VIASAT INC, 424B1, 1996-12-03

VIASAT INC
424B1, 1996-12-03
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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<PAGE> 1
This filing is made pursuant
to Rule 424(b)(1) under
the Securities Act of 1933
in connection with
Registration No. 333-13183

PROSPECTUS

2,200,000 SHARES

LOGO

COMMON STOCK

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

Of the 2,200,000 shares of Common Stock ("Common Stock") offered hereby,
1,650,000 shares are being sold by ViaSat, Inc. ("ViaSat" or the "Company") and
550,000 shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). The Company will not receive any of the proceeds from
the sale of shares by the Selling Stockholders. See "Principal and Selling
Stockholders."

Prior to this offering, there has been no public market for the Common
Stock. See "Underwriting" for information relating to the determination of the
initial public offering price. The Common Stock has been approved for quotation
and trading on The Nasdaq National Market, subject to official notice of
issuance, under the symbol "VSAT."

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

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 7.
------------------------

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>
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<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- ------------------------------------------------------------------------------------------------------------
Per Share................................. $9.00 $0.63 $8.37 $8.37
Total(3).................................. $19,800,000 $1,386,000 $13,810,500 $4,603,500
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting offering expenses payable by the Company, estimated to be
$650,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 330,000 shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $22,770,000, $1,593,900 and $16,572,600,
respectively.

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

The shares of Common Stock are offered severally by the Underwriters when,
as and if delivered to and accepted by them, subject to their right to withdraw,
cancel or reject orders in whole or in part and subject to certain other
conditions. It is expected that delivery of the certificates representing the
shares will be made against payment on or about December 6, 1996 at the office
of Oppenheimer & Co., Inc., Oppenheimer Tower, World Financial Center, New York,
New York 10281.

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

OPPENHEIMER & CO., INC.
NEEDHAM & COMPANY, INC.
UNTERBERG HARRIS

The date of this Prospectus is December 3, 1996.

<PAGE> 2

[PHOTOGRAPHS AND CHARTS OF
THE COMPANY'S PRODUCTS AND SERVICES]

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<PAGE> 3

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Common Stock
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock offered hereby, reference is hereby
made to such Registration Statement, exhibits and schedules filed as part of the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or any other document referred to are not necessarily
complete, and in each instance, reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement or such other
document. Each such statement is qualified in all respects by such reference to
such exhibit.

After consummation of the offering, the Company will be subject to the
informational and reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and in accordance therewith, will be required
to file reports, proxy and information statements, and other information with
the Commission. Such reports, proxy statements and other information, as well as
the Registration Statement of which this Prospectus is a part and the exhibits
and schedules thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as at the following regional offices: 7
World Trade Center, Suite 1300, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials also can
be obtained from the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Electronic reports, proxy and information statements, and other information
filed through the Commission's Electronic Data Gathering, Analysis and Retrieval
system are publicly available through the Commission's Web site
(http://www.sec.gov).

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

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

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information appearing elsewhere in this
Prospectus. Except as otherwise noted, all information in this Prospectus (i)
assumes no exercise of the Underwriters' over-allotment option, (ii) reflects
the conversion of all outstanding shares of the Company's Preferred Stock
("Preferred Stock") into Common Stock upon the closing of this offering and
(iii) has been adjusted to give effect to the 0.7335-for-one reverse stock split
of the Common Stock effected on November 4, 1996. See "Glossary of Selected
Terms" for definitions of certain terms used in this Prospectus.
THE COMPANY

ViaSat designs, produces and markets advanced digital satellite
telecommunications and wireless signal processing equipment. The Company has
achieved ten consecutive years of internally generated revenue growth and nine
consecutive years of profitability, primarily through defense-related
applications. More recently, the Company has been developing and marketing its
technology through strategic alliances for emerging commercial markets, such as
rural telephony, alternative carrier access and Internet/Intranet access by
satellite to multiple servers. ViaSat is a leading provider of Demand Assigned
Multiple Access ("DAMA") technology, which allows a large number of Very Small
Aperture Terminal ("VSAT") subscribers to economically share common satellite
transponders for high-performance voice, fax or data communications.

The Company believes that DAMA satellite technology is superior to other
existing VSAT networking technologies. The existing Time Division Multiplex/Time
Division Multiple Access ("TDM/TDMA") networking technology features a "hub and
spoke" architecture which requires all transmissions to be routed through a
central terrestrial hub. Unlike TDM/TDMA systems, DAMA provides direct,
on-demand switched networking capabilities which do not require a terrestrial
hub and allow faster and more efficient use of expensive satellite transponder
resources. In addition, the Company believes that its DAMA products,
commercially marketed under the tradename StarWire(TM), offer greater network
flexibility and permit up to 50% greater satellite capacity than competing DAMA
systems. See "Business -- The ViaSat Advantage" and "-- Technology."

ViaSat's DAMA products include satellite modems, networking processors and
network control systems for managing large numbers of network subscribers. The
Company's DAMA technology consists of proprietary real-time firmware and
software designed to run on industry-standard digital signal processors. The
Company also has developed DAMA network control software that operates on
IBM-compatible personal computers running Windows NT(TM) operating systems. The
Company's DAMA technology operates on satellites in the military UHF and SHF
frequency bands, and commercial C and K(u) bands. In addition to DAMA products,
the Company offers network information security products, communications
simulation and test equipment, and spread spectrum digital radios for satellite
and terrestrial data networks.

The wireless communications industry has experienced significant worldwide
growth in both the government and commercial markets during the past decade,
primarily as a result of cost reductions and improvements in quality and
performance. Although there can be no assurance that such growth will continue
at a comparable rate or at all, service providers continue to expand the
infrastructure associated with the wireless communications industry. A growing
segment of such industry involves networked VSAT communication systems. The
Company believes DAMA products offer customers using VSAT networks a more cost-
effective opportunity than other existing VSAT networking technologies to expand
and better utilize existing satellite capacity. The Company believes it can
capitalize on this market opportunity through its leadership position with
respect to DAMA technology and related networking and software products.

BUSINESS STRATEGY

ViaSat's objective is to become a leading developer and supplier of
DAMA-based products to commercial markets and to retain a leadership position in
developing and supplying DAMA-based products to the government market. See
"Business -- Strategy." The Company's strategy incorporates the following key
elements:

Maintain and Enhance Technology Leadership Position. The Company's
strategy is to maintain and enhance its leadership position in DAMA-based
satellite technology by continuing its participation in selected programs with
the U.S. Department of Defense and its prime contractors (collectively, the
"DOD") involving

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networking technology and other related real-time signal processing and
networking software. The Company is also investing in proprietary research for
commercial applications.

Develop Strategic Alliances. The Company's strategy is to develop
strategic alliances with leading prime defense contractors and major
international telecommunications companies and equipment suppliers. The Company
has entered into strategic alliances with defense companies, such as Hughes
Defense Communications, formerly Magnavox Electronic Systems Co. ("Hughes
Defense Communications"), and Lockheed Martin Corporation ("Lockheed Martin"),
and commercial telecommunications companies, such as AT&T acting through its
Tridom division ("AT&T Tridom"), Hutchison Corporate Access (HK) Limited
("Hutchison Telecommunications") and HCL Comnet Systems and Services Limited
("HCL Comnet").

Establish Global Presence. The Company's strategy is to develop its
products so that they may be marketed and used throughout the world. The Company
believes its focus on meeting applicable international communication standards
and establishing key international strategic alliances will enable it to
effectively penetrate foreign markets.

Address Rural Telephony Market. The Company believes there is a
substantial unmet demand for rural telephony services, especially in developing
countries. The Company's strategy is to capitalize on its networking software
expertise to develop technology for establishing regional rural telephony
network infrastructures of strategically located VSAT terminals capable of
handling multiple satellite telephone calls ("Point-of-Entry Terminals"). The
Company's strategy also includes seeking partnerships with regional and local
service providers to create distribution channels for rural telephony
infrastructures and to provide related retail distribution services, including
sales of Company-designed subscriber terminals, installation and maintenance, as
well as customer service, billing and revenue collection. To this end, the
Company has recently entered into a contract with Hutchison Telecommunications
for satellite telephony equipment which can serve as rural telephony
infrastructure.

The Company was incorporated in California in 1986 and reincorporated in
Delaware in 1996. Its principal executive offices are located at 2290 Cosmos
Court, Carlsbad, California 92009, and its telephone number is (619) 438-8099.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the Company.......... 1,650,000 Shares
Common Stock Offered by the Selling
Stockholders............................... 550,000 Shares
Common Stock to be Outstanding After the
Offering................................... 7,531,503 Shares(1)
Use of Proceeds.............................. For working capital and general corporate
purposes. See "Use of Proceeds."
Nasdaq National Market Symbol................ VSAT
</TABLE>

- ---------------
(1) Based on shares outstanding as of October 25, 1996. Does not include 330,000
shares of Common Stock issuable upon the full exercise of the Underwriters'
over-allotment option. Also does not include 369,348 shares of Common Stock
issuable upon the exercise of outstanding options. See "Capitalization."

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, -----------------------------
--------------------------------------------- SEPTEMBER 30, SEPTEMBER 30,
1992 1993 1994 1995 1996 1995 1996
------ ------ ------- ------- ------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.................. $4,019 $5,072 $11,579 $22,341 $29,017 $14,156 $21,582
Cost of revenues.......... 3,006 3,939 9,033 16,855 20,983 10,110 15,333
------ ------ ------- ------- ------- ------- -------
Gross profit........... 1,013 1,133 2,546 5,486 8,034 4,046 6,249
Operating expenses:
Selling, general and
administrative....... 503 740 1,554 2,416 3,400 1,762 2,313
Independent research
and development...... -- 59 134 788 2,820 1,186 2,218
------ ------ ------- ------- ------- ------- -------
Income from operations.... 510 334 858 2,282 1,814 1,098 1,718
Interest income
(expense).............. 7 (17) (45) (87) (231) (86) (56)
------ ------ ------- ------- ------- ------- -------
Income before income
taxes.................. 517 317 813 2,195 1,583 1,012 1,662
Provision (benefit) for
income taxes........... 159 93 328 888 (50) (32) 580
------ ------ ------- ------- ------- ------- -------
Net income................ $ 358 $ 224 $ 485 $ 1,307 $ 1,633 $ 1,044 $ 1,082
====== ====== ======= ======= ======= ======= =======
Pro forma net income per
share(1)............... $ 0.28 $ 0.18
======= =======
Shares used in per share
calculations(1)........ 5,876 6,121
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
MARCH 31, ---------------------
------------------------------------------- AS
1992 1993 1994 1995 1996 ACTUAL ADJUSTED(2)
------ ------ ------ ------ ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....... $ 101 $ 75 $ 9 $2,731 $ 2,297 $ 1,186 $14,347
Working capital................. 912 964 1,486 2,808 4,651 4,969 18,130
Total assets.................... 1,750 2,550 4,986 9,377 13,262 16,412 29,573
Long-term debt, less current
portion...................... 50 124 297 1,220 1,747 1,512 1,512
Total stockholders' equity...... 1,226 1,465 1,956 3,413 5,217 6,477 19,638
</TABLE>

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(1) For an explanation of the determination of the number of shares used in
computing pro forma net income per share, see Note 1 of Notes to Financial
Statements.

(2) As adjusted to reflect the sale of 1,650,000 shares of Common Stock offered
by the Company hereby at an offering price of $9.00 per share, and the
application of the net proceeds therefrom as described under "Use of
Proceeds." If the Company issues 1,980,000 shares of Common Stock upon the
full exercise of the Underwriters' option to cover over-allotments, Cash and
cash equivalents, Working capital, Total assets and Total stockholders'
equity would be $17,109, $20,892, $32,335 and $22,400, respectively. See
"Use of Proceeds" and "Capitalization."

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RISK FACTORS

This Prospectus contains forward-looking statements within the meaning of
the Securities Act. Discussions containing such forward-looking statements may
be found throughout this Prospectus, including without limitation in the
materials set forth under "Summary," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business." Actual events or
results may differ materially from those discussed in the forward-looking
statements as a result of various factors, including without limitation the risk
factors set forth below and the matters set forth in this Prospectus generally.

DEPENDENCE ON DEFENSE MARKET

Over 95% of the Company's revenues for the fiscal year ended March 31, 1996
and the six months ended September 30, 1996 were derived from U.S. government
defense applications. Although the Company has invested heavily in developing
commercial satellite products, there can be no assurance that the percentage of
the Company's commercial business will increase. In addition, there can be no
assurance that the Company's revenues from its government business will continue
to increase at historical rates or at all. U.S. government business is subject
to various risks including (i) unpredictable contract or project terminations,
reductions in funds available for the Company's projects due to government
policy changes, budget cuts and contract adjustments and penalties arising from
post-award contract audits, and incurred cost audits in which the value of the
contract may be reduced, (ii) risks of underestimating ultimate costs,
particularly with respect to software and hardware development, for work
performed pursuant to fixed-price contracts where the Company commits to achieve
specified deliveries for a predetermined fixed price, (iii) limited
profitability from cost-reimbursement contracts under which the amount of profit
attainable is limited to a specified negotiated amount and (iv) unpredictable
timing of cash collections of certain unbilled receivables as they may be
subject to acceptance of contract deliverables by the customer and contract
close-out procedures, including government approval of final indirect rates. See
"Business -- Government Contracts." In addition, substantially all of the
Company's backlog scheduled for delivery can be terminated at the convenience of
the government since orders are often made well in advance of delivery, and the
Company's contracts typically provide that orders may be terminated with limited
or no penalties. See "Business -- Backlog."

Certain of the Company's contracts individually contribute a significant
percentage of the Company's revenues. For the fiscal year ended March 31, 1996
and the six months ended September 30, 1996, the Company's largest contracts (by
revenues) were contracts related to the Company's UHF DAMA technology, which
generated approximately 42.8% and 71.2% of the Company's total revenues for such
periods, respectively, including a contract with Hughes Defense Communications
which generated approximately 9.4% and 26.5% of the Company's total revenues for
such periods, respectively. Scheduled deliveries pursuant to firm purchase
orders under this contract are to be completed in June 1997. Hughes Defense
Communications is an affiliate of Hughes Network Systems (HNS), which is the
Company's principal competitor in the commercial DAMA market. See
"Business -- Competition." The Company's five largest contracts (by revenues)
generated approximately 36.5% and 62.7% of the Company's total revenues for the
fiscal year ended March 31, 1996 and the six months ended September 30, 1996,
respectively. The Company expects revenues to continue to be concentrated in a
relatively small number of large U.S. government contracts. Termination or
disruption of such contracts, especially the Company's largest contract, or the
Company's inability to renew or replace such contracts when they expire, could
have a material adverse effect on the Company's business, financial condition
and results of operations.

PENETRATION OF COMMERCIAL MARKETS; NEW PRODUCT INTRODUCTIONS

The Company's ability to grow will depend substantially on its and its
customers' ability to apply its expertise and technologies to existing and
emerging commercial wireless communications markets. The Company's efforts to
penetrate commercial markets has resulted, and the Company anticipates that it
will continue to result, in increased sales and marketing and research and
development expenses. If the Company's net revenues do not correspondingly
increase, the Company's business, financial condition and results of operations
could be materially adversely affected. The Company's success in penetrating
commercial markets

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also depends upon the success of new product introductions by the Company, which
will be dependent upon several factors, including timely completion and
introduction of new product designs, achievement of acceptable product costs,
establishment of close working relationships with major customers for the design
of their new wireless communications systems incorporating the Company's
products and market acceptance. Sales of the Company's commercial StarWire(TM)
products (see "Business -- Commercial Markets, Products and
Customers -- Commercial Products") have not yet achieved profitability. The
Company believes that as the market expands for the StarWire(TM) products,
average production costs for such products should decrease and sales of such
products should become profitable. However, there can be no assurance that the
market for such products will expand or that average production costs will
decrease. If the Company is unable to design, manufacture and market profitable
new products for existing or emerging commercial markets, its business,
financial condition and results of operations will be adversely affected. No
assurance can be given that the Company's product development efforts for
commercial products will be successful or that any new commercial products it
develops will achieve market acceptance. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business -- Commercial Markets, Products and Customers."

DEVELOPMENT CONTRACTS

The telecommunications industry is characterized by rapid technological
change. As a result, many companies involved in the telecommunications industry,
including the Company, are often parties to governmental and commercial
contracts which involve development of various products. Pursuant to such
contracts, the company performing the development services typically must agree
to meet strict performance covenants and project milestones which there is a
risk it may not be able to satisfy. Under the terms of such contracts, the
failure by a company to meet such performance covenants and milestones permit
the other party to terminate the contract and, under certain circumstances,
recover liquidated damages or other penalties from the breaching party. The
Company is currently a party to a number of such contracts with a number of
customers including, but not limited to, Hutchison Telecommunications, HCL
Comnet, Hughes Defense Communications and the DOD. See "Business -- Commercial
Markets, Products and Customers -- Commercial Customers" and " -- Government
Markets, Products and Customers -- Government Customers." In substantially all
of these contracts, the Company is not currently or in the past has not been in
compliance with every outstanding performance covenant and project milestone.
While the Company's past experience has been that in situations where the
Company has not met all performance covenants and project milestones generally
the other party has not elected to terminate such contracts or seek liquidated
damages from the Company, there can be no assurance that this will not occur in
the future with respect to current or future contracts and that such termination
or damages would not have a material adverse effect on the Company.

FLUCTUATIONS IN RESULTS OF OPERATIONS

The Company has experienced and expects to continue to experience
significant fluctuations in quarterly and annual revenues, gross margins and
operating results. The procurement process for most of the Company's current and
potential customers is complex and lengthy, and the timing and amount of
revenues is difficult to predict reliably. The Company recognizes a majority of
its revenues under the percentage of completion method which requires estimates
regarding costs that will be incurred over the life of a specific contract.
Actual results may differ from those estimates. In such event, the Company has
been and may in the future be required to adjust revenues in subsequent periods
relating to revisions of prior period estimates, resulting in fluctuations in
the Company's results of operations from period to period. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Results of Operations." In addition, a single customer's
order scheduled for delivery in a quarter can represent a significant portion of
the Company's potential revenues for such quarter. The Company has at times
failed to receive expected orders, and delivery schedules have been deferred as
a result of, among other factors, changes in customer requirements or parts
shortages. Currently, approximately 26.5% of the Company's revenues are
dependent on its largest contract. Any disruption with respect to this contract
could have a material adverse effect on the Company in any period where such a
disruption occurs. See "Business -- Government Markets, Products and
Customers -- Government Customers." As a result of the foregoing and other
factors, the Company's operating results for

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particular periods have in the past been and may in the future be materially
adversely affected by a delay, rescheduling or cancellation of even one purchase
order. Moreover, purchase orders are often received and accepted substantially
in advance of delivery, and the failure to reduce actual costs to the extent
anticipated or an increase in anticipated costs before delivery could materially
adversely affect the gross margins for such orders, and as a result, the
Company's results of operations. There can be no assurance that the Company will
continue to realize positive gross margins or operating results in the future,
and even if so realized, there can be no assurance as to the level of such gross
margins and operating results.

A large portion of the Company's expenses are fixed and difficult to reduce
should revenues not meet the Company's expectations, thus magnifying the
material adverse effect of any revenue shortfall. Furthermore, announcements by
the Company or its competitors of new products and technologies could cause
customers to defer or cancel purchases of the Company's products and services,
which could materially adversely affect the Company's business, financial
condition and results of operations or result in fluctuations in the Company's
results of operations from period to period. Additional factors that may cause
the Company's revenues, gross margins and results of operations to vary
significantly from period to period include mix of products and services sold;
manufacturing efficiencies, costs and capacity; price discounts; market
acceptance and the timing of availability of new products by the Company or its
customers; usage of different distribution and sales channels; warranty and
customer support expenses; customization of products and services; and general
economic and political conditions. In addition, the Company's results of
operations are influenced by competitive factors, including the pricing and
availability of, and demand for, competitive products. All of the above factors
are difficult for the Company to forecast, and these and other factors could
materially adversely affect the Company's business, financial condition and
results of operations or result in fluctuations in the Company's results of
operations from period to period. As a result, the Company believes that
period-to-period comparisons are not necessarily meaningful and should not be
relied upon as indications of future performance. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Quarterly
Results of Operations."

CONTRACT PROFIT EXPOSURE

The Company's products and services are provided primarily through three
types of contracts: fixed-price, time-and-materials and cost-reimbursement
contracts. Approximately 56.3% and 56.9% of the Company's total revenues for the
fiscal year ended March 31, 1996 and for the six months ended September 30,
1996, respectively, were derived from fixed-price contracts which require the
Company to provide products and services under a contract at a stipulated price.
The Company derived approximately 5.0% and 5.8% of its revenues during such
periods from time-and-materials contracts which reimburse the Company for the
number of labor hours expended at an established hourly rate negotiated in the
contract, plus the cost of materials utilized in providing such products or
services. The remaining 38.7% and 37.3% of the Company's revenues for the fiscal
year ended March 31, 1996 and the six months ended September 30, 1996,
respectively, were derived from cost-reimbursement contracts under which the
Company is reimbursed for actual costs incurred in performing the contract to
the extent that such costs are within the contract ceiling and allowable,
allocable and reasonable under the terms of the contract, plus a fee or profit.
See "Business -- Government Contracts."

The Company assumes greater financial risk on fixed-price contracts than on
either time-and-materials or cost-reimbursement contracts. As the Company
increases its manufacturing business, it believes that an increasing percentage
of its contracts will be fixed-priced. Failure to anticipate technical problems,
estimate costs accurately or control costs during performance of a fixed-price
contract may reduce the Company's profit or cause a loss. In addition, greater
risks are involved under time-and-materials contracts than under cost-
reimbursement contracts because the Company assumes the responsibility for the
delivery of specified products or services at a fixed hourly rate. Although
management believes that it adequately estimates costs for fixed-price and
time-and-materials contracts, no assurance can be given that such estimates are
adequate or that losses on fixed-price and time-and-materials contracts will not
occur in the future.

To compete successfully for business, the Company must satisfy client
requirements at competitive rates. Although the Company continually attempts to
lower its costs, there are other companies that may provide the same or similar
products or services at comparable or lower prices than the Company. There can
be no

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assurance that the Company will be able to compete effectively on pricing or
other requirements, and as a result, the Company could lose clients or be unable
to maintain historic gross margin levels or to operate profitably. See
"Business -- Competition."

DECLINING AVERAGE SELLING PRICES; FLUCTUATIONS IN GROSS MARGINS

Average selling prices for the Company's products may fluctuate from period
to period due to a number of factors, including product mix, competition and
unit volumes. In particular, the average selling prices of a specific product
tend to decrease over that product's life. To offset such decreases, the Company
intends to rely primarily on obtaining yield improvements and corresponding cost
reductions in the manufacture of existing products and on introducing new
products that incorporate advanced features and therefore can be sold at higher
average selling prices. However, there can be no assurance that the Company will
be able to obtain any such yield improvements or cost reductions or introduce
any such new products in the future. To the extent that such cost reductions and
new product introductions do not occur in a timely manner or the Company's or
its customers' products do not achieve market acceptance, the Company's
business, financial condition and results of operations could be materially
adversely affected. See "Business -- Manufacturing."

The Company's gross margins in any period are affected by a number of
different factors. Because of the different gross margins on various products,
changes in product mix can impact gross margins in any particular period. In
addition, in the event that the Company is not able to adequately respond to
pricing pressures, the Company's current customers may decrease, postpone or
cancel current or planned orders, and the Company may not be able to secure new
customers or orders. As a result, the Company may not be able to achieve desired
production volumes or gross margins.

GOVERNMENT REGULATIONS

The Company's products are incorporated into wireless communications
systems that are subject to various government regulations. Regulatory changes,
including changes in the allocation of available frequency spectrum and in the
military standards and specifications ("MIL-STDs") which define the current
satellite networking environment, could significantly impact the Company's
operations by restricting development efforts by the Company's customers, making
current products obsolete or increasing the opportunity for additional
competition. There can be no assurance that regulatory bodies will not
promulgate new regulations that could have a material adverse effect on the
Company's business, financial condition and results of operations. Changes in,
or the failure by the Company to comply with, applicable domestic and
international regulations could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
increasing demand for wireless communications has exerted pressure on regulatory
bodies worldwide to adopt new standards for such products and services,
generally following extensive investigation of and deliberation over competing
technologies. The delays inherent in this governmental approval process have
caused and may continue to cause the cancellation, postponement or rescheduling
of the installation of communications systems by the Company's customers, which
in turn may have a material adverse effect on the sale of products by the
Company to such customers. See "Business -- Government Regulations."

The Company has benefitted and continues to benefit from the Small Business
Innovation Research ("SBIR") program, through which the government provides
research and development funding for companies with fewer than 500 employees.
While the Company has already harvested significant benefits from the SBIR
program throughout the initial developmental stages of its core technology base,
the Company believes that its business, financial condition and results of
operations would not be materially adversely affected if the Company were to
lose its SBIR funding status. See "Business -- Research and Development."

EMERGING MARKETS IN WIRELESS COMMUNICATIONS

A number of the commercial markets for the Company's products in the
wireless communications area, including its DAMA products, have only recently
begun to develop. Because these markets are relatively new, it is difficult to
predict the rate at which these markets will grow, if at all. If the markets for
the Company's

10
<PAGE> 11

products in the commercial wireless communications area fail to grow, or grow
more slowly than anticipated, the Company's business, financial condition and
results of operations could be materially adversely affected. Conversely, to the
extent that growth in these markets results in capacity limitations in the
wireless communications area, the Company's business, financial condition and
results of operations could also be materially adversely affected. See
"Business -- Commercial Markets, Products and Customers."

RURAL TELEPHONY MARKET

The Company's strategy includes focusing on establishing rural telephony
networking infrastructure for developing countries through strategic alliances
with regional and local service providers (see "Business -- Strategy -- Address
Rural Telephony Market"). There can be no assurance that a substantial market
for rural telephony equipment in developing countries will ever develop, or if
such a market does develop that fixed-site DAMA VSAT-based equipment will
capture a significant portion of that market. The Company's ability to penetrate
such markets will be dependent upon its ability to develop equipment and
software which can be utilized by the regional and local service providers to
develop and implement such infrastructure and for such service providers to
market and sell the use of such systems. Furthermore, there can be no assurance
that the regional and local service providers will be able to successfully
market subscriber terminals to rural subscribers. The development and
implementation of such rural telephony systems will be dependent upon, among
other things, the continued development of the necessary hardware and software
technologies (including the necessary expenditures of a large amount of funds
and resources), the implementation of cost-effective systems, market acceptance
for such systems and approval by the appropriate regulatory agencies. There can
be no assurance that the Company will be able to develop equipment and software
which can be utilized in such rural telephony systems and accepted by regional
and local service providers or that any regional or local service providers will
be able to develop, implement and market rural telephony systems. Furthermore,
if the Company successfully introduces such products and the regional and local
service providers successfully develop and implement such systems, there is no
assurance that the Company will generate enough revenues to cover the Company
expenditures in the development and marketing of such products. Even if the
Company is able to realize sales of such products, the Company believes it is
not likely that the Company will realize any significant revenues from rural
telephony applications any time in the foreseeable future, including at least
the next two years.

DEPENDENCE ON CONTRACT MANUFACTURERS; RELIANCE ON SOLE OR LIMITED SOURCES OF
SUPPLY

The Company's internal manufacturing capacity is limited. The Company has
recently begun to utilize contract manufacturers to produce its products and
expects to rely increasingly on such manufacturers in the future. The Company
also relies on outside vendors to manufacture certain components and
subassemblies, including printed wiring boards. Certain components,
subassemblies and services necessary for the manufacture of the Company's
products are obtained from a sole supplier or a limited group of suppliers. In
particular, Texas Instruments is a sole source supplier of digital signal
processing chips, which are critical components used by the Company in
substantially all of its products. There can be no assurance that the Company's
internal manufacturing capacity and that of its contract manufacturers and
suppliers will be sufficient to timely fulfill the Company's orders. See
"Business -- Manufacturing."

The Company's reliance on contract manufacturers and on sole suppliers or a
limited group of suppliers involves several risks, including a potential
inability to obtain an adequate supply of required components, and reduced
control over the price, timely delivery, reliability and quality of finished
products. From time to time, the Company enters into long-term supply agreements
with its manufacturers and suppliers. See Note 9 of Notes to Financial
Statements. Manufacture of the Company's products and certain of its components
and subassemblies is an extremely complex process, and the Company has from time
to time experienced and may in the future experience delays in the delivery of
and quality problems with products and certain components and subassemblies from
vendors. Certain of the Company's suppliers have relatively limited financial
and other resources. Any inability to obtain timely deliveries of components and
subassemblies of acceptable quality or any other circumstance that would require
the Company to seek alternative sources of supply, or to manufacture its
finished products or such components and subassemblies internally, could delay
or prevent the

11
<PAGE> 12

Company from timely delivery of its systems or raise issues regarding quality,
which could damage relationships with current or prospective customers and have
a material adverse effect on the Company's business, financial condition and
results of operations.

COMPETITION

The markets for the Company's products and services are extremely
competitive, and the Company expects that competition will increase in such
markets. Many of the Company's competitors have entrenched market positions,
established patents, copyrights, tradenames, trademarks, service marks and
intellectual property rights and substantial technological capabilities. The
Company's existing and potential competitors include large and emerging domestic
and international companies, many of which have significantly greater financial,
technical, manufacturing, marketing, sales and distribution resources and
management expertise than the Company. The Company believes that its ability to
compete successfully in the markets for its products and services depends upon a
number of factors within and outside its control, including price, quality,
availability, product performance and features, timing of new product
introductions by the Company, its customers and competitors, and customer
service and technical support. The Company's customers continuously evaluate
whether to develop and manufacture their own products and could elect to compete
with the Company at any time. Price competition in the markets in which the
Company currently competes is likely to increase, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Competition."

LIMITED PROTECTION OF THE COMPANY'S INTELLECTUAL PROPERTY

The Company's ability to compete may depend, in part, on its ability to
obtain and enforce intellectual property protection for its technology in the
United States and internationally. The Company relies on a combination of trade
secrets, copyrights, trademarks, service marks and contractual rights to protect
its intellectual property. There can be no assurance that the steps taken by the
Company will be adequate to deter misappropriation or impede third party
development of the Company's technology. In addition, the laws of certain
foreign countries in which the Company's products are or may be sold do not
protect the Company's intellectual property rights to the same extent as do the
laws of the United States. The failure of the Company to protect its proprietary
information could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Intellectual
Property."

Litigation may be necessary to protect the Company's intellectual property
rights and trade secrets, to determine the validity and scope of the proprietary
rights of others or to defend against claims of infringement or invalidity. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that
infringement, invalidity, right to use or ownership claims by third parties or
claims for indemnification resulting from infringement claims will not be
asserted against the Company in the future. If any claims or actions are
asserted against the Company, the Company may seek to obtain a license under a
third party's intellectual property rights. There can be no assurance, however,
that a license will be available under reasonable terms or at all. In addition,
should the Company decide to litigate such claims, such litigation could be
extremely expensive and time consuming and could materially adversely affect the
Company's business, financial condition and results of operations, regardless of
the outcome of the litigation. If the Company's products are found to infringe
upon the rights of third parties, the Company may be forced to incur substantial
costs to develop alternative products. There can be no assurance that the
Company would be able to develop such alternative products or that if such
alternative products were developed, they would perform as required or be
accepted in the applicable markets.

REQUIREMENT FOR RESPONSE TO RAPID TECHNOLOGICAL CHANGE AND REQUIREMENT FOR
FREQUENT
NEW PRODUCT INTRODUCTIONS

The wireless communications market is subject to rapid technological
change, frequent new product introductions and enhancements, product
obsolescence and changes in end-user requirements. The Company's ability to be
competitive in this market will depend in significant part upon its ability to
successfully develop,

12
<PAGE> 13

introduce and sell new products and enhancements on a timely and cost-effective
basis that respond to changing customer requirements. Any success of the Company
in developing new and enhanced products will depend upon a variety of factors,
including new product selection, integration of the various elements of its
complex technology, timely and efficient completion of product design, timely
and efficient implementation of manufacturing and assembly processes and its
cost reduction efforts, development and completion of related software tools,
product performance, quality and reliability and development of competitive
products by competitors. The Company may experience delays from time to time in
completing development and introduction of new products. Moreover, there can be
no assurance that the Company will be successful in selecting, developing,
manufacturing and marketing new products or enhancements. There can be no
assurance that errors will not be found in the Company's products after
commencement of deliveries, which could result in the loss of or delay in market
acceptance. The inability of the Company to introduce in a timely manner new
products that achieve market acceptance and thereby contribute to revenues could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Research and Development."

INTERNATIONAL OPERATIONS; RISKS OF DOING BUSINESS IN DEVELOPING COUNTRIES

The Company anticipates that international sales will account for an
increasing percentage of its revenues for the foreseeable future. The Company's
international sales may be denominated in foreign or U.S. currencies. The
Company does not currently engage in foreign currency hedging transactions. As a
result, a decrease in the value of foreign currencies relative to the U.S.
dollar could result in losses from transactions denominated in foreign
currencies. With respect to the Company's international sales that are U.S.
dollar-denominated, such a decrease could make the Company's products less
price-competitive. Additional risks inherent in the Company's international
business activities include various and changing regulatory requirements, cost
and risks of localizing systems in foreign countries, increased sales and
marketing and research and development expenses, availability of suitable export
financing, timing and availability of export licenses, tariffs and other trade
barriers, political and economic instability, difficulties in staffing and
managing foreign operations, difficulties in managing distributors, potentially
adverse taxes, complex foreign laws and treaties and the possibility of
difficulty in accounts receivable collections. Certain of the Company's customer
purchase agreements are governed by foreign laws, which may differ significantly
from U.S. laws. Therefore, the Company may be limited in its ability to enforce
its rights under such agreements and to collect damages, if awarded. There can
be no assurance that any of these factors will not have a material adverse
effect on the Company's business, financial condition and results of operations.

ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that a viable public market for the Common
Stock will develop or be sustained after this offering. The Company believes
that factors such as announcements of developments related to the Company's
business, announcements of technological innovations or new products or
enhancements by the Company or its competitors, developments in the Company's
relationships with its customers, partners, distributors and suppliers, changes
in analysts' estimates, regulatory developments, fluctuations in results of
operations and general conditions in the Company's market or the markets served
by the Company's customers or the economy could cause the price of the Common
Stock to fluctuate, perhaps substantially. In addition, in recent years the
stock market in general, and technology companies in particular have been
subject to significant price fluctuations, which have often been unrelated to
the operating performance of affected companies. Such fluctuations could
adversely affect the market price of the Common Stock. There can be no assurance
that the market price of the Common Stock will not experience significant
fluctuations in the future, including fluctuations that are unrelated to the
Company's performance.

CONTROL BY EXISTING STOCKHOLDERS

Following the completion of this offering, members of the Board of
Directors and the executive officers of the Company, together with members of
their families and entities that may be deemed affiliates of or related

13
<PAGE> 14

to such persons or entities, will beneficially own approximately 36.4% of the
outstanding shares of Common Stock of the Company. Accordingly, these
stockholders may be able to elect all members of the Company's Board of
Directors and determine the outcome of corporate actions requiring stockholder
approval, such as mergers and acquisitions. This level of ownership may have a
significant effect in delaying, deferring or preventing a change in control of
the Company and may adversely affect the voting and other rights of other
holders of the Common Stock. See "Management -- Executive Officers and
Directors" and "Principal and Selling Stockholders."

BENEFITS OF OFFERING TO EXISTING STOCKHOLDERS

The existing stockholders of the Company will receive certain benefits from
the sale of the Common Stock offered hereby. The offering will establish a
public market for the Common Stock and provide increased liquidity to the
existing stockholders for the shares of Common Stock they will own after the
offering, subject to certain limitations. See "Shares Eligible for Future Sale."
The Selling Stockholders are selling 550,000 shares of Common Stock in the
offering and, at an offering price of $9.00 per share, will receive
approximately $5.0 million. See "Principal and Selling Stockholders -- Benefits
of Offering to Existing Stockholders." In addition, immediately following the
offering existing stockholders will, based on an offering price of $9.00 per
share, have an average unrealized gain over the original cost of the shares that
will continue to be held by them of $8.76 per share or an aggregate unrealized
gain of approximately $46.7 million. See "Dilution."

ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER PROVISIONS

Certain provisions of the Company's Amended and Restated Certificate of
Incorporation and Bylaws could discourage potential acquisition proposals, could
delay or prevent a change in control of the Company and could make removal of
management more difficult. Such provisions could diminish the opportunities for
a stockholder to participate in tender offers, including tender offers that are
priced above the then current market value of the Common Stock. The provisions
also may inhibit increases in the market price of the Common Stock that could
result from takeover attempts. Additionally, the Board of Directors of the
Company, without further stockholder approval, may issue up to 5,000,000 shares
of Preferred Stock, in one or more series, with such terms as the Board of
Directors may determine, including rights such as voting, dividend and
conversion rights which could adversely affect the voting power and other rights
of the holders of Common Stock. Preferred Stock may be issued quickly with terms
which delay or prevent the change in control of the Company or make removal of
management more difficult. Also, the issuance of Preferred Stock may have the
effect of decreasing the market price of the Common Stock. Other than as set
forth under "Description of Capital Stock," the Company does not currently
intend to adopt any anti-takeover provisions. See "Description of Capital
Stock -- Preferred Stock" and "-- Business Combinations; Certain Charter and
Bylaw Provisions."

DEPENDENCE ON KEY PERSONNEL

The Company's future success depends in large part on the continued service
of its key technical, marketing and management personnel and on its ability to
continue to attract and retain qualified employees, particularly its Chief
Executive Officer, Mark D. Dankberg, and those highly skilled design, process
and test engineers involved in the manufacture of existing products and the
development of new products and processes. The competition for such personnel is
intense, and the loss of key employees could have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company does not have employment agreements with any of its officers or
employees. The Company has obtained, however, a key man insurance policy on the
life of Mr. Dankberg in the amount of $500,000, of which the Company is the sole
beneficiary. See "Business -- Employees" and "Management."

MANAGEMENT'S DISCRETION OVER PROCEEDS OF THE OFFERING

The Company has no current specific plan for the net proceeds of this
offering, other than for working capital and general corporate purposes. As a
consequence, the Company's management will have discretion over the proceeds for
the foreseeable future. There can be no assurance that the proceeds can or will
be

14
<PAGE> 15

invested to yield a return as great as the Company has historically experienced
or any significant return at all. See "Use of Proceeds."

DILUTION

The initial public offering price is expected to be substantially higher
than the net tangible book value per share of the Common Stock. Investors
purchasing shares of Common Stock in this offering will therefore incur
immediate and substantial net tangible book value dilution. To the extent that
stock options (currently outstanding or subsequently granted) to purchase Common
Stock are exercised, there will be further dilution. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of shares in the public market or the prospect
of such sales could adversely affect the market price of the Common Stock. Upon
completion of this offering, the Company will have outstanding 7,531,503 shares
of Common Stock. Immediately upon the effectiveness of this offering, the
2,200,000 shares offered hereby (plus any shares issued upon exercise of the
Underwriters' over-allotment option) will be freely tradeable. Of the remaining
shares, 4,491,822 are subject to lock-up agreements pursuant to which the
holders of such shares have agreed not to sell or otherwise dispose of such
shares for a period of 180 days after the date of the offering without the prior
written consent of the representatives of the Underwriters. The shares not
subject to lock-up agreements may be freely sold after the offering, subject to
certain volume and other limitations of Rule 144 under the Securities Act. The
Company intends to file a registration statement under the Securities Act after
this offering covering the sale of 1,369,348 shares of Common Stock under the
Company's 1993 Stock Option Plan, 1996 Equity Participation Plan and Employee
Stock Purchase Plan. See "Management -- 1993 Stock Option Plan," "-- 1996 Equity
Participation Plan," "-- Employee Stock Purchase Plan," "Shares Eligible for
Future Sale" and "Underwriting."

15
<PAGE> 16

CAPITALIZATION

The following table sets forth as of September 30, 1996 (i) the Company's
actual capitalization (as if the 0.7335-for-one reverse stock split of the
Common Stock effected on November 4, 1996 had occurred prior to September 30,
1996) and (ii) capitalization as adjusted to reflect the conversion of all
outstanding shares of Preferred Stock into Common Stock upon the closing of this
offering, the amendments to the Company's Certificate of Incorporation to
increase the Company's authorized capital stock and the sale of the 1,650,000
shares of Common Stock offered by the Company hereby at an offering price of
$9.00 per share (after deduction of the underwriting discounts and commissions
and estimated offering expenses), and the application of the net proceeds
therefrom as described under "Use of Proceeds."

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
-----------------------------
ACTUAL AS ADJUSTED(2)
---------- --------------
<S> <C> <C>
Total long-term debt, less current portion........................ $1,512,000 $ 1,512,000
Stockholders' equity(1):
Preferred stock, $.0001 par value, 3,225,000 shares authorized,
3,225,000 shares issued and outstanding actual; 5,000,000
shares authorized, no shares issued or outstanding as
adjusted..................................................... 32,000 --
Common stock, $.0001 par value, 7,335,000 shares authorized,
3,509,804 shares issued and outstanding actual; 25,000,000
shares authorized, 7,525,342 shares issued and outstanding as
adjusted..................................................... 48,000 80,000
Paid-in capital................................................. 1,224,000 14,385,000
Stockholders' notes receivable.................................. (311,000) (311,000)
Retained earnings............................................... 5,484,000 5,484,000
---------- -----------
Total stockholders' equity...................................... 6,477,000 19,638,000
---------- -----------
Total capitalization.................................... $7,989,000 $21,150,000
========== ===========
</TABLE>

- ---------------
(1) Excludes 330,000 shares of Common Stock issuable by the Company upon the
full exercise of the Underwriters' over-allotment option. Also excludes
375,509 shares of Common Stock issuable upon exercise of options outstanding
as of September 30, 1996 at an average exercise price of $1.87 per share.
See "Management -- 1993 Stock Option Plan," "-- 1996 Equity Participation
Plan" and Note 6 of Notes to Financial Statements.

(2) Common Stock, Paid-in capital, Total stockholders' equity and Total
capitalization would be $80,000, $17,146,000, $22,400,000 and $23,912,000,
respectively, if the Underwriters' over-allotment option is exercised in
full.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,650,000 shares of
Common Stock being offered by the Company are estimated to be $13,161,000
($15,923,000 if the Underwriters' over-allotment option is exercised in full)
after deducting the underwriting discounts and commissions and estimated
offering expenses payable by the Company. The Company intends to use the net
proceeds of this offering for working capital and general corporate purposes.
Pending their use, the proceeds will be invested in short-term,
investment-grade, interest-bearing securities. The Company will not receive any
of the proceeds from the sale of Common Stock by the Selling Shareholders. See
"Principal and Selling Stockholders."

DIVIDEND POLICY

To date, the Company has neither declared nor paid any dividends on the
Common Stock. The Company currently intends to retain all future earnings, if
any, for use in the operation and development of its business and, therefore,
does not expect to declare or pay any cash dividends on the Common Stock in the
foreseeable future. In addition, an equipment financing agreement of the Company
prohibits the payment of any cash dividends on the Company's capital stock.

16
<PAGE> 17

DILUTION

The pro forma net tangible book value of the Company as of September 30,
1996 was $6,352,000 or $1.08 per share. Pro forma net tangible book value per
share represents the amount of total tangible assets of the Company reduced by
the amount of its total liabilities, divided by the total number of shares of
Common Stock outstanding, including shares of Common Stock resulting from the
conversion of the Preferred Stock. After giving effect to the net proceeds from
the sale of 1,650,000 shares of Common Stock offered by the Company at an
offering price of $9.00 per share, the pro forma net tangible book value of the
Company as of September 30, 1996 would have been $19,638,000 or $2.61 per share
of Common Stock. This represents an immediate increase in net tangible book
value of $1.53 per share to existing stockholders and an immediate dilution of
$6.39 per share to new investors. See "Risk Factors -- Benefits of Offering to
Existing Stockholders." The following table illustrates the per share dilution
in net tangible book value to new investors.

<TABLE>
<S> <C> <C>
Initial public offering price per share.............................. $9.00
Net tangible book value per share.................................... $1.08
Increase per share attributable to new investors..................... 1.53
-----
Pro forma net tangible book value per share after the offering(1).... 2.61
-----
Dilution per share to new investors(1)............................... $6.39
=====
</TABLE>

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

(1) If the Underwriters had exercised their over-allotment option at September
30, 1996, pro forma net tangible book value per share after the offering
would have been $2.85, representing an increase in pro forma net tangible
book value per share of $1.77 to existing stockholders and an immediate
dilution of $6.15 per share to new investors. Additionally, had all options
for the purchase of Common Stock outstanding at September 30, 1996 been
exercised at such date, pro forma net tangible book value per share after
the offering (and the assumed exercise of the Underwriters' over-allotment
option) would have been $2.80, representing an increase in pro forma net
tangible book value per share of $1.72 to existing stockholders and an
immediate dilution of $6.20 per share to new investors.

The following table summarizes, on a pro forma basis, as of September 30,
1996, the differences in total consideration paid and the average price per
share paid by existing stockholders and new investors with respect to the number
of shares of Common Stock purchased from the Company:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE PAID
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).............. 5,875,342 78% $ 1,304,000 8% $0.22
New investors(2)...................... 1,650,000 22 14,850,000 92 9.00
--------- --- ----------- ---
Total(2).................... 7,525,342 100% $16,154,000 100%
========= === =========== ===
</TABLE>

- ---------------
(1) Sales by Selling Stockholders in this offering will reduce the number of
shares of Common Stock held by existing stockholders to 5,325,342 or
approximately 70.8% (5,325,342 shares or approximately 67.8% if the
Underwriters' over-allotment option is exercised in full) and will increase
the number of shares of Common Stock held by new investors to 2,200,000 or
approximately 29.2% (2,530,000 shares or approximately 32.2% if the
Underwriters' over-allotment option is exercised in full) of the total
number of shares of Common Stock outstanding after the closing of this
offering.

(2) The Company has granted the Underwriters an option to purchase up to 330,000
shares of Common Stock to cover over-allotments, if any. If the
Underwriters' over-allotment option is exercised in full, the Company will
issue an aggregate of 1,980,000 shares of Common Stock to new investors
(25.2% of the total of 7,855,342 shares outstanding) and the total
consideration from new investors will be $17,820,000 (93.2% of the total of
$19,124,000 consideration paid for all shares outstanding).

The information presented with respect to existing stockholders assumes no
exercise of the Underwriters' over-allotment option and no exercise of
outstanding options after September 30, 1996. As of September 30, 1996, options
to purchase 375,509 shares of Common Stock were outstanding. An additional
750,000 shares of Common Stock are reserved for issuance under the 1996 Equity
Participation Plan and 250,000 shares are reserved for issuance under the
Employee Stock Purchase Plan. The issuance of Common Stock under these plans
could result in further dilution to new investors. See "Management -- 1993 Stock
Option Plan," "-- 1996 Equity Participation Plan" and "-- Employee Stock
Purchase Plan."

17
<PAGE> 18

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected financial data as of March 31, 1995 and 1996 and for
the years ended March 31, 1994, 1995 and 1996 have been derived from, and are
qualified by reference to, the audited financial statements of the Company
included elsewhere in this Prospectus. The selected financial data as of March
31, 1992, 1993 and 1994 and for the years ended March 31, 1992 and 1993 have
been derived from the audited financial statements of the Company not included
herein. The selected financial data as of September 30, 1996 and for the six
months ended September, 30, 1995 and 1996 have been prepared on a basis
consistent with the audited financial statements and derived from unaudited
financial statements also appearing herein which, in the opinion of management,
include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial position and results of
operations of the Company for the unaudited interim periods. The statement of
operations data for any particular period are not necessarily indicative of the
results of operations for any future period, including the Company's fiscal year
ending March 31, 1997. The data set forth below are qualified by reference to,
and should be read in conjunction with, the Financial Statements and Notes
thereto and the discussion thereof included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, -----------------------------
--------------------------------------------- SEPTEMBER 30, SEPTEMBER 30,
1992 1993 1994 1995 1996 1995 1996
------ ------ ------- ------- ------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.......................... $4,019 $5,072 $11,579 $22,341 $29,017 $14,156 $21,582
Cost of revenues.................. 3,006 3,939 9,033 16,855 20,983 10,110 15,333
------ ------ ------- ------- ------- ------- -------
Gross profit.................... 1,013 1,133 2,546 5,486 8,034 4,046 6,249
Operating expenses:
Selling, general and
administrative................ 503 740 1,554 2,416 3,400 1,762 2,313
Independent research and
development................... -- 59 134 788 2,820 1,186 2,218
------ ------ ------- ------- ------- ------- -------
Income from operations............ 510 334 858 2,282 1,814 1,098 1,718
Interest income (expense)......... 7 (17) (45) (87) (231) (86) (56)
------ ------ ------- ------- ------- ------- -------
Income before income taxes........ 517 317 813 2,195 1,583 1,012 1,662
Provision (benefit) for income
taxes........................... 159 93 328 888 (50) (32) 580
------ ------ ------- ------- ------- ------- -------
Net income........................ $ 358 $ 224 $ 485 $ 1,307 $ 1,633 $ 1,044 $ 1,082
====== ====== ======= ======= ======= ======= =======
Pro forma net income per
share(1)........................ $ 0.28 $ 0.18
======= =======
Shares used in per share
calculations(1)................. 5,876 6,121
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30, 1996
------------------------------------------- ------------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(2)
------ ------ ------ ------ ------- ------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............. $ 101 $ 75 $ 9 $2,731 $ 2,297 $ 1,186 $14,347
Working capital........................ 912 964 1,486 2,808 4,651 4,969 18,130
Total assets........................... 1,750 2,550 4,986 9,377 13,262 16,412 29,573
Long-term debt, less current portion... 50 124 297 1,220 1,747 1,512 1,512
Total stockholders' equity............. 1,226 1,465 1,956 3,413 5,217 6,477 19,638
</TABLE>

- ---------------
(1) For an explanation of the determination of the number of shares used in
computing pro forma net income per share, see Note 1 of Notes to Financial
Statements.

18
<PAGE> 19

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

This Prospectus contains forward-looking statements within the meaning of
the Securities Act. Discussions containing such forward-looking statements may
be found throughout this Prospectus, including without limitation in the
materials set forth under "Summary," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business." Actual events or
results may differ materially from those discussed in the forward-looking
statements as a result of various factors, including without limitation the
risks set forth under "Risk Factors" and the matters set forth in this
Prospectus generally.

Historically, the Company's revenues have been principally derived from
contracts with the DOD. The Company's DOD revenues have continued to grow
significantly despite government budgetary constraints. Since 1992, such
revenues have grown at a compounded annual growth rate of 63.9%. DOD revenues
amounted to $11.1 million, $21.2 million and $28.3 million for the fiscal years
ended March 31, 1994, 1995 and 1996, respectively, and $13.9 million and $21.4
million for the six months ended September 30, 1995 and 1996, respectively. The
Company has achieved this growth rate entirely through internal growth, and not
through acquisitions. See "Risk Factors -- Fluctuations in Results of
Operations."

The Company's products and services are provided primarily through three
types of contracts: fixed-price, time-and-materials and cost-reimbursement
contracts. Approximately 56.3% and 56.9% of the Company's total revenues for the
fiscal year ended March 31, 1996 and for the six months ended September 30,
1996, respectively, were derived from fixed-price contracts which require the
Company to provide products and services under a contract at a stipulated price.
The Company derived approximately 5.0% and 5.8% of its revenues during such
periods from time-and-materials contracts which reimburse the Company for the
number of labor hours expended at an established hourly rate negotiated in the
contract, plus the cost of materials utilized in providing such products or
services. The remaining 38.7% and 37.3% of the Company's revenues for the fiscal
year ended March 31, 1996 and the six months ended September 30, 1996,
respectively, were derived from cost-reimbursement contracts under which the
Company is reimbursed for all actual costs incurred in performing the contract
to the extent that such costs are within the contract ceiling and allowable
under the terms of the contract, plus a fee or profit. See "Risk
Factors -- Contract Profit Exposure."

As of September 30, 1996, the Company had firm backlog of $43.5 million, of
which $40.1 million was funded. Of the $43.5 million in firm backlog,
approximately $24.0 million is expected to be delivered in the fiscal year
ending March 31, 1997, approximately $17.4 million is expected to be delivered
in the fiscal year ending March 31, 1998 and the balance is expected to be
delivered in the fiscal year ending March 31, 1999. Such backlog includes $37.6
million in awards received during the six months ended September 30, 1996,
consisting of $24.8 million in UHF DAMA satellite communications awards, $4.5
million in awards for the defense simulator business, $5.6 million in other
defense awards and $2.7 million in commercial satellite communications awards.
The Company's $43.5 million in firm backlog does not include an additional $26.9
million of customer options. See "Business -- Backlog."

Historically, a significant portion of the Company's revenue has been
derived from research and development contracts with the DOD. The research and
development efforts are conducted in direct response to the specific
requirements of a customer's order and, accordingly, expenditures related to
such efforts are included in cost of sales when incurred and the related funding
(which includes a profit component) is included in net revenues at such time.
Revenues are recognized using the percentage of completion method on these
long-term development contracts. Revenues for funded research and development
during the fiscal years ended March 31, 1994, 1995 and 1996 and the six months
ended September 30, 1996 were approximately $9.7 million, $20.7 million, $19.5
million and $11.6 million, respectively. See "Business -- Research and
Development."

Beginning in fiscal 1995, production contracts for delivery of previously
developed equipment became a more significant percentage of total revenues.
Production contracts amounted to approximately 6.5% of fiscal 1995 total
revenues, approximately 19.4% of fiscal 1996 total revenues and approximately
35.1% of total revenues for the six months ended September 30, 1996.

19
<PAGE> 20

The Company invests in independent research and development ("IR&D"), which
is not directly funded by a third party. The Company expenses IR&D costs as they
are incurred. IR&D expenses consist primarily of salaries and other
personnel-related expenses, supplies and prototype materials related to research
and development programs. IR&D expenses for governmental and commercial
applications were minimal prior to fiscal 1995. In the fourth quarter of fiscal
1995, the Company began investing a significant amount of IR&D funds primarily
in the development of satellite telephony and other satellite DAMA products. The
Company expended 9.7% and 10.3% of revenues in IR&D, respectively, in the fiscal
year ended March 31, 1996 and for the six months ended September 30, 1996. The
Company expects that IR&D expenditures will continue to increase in order to
fund growth in governmental and commercial applications. As a government
contractor, the Company is able to recover a portion of its IR&D expenses
pursuant to its government contracts.

RESULTS OF OPERATIONS

The following table sets forth, as a percentage of total revenues, certain
income data for the periods indicated.

<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEARS ENDED ENDED
MARCH 31, SEPTEMBER 30,
------------------------- ---------------
1994 1995 1996 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues................................... 78.0 75.4 72.3 71.4 71.0
----- ----- ----- ----- -----
Gross profit....................................... 22.0 24.6 27.7 28.6 29.0
Operating expenses:
Selling, general and administrative................ 13.4 10.8 11.7 12.4 10.7
Independent research and development............... 1.2 3.5 9.7 8.4 10.3
----- ----- ----- ----- -----
Income from operations............................. 7.4 10.3 6.3 7.8 8.0
Income before income taxes......................... 7.0 9.9 5.5 7.1 7.7
Net income......................................... 4.2 5.9 5.6 7.4 5.0
</TABLE>

SIX MONTHS ENDED SEPTEMBER 30, 1996 VS. SIX MONTHS ENDED SEPTEMBER 30, 1995

Revenues. Revenues increased 52.5% from $14.2 million for the six months
ended September 30, 1995 to $21.6 million for the six months ended September 30,
1996. This increase was primarily due to a $6.6 million increase in revenues
generated by contracts with the U.S. Air Force for UHF DAMA network control
stations and modems, and Enhanced Manpack UHF Terminal ("EMUT") DAMA modem
production of $5.7 million, offset in part by reduced activity in other product
lines and the completion of certain contracts.

Gross Profit. Gross profit increased 54.4% from $4.0 million (28.6% of
revenues) for the six months ended September 30, 1995 to $6.2 million (29.0% of
revenues) for the six months ended September 30, 1996.

Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased 31.3% from $1.8 million (12.4% of
revenues) for the six months ended September 30, 1995 to $2.3 million (10.7% of
revenues) for the six months ended September 30, 1996. This decrease in SG&A
expenses as a percentage of revenues reflects an increased expense in connection
with a large bid and proposal effort in the six months ended September 30, 1995
and the impact of a 52.5% growth in revenues between the two periods. SG&A
expenses consist primarily of personnel costs and expenses for business
development, marketing and sales, finance, contract administration and general
management. They also include bid and proposal costs. Certain SG&A expenses are
difficult to predict and vary based on specific government and commercial sales
opportunities.

20
<PAGE> 21

Independent Research and Development. IR&D expenses increased 87.0% from
$1.2 million (8.4% of revenues) in the six months ended September 30, 1995 to
$2.2 million (10.3% of revenues) in the six months ended September 30, 1996.
This increase resulted primarily from higher IR&D expenses related to the
Company's StarWire(TM) DAMA product, which represented approximately 87.6% of
total IR&D.

Interest Expense. Interest expense increased 20.2% from $104,000 for the
six months ended September 30, 1995 to $125,000 for the six months ended
September 30, 1996. Interest expense relates to loans for the purchase of
capital equipment, which are generally four year fixed-rate term loans, and to
short-term borrowings under the Company's line of credit to cover working
capital requirements. Total outstanding equipment loans were $2.2 million at
September 30, 1995 and $2.5 million at September 30, 1996. The Company had a
zero balance on its line of credit at the end of both periods.

Interest Income. Interest income increased 283.3% from $18,000 for the six
months ended September 30, 1995 to $69,000 for the six months ended September
30, 1996. Interest income related to interest earned on short-term deposits of
cash.

Provision (Benefit) for Income Taxes. The income tax benefit in the six
months ended September 30, 1995 was primarily attributable to the utilization of
research and development credits generated during the period and the impact of a
United States Federal judicial decision which clarified the tax law related to
the utilization of research and development credits generated from funded
research and development. As of September 30, 1996, the unutilized income tax
benefit was zero. The Company's effective tax rate for the six months ended
September 30, 1996 was 35.0%.

FISCAL YEAR ENDED MARCH 31, 1996 VS. FISCAL YEAR ENDED MARCH 31, 1995

Revenues. The Company's revenues increased 29.9% from $22.3 million in
fiscal 1995 to $29.0 million in fiscal 1996. This increase reflects the growth
in defense related production contracts, primarily associated with the Company's
EMUT DAMA modem products, which experienced a $5.3 million increase, and
Advanced Data Controller ("ADC") products, which experienced a $1.5 million
increase. Revenues from production orders (compared to funded research and
development) increased from $1.4 million (6.5% of revenues) in fiscal 1995 to
$5.6 million (19.4% of revenues) in fiscal 1996.

Revenues from UHF DAMA satellite communications products increased to 42.8%
of revenues in fiscal 1996. This increase was due to the first EMUT DAMA modem
production deliveries in the fourth quarter of 1996. UHF DAMA business area
revenues grew from $7.1 million (31.7% of revenues) in fiscal 1995 to $12.4
million (42.8% of revenues) in fiscal 1996.

Gross Profit. Gross profit increased 46.4% from $5.5 million (24.6% of
revenues) in fiscal 1995 to $8.0 million (27.7% of revenues) in fiscal 1996.
This increase primarily reflects higher prices related to the recovery of
allowable IR&D costs under certain government contracts and improved contract
profitability under certain production contracts.

Selling, General and Administrative Expenses. SG&A expenses increased
40.7% from $2.4 million (10.8% of revenues) in fiscal 1995 to $3.4 million
(11.7% of revenues) in fiscal 1996. Increased spending was offset somewhat by
the continuing revenue growth. The Company continued to increase staff to
support IR&D related to its StarWire(TM) DAMA product, increased its business
development staff for defense programs, and added to finance and administrative
staffing. Bid and proposal efforts increased from $321,000 in fiscal 1995 to
$1.0 million in fiscal 1996.

Independent Research and Development. IR&D expenses increased 257.9% from
$788,000 (3.5% of revenues) in fiscal 1995 to $2.8 million (9.7% of revenues) in
fiscal 1996. Expenditures on the development of the Company's StarWire(TM) DAMA
product began in the last quarter of fiscal 1995 and have been steadily
increasing.

Interest Expense. Interest expense increased 128.1% from $114,000 in
fiscal 1995 to $260,000 in fiscal 1996. Total outstanding equipment loans for
the periods were $1.7 million at the end of fiscal 1995 and $2.5

21
<PAGE> 22

million at the end of fiscal 1996. There was a zero balance under the Company's
line of credit at the end of each fiscal year.

Interest Income. Interest income increased 7.4% from $27,000 in fiscal
1995 to $29,000 in fiscal 1996. Interest income related to interest earned on
short-term deposits of cash.

Provision (Benefit) for Income Taxes. The income tax provision in fiscal
1995 approximated the combined federal and state statutory rate of 40.0%. The
income tax benefit in fiscal 1996 was primarily attributable to the utilization
of research and development credits generated during the current period and the
impact of a United States Federal judicial decision which clarified the tax law
related to the utilization of research and development credits generated from
funded research and development.

FISCAL YEAR ENDED MARCH 31, 1995 VS. FISCAL YEAR ENDED MARCH 31, 1994

Revenues. The Company's revenues increased 92.9% from $11.6 million in
fiscal 1994 to $22.3 million in fiscal 1995. Funded development in the UHF DAMA
business area had the largest impact on revenue growth. Revenues for the UHF
DAMA business area increased 317.1% from $1.7 million (14.7% of revenues) in
fiscal 1994 to $7.1 million (31.7% of revenues) in fiscal 1995. Other increases
occurred in the simulator business area which increased from $2.2 million (18.9%
of revenues) in fiscal 1994 to $4.0 million (18.0% of revenues) in fiscal 1995,
and in the Joint Tactical Information Distribution System ("JTIDS") business
area which increased from $1.3 million (10.9% of revenues) in fiscal 1994 to
$2.6 million (11.8% of revenues) in fiscal 1995.

Gross Profit. Gross profit increased 115.5% from $2.5 million (22.0% of
revenues) in fiscal 1994 to $5.5 million (24.6% of revenues) in fiscal 1995.
This increase primarily reflects higher prices related to the recovery of
allowable IR&D costs under certain government contracts and improved contract
profitability under certain contracts.

Selling, General and Administrative Expenses. SG&A expenses increased
55.5% from $1.6 million (13.4% of revenues) in fiscal 1994 to $2.4 million
(10.8% of revenues) in fiscal 1995. This decrease in SG&A expenses as a
percentage of revenues was due to the larger growth in revenues during the
period. Near the end of fiscal 1995 the Company added administrative staff to
support increasing revenue and the associated increase in direct labor. The
Company added other indirect staff in both years to support the commercial DAMA
business. Bid and proposal efforts in fiscal 1995 were minimal due to the
concentration on performance in the existing defense backlog.

Independent Research and Development. IR&D expenses increased 488.1% from
$134,000 (1.2% of revenues) in fiscal 1994 to $788,000 (3.5% of revenues) in
fiscal 1995. Expenditures on the development of the Company's StarWire(TM) DAMA
product began in the last quarter of fiscal 1995, accounting for most of the
increase.

Interest Expense. Interest expense increased 142.6% from $47,000 in fiscal
1994 to $114,000 in fiscal 1995. Total outstanding equipment loans for the
periods were $392,000 at the end of fiscal 1994 and $1.7 million at the end of
fiscal 1995, reflecting an increase in purchases of capital equipment to support
the increased requirements of development programs. There was $350,000
outstanding under the Company's line of credit at the end of fiscal 1994, and a
zero balance at the end of fiscal 1995.

Interest Income. There was no material interest income in fiscal 1994 and
$27,000 of interest income in fiscal 1995, which related to interest earned on
short-term deposits of cash.

Provision (Benefit) for Income Taxes. The income tax provisions in fiscal
1994 and 1995 approximated the combined federal and state statutory rate of
40.0%.

22
<PAGE> 23

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain financial information for each of
the Company's last ten quarters. The information for each of these quarters is
unaudited but includes all adjustments, consisting only of normal recurring
adjustments, which the Company considers necessary for a fair presentation of
this information when read in conjunction with the Financial Statements and
Notes thereto appearing elsewhere in this Prospectus. The results of operations
for any quarter and any quarter-to-quarter trends are not necessarily indicative
of the results to be expected for any future periods.

<TABLE>
<CAPTION>
QUARTERS ENDED
-------------------------------------------------------------------------------------------------------------------
FISCAL YEAR 1995 FISCAL YEAR 1996 FISCAL YEAR 1997
------------------------------------------- ------------------------------------------- -----------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1994 1994 1994 1995 1995 1995 1995(1) 1996 1996 1996
-------- --------- -------- --------- -------- --------- -------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues..... $4,726 $5,489 $5,641 $6,485 $6,768 $7,388 $5,755 $9,106 $9,732 $11,850
Cost of
revenues... 3,718 4,319 4,330 4,488 4,830 5,280 4,042 6,831 6,862 8,471
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Gross
profit..... 1,008 1,170 1,311 1,997 1,938 2,108 1,713 2,275 2,870 3,379
Operating
expenses:
SG&A....... 478 576 639 723 918 844 815 823 1,040 1,272
IR&D....... 54 95 184 455 467 719 769 865 1,058 1,160
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Income from
operations.. 476 499 488 819 553 545 129 587 772 947
Income before
income
taxes...... 454 479 466 796 524 488 68 503 740 922
Net income... 271 286 278 472 541 503 70 519 478 604
</TABLE>

- ---------------
(1) The Company experienced reduced revenues, gross profit and income from
operations for the third quarter of fiscal 1996 due primarily to delays on
the EMUT contract. Production deliveries were scheduled to begin in the
third quarter of fiscal 1996, but were delayed at the customer's request.
Deliveries began instead in the fourth quarter of fiscal 1996.

The following table sets forth the above unaudited quarterly financial
information as a percentage of total net revenues.

<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------------------------------------------------------
FISCAL YEAR 1995 FISCAL YEAR 1996 FISCAL YEAR 1997
------------------------------------------- ------------------------------------------- --------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1994 1994 1994 1995 1995 1995 1995 1996 1996 1996
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of
revenues...... 78.7 78.7 76.8 69.2 71.4 71.5 70.2 75.0 70.5 71.5
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit.... 21.3 21.3 23.2 30.8 28.6 28.5 29.8 25.0 29.5 28.5
Operating
expenses:
SG&A.......... 10.1 10.5 11.3 11.1 13.6 11.4 14.2 9.0 10.7 10.7
IR&D.......... 1.1 1.7 3.3 7.0 6.9 9.7 13.4 9.5 10.9 9.8
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from
operations.... 10.1 9.1 8.6 12.7 8.1 7.4 2.2 6.5 7.9 8.0
Income before
income
taxes......... 9.6 8.7 8.3 12.3 7.7 6.6 1.2 5.6 7.6 7.8
Net income...... 5.7 5.2 4.9 7.3 8.0 6.8 1.2 5.7 4.9 5.1
</TABLE>

Historically, development contracts have been a significant source of
revenue. The Company recognizes a majority of its revenues under the percentage
of completion method which requires engineering estimates and assumptions
regarding costs that will be incurred over the life of a specific contract.
Actual results may differ from those estimates. In such event, the Company has
been required to adjust revenues in subsequent periods relating to revisions of
prior period estimates, resulting in fluctuations in the Company's results of
operations from period to period. See "Risk Factors -- Fluctuations in Results
of Operations."

23
<PAGE> 24

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations to date primarily from cash flow
from operations, bank line of credit financing and loans for the purchase of
capital equipment. Cash provided from operations for the fiscal years ended
March 31, 1994, 1995 and 1996 was $183,000, $3.3 million and $456,000,
respectively, and cash used in operating activities was $39,000 for the six
months ended September 30, 1996. The relative decrease in cash generated from
operations in fiscal 1996 compared to fiscal 1995 was due to higher levels of
accounts receivable and inventory. The increase in accounts receivable resulted
from an increase in revenues. The growing share of revenues from production
contracts led to the need to build inventory levels to support production
demands. The Company anticipates that in future periods the level of inventories
will be higher than historical levels.

Cash provided by financing activities, principally from equipment financing
and to a lesser extent from the sale of Common Stock, was $262,000 in fiscal
1994, $1.1 million in fiscal 1995, $1.0 million in fiscal 1996 and $188,000 for
the six months ended September 30, 1996. Purchases of property and equipment,
primarily consisting of test equipment and computers, were $511,000, $1.7
million and $1.9 million, respectively, in fiscal 1994, 1995 and 1996, and $1.3
million in the six months ended September 30, 1996.

At September 30, 1996, the Company had $1.2 million in cash and cash
equivalents, $4.9 million in working capital and $2.5 million in long-term debt,
consisting of equipment financing, and a zero balance under the Company's line
of credit. In September 1995, the Company entered into a credit facility with
Union Bank, which includes a $4.0 million line of credit and $4.0 million in
commitments for equipment financing. The line of credit allows the Company to
borrow, for general working capital purposes, the greater of $1.0 million or
80.0% of eligible accounts receivable plus 50.0% of the Company's eligible
inventory. It accrues interest at the bank's prime rate, which was 8.25% at
September 30, 1996, and expires on September 15, 1997. The Company is required
to pay a fee equal to 0.25% of the unused portion of the line of credit on an
annual basis.

The equipment line consists of two loans, each of which allows the Company
to borrow, for purchases of equipment, machinery and software directly related
to the Company's principal line of business, up to $2.0 million while limiting
borrowings to an 80.0% advance against the purchase price, net of sales tax,
delivery and insurance. The aggregate borrowings under the first loan totaled
$1.1 million at September 15, 1996, at which time all unpaid principal under
such loan was converted into a fully amortizing loan for a period of 36 months
with a maturity date of September 15, 1999. All borrowings under the second loan
must be made before September 15, 1997, at which time all unpaid principal under
such loan will be converted into a fully amortizing loan for a period of 36
months with a maturity date of September 15, 2000. As of September 30, 1996,
there was approximately $1.1 million outstanding under the first loan and a zero
balance under the second loan. The equipment loans accrue interest at the bank's
prime rate plus 0.35% per annum, or 8.6% as of September 30, 1996.

The credit agreement with Union Bank contains affirmative and negative
covenants, including, among others, financial covenants regarding the
maintenance of stated net worth amounts, net income levels and specific
liquidity and long-term solvency ratios. In addition, the credit agreement
restricts the Company's ability to borrow money, except in the ordinary course
of business or pursuant to agreements made with Union Bank. Amounts borrowed are
secured by substantially all of the Company's assets.

In October 1996, the Company received a commitment for a new credit
facility with Union Bank, which includes a $6.0 million line of credit and $4.5
million in commitments for equipment financing. The line of credit allows the
Company to borrow, for general working capital purposes, the greater of $2.0
million or 80.0% of eligible accounts receivable, plus 50.0% of the Company's
eligible inventory to a maximum of $2.0 million. It is an interest only loan
which matures on September 15, 1998. The equipment line consists of two loans,
each of which limits borrowings to an 80.0% advance against the purchase price,
net of sales tax, delivery and insurance. All borrowings under the first loan,
which may not exceed $2.0 million, must be made before September 15, 1997, at
which time all unpaid principal under such loan will be converted into a fully

24
<PAGE> 25

amortizing loan for a period of 36 months with a maturity date of September 15,
2000. All borrowings under the second loan, which may not exceed $2.5 million,
must be made before September 15, 1998, at which time all unpaid principal under
such loan will be converted into a fully amortizing loan for a period of 36
months with a maturity date of September 15, 2001.

The Company's future capital requirements, which management anticipates
will not exceed $10.0 million over the next 12 months, will depend upon many
factors, including the progress of the Company's research and development
efforts, expansion of the Company's marketing efforts, and the nature and timing
of commercial orders. The Company believes that the net proceeds from the sale
of the Common Stock offered hereby, together with its current cash balances,
amounts available under its credit facility and net cash provided by operating
activities, will be sufficient to meet its working capital and capital
expenditure requirements for at least the next 12 months. Management intends to
invest the Company's cash in excess of current operating requirements in
short-term, interest-bearing, investment-grade securities.

25
<PAGE> 26

BUSINESS

INTRODUCTION

ViaSat designs, produces and markets advanced digital satellite
telecommunications and wireless signal processing equipment. The Company has
achieved ten consecutive years of internally generated revenue growth and nine
consecutive years of profitability, primarily through defense-related
applications. More recently, the Company has been developing and marketing its
technology through strategic alliances for emerging commercial markets, such as
rural telephony, alternative carrier access and Internet/Intranet access by
satellite to multiple servers. ViaSat is a leading provider of DAMA technology,
which allows a large number of VSAT subscribers to economically share common
satellite transponders for high-performance voice, fax or data communications.

The Company believes that DAMA satellite technology is superior to other
existing VSAT networking technologies. The existing TDM/TDMA networking
technology features a "hub and spoke" architecture which requires all
transmissions to be routed through a central terrestrial hub. Unlike TDM/TDMA
systems, DAMA provides direct, on-demand switched networking capabilities which
do not require a terrestrial hub and allow faster and more efficient use of
expensive satellite transponder resources. In addition, the Company believes
that its DAMA products, commercially marketed under the tradename StarWire(TM),
offer greater network flexibility and permit up to 50% greater satellite
capacity than competing DAMA systems. See "-- The ViaSat Advantage" and
"-- Technology."

INDUSTRY BACKGROUND

A broad array of new consumer, business and government markets, as well as
the development of new technologies, have driven the significant expansion of
the wireless communications industry. In addition to common consumer
applications such as paging, cellular telephony and new Personal Communications
Services ("PCS"), there is a wide range of other specialized terrestrial- and
space-based wireless applications. Such wireless applications include government
fixed and mobile wireless networking and commercial fixed-site, switched
satellite services, ViaSat's principal lines of business. The growth in
software-intensive wireless equipment markets stems from, among other things,
increasing dependence on voice and data networks of all types, regulatory
reform, advances in technology, decreasing costs of equipment and services,
economic growth in developing nations, the increasing importance of
communications infrastructure as a catalyst of economic growth, and increasing
user acceptance of and confidence in wireless solutions. This growth in wireless
equipment markets corresponds to a transition away from mere point to point
radio links connecting remote or mobile users towards offering more
comprehensive wireless network services. Market demands for wireless services
are being addressed by both terrestrial- and satellite-based systems.

Government Applications. Historically, the military has driven development
of many new wireless technologies -- pioneering applications of satellite
communications, digital radios, spread spectrum and mobile wireless networks to
connect widely dispersed operations. In many cases these technologies have been
extended and increased in scale for broader non-defense use. Defense
applications of wireless technologies also have evolved over the same time
period. The break-up of the Soviet Union has caused a de-emphasis on strategic
missions and a shift towards more localized tactical roles such as
peace-keeping, counter-terrorism, counter-insurgency and drug enforcement. These
missions create new demands for rapidly deployable, mobile connectivity. Overall
reductions in the defense budget have led to a numerically smaller, more
technologically-advanced force structure. As a result, defense networks
increasingly build around real-time transmission of

26
<PAGE> 27

digital tactical data. Defense systems also are adopting and extending low cost
commercial technologies to meet their needs.

There has been a constantly shifting flow of technology between government
and commercial network applications. Both government and commercial users
developed fixed-site, long-haul applications. The government pioneered mobile
satellite terminals, as well as non-geosynchronous, high power and extremely
high frequency satellites. Commercial users adopted elements of these
technologies for Low Earth Orbit ("LEO") mobile telephony and high-powered
Direct Broadcast Satellite ("DBS") television systems. Now government agencies
are planning to integrate these technologies into still more advanced military
networks. Often, companies with both government and commercial expertise have
facilitated such technology transitions.

Commercial Applications. The recent worldwide trend toward privatization
of public telephone operators and deregulation of local telephone ("local loop")
services has resulted in increased competition in the delivery of telephone
services from alternative access providers. Many of these new access providers,
such as long-distance telephone carriers, must install or upgrade infrastructure
to support basic and enhanced services. In addition, worldwide demand for basic
telephone service has grown, especially in developing countries. As new
infrastructure is established to deliver local telephone service, the technology
exists to provide cost-effective, satellite-based wireless transmission systems,
instead of a traditional wired approach, to connect subscribers to the public
telephone network.

A growing segment of the wireless communications industry involves VSATs,
which are communications systems utilizing fixed-site satellite terminals.
Historically, these systems were primarily designed for certain specific data
applications. But recent improvements in VSAT technology for satellite-based
wireless voice and data networks have led to their increasing use in a variety
of broader, higher system throughput commercial applications such as mobile and
rural telephony and more complicated data transmissions. Satellite telephony
systems are being utilized by developing countries that lack a terrestrial-based
telecommunication infrastructure, and which seek to provide telephone service
for large areas fairly rapidly and on a cost-effective basis. Additionally, even
where terrestrial systems exist, satellite systems are used to fill in coverage
for remote areas.

Evolution of VSAT Technology. The commercial VSAT business began with U.S.
customers who operated large, sophisticated private terrestrial networks using
TDM/TDMA technology. Customers such as chain retailers, hotels and auto dealers
operated private data networks with hundreds or thousands of sites and a high
flow of transactions from remote terminals to host mainframe computers for
credit card validations, point-of-sale data collection, reservations or similar
applications. Customers who used VSATs for data networking still relied on
terrestrial providers for telephone service and possibly other
telecommunications needs for their sites. Sales of such VSAT systems are often
quite sensitive to prices from telephone carriers for equivalent packet
transaction services. Users with large networks generally are the only ones who
can justify the significant one-time cost of a VSAT network management hub.

TDM/TDMA technology, while more established than DAMA technology, features
a "hub and spoke" architecture which requires all transmissions to be routed
through a central hub and is most useful for remote to mainframe network
connections. Remote-to-remote TDM/TDMA connections require two satellite hops.
DAMA is better suited for remote-to-remote connections than TDM/TDMA because the
voice quality is better and DAMA networks use expensive satellite transponders
more efficiently. DAMA satellite technology allows individual subscribers to
request links on demand directly to any other subscriber with a single satellite
hop. DAMA allows users to make exactly the connections needed, lasting only for
the duration of a voice call, fax, electronic mail or digital file transfer.
DAMA technology has been under development for many years by the DOD to serve
large networks of fixed and mobile subscribers sharing a limited amount of
satellite capacity, but is only recently being deployed in significant
quantities by the DOD.

The Company believes the opportunities for government and commercial ground
station equipment sales are increasing. The government is investing over $1.0
billion over several years in the UHF space segment alone for tactical
communications. DAMA is applicable to several different satellite bands,
including government UHF and SHF and commercial C, K(u) and K(a) bands. DAMA is
also being required by

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commercial customers who believe that it is better suited for their applications
than the earlier VSAT technologies.

THE VIASAT ADVANTAGE

In light of the limitations of the TDM/TDMA architecture, and the magnitude
of the potential market for primary telecommunications services compared to the
more limited market for data transaction services, ViaSat believes that DAMA
networks will better serve the emerging international market for VSAT, voice and
data services. Virtually all of the VSAT equipment makers are now adding DAMA
products to their line of products. This represents a discontinuity in the VSAT
market. VSAT vendors are now developing new transmission waveforms, multiple
access techniques, DAMA protocols, DAMA control software, subscriber terminals
and interface protocols to support the targeted applications (voice, fax,
dial-up data, video conferencing or others), which creates an opportunity for
new equipment suppliers such as the Company.

The Company believes that its DAMA-based products have technological
advantages over competing DAMA products in offering practical solutions for
telecommunications applications through several means:

Flexibility

Since communications networks are evolving so quickly, a system such
as the Company's that can be easily extended and configured has a
competitive advantage.

- REAL-TIME DIGITAL SIGNAL PROCESSING FIRMWARE. The Company's
technology involves extensive use of real-time digital signal
processing firmware to implement both signal processing and DAMA
networking protocol functions. This approach was developed and proven
under several government programs, especially UHF DAMA. The Company
believes that digital signal processing firmware offers great
flexibility in adding new features, because it allows modification
without more expensive hardware changes, and that product costs should
decrease if prices of Texas Instruments digital signal processing
chips and associated peripherals continue to decline. The Company's
digital signal processing design allows common hardware to be applied
to both government and commercial markets.

- WINDOWS NT(TM)-BASED NETWORK CONTROL. ViaSat believes that it is the
only company using an Intel PC/Windows NT(TM) computer platform for
its network control system. Most vendors still use Unix platforms.
ViaSat developed and proved Windows NT(TM) as a viable network control
platform under government funded UHF and SHF DAMA programs. Windows
NT(TM) has several advantages which the Company believes support its
technical leadership position:

-- True real-time multi-tasking, allowing many functions to be moved
from specialized VSAT hardware into an industry-standard personal
computer. Such functions can be developed more quickly and are more
easily modified to support new communications applications and
interfaces.

-- Lower overall costs and faster time to market in terms of
development hardware and software tools, a more readily available
pool of experienced software engineers, lower recurring cost of
network control computer platforms, less expensive networking and
communications interfaces and lower operator training costs than
Unix-based systems.

-- DOD approved access-control is built directly into the
network-controller computer operating system. This includes secure
remote-access via many built-in communication paths. The Company
believes computer security is essential technology for mission
critical telecommunication tasks such as billing.

- STANDARD VSAT PLATFORM. ViaSat believes that it is the only company
building on a standard "open systems" VSAT platform for commercial and
SHF DAMA products. Open systems enable mix and match of satellite
equipment and baseband terrestrial interfaces on a circuit by circuit
basis. The architecture supports third party interface cards for
faster time to market for specialized

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terrestrial interfaces. While open systems architecture does not offer
the lowest possible manufacturing cost for any single fixed terminal
configuration, it is consistent with two other strategic objectives:
(i) rapid time to market by building on industry standard third-party
hardware and software and (ii) flexibility to support a broad array of
services and applications consistent with the Company's target
distribution channels of service providers.

- INTERNALLY-DEVELOPED TECHNOLOGY. Many competing VSAT providers are
primarily systems integrators with little internally-developed
technology, particularly in the software and firmware areas. The
Company believes its extensive internal technology development
capability gives it an advantage in flexibility, time-to-market and
product quality.

Capacity

ViaSat's narrow-spacing technology, developed during the course of its
government DAMA contracts, results in less unused bandwidth between voice
channels than other DAMA systems, and this, along with more precise
power-usage control software, allows ViaSat's DAMA products to achieve up
to 50% greater satellite capacity than competing DAMA systems. For example,
the ViaSat DAMA system can space toll-quality voice carriers 14 kHz apart,
compared to 20 kHz for competing systems.

Certification

ViaSat believes it is currently the only provider of DAMA products
which has received certification from the U.S. government that one of its
DAMA products meets the required military specifications for 5 kHz products
in accordance with MIL-STD 188-182. The rigorous military certification
process may take up to several months to complete.

STRATEGY

ViaSat's objective is to become a leading developer and supplier of
DAMA-based products to commercial markets and to retain a leadership position in
developing and supplying DAMA-based products to the government market. The
Company's strategy incorporates the following key elements:

Maintain and Enhance Technology Leadership Position. The Company's
strategy is to maintain and enhance its leadership position in DAMA-based
satellite technology by continuing its participation in selected DOD programs
involving networking technology and other related real-time signal processing
and networking software. The Company is also investing in proprietary research
for commercial applications. The Company's objective is to continue to offer
high-performance, software-oriented products which provide the most effective
use of satellite power and bandwidth as well as offering the most flexible
platform for continued growth.

Leverage Technological Expertise into Commercial Markets. The Company's
strategy is to continue using its technological expertise developed in defense
applications to develop and market products to respond to the increasing demand
for DAMA-based VSAT solutions for commercial voice and data applications. The
Company is targeting commercial markets which it believes will offer high growth
potential and where it believes ViaSat's technology will have competitive
advantages, such as rural telephony, alternative carrier access and
Internet/Intranet access by satellite to multiple servers. The Company believes
its products are competitive largely because of their technological advantages
over competing products. The Company's strategy is to capitalize on these
technological advantages by utilizing a "cost of ownership" marketing approach
that emphasizes the overall lower cost to customers over the operating life of
the Company's products because of the products' adaptability and more efficient
use of limited satellite capacity.

Develop Broad Base of Innovative Proprietary Products. The Company's
strategy is to continue to develop and market to both defense and commercial
customers a broad variety of signal processing and networking software products.
The Company has over 150 research engineers on staff and emphasizes offering
technologically-superior products. The Company generally retains certain
proprietary rights from the government-funded research and development of its
defense products and is also devoting a significant amount of its own resources
to independent product development.

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Develop Strategic Alliances. The Company's strategy is to develop
strategic alliances with leading prime defense contractors and major
international telecommunications companies and equipment suppliers. The Company
targets those companies whose financial and technological resources and
established customer bases allow them to jointly introduce new technologies and
penetrate new markets sooner and at a lower cost than the Company could alone.
The Company has entered into strategic alliances with defense companies, such as
Hughes Defense Communications and Lockheed Martin, and commercial
telecommunications companies, such as AT&T Tridom, Hutchison Telecommunications
and HCL Comnet.

Establish Global Presence. The Company's strategy is to develop its
products so that they may be marketed and used throughout the world. The Company
is a market leader in DAMA-based defense products for the United States and its
allies. The Company believes that the commercial market opportunities for the
Company's products are greater internationally. The Company believes its focus
on meeting applicable international communication standards and establishing key
international strategic alliances will enable it to effectively penetrate
foreign markets.

Address Rural Telephony Market. The Company believes there is a
substantial unmet demand for rural telephony services, especially in developing
countries. The Company's strategy is to capitalize on its networking software
expertise to develop technology for establishing regional rural telephony
network infrastructures of strategically located VSAT terminals capable of
handling multiple satellite telephone calls ("Point-of-Entry Terminals"). The
Company believes such an infrastructure would have a competitive advantage over
a single Point-of-Entry system by minimizing the ground transmission cost of
each satellite telephone call by permitting such calls to enter the Public
Switched Telephone Network (PSTN) through the Point-of-Entry Terminal closest to
the call's destination. The Company's strategy also includes seeking
partnerships with regional and local service providers to create distribution
channels for rural telephony infrastructures and to provide related retail
distribution services, including sales of Company-designed subscriber terminals,
installation and maintenance, as well as customer service, billing and revenue
collection. To this end, the Company has recently entered into a contract with
Hutchison Telecommunications for satellite telephony equipment which can serve
as rural telephony infrastructure.

TECHNOLOGY

The Company's VSAT technology is focused on DAMA which allows individual
subscribers to request links on demand to any other subscriber through one
satellite hop. TDM/TDMA technology, while more established than DAMA technology,
features a "hub and spoke" architecture which requires all transmissions to be
routed through a central hub and is most useful for remote to mainframe network
connections. Remote-to-remote TDM/TDMA connections require two satellite hops.
DAMA is better suited for remote-to-remote connections than TDM/TDMA because the
voice quality is better and DAMA networks use expensive satellite transponders
more efficiently.

DAMA technology has been under development for many years by the DOD, but
is only recently being deployed in significant quantities. DAMA is applicable to
several different satellite bands, including government UHF and SHF and
commercial C, K(u) and K(a) bands. A major objective for the DOD is to improve
capacity of extremely expensive government-owned satellite transponders. The
government expects DAMA to increase capacity for UHF tactical users by as much
as a factor of ten, depending on the application and traffic usage, compared to
dedicated non-DAMA links.

A DAMA system consists of (i) a set of subscribers with DAMA-capable
terminals, (ii) a network management terminal which orchestrates access to a
shared satellite resource, and (iii) satellite transponder capacity managed by
the network controller and shared by subscribers. DAMA subscribers use
networking protocols to interact with the controller and each other. The essence
of DAMA is that the network controller allocates a shared satellite resource to
a particular combination of subscribers only when they request it, and then
terminates the connection when they are finished.

DAMA protocols may be either "open" or "proprietary." Open standards are
published so that multiple manufacturers can develop equipment that works
together. The DOD has designated two different open DAMA standards defining
over-the-air interfaces for narrowband UHF satellite communications channels.

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MIL-STD 188-182 defines an interoperable waveform for channels with 5 kHz
bandwidth, and MIL-STD 188-183 defines the 25 kHz channel waveform. The DOD is
currently defining open standards for SHF channels and for government DAMA use
of commercial C and K(u) band transponders. There are no widely accepted
commercial open DAMA standards, and no open standards have evolved for TDM/TDMA
VSATs.

DAMA vs. TDM/TDMA. DAMA is being sought by customers who see that it is a
better fit than TDM/TDMA VSATs for non-transaction applications such as voice
and fax. The principal limitations of TDM/TDMA for non-transaction applications
are:

Capacity Limitations and Costs

- The TDM/TDMA hub and spoke architecture is primarily designed for
rapid service for sporadic, short, burst transactions between a remote
site and a mainframe computer. The hubs typically only support a
maximum instantaneous aggregate data rate of 256 kbps to approximately
1 Mbps divided among the entire subscriber population (often several
thousand terminals). This is a severe bottleneck for sustained
circuit-type services like telephony, fax or peer-to-peer file
transfers, which often dominate when the VSAT becomes the primary
communication means for a site, as in telephony uses. In contrast, a
comparable DAMA system has a much higher aggregate capacity. For small
networks the TDM/TDMA hub performance is not a capacity bottleneck,
but the typical hub price of approximately $1.0 million, amortized
over a small number of subscribers, is usually prohibitively
expensive. The equipment cost for a comparable DAMA system for voice
use, in contrast, would be significantly less.

Transmission Time

- The hub and spoke architecture requires all calls (voice or data)
between two remote nodes to be routed through the hub. This causes
each call to traverse two separate satellite hops in each direction
(remote A-to-satellite-to-hub and then hub-to-satellite-to-remote B,
with the return path from remote B to remote A also traversing two
satellite hops). The additional time delay due to the extra satellite
hops is striking for voice communications and is unacceptable to many
users. Plus, the two satellite hops consume more expensive transponder
resources per call than a single hop DAMA connection.

DAMA vs. Dedicated SCPC. In contrast to DAMA, which allows individual
subscribers to request links to other subscribers on demand, dedicated Single
Channel Per Carrier ("SCPC")-based systems maintain dedicated, unswitched links
between subscribers, such as for long distance trunk lines. Dedicated links
provide high quality transmissions, but only between particular subscriber sets.
In order to provide connections among many sites, an SCPC-based system would
require a dedicated link between each subscriber and each other subscriber,
which would be prohibitively expensive. As a result, DAMA is a much more
attractive solution for managing large numbers of network subscribers, as DAMA
provides transmissions of equally high quality, without restricting the
subscribers' ability to establish links on demand to any other subscriber.

Mobile Satellite vs. Fixed-site DAMA. The obvious advantage of commercial
mobile satellite systems, such as Iridium(TM) and GlobalStar(TM), is that they
allow subscribers to be mobile. A mobile satellite terminal can be used by
either a mobile or a fixed subscriber, while a fixed terminal cannot be used by
a mobile subscriber. However, in order to gain mobility, mobile terminals employ
an omni-directional antenna which operates at lower frequencies and provides
less bandwidth than is available in the fixed-site DAMA satellite bands. Less
bandwidth corresponds to less capacity and fewer voice circuits. Also, mobile
satellite systems typically require a greater investment in unique space-based
satellite resources than fixed-site DAMA systems which use existing capacity on
general purpose communication satellites. The combination of lower capacity plus
higher capital investments means that mobile service providers are projecting
per-minute service costs that are five to ten times higher than that possible
through fixed-site DAMA-based systems. Therefore, the Company believes that
customers who require satellite telephony services at fixed locations will find
fixed-site DAMA services to be much more economical than using mobile satellite
phones -- even if they already own mobile satellite phones for mobile use.

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Non-DAMA Technology. The Company offers products outside of DAMA and
satellite communications that benefit from the Company's wireless networking
software and related technology. Important non-DAMA applications include:

- Spread spectrum digital radios for real-time tactical data networks
among ground and airborne users. The JTIDS (Joint Tactical Information
Distribution System) radio builds on the Company's software, firmware
and hardware technology. The government is investing in "digitized
battlefield" communications in an effort to obtain greater
effectiveness from expensive tactical aircraft.

- Information security modules that encrypt classified information that
can be broadcasted and routed across unclassified wired or wireless
networks. This technology allows the government to make better use of
commercial networks for securely transmitting classified information.

- Equipment that tests wireless receivers in the presence of complex,
simulated radio wave environments. This technology allows the
government to thoroughly test sophisticated airborne radio equipment
without expensive flight exercises.

GOVERNMENT MARKETS, PRODUCTS AND CUSTOMERS

Government Markets

The Company believes it has an opportunity to build on its government DAMA
technology, software, hardware design and manufacturing base to capture
significant revenues in the government markets.

UHF DAMA Markets. The Company is considered a leader in the UHF DAMA
market. The Company believes its DAMA manpack subcontract is the largest
outstanding DAMA contract in terms of quantity of units sold. The Company also
believes that it was the first to develop and market a stand-alone airborne DAMA
modem. The DOD requires all UHF satellite communications terminals to meet open
DAMA standards. This mandate has helped stimulate the UHF DAMA market. ViaSat is
active in the following business segments:

- UHF DAMA NETWORK CONTROL INFRASTRUCTURE. As of September 30, 1996,
ViaSat had over $30.0 million in contracts with the U.S. Air Force for
an initial network control system. This includes development,
production, installation and support for four global sites. Each site
serves as a primary controller for seven channels and as an alternate
for seven channels. Each satellite has 38 channels, offering a
potential market for additional production, installation and support
services.

- MANPACK TERMINALS. ViaSat has a contract with Hughes Defense
Communications for over 3,000 DAMA modems for manpacks. The contract
has options which allow the DOD in its discretion to purchase up to an
additional 4,000 of such modems. As of September 30, 1996, the funded
contract value was $16.8 million, which did not include options of
$20.9 million.

- AIRBORNE DAMA TERMINALS. The 5 kHz channel DAMA protocols were
designed to support U.S. Air Force aircraft. The U.S. Navy is also a
major user of airborne UHF terminals. ViaSat equipment has been
designed into a number of platforms, including P-3, S-3, Air Force
One, EP-3, ES-3, Tomahawk cruise missiles and others.

- INTERNATIONAL UHF DAMA MARKET. Cooperative efforts among multiple
nations, such as in the Gulf War and Bosnia, require that allies have
a standard communications platform. There are requirements for some
units of NATO and other allies to have UHF DAMA capable satellite
terminals.

The Company's strategy includes actively working to expand the UHF DAMA
market as a whole, while sustaining its leading market share. Increasing the
market means extending UHF satellite communications capability to new users. UHF
satellite communications access and market size is limited in the following
ways:

- AVAILABILITY OF SATELLITE CAPACITY. Without DAMA, many users are
denied access because higher priorities consume all channels. DAMA
expands capacity. The Company anticipates

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increases in the UHF market, versus pre-DAMA levels, over the next
seven years due to pent-up demand for service.

- EQUIPMENT SIZE AND WEIGHT. Most users are mobile and thus size and
weight sensitive. They carry equipment in back-packs, or airframes
where communication gear displaces weapons or mission critical
payloads. Easier to carry, smaller, lighter equipment may expand the
market beyond a core group who require DAMA to complete their mission.

- EQUIPMENT PRICE. The Company believes that the UHF DAMA market can
expand by reducing the price of DAMA equipment. Embedded DAMA radios
are less expensive than stand-alone models, and offer reduced size and
weight.

- IMPROVED DAMA SUBSCRIBER SERVICES. The current DAMA system is a data
"pipe." The Company anticipates that demand for DAMA can grow by
increasing the value of the content sent over the pipes. Several areas
are being explored, including improved secure voice quality, increased
message routing capability, higher data rates and improved service
set-up times.

- DAMA SIGNAL PROCESSING. Airborne DAMA is currently limited to large,
slow aircraft for surveillance, airlift, command and control, or
similar missions. High performance aircraft are excluded because
current satellite communications antennas degrade mission performance
or safety. A promising solution is to use low profile, conformal
antennas with active antenna combiners. The Company has a contract for
such active antenna combiners with Lockheed Martin which, if
successful, opens the possibility of extending the UHF DAMA market to
high performance aircraft, potentially resulting in an increase of up
to 100% in the airborne DAMA market.

ViaSat is also applying the market expansion strategy to its Advanced Data
Controller ("ADC") products. ADC conforms to MIL-STD 188-184 for packet
processing. It provides error-free data transmission over noisy channels. ADC
works for terrestrial and satellite communications wireless links. The Company
is working to reduce size, weight and price for ADC products, and potentially
licensing other manufacturers to embed ViaSat's ADC digital signal processing
firmware directly into their radios.

Tri-band DAMA Markets. The U.S. government is a major consumer of leased
commercial satellite capacity in the C and K(u) bands. Since satellite
availability is limited, the government has specified the purchase of "tri-band"
terminals (i.e., terminals which can operate on any of three bands, SHF (X
band), C or K(u) band). This makes it easier for subscribers to use available
capacity in any band, as a function of time and location. The government
established the Commercial Satellite Communications Initiative program to
manage:

- Long term leases for commercial satellite transponders.

- Contracts to purchase tri-band satellite terminals.

- Bandwidth Management Centers to act as network controllers for the
tri-band terminals.

The DOD is defining an "open" standard for DAMA in SHF and commercial
satellite bands. The government owns and operates the Defense Satellite
Communication System constellation at SHF. Bandwidth at SHF is much greater than
at UHF -- over 200 MHz per satellite compared to less than 2 MHz at UHF. Still,
SHF capacity is insufficient and could be improved via DAMA. More effective SHF
use should reduce the government's monthly lease on commercial satellites used
for overflow. The potential market for SHF DAMA capable terminals may be as
large as that for UHF DAMA terminals.

Extending DAMA to commercial satellites vastly increases the bandwidth
available for government users. Increased bandwidth should support many more
terminals, increasing the potential DAMA user equipment market.

In 1994, ViaSat was awarded a $2.0 million contract by the U.S. Air Force
for prototype demonstration of a draft SHF DAMA standard. This contract is still
underway. In February 1996, the Company delivered and installed equipment which
performs many, but not all, of the protocols in the draft. The DOD has not yet

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designated a final version of SHF DAMA, nor has the DOD yet issued a mandate for
DAMA in SHF terminals.

The government tri-band DAMA market is very immature. This market will
likely not grow substantially until the DOD adopts a final standard and mandates
its use. However, there can be no assurance that the Company's products will be
procured by the government or prime contractors, even if a final standard
similar to the draft version is adopted. The Company is working to position its
SHF DAMA products through participation in government-industry standards working
groups and by providing proof-of-concept equipment through an existing SHF DAMA
contract with the U.S. Air Force. ViaSat also has been working with terminal
manufacturers to help ensure that its DAMA equipment integrates easily into
their products. Finally, the Company is working to maintain a prudent level of
commonality between the government and commercial DAMA modem platforms. The
benefit of commonality is that the larger commercial market offers economies of
scale that reduce manufacturing costs for the smaller government market. There
is a potential disadvantage if unique government product requirements increase
the cost of commercial products. The Company considers issues arising from this
trade-off on a case-by-case basis.

Government Products

ViaSat's DAMA products for the government market include:

- EMUT (ENHANCED MANPACK UHF TERMINAL) is a battery-operated UHF
satellite radio which Hughes Defense Communications builds for the
U.S. Army. ViaSat provides a DAMA modem to Hughes under subcontract.
EMUT is used to send encrypted voice, electronic mail, fax or other
data via satellite. The DAMA modem allows the operator to
automatically request a portion of a satellite channel to a selected
destination whenever the operator asks to send a message or make a
call. The EMUT radio, combined with a portable satellite antenna, can
be used to make a secure voice or data call almost anywhere in the
world.

- INCS (INITIAL NETWORK CONTROL SYSTEM) is the DAMA network management
system for the U.S. Air Force. There are four sites worldwide (Guam,
Hawaii, Naples and Virginia) that manage automatic DAMA access to 5
kHz band with UHF satellite channels. The network control computer
automatically allocates satellite resources to subscriber terminals
(such as EMUT) whenever a subscriber requests a voice or data service.
The INCS also keeps track of which satellite terminals are active, how
much capacity is used and how much is available. ViaSat designs,
installs and supports the whole system at each site.

- VM-200 (ALSO CALLED MD-1324) is ViaSat's stand-alone UHF DAMA modem
product. The modem can be used with many UHF satellite radios having
an industry standard 70 MHz interface. The VM-200 enables a satellite
radio to connect to a DAMA network. VM-200 modems also are used in the
INCS to communicate with subscribers. The modems connect to external
voice coders, computers or encryption equipment and provide network
access for those devices.

ViaSat's other government wireless networking products include:

- JTIDS (JOINT TACTICAL INFORMATION DISTRIBUTION SYSTEM) is an anti-jam
radio and message protocol standard for communicating real-time data
among aircraft and ground units. It connects to sensors (like radar),
computers, and targeting systems and provides information used for
navigation, target identification, tracking and fire control. JTIDS is
currently used as the wireless communication system for "digital
battlefields." It allows individual fighter planes to obtain a broad
view of the battlefield that is synthesized based on many different
views from many different participants.

- CES/JCS (COMMUNICATION ENVIRONMENT SIMULATOR/JOINT COMMUNICATION
SIMULATOR) is used to simulate a realistic radio environment which can
be used to test how well surveillance or other radio systems work in
the presence of various and changing signals. It can simulate friendly
military signals, neutral signals, commercial signals and enemy
signals. The government uses the

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simulated total environment to verify that a system under test can
correctly analyze specific target signals within a complicated and
cluttered composite signal.

- EIP (EMBEDDABLE INFOSEC PRODUCT) is a plug-in module that encrypts
classified information so that it can be broadcast over wireless
systems (terrestrial or satellite) or sent over unclassified
wirelines. EIP is unique because it can work for packet data systems
instead of on circuits. For instance, EIP can encrypt information for
the Internet (or government equivalents). EIP also can separate the
addressing and routing information from a packet and allow such
information to remain unencrypted so that the network can correctly
route the packet to its destination.

- ADC (ADVANCED DATA CONTROLLER) is a packet processing system which
provides error-free data transmission over noisy channels. ADC works
for terrestrial and satellite communications wireless lines.

Government Customers

The Company's major customers in the government DAMA market include:

- Hughes Defense Communications is the customer for the EMUT DAMA modem.
Approximately 26.5% of the Company's revenues in the first six months
of fiscal 1997 were derived from this contract. Hughes is also a
customer for the Tomahawk Baseline Improvement Program which includes
adding a UHF DAMA satellite link to Tomahawk cruise missiles.

- The U.S. Air Force Electronics System Center ("ESC") is the customer
for the 5 kHz UHF DAMA Global Initial Network Control System. ESC also
procures stand-alone DAMA modems and Control/Indicators for various
Air Force user agencies.

- Lockheed Martin is the customer for the VM-200 under the
Communications Improvement Program.

- Lockheed Martin is the customer for the airborne DAMA-capable UHF
satellite communications antenna combiner.

- The U.S. Air Force Rome Labs has entered into a contract with the
Company for SHF and tri-band DAMA development and production.

- The Company also has entered into a number of smaller contracts with
the DOD for UHF DAMA and ADC satellite equipment.

The Company's major government customers for other wireless networking
products include:

- Lockheed Martin, the U.S. Air Force and Logicon Tactical Systems
Division are the customers for JTIDS.

- The U.S. Navy and U.S. Air Force are the customers for CES/JCS.

- The U.S. Navy is the customer for EIP.

COMMERCIAL MARKETS, PRODUCTS AND CUSTOMERS

Commercial Markets

DAMA technology is increasingly being used in emerging commercial
telecommunications markets. In contrast to "pre-assigned" or "hub and spoke"
satellite networks, DAMA is well suited to primary "circuit-oriented"
telecommunication because it routes connections in real-time on a call-by-call
basis from any subscriber to any other subscriber with only one satellite hop.
See "-- Industry Background" and "-- Technology." DAMA commercial markets can be
segmented as follows:

- TURN-KEY PRIVATE NETWORK EQUIPMENT SALES for corporations and
government agencies in developing nations. These customers require
voice and/or data services. Users manage their own networks and/or
contract for management services. They lease satellite capacity in
bulk. DAMA

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equipment is selected based primarily on purchase and operating costs
for specific needs. Customers typically need to operate ten or more
sites for a turn-key private network to be economical.

- "SHARED HUB" PRIVATE NETWORK SERVICE PROVIDERS. Customers with small
networks may use a satellite service provider. The provider purchases
a DAMA network and obtains transponder capacity at wholesale rates.
The provider manages small "virtual" nets for its customers. Customers
buy capacity from the provider at retail daily, hourly or minute
rates. Service providers have different priorities than turn-key
operators. Breadth and depth of service offerings are more important
to providers since they must attract a broad base of customers. DAMA
terminals must support a range of telephone and data equipment.
Providers generally prefer flexible user terminal configurations to
meet varying customer needs. They profit from the spread between
wholesale transponder lease costs and retail minute prices, so DAMA
performance is important. Efficiency advantages (measured, for
example, by voice circuits per unit bandwidth) can offset a higher
initial terminal purchase price over the term of a service contract.

- PUBLIC NETWORK CARRIER SERVICE PROVIDERS. Many telecommunications
carriers use satellite links as part of their long distance networks.
However, the satellite segment usually consists of a pre-planned link
establishing a particular geographic connection at a fixed capacity. A
satellite DAMA network can reduce costs for independent carriers by
bypassing transit switching charges through a telecommunications hub
city. Satellite DAMA can serve as either a primary link or as a
back-up when terrestrial links are congested. DAMA satellite
technology provides an economical secondary connection because the
satellite pool of trunk lines can be quickly applied to any of the
primary terrestrial routes. The DAMA network's ability to reach many
different destinations offers a competitive advantage to a DAMA
operator whose business is selling wholesale minutes of long distance
service to national or regional carriers.

- PUBLIC NETWORK "LOCAL LOOP" SUBSCRIBER SERVICE PROVIDERS. Subscriber
services differ from the carrier services in that there is a local
loop interface between the DAMA satellite switch and a subscriber
telephone. This allows a subscriber with a small VSAT terminal to
connect directly into the public switched telephone network by using a
single dial-tone to call to other satellite subscribers or to
terrestrial phones through national (and/or international) switches.
While the Company believes the local loop subscriber service has, by
far, the greatest potential market volume for equipment manufacturers
and also represents the greatest opportunity for service providers,
there are numerous technical, regulatory and business management
hurdles to implementing this service.

Commercial Products

STARWIRE(TM) is a satellite networking system consisting of two major
elements, a network control system and a subscriber terminal. The network
control system sends and receives messages over the satellite, while the
subscriber terminal switches all user interface ports (voice and data)
individually and connects them call-by-call to an available satellite modem.
StarWire(TM) provides toll-quality voice circuits on a demand basis, efficiently
sharing satellite resources and thereby reducing costs to the end-user and the
network service provider.

StarWire(TM) products include:

- AURORA TERMINAL is a ten slot rack mountable chassis configured with
one VMM-101 and one TIM-201 (described below). The terminal is
expandable to six user traffic channels by inserting additional VMM
modems and TIM modules. Expansion beyond six channels is possible by
using additional Aurora chassis with VMM modems and TIM modules
installed.

- VMM-101 is a DAMA modem module designed for the Aurora. The VMM-101 is
a single modem used for both user-data transmission and order-wire
control channels.

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- TIM-201 is a dual channel voice encoder/decoder module designed for
the Aurora. The TIM-201 has a fax modem on board, along with an
integrated echo canceller.

- TMC-101 is a terminal monitor and control card designed for the
Aurora. The "EIP" version has an integrated LAN Ethernet port and
supports multiple daughter-cards for data communications and
additional external equipment control support.

- STARWIRE(TM) NETWORK CONTROL TERMINAL (NCT) is a ten slot rack
mountable Aurora chassis with one Network Control Computer (NCC)
interface card and two VMM-101 modems (operating as DAMA system
control channel modems).

- STARWIRE(TM) DAMA NETWORK CONTROL SOFTWARE (NCS) provides the
real-time network control and monitoring functions of the StarWire(TM)
DAMA networking system. The NCS software acts as a switch to route
calls through the network. In addition, the StarWire(TM) NCS monitors
all aspects of system operation as well as collecting historical
information about calls and maintaining detailed call records for
billing purposes.

- STARWIRE(TM) NETWORK CONTROL COMPUTER (NCC) is computing and
networking equipment designed to support the operation of the NCS
software. The non-redundant configuration (NCC-100) provides for one
operator workstation/server, Ethernet interface, Windows NT(TM)
operating system and back-up media. The redundant configuration
(NCC-200) provides two operator workstations/servers, Ethernet adapter
cards, Windows NT(TM) operating system and back-up media.

- EXTERNAL DEVICE INTERFACE DRIVER (EDID) supports third party modem and
RF terminal equipment.

Commercial Customers

The Company is in the early stages of establishing sales for its
StarWire(TM) commercial DAMA product. Activities to date have primarily focused
on establishing distribution agreements with "in-country" service providers,
distributors and original equipment manufacturers ("OEMs"). The Company also has
delivered several test versions of the StarWire(TM) product for customer
evaluation and demonstration purposes. To date, the Company has received
purchase orders from its commercial customers to purchase approximately $3.4
million, and commitments to purchase an additional $1.3 million, of its
products. The Company's major customers in the commercial DAMA market include:

- AT&T TRIDOM -- The Company believes AT&T Tridom has the third largest
VSAT revenues (counting equipment and services) in the United States.
AT&T Tridom selected ViaSat as the private label manufacturer of an
AT&T Tridom "Clearlink"-labeled DAMA VSAT product through competitive
bids. AT&T Tridom has taken delivery of two test systems, one of which
is installed at a customer site in Indonesia.

- HCL COMNET -- HCL Comnet, located in India, operates the largest
single VSAT network in India for the national stock exchange. HCL
Comnet selected ViaSat's StarWire(TM) system for HCL Comnet's DAMA
private network products and services. ViaSat's contract with HCL
Comnet provides that HCL Comnet must use ViaSat as its exclusive
supplier of DAMA networks and that ViaSat may not supply DAMA networks
to any other India-based company, although ViaSat may supply such
networks to companies based in other areas which provide VSAT services
in India. HCL Comnet has placed an order for initial production
systems.

- HUTCHISON TELECOMMUNICATIONS -- ViaSat and Hutchison
Telecommunications have recently entered into a contract for
intranational and international carrier satellite telephony equipment.
The contact also provides for advanced digital data capabilities for
public and private networks. The contract was awarded after
competition from many other DAMA vendors. Under the terms of the
contract, Hutchison Telecommunications has the right to terminate the
contract and, under certain circumstances, receive liquidated damages
from the Company of up to approximately $275,000, as well as other
damages. See "Risk Factors -- Development Contracts."

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- ViaSat also has executed distribution agreements and purchase
contracts with companies operating VSAT networks in Mexico, the
Caribbean, South America and other regions.

RESEARCH AND DEVELOPMENT

The Company believes that its future success depends on its ability to
adapt to the rapidly changing satellite communications and related real-time
signal processing and networking software environment, and to continue to meet
its customers' needs. Therefore, the continued timely development and
introduction of new products is essential in maintaining its competitive
position. The Company develops most of its products in-house and currently has a
research and development staff which includes over 150 engineers. A significant
portion of the Company's research and development efforts in the defense
industry have generally been conducted in direct response to the specific
requirements of a customer's order and, accordingly, such amounts are included
in the cost of sales when incurred and the related funding (which includes a
profit component) is included in net revenues at such time. Revenues for funded
research and development during the fiscal years ended March 31, 1994, 1995 and
1996 and the six months ended September 30, 1996 were approximately $9.7
million, $20.7 million, $19.5 million and $11.6 million, respectively. In
addition, the Company invested $134,000, $788,000 and $2.8 million,
respectively, during the fiscal years ended March 31, 1994, 1995 and 1996 on
independent research and development, which is not directly funded by a third
party. Funded research and development contains a profit component and is
therefore not directly comparable to independent research and development. As a
government contractor, the Company also is able to recover a portion of its
independent research and development expenses, consisting primarily of salaries
and other personnel-related expenses, supplies and prototype materials related
to research and development programs, pursuant to its government contracts.

The Company has benefitted and continues to benefit from the SBIR program,
through which the government provides research and development funding for
companies with fewer than 500 employees. While the Company has already harvested
significant benefits from the SBIR program throughout the initial developmental
stages of its core technology base, the Company believes that its business,
financial condition and results of operations would not be materially adversely
affected if the Company were to lose its SBIR funding status. The Company plans
to leverage from this technology base to further develop products for commercial
applications.

MANUFACTURING

The Company's manufacturing objective is to produce products that conform
to its specifications at the lowest possible manufacturing cost. The Company is
engaged in an effort to increase the standardization of its manufacturing
process in order to permit it to more fully utilize contract manufacturers. As
part of its program to reduce the cost of its manufacturing and to support an
increase in the volume of orders, the Company primarily utilizes contract
manufacturers in its manufacturing process. The Company conducts extensive
testing and quality control procedures for all products before they are
delivered to customers.

The Company also relies on outside vendors to manufacture certain
components and subassemblies used in the production of the Company's products.
Certain components, subassemblies and services necessary for the manufacture of
the Company's products are obtained from a sole supplier or a limited group of
suppliers. In particular, Texas Instruments is a sole source supplier of digital
signal processing chips, which are critical components used by the Company in
substantially all of its products. The Company intends to reserve its limited
internal manufacturing capacity for new products and products manufactured in
accordance with a customer's custom specifications or expected delivery
schedule. Therefore, the Company's internal manufacturing capability for
standard products has been, and is expected to continue to be, very limited, and
the Company intends to rely on contract manufacturers for large scale
manufacturing. There can be no assurance that the Company's internal
manufacturing capacity and that of its contract manufacturers and suppliers will
be sufficient to fulfill the Company's orders in a timely manner. Failure to
manufacture, assemble and deliver products and meet customer demands on a timely
and cost effective basis could damage relationships with customers and have a
material adverse effect on the Company's business, financial condition and
operating results.

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SALES AND MARKETING

The Company markets its products to the DOD and to commercial customers
worldwide primarily through the Company's internal sales and marketing staff of
nine people. After the Company has identified key potential customers in its
market segments, the Company makes sales calls with its sales, management and
engineering personnel. Many of the companies entering the wireless
communications markets possess expertise in digital processing and wired systems
but relatively little experience in DAMA wireless transmission. In order to
promote widespread acceptance of its products and provide customers with support
for their wireless transmission needs, the Company's sales and engineering teams
work closely with its customers to develop tailored solutions to their wireless
transmission needs. The Company believes that its customer engineering support
provides it with a key competitive advantage.

During the fiscal year ended March 31, 1996 and the six months ended
September 30, 1996, respectively, ViaSat sold products to approximately 42 and
26 customers of which DOD contracts accounted for approximately 97.5% and 99.1%
of total revenues.

BACKLOG

At September 30, 1996, the Company had firm backlog of $43.5 million, of
which $40.1 million was funded, not including options of $26.9 million. Of the
$43.5 million in firm backlog, approximately $24.0 million is expected to be
delivered in the fiscal year ending March 31, 1997, $17.4 million is expected to
be delivered in the fiscal year ending March 31, 1998 and the balance is
expected to be delivered in the fiscal year ending March 31, 1999. The Company
had firm backlog of $28.7 million, not including options of $28.0 million, at
March 31, 1996, compared to firm backlog of $31.7 million, not including options
of $27.3 million, at March 31, 1995. The Company includes in its backlog only
those orders for which it has accepted purchase orders. However, backlog is not
necessarily indicative of future sales. A majority of the Company's backlog
scheduled for delivery can be terminated at the convenience of the government
since orders are often made substantially in advance of delivery, and the
Company's contracts typically provide that orders may be terminated with limited
or no penalties. In addition, purchase orders may set forth product
specifications that would require the Company to complete additional product
development. A failure to develop products meeting such specifications could
lead to a termination of the related purchase order.

The backlog amounts as presented are comprised of funded and unfunded
components. Funded backlog represents the sum of contract amounts for which
funds have been specifically obligated by customers to contracts. Unfunded
backlog represents future contract or option amounts that customers may obligate
over the specified contract performance periods. The Company's customers
allocate funds for expenditures on long-term contracts on a periodic basis. The
Company is committed to produce products under its contracts to the extent funds
are provided. The funded component of the Company's backlog at September 30,
1996 was approximately $40.1 million, and the funded components of the Company's
backlog at March 31, 1995 and 1996 were $29.6 million and $26.3 million,
respectively. The ability of the Company to realize revenues from government
contracts in backlog is dependent upon adequate funding for such contracts.
Although funding of its government contracts is not within the Company's
control, the Company's experience indicates that actual contract fundings have
ultimately been approximately equal to the aggregate amounts of the contracts.

GOVERNMENT CONTRACTS

A substantial portion of the Company's revenues are derived from contracts
and subcontracts with the DOD and other federal government agencies. Many of the
Company's contracts are competitively bid and awarded on the basis of technical
merit, personnel qualifications, experience and price. The Company also receives
some contract awards involving special technical capabilities on a negotiated,
noncompetitive basis due to the Company's unique technical capabilities in
special areas. Future revenues and income of the Company could be materially
affected by changes in procurement policies, a reduction in expenditures for the
products and services provided by the Company, and other risks generally
associated with federal government contracts. See "Risk Factors -- Dependence on
Defense Market" and "-- Government Regulations."

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The Company provides products under federal government contracts that
usually require performance over a period of one to five years. Long-term
contracts may be conditioned upon continued availability of Congressional
appropriations. Variances between anticipated budget and Congressional
appropriations may result in a delay, reduction or termination of such
contracts. Contractors often experience revenue uncertainties with respect to
available contract funding during the first quarter of the government's fiscal
year beginning October 1, until differences between budget requests and
appropriations are resolved.

The Company's federal government contracts are performed under
cost-reimbursement contracts, time-and-materials contracts and fixed-price
contracts. Cost-reimbursement contracts provide for reimbursement of costs (to
the extent allowable, allocable and reasonable under Federal Acquisition
Regulations) and for payment of a fee. The fee may be either fixed by the
contract (cost-plus-fixed fee) or variable, based upon cost control, quality,
delivery and the customer's subjective evaluation of the work (cost-plus-award
fee). Under time-and-materials contracts, the Company receives a fixed amount by
labor category for services performed and is reimbursed (without fee) for the
cost of materials purchased to perform the contract. Under a fixed-price
contract, the Company agrees to perform certain work for a fixed price and,
accordingly, realizes the benefit or detriment to the extent that the actual
cost of performing the work differs from the contract price. Contract revenues
for the fiscal year ended March 31, 1996 and the six months ended September 30,
1996, respectively, were approximately 38.7% and 37.2% from cost-reimbursement
contracts, approximately 5.0% and 5.9% from time-and-materials contracts and
approximately 56.3% and 56.9% from fixed-price contracts. See "Risk
Factors -- Contract Profit Exposure."

The Company's allowable federal government contract costs and fees are
subject to audit by the Defense Contract Audit Agency. Audits may result in
non-reimbursement of some contract costs and fees. While the government reserves
the right to conduct further audits, audits conducted for periods through fiscal
1994 have resulted in no material cost recovery disallowances for the Company.

The Company's federal government contracts may be terminated, in whole or
in part, at the convenience of the government. If a termination for convenience
occurs, the government generally is obligated to pay the cost incurred by the
Company under the contract plus a pro rata fee based upon the work completed.
When the Company participates as a subcontractor, the Company is at risk if the
prime contractor does not perform its contract. Similarly, when the Company as a
prime contractor employs subcontractors, the Company is at risk if a
subcontractor does not perform its subcontract.

Some of the Company's federal government contracts contain options which
are exercisable at the discretion of the customer. An option may extend the
period of performance for one or more years for additional consideration on
terms and conditions similar to those contained in the original contract. An
option may also increase the level of effort and assign new tasks to the
Company. In the Company's experience, options are usually exercised.

The Company's eligibility to perform under its federal government contracts
requires the Company to maintain adequate security measures. The Company has
implemented security procedures which it believes are adequate to satisfy the
requirements of its federal government contracts.

GOVERNMENT REGULATIONS

Certain of the Company's products are incorporated into wireless
telecommunications systems that are subject to regulation domestically by the
Federal Communications Commission and internationally by other government
agencies. Although the equipment operators and not the Company are responsible
for compliance with such regulations, regulatory changes, including changes in
the allocation of available frequency spectrum and in the military standards
which define the current networking environment, could materially adversely
affect the Company's operations by restricting development efforts by the
Company's customers, making current products obsolete or increasing the
opportunity for additional competition. Changes in, or the failure by the
Company to manufacture products in compliance with, applicable domestic and
international regulations could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
increasing demand for wireless telecommunications has exerted pressure on
regulatory bodies worldwide to adopt new standards for such products, generally
following extensive

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investigation and deliberation over competing technologies. The delays inherent
in this governmental approval process have in the past caused and may in the
future cause the cancellation, postponement or rescheduling of the installation
of communication systems by the Company's customers, which in turn may have a
material adverse effect on the sale of products by the Company to such
customers.

The Company is also subject to a variety of local, state and federal
governmental regulations relating to the storage, discharge, handling, emission,
generation, manufacture and disposal of toxic or other hazardous substances used
to manufacture the Company's products. The failure to comply with current or
future regulations could result in the imposition of substantial fines on the
Company, suspension of production, alteration of its manufacturing processes or
cessation of operations. To date, these regulations have not had a material
effect on the Company, as the Company has neither incurred significant costs to
maintain compliance nor to remedy past noncompliance.

The Company believes that it operates its business in material compliance
with applicable government regulations. The Company is not aware of any pending
legislation which if enacted could have a material adverse effect on the
Company's business, financial condition and results of operations.

COMPETITION

The markets for the Company's products and services are extremely
competitive, and the Company expects that competition will increase in such
markets. See "Risk Factors -- Competition." The Company faces intense
competition in both government and commercial wireless networking markets.

Government DAMA Competition. Competition in the government DAMA market
consists primarily of other companies offering DAMA capable modem, radio or
network control equipment that is compatible with the open MIL-STD protocols.
The government DAMA competitors are significantly larger companies than ViaSat
and include Titan Corporation, Rockwell International, Raytheon Corporation and
GEC (UK). The Company believes that it is well-positioned among these
competitors because of its significant backlog of DAMA modem orders, its market
lead time with respect to 5 kHz DAMA product certification and its participation
in both the network control and subscriber terminal markets.

Government Non-DAMA Competition. There is also intense competition in
other wireless networking markets. The JTIDS market, in particular, is dominated
by two very large competitors (Rockwell and GEC-Marconi). The Company believes
its strategic alliance with Lockheed Martin provides the Company with a relative
advantage because Lockheed Martin is the single largest government contractor
and is also a large potential customer, as it manufactures and upgrades many
aircraft that are candidates for JTIDS radios.

The Company's simulation and test equipment and information security
products represent relatively new technologies in markets that are still small.
Most of the Company's competition in these markets stems from alternative
technologies that may or may not be applicable to any particular customer.

Commercial DAMA Competition. There is intense competition in the
commercial DAMA market from companies that have strong positions in the TDM/TDMA
VSAT business, as well as from other companies that seek to enter the VSAT
market using DAMA technology. Most of the leading TDM/TDMA VSAT companies are
offering DAMA products, including Hughes Network Systems, an affiliate of Hughes
Defense Communications (see "Risk Factors -- Dependence on Defense Market"),
Scientific Atlanta Inc., Gilat Satellite Networks Ltd., STM Wireless Inc. and
NEC. In addition, there are also other types of competing DAMA technologies
being developed.

AT&T Tridom, which is one of the largest VSAT equipment and service
providers and which offers TDM/TDMA products, has entered into a strategic
alliance with the Company to sell the Company's products under an OEM agreement.
The Company believes that this may allow it to compete for customers seeking
hybrid TDM/TDMA and DAMA VSAT solutions.

In different situations, DAMA products may be evaluated in comparison with
either TDM/TDMA technology, DAMA technology from other companies, dedicated SCPC
technology, mobile satellite technology or possibly terrestrial wireless
solutions. The Company believes that it has a good understanding of those

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situations where DAMA systems in general, and its technology in particular,
offer the best overall value to its customers, and tends to focus its marketing
and selling efforts on those applications. DAMA technology is most attractive
for customers with telephone, fax or other circuit-oriented applications. DAMA
technology also allows networks to achieve much higher total capacity, with
better voice quality than TDM/TDMA networks.

The Company seeks to establish strategic alliances with satellite service
providers which would most benefit from its particular technological advantages.
The Company has established such relationships with a few key companies,
including HCL Comnet in India. The Company believes that its products offer the
lowest total cost of ownership for service providers considering the flexibility
of its equipment, its transponder capacity advantages and the breadth of its
service offerings.

INTELLECTUAL PROPERTY

The Company relies on a combination of trade secrets, copyrights,
trademarks, service marks and contractual rights to protect its intellectual
property. The Company attempts to protect its trade secrets and other
proprietary information through agreements with its customers, suppliers,
employees and consultants, and through other security measures. Although the
Company intends to protect its rights vigorously, there can be no assurance that
these measures will be successful. In addition, the laws of certain countries in
which the Company's products are or may be developed, manufactured or sold may
not protect the Company's products and intellectual property rights to the same
extent as the laws of the United States.

While the Company's ability to compete may be affected by its ability to
protect its intellectual property, the Company believes that, because of the
rapid pace of technological change in the wireless personal communications
industry, its technical expertise and ability to introduce new products on a
timely basis will be more important in maintaining its competitive position than
protection of its intellectual property and that patent, trade secret and
copyright protections are important but must be supported by other factors such
as the expanding knowledge, ability and experience of the Company's personnel,
new product introductions and frequent product enhancements. Although the
Company continues to implement protective measures and intends to defend
vigorously its intellectual property rights, there can be no assurance that
these measures will be successful. See "Risk Factors -- Limited Protection of
the Company's Intellectual Property."

There can be no assurance that third parties will not assert claims against
the Company with respect to existing and future products. In the event of
litigation to determine the validity of any third party's claims, such
litigation could result in significant expense to the Company and divert the
efforts of the Company's technical and management personnel, whether or not such
litigation is determined in favor of the Company. The wireless communications
industry has been subject to frequent litigation regarding patent and other
intellectual property rights. Leading companies and organizations in the
industry have numerous patents that protect their intellectual property rights
in these areas. In the event of an adverse result of any such litigation, the
Company could be required to expend significant resources to develop
non-infringing technology or to obtain licenses to the technology which is the
subject of the litigation. There can be no assurance that the Company would be
successful in such development or that any such license would be available on
commercially reasonable terms.

EMPLOYEES

As of September 30, 1996, the Company had 257 employees (15 of which were
temporary employees), including over 150 in research and development, nine in
marketing and sales, 40 in production, and 53 in corporate, administration and
production coordination. The Company believes that its future prospects will
depend, in part, on its ability to continue to attract and retain skilled
engineering, marketing and management personnel, who are in great demand. In
particular, there is a limited supply of highly qualified engineers with
appropriate experience. See "Risk Factors -- Dependence on Key Personnel." Each
of the Company's employees is required to sign an Invention and Confidential
Disclosure Agreement upon joining the Company. Under such agreement, each
employee agrees that any inventions developed by such employee during the term
of employment are the exclusive property of the Company and that such employee
will not disclose or

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use in any way information related to the Company's business or products, either
during the term of such employee's employment or at any time thereafter. The
Company currently employs over 150 engineers, including 75 engineers who have
masters degrees and seven engineers who have doctorate degrees. None of the
Company's employees are covered by a collective bargaining agreement and the
Company has never experienced any strike or work stoppage. The Company believes
that its relations with its employees are good.

PROPERTIES

The Company's headquarters are located in an approximately 37,000 square
foot leased facility in Carlsbad, California. This facility houses the Company's
management, marketing and sales personnel. The lease for this facility
terminates in November 1998. The Company also leases another facility in
Carlsbad, California containing approximately 49,000 square feet for research
and development, application engineering and manufacturing coordination
activities. This lease terminates in August 1999 with options to renew for two
additional periods of two years each. In addition, the Company leases two
smaller sales facilities aggregating approximately 2,600 square feet located in
Boston, Massachusetts, and Melbourne, Florida. The Boston lease terminates in
May 1998 with an option to renew for one additional period of two years. The
Melbourne lease terminates in March 1997 with no renewal options. Annual leasing
costs of the Company totaled $387,000, $493,000 and $608,000 for the fiscal
years ended March 31, 1994, 1995 and 1996, respectively. The Company believes
that its existing facilities are adequate to meet its current needs and that
suitable additional or alternative space will be available on commercially
reasonable terms as needed.

LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings other than various
claims and lawsuits arising in the ordinary course of its business which, in the
opinion of the Company's management, are not individually or in the aggregate
material to its business.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers, directors and other principal officers of the
Company, and their ages as of September 30, 1996, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- ------------------------------------------------------
<S> <C> <C>
Mark D. Dankberg........ 41 Chairman of the Board, President and Chief Executive
Officer
Gregory D. Monahan...... 51 Vice President, Chief Financial Officer and General
Counsel
Thomas E. Carter........ 42 Vice President -- Engineering
Andrew M. Paul.......... 41 Vice President -- Commercial Operations
James P. Collins........ 53 Vice President -- Business Development
Mark J. Miller.......... 37 Vice President, Chief Technical Officer and Secretary
Steven R. Hart.......... 43 Vice President and Chief Technical Officer
Robert W. Johnson....... 47 Director
Jeffrey M. Nash......... 49 Director
B. Allen Lay............ 62 Director
</TABLE>

Mr. Dankberg was a founder of the Company and has served as Chairman of the
Board, President and Chief Executive Officer of the Company since its inception
in May 1986. Prior to joining the Company, he was Assistant Vice President of
M/A-COM Linkabit, a manufacturer of satellite telecommunications equipment, from
1979 to 1986 and Communications Engineer for Rockwell International from 1977 to
1979. Mr. Dankberg holds B.S.E.E. and M.E.E. degrees from Rice University.

Mr. Monahan has served as Vice President, Chief Financial Officer and
General Counsel of the Company since December 1988. Prior to joining the
Company, Mr. Monahan was Assistant Vice President of M/A-COM Linkabit from 1978
to 1988. Mr. Monahan holds a J.D. degree from the University of San Diego and
B.S.M.E. and M.B.A. degrees from the University of California, Berkeley.

Dr. Carter has served as Vice President -- Engineering of the Company since
November 1990. Prior to joining the Company, Dr. Carter served in several
positions including Business Area Manager, Program Manager and System
Engineering Department Manager in the Military Electronics and Avionics Division
of TRW Inc. Dr. Carter holds a Ph.D. in Electrical Engineering from the
University of Southern California and B.S.E.E. and M.S.E.E. degrees from Rice
University.

Mr. Paul has served as Vice President -- Commercial Operations of the
Company since March 1993. Prior to joining the Company, Mr. Paul served as Vice
President and General Manager of the Western Region of Evernet Systems, Inc., a
computer network integrator, from 1992 to 1993. Previously, Mr. Paul was Vice
President of Sales at ComStream Corp. from 1989 to 1992. Mr. Paul holds a B.A.
degree from Stanford University.

Mr. Collins has served as Vice President -- Business Development of the
Company since December 1988. Prior to joining the Company, Mr. Collins was
Assistant Vice President of M/A-COM Linkabit from 1982 to 1988. Mr. Collins was
a Director of Marketing at General Dynamics from 1976 to 1982 and prior to that
served on active duty in the U.S. Army for ten years. Mr. Collins currently
serves in the U.S. Army Reserve and was recently selected for assignment as a
Brigadier General. He holds a B.A. degree from Hofstra University and an M.S.
degree in Geodetic Science from Ohio State University.

Mr. Miller was a founder of the Company and has served as Vice President
and Chief Technical Officer of the Company since 1993 and as Engineering Manager
and Secretary since 1986. Prior to joining the Company, Mr. Miller was a Staff
Engineer at M/A-COM Linkabit from 1983 to 1986. Mr. Miller holds a B.S.E.E.
degree from the University of California, San Diego and a M.S.E.E. degree from
the University of California, Los Angeles.

Mr. Hart was a founder of the Company and has served as Vice President and
Chief Technical Officer since 1993 and as Engineering Manager since 1986. Prior
to joining the Company, Mr. Hart was a Staff Engineer and Manager at M/A-COM
Linkabit from 1982 to 1986. Mr. Hart holds a B.S. in Mathematics

44
<PAGE> 45

from the University of Nevada, Las Vegas and a M.A. in Mathematics from the
University of California, San Diego.

Mr. Johnson has been a director of the Company since 1986. Mr. Johnson has
been self-employed as a private investor from 1988 to the present. From 1983 to
1988, Mr. Johnson was a Principal of Southern California Ventures ("SCV"). Mr.
Johnson currently is a director of STAC Inc., a publicly-held company which
manufactures semiconductors and software for data storage and communications,
Proxima Corporation, a publicly-held company which manufactures computer display
equipment, and TransTech Information Management Systems, Inc., a privately-held
company which manufactures software for the towing and recovery industry.

Dr. Nash has been a director of the Company since 1987. Since August 1995,
he has been President, Chief Executive Officer and a director of TransTech
Information Management Systems, Inc., a privately-held company which
manufactures software for the towing and recovery industry. From 1994 to the
present, Dr. Nash has been Chairman of the Board of Digital Perceptions, Inc.,
and, from 1989 to 1994, was the Chief Executive Officer and President of Visqus
as well as Conner Technology, Inc., both subsidiaries of Conner Peripherals,
Inc. Dr. Nash is currently a director of REMEC, Inc., a publicly-held company
which manufactures microwave multi-function modules, Proxima Corporation, a
publicly-held company which manufactures computer display equipment, and Esscor,
Inc., a privately-held electrical utility simulation company.

Mr. Lay has been a director of the Company since 1996. Since 1983, he has
been a General Partner of SCV. Mr. Lay is Chief Executive Officer and a director
of Vestro Natural Foods Inc., a publicly-held natural foods marketing company.
Mr. Lay is also a director of Pair Gain Technology, Inc., a publicly-held
telecommunications company, Physical Optics Company, a privately-held optical
systems and subsystems company, Kofax Imaging Systems, a privately-held document
imaging systems company, and Medclone Inc., a privately-held biotech company.

The Company intends to recruit an additional outside director with
experience in industries complementary to the Company's business following the
closing of this offering.

COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee. Following the closing of this offering, the Board of
Directors will establish an audit committee (the "Audit Committee"), which will
consist of two or more independent directors. The Audit Committee will be
established to make recommendations concerning the engagement of independent
public accountants, review with the independent public accountants the plans and
results of the audit engagement, approve professional services provided by the
independent public accountants, review the independence of the independent
public accounts, consider the range of audit and non-audit fees and review the
adequacy of the Company's internal accounting controls.

Compensation Committee. Following the closing of this offering, the Board
of Directors will establish a compensation committee (the "Compensation
Committee"), which will consist of two or more non-employee or independent
directors to the extent required by Rule 16b-3 under the Exchange Act, to
determine compensation for the Company's executive officers and awards under the
Company's 1996 Equity Participation Plan and Employee Stock Purchase Plan.

The Board of Directors initially will not have a nominating committee or
any other committee.

COMPENSATION OF DIRECTORS

During the fiscal year ended March 31, 1996, Messrs. Johnson, Nash and Lay
each received options to purchase 3,668 shares of Common Stock at an exercise
price of $1.36 per share. Other than such options, the directors of the Company
received zero compensation from the Company for services rendered as a director
during the fiscal year ended March 31, 1996. The Company expects that, following
the closing of this offering, its independent directors will be paid in a manner
and at a level consistent with industry practice.

45
<PAGE> 46

EXECUTIVE COMPENSATION

The following table sets forth certain information concerning compensation
for the fiscal year ended March 31, 1996 received by the Chief Executive Officer
and the five other most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
FISCAL YEAR NUMBER OF
COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(S) SALARY BONUS OPTIONS COMPENSATION(1)
- --------------------------------------------- --------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
Mark D. Dankberg............................. $165,000 $35,000 14,670 $5,726
Chairman of the Board, President and Chief
Executive Officer
Thomas E. Carter............................. 131,500 10,000 40,343 4,723
Vice President -- Engineering
Gregory D. Monahan........................... 124,000 8,000 14,670 4,703
Vice President, Chief Financial Officer and
General Counsel
Andrew M. Paul............................... 125,938 5,000 8,802 2,274
Vice President -- Commercial Operations
Steven R. Hart............................... 112,500 8,000 3,668 4,716
Vice President and Chief Technical Officer
Mark J. Miller............................... 112,000 8,000 3,668 1,582
Vice President, Chief Technical Officer and
Secretary
</TABLE>

- ---------------
(1) Includes contributions to the Company's 401(k) Plan.

The following table sets forth certain information concerning individual
grants of stock options made by the Company during the fiscal year ended March
31, 1996 to each of the Named Executive Officers.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------
NAME GRANTED FISCAL 1996 PER SHARE DATE 5% 10%
- ------------------------------ ---------- ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Mark D. Dankberg.............. 14,670 12.54% $1.50 6/26/00 $28,078 $35,439
Thomas E. Carter.............. 40,343 34.47 1.36 6/26/00 70,025 88,363
Gregory D. Monahan............ 14,670 12.54 1.36 6/26/00 25,463 32,132
Andrew M. Paul................ 8,802 7.52 1.36 6/26/00 15,278 19,279
Steven R. Hart................ 3,668 3.13 1.50 6/26/00 7,022 8,861
Mark J. Miller................ 3,668 3.13 1.36 6/26/00 6,367 8,034
</TABLE>

- ---------------
(1) These amounts represent assumed rates of appreciation in the price of the
Common Stock during the terms of the options in accordance with rates
specified in applicable federal securities regulations. Actual gains, if
any, on stock option exercises will depend on the future price of the Common
Stock and overall stock market conditions. There is no representation that
the rates of appreciation reflected in this table will be achieved.

46
<PAGE> 47

The following table sets forth certain information concerning exercises of
stock options by the Named Executive Officers during the fiscal year ended March
31, 1996, and the number of options and value of unexercised options held by
each of the Named Executive Officers at March 31, 1996.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT FISCAL
SHARES OPTIONS AT FISCAL YEAR-END YEAR-END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark D. Dankberg............ -- -- -- 14,670 -- --
Thomas E. Carter............ -- -- 37,225 72,800 $34,738 $27,013
Gregory D. Monahan.......... 8,215 $ 5,705 -- 28,093 -- 8,720
Andrew M. Paul.............. -- -- 5,135 18,338 2,800 5,200
Steven R. Hart.............. -- -- -- 3,668 -- --
Mark J. Miller.............. -- -- -- 3,668 -- --
</TABLE>

- ---------------
(1) The dollar values have been calculated by determining the difference between
the fair market value of the securities underlying the options as determined
in good faith by the Board of Directors at the applicable date and the
exercise price of the options. The options were granted on November 8, 1993,
July 20, 1994, October 4, 1994 and June 26, 1995 at exercise prices of
$0.34, $0.48, $0.82 and $1.36, respectively, which equaled the fair market
value of the Common Stock as determined by the Board of Directors on such
dates.

1993 STOCK OPTION PLAN

In 1993, the Company adopted the ViaSat, Inc. 1993 Stock Option Plan (the
"1993 Stock Option Plan") to enable key employees, consultants and non-employee
directors of the Company to acquire a proprietary interest in the Company, and
thus to create in such persons an increased interest in and a greater concern
for the welfare of the Company. The 1993 Stock Option Plan provided for
aggregate option grants of up to 733,500 shares. As of September 30, 1996,
options to purchase an aggregate of 375,509 shares of Common Stock at prices
ranging from $0.34 to $4.50 were outstanding under the 1993 Stock Option Plan.
No additional grants will be made under the 1993 Stock Option Plan after the
consummation of this offering.

1996 EQUITY PARTICIPATION PLAN

In connection with this offering, the Company has adopted the ViaSat, Inc.
1996 Equity Participation Plan (the "1996 Equity Participation Plan") designed
to update and replace the 1993 Stock Option Plan. The 1996 Equity Participation
Plan provides for the grant to executive officers, other key employees,
consultants and non-employee directors of the Company of a broad variety of
stock-based compensation alternatives such as nonqualified stock options,
incentive stock options, restricted stock and performance awards. Grants under
the 1996 Equity Participation Plan may provide participants with rights to
acquire shares of Common Stock.

The 1996 Equity Participation Plan will be administered by the Compensation
Committee, which is authorized to select from among the eligible participants
the individuals to whom options, restricted stock purchase rights and
performance awards are to be granted and to determine the number of shares to be
subject thereto and the terms and conditions thereof. The members of the
Compensation Committee who are not affiliated with the Company will select from
among the eligible participants the individuals to whom nonqualified stock
options are to be granted, except as set forth below, and will determine the
number of shares to be subject thereto and the terms and conditions thereof. The
Compensation Committee is also authorized to adopt, amend and rescind rules
relating to the administration of the 1996 Equity Participation Plan.

Nonqualified stock options will provide for the right to purchase Common
Stock at a specified price which may be less than fair market value on the date
of grant (but not less than par value), and usually will

47
<PAGE> 48

become exercisable in installments after the grant date. Nonqualified stock
options may be granted for any reasonable term.

Incentive stock options will be designed to comply with the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), and will be subject
to restrictions contained in the Code, including exercise prices equal to at
least 100% of fair market value of Common Stock on the grant date and a ten year
restriction on their term, but may be subsequently modified to disqualify them
from treatment as an incentive stock option.

Restricted stock may be sold to participants at various prices (but not
below par value) and made subject to such restrictions as may be determined by
the Compensation Committee. Restricted stock, typically, may be repurchased by
the Company at the original purchase price if the conditions or restrictions are
not met. In general, restricted stock may not be sold, or otherwise transferred
or hypothecated, until restrictions are removed or expire. Purchasers of
restricted stock, unlike recipients of options, will have voting rights and will
receive dividends prior to the time when the restrictions lapse.

Performance awards may be granted by the Compensation Committee on an
individual or group basis. Generally, these awards will be based upon specific
agreements and may be paid in cash or in Common Stock or in a combination of
cash and Common Stock. Performance awards may include "phantom" stock awards
that provide for payments based upon increases in the price of the Company's
Common Stock over a predetermined period. Performance awards also may include
bonuses which may be granted by the Compensation Committee on an individual or
group basis and which may be payable in cash or in Common Stock or in a
combination of cash and Common Stock.

Upon the closing of this offering, the Company estimates that it will issue
to recently-hired executive officers and other key employees of the Company
options to purchase approximately 15,000 shares of Common Stock pursuant to the
1996 Equity Participation Plan.

A maximum of 750,000 shares are reserved for issuance under the 1996 Equity
Participation Plan.

EMPLOYEE STOCK PURCHASE PLAN

In connection with this offering, the Company has adopted the ViaSat, Inc.
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") to assist
employees of the Company in acquiring a stock ownership interest in the Company
and to encourage them to remain in the employment of the Company. The Employee
Stock Purchase Plan is intended to qualify under Section 423 of the Code. A
maximum of 250,000 shares of Common Stock will be reserved for issuance under
the Employee Stock Purchase Plan. The Employee Stock Purchase Plan permits
eligible employees to purchase Common Stock at a discount through payroll
deductions during specified six-month offering periods. No employee may purchase
more than $25,000 worth of stock in any calendar year. The price of shares
purchased under the Employee Stock Purchase Plan
will be equal to 85% of the fair market value of the Common Stock on the first
or last day of the offering period, whichever is lower. The Employee Stock
Purchase Plan will be administered by the Compensation Committee.

401(K) PLAN

The Company adopted a tax-qualified employee savings and retirement plan
(the "401(k) Plan") effective January 1990 covering all employees who have been
employed by the Company for at least 90 days and who are at least 21 years of
age. Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by not less than 1.0% nor more than 15.0% of eligible compensation
and have the amount of such reduction contributed to the 401(k) Plan. The 401(k)
Plan permits, but does not require, additional cash contributions to the 401(k)
Plan by the Company. The trustee under the 401(k) Plan invests the assets of the
401(k) Plan in designated investment options. The 401(k) Plan is intended to
qualify under Section 401 of the Code so that contributions to the 401(k) Plan,
and income earned on plan contributions, are not taxable to employees until
withdrawn from the 401(k) Plan, and so that contributions by the Company are
deductible by the Company when made for income tax purposes.

48
<PAGE> 49

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the fiscal year ended March 31, 1996, each director of the Company,
including Mark D. Dankberg, Chairman, President and Chief Executive Officer of
the Company, participated in all discussions and decisions regarding salaries
and incentive compensation for all employees and consultants of the Company,
except that Mr. Dankberg was excluded from discussions regarding his own salary
and incentive compensation.

Mr. Johnson, individually, and Mr. Lay, through his position as a General
Partner of SCV, had an interest in the Company's sale of Series A Convertible
Preferred Stock and the related transactions described under "Certain
Transactions."

CERTAIN TRANSACTIONS

In June 1986, the Company sold 3,000,000 shares of Series A Convertible
Preferred Stock to SCV and certain of its affiliates, including Robert W.
Johnson, a director of the Company, at a price of $0.10 per share in a private
placement transaction. Each outstanding share of Series A Convertible Stock will
automatically convert into one share of Common Stock upon the closing of this
offering. For a description of the rights, preferences and privileges of the
Series A Convertible Preferred Stock, see Note 5 of Notes to Financial
Statements.

In connection with the sale of the Series A Convertible Preferred Stock in
June 1986, the Company entered into a Shareholders Agreement with SCV and
certain of its affiliates, including Robert W. Johnson, a director of the
Company, providing for the corporate governance of the Company. The Shareholders
Agreement will terminate upon the closing of this offering.

49
<PAGE> 50

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of October 25, 1996, and as adjusted to reflect
the sale of the shares offered by this Prospectus (i) by each of the Company's
directors and each of the Named Executive Officers, (ii) by all directors and
executive officers as a group, (iii) by each person who is known by the Company
to own beneficially more than 5% of the Common Stock, and (iv) by the Selling
Stockholders. Unless otherwise indicated, the address for all stockholders
listed in the table is c/o ViaSat, 2290 Cosmos Court, Carlsbad, California
92009.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO OFFERING(1) NUMBER OF OFFERING(1)
----------------------- SHARES -----------------------
NAME AND ADDRESS NUMBER PERCENT(2) OFFERED NUMBER PERCENT(2)
- --------------------------------------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Southern California Ventures(3)........ 1,995,120 33.92% 455,377 1,539,743 20.44%
406 Amapula Avenue, Suite 205
Torrance, California 90501
Mark D. Dankberg(4).................... 885,335 15.03 29,340 855,995 11.35
Steven R. Hart(5)...................... 661,434 11.24 25,673 635,761 8.44
Mark J. Miller(6)...................... 367,915 6.25 18,338 349,577 4.64
Maureen Miller......................... 293,519 4.99 7,335 286,184 3.80
3042 Spearman Lane
Spring Valley, California 91978
Thomas E. Carter(7).................... 183,925 3.09 9,536 174,389 2.30
Robert W. Johnson(8)................... 183,375 3.12 -- 183,375 2.43
Gregory D. Monahan(9).................. 175,600 2.98 -- 175,600 2.33
Jeffrey M. Nash(10).................... 165,038 2.81 -- 165,038 2.19
James P. Collins....................... 115,893 1.97 4,401 111,492 1.48
Andrew M. Paul(11)..................... 89,634 1.52 -- 89,634 1.19
B. Allen Lay(12)....................... -- -- -- -- --
All directors and executive officers as
a group (9 persons)(13).............. 2,712,256 46.12 82,887 2,629,369 34.91
</TABLE>

- ---------------
(1) Assumes no exercise of the Underwriters' over-allotment option. Except as
indicated in the footnotes to this table, to the Company's knowledge, each
stockholder identified in the table possesses sole voting and investment
power with respect to all shares of Common Stock shown as beneficially
owned by such stockholder.

(2) Applicable percentage of ownership for each stockholder is based on
5,881,503 shares of Common Stock outstanding as of October 25, 1996
(including 2,365,538 shares of Common Stock to be issued upon conversion of
the Preferred Stock), together with applicable options for such
stockholder. Beneficial ownership is determined in accordance with the
rules of the Commission and includes voting and investment power with
respect to the shares. Shares of Common Stock subject to outstanding
options which are currently vested or which vest within 60 days are deemed
outstanding for computing the percentage ownership of the person holding
such options, but are not deemed outstanding for computing the percentage
ownership of any other person.

(3) B. Allen Lay, a director of the Company, is a General Partner of SCV and
may therefore be deemed to own beneficially shares owned by SCV. Mr. Lay
disclaims beneficial ownership of such shares.

(4) Includes options to purchase 5,135 shares of Common Stock exercisable
within 60 days of October 25, 1996. Excludes options to purchase 24,205
shares of Common Stock not exercisable within such 60-day period.

(5) Includes options to purchase 1,284 shares of Common Stock exercisable
within 60 days of October 25, 1996. Excludes options to purchase 6,051
shares of Common Stock not exercisable within such 60-day period.

50
<PAGE> 51

(6) Includes options to purchase 1,284 shares of Common Stock exercisable
within 60 days of October 25, 1996. Excludes options to purchase 6,051
shares of Common Stock not exercisable within such 60-day period.

(7) Includes options to purchase 48,228 shares of Common Stock exercisable
within 60 days of October 25, 1996. Excludes options to purchase 39,059
shares of Common Stock not exercisable within such 60-day period.

(8) Excludes options to purchase 3,668 shares of Common Stock not exercisable
within 60 days of October 25, 1996.

(9) Includes options to purchase 5,685 shares of Common Stock exercisable
within 60 days of October 25, 1996. Excludes options to purchase 26,479
shares of Common Stock not exercisable within such 60-day period.

(10) Excludes options to purchase 3,668 shares of Common Stock not exercisable
within 60 days of October 25, 1996.

(11) Includes options to purchase 13,350 shares of Common Stock exercisable
within 60 days of October 25, 1996. Excludes options to purchase 15,990
shares of Common Stock not exercisable within such 60-day period.

(12) Excludes options to purchase 3,668 shares of Common Stock not exercisable
within 60 days of October 25, 1996. Mr. Lay is a General Partner of SCV and
may therefore be deemed to have beneficial ownership of 1,995,120 shares of
Common Stock held by SCV. Mr. Lay disclaims beneficial ownership of such
shares. See footnote (3).

(13) Includes options to purchase 74,966 shares of Common Stock exercisable
within 60 days of October 25, 1996. Excludes options to purchase 128,839
shares of Common Stock not exercisable within such 60-day period.

BENEFITS OF OFFERING TO EXISTING STOCKHOLDERS

The following table sets forth certain information, based on an offering
price of $9.00 per share, concerning benefits to be received by existing
stockholders of the Company from the sale of the Common Stock offered hereby.
See "Risk Factors -- Benefits of Offering to Existing Stockholders."

<TABLE>
<CAPTION>
SHARES OWNED OPTIONS OWNED(1)
------------------------------- --------------------------- AGGREGATE AGGREGATE
AVERAGE SHARES COST OF VALUE OF
PURCHASE TOTAL UNDER AVERAGE TOTAL SHARES AND SHARES AND
NUMBER PRICE COST OPTION PRICE PRICE OPTIONS OPTIONS
--------- -------- -------- ------- ------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Southern California Ventures....... 1,995,120 $0.14 $272,000 -- -- -- $272,000 $17,956,080
Mark D. Dankberg................... 880,200 0.01 12,000 5,135 $1.36 $ 7,000 19,000 7,968,015
Steven R. Hart..................... 660,150 0.01 9,000 1,284 1.36 1,750 10,750 5,952,906
Mark J. Miller..................... 366,631 0.01 4,998 1,284 1.36 1,750 6,748 3,311,235
Maureen Miller..................... 293,519 0.01 4,001 -- -- -- 4,001 2,641,671
Thomas E. Carter................... 135,697 0.17 22,500 48,228 0.78 37,525 60,025 1,655,325
Robert W. Johnson.................. 183,375 0.14 25,000 -- -- -- 25,000 1,650,375
Greg D. Monahan.................... 169,915 0.25 43,153 5,685 0.77 4,388 47,541 1,580,400
Jeffrey M. Nash.................... 165,038 0.14 22,500 -- -- -- 22,500 1,485,342
James P. Collins................... 115,893 0.16 18,300 -- -- -- 18,300 1,043,037
Andrew M. Paul..................... 76,284 0.54 41,000 13,350 0.94 12,600 53,600 806,706
B. Allen Lay....................... -- -- -- -- -- -- -- --
All directors and executive
officers as a group (9 persons).. 2,637,290 0.07 180,151 74,966 0.87 65,013 245,164 24,410,304
</TABLE>

- ---------------
(1) Includes shares of Common Stock subject to outstanding options which are
currently vested or which vest within 60 days of October 25, 1996.

51
<PAGE> 52

DESCRIPTION OF CAPITAL STOCK

The following summary description of the capital stock of the Company does
not purport to be complete and is subject to the provisions of the Company's
Certificate of Incorporation and Bylaws, which are included as exhibits to the
Registration Statement of which this Prospectus forms a part and by the
provisions of applicable law.

Upon the closing of this offering, the authorized capital stock of the
Company will consist of 25,000,000 shares of Common Stock, par value $.0001 per
share, and 5,000,000 shares of Preferred Stock, par value $.0001 per share,
after giving effect to amendments to the Company's Certificate of Incorporation
that have been approved by the Company's Board of Directors and stockholders.

COMMON STOCK

As of October 25, 1996, there were 3,515,965 shares of Common Stock
outstanding held of record by 184 stockholders, and 3,225,000 shares of
Preferred Stock outstanding held of record by four stockholders. Upon the
closing of this offering, there will be 7,531,503 shares of Common Stock
outstanding, including 1,650,000 shares to be issued by the Company hereunder
and 2,365,538 shares to be issued upon conversion of the Preferred Stock.

Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the stockholders of the Company. The Common Stock does not
have cumulative voting rights, which means the holder or holders of more than
one-half of the shares voting for the election of directors can elect all of the
directors then being elected. Subject to the preferences that may be applicable
to any outstanding preferred stock, the holders of Common Stock are entitled to
a ratable distribution of any dividends that may be declared by the Board of
Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to the prior liquidation rights of any outstanding
preferred stock. The Common Stock has no preemptive, redemption or conversion
rights. The outstanding shares of Common Stock are, and the shares offered by
the Company in the offering, when issued and paid for, will be fully paid and
nonassessable. The rights, preferences and privileges of holders of Common Stock
are subject to, and may be adversely affected by, the rights of the holders of
shares of any preferred stock which the Company may designate and issue in the
future. See "Dividend Policy."

PREFERRED STOCK

Upon the closing of this offering, each outstanding share of Series A
Convertible Preferred Stock will be converted into 0.7335 of a share of Common
Stock, and the Series A Convertible Preferred Stock will be automatically
retired. Thereafter, the Board of Directors will be authorized, without further
stockholder approval, to issue up to 5,000,000 shares of Preferred Stock in one
or more series and to fix the rights, preferences, privileges and restrictions
granted or imposed upon any unissued shares of Preferred Stock and to fix the
number of shares constituting any series and the designations of such series.

The issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company. The issuance of Preferred Stock
could decrease the amount of earnings and assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock. As of the closing of the offering, no shares of
Preferred Stock will be outstanding, and the Company currently has no plans to
issue any shares of Preferred Stock.

BUSINESS COMBINATIONS; CERTAIN CHARTER AND BYLAW PROVISIONS

Section 203 of the Delaware General Corporation Law (the "DGCL") prohibits
a publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless
upon closing of such transaction the interested stockholder owned 85% of the
voting stock of the corporation

52
<PAGE> 53

outstanding at the time the transaction commenced, or unless the business
combination is, or the transaction in which such person became an interested
stockholder was, approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the stockholder. An "interested stockholder" is a person who,
together with affiliates and associates, owns (or, in the case of affiliates and
associates of the issuer, did own within the last three years) 15% or more of
the corporation's voting stock.

The Company's Amended and Restated Certificate of Incorporation and Bylaws
contain provisions prohibiting stockholder action by written consent by the
stockholders; limiting the right to call stockholder meetings to the Chairman of
the Board, the President, the Secretary or the Board of Directors; and
prohibiting the stockholders from removing directors from office except for
cause and reserving to the directors the exclusive right to change the number of
directors or to fill vacancies on the Board. The Company's Amended and Restated
Certificate of Incorporation also provides for the Board of Directors to be
divided into three classes of directors serving staggered three-year terms. As a
result, approximately one-third of the Board of Directors will be elected each
year.

The purpose and intended effect of the above described provisions in the
Company's Amended and Restated Certificate of Incorporation and Bylaws are to
enhance the continuity and stability of the Company's management by making it
more difficult for stockholders to remove or change the incumbent members of the
Board of Directors. Such provisions, coupled with the ownership by existing
stockholders of approximately 70.8% of the Common Stock following this offering,
could also render the Company more difficult to be acquired pursuant to an
unfriendly acquisition by an outsider by making it more difficult for such
person to obtain control of the Company and replace current management without
the approval of the Board of Directors.

The Company has included in its Amended and Restated Certificate of
Incorporation and Bylaws provisions to (i) eliminate the personal liability of
its directors for monetary damages resulting from breaches of their fiduciary
duty to the extent permitted by the DGCL and (ii) indemnify its directors and
officers to the fullest extent permitted by Section 145 of the DGCL, including
circumstances in which indemnification is otherwise discretionary. The Company
believes that these provisions are necessary to attract and retain qualified
persons as directors and officers. The Company also intends to enter into
indemnification agreements with certain officers and directors upon consummation
of the offering.

LISTING

The Common Stock has been approved for quotation and trading on The Nasdaq
National Market, subject to official notice of issuance, under the symbol
"VSAT."

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is Harris Trust
Company of California.

53
<PAGE> 54

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the offering, the Company will have outstanding
7,531,503 shares of Common Stock. Of these shares, the 2,200,000 shares sold in
the offering (plus any shares issued upon exercise of the Underwriters'
over-allotment option) will be freely tradeable without restriction under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act.

In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned shares
constituting "restricted securities" (generally defined as securities acquired
from the Company or an affiliate of the Company in a non-public transaction) for
at least two years, is entitled to sell within any three-month period a number
of shares that does not exceed the greater of one percent of the outstanding
Common Stock or the average weekly trading volume in the Common Stock during the
four calendar weeks preceding the date on which notice of such sale is filed
pursuant to Rule 144. Sales under Rule 144 are also subject to certain
provisions regarding the manner of sale, notice requirements and the
availability of current public information about the Company. A stockholder (or
stockholders whose shares are aggregated) who is not an affiliate of the Company
for at least 90 days prior to a proposed transaction and who has beneficially
owned "restricted securities" for at least three years is entitled to sell such
shares under Rule 144 without regard to the limitations described above.
Currently 2,812,817 shares of Common Stock are qualified for sale under this
rule. The Commission has proposed to amend Rule 144 to reduce the two and three
year holding periods specified above to one and two years, respectively.

Holders of 4,491,822 shares, including all officers and directors of the
Company, have entered into contractual "lock-up" agreements generally providing
that they will not directly or indirectly offer, sell, contract to sell or grant
any option to purchase or otherwise transfer or dispose of shares of Common
Stock or other equity securities of the Company or any securities exercisable
for or convertible into Common Stock or other equity securities of the Company
owned by them for a period of 180 days after the closing of the offering without
the prior written consent of representatives of the Underwriters.

The Company has entered into a Stock Restriction Agreement with each of its
stockholders for the purpose of limiting the sale, succession or other transfer
of the Common Stock during the lifetime or upon the death of each stockholder.
The Stock Restriction Agreement provides that the Company's stockholders will
not transfer their shares of Common Stock during their lifetime or upon their
death, except in limited instances, without first offering such shares for sale
to the Company. In addition, the Stock Restriction Agreement requires each
stockholder to approve an offer to purchase all of the outstanding Common Stock
if such offer is accepted by stockholders owning at least two-thirds of the
outstanding shares. The Stock Restriction Agreement with respect to each
stockholder will terminate upon the closing of this offering, regardless of
whether any of such stockholder's shares are included in this offering.

The Company intends to file a registration statement under the Securities
Act after the offering covering the sale of 1,369,348 shares of Common Stock
reserved for issuance under the 1993 Stock Option Plan, the 1996 Equity
Participation Plan and the Employee Stock Purchase Plan. See "Management -- 1993
Stock Option Plan," "-- 1996 Equity Participation Plan" and "-- Employee Stock
Purchase Plan." Such registration statement will automatically become effective
upon filing. Accordingly, shares registered under such registration statement
will, subject to Rule 144 volume and other limitations applicable to affiliates
of the Company, be available for sale in the public market, except to the extent
that such shares are subject to vesting restrictions.

Prior to the offering, there has been no public market for the Common Stock
and no predictions can be made as to the effect, if any, that sales of shares of
Common Stock will have on the market price of the Common Stock prevailing from
time to time. Nevertheless, sales of significant numbers of shares of the Common
Stock in the public market could adversely affect the market price of the Common
Stock and could impair the Company's future ability to raise capital through an
offering of its equity securities.

54
<PAGE> 55

UNDERWRITING

Under the terms and subject to the conditions of the Underwriting
Agreement, the Underwriters named below, for whom Oppenheimer & Co., Inc.,
Needham & Company, Inc. and Unterberg Harris are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Company and
Selling Stockholders, and the Company and Selling Stockholders have agreed to
sell to each Underwriter, the aggregate number of shares of Common Stock set
forth opposite their respective names in the table below. The Underwriting
Agreement provides that the obligations of the Underwriters to pay for and
accept delivery of the shares of Common Stock are subject to certain conditions
precedent, and that the Underwriters are committed to purchase and pay for all
shares if any shares are purchased.

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
--------------------------------------------------------------------- ----------------
<S> <C>
Oppenheimer & Co., Inc. ............................................. 350,000
Needham & Company, Inc. ............................................. 350,000
Unterberg Harris..................................................... 350,000
Alex. Brown & Sons Incorporated...................................... 85,000
Cowen & Company...................................................... 85,000
Dillon, Read & Co. Inc. ............................................. 85,000
Hambrecht & Quist LLC................................................ 85,000
Smith Barney Inc. ................................................... 85,000
UBS Securities LLC................................................... 85,000
Robert W. Baird & Co. Incorporated................................... 40,000
Brad Peery Inc. ..................................................... 40,000
Burnham Securities Inc. ............................................. 40,000
First Albany Corporation............................................. 40,000
Furman Seltz LLC..................................................... 40,000
Gabelli & Company, Inc. ............................................. 40,000
Gerard Klauer Mattison & Co., LLC.................................... 40,000
Nutmeg Securities, Ltd. ............................................. 40,000
Ormes Capital Markets, Inc. ......................................... 40,000
Pacific Growth Equities, Inc. ....................................... 40,000
Rauscher Pierce Refsnes, Inc. ....................................... 40,000
H.C. Wainwright & Co., Inc. ......................................... 40,000
Sands Brothers & Co., Ltd. .......................................... 40,000
Sutro & Co. Incorporated............................................. 40,000
Van Kasper & Company................................................. 40,000
Wedbush Morgan Securities Inc. ...................................... 40,000
---------
Total...................................................... 2,200,000
=========
</TABLE>

The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus, and to certain dealers
(who may include the Underwriters) at such price less a concession not in excess
of $0.30 per share, of which $0.10 may be reallowed to other dealers. After the
offering to the public, the offering price and other selling terms may be
changed by the Representatives. No such reduction shall change the amount of the
proceeds to be received by the Company and the Selling Stockholders as set forth
on the cover page of this Prospectus.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 330,000
shares of Common Stock at the same price per share set forth on the cover page
of this Prospectus solely to cover over-allotments, if any. To the extent that
the Underwriters exercise such option, each of the Underwriters will be
committed, subject to certain conditions,

55
<PAGE> 56

to purchase approximately the same percentage of such additional shares as the
number of shares of Common Stock to be purchased by such Underwriter, as shown
in the above table, bears to the total shown.

The Underwriting Agreement contains covenants of indemnity and contribution
between the Company and the Underwriters and the Selling Stockholders against
certain civil liabilities that may be incurred in connection with this offering,
including liabilities under the Securities Act.

Pursuant to the terms of lock-up agreements, all officers, directors,
Selling Stockholders and holders of 1.0% or more of the Common Stock have agreed
with the Representatives not to sell, otherwise dispose of, contract to sell,
grant any option to sell, transfer or otherwise dispose of, directly or
indirectly, shares of Common Stock or other equity securities of the Company or
securities exchangeable for or convertible into shares of Common Stock or other
equity securities of the Company for a period of 180 days after the date of this
Prospectus, without the prior written consent of the Representatives. The
Company has agreed not to sell, contract to sell, grant any option to sell,
transfer or otherwise dispose of, directly or indirectly, shares of Common Stock
or other equity securities of the Company for a period of 180 days after the
date of this Prospectus, without the prior written consent of the
Representatives, except that the Company may issue securities pursuant to the
1993 Stock Option Plan, the 1996 Equity Participation Plan and the Employee
Stock Purchase Plan and upon the exercise of outstanding stock options or
purchase rights under such plans. See "Shares Eligible for Future Sale."

The Underwriters will not make sales to accounts over which they exercise
discretionary authority (i) in excess of five percent of the number of shares of
Common Stock offered hereby, and (ii) unless they obtain specific written
consent of the customer.

Prior to the offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock has been
determined by negotiation among the Company, the Selling Stockholders and the
Representatives. Among the factors considered in determining the initial public
offering price were prevailing market and economic conditions, revenues and
earnings of the Company, estimates of the business potential and prospects of
the Company, the present state of the Company's business operations, the
Company's management and other factors deemed relevant.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Latham & Watkins, San Diego, California. Certain legal matters in
connection with the offering will be passed upon for the Underwriters by Kaye,
Scholer, Fierman, Hays & Handler, LLP, Los Angeles, California.

EXPERTS

The financial statements of the Company as of March 31, 1995 and 1996, and
for each of the three years in the period ended March 31, 1996 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.

56
<PAGE> 57

GLOSSARY OF SELECTED TERMS

DAMA....................... Demand Assigned Multiple Access. A protocol for
assigning a communication channel to a user only
upon request.

DOD........................ Department of Defense.

Downlink................... A radio transmission from a satellite back down
toward the earth.

EMUT....................... Enhanced Manpack UHF Terminal. A small, portable
satellite terminal for DOD that operates in the
UHF frequency band.

FDMA....................... Frequency Division Multiple Access. A protocol that
assigns each communication channel to a different
transmission frequency.

GHz........................ Giga Hertz. One billion cycles per second. A
measure of frequency or bandwidth.

LEO........................ Low Earth Orbit.

Local Loop Services........ Local telephony service.

MHz........................ Mega Hertz. One million cycles per second. A
measure of frequency or bandwidth.

MIL-STD.................... Military standard.

NCS........................ Network Control System. The satellite terminal and
computer that manages channel assignments in a
DAMA network.

Network.................... A collection of user terminals linked together by a
satellite.

PSTN....................... Public Switched Telephone Network.

RF......................... Radio Frequency.

SCPC....................... Single Channel Per Carrier. A signalling technique
that transmits one voice or data circuit per
radio channel.

SHF........................ Super High Frequency radio transmissions.

TDM........................ Time Division Multiplexing. A protocol for
combining several different circuits into a
single, continuous transmission.

TDMA....................... Time Division Multiple Access. A protocol for time
sharing a single communication channel among a
number of different users.

Transponder................ A receiving and transmitting device on board a
satellite that relays an uplink transmission from
a satellite terminal back down to earth.

UHF........................ Ultra High Frequency radio transmissions.

Uplink..................... A radio transmission from a satellite terminal that
is sent up to a satellite.

VSAT....................... Very Small Aperture Terminal. A satellite terminal
with a very small antenna. A VSAT antenna is
typically considered to be less than 3.7 meters
in diameter.

Wireless Local Loop........ Wireless switched local telephony service.

57
<PAGE> 58

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
VIASAT, INC.
Report of Independent Accountants..................................................... F-2
Balance Sheet......................................................................... F-3
Statement of Income................................................................... F-4
Statement of Stockholders' Equity..................................................... F-5
Statement of Cash Flows............................................................... F-6
Notes to Financial Statements......................................................... F-7
</TABLE>

F-1
<PAGE> 59

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of ViaSat, Inc.

In our opinion, the accompanying balance sheet and the related statements of
income, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of ViaSat, Inc. at March 31, 1996 and
1995, and the results of its operations and its cash flows for each of the three
years in the period ended March 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

San Diego, California
June 11, 1996, except as to the
Recapitalization discussed in Note 1,
which is as of November 4, 1996

F-2
<PAGE> 60

VIASAT, INC.

BALANCE SHEET

<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER PRO FORMA
--------------------------- 30, STOCKHOLDERS'
1995 1996 1996 EQUITY
----------- ------------ ------------ -------------
(UNAUDITED) (UNAUDITED)
(NOTE 1)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $2,731,000 $ 2,297,000 $ 1,186,000
Accounts receivable.................. 4,300,000 6,171,000 6,620,000
Inventory............................ 204,000 1,223,000 3,678,000
Deferred income taxes................ 134,000 484,000 637,000
Other current assets................. 64,000 170,000 422,000
---------- ----------- -----------
Total current assets.............. 7,433,000 10,345,000 12,543,000
Property and equipment, net............ 1,896,000 2,789,000 3,430,000
Other assets........................... 48,000 128,000 439,000
---------- ----------- -----------
Total assets................. $9,377,000 $13,262,000 $16,412,000
========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................... $1,480,000 $ 2,774,000 $ 3,952,000
Accrued liabilities.................. 2,669,000 2,157,000 2,615,000
Current portion of notes payable..... 476,000 763,000 1,007,000
---------- ----------- -----------
Total current liabilities......... 4,625,000 5,694,000 7,574,000
---------- ----------- -----------
Notes payable.......................... 1,220,000 1,747,000 1,512,000
Other liabilities...................... 119,000 604,000 849,000
---------- ----------- -----------
Total long-term liabilities....... 1,339,000 2,351,000 2,361,000
---------- ----------- -----------
Commitments (Note 9)
Stockholders' equity:
Series A, convertible preferred stock,
$.01 par value; 3,225,000 shares
authorized, issued and outstanding
actual, no shares outstanding pro
forma (unaudited).................... 32,000 32,000 32,000 --
Common stock, $.01 par value, 7,335,000
shares authorized; 3,207,339,
3,342,101 and 3,509,804 issued and
outstanding actual, respectively;
5,875,342 shares issued and
outstanding pro forma (unaudited).... 44,000 46,000 48,000 80,000
Paid in capital........................ 568,000 737,000 1,224,000 1,224,000
Stockholders' notes receivable......... -- -- (311,000) (311,000)
Retained earnings...................... 2,769,000 4,402,000 5,484,000 5,484,000
---------- ----------- ----------- ----------
Total stockholders' equity........ 3,413,000 5,217,000 6,477,000 $6,477,000
==========
---------- ----------- -----------
Total liabilities and
stockholders' equity............ $9,377,000 $13,262,000 $16,412,000
========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE> 61

VIASAT, INC.

STATEMENT OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, SIX MONTHS ENDED
--------------------------------------- -------------------------
SEPT. 30, SEPT. 30,
1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues........................ $11,579,000 $22,341,000 $29,017,000 $14,156,000 $21,582,000
Cost of revenues................ 9,033,000 16,855,000 20,983,000 10,110,000 15,333,000
----------- ----------- ----------- ----------- -----------
Gross profit.................. 2,546,000 5,486,000 8,034,000 4,046,000 6,249,000
Operating expenses:
Selling, general and
administrative............. 1,554,000 2,416,000 3,400,000 1,762,000 2,313,000
Independent research and
development................ 134,000 788,000 2,820,000 1,186,000 2,218,000
----------- ----------- ----------- ----------- -----------
Income from operations.......... 858,000 2,282,000 1,814,000 1,098,000 1,718,000
Other income (expense):
Interest income................. 2,000 27,000 29,000 18,000 69,000
Interest expense................ (47,000) (114,000) (260,000) (104,000) (125,000)
----------- ----------- ----------- ----------- -----------
Income before income taxes...... 813,000 2,195,000 1,583,000 1,012,000 1,662,000
Provision (benefit) for income
taxes......................... 328,000 888,000 (50,000) (32,000) 580,000
----------- ----------- ----------- ----------- -----------
Net income...................... $ 485,000 $ 1,307,000 $ 1,633,000 $ 1,044,000 $ 1,082,000
=========== =========== =========== =========== ===========
Pro forma net income per share
(unaudited)................... $ 0.28 $ 0.18
=========== ===========
Shares used in computing pro
forma net income per share
(unaudited)................... 5,875,729 6,120,635
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE> 62

VIASAT, INC.

STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
-------------------- -------------------- STOCKHOLDERS'
NUMBER OF NUMBER OF PAID IN NOTES RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE EARNINGS
--------- ------- --------- ------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31,
1993.................. 3,225,000 $32,000 2,949,697 $40,000 $ 416,000 $ 977,000
Issuance of common
stock............... 17,311 6,000
Net income............ 485,000
--------- ------- --------- ------- ---------- --------- ----------
Balance at March 31,
1994.................. 3,225,000 32,000 2,967,008 40,000 422,000 1,462,000
Issuance of common
stock............... 240,331 4,000 146,000
Net income............ 1,307,000
--------- ------- --------- ------- ---------- --------- ----------
Balance at March 31,
1995.................. 3,225,000 32,000 3,207,339 44,000 568,000 2,769,000
Issuance of common
stock............... 134,762 2,000 169,000
Net income............ 1,633,000
--------- ------- --------- ------- ---------- --------- ----------
Balance at March 31,
1996.................. 3,225,000 32,000 3,342,101 46,000 737,000 4,402,000
Issuance of common
stock (unaudited)... 167,703 2,000 487,000
Shares subscribed..... $(311,000)
Net income
(unaudited)......... 1,082,000
--------- ------- --------- ------- ---------- --------- ----------
Balance at September 30,
1996 (unaudited)...... 3,225,000 $32,000 3,509,804 $48,000 $1,224,000 $(311,000) $5,484,000
========= ======= ========= ======= ========== ========= ==========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE> 63

VIASAT, INC.

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, SIX MONTHS ENDED
---------------------------------------- ------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1995 1996
----------- ---------- ----------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................... $ 485,000 $1,307,000 $ 1,633,000 $ 1,044,000 $ 1,082,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation....................... 316,000 542,000 982,000 424,000 619,000
Loss on disposal of fixed assets... 83,000
Deferred income taxes.............. (66,000) (13,000) (350,000) (175,000) (153,000)
Increase (decrease) in cash resulting
from changes in:
Accounts receivable................ (2,256,000) (265,000) (1,871,000) (2,217,000) (449,000)
Inventory.......................... (15,000) (189,000) (1,019,000) (480,000) (2,455,000)
Other assets....................... (53,000) (43,000) (186,000) (62,000) (564,000)
Accounts payable................... 670,000 530,000 1,294,000 183,000 1,178,000
Accrued liabilities................ 1,019,000 1,331,000 (512,000) (919,000) 458,000
Other liabilities.................. -- 119,000 485,000 (5,000) 245,000
----------- ---------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities.......... 183,000 3,319,000 456,000 (2,207,000) (39,000)
----------- ---------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and
equipment.......................... (511,000) (1,701,000) (1,875,000) (1,035,000) (1,260,000)
----------- ---------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from short-term bank
borrowings......................... 170,000 -- 1,400,000
Repayment of short-term bank
borrowings......................... (150,000) (350,000) (1,400,000)
Proceeds from issuance of notes
payable............................ 289,000 1,650,000 2,778,000 734,000 326,000
Repayment of notes payable........... (53,000) (346,000) (1,964,000) (254,000) (316,000)
Proceeds from issuance of common
stock.............................. 6,000 150,000 171,000 81,000 178,000
----------- ---------- ----------- ----------- -----------
Net cash provided by financing
activities....................... 262,000 1,104,000 985,000 561,000 188,000
----------- ---------- ----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents..................... (66,000) 2,722,000 (434,000) (2,681,000) (1,111,000)
Cash and cash equivalents at beginning
of period............................ 75,000 9,000 2,731,000 2,731,000 2,297,000
----------- ---------- ----------- ----------- -----------
Cash and cash equivalents at end of
period............................... $ 9,000 $2,731,000 $ 2,297,000 $ 50,000 $ 1,186,000
=========== ========== =========== =========== ===========
Supplemental information:
Cash paid for interest............... $ 48,000 $ 116,000 $ 260,000 $ 104,000 $ 125,000
=========== ========== =========== =========== ===========
Cash paid for income taxes........... $ 121,000 $ 642,000 $ 468,000 $ 303,000 $ 1,086,000
=========== ========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE> 64

VIASAT, INC.

NOTES TO FINANCIAL STATEMENTS

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

ViaSat, Inc. (the "Company") designs, produces and markets advanced digital
satellite telecommunications and wireless signal processing equipment.

Management Estimates and Assumptions

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Cash Equivalents

Cash equivalents consist of highly liquid investments with original
maturities of 90 days or less.

Revenue Recognition

The majority of the Company's revenues are derived from services performed
for the United States Government and its prime contractors under a variety of
contracts including cost-plus-fixed fee, fixed-price, and time and materials
type contracts. Such sales amounted to $28,305,000, $21,226,000 and $11,143,000
for the years ended March 31, 1996, 1995 and 1994, respectively. Included in
these revenues are sales to a significant customer under various subcontracts
totaling $5,269,000 and $4,166,000 during the years ended March 31, 1996 and
1995, respectively. Sales to this customer were not significant during the year
ended March 31, 1994. Generally, revenues are recognized as services are
performed using the percentage of completion method, measured primarily by costs
incurred to date compared with total estimated costs at completion or based on
the number of units delivered. The Company provides for anticipated losses on
contracts by a charge to income during the period in which they are first
identified.

Contract costs, including indirect costs, are subject to audit and
negotiations with Government representatives. These audits have been completed
and agreed upon through fiscal year 1994. Contract revenues and accounts
receivable are stated at amounts which are expected to be realized upon final
settlement.

Unbilled Accounts Receivable

Unbilled receivables consist of costs and fees earned and billable on
contract completion or other specified events. The majority of unbilled
receivables is expected to be collected within one year. The amount of contract
retention included in unbilled accounts receivable as of March 31, 1996 and 1995
is $45,000 and $22,000, respectively, and is expected to be collected beyond one
year.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash equivalents and trade
accounts receivable which are generally not collateralized. The Company limits
its exposure to credit loss by placing its cash equivalents with high credit
quality financial institutions. Concentrations of credit risk with respect to
receivables are limited because the Company's primary customers are various
agencies of the United States Government and its prime contractors.

F-7
<PAGE> 65

VIASAT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Inventories

Inventories are valued at the lower of cost or market, cost being
determined by the first-in, first-out method.

Software Costs

Software product development costs incurred from the time technological
feasibility is reached until the product is available for general release to
customers are capitalized and reported at the lower of cost or net realizable
value. Through March 31, 1996, no significant amounts were expended subsequent
to reaching technological feasibility.

Property and Equipment

Equipment, computers, and furniture and fixtures are recorded at cost, and
depreciated over estimated useful lives of 3 to 7 years under the straight-line
method. Additions to property and equipment together with major renewals and
betterments are capitalized. Maintenance, repairs and minor renewals and
betterments are charged to expense. When assets are sold or otherwise disposed
of, the cost and related accumulated depreciation or amortization are removed
from the accounts and any resulting gain or loss is recognized.

Long-lived Assets

The Company assesses potential impairments to its long-lived assets when
there is evidence that events or changes in circumstances have made recovery of
the asset's carrying value unlikely. An impairment loss would be recognized when
the sum of the expected future net cash flows is less than the carrying amount
of the asset. No such impairment losses have been identified by the Company.

Warranty Reserves

The Company provides limited warranties on certain of its products for
periods of up to three years. The Company recognizes warranty reserves based
upon an estimate of total warranty costs, with amounts expected to be incurred
within twelve months classified as a current liability.

Income Taxes

Income taxes are provided utilizing the liability method. The liability
method requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying
amounts and tax bases of assets and liabilities. Additionally, under the
liability method, changes in tax rates and laws will be reflected in income in
the period such changes are enacted.

Fair Value of Financial Instruments

At March 31, 1996, the carrying amounts of the Company's financial
instruments, including cash equivalents, trade receivables and accounts payable,
approximated their fair values due to their short term maturities. At March 31,
1996, the estimated fair value of the Company's long-term debt approximated its
carrying value.

New Accounting Pronouncement

In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). The
Company does not intend to adopt the measurement provisions of SFAS 123 with
regard to employee-based stock compensation, and will adopt the disclosure
provisions during the fiscal year ending March 31, 1997.

F-8
<PAGE> 66

VIASAT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Pro forma net income per share

Pro forma net income per share is computed based on the weighted average
number of common shares and common stock equivalents, using the treasury stock
method, outstanding during the respective periods after giving retroactive
effect to the conversion, which will occur upon the closing of the Company's
initial public offering, of all outstanding shares of preferred stock into
2,365,538 shares of common stock. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 83, all issuances of common stock and all stock
options granted within one year prior to the Company's planned initial public
offering have been included as outstanding for all periods using the treasury
stock method. Historical earnings per share are not presented because such
amounts are not deemed meaningful due to the significant change in the Company's
capital structure that will occur in connection with the planned initial public
offering.

Recapitalization

In November 1996, the Company filed an Amended and Restated Certificate of
Incorporation to effect a .7335 for 1 reverse stock split of all outstanding
shares of common stock and stock options. All shares and per share data in the
accompanying financial statements have been adjusted retroactively to give
effect to the reverse stock split. The Amended and Restated Certificate of
Incorporation increases the authorized stock of the Company such that the
Company is authorized to issue 5,000,000 shares of $0.0001 par value preferred
stock, and 25,000,000 shares of $0.0001 par value common stock. Concurrently,
the conversion ratio of the Company's preferred stock was changed to .7335 for
1.

Interim results (unaudited)

The accompanying balance sheet at September 30, 1996 and the related
statements of income and of cash flows for the six months ended September 30,
1995 and 1996, and the statement of stockholders' equity for the six months
ended September 30, 1996 are unaudited. In the opinion of management, these
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for the fair statement of results of the interim periods.
The data disclosed in these notes to the financial statements at such dates and
for such periods are also unaudited.

Pro forma stockholders' equity (unaudited)

The unaudited pro forma information presented in the accompanying balance
sheet as of September 30, 1996 reflects the conversion of all outstanding
preferred stock into 2,365,538 shares of common stock, which will occur upon
completion of the Company's planned initial public offering.

F-9
<PAGE> 67

VIASAT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. COMPOSITION OF CERTAIN BALANCE SHEET CAPTIONS

<TABLE>
<CAPTION>
MARCH 31,
------------------------- SEPTEMBER 30,
1995 1996 1996
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Accounts receivable:
Billed...................................... $2,890,000 $5,653,000 $5,062,000
Unbilled.................................... 1,410,000 518,000 1,558,000
---------- ---------- ----------
$4,300,000 $6,171,000 $6,620,000
========== ========== ==========
Inventory:
Raw materials............................... $ 67,000 $ 753,000 $ 532,000
Work in process............................. 137,000 402,000 3,043,000
Finished goods.............................. 68,000 103,000
---------- ---------- ----------
$ 204,000 $1,223,000 $3,678,000
========== ========== ==========
Property and equipment:
Machinery and equipment..................... $1,288,000 $2,313,000 $3,097,000
Computer equipment.......................... 1,564,000 2,213,000 2,540,000
Furniture and fixtures...................... 179,000 380,000 529,000
---------- ---------- ----------
3,031,000 4,906,000 6,166,000
Less accumulated depreciation............... (1,135,000) (2,117,000) (2,736,000)
---------- ---------- ----------
$1,896,000 $2,789,000 $3,430,000
========== ========== ==========
Accrued liabilities:
Accrued vacation............................ $ 406,000 $ 591,000 $ 632,000
Accrued 401(k) matching contribution........ 275,000 444,000 284,000
Current portion of warranty reserve......... 67,000 413,000 651,000
Accrued bonus............................... 488,000 347,000 357,000
Collections in excess of revenues........... 773,000 237,000 498,000
Income taxes payable........................ 601,000 40,000 50,000
Other....................................... 59,000 85,000 143,000
---------- ---------- ----------
$2,669,000 $2,157,000 $2,615,000
========== ========== ==========
</TABLE>

3. SHORT-TERM BANK BORROWINGS

The Company has a $4,000,000 line of credit with a bank which allows it to
borrow the greater of $1,000,000 or 80% of eligible accounts receivable plus 50%
of the Company's eligible inventory at the bank's prime rate (8.25% at March 31,
1996). There were no borrowings outstanding as of March 31, 1996 and 1995. The
Company is required to pay a fee equal to 0.25% of the unused portion of the
line of credit on an annual basis. The credit agreement includes covenants
which, among other things, require the Company to maintain stated net worth
amounts plus specific liquidity and long-term solvency ratios as well as a
minimum net income level. The line of credit expires on September 15, 1997.
Amounts borrowed are secured by substantially all of the Company's assets.

F-10
<PAGE> 68

VIASAT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. NOTES PAYABLE

Notes payable are as follows:

<TABLE>
<CAPTION>
MARCH 31,
----------------------- SEPTEMBER 30,
1995 1996 1996
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Bank installment loans, with various expiration
dates through September 1999, total monthly
payments of $81,000 with interest rates ranging
between 8% and 12%, collateralized by
equipment....................................... $1,092,000 $1,989,000 $2,088,000
Finance company installment loans, with various
expiration dates through April 1999, total
monthly payments of $20,000 with interest rates
ranging between 10.23% and 11.81%,
collateralized by equipment..................... 604,000 521,000 431,000
---------- ---------- ----------
1,696,000 2,510,000 2,519,000
Less current portion.............................. (476,000) (763,000) (1,007,000)
---------- ---------- ----------
$1,220,000 $1,747,000 $1,512,000
========== ========== ==========
</TABLE>

Principal maturities of notes payable as of March 31, 1996 are summarized
as follows:

YEAR ENDING MARCH 31,
- ---------------------
<S> <C>
1997.......................................................... $ 763,000
1998.......................................................... 932,000
1999.......................................................... 623,000
2000.......................................................... 192,000
----------
$2,510,000
==========
</TABLE>

5. CONVERTIBLE PREFERRED STOCK

At March 31, 1996, the Company had 3,225,000 shares of its convertible $.01
par value Series A preferred stock (preferred stock) outstanding with a
liquidation preference of $.10 per share. Each share of preferred stock is
convertible at the option of the holder into one share of common stock subject
to adjustment for stock splits and certain other transactions (Note 1). Holders
of the preferred stock have votes per share equivalent to the number of shares
of common stock to which the preferred stock may be converted.

Each share of preferred stock shall automatically convert at its then
effective conversion price (i) upon the closing of any public offering of the
Company's common stock at an offering price of not less than $.50 per share and
having an aggregate offering price of at least $3,000,000, or (ii) immediately
prior to the closing of a merger, consolidation or combination of the Company
with any other corporation, or (iii) immediately prior to a sale of
substantially all of the Company's assets in which the Company receives at least
$3,000,000 in cash or negotiable securities.

Each share of preferred stock is entitled to receive dividends on a
cumulative basis at the annual rate of $.009 per share, when and as declared by
the Board of Directors. Such dividends have preference over any distribution to
holders of common stock. Undeclared cumulative dividends amounted to $260,000 at
March 31, 1996.

F-11
<PAGE> 69

VIASAT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. COMMON STOCK AND OPTIONS

In July 1993, the Company adopted the 1993 Stock Option Plan (the Plan)
which authorizes 733,500 shares to be granted no later than July 2003. The Plan
provides for the grant of both incentive stock options and non-qualified stock
options which are subject to a three year vesting period. The option prices
represent the estimated fair market value of the Company's common stock as
determined by the Company's Board of Directors.

Transactions under the stock option plan are summarized as follows:

<TABLE>
<CAPTION>
NUMBER OPTION PRICE
OF SHARES PER SHARE
--------- ------------
<S> <C> <C>
Outstanding at March 31, 1994
(all granted in fiscal 1994)................................... 54,829 $ .34
Options granted................................................ 61,137 $ .48
Options granted................................................ 74,450 $ .82
-------
Outstanding at March 31, 1995.................................. 190,416 $.34 - $ .82
Options granted................................................ 128,033 $1.36
Options canceled............................................... (147) $ .82
Options exercised.............................................. (8,215) $.34 - $ .82
-------
Outstanding at March 31, 1996.................................. 310,087 $.34 - $1.36
Options granted (unaudited).................................... 120,661 $4.09 - $4.50
Options canceled (unaudited)................................... (183) $1.36
Options exercised (unaudited).................................. (55,056) $.34 - $1.36
-------
Outstanding at September 30, 1996 (unaudited).................. 375,509 $.34 - $4.50
=======
</TABLE>

At March 31, 1996, options to purchase 77,570 shares of the Company's
Common Stock were currently exercisable at $.34 to $.82 per share.

The Company also granted certain officers and employees the opportunity to
purchase at fair market value 254,855, 124,805, and 118,607 shares of the
Company's common stock in fiscal 1995, 1996 and for the six months ended
September 30, 1996, respectively.

F-12
<PAGE> 70

VIASAT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. INCOME TAXES

The provision (benefit) for income taxes includes the following:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED MARCH 31, ENDED
------------------------------------ SEPTEMBER 30,
1994 1995 1996 1996
--------- -------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current tax provision
Federal.......................... $ 361,000 $708,000 $ 344,000 $ 857,000
State............................ 109,000 193,000 9,000 188,000
--------- -------- --------- ----------
470,000 901,000 353,000 1,045,000
--------- -------- --------- ----------
Deferred tax provision:
Federal.......................... (109,000) (10,000) (310,000) (370,000)
State............................ (33,000) (3,000) (93,000) (95,000)
--------- -------- --------- ----------
(142,000) (13,000) (403,000) (465,000)
--------- -------- --------- ----------
Total provision (benefit) for
income taxes................ $ 328,000 $888,000 $ (50,000) $ 580,000
========= ======== ========= ==========
</TABLE>

Significant components of the Company's deferred tax assets and liabilities
are as follows:

<TABLE>
<CAPTION>
MARCH 31,
--------------------- SEPTEMBER 30,
1995 1996 1996
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Warranty reserve............................... $ 36,000 $219,000 $ 438,000
Accrued vacation............................... 129,000 190,000 203,000
Other.......................................... 60,000 142,000 384,000
-------- -------- ----------
Total deferred tax assets................... 225,000 551,000 1,025,000
Deferred tax liabilities:
Depreciation................................... (91,000) (14,000) (23,000)
-------- -------- ----------
Net deferred tax assets.......................... $134,000 $537,000 $1,002,000
======== ======== ==========
</TABLE>

A reconciliation of the provision for income taxes to the amount computed
by applying the statutory federal income tax rate to income before income taxes
is as follows:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED MARCH 31, ENDED
----------------------------------- SEPTEMBER 30,
1994 1995 1996 1996
-------- -------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Tax expense at statutory rate....... $276,000 $746,000 $ 538,000 $565,000
State tax provision (benefit), net
of federal benefit................ 87,000 153,000 (60,000) 62,000
Research tax credit................. -- (18,000) (480,000) (50,000)
Other............................... (35,000) 7,000 (48,000) 3,000
-------- -------- --------- --------
$328,000 $888,000 $ (50,000) $580,000
======== ======== ========= ========
</TABLE>

The Company's income tax benefit for the fiscal year ended March 31, 1996
was primarily attributable to the utilization of research and development
credits generated in the period and the impact of a favorable

F-13
<PAGE> 71

VIASAT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

United States Federal judicial decision which clarified the tax law related to
the utilization of research and development credits generated from the Company's
funded research and development.

8. EMPLOYEE BENEFITS

The Company has a voluntary deferred compensation plan under Section 401(k)
of the Internal Revenue Code. The Company may make discretionary contributions
to the plan which vest equally over six years. Employees who have completed 90
days of service and are at least 21 years of age are eligible to participate in
the plan. Participants are entitled, upon termination or retirement, to their
vested portion of the plan assets which are held by an independent trustee.
Discretionary contributions accrued by the Company during fiscal years 1996,
1995 and 1994 amounted to $444,000, $275,000 and $45,000, respectively. The cost
of administering the plan is not significant.

9. COMMITMENTS

The Company leases office facilities under noncancelable operating leases
with terms ranging from one to five years which expire between March 7, 1997 and
August 11, 1999. Certain of the Company's facilities leases contain option
provisions which allow for extension of the lease terms. Rent expense was
$608,000, $493,000 and $387,000 in fiscal years 1996, 1995 and 1994,
respectively.

Future minimum lease payments are as follows:

<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
------------------------------------------------
<S> <C>
1997............................................ $ 655,000
1998............................................ 650,000
1999............................................ 335,000
2000............................................ 135,000
----------
$1,775,000
==========
</TABLE>

Additionally, the Company enters into long term purchase commitments with
certain of its vendors to purchase materials used to manufacture products
delivered under long term contracts. At March 31, 1996, the Company had
commitments to purchase $2,689,000 and $11,000 of materials in fiscal 1997 and
1998, respectively. Purchases under these contracts totaled $692,000 during the
year ended March 31, 1996.

10. SUBSEQUENT EVENTS (UNAUDITED)

In July 1996, the Company granted certain officers and employees the
opportunity to purchase 118,607 shares of the Company's Common Stock at $4.09
per share.

F-14
<PAGE> 72

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................... 3
Prospectus Summary......................... 4
Risk Factors............................... 7
Capitalization............................. 16
Use of Proceeds............................ 16
Dividend Policy............................ 16
Dilution................................... 17
Selected Financial Data.................... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 19
Business................................... 26
Management................................. 44
Certain Transactions....................... 49
Principal and Selling Stockholders......... 50
Description of Capital Stock............... 52
Shares Eligible for Future Sale............ 54
Underwriting............................... 55
Legal Matters.............................. 56
Experts.................................... 56
Glossary of Selected Terms................. 57
Index to Financial Statements.............. F-1
</TABLE>

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

UNTIL DECEMBER 28, 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
2,200,000 SHARES

LOGO

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

PROSPECTUS
-------------------
OPPENHEIMER & CO., INC.

NEEDHAM & COMPANY, INC.
UNTERBERG HARRIS

DECEMBER 3, 1996

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