8
Third Quarter............................................ 6 1/8 2 1/4
Fourth Quarter........................................... 11 1/8 4 1/8
1994
First Quarter............................................ 12 7 1/4
Second Quarter........................................... 12 6 1/2
Third Quarter............................................ 10 1/8 5 7/8
Fourth Quarter........................................... 7 1/4 2 1/8
1995
First Quarter............................................ 11 1/4 3 1/2
Second Quarter........................................... 12 1/8 8 3/8
Third Quarter (through August 24, 1995).................. 21 5/8 13 5/8
</TABLE>

On August 24, 1995, the last reported sales price for the Common Shares on
the Nasdaq National Market was $18.625 per share. As of July 2, 1995, there were
approximately 1,100 holders of record of the Common Shares.

DIVIDEND POLICY

Historically the Company has not paid any cash or other dividends. The
Company does not expect to pay dividends in the foreseeable future, but
currently intends to retain any earnings to finance operations and future
growth. Furthermore, the credit facility agreement between the Company and its
bank prohibits the payment of dividends.

8
<PAGE> 9

CAPITALIZATION

The following table sets forth the unaudited capitalization of the Company
at July 2, 1995, and as adjusted to reflect the receipt by the Company of $16.6
million of net proceeds from the sale of 1,000,000 Common Shares offered by the
Company hereby and the application of the net proceeds therefrom. See "Use of
Proceeds." This table should be read in conjunction with the Company's
Consolidated Financial Statements and related Notes incorporated herein by
reference.

<TABLE>
<CAPTION>
JULY 2, 1995
------------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
SHORT-TERM DEBT:
Bank indebtedness............................................... $ 9,663 $ 2,750
======= ========
LONG-TERM OBLIGATIONS:
Long-term capital lease obligations............................. $ 962 $ 962
Long-term debt.................................................. -- --
------- --------
Total long-term obligations.................................. $ 962 $ 962
------- --------
SHAREHOLDERS' EQUITY:
Common shares without par value ($.20 stated value); 20,000,000
shares authorized; 17,053,120 shares issued; 18,053,120
shares issued as adjusted(1)................................. $ 3,411 $ 3,611
Paid-in capital................................................. 6,278 22,647
Retained earnings............................................... 25,556 25,556
Treasury stock at cost, 2,933,175 shares........................ (19,686) (19,686)
------- --------
Total shareholders' equity................................... 15,559 32,128
------- --------
Total capitalization......................................... $16,521 $33,090
======= ========

<FN>
---------------

(1) Includes treasury stock. Of the treasury stock, 1,587,854 Common Shares
underlie outstanding stock options and 1,345,321 Common Shares may be
acquired upon the exercise of outstanding warrants to purchase Common Shares
at $4.00 per share at any time prior to 5:00 p.m., Eastern Standard Time, on
December 31, 1998 (the "Warrants").

</TABLE>

9
<PAGE> 10

DILUTION

The net tangible book value of the Company as of July 2, 1995 was $13.1
million or $0.93 per Common Share. Net tangible book value per share is equal to
the Company's total tangible assets less its total liabilities, divided by the
number of Common Shares outstanding. After giving effect to the sale by the
Company of 1,000,000 Common Shares offered hereby at the offering price of
$18.00 and the receipt by the Company of the estimated net proceeds therefrom,
after deducting underwriting discounts and estimated offering expenses, the net
tangible book value of the Company as of July 2, 1995 would have been $29.7
million or $1.96 per share. This represents an immediate increase in net
tangible book value of $1.03 per share to existing shareholders and an immediate
dilution of $16.04 per share to new investors. The following table illustrates
this per share dilution:

<TABLE>
<S> <C> <C>
Public offering price per share.......................................... $18.00
Net tangible book value per share before the Offering............... $ 0.93
Increase in net tangible book value per share attributable to new
investors.......................................................... $ 1.03
Net tangible book value per share after the Offering..................... $ 1.96
Dilution of net tangible book value per share to new investors........... $16.04
</TABLE>

The foregoing table does not give effect to the exercise of any of the
Company's 1,345,321 outstanding Warrants. Assuming that all of the outstanding
Warrants were exercised as of July 2, 1995, there would be a net tangible book
value of $35.1 million or $2.13 per share.

10
<PAGE> 11

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected historical consolidated financial
data of the Company for the fiscal years 1990 through 1994 and for the six month
periods ended June 26, 1994 and July 2, 1995. The selected consolidated
financial data for the five fiscal years in the period ended December 25, 1994
are derived from the consolidated financial statements of the Company which have
been audited by Price Waterhouse LLP, independent accountants. The selected
consolidated financial data for the six month periods ended June 26, 1994 and
July 2, 1995 are derived from the Company's unaudited consolidated financial
statements. In the opinion of management, the interim financial data reflect all
adjustments, consisting of normal recurring adjustments, necessary for the fair
presentation of such data. The results for the first six months of fiscal 1995
are not necessarily indicative of the results to be expected for the full year.
The information below should be read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing in the Company's Annual Report
on Form 10-K incorporated herein by reference and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this Prospectus. The Company did not pay any cash or other dividends in the
periods presented below.

<TABLE>
<CAPTION>
YEAR ENDED (1) SIX MONTHS ENDED
-------------------------------------------------------- -------------------
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER JUNE 26, JULY 2,
31, 1990 29, 1991 27, 1992 26, 1993 25, 1994 1994 1995
-------- -------- -------- -------- -------- -------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................. $63,720 $48,292 $51,339 $58,461 $64,708 $26,042 $32,665
Cost of sales......................... 42,531 33,163 37,819 39,778 50,359 17,508 23,426
------- -------- -------- -------- -------- -------- -------
Gross profit...................... 21,189 15,129 13,520 18,683 14,349 8,534 9,239
Operating expenses:
Research & development.............. 4,090 4,843 7,182 8,117 8,449 4,227 3,602
Selling............................. 14,734 10,838 10,707 10,391 12,671 5,705 5,515
Administrative...................... 5,941 4,778 3,057 3,259 3,253 1,267 2,282
------- -------- -------- -------- -------- -------- -------
24,765 20,459 20,946 21,767 24,373 11,199 11,399
------- -------- -------- -------- -------- -------- -------
Operating loss...................... (3,576) (5,330) (7,426) (3,084) (10,024) (2,665) (2,160)
Gain on sale of marketable equity
securities.......................... -- -- -- 1,435 -- -- --
Interest expense...................... (350) (433) (204) (521) (738) (225) (559)
Other income (expense), net........... 118 (869) (1,128) 886 502 566 (84)
------- -------- -------- -------- -------- -------- -------
Loss from continuing operations
before income taxes............... (3,808) (6,632) (8,758) (1,284) (10,260) (2,324) (2,803)
Income tax benefit.................... (1,198) (725) -- -- -- -- (1,438)
------- -------- -------- -------- -------- -------- -------
Loss from continuing operations..... (2,610) (5,907) (8,758) (1,284) (10,260) (2,324) (1,365)
Discontinued operations............... (2,941) (2,914) 1,449 -- -- -- --
------- -------- -------- -------- -------- -------- -------
Loss before extraordinary item...... (5,551) (8,821) (7,309) (1,284) (10,260) (2,324) (1,365)
Realization of net operating loss
carryforward........................ -- -- 869 -- -- -- --
------- -------- -------- -------- -------- -------- -------
Net loss.............................. $(5,551) $(8,821) $(6,440) $(1,284) $(10,260) $(2,324) $(1,365)
======= ======== ======== ======== ======== ======== =======
Net loss per share:
Continuing operations............... $ (0.25) $ (0.57) $ (0.80) $ (0.12) $ (0.94) $ (0.21) $ (0.10)
Discontinued operations............. (0.29) (0.28) 0.13 -- -- -- --
Realization of net operating loss
carryforward...................... -- -- 0.08 -- -- -- --
------- -------- -------- -------- -------- -------- -------
Net loss.......................... $ (0.54) $ (0.85) $ (0.59) (0.12) (0.94) $ (0.21) $ (0.10)
======= ======== ======== ======== ======== ======== =======
Weighted average number of shares
outstanding......................... 10,291 10,355 10,919 10,691 10,880 10,852 13,936

BALANCE SHEET DATA:
Working capital....................... $ 6,398 $ 1,957 $(2,483) $ (254) $(1,701) $ 2,879 $ 28
Total assets.......................... 45,484 38,247 42,512 32,418 32,839 36,191 38,001
Short-term debt....................... 5,400 4,000 6,000 6,001 600 2,196 9,663
Long-term lease obligations........... -- -- -- 418 1,422 1,302 962
Long-term debt........................ -- -- -- -- 7,419 5,065 --
Shareholders' equity.................. 31,832 23,368 17,641 16,830 6,902 14,642 15,559

<FN>
---------------

(1) In 1991, the Company changed its reporting period to a fiscal year ending
the last Sunday in the calendar year. In addition, pretax restructuring and
impairment charges of approximately $6.9 million were recorded in March
1991.

</TABLE>
11
<PAGE> 12

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

Cincinnati Microwave was founded in 1976 to pioneer the development and
design of consumer radar warning detectors using superheterodyne technology,
which has now become the industry standard for these products. The Company
experienced significant growth and profitability in the 1980s due to the
performance of its products, which attracted many competitors. During this
period, the Company's competitors focused on lower prices while the Company
focused on technological improvements. Consequently, the Company lost
substantial market share to competitors in the late 1980s. In 1991 the Company
adopted a strategy of capitalizing on its expertise in the design and
manufacture of ultrahigh frequency and microwave electronic devices by applying
it to wireless communication products. In 1993 the Company introduced its first
digital spread spectrum cordless telephone and wireless data modem products.

RESULTS OF OPERATIONS

The following table sets forth certain operational data of the Company
expressed as a percentage of net sales for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
---------------------------------- ---------------------
DECEMBER DECEMBER DECEMBER JUNE 26, JULY 2,
27, 1992 26, 1993 25, 1994 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................... 73.7 68.0 77.8 67.2 71.7
----- ----- ----- ----- -----
Gross profit................ 26.3 32.0 22.2 32.8 28.3
Research & development........... 14.0 13.9 13.1 16.2 11.0
Selling.......................... 20.8 17.8 19.6 21.9 16.9
Administrative................... 6.0 5.6 5.0 4.9 7.0
----- ----- ----- ----- -----
Total operating expenses.... 40.8 37.3 37.7 43.0 34.9
----- ----- ----- ----- -----
Operating loss................... (14.5) (5.3) (15.5) (10.2) (6.6)
===== ===== ===== ===== =====
</TABLE>

The following table shows net sales by product line for the Company, for
the periods indicated (in thousands and as a percentage of total net sales):

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
---------------------------------------------------------- -------------------------------------
DECEMBER 27, DECEMBER 26, DECEMBER 25, JUNE 26, JULY 2,
1992 1993 1994 1994 1995
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Radar warning detectors... $40,509 79% $50,125 86% $46,602 72% $22,012 85% $26,089 80%
Cordless telephones....... -- -- 2,705 4 14,060 22 2,556 10 5,877 18
Other(1).................. 10,830 21 5,631 10 4,046 6 1,474 5 699 2
------- --- ------- --- ------- --- ------- --- ------- ---
Total..................... $51,339 100% $58,461 100% $64,708 100% $26,042 100% $32,665 100%
======= === ======= === ======= === ======= === ======= ===
<FN>

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

(1) Other sales for 1992, 1993, 1994 and the first six months of 1995 represent
revenue primarily from contract manufacturing activities of the Company.
This activity ceased during the first quarter of 1995. For 1994 and the
interim period of 1995, other sales include sales of wireless data modems of
$368,000 and $248,000, respectively. Other sales for 1992 and 1993 do not
include revenues from sales of home incarceration units to Guardian
Technologies, Inc., which are treated as discontinued operations.
</TABLE>

SIX MONTHS ENDED JULY 2, 1995 COMPARED TO SIX MONTHS ENDED JUNE 26, 1994

Cincinnati Microwave's net sales for the six months (27 week period) ended
July 2, 1995 increased 25% to $32.7 million as compared to $26.0 million for the
six months (26 week period) ended June 26, 1994. The increase reflects the
growing market acceptance of the Company's digital spread spectrum cordless
telephone, which resulted in a net sales increase of 130% over the 1994 period,
due to greater telephone unit volume sales. In addition, continued market
acceptance of the

12
<PAGE> 13

new radar detector products introduced in the third quarter of 1994 resulted in
a sales increase of 19%, due to greater radar detector unit volume sales. The
Company's wireless data modem sales are not significant.

The Company's gross profit margin decreased for the six months ended July
2, 1995 as compared to the comparable period of 1994. The primary reasons for
the reduction were start-up costs associated with the Company's new telephone
production lines and the continued shift in the sales mix from direct retail
business to OEM and reseller business. OEMs and resellers accounted for 50% of
total sales in the 1995 period as compared to 40% for the comparable period in
1994.

Operating expenses as a percentage of sales for the 1995 period were lower
than for the comparable period of 1994. The operating expense decline reflects
lower selling and research and development expenses, offset in part by higher
administrative expenses caused by a 1995 change in the method of classifying
such expenses among administrative, selling and research and development
expenses.

Primarily as a result of the sales increase, the operating loss for the
first six months of 1995 was reduced to $2.2 million from $2.7 million for the
comparable period of 1994. Interest expense for the 1995 period was $559,000
versus $225,000 in 1994. The net loss for the first six months of 1995 declined
to $1.4 million from $2.3 million in 1994. In March 1995, as a result of the
closure of the Company's 1991 federal tax return, the Company released certain
tax reserves to income. This adjustment reduced net loss for the first six
months of 1995 by $1.4 million. 1994 six month results included a gain of
$657,000 from a land sale.

YEAR ENDED DECEMBER 25, 1994 COMPARED TO YEAR ENDED DECEMBER 26, 1993

Cincinnati Microwave's net sales of $64.7 million for 1994 were 10.7%
higher than 1993 net sales. This increase was due entirely to increased sales of
the digital spread spectrum cordless telephone product line, offsetting a 7%
sales decline in the radar warning detector product line. The digital spread
spectrum cordless telephone was introduced during the second quarter of 1993 and
had modest sales in 1993. The decline in the radar warning detector net sales
was due to lower unit volume for these products and lower pricing. The Company's
wireless data modem sales for 1994 were insignificant. Testing of the CDPD
networks continues with end-users testing the system for its compatibility with
their business applications. The Company's wireless data modem has been tested
for various industrial and commercial CDPD applications.

The Company's gross profit margin decreased to 22.2% in 1994 from 32.0% in
1993. This decline was caused by two significant factors. During 1994, the
Company experienced significant component delivery problems relating to its
digital spread spectrum cordless telephone product line. This impacted the
factory production schedule and increased the cost to fill customer orders. For
much of the fourth quarter, the Company operated its digital spread spectrum
cordless telephone production line in a stop and start mode, as and when parts
became available, in order to expedite deliveries to its customers. Secondly,
several competing radar warning detector manufacturers made substantial price
reductions during 1994. In order to maintain its market position, the Company
reacted to these developments by introducing a major sales promotional program
for its retail customers for the month of December.

1994 research and development expenses increased $332,000 from 1993. The
Company continued to focus its efforts on new product development and product
improvements. Selling expenses increased $2.3 million from 1993 primarily as a
result of increased advertising for its digital spread spectrum cordless
telephone. Administrative expenses did not fluctuate significantly from the
prior year.

YEAR ENDED DECEMBER 26, 1993 COMPARED TO YEAR ENDED DECEMBER 27, 1992

Cincinnati Microwave's net sales of $58.5 million for 1993 were 13.9%
higher than 1992 net sales due primarily to a 6% increase in units shipped and a
14% increase in the average selling price of units. Products introduced in 1993
included the super wideband radar laser warning detector, a

13
<PAGE> 14

revised laser warning detector, the digital spread spectrum cordless telephone
and a lower cost home incarceration unit. The increase in selling prices
resulted primarily from higher sales prices of new products which replaced lower
priced products with fewer features.

The Company's gross profit margin increased from 26.3% in 1992 to 32.0% in
1993. This increase was due primarily to the installation and utilization of an
automated production process in the second half of 1993. The efficient operation
of this equipment had two positive effects. First, sufficient quantities of
product were manufactured to permit the Company to fill customer orders at a
lower cost. Second, the ability to produce these products in an efficient manner
permitted the Company's research and development group to focus its attention on
product design modifications, which enabled the Company to substantially reduce
its dependence on a single microprocessor supplier who was unable to provide
adequate supply of product in early 1993.

Research and development expenses increased $935,000 from 1992, as the
Company continued to focus its efforts on new product development and product
improvements. Selling and administrative expenses did not fluctuate
significantly from the prior year.

In 1993, the Company sold its investment in the common stock of BI
Incorporated for a gain of $1.4 million. The net proceeds of $7.3 million were
utilized by the Company to pay down the Company's credit facility and vendor
accounts.

Interest expense increased from the prior year by $317,000 due to the
Company's increased borrowings on its credit facility.

Other income of $886,000 fluctuated from other expense recorded in 1992 of
$1.1 million primarily as a result of the gain on the sale of land in the fourth
quarter of 1993 of $741,000 and loss from the diminution of the Company's
long-term investment in Cellular Data, Inc. (CDI) of $1.4 million in 1992.

As a result of the merger of Guardian Technologies, Inc., a wholly owned
subsidiary of the Company, and BI Incorporated, the Company recorded net income
from discontinued operations of $1.4 million in 1992 or $0.13 per share. At
December 31, 1993 and 1992, no significant obligations or assets remain related
to discontinued operations. In 1992, the Company also recorded an extraordinary
item for the realization of a book net operating loss carryforward of $869,000.

14
<PAGE> 15

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth certain unaudited quarterly financial
information for the past eight quarters (in thousands except for per share data
and as a percentage of net sales):

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------------------
SEPTEMBER DECEMBER MARCH 27, JUNE 26, SEPTEMBER DECEMBER APRIL 2, JULY 2,
26, 1993 26, 1993 1994 1994 25, 1994 25, 1994 1995 1995
--------- --------- ------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $17,545 $22,942 $12,350 $13,692 $15,299 $23,367 $13,648 $ 19,017
Gross profit............. 6,620 8,609 4,025 4,509 2,987 2,828 4,091 5,148
Net income (loss)........ 2,612 2,790 (567) (1,757) (3,995) (3,941) (582) (783)
Net income (loss) per
share.................. 0.24 0.24 (0.05) (0.16) (0.37) (0.36) (0.04) (0.06)
</TABLE>

<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET SALES
------------------------------------------------------------------------------------------------
QUARTER ENDED
------------------------------------------------------------------------------------------------
SEPTEMBER DECEMBER MARCH 27, JUNE 26, SEPTEMBER DECEMBER APRIL 2, JULY 2,
26, 1993 26, 1993 1994 1994 25, 1994 25, 1994 1995 1995
--------- --------- -------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ 100.0% 100.0% 100.0 % 100.0% 100.0 % 100.0% 100.0 % 100.0%
Gross profit............. 37.7 37.5 32.6 32.9 19.5 12.1 30.0 27.1
Net income (loss)........ 14.9 12.2 (4.6) (12.8) (26.1) (16.9) (4.3) (4.1)
</TABLE>

Quarterly earnings per share calculations are based on the weighted average
number of shares outstanding for the quarter then ended. Annual earnings per
share calculations are based on the weighted average number of shares
outstanding for the twelve month period then ended. Due to fluctuations in the
weighted average number of shares outstanding, the sum of the earnings per share
calculations for each quarter will not necessarily equal the calculated earnings
per share for the twelve month period.

LIQUIDITY AND CAPITAL RESOURCES

The Company finances its operations through a combination of equity capital
and bank debt. On January 12, 1995, the Company completed an equity rights
offering, receiving net proceeds of $9.3 million. The funds were utilized to
reduce debt and trade payables to vendors and for working capital requirements.
During the first six months of 1995, the Company utilized its line of credit to
finance increased finished goods inventory to meet, in part, the ramp-up in
production to prepare for the fall selling season. As of August 13, 1995 the
Company had borrowed $13.6 million against its $14.0 million credit facility.
The credit facility consists of (i) a $7.0 million revolving credit due June 30,
1996, (ii) a $4.0 million supplemental revolving credit due September 30, 1995,
(iii) a $3.0 million term loan due June 30, 1996 and (iv) a standby letter of
credit facility not to exceed $1.0 million which expires June 30, 1996; however,
the sum of the outstanding principal balance of the revolving credit and the
supplemental revolving credit plus the aggregate stated value of the Company's
outstanding letters of credit shall not exceed $11.0 million at any time. The
credit facility is secured by a first lien on the Company's inventory,
receivables, and equipment and a mortgage on the real estate of the Company. At
period end, shareholders' equity was $15.6 million and the ratio of
debt-to-equity was 1.71 times versus $14.6 million and 1.90 times a year ago.
The Company believes that its working capital and credit facilities and cash
generated from operations, along with the net proceeds from this Offering, will
be sufficient to fund its operations for the foreseeable future. The Company
expects to spend approximately $4.1 million for capital equipment during the
last six months of 1995, principally relating to acquiring additional
manufacturing equipment, a portion of which may be financed by equipment lease
financing.

15
<PAGE> 16

BUSINESS

The Company designs, manufactures and markets ultrahigh frequency and
microwave wireless communications products. The Company's principal product line
since its inception has been radar warning detectors. The Company has become a
leader in the radar warning detector market by combining its experience in
ultrahigh frequency and microwave wireless technology, including digital signal
processing, with its high volume manufacturing capabilities. In 1993, the
Company introduced its first digital spread spectrum cordless telephone and its
first wireless data modem. Both of the new product lines leverage the Company's
wireless and digital signal processing expertise and high volume, low cost
manufacturing capabilities.

BUSINESS STRATEGY

The Company's business strategy is to use its core technology in ultrahigh
frequency and microwave circuit design, digital signal processing, digital
spread spectrum capability and digital communication techniques, together with
its experience in short product development cycles and low cost mass production,
to introduce leading edge products early in new market life cycles. Using the
early introduction as a platform to gain a leading market share, the Company
strives to aggressively introduce subsequent versions of the product at lower
prices made possible by greater production volume and manufacturing
efficiencies.

The Company's business strategy includes the following elements:

- Leverage core technology

The Company has considerable experience in the design, development and
manufacture of portable electronic wireless communication devices that operate
in the ultrahigh frequency radio and microwave spectrum, having utilized this
technology in its radar detection products since 1978. The Company is committed
to capitalizing upon its core technology base, as shown by its development of
new products and the expansion and enhancement of its technology base through
significant and ongoing research and development expenditures.

- Emphasize short product development cycles

The Company believes that short product development cycles are essential to
its success. Such cycles enable the Company to capitalize upon the higher
margins that are associated with the introduction of new products and positions
the Company to establish itself as a leader in new markets. Since 1991, the
Company has developed and introduced more than 16 radar warning detector
products, four generations of digital spread spectrum cordless telephones and a
series of wireless data modems.

- Increase manufacturing efficiencies, improve quality and lower product
cost

The Company uses surface mount technology ("SMT") extensively to
manufacture its products. The Company was among the first to utilize SMT to
manufacture consumer radar detection products. SMT is the automated
manufacturing process used to place micro electronic components on printed
circuit boards with a high level of accuracy at a high speed. The use of SMT
enables the Company to design and manufacture products that are compact,
portable and reliable and allows it to achieve manufacturing efficiencies that
result in lower costs. The Company has also developed high speed automated
testing capabilities in order to ensure quality and improve manufacturing
efficiency. Testing procedures have become an integral part of the Company's
manufacturing process encompassing all aspects of the manufacture of its
products, from component to sub-assembly and finished product testing.

16
<PAGE> 17

- Develop strategic alliances

The Company's strategy for entering new markets is to align with companies
that have established sales leadership and market positions. This strategy is
designed to provide broader access to retailers and end users. The Company
developed its digital spread spectrum cordless telephones and wireless data
modems utilizing this teaming approach. With respect to the Company's digital
spread spectrum cordless telephones, this strategy involves selling as an OEM to
major cordless telephone vendors. With respect to the Company's wireless modems,
this strategy involves working with cellular service providers as well as
vendors of services utilizing the CDPD networks.

PRODUCTS AND MARKETS

The Company's products are ultrahigh frequency wireless communication
products that operate in the UHF radio and microwave spectrum. At the present
time, the Company has developed and introduced radar warning detectors, digital
spread spectrum cordless telephones and wireless data modems that utilize the
CDPD networks. These three products are described in more detail below.

CORDLESS TELEPHONES

The market for cordless telephones has grown over the past few years and,
according to industry sources, sales of all cordless telephones exceeded 17
million units in 1994, with approximately 700,000 units in the 900 megahertz
("MHz") segment. Conventional cordless phones, which operate in the 46-49 MHz
segment, may be nearing the mature phase of their product life cycle. The
Company believes that the growth area is in high performance telephones, which
operate in the 900 MHz segment. These high performance telephones can deliver to
a consumer the superior range and clarity required for cordless telephones to
become a true substitute for the traditional corded telephone.

In May 1993, the Company introduced its first digital spread spectrum high
performance cordless telephone. These telephones are sold both under the
ESCORT(R) brand name (the ESCORT(R) 9000 series) and to OEM customers. The
Company's digital spread spectrum cordless telephones offer superior performance
over traditional cordless telephones, specifically in the areas of improved
voice clarity, range and communication security. The term "spread spectrum"
refers to a communications technique that encodes signals to be transceived over
multiple frequencies. Spread spectrum transceivers cause substantially less
interference and are less susceptible to interference than conventional
transceivers such as those used in traditional cordless telephones. Due to the
substantially lower interference, the Federal Communications Commission has
specified operating parameters for the 902-928 MHz band that are highly
advantageous to spread spectrum products. The lower susceptibility to
interference together with the advantageous Federal Communications Commission
operating parameters have enabled the Company to design products that can
achieve significantly greater range than traditional cordless telephones.
Cincinnati Microwave has combined spread spectrum technology with digital signal
processing technology, thereby digitizing the speech and transmitting it as a
high speed data transmission. By using a high speed data transmission, no voice
compression is required, resulting in a voice clarity that is comparable to a
traditional corded telephone. Finally, spread spectrum encoding by its nature
scrambles voice and data resulting in very secure communications.

The Company has recently introduced its next generation of digital spread
spectrum cordless telephone models, both for the Company's retail and OEM
channels. These digital spread spectrum cordless telephones are less expensive
to manufacture and can be sold by the Company at a lower price than its previous
digital spread spectrum cordless telephone products.

WIRELESS DATA MODEMS

In July 1993, Cincinnati Microwave announced that it had developed a series
of wireless data modems to be used in conjunction with the CDPD networks being
deployed by a consortium of

17
<PAGE> 18

cellular telephone carriers. CDPD, one of the recognized leading technologies in
wide area wireless data communications, is a digital system that overlays the
cellular voice network and uses the idle times between cellular voice calls to
transmit data. The Company's MC-DART (Mobile Cellular Data Access Radio
Transceiver) wireless data modems enable data to be sent and received using the
CDPD networks without the burden of wires or the costs of circuit switched
connections (the traditional method used for a voice call). In order to enter
this market, the Company has established marketing arrangements with five
leading cellular service providers: Ameritech Mobile Services, Bell Atlantic
Mobile Services, GTE Mobile Communications, McCaw Cellular Communications, Inc.
and Sprint Cellular Communications. Production of the Company's wireless data
modem products commenced in June 1994 and sales to date have been limited.

In June 1995, Bell Atlantic Mobile Services, Firstnet Corporation and the
Company announced that the Company's wireless data modems will provide the
wireless communication link for AireTrans, the nation's first large-scale
deployment of wireless credit card verification using CDPD. The system is now
operational in northern New Jersey and the greater Washington, D.C. and
Baltimore, Maryland metropolitan areas.

CDPD has uses in three broad applications of data networking: mobile
applications -- exchanging data with data sources in motion, such as truck
fleets, portable point of sale devices and credit card verification units; fixed
wireless applications -- exchanging data with data sources which are difficult
or prohibitively expensive to reach, such as utility meters, vending machines
and pipe line pumps; and portable applications -- such as portable computers.

RADAR WARNING DETECTORs

The Company's principal product since its formation has been radar warning
detectors, which use microwave and other technologies to detect and amplify
police radar transmissions. During 1992, the Company also began manufacturing
and selling a laser detection product. The Company's superheterodyne radar
warning detectors use digital signal processing and high gain laser detectors to
detect police radar and laser signals and reject unwanted signals so that early
identification is enhanced.

The Company's radar warning detectors are also being used in conjunction
with the Safety Alert1 system that commenced operations in a number of locales
in 1995. The Safety Alert system utilizes small transmitters that emit a low
power K-band microwave signal which can be mounted on anything that may
constitute a traffic hazard (such as a speeding emergency vehicle, a road
construction site or a locomotive approaching a grade crossing). The Safety
Alert signal is encoded and when detected and decoded by an appropriately
equipped radar warning detector, the signal can provide the driver with more
specific information as to the nature of the traffic hazard, thereby enhancing
driver safety. The Company was the first to offer products specifically designed
to decode Safety Alert signals for drivers and commenced shipping such radar
warning detectors in August 1994 (the PASSPORT(R) 5000) in anticipation of the
system's implementation. The Company plans to add this capability to its entire
radar warning detector product line by the end of 1995. The Company believes
that the Safety Alert systems are in limited use at present.

MARKETING AND SALES

The Company's marketing and sales efforts are differentiated into two
distinct categories: Consumer Products and Commercial Products.

CONSUMER PRODUCTS

The Company's radar warning detector products have traditionally been
marketed under the ESCORT(R) brand name by direct advertising. Through
advertisements placed in national publications, such as "Car and Driver" and
"Road & Track," consumers can reach a dedicated telemarket-
[FN]
---------------

1"Safety Alert" is a trademark of COBRA Electronics Corporation.

18
<PAGE> 19

ing staff (via a toll-free phone number) to obtain additional information or
place orders for the Company's products. The successful introduction of the
evolving series of ESCORT(R) radar warning detectors has provided the Company
with a loyal customer base that can be reached by direct mail efforts for new
radar warning detector products as they become available.

To augment this direct sales channel, the Company has developed a strategic
alliance with Home Shopping Network ("HSN"). The Company's radar warning
detector products are marketed to subscribers of HSN's cable shopping networks.
HSN purchased a substantial part of the Company's radar warning detector output
in 1994 and accounted for 14% of the Company's total net sales. For the first
six months of 1995, HSN purchases have accounted for 16% of the Company's total
net sales. In addition, the Company is actively developing additional alliances
with "sheltered channel" distributors. The Company also sells its radar warning
detectors as an OEM supplier to COBRA Electronics Corporation.

The Company sells its digital spread spectrum cordless telephone primarily
as an OEM as well as under its ESCORT(R) brand. As an OEM, the Company designs,
develops and manufactures digital spread spectrum cordless telephones for
specific customers on a private label basis based upon their specifications.

COMMERCIAL PRODUCTS

The Company's commercial product marketing and sales efforts have evolved
out of its OEM approach to consumer products. At present the Company's one
commercial product is its wireless data modem. The Company was an early active
participant with the CDPD consortium, with its engineers being consulted in the
formation of the CDPD standards. The Company took advantage of this early start
by aligning itself with certain cellular carriers for the marketing of its
wireless data modem. The Company has established marketing arrangements with
five leading cellular service providers: Ameritech Mobile Services, Bell
Atlantic Mobile Services, GTE Mobile Communications, McCaw Cellular
Communications, Inc. and Sprint Cellular Communications. Production of the
Company's wireless data modem products commenced in June 1994 and sales to date
have been limited.

RESEARCH AND DEVELOPMENT

The Company believes that continued strong investment in research and
development is critical to its long term growth and success. Utilizing its
expertise in ultrahigh frequency and microwave wireless communications and
digital signal processing, the Company intends to continue to develop new
products that strengthen its position in its current markets as well as to enter
new markets. The research and development activities of the Company are directed
toward product development, product improvement, new product screening,
technology development and manufacturing process development. All of the costs
of such research and development activities are expensed as incurred.

As of July 2, 1995, the Company employed 71 people in research and
development functions. The Company's research and development expenditures (in
dollars and as a percentage of net sales) were $7.2 million (14.0%) for fiscal
year 1992; $8.1 million (13.9%) for fiscal year 1993; $8.4 million (13.1%) for
fiscal year 1994; and $3.6 million (11.0%) for the six months ended July 2,
1995.

MANUFACTURING

Cincinnati Microwave designs, manufactures, tests and packages its products
at its plant near Cincinnati, Ohio. All of the Company's products are designed
around the Company's manufacturing processes, which particularly emphasize SMT.
SMT is the automated manufacturing process used to

19
<PAGE> 20

place micro electronic components on printed circuit boards with a high level of
accuracy and at high speed. The use of SMT enables the Company to design and
manufacture products that are compact, portable and reliable and to achieve
manufacturing efficiencies that result in lower costs. The Company believes that
it is important to maintain competitive manufacturing facilities by investing in
advanced manufacturing equipment (particularly SMT and automated test equipment)
and by improving existing and developing new manufacturing processes.

The Company's products include a number of high-technology components that
are available from only a few suppliers and, in several cases, a single
supplier. The Company frequently requires large volumes of such components and,
if the Company's suppliers are unable to fulfill the Company's needs for such
components, the Company may be unable to fill customer orders and its business,
financial condition, including working capital, and results of operations may be
materially and adversely affected. In 1993, and again in 1994, certain of the
Company's suppliers were unable to deliver sufficient quantities of critical
components to allow the Company to manufacture its products at previously
anticipated volumes. These shortages adversely affected the Company's ability to
manufacture and deliver products and, as a result, had a significant adverse
effect on the Company's business, financial condition, including working
capital, and results of operations. Since part of the Company's strategy is to
shorten product development and introduction cycles, occasions may arise in the
future where the Company's ability to produce products outpaces its suppliers'
ability to supply components. There can be no assurance that the Company can
continue to obtain adequate supplies or obtain such supplies at their historical
cost levels. The Company has no guaranteed supply arrangements with any of its
sole or limited source suppliers, does not maintain an extensive inventory of
components and customarily purchases sole or limited source components pursuant
to purchase orders placed from time to time in the ordinary course of business.
Moreover, the Company's suppliers may, from time to time, experience production
shortfalls or interruptions which impair the supply of components to the
Company. There can be no assurance that such shortages will not occur in the
future and adversely affect the Company's business, financial condition,
including working capital, and results of operations.

TRADEMARKS AND PATENTS

Cincinnati Microwave has a variety of patents, patent applications,
registered and unregistered trademarks and registered trade names. The Company
does not believe that its ability to compete in any of its product markets is
currently dependent on its patents or patent applications, but does believe that
its rights to, and the goodwill associated with, its ESCORT(R), PASSPORT(R) and
SOLO(R) registered trademarks provide it with a marketing advantage and that its
knowledge and accumulated experience in the design and mass production of
ultrahigh frequency wireless transmitters and receivers incorporating digital
signal processing provide it with a competitive advantage.

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<PAGE> 21

COMPETITION

All markets in which the Company participates are highly competitive. The
market for conventional cordless telephones is largely driven by AT&T, followed
by four major brands (Bell South, GE, Panasonic and Sony), several other
Regional Bell brands and a host of minor brands. The market for high performance
cordless telephones, such as those manufactured by the Company, is relatively
new. The Company's major competitors in the high performance cordless telephone
market segment are Panasonic, Uniden and Vtech. Competition in this segment is
currently based primarily on product performance, features and price. Many
current or prospective competitors serving this market are substantially larger
than the Company and possess significantly greater financial, marketing and
technical resources than the Company. There can be no assurance that the Company
will be successful against its competition in this market.

The Company's wireless data modems have been proven fully operational on
commercial CDPD networks. The market for wireless data modems is still
developing, and there are current or prospective competitors, such as Motorola
and PCSI, a subsidiary of Cirrus Logic, who are substantially larger than the
Company and possess significantly greater financial and technical resources.
There can be no assurance that the Company will compete successfully in this
market.

The market for radar warning detectors is highly competitive, has matured
and is declining. As the market has moved toward lower priced products offering
fewer features, competition has been based primarily on price and, to a lesser
degree, product quality, availability and performance. Lower than expected
demand for the Company's radar warning detectors, coupled with intense price
competition in the radar warning detector market, adversely affected the
Company's fourth quarter 1994 results. A recurrence of these conditions would
have a material adverse effect on the Company.

GOVERNMENT REGULATION

Existing, pending or future legislation prohibiting the use, possession or
sale of radar warning detectors or future legislation by states increasing speed
limits could have a material adverse effect on the Company's business.
Currently, there are two jurisdictions in the United States which have specific
prohibitions against the use, possession or sale of radar warning detectors in
automobiles. In addition, two other jurisdictions prohibit the use of radar
warning detectors in large commercial vehicles only and, in January 1994, the
Federal Highway Administration enacted a regulation banning radar warning
detectors from commercial vehicles weighing over 18,000 pounds, from buses
carrying 16 or more passengers and from trucks transporting hazardous materials
on highways funded by the Federal Government. This is, in effect, a ban on use
of such radar warning detectors in all large trucks and buses. A bill currently
pending in Congress would eliminate the existing federal requirement that states
comply with national maximum speed limit provisions before receiving certain
federal funds. This bill has passed the Senate and, if enacted, is likely to
result in higher speed limits in some states.

In addition, radio communications are subject to regulation by United
States and foreign laws and international treaties. The Company's digital spread
spectrum cordless telephones and wireless data modems must conform to domestic
and international requirements established to avoid interference among users of
radio frequencies. Therefore, the Company's opportunities to introduce new
products may be limited to the extent that suitable radio frequencies are not
available.

EMPLOYEES

As of July 2, 1995 the Company had 480 employees: 71 employees in
engineering, 276 employees in manufacturing, 93 employees in sales and marketing
and 40 employees in administration. The Company believes that its relations with
its employees are good. None of the Company's employees is represented by a
labor union or covered by a collective bargaining agreement, and the Company has
never experienced a work stoppage as a result of its employee relations.

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<PAGE> 22

PROPERTIES

Cincinnati Microwave owns its manufacturing and research facilities and
executive offices located on 13 acres of land near the intersection of
Fields-Ertel Road and I-71, approximately twenty miles north of Cincinnati,
Ohio. The building at One Microwave Plaza, built in 1982 and expanded in 1986,
is a modern 172,000 square foot, one-story building.

The Company also owns substantially all of the equipment associated with
its manufacturing, research and testing operations. The Company has acquired
certain equipment through leasing arrangements. All equipment is modern, in good
operating condition and well-maintained and, except for leased equipment, is
currently used as collateral for the line of credit with the current lender.

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<PAGE> 23

MANAGEMENT

The following table sets forth certain information with respect to the
executive officers and directors of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------- --- -----------------------------------------------------------
<S> <C> <C>
James L. Jaeger 48 Chairman of the Board
Jacques A. Robinson 48 President, Chief Executive Officer and Director
John W. Noland 54 Executive Vice President, Chief Operating Officer and
Director
R. Gregory Blair 48 Vice President/Product Management
Anita L. Hromish 41 Vice President/Chief Information Officer
Thomas H. Perszyk 47 Vice President/Engineering
Walter P. Masavage 59 Vice President/Finance, Treasurer and Secretary
Robert J. Brockman 50 Vice President/Commercial Products Marketing and Sales
Charles M. Fullgraf 76 Director
Joseph M. O'Donnell 49 Director
Gilbert L. Wachsman 47 Director
Erika Williams 48 Director
</TABLE>

James L. Jaeger is a founder of the Company. In May 1985 he was elected
Chairman of the Board. He also served as Chief Executive Officer of the Company
from June 1983 until June 1988 and from January 1990 through April 22, 1991. He
has been a Director of the Company since 1976. Mr. Jaeger spends substantially
all of his time on activities outside of the Company.

Jacques A. Robinson has been President and Chief Executive Officer of the
Company since April 23, 1991 and President of The Scotcrest Group since its
incorporation in 1989. From July 1987 through February 1991, Mr. Robinson served
as President of Carillon Technology, Inc. (a California company that
manufactured consumer audio technology products). From 1979 through June 1987,
Mr. Robinson held various positions with the General Electric Company; his most
recent position with that company was Vice President and General Manager of the
Consumer Electronics Business Operations. He has been a Director of the Company
since 1991.

John W. Noland has been Executive Vice President and Chief Operating
Officer of the Company since November 1992. Prior to this, Mr. Noland was with
Thomson Consumer Electronics, Inc. (a world wide consumer electronics products
manufacturing and marketing company) serving as Vice President, TV Division
Asia, located in Singapore. In this position, he was responsible for Asian
marketing, product development, design, manufacturing and managing manufacturing
locations in five Asian countries. Mr. Noland was with General Electric
Company's Consumer Electronics Business from 1963 through 1987 and held various
manufacturing positions in the television, audio and communications divisions of
GE. He was general manager of the cathode ray tube manufacturing operations when
Thomson acquired all of GE's consumer electronics business in 1987. He has been
a Director of the Company since November 1992.

R. Gregory Blair is Vice President/Products Management. Mr. Blair joined
the Company in December 1984 as its Director of Manufacturing and in October
1985 was appointed Vice President-Operations. He also served as President and
Chief Operating Officer of Guardian Technologies, Inc., a wholly owned
subsidiary of the Company, from March 1987 to November 1988, and as President
and Chief Operating Officer of CMI Technologies, Inc., a wholly owned subsidiary
of the Company, from November 1988 until September 1991.

Anita L. Hromish is Vice President/Chief Information Officer of the
Company. Ms. Hromish joined the Company in March 1986 and has assumed positions
of increasing responsibility during this time. From 1979 to 1984, Ms. Hromish
was employed by The Procter & Gamble Company

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<PAGE> 24

("P&G") (a diversified manufacturer of household and industrial products
headquartered in Cincinnati, Ohio) in the Management Systems Division. Ms.
Hromish was appointed Vice President in July 1993.

Thomas H. Perszyk is Vice President/Engineering. Prior to joining the
Company in December 1994, Mr. Perszyk was Senior Resource Manager-Engineering
for Motorola and had 24 years of experience with Motorola in the
electrical/electronics engineering field. Recent product responsibilities
included a wide range of portable communication equipment and involved worldwide
assignments in engineering and manufacturing.

Walter P. Masavage, Vice President/Finance, Treasurer and Secretary, worked
for the General Electric Company for 31 years and Thomson Consumer Electronics,
Inc. (a world wide consumer electronics products manufacturing and marketing
company) for six years in accounting management positions of increasing
responsibility. Before joining Cincinnati Microwave, Mr. Masavage was CFO of
Thomson Consumer Electronics' Canadian affiliate. Mr. Masavage joined the
Company in May 1994 and was appointed Vice President in May 1994 and Treasurer
and Secretary in January 1995.

Robert J. Brockman is Vice President/Commercial Products Marketing and
Sales. After ten years with the Power Generation Division of Babcock & Wilcox (a
manufacturer of steam generating equipment for utility and industrial power
generation), as R&D Program Manager, Mr. Brockman joined Bailey Controls Company
(a manufacturer of electronic process control equipment) as Manager, Product
Planning and Marketing. Mr. Brockman then served as Manager, Marketing and Sales
for the General Electric Company's Display Product Operations from 1985 to 1993.
Mr. Brockman joined the Company and was appointed Vice President in June 1994.

Charles M. Fullgraf retired from P&G in 1982 after a 42-year career serving
P&G in various management positions. From 1978 to 1982 Mr. Fullgraf was a Group
Vice President of P&G and served on its Board of Directors. He also served as a
trustee of the P&G Profit Sharing Trust. He has been a Director of the Company
since 1985.

Joseph M. O'Donnell is currently Managing Director of his own consulting
firm. Mr. O'Donnell also has been President and Chief Executive Officer of
Computer Products, Inc. (a multi-national manufacturer of electronic products
and subsystems) since July 1994. Mr. O'Donnell was Chief Executive Officer of
Savin Corporation (a manufacturer of office products and equipment) from October
1993 to February 1994. From June 1990 through July 1992, Mr. O'Donnell was
President and Chief Executive Officer of GO/DAN Industries (a company that
manufactures and markets products for the automotive aftermarket business). From
October 1988 to May 1990, Mr. O'Donnell was Group Vice President of Handy &
Harmon (a company primarily involved in precious metals refining, stamping,
forging and fabrication headquartered in New York, New York); from August 1987
to September 1988 he was President of OD&S Ventures, Inc. (a venture capital
company). He has been a Director of the Company since 1991.

Gilbert L. Wachsman has been President of Wachsman Management Consulting,
Inc., which provides consulting services to retailers and consumer oriented
manufacturers, since 1990. Pursuant to his consulting practice, Mr. Wachsman
served as Vice Chairman of Universal International, Inc. (a wholesaler/retailer
of close-out merchandise) from October 1992 to February 1995. From December 1988
to July 1990, Mr. Wachsman was President of Lieberman Enterprises (a distributor
of pre-recorded music, video and personal computer software); from January 1986
to December 1988 he was President of Child World, Inc. (one of the largest U.S.
toy chains). He has been a Director of the Company since 1991.

Erika Williams is currently President of the Erika Williams Group, a
consulting firm. Ms. Williams also is Chief Operating Officer of System
Integrators, Inc. (a company that designs, manufactures and markets services
publishing systems to the newspaper publishing industry). From 1993 to March
1995, Ms. Williams was Senior Vice President and General Manager of Enterprise
Storage Systems of Amdahl Corporation (a developer and manufacturer of mainframe
computers)

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<PAGE> 25

of Sunnyvale, California. Since 1978, Ms. Williams held various positions with
Amdahl Corporation including the Corporate Officer responsible for product
management of the main frame business, Vice President of Processor Technology
and Development and Director of Product Software and Diagnostics. She has been a
Director of the Company since 1994.

SELLING SHAREHOLDER

James L. Jaeger, a founder of the Company, is offering 3,000,000 Common
Shares hereby. Mr. Jaeger has been Chairman of the Board of the Company since
May 1985. He also served as Chief Executive Officer of the Company from June
1983 until June 1988 and from January 1990 through April 22, 1991. He has been a
Director of the Company since 1976. Prior to the Offering, Mr. Jaeger
beneficially owned 6,127,179 Common Shares which represented 43.3% of the
outstanding Common Shares. After completion of the Offering (assuming no
exercise of the Underwriters' over-allotment option to purchase up to 600,000
Common Shares from the Company and Mr. Jaeger), he will own 3,127,179 Common
Shares which will represent 20.6% of the outstanding Common Shares. The percent
of shares owned prior to the Offering is based on 14,155,415 Common Shares
outstanding on August 9, 1995. The percent of shares owned after the Offering is
based on 15,155,415 shares outstanding. Mr. Jaeger also owns Warrants to
purchase 30,000 Common Shares.

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 20,000,000 Common
Shares, without par value and 100,000 Preferred Shares. After giving effect to
the Offering (assuming no exercise of the Underwriters' over-allotment option),
the issued and outstanding capital stock of the Company will consist of
15,155,415 Common Shares. In addition, the Company has 1,345,321 Warrants issued
and outstanding as described below.

The following summary of certain matters relating to the capital stock of
the Company is qualified in its entirety by the provisions of the Company's
Articles of Incorporation and Regulations.

COMMON STOCK

The Company had 14,155,415 Common Shares issued and outstanding at August
9, 1995. Holders of Common Shares are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders.
Shareholders have the right to cumulate their votes in the election of
directors.

Holders of Common Shares are entitled to share in such dividends as the
Board of Directors, in its discretion, may validly declare from funds legally
available. In the event of liquidation, each outstanding Common Share entitles
its holder to participate ratably in the assets remaining after payment of
liabilities.

Shareholders have no preemptive or other rights to subscribe for or
purchase additional shares of any class of stock or any other securities of the
Company, and there are no redemption or sinking fund provisions with regard to
the Common Shares. All outstanding Common Shares are fully paid, validly issued
and non-assessable.

The vote of the holders of 66 2/3% of all outstanding Common Shares is
required to amend the Articles of Incorporation and to approve mergers,
reorganizations, and similar transactions.

PREFERRED STOCK

The Articles authorize the Board of Directors to designate and issue, from
time to time, Preferred Shares in one or more series. The Board of Directors is
authorized, to the extent permitted by applicable law, to fix and determine the
relative rights and preferences of the shares of any series so established with
respect to, among other things, dividend or distribution rights, the

25
<PAGE> 26

dates of payments of dividends or distributions and the dates from which they
are cumulative, liquidation price, redemption rights and price, sinking fund
requirements, conversion or exchange rights and certain other terms of the
Preferred Shares. Because the rights and preferences set by the Board of
Directors for a series of Preferred Shares may be superior to the rights and
preferences of the Common Shares, the issuance of such series may adversely
affect the rights of the holders of Common Shares. As of the date of this
Prospectus, the Board of Directors had not authorized or issued any series of
Preferred Shares and had no plans, agreements or understandings for such
authorization or issuance.

While issuance of Preferred Shares could provide needed flexibility in
connection with possible acquisitions and other corporate purposes, such
issuance also could make it more difficult for a prospective acquiror to acquire
a majority of the outstanding voting shares of the Company and could discourage
an attempt to gain control of the Company. Such authority granted to the Board
of Directors could adversely affect the market price of the Common Shares.

WARRANTS

The Company had 1,345,321 Warrants issued and outstanding at August 9,
1995. Each Warrant entitles its holder to purchase one Common Share at an
exercise price of $4.00 at any time prior to 5:00 p.m., Eastern Standard
Time, on December 31, 1998. Warrant holders have no voting rights or
dividend rights.

PROVISIONS EFFECTING BUSINESS COMBINATIONS

Chapter 1704 of the Ohio Revised Code may be viewed as having an
anti-takeover effect. This statute, in general, prohibits an "issuing public
corporation" (the definition of which would include the Company) from entering
into a "Chapter 1704 Transaction" with the beneficial owner (or affiliates of
such beneficial owner) of 10% or more of the outstanding shares of the
corporation (an "interested shareholder") for at least three years following the
date on which the interested shareholder attains such 10% ownership, unless the
board of directors of the corporation approves, prior to such person becoming an
interested shareholder, either the transaction or the acquisition of shares
resulting in a 10% ownership. A "Chapter 1704 Transaction" is broadly defined to
include, among other things, a merger or consolidation with, sale of substantial
assets to, or the receipt of a loan, guaranty or other financial benefit (which
is not proportionately received by all shareholders) by the interested
shareholder. Following the expiration of such three-year period, a Chapter 1704
Transaction with the interested shareholder is permitted only if either (i) the
transaction is approved by the holders of at least two-thirds of the voting
power of the corporation (or such different proportion as set forth in the
corporation's articles of incorporation), including a majority of the
outstanding shares, excluding those owned by the interested shareholder, or (ii)
the business combination results in the shareholders other than the interested
shareholder receiving a prescribed "fair price" for their shares. One
significant effect of Chapter 1704 is to cause an interested shareholder to
negotiate with the board of directors of a corporation prior to becoming an
interested shareholder.

In addition, Section 1707.043 of the Ohio Revised Code requires a person or
entity that makes a proposal to acquire the control of a corporation to repay to
that corporation any profits made from trades in the corporation's stock within
18 months after making the control proposal.

TRANSFER AGENT AND REGISTRAR

The registrar and transfer agent for the Company's Common Shares is The
State Street Bank and Trust Company, Boston, Massachusetts.

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<PAGE> 27

UNDERWRITING

Montgomery Securities and Roney & Co. (the "Underwriters") have
individually agreed, subject to the terms and conditions contained in the
Underwriting Agreement, to purchase from the Company and the Selling Shareholder
the number of Common Shares indicated below opposite their respective names at
the public offering price less the underwriting discount set forth on the cover
page of this Prospectus. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent and
that the Underwriters are committed to purchase all of such Common Shares if any
are purchased.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Montgomery Securities.................................... 3,000,000
Roney & Co............................................... 1,000,000
---------
Total............................................... 4,000,000
=========
</TABLE>

The Underwriters propose to offer the Common Shares to the public on the
terms set forth on the cover page of this Prospectus. The Underwriters may allow
to selected dealers a concession of not more than $0.55 per share, and the
Underwriters may allow, and such dealers may reallow, a concession of not more
than $0.10 per share to certain other dealers. The Common Shares are offered
subject to receipt and acceptance by the Underwriters and to certain other
conditions, including the right to reject an order in whole or in part.

The Company and the Selling Shareholder have granted an option to the
Underwriters, exercisable during the 30-day period immediately after the date of
this Prospectus, to purchase up to 600,000 additional Common Shares to cover
over-allotments, if any, at the same price per share as the initial 4,000,000
shares to be purchased by the Underwriters. To the extent that the Underwriters
exercise this option, each of the Underwriters will be committed, subject to
certain conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with this Offering.

The Underwriting Agreement provides that the Company and the Selling
Shareholder will indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments the Underwriters may be required to make in respect thereof.

The Company and each of its officers and directors have agreed that, for a
period of 90 days after the date of this Prospectus, they will not, without the
prior written consent of Montgomery Securities, directly or indirectly, offer
for sale, sell, transfer or otherwise dispose of any securities of the Company
(other than sales by Mr. Jaeger in connection with this Offering).

The rules of the SEC generally prohibit the Underwriters from making a
market in the Company's Common Shares during the "cooling off" period
immediately preceding the commencement of sales in the Offering. The SEC has,
however, adopted an exemption from these rules that permits passive market
making under certain conditions. These rules permit an Underwriter to continue
to make a market in the Company's Common Shares subject to the conditions, among
others, that its bid not exceed the highest bid by a market maker not connected
with the Offering and that its net purchases on any one trading day not exceed
prescribed limits. Pursuant to these exemptions, the Underwriters intend to
engage in passive market making in the Company's Common Shares during the
cooling off period.

The Underwriters have informed the Company that they do not expect to make
sales to accounts over which they exercise discretionary authority in excess of
five percent of the Common Shares offered hereby.

Roney & Co. acted as dealer manager for a rights offering by the Company
during the third and fourth quarters of 1994.

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<PAGE> 28

LEGAL MATTERS

The validity of the issuance of Common Shares offered hereby will be passed
upon for the Company by Frost & Jacobs, Cincinnati, Ohio. Certain legal matters
in connection with this Offering will be passed upon for the Underwriters by
Taft, Stettinius & Hollister, Cincinnati, Ohio. Certain legal matters in
connection with this Offering will be passed upon for the Selling Shareholder by
Keating, Muething & Klekamp, Cincinnati, Ohio.

EXPERTS

The Consolidated Financial Statements and Notes thereto incorporated in
this Prospectus by reference to the Company's Annual Report on Form 10-K for the
year ended December 25, 1994 have been so incorporated in reliance on the report
of Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.

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No dealer, sales representative, or any other person has been authorized to
give any information or to make any representations in connection with this
Offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company, the Selling Shareholder or any of the Underwriters.
This Prospectus does not constitute an offer to sell or a solicitation of any
offer to buy any securities other than the Common Shares to which it relates or
an offer to, or a solicitation of, any person in any jurisdiction where such an
offer or solicitation would be unlawful. Neither the delivery of this Prospectus
nor any sales made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of the Company or that
information contained herein is correct as of any time subsequent to the date
hereof.

----------------------------
TABLE OF CONTENTS
----------------------------

<TABLE>
<CAPTION>
Page
----
<S> <C>
Additional Information.................. 2
Available Information................... 2
Incorporation of Documents by
Reference............................. 2
Prospectus Summary...................... 3
Risk Factors............................ 4
Use of Proceeds......................... 8
Price Range of Common Shares............ 8
Dividend Policy......................... 8
Capitalization.......................... 9
Dilution................................ 10
Selected Consolidated Financial Data.... 11
Management's Discussion and Analysis
of Financial Condition and
Results of Operations................. 12
Business................................ 16
Management.............................. 23
Selling Shareholder..................... 25
Description of Capital Stock............ 25
Underwriting............................ 27
Legal Matters........................... 28
Experts................................. 28
</TABLE>

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[LOGO]
4,000,000 COMMON SHARES

------------------------
PROSPECTUS
------------------------

MONTGOMERY SECURITIES

RONEY & CO.

August 24, 1995

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