SIGNAL TECHNOLOGY CORP, S-3, 2000-08-02

SIGNAL TECHNOLOGY CORP
S-3, 2000-08-02
INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 2000

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

SIGNAL TECHNOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 04-2758268
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>

222 ROSEWOOD DRIVE
DANVERS, MA 01923
(978) 774-2281
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GEORGE E. LOMBARD
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
SIGNAL TECHNOLOGY CORPORATION
222 ROSEWOOD DRIVE
DANVERS, MASSACHUSETTS 01923
(978) 774-2281
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:

<TABLE>
<S> <C>
ROGER D. FELDMAN, ESQ. CAMERON READ, ESQ.
TYCHO H. E. STAHL, ESQ. FREDERICK P. CALLORI, ESQ.
BINGHAM DANA LLP CHOATE, HALL & STEWART
150 FEDERAL STREET EXCHANGE PLACE
BOSTON, MA 02110 53 STATE STREET
(617) 951-8000 BOSTON, MA 02109
(617) 248-5000
</TABLE>

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

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]

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

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

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

<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share............ 2,330,000 $20.00 $46,600,000 $12,500
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Selling Shareholders........ 200,000 $20.00 $4,000,000 $1,200
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</TABLE>

(1) Includes 330,000 shares of common stock that the underwriters have the
option to purchase from Signal solely to cover over-allotments, if any.

(2) Estimated solely for the purpose of determining the registration fee.
Calculated in accordance with Rule 457(c), based on the offering of up to
2,530,000 shares at a purchase price of $20.00 per share, which is the
average of high and low prices reported in the consolidated reporting system
of the Nasdaq National Market on July 27, 2000. It is not known how many
shares will be purchased under this Registration Statement or at what price
such shares will be purchased.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2

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

SUBJECT TO COMPLETION, DATED AUGUST 2, 2000
PROSPECTUS

2,200,000 SHARES

SIGNAL TECHNOLOGY CORPORATION (LOGO)

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

Signal Technology Corporation is offering 2,000,000 shares of common stock.
Our common stock is listed on the Nasdaq National Market under the symbol
"STCO." On July 27, 2000, the closing sale price of the common stock, as
reported on the Nasdaq National Market, was $20.00 per share.

Of the 2,200,000 shares of common stock offered, we are offering 2,000,000
shares and two selling shareholders are, in the aggregate, offering 200,000
shares of common stock. We will not receive any of the proceeds from the shares
sold by the selling shareholders.

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

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
------------------------

We have granted the underwriters a 30-day option to purchase up to an
additional 330,000 shares of common stock to cover over-allotments assuming the
sale by the selling shareholders, in the aggregate, of 200,000 shares of common
stock.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.

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

NEEDHAM & COMPANY, INC.

FERRIS, BAKER WATTS, INCORPORATED TUCKER ANTHONY CLEARY GULL

The date of this prospectus is August , 2000
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 4
Forward-Looking Statements.................................. 14
Use of Proceeds............................................. 14
Dividend Policy............................................. 14
Price Range of Common Stock................................. 15
Capitalization.............................................. 16
Selected Consolidated Financial Data........................ 17
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 18
Business.................................................... 23
Management.................................................. 35
Principal and Selling Stockholders.......................... 38
Underwriting................................................ 40
Legal Matters............................................... 41
Experts..................................................... 42
Where You Can Find More Information......................... 42
Information We are Incorporating By Reference............... 43
</TABLE>

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

In this prospectus, "Signal," "we," "us" and "our" refer to Signal
Technology Corporation and our subsidiaries on a consolidated basis. "STC" and
"Signal Wireless Group" are our trademarks. All other trademarks, servicemarks
or trade names referred to in this prospectus are the property of their
respective owners.

You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized anyone to provide you with
information different from that contained in this prospectus. This prospectus is
not an offer to sell or a solicitation of an offer to buy our common stock in
any jurisdiction where it is unlawful. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of common stock. This
preliminary prospectus is subject to completion prior to this offering. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of common stock.

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<PAGE> 4

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information and the other information, financial statements and notes thereto
appearing elsewhere in this prospectus. Except as otherwise indicated, the
information in this prospectus assumes the underwriters do not exercise their
over-allotment option and assumes any outstanding options to purchase shares of
common stock have not been exercised.

THE COMPANY

We design, manufacture and market power management products and
sophisticated electronic radio frequency, or RF, components and subsystems that
are used in broadband wireless equipment, digital cellular/PCS wireless
infrastructure equipment and defense applications. Our products enable the
transmission and reception of data signals in wireless systems worldwide. Our
commercial customers integrate our products into wireless systems, which are
then sold to wireless service providers throughout the world. Applications for
our products include point-to-point transport, point-to-point access, point-to-
multipoint access, cellular backhaul and digital cellular/PCS base stations.
Selected commercial customers include Digital Microwave, Giganet, Helioss,
P-Com, Sagem, Siemens, Spectrian and Witcom. Selected defense customers include
Boeing, British Aerospace, Lockheed Martin, Northrop Grumman, Raytheon and TRW.

Our defense electronics technology, manufacturing skill and focus on
quality have allowed us to rapidly expand into the commercial wireless market.
Our defense electronics experience includes over 20 years of proven expertise in
the design, development, manufacture and marketing of sophisticated RF,
microwave and millimeter wave electronic components. These components and
subsystems are used for applications such as radar, communications and smart
weapons and contain vital technology to receive, transmit and process wireless
data signals. This technology is directly applicable to commercial wireless
communications. After one year of implementing our strategic vision to diversify
into the commercial broadband wireless infrastructure market, we have both a
rapidly growing backlog and a worldwide customer list.

The market for broadband wireless equipment is characterized by the
increasing demand for high speed Internet access and other data services due to
the proliferation of mobile voice and wireless Internet appliances. The increase
in the usage of wireless devices is driving the expansion and development in the
wireless infrastructure equipment industry. Strategies Unlimited, a market
research firm specializing in wireless communications, estimates that the number
of mobile phone users will grow from 313 million in 1998 to approximately 1.3
billion in 2004. It is estimated in the Modoff and Toll Report that wireless
infrastructure equipment sales for products such as base stations, cell site
equipment and switch equipment sales will grow from $35.1 billion in 1998 to
$75.2 billion in 2003.

Existing telecommunications solutions such as copper wire, cable and fiber
have certain limitations, including the high cost of infrastructure deployment
and slow data transmission rates. These limitations have helped to propel the
increasing demand for broadband wireless access service. New fixed-access
wireless technology offers quality of service comparable to land-line
alternatives, but at data transmission speeds significantly faster than copper
wire networks or coaxial cable. In addition, wireless solutions can be deployed
in a much shorter time and at a significantly lower cost than fiber optic
solutions.

Our products cover the entire frequency spectrum from RF, at 900Mhz and
1.8Ghz for cellular and PCS applications, through microwave frequencies, 2.4Ghz
through 18Ghz, and to millimeter wave frequencies, 20Ghz through 40Ghz. This
capability allows us to address global opportunities in both fixed wireless
broadband access applications as well as mobile wireless applications.

We intend to become the supplier of choice for OEMs in the wireless
communications infrastructure market and to major defense contractors. We plan
to accomplish this goal through the following strategy:

-- leverage our success in the broadband wireless point-to-point market
to expand into the rapidly growing point-to-multipoint market;
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-- extend our military electronics technology and expertise into
commercial markets;

-- build upon our success in wireless mobile infrastructure Power
Combiner/Switch products to capture a greater percentage of the
electronic content of base stations;

-- increase our penetration of top tier wireless OEMs;

-- expand our manufacturing excellence and "lean enterprise" operations;

-- pursue strategic alliances and acquisitions to develop next
generation products and technology; and

-- continue significant investment in research and development.

Our principal executive offices are located at 222 Rosewood Drive, Danvers,
Massachusetts 01923, and our telephone number is (978) 774-2281.

THE OFFERING

Common stock offered by Signal... 2,000,000 shares

Common stock offered by the
selling shareholders............. 200,000 shares

Common stock to be outstanding
after the offering............... 9,845,137 shares

Use of proceeds.................. General corporate and working capital
purposes, including without limitation to
finance one or more potential acquisitions
that we may decide to undertake from time
to time in the future and to retire certain
outstanding balances under a revolving
credit agreement.

Nasdaq National Market........... STCO

The number of shares to be outstanding immediately after this offering is
based on the number of shares outstanding as of June 30, 2000, and excludes
shares that may be issued by us under the following plans:

-- 1,621,625 shares of common stock issuable by us pursuant to stock
options granted under the Amended and Restated 1992 Equity Incentive
Plan at a weighted average exercise price of $7.73 per share, and
41,667 shares of common stock issuable by us pursuant to stock
options granted under the 1982 Equity Incentive Plan at a weighted
average exercise price of $1.82 per share;

-- 426,404 shares of common stock reserved for issuance pursuant to
stock options that may be granted by us in the future pursuant to the
Amended and Restated 1992 Equity Incentive Plan; and

-- 127,664 shares of common stock reserved for future issuance under our
Employee Stock Purchase Plan.
------------------------

Unless otherwise indicated, all information contained in this prospectus:

-- Assumes that the underwriters do not exercise their over-allotment
option; and

-- Assumes that the selling shareholders will sell 200,000 shares of
common stock as described herein.

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<PAGE> 6

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------------- -----------------
1995 1996 1997 1998 1999 1999 2000
------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Net sales..................... $89,728 $113,064 $102,239 $92,083 $82,449 $41,370 $43,351
Gross profit.................. 19,677 24,044 17,992 13,880 26,234 12,031 14,749
Income (loss) from
operations(1)............... 1,040 4,252 76 (6,600) 5,565 1,748 2,456
Net income (loss)............. (269) 1,698 (657) (7,173) 4,476 1,464 959
======= ======== ======== ======= ======= ======= =======
Earnings (loss) per common
share(1):
Basic....................... $ (0.04) $ 0.24 $ (0.09) $ (0.97) $ 0.59 $ 0.19 $ 0.12
======= ======== ======== ======= ======= ======= =======
Diluted..................... $ (0.04) $ 0.22 $ (0.09) $ (0.97) $ 0.56 $ 0.18 $ 0.11
======= ======== ======== ======= ======= ======= =======
Shares used in per share
calculations:
Basic....................... 6,880 7,076 7,268 7,365 7,587 7,544 7,789
Diluted..................... 6,880 7,676 7,268 7,365 7,986 7,922 8,806
</TABLE>

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(1) In 1995, includes restructuring expense of $779 or $(0.07) per share.

<TABLE>
<CAPTION>
JUNE 30, 2000
----------------------
ACTUAL AS ADJUSTED
------- -----------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 1,331 $29,141
Working capital............................................. 16,219 53,529
Total assets................................................ 65,418 93,228
Long-term debt.............................................. 5,678 5,678
Total shareholders' equity.................................. 33,838 71,148
</TABLE>

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RISK FACTORS

You should carefully consider the following risks before making an
investment decision in our common stock. The risks described below are not the
only ones that we face. Additional risks and uncertainties not presently known
to us or that are currently deemed immaterial may also impair our business
operations. If any of the following risks actually occur, our business,
operating results or financial condition could be materially adversely affected.
This could cause the market price of our common stock to decline and could cause
you to lose all or part of your investment. You should refer to the other
information included in this prospectus and the other information, our financial
statements and the related notes incorporated by reference into this prospectus
before you decide to purchase shares of our common stock.

This prospectus contains forward-looking statements that involve risks and
uncertainties, such as statements of our plans, objectives, expectations and
intentions. Our actual results could differ materially from those anticipated in
the forward-looking statements for many reasons, including the factors described
below and elsewhere in this prospectus. You should not place undue reliance on
these forward-looking statements.

OUR EFFORTS TO EXPAND OUR COMMERCIAL BUSINESS MAY CAUSE OUR REVENUE AND
PROFITABILITY TO FLUCTUATE.

Our business has historically focused on designing, developing and
manufacturing sophisticated electronic components and subsystems that are used
in defense, space and telecommunications applications. More recently, however,
we have targeted the commercial wireless communications markets, and, in the
past year, we have begun to compete in the broadband wireless infrastructure
marketplace with our acquisition of substantially all of the assets of Advanced
Frequency Products LLC in December 1999. We believe that our future growth
depends on our continued success in this and other commercial markets. Our
strategy and, consequently, our revenues and profitability, could be negatively
impacted if commercial markets do not grow at all or as quickly as anticipated,
or if we experience difficulties in adapting to competitive conditions in
commercial markets.

Some of the commercial markets in which we sell products have only recently
begun to develop. For instance, commercial wireless communications equipment
markets have just begun to emerge in recent years and are still evolving.
Because these markets and applications for our products are relatively new, it
is difficult to predict the rate at which these segments will grow, if at all.
Existing or potential applications for our products may fail to develop or may
erode for many different reasons including, without limitation:

-- insufficient economic growth to support expensive infrastructure
equipment;

-- insufficient consumer demand for wireless products or services
because of pricing, other risks identified below, or other or unknown
risks; and

-- real or perceived security risks associated with wireless
communications, such as privacy of data and eavesdropping.

OUR DEPENDENCE ON SUPPLIERS AND CONTRACT MANUFACTURERS TO DELIVER KEY COMPONENTS
MAY AFFECT OUR ABILITY TO DELIVER PRODUCTS TO OUR CUSTOMERS IN A TIMELY MANNER
WHICH MAY RESULT IN LOST REVENUES AND CONFIDENCE IN US BY OUR CUSTOMERS.

We rely on outside suppliers and contract manufacturers that in some
instances are single or limited sources for key components that we need to
produce our products. If we lose one or more of these sources, we could be
delayed in, or even prevented from, delivering our products to our customers and
our customer relations and business would suffer as a result. If supply delays
and shortages of certain key components persist, we may experience an
interruption in production until we locate alternative sources of supply or we
may even be forced to adjust our product designs and production schedules.
Because of a worldwide demand for and shortage of certain components, some
suppliers have begun to limit the number of components that we may purchase.
These components include chip components and other products necessary for the
production of our products. If we are not able to obtain sufficient allocations
of these
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components, our production and shipment of product will be delayed, we may lose
customers and our profitability will be affected.

Other risks relating to our reliance on contract manufacturers and on sole
suppliers include reduced control over production costs, delivery schedules,
reliability and quality of materials. The inability to obtain timely deliveries
of acceptable quality materials, or any other circumstances that would require
us to seek alternative contract manufacturers or suppliers, could adversely
affect our ability to deliver products to our customers. In addition, if costs
for our contract manufacturers or suppliers increase, we may suffer losses if we
are unable to recover such cost increases under fixed price production
commitments to our customers.

INTENSE COMPETITION AMONG TECHNOLOGY COMPANIES FOR EXPERIENCED ENGINEERS AND
OTHER PERSONNEL MAY AFFECT OUR ABILITY TO SUSTAIN OUR GROWTH EXPECTATIONS.

We depend on, and must attract and retain, competent personnel in all areas
of our business, including management, engineering, manufacturing, quality
assurance, finance, marketing and support. Especially our development efforts
depend on hiring and retaining qualified engineers. We believe that our
engineers, including highly skilled microwave engineers with the skills
necessary to develop products for wireless communications, are in high demand.
We may not be able to hire and retain these personnel at compensation levels
consistent with our existing compensation and salary structure. If we are unable
to hire a sufficient number of engineering personnel, we may be unable to
support the growth of our business, and as a result, our sales may suffer.

WE DEPEND ON THE CONTINUED CONTRIBUTIONS OF OUR EXECUTIVE OFFICERS AND OTHER KEY
MANAGEMENT, EACH OF WHOM WOULD BE DIFFICULT TO REPLACE.

The loss of any of our executive officers or other key management,
including particularly our Chairman and CEO, George Lombard, our President and
Chief Operating Officer, James DiLorenzo, and our Vice President, Treasurer and
Chief Financial Officer, Robert Nelsen, would disrupt our operations and divert
the time and attention of our remaining officers. We do not have employment
contracts with our key executives nor have we purchased "key-person" insurance
on the lives of any of our key officers or management personnel to cushion the
blow to our company that the loss of any of them would cause.

CUSTOMER ORDER ESTIMATES MAY NOT BE INDICATIVE OF ACTUAL FUTURE SALES.

Some of our customers have provided us with forecast estimates of their
requirements for our products over a period of time. We make a number of
management decisions based on these customer estimates, including our purchase
of materials, hiring of personnel and other matters that may increase our
production capabilities and costs. If a customer reduces its orders from prior
estimates after we have increased our production capabilities and costs, this
reduction may decrease our revenue and we may not be able to reduce our costs to
account for this reduction in customer orders.

WE RELY ON A SMALL NUMBER OF SIGNIFICANT CUSTOMERS.

Our sales have historically come mainly from contracts with agencies of,
and contractors to, the U.S. government. Additionally, approximately 18%, 23%
and 20% of our net sales were attributable to Raytheon in the years ended,
respectively, December 31, 1999, 1998 and 1997. Variations in the demand for our
products by any of these direct and indirect customers could have a serious,
adverse impact on our performance. If we were to lose any of these or any other
major customers, or if orders by any major customer were otherwise to be delayed
or reduced, including reductions due to market or competitive conditions in
commercial markets or further decreases in government defense spending, then our
business, operating results, revenues, profitability and financial condition
would be harmed.

THE MARKETS IN WHICH WE OPERATE ARE EXTREMELY COMPETITIVE.

Our historical defense markets and our more recent commercial markets are
characterized by rapid technological change as new products are generally
developed quickly and industry standards are constantly
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<PAGE> 9

evolving. Thus, our products can become obsolete over a short period of time
unless we succeed in remaining technologically innovative and in anticipating
new market demands. As a result, price competition is intense and market prices
and profit margins frequently decline once competitors begin offering similar
products. We believe that we will need to invest significant financial resources
in research and development in order to remain competitive.

The defense industry in particular has experienced substantial
consolidation due to declining defense budgets and increasing pressures for cost
reductions, both of which factors have substantially increased competitive
pressures and introduced delays in contract funding and awards into our
historical markets in the defense industry. We also expect that competition for
original equipment manufacturer business will increase due to the emergence of
merchant suppliers. Our ability to compete for defense contracts largely depends
on the following factors:

-- the effectiveness and innovations of our research and development
programs;

-- our ability to offer better performance than our competitors at a
lower cost to the U.S. government; and

-- the readiness of our facilities, equipment and personnel to undertake
the programs for which we compete.

Some of our current and potential competitors have to varying degress
greater technical, financial, marketing, distribution and other resources than
we have. They also may have greater name recognition and market acceptance of
their products and technologies. Our competitors, or the competitors of our
customers, may develop new technologies, enhancements to existing products, or
new products that offer superior price or performance features. Any such new
products or technologies could render our products or the systems of our
customers into which our products are integrated obsolete.

OUR EXPANSION OF PRODUCT LINES AND OF OUR CUSTOMER BASE COULD CAUSE PROBLEMS IN
OUR MANAGEMENT OF GROWTH.

Our business is expected to grow in size and complexity and we plan to
continue to expand our product lines and customer base. This growth and
expansion will place increasing demands on our management and operations,
particularly as we continue to seek out new commercial markets. Our ability to
compete effectively and to manage future growth will depend on our ability to
implement and improve operating and financial systems on a timely basis. We may
not be able to manage our future growth effectively, which could adversely
affect our financial performance.

PRESSURE BY OUR CUSTOMERS TO REDUCE PRICES AND AGREE TO LONG-TERM SUPPLY
ARRANGEMENTS MAY CAUSE OUR REVENUES OR PROFIT MARGINS TO DECLINE.

Our customers are under pressure to reduce prices of their products and,
therefore, we expect to continue to experience pressure from our customers to
reduce the prices of our products. Our customers frequently negotiate supply
arrangements with us well in advance of delivery dates, thereby requiring us to
commit to price reductions before we can determine if we can achieve the assumed
cost reductions. We believe we must reduce our manufacturing costs and obtain
higher volume orders to offset declining average sales prices. If we are unable
to offset declining average selling prices, our gross profit margins will
decline.

WE DEPEND ON COMMERCIAL OEMS AND DEFENSE CONTRACTORS TO OUTSOURCE PRODUCTS WE
PRODUCE AND WE ARE VULNERABLE IF THEY WERE TO DEVELOP THEIR OWN IN-HOUSE
CAPABILITIES.

Our primary current competitors are captive manufacturing operations of our
customers that are large wireless infrastructure OEMs and defense prime
contractors. We believe that our future success depends largely on the extent to
which OEMs and defense contractors elect to purchase integrated components and
subsystems from outside sources such as us. Our customers could develop greater
internal capabilities and

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<PAGE> 10

manufacture products in-house that we currently sell to them, which would
substantially reduce our sales and customer base.

THE FAILURE OF OUR CUSTOMERS TO SELL PRODUCTS INTO WHICH OUR PRODUCTS AND
COMPONENTS ARE INCORPORATED WOULD HARM OUR SALES, PARTICULARLY AS WE MUST OFTEN
MAKE A LARGE, UP-FRONT ENGINEERING INVESTMENT TO CUSTOMIZE MANY OF OUR PRODUCTS
FOR OUR CUSTOMERS.

Our products and components are generally custom designed for use in our
customers' products. As a result, we sell our products to a relatively small
group of customers and our products must be specifically engineered for each
customer, requiring a considerable up-front investment by us in each customer.
We often make significant investments in the design and engineering of new
products for customers without any commitment by the customer for the future
purchase of the products. If we do not receive initial or follow-on orders for
products we design, our profitability will be affected because those costs would
not be offset by additional revenues. While we select our customers based on our
assessment of their ability to succeed in the marketplace, we can not be sure
that they will succeed. If our customers do not succeed, we may be required to
reengineer the product. If so, the length of time required to reengineer our
product for another customer may delay our sales or prohibit us from getting our
products to the marketplace in a timely manner or at all.

HISTORICALLY WE HAVE DERIVED OVER 80% OF OUR NET SALES FROM DIRECT AND INDIRECT
SALES TO THE GOVERNMENT, PARTICULARLY IN THE DEFENSE SECTOR, WHICH ENTAIL
CERTAIN SPECIAL RISKS.

The reduction in the U.S. defense budget in the early 1990s has caused most
defense-related government contractors to experience declining revenues,
increased pressure on operating margins and, in some cases, net losses. As a
substantial majority of our sales are still directly and indirectly made to the
government, we thus have faced, and may continue to face in the future, a
shrinking market for a substantial portion of our products. Indeed, our
businesses taken as a whole have experienced a substantial decline in sales
during this period. A significant further decline in U.S. military expenditures
in the future could thus continue to adversely affect our sales and earnings.
The loss or significant cutback of a large program in which we participate could
also materially adversely affect our future sales and earnings and thus our
ability to meet our financial obligations.

Companies that supply defense-related and other equipment and services to
government agencies are subject to certain special business risks. These risks
include the ability of the U.S. government to:

-- suspend us from receiving new contracts pending resolution if we were
found in violation of procurement laws or regulations;

-- terminate existing contracts;

-- audit our contract-related costs and fees, including allocated
indirect costs; and

-- control and potentially prohibit the export of our products.

The U.S. government may terminate any or all of our contracts either for
its convenience or if we, or the prime contractor to whom we sell our products,
default. Termination for convenience provisions provide only for our recovery of
costs incurred or committed, settlement expenses and profit on work completed
prior to termination. Termination for default provisions provide for the
contractor to be liable for excess costs incurred by the U.S. government in
procuring undelivered items from another source. U.S. government contracts are
also conditioned on continuing funding approval by Congress. Congress usually
appropriates funds for a given program on a fiscal-year basis even when contract
performance takes more than one year. Consequently, major programs are usually
only partially funded in the beginning and additional monies are normally
committed only if, as and when appropriated by Congress for future fiscal years.
The U.S. government may review our costs, performance, accounting and general
business practices. The U.S. government may, based on the results of its review
or audits, adjust our contract-related costs and fees, including allocated
indirect costs. In addition, under U.S. government purchasing regulations
provide that some of our costs related to government contracts, including
certain financing costs, goodwill,
7
<PAGE> 11

portions of research and development costs and certain marketing expenses may
not be reimbursable. As a government contractor, we are also subject to
investigation, legal action and/or liability that would not apply to general
commercial contracts. Foreign defense contracts often contain similar provisions
relating to termination at the convenience of the government. Government
contracts are also often subject to the following additional risks:

-- the frequent need to bid on programs in advance of the completion of
their design, which may result in unforeseen technological
difficulties and/or cost overruns;

-- investments of substantial time and effort for relatively
unproductive design and development;

-- design complexity and rapid obsolescence; and

-- the constant need for design improvement.

We obtain many of our U.S. government contracts through a competitive
bidding process. We cannot assure you that we will continue to win competitively
awarded contracts or that awarded contracts will generate sufficient sales to
result in our profitability.

FIXED-PRICE CONTRACTS ARE COMMON IN ALL OF OUR MARKETS AND MAY INCREASE RISKS OF
COST OVERRUNS AND PRODUCT NON-PERFORMANCE.

Our customers set demanding specifications for product performance,
reliability and cost. Most of our customer contracts are firm, fixed price
contracts providing for a predetermined fixed price for the products we make,
regardless of the costs we incur. Thus, we must make pricing commitments to our
customers based on our expectation that we will achieve more cost effective
product designs and automate more of our manufacturing operations. The
manufacture of our products requires a complex integration of demanding
processes involving unique technical skill sets. We face risks of cost overruns
or order cancellations if we fail to achieve forecasted product design and
manufacturing efficiencies or if products cost more to produce than expected.
The expense of producing products can rise due to increased cost of materials,
components, labor, capital equipment or other factors. We may have cost overruns
or problems with the performance or reliability of our products in the future.

LACK OF PATENT PROTECTION ON OUR PRODUCTS AND TECHNOLOGY MAY ALLOW COMPETITORS
TO DEVELOP SIMILAR PROPRIETARY PRODUCTS OR TECHNOLOGY.

We do not hold patents on most of our significant products and processes.
We rely on a combination of trade secrets, copyrights and trademarks and
employee and third party nondisclosure agreements, in addition to relying on
some patent rights, to protect our intellectual property rights. We also limit
access to and distribution of proprietary information. The steps that we have
taken to protect our intellectual property rights may not be adequate to prevent
misappropriation of our technology or to preclude competitors from independently
developing similar technology.

OUR PRODUCTS MAY CONTAIN UNDETECTED OR UNRESOLVED DEFECTS WHEN SOLD OR MAY NOT
MEET OUR CUSTOMERS' PERFORMANCE CRITERIA.

Our standard product warranties run for 12 months. If our products do not
perform as warranted and we do not resolve product quality or performance issues
in a timely manner, we may lose sales or be forced to pay damages. Additionally,
our customers may uncover latent design defects in our products which were not
apparent at the time the product was sold. This type of defect may be discovered
after the warranty period has expired. A performance failure due to a design
defect may cause loss of customers, damage to our reputation for delivering high
quality products, delay in or loss of market acceptance, additional warranty
expense or product recall. There is a risk that we may be required to repair or
replace a substantial number of products in use or to reimburse customers for
products that fail to work or meet strict performance criteria for unforeseen
reasons. In addition, because our products are sold and marketed in different
countries, our products must function in and meet the requirements of many
different

8
<PAGE> 12

environments and be compatible with various systems, regulations and products.
Any failure on our part to meet our customers' performance requirements could
hurt our sales.

WE MAY NOT SUCCEED IN ESTABLISHING MANUFACTURING CAPACITY NEEDED TO MEET GROWTH
OF OUR COMMERCIAL BUSINESS.

The dynamics of the commercial wireless market generally require the
ability to produce a high volume of products in a short time relative to
products that we produce for the defense electronics industry. As a result of
expected growth in our commercial wireless business, we are significantly
increasing our manufacturing capacity. Higher volume manufacturing generally
requires greater automation in order to be cost effective. We may not be able to
automate sufficiently in order to fulfill high volume production orders in a
cost effective manner. If we can not manufacture our products in the future at
volumes, yields or cost levels necessary to meet our customers' needs, we may
lose customers and our sales, revenues and profitability will suffer. In
addition, we can give no assurance that we will obtain a sufficient amount of
high volume orders to absorb the capital costs incurred in increasing our
automation.

OUR PRODUCTION SCHEDULES AND MANUFACTURING PROCESSES MAY CAUSE FLUCTUATIONS IN
QUARTERLY RESULTS.

Our quarterly results have varied significantly in the past and are likely
to continue to vary significantly due to a number of factors including the
following:

-- our ability to obtain components and subassemblies from contract
manufacturers and suppliers;

-- timing, cancellation or rescheduling of customer estimates for
product, customer orders and shipments;

-- pricing and mix of products sold;

-- our receiving, or not, follow-on orders after the initial order, or
high-volume orders, that allow us to recover engineering costs and
other initial investments that we must make to produce our
highly-customized products for our customers;

-- introduction of new products; and

-- variations in manufacturing efficiencies.

Any one of these factors could substantially affect our results of
operations for any particular fiscal quarter. Additionally, we have entered into
more defense industry development contracts as a source of defense revenues
owing to the decline in the number of defense industry production programs.
Development contracts are contracts for the development of products, rather than
for the production of products, and they tend to be fixed price contracts that
generally result in lower gross profit margins than production contracts. As a
result, our increased reliance on development contracts has led to increased
quarterly fluctuations in sales and gross profit margins. Accordingly, our
comparative performance from one fiscal quarter to the next is not necessarily
an accurate indicator of our future performance.

OUR EXCLUSIVE ARRANGEMENTS WITH SOME CUSTOMERS MAY RESTRICT OUR ABILITY TO
PURSUE MARKET OPPORTUNITIES AND MAY RESULT IN LOSS OF REVENUES.

We have granted some of our customers exclusivity on specific products,
which means that we are only permitted to sell those specially engineered
products to then. We expect that in some cases our existing customers and new
customers may require us to give then exclusivity on new products that we make
for them, which may force us to forego opportunities to supply these products to
other prospective customers. In addition, if we enter into exclusive
relationships with customers who are unsuccessful, our revenues will be
negatively affected. We may not be able to establish business relationships
with, or negotiate acceptable arrangements with significant customers in the
future. Also, our current or future arrangements with significant customers may
not continue or be successful.

9
<PAGE> 13

OUR SUCCESS IN PURSUING SALES IN INTERNATIONAL MARKETS MAY BE LIMITED BY RISKS
RELATED TO INTERNATIONAL TRADE AND MARKETING AND MAY GIVE RISE TO COSTS AND
RISKS SPECIFIC TO THOSE MARKETS.

For the fiscal year ended December 31, 1999, approximately 21% of our
revenue was derived from sales to foreign customers. Some of our U.S.-based
customers may also integrate our products into products that they sell into
foreign markets. Adverse international economic conditions or developments have
and could in the future negatively affect our direct sales and sales by our
customers into these markets, which would impact our revenues.

In addition to the uncertainty as to our ability to maintain and expand our
international presence, there are certain risks inherent in foreign operations,
including:

-- delays in or prohibitions on exporting products resulting from export
restrictions for certain products and technologies;

-- risks of fluctuating foreign exchange rates;

-- loss of revenue, property and equipment from expropriation,
nationalization, war, insurrection, terrorism and other political
risks;

-- divergent and sometimes lower degrees of intellectual property
protection afforded by foreign laws;

-- inability on our part to gain export, import or other government
licenses we may need in order to export our products from the U.S.
and deliver then to our foreign customers, without which licenses
some of our products can not legally be exported from the U.S.;

-- overlap of different tax structures;

-- seasonal reductions in business activity; and

-- risks of increases in taxes and other government fees.

We seek to expand our presence in international wireless communications and
related markets by entering into partnerships or alliances with OEMs and service
providers in those countries and acquiring complementary international business.
We have had limited experience in partnering with international entities and
managing international operations. Our success in increasing our international
market presence depends on many factors, including the success of our domestic
operations, level of funding, stability of our stock price, ability to produce
competitive international products, attraction and retention of key employees at
our international locations and our execution of strategic objectives.

NEW GOVERNMENT REGULATIONS COULD INTERFERE WITH OUR BUSINESS GROWTH.

Our commercial products are incorporated into wireless communications
systems that are regulated domestically by the FCC and internationally by other
government agencies. Typically, service providers and end-users of our products
are responsible for compliance with these regulations. However, regulatory
changes, including changes in the allocation of available frequency spectrum,
could negatively affect our business by restricting development efforts by our
customers, making our current products obsolete or increasing the opportunity
for additional competition. Our sales will be adversely affected if our
manufactured products fail to comply with all applicable domestic and
international regulations.

Delays inherent in the governmental approval process have in the past
caused, and may in the future cause, cancellation, postponement or rescheduling
of the installation of communications systems by our customers. This in-turn may
have a negative impact on the sale of our products to these customers. In
addition, the increasing demand for wireless communications has exerted pressure
on regulatory bodies world-wide to adopt new standards for such products. The
approval of new standards generally follows extensive investigation of and
deliberation over competing technologies.

10
<PAGE> 14

WE ARE REQUIRED TO MAINTAIN A U.S. GOVERNMENT FACILITY SECURITY CLEARANCE AT
EACH OF OUR LOCATIONS.

Our security clearance could be suspended or revoked if we are found not to
be in compliance with applicable security regulations. Any such revocation or
suspension would delay our delivery of our products to customers. Although we
have adopted policies directed at assuring our compliance with applicable
regulations and there have been no suspensions or revocations of any of our
facilities, there can be no assurance that the approved status of our facilities
will continue without interruption. U.S. government regulations require a
license for the export of advanced weapons systems. Changes in U.S. government
policies towards the export of these systems may impact our international
business.

IF WE ARE AUDITED BY U.S. GOVERNMENT AGENCIES, WE COULD INCUR SIGNIFICANT
EXPENSES AND EXPERIENCE DISRUPTION OF OUR BUSINESS.

As a contractor participating in the defense industry, we are subject to
audit from time to time for our compliance with government regulations by
various agencies including the following:

-- the Defense Contract Audit Agency;

-- the Defense Security Service;

-- the Office of Federal Contract Compliance Programs; and

-- the Defense Supply Center Columbus.

These and other governmental agencies may from time to time investigate a
broad range of our activities. For example, the SEC is conducting an informal
inquiry arising from our restatement in 1998 of our financial statements for
1996, 1997 and the first quarter of 1998. See "Business -- Legal Proceeding --
SEC Investigation." Responding to governmental audits, inquiries or
investigations may involve significant expense and divert management attention.
Also, an adverse finding in any such audit, inquiry or investigation could
involve fines, injunctions or other sanctions.

ENVIRONMENTAL REGULATIONS MAY INCREASE OUR OPERATION COSTS OR DECREASE OUR
SALES.

We are subject to many environmental regulations by local, state, federal
and foreign governments. These regulations govern storage, discharge, handling,
emission, generation, manufacture and disposal of toxic or other hazardous
substances used to manufacture our products. If we fail to comply with current
or future regulations, the following adverse effects could occur:

-- we could be forced to alter manufacturing processes;

-- we could be fined substantial amounts;

-- our production could be suspended; or

-- we could be forced to cease operations.

We are currently the subject of environmental claims which, if determined
adversely to us, could have serious adverse consequences for our business. See
"Business -- Legal Proceedings."

PUBLIC CONCERN OVER HEALTH RISKS POSED BY WIRELESS DEVICES MAY DECREASE DEMAND
FOR SUCH PRODUCTS.

News reports have asserted that power levels associated with handheld
cellular telephones and related infrastructure equipment may pose certain health
risks. If wireless communications equipment or other devices that incorporate
our products were determined or perceived to create a significant health risk,
the market for our products could be significantly impacted. Moreover, we could
be named as defendants in product liability lawsuits brought by governments,
businesses or consumers if such a health risk were determined or perceived to
exist, which could impose defense costs upon us and divert management's
attention from our business. Any such actions could impose additional costs upon
us if any court decision or other determination were to be adverse to us.

11
<PAGE> 15

WE MAY ENCOUNTER DIFFICULTIES IN EFFECTIVELY INTEGRATING ACQUIRED BUSINESSES.

As part of our business strategy, we intend to augment our technology base
by acquiring specialized technology firms and we may use a portion, or all, of
the proceeds of this offering to fund such acquisitions. Historically, we have
acquired a number of companies and have had some difficulties integrating those
companies into our business. These and any future acquisitions we make will be
accompanied by the risks commonly encountered in acquisitions of companies which
include, among other things:

-- potential exposure to unknown liabilities of acquired companies;

-- higher than anticipated acquisition costs and expenses;

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

-- potential disruption of our ongoing business and diversion of
management time and attention;

-- failure to maximize our financial and strategic position by the
successful incorporation of acquired technology;

-- difficulties in adopting and maintaining uniform standards, controls,
procedures and policies;

-- loss of key employees and customers as a result of changes in
management; and

-- possible dilution to our shareholders.

We may not be successful in overcoming these risks or any other problems
encountered in connection with any of our acquisitions. We may make a strategic
acquisition knowing that the transaction may adversely affect our short-term
profitability, perhaps because the acquisition candidate may be experiencing
operating losses. We may believe that the strategic opportunity of acquiring
such a company outweighs the operating losses the candidate is experiencing and
that we expect to experience before being able to return the acquisition
candidate to profitability. The completion of such an acquisition in the future
would negatively affect our profitability and may cause a decline in our stock
price.

WE WERE NOT IN COMPLIANCE WITH A COVENANT IN OUR REVOLVING CREDIT AGREEMENT AT
JUNE 30, 2000.

At June 30, 2000, we were not in compliance with the interest coverage
covenant of our revolving credit agreement with a bank. We obtained a waiver of
such non-compliance from the bank for the quarter ended June 30, 2000. We are
currently negotiating a new revolving credit arrangement and expect to be in
compliance with all covenants in the future. If we are out of compliance with
these covenants and are unable to obtain waivers from our lenders, the revolving
credit agreement would be in default and could be called by the lenders. At June
30, 2000, we had borrowed $9.5 million under the revolving credit agreement.

IF INFRINGEMENT CLAIMS ARE BROUGHT AGAINST US IN THE FUTURE, WE COULD BE
REQUIRED TO PAY SUBSTANTIAL ROYALTIES AND OTHER COSTS.

If a third party were to be successful in a claim that one of our products
infringed the third party's proprietary rights, we might have to pay substantial
royalties or damages or remove that product from the marketplace. We might also
have to expend substantial financial and engineering resources in order to
modify the product so that it would no longer infringe on those proprietary
rights. As to some of our products, we have agreed to indemnify our customers
against possible claims by third parties that the products infringe their
intellectual property rights. In the future, third parties may assert
infringement claims against us or with respect to our products. Asserting our
rights or defending against third party claims could involve substantial costs
and diversion of resources.

12
<PAGE> 16

OUR STOCK PRICE HAS FLUCTUATED SIGNIFICANTLY AND MAY CONTINUE TO DO SO.

The market price of our common stock, like the stock prices of many of our
competitors, is subject to wide fluctuations in response to a variety of
factors, including:

-- actual or anticipated operating results;

-- announcements of technological innovations;

-- announcements of new products or new contracts by us, our competitors
or customers;

-- government regulatory action;

-- developments with respect to wireless telecommunications; and

-- general market conditions and other factors.

In addition, the stock market has from time to time experienced significant
price and volume fluctuations. These fluctuations have particularly affected the
market prices for the stocks of technology companies and have often been
unrelated to the operating performance of particular companies.

MANAGEMENT WILL HAVE BROAD DISCRETION OVER THE USE OF PROCEEDS OF THE OFFERING.

Our management will have significant flexibility in applying the net
proceeds of this offering and will have the ability to change the application of
the proceeds of this offering without shareholder approval. Consequently, you
will be relying on the judgment of our management regarding the application of
the proceeds of this offering.

13
<PAGE> 17

FORWARD-LOOKING STATEMENTS

This prospectus contains and incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
may be identified or qualified by words such as "likely," "will," "suggests,"
"may," "would," "could," "should," "expects," "anticipates," "estimates,"
"plans," "projects," "believes," or similar expressions and variants of those
words or expressions.

Forward-looking statements necessarily involve risks and uncertainties, and
our actual results could differ materially from those anticipated in the
forward-looking statements due to a number of factors, including those set forth
above under "Risk Factors" and elsewhere in this prospectus. The factors set
forth above in the "Risk Factors" section and other cautionary statements made
in this prospectus should be read and understood as being applicable to all
related forward-looking statements wherever they appear in this prospectus. The
forward-looking statements contained in this prospectus represent our judgment
as of the date of this prospectus. We caution readers not to place undue
reliance on such statements. We undertake no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.

Information regarding market and industry statistics contained in this
prospectus is included based on information available to us that we believe is
accurate. It is generally based on academic and other publications that are not
produced for purposes of securities offerings or economic analysis. We have not
independently verified that data and cannot assure you of the accuracy of the
data we have included.

USE OF PROCEEDS

We expect to receive net proceeds of $37,310,000 from the sale of 2,000,000
shares of our common stock in this offering, or $43,540,400 if the underwriters'
over-allotment option is exercised in full, assuming a public offering price of
$20.00 per share and after deducting the estimated underwriting discounts and
commissions and the estimated offering expenses payable by us. We intend to use
the net proceeds of this offering for general corporate and working capital
purposes. We also may use a portion of the net proceeds of this offering to (1)
acquire or invest in businesses, products, services or technologies
complementary to our current business, through mergers, acquisitions, joint
ventures or otherwise, and (2) repay indebtedness incurred under a revolving
credit agreement expiring on September 30, 2000, which is subject to varying
interest rates which, as of June 30, 2000, was 10.0%. Accordingly, we will
retain broad discretion as to the allocation of the net proceeds of this
offering. Pending application of any of the proceeds to any specific uses, we
intend to invest the net proceeds of this offering in short-term,
interest-bearing investment grade securities. We will not receive any of the
proceeds from any shares sold by the selling shareholders. We have agreed to pay
the expenses, other than the underwriting discounts, relating to the sale of
these shares.

DIVIDEND POLICY

We have never declared or paid cash dividends on our capital stock and do
not anticipate paying any dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to operate and expand our business.
Our payment of any future dividends will be at the discretion of our board of
directors after taking into account various factors, including our financial
condition, operating results, cash needs and growth plans. Our bank term loan
contains a restrictive covenant that prohibits us from paying cash dividends or
making stock redemptions or repurchases without the prior written consent of the
lender bank.

14
<PAGE> 18

PRICE RANGE OF COMMON STOCK

Our common stock is traded on the Nasdaq National Market under the symbol
"STCO." The following table sets forth, for the periods indicated, the high and
low closing prices per share of our common stock as reported on the Nasdaq
National Market.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Year Ended December 31, 1998:
First Quarter............................................. $ 7.00 $ 4.75
Second Quarter............................................ 6.50 5.25
Third Quarter............................................. 6.38 3.50
Fourth Quarter............................................ 3.50 2.50

Year Ended December 31, 1999:
First Quarter............................................. $ 4.75 $ 2.56
Second Quarter............................................ 5.88 3.69
Third Quarter............................................. 5.75 5.00
Fourth Quarter............................................ 9.63 4.00

Year Ending December 31, 2000:
First Quarter............................................. $27.50 $ 7.00
Second Quarter............................................ 26.63 14.75
Third Quarter (through July 27, 2000)..................... 25.00 17.20
</TABLE>

On July 27, 2000, the last reported sale price of our common stock on the
Nasdaq National Market was $20.00 per share. As of July 27, 2000, there were
approximately 85 stockholders of record of the common stock.

15
<PAGE> 19

CAPITALIZATION

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

- on an actual basis; and

- on a pro forma as adjusted basis to also give effect to the sale of
2,000,000 shares of common stock in this offering at an assumed public
offering price of $20.00 per share and after deducting the estimated
underwriting discounts and commissions and the estimated offering
expenses that we will pay, and the application of the estimated net
proceeds as described under "Use of Proceeds."

This table should be read in conjunction with our consolidated financial
statements and related notes incorporated by reference in this prospectus.

<TABLE>
<CAPTION>
JUNE 30, 2000
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt and current portion of long-term debt....... $10,158 $ 658
======= =======
Long-term debt, net of current portion...................... 5,678 5,678
Stockholders' equity:
Preferred Stock; $.01 par value; authorized shares,
5,000,000, no shares issued and outstanding............ -- --
Common Stock, $.01 par value; authorized shares,
30,000,000; 7,997,237 shares issued and 7,845,137
shares outstanding; 9,997,237 shares issued and
9,845,137 shares outstanding as adjusted............... 80 102
Additional paid-in capital................................ 14,858 52,146
Retained earnings......................................... 19,800 19,800
Less treasury stock: 152,100 shares....................... (900) (900)
------- -------
Total stockholders' equity........................ 33,838 71,148
------- -------
Total capitalization.............................. $39,516 $76,826
======= =======
</TABLE>

The table above excludes:

- 1,621,625 shares of common stock issuable by us pursuant to stock options
granted under the Amended and Restated 1992 Equity Incentive Plan at a
weighted average exercise price of $7.73 per share, and 41,667 shares of
common stock issuable by us pursuant to stock options granted under the
1982 Equity Incentive Plan at a weighted average exercise price of $1.82
per share;

- 426,404 shares of common stock reserved for issuance pursuant to stock
options that may be granted by us in the future pursuant to the Amended
and Restated 1992 Equity Incentive Plan; and

- 127,664 shares of common stock reserved for future issuance under our
Employee Stock Purchase Plan.

16
<PAGE> 20

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data should be read in conjunction with
the "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus and our financial statements
and related notes incorporated by reference into this prospectus. The selected
financial data set forth below with respect to statements of operations for each
of the fiscal years in the three year period ended December 31, 1999 and with
respect to the balance sheets at December 31, 1998 and 1999, are derived from
the audited financial statements. These financial statements are incorporated by
reference into this prospectus and the data below are qualified by reference to
those financial statements and related notes. The statement of operations data
for the fiscal years ended December 31, 1995 and 1996 and the balance sheet data
at December 31, 1995, 1996 and 1997 are derived from audited financial
statements not incorporated by reference into this prospectus. The statements of
operations data for the six months ended June 30, 1999 and June 30, 2000, and
the balance sheet data at June 30, 2000 are derived from unaudited financial
statements which are incorporated by reference into this prospectus. The
unaudited financial statements include all adjustments, consisting only of
normal recurring adjustments, which we consider necessary for a fair
presentation of our financial position and the results of operation for these
periods. Operating results for the six months ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ended December 31, 2000.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------- -----------------
1995 1996 1997 1998 1999 1999 2000
------- -------- -------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net sales............................. $89,728 $113,064 $102,239 $92,083 $82,449 $41,370 $43,351
Cost of sales......................... 70,051 89,020 84,247 78,203 56,215 29,339 28,602
------- -------- -------- ------- ------- ------- -------
Gross profit........................ 19,677 24,044 17,992 13,880 26,234 12,031 14,749
Operating expenses:
Selling, general and
administrative.................... 16,248 19,270 17,139 20,206 18,883 9,458 11,003
Research and development............ 1,610 522 777 274 1,786 825 1,290
Restructuring charge................ 779 -- -- -- -- -- --
------- -------- -------- ------- ------- ------- -------
Operating income (loss)............... 1,040 4,252 76 (6,600) 5,565 1,748 2,456
Other expenses........................ -- -- -- -- 1,250 -- 276
Interest expenses..................... 1,163 1,345 1,070 897 368 252 517
------- -------- -------- ------- ------- ------- -------
Income (loss) before income
taxes............................... (123) 2,907 (994) (7,497) 3,947 1,496 1,663
Provision (benefit) for income
taxes............................... 146 1,209 (337) (324) (529) 32 704
------- -------- -------- ------- ------- ------- -------
Net income (loss)..................... $ (269) $ 1,698 $ (657) $(7,173) $ 4,476 $ 1,464 $ 959
======= ======== ======== ======= ======= ======= =======
Basic net income (loss) per
share............................... $ (0.04) $ 0.24 $ (0.09) $ (0.97) $ 0.59 $ 0.19 $ 0.12
======= ======== ======== ======= ======= ======= =======
Diluted net income (loss) per share... $ (0.04) $ 0.22 $ (0.09) $ (0.97) $ 0.56 $ 0.18 $ 0.11
======= ======== ======== ======= ======= ======= =======
Shares used in calculating net income
(loss) per share
Basic............................... 6,880 7,076 7,268 7,365 7,587 7,544 7,789
Diluted............................. 6,880 7,676 7,268 7,365 7,986 7,922 8,806
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 2000
------------------
AS
1995 1996 1997 1998 1999 ACTUAL ADJUSTED
------- -------- -------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and Cash Equivalents............. $ 1,584 $ 1,870 $ 1,127 $ 2,366 $ 3,571 $ 1,331 $29,141
Working Capital....................... 30,739 31,031 29,039 19,701 13,616 16,219 53,529
Total Assets.......................... 66,117 65,644 62,840 48,983 57,601 65,418 93,228
Long-term debt........................ 17,283 13,408 13,408 9,928 5,573 5,678 5,678
Total Shareholders' equity............ 31,944 34,362 34,274 26,487 31,686 33,838 71,148
</TABLE>

17
<PAGE> 21

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

The following discussion of our financial condition and results of
operations should be read together with our supplemental consolidated financial
statements included elsewhere in this prospectus. This discussion contains
forward-looking statements which involve risks and uncertainties. Our actual
results could differ materially from those anticipated in the forward-looking
statements as a result of certain factors, including but not limited to those
discussed in "Risk Factors" and elsewhere in this prospectus.

OVERVIEW

Our principal business is the design, development and manufacture of power
management products and electronic radio frequency components and subsystems
that are used in broadband wireless equipment, digital cellular/PCS wireless
infrastructure equipment and defense applications. We were incorporated in 1982
and have traditionally been a supplier to the defense industry. Our
sophisticated RF, microwave and millimeter wave electronic components are used
in applications such as radar, communications, smart weapons and contain vital
technology to receive, transmit and process wireless data signals. Our
experience in designing, manufacturing and marketing wireless equipment for the
demanding defense industry has positioned us well to effectively penetrate the
commercial broadband wireless market.

In the past two years we have introduced a new management team to Signal
including all corporate-level management. The new management team's initial
focus was to implement financial controls and operating procedures addressing
problems that became apparent during an internal investigation. The
investigation resulted in our fiscal years being restated for 1996, 1997 and the
first quarter ending March of 1998 in order to record contract revenue and
inventory adjustments in the correct periods. The new management team has
focused on developing and implementing our strategic initiative to grow our
business in the commercial wireless market.

We have been active in the pursuit and acquisition of complementary
businesses over the years. Most recently, in December of 1999, we acquired
Advanced Frequency Products, or AFP, which provided us with an entry into the
rapidly growing broadband wireless millimeter wave communications market. AFP is
currently a division of the Signal Wireless Group and their products focus on
the commercial wireless industry.

We report net sales in four segments, each of which focuses on different
segments of the respective commercial and military markets for our products.

- Signal Wireless Group. Designs and manufactures commercial wireless
products for the telecommunications industry.

- Microwave Components and Subsystems. Designs and manufactures microwave
oscillators, frequency synthesizers and converters, space qualified
microwave assemblies, microwave amplifiers and microwave switch matrices.

- Power Management Products. Designs and manufactures military high and
low voltage power suppliers, DC to DC converters and military high power
amplifiers and transmitters for use in radar systems.

- RF Components & Subsystems. Designs and manufactures RF and intermediate
frequency signal processing components, integrated multi-function
devices, and switching systems.

We recognize our net sales on a percentage of completion basis generally
using units of delivery as the basis to measure the contract work which has been
completed. For the fiscal year ending 1999, shipments within the United States
represented approximately 79% of our net sales, with 21% of net sales from
international customers. With the exception of Raytheon, which accounted for
18%, 23%, and 20% of our net sales in 1999, 1998 and 1997, respectively, we
believe that the loss of any single customer would not have a material adverse
effect on us.

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<PAGE> 22

RESULTS OF OPERATIONS

The following table sets forth the percentage of net sales of certain items
in our consolidated financial statements for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------- --------------
1997 1998 1999 1999 2000
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales...................................... 82.4% 84.9% 68.2% 70.9% 66.0%
----- ----- ----- ----- -----
Gross profit..................................... 17.6% 15.1% 31.8% 29.1% 34.0%
Operating expenses:
Selling, general and administrative expenses..... 16.8% 21.9% 22.9% 22.9% 25.4%
Research and development expenses................ 0.8% 0.3% 2.2% 2.0% 3.0%
----- ----- ----- ----- -----
Operating income (loss)............................ 0.1% (7.2)% 6.7% 4.2% 5.7%
Other expenses..................................... 0.0% 0.0% 1.5% 0.0% 0.6%
Interest expenses.................................. 1.0% 1.0% 0.4% 0.6% 1.2%
----- ----- ----- ----- -----
Income (loss) before income taxes.................. (1.0)% (8.1)% 4.8% 3.6% 3.8%
Provision (benefit) for income taxes............... (0.3)% (0.4)% (0.6)% 0.1% 1.6%
----- ----- ----- ----- -----
Net income (loss).................................. (0.6)% (7.8)% 5.4% 3.5% 2.2%
===== ===== ===== ===== =====
</TABLE>

SIX MONTHS ENDED JUNE 30, 2000 VS. SIX MONTHS ENDED JUNE 30, 1999

Net sales. Net sales increased 4.8% from $41.4 million during the first
six months of 1999 to $43.4 million during the similar period in 2000. The
primary reason for the increase was the addition of $4.5 million in commercial
wireless equipment sales from the Signal Wireless Group. The net sales to the
defense electronics market were down 6.5% due to delays in new orders and delays
in completion of development contracts.

Gross profit. Gross profit increased 22.6% from $12.0 million during the
first six months of 1999 to $14.8 million during the similar period in 2000. As
a percentage of net sales, gross profit increased from 29.1% in 1999 to 34.0% in
2000. The increase in gross profit is primarily attributable to streamlining of
operations, improvements in financial controls, changes in product mix and
increased sales volume.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased 16.3% from $9.5 million during the first six
months of 1999 to $11.0 million during the similar period in 2000. The increase
is partially a result of higher additional selling, general and administrative
expenses associated with the Signal Wireless Group and the acquisition of
Advanced Frequency Products. The expenses associated with AFP include the
amortization of intangible assets. Additionally, there was a non-cash stock
option compensation expense of $300,000 related to stock options granted to
non-employees.

Research and development expenses. Research and development increased
56.4% from $825,000 during the first six months of 1999 to $1.3 million during
the similar period in 2000. In 2000 our management team has continued to
increase research and development expenditures as part of our new focus on the
commercial wireless industry and to produce technology upgrades to existing
equipment.

Other expenses. Other expenses were $276,000 during the first six months
of 2000 and were related to the proposed acquisition of LogiMetrics Inc.'s
high-power amplifier business. We have notified LogiMetrics of our intent to
exercise our option to return the Bohemia, New York business back to
LogiMetrics. We are in discussions with LogiMetrics concerning terms and
conditions under which we may retain the Bohemia, New York business. Whether we
retain the business in question or not, we expect no material financial impact
on our financial results. A $2.0 million note receivable was collected on July
25, 2000 including $85,000 of interest.

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<PAGE> 23

Interest expense. Interest expense increased by 105.2% from $252,000
during the first six months of 1999 to $517,000 during the similar period in
2000. The increase is due to an increased level of borrowings at higher interest
rates.

Provision for income taxes. Income taxes were $32,000 during the first six
months of 1999 compared to $704,000 during the similar period in 2000. The
$32,000 in taxes paid was the alternative minimum tax as the majority of taxable
income was offset by tax benefits.

FISCAL YEAR ENDED DECEMBER 31, 1999 VS. FISCAL YEAR ENDED DECEMBER 31, 1998

Net sales. Net sales decreased 10.5% from $92.1 million during fiscal 1998
to $82.5 million during fiscal 1999. Backlog increased to $83.4 million at the
end of 1999 from $64.8 million at the end of 1998 on orders of $95.2 million in
1999 compared to $68.2 million in 1998. A reduction in orders during the last
six months of 1998 at the Microwave and RF components and subsystems business
was the primary reason for the overall decreased net sales in 1999. The decrease
in orders and delayed orders produced lower backlog at the beginning of 1999 and
subsequently lower net sales.

Gross profit. Gross profit increased 89.0% from $13.9 million during
fiscal year 1998 to $26.2 million during fiscal year 1999 and as a percentage of
net sales, gross profit increased from 15.1% in 1998 to 31.8% in 1999. Gross
profit was adversely affected during 1998 by contract adjustments and inventory
write-downs at our Keltec operation and also our Microwave Components and
Subsystems business. In addition, in 1999 we began to recognize the benefits of
the implementation of new financial and manufacturing controls.

Selling, general and administrative expenses. Selling, general and
administrative expenses decreased 6.5% from $20.2 million during fiscal year
1998 to $18.9 million during fiscal 1999. The $1.3 million decrease is primarily
due to a reduction in commissions and selling expenses.

Research and development expenses. Research and development increased
551.8% from $274,000 during 1998 to $1.8 million during 1999. During fiscal year
1999, our management team made the decision to increase research and development
expenditures as part of our new focus on the commercial wireless industry.

Other expenses. Other expenses were $1.3 million during fiscal year ending
1999 and were related to an agreement-in-principle to settle a pending class
action suit against us.

Interest expense. Interest expense decreased 59.0% from $897,000 the
fiscal year ended 1998 compared to $368,000 during the similar period in 1999.
The decrease is due to pay down of our revolving credit facility. Total debt
decreased to $9.2 million at fiscal year ending 1999, from $10.4 million at the
end of 1998.

Provision for income taxes. The benefit for income taxes in 1998 was
$324,000 compared to an income tax benefit of $529,000 during 1999. The 1999
benefit for income taxes primarily relates to the full reversal of the valuation
allowance on the deferred tax assets, which we believe is more likely than not
to be realized, based on our earnings performance.

FISCAL YEAR ENDED DECEMBER 31, 1998 VS. FISCAL YEAR ENDED DECEMBER 31, 1997

Net sales. Net sales decreased 10.0% from $102.2 million during fiscal
year ended 1997 to $92.1 million in 1998. Backlog decreased from $88.7 million
at the end of 1997 to $64.8 million at the end of 1998 on orders of $101.9
million in 1997 compared to $68.2 million in 1998. A reduction in orders was the
primary reason for the decreased net sales in 1998. Our orders were moderately
affected by economic conditions in Asia. Government sanctions placed on certain
shipments to India and Pakistan have also delayed or cancelled shipments and
postponed new orders.

Gross profit. Gross profit decreased 22.9% from $17.9 million during
fiscal year 1997 to $13.9 million during fiscal year 1998 and as a percentage of
net sales, gross profit decreased from 17.6% in 1997 to 15.1% in 1998. The
decrease in gross profit as a percentage of net sales was attributable to our
recognizing
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<PAGE> 24

losses on contracts and inventory write-downs taken at the Keltec operation and
to a lesser extent the Microwave Components and Subsystems business.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 17.9% from $17.1 million during fiscal year
ended 1997 to $20.2 million during 1998. The $3.1 million increase was in part
due to a charge we took for the environmental remediation cost at our facility
in Weymouth, Massachusetts due a settlement with the state of Massachusetts. In
addition, we recognized increased legal and accounting costs associated with our
restatement of 1996 and 1997 financial statements as well as expenses related to
the relocation of new executive employees and severance paid to former executive
employees.

Research and development expenses. Research and development expenses
decreased by 64.7% from $777,000 during fiscal year ended 1997 to $274,000
during 1998. We were not engaged in any significant company-funded research and
development efforts during the years 1998, 1997 or 1996.

Interest expense. Interest expense decreased 16.2% from $1.1 million the
fiscal year ended 1997 compared to $897,000 during the similar period in 1998.
The decreased interest expense reflects slightly lower interest rates and lower
levels of borrowings. Total debt decreased to $10.4 million at fiscal year ended
1998 from $13.9 million at the end of 1997.

Provision for income taxes. The benefit for income taxes in 1997 was
$337,000 compared to an income tax benefit of $324,000 during 1998.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2000, we had a working capital of $16.2 million, including cash
and cash equivalents of $1.3 million, as compared to working capital of $13.6
million and cash and cash equivalents of $3.6 million, respectively, at December
31, 1999. In the first six months of 2000, we borrowed under our revolving
credit facility $6.5 million increasing the amount borrowed to $9.5 million
under the facility. Net cash flow used by operations was $6.0 million for the
first six months of 2000 compared to $4.0 million net cash flow provided by
operations for the first six months of 1999. A $6.3 million increase in
inventory and a $2.2 million increase in accounts receivable, along with a $1.3
million payment associated with the shareholder lawsuit, are the primary reasons
for negative cash flow from operations during the first six months of 2000.

Our borrowing arrangement requires us to maintain certain minimum balances
and ratios, including the requirement to maintain a minimum tangible net worth.
We were in compliance with the net worth covenant at June 30, 2000. Our
borrowing arrangement also requires that we maintain an interest coverage ratio.
At June 30, 2000, we were not in compliance with the interest coverage covenant
and we obtained a waiver with respect to such non-compliance for the quarter
ending June 30, 2000. The revolving credit facility, which will expire September
30, 2000, is shown as a current liability.

On February 17, 2000, we entered into a non-binding letter of intent
pursuant to which we proposed to acquire LogiMetrics, Inc. We have loaned
approximately $2.0 million to LogiMetrics, Inc. for working capital and other
purposes, see Note 6. The $2.0 million note receivable is included in other
current assets on the June 30, 2000 balance sheet. On July 12, 2000, we
terminated discussions relating to the proposed acquisition of LogiMetrics, Inc.
We intend to exercise our option to return the Bohemia, New York business back
to LogiMetrics, Inc. The $2.0 million note receivable was collected on July 25,
2000 including interest of $85,000.

We continue to investigate acquisition opportunities in complementary
businesses, product lines and markets. We believe that we have adequate cash,
working capital and available financing to meet our operating and capital
requirements in the foreseeable future and to pursue acquisition opportunities.

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<PAGE> 25

ACCOUNTING PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "SAB 101", "Revenue Recognition in Financial
Statements." SAB 101 summarizes the SEC's view in applying generally accepted
accounting principles to selected revenue recognition issues. We will be
required to apply the SAB 101, as amended by SAB 101A and SAB 101B, in our
fourth quarter of the fiscal year 2000. The effects of this application, if any,
will be reported as a cumulative effect adjustment resulting from a change in
accounting principle. Our evaluation of SAB 101 is not yet complete.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not engage in trading of market risk sensitive instruments or
purchasing hedging instruments or "other than trading" instruments that are
likely to expose us to market risk, whether interest rate, foreign currency
exchange, commodity price or equity price risk. We have not purchased options or
entered into swaps or forward or futures contracts. Our primary market risk
exposure is that of interest rate risk on borrowings under our revolving credit
facility, which is subject to interest rates based on the bank's base rate plus
1/2%. We also have a collateralized real estate loan at the bank's base rate
and a change in the applicable interest rate on these loans would affect the
rate at which we could borrow.

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<PAGE> 26

BUSINESS

INTRODUCTION

We design, manufacture and market power management products and
sophisticated electronic radio frequency, or RF, components and subsystems that
are used in broadband wireless equipment, digital cellular/PCS wireless
infrastructure equipment and defense applications. Our products enable the
transmission and reception of data signals in wireless systems worldwide. Our
customers integrate our products into wireless systems, which are then sold to
wireless service providers throughout the world. Applications for our products
include point-to-point transport, point-to-point access, point-to-multipoint
access, cellular backhaul and digital cellular/PCS base station applications.
Selected commercial customers include Digital Microwave, Giganet, Helioss,
P-Com, Sagem, Siemens, Spectrian and Witcom. Selected defense customers include
Boeing, British Aerospace, Lockheed Martin, Northrop Grumman, Raytheon and TRW.

We have over 20 years of experience in the design, development, manufacture
and marketing of sophisticated RF, microwave and millimeter wave electronic
components used in the defense industry. Our components and subsystems are used
for applications such as radar, communications and smart weapons. The products
we have designed for the defense industry contain key technology to receive,
transmit and process wireless data signals. This technology is directly
applicable to commercial wireless communications. Our heritage of military
electronics technology, manufacturing skill and quality focus has allowed us to
rapidly expand into the commercial wireless market by leveraging our defense
electronic experience.

After only one year of implementing our strategic vision to diversify into
the commercial broadband wireless infrastructure market, we have both a rapidly
growing backlog and a worldwide customer list.

INDUSTRY BACKGROUND

GLOBAL DEMAND FOR BROADBAND ACCESS IS DRIVEN BY THE RAPID GROWTH IN HIGH
SPEED INTERNET ACCESS AND OTHER DATA SERVICES. The demand for data over the
Internet and other communications networks has grown dramatically. Both
consumers and businesses are increasingly using the Internet as a global
communications medium. Consumers use the Internet for an expanding number of
applications such as e-mail, audio, video, multimedia services, information
gathering and shopping. Businesses use the Internet to enhance their reach to
both residential and business consumers using applications such as electronic
commerce, global marketing, customer support, web-hosting, order fulfillment and
supply management. The Internet also enables access to corporate data networks,
including intranets and extranets, and facilitates communication among corporate
sites and telecommuters, or traveling employees. This increased usage requires
an expanded capacity for the quick and reliable transmission of voice, video and
data which can be efficiently accomplished through broadband access.

INCREASED GLOBAL DEMAND FOR MOBILE VOICE AND DATA WIRELESS SERVICE MANDATES
AN EXPANSION OF WIRELESS INFRASTRUCTURE THAT WILL REQUIRE TECHNOLOGY UPGRADES OF
NEW WIRELESS INFRASTRUCTURE EQUIPMENT. The rapid increase in the use of
wireless communications by consumers and businesses for telephony, paging and
low speed data signals over analog, cellular, digital cellular and digital PCS
systems is driving the expansion of wireless infrastructure. Strategies
Unlimited, a market research firm specializing in wireless communications,
estimates that the number of global cellular/PCS subscribers will grow from 313
million in 1998 to approximately 1.3 billion by 2004. Because each cellular or
PCS base station has a finite capacity, the demand created by increased
subscribers will require a substantial increase in capital investment in
wireless communications infrastructure equipment. It is also estimated that
sales of wireless base stations, cell site equipment and switch equipment will
grow from $35.1 billion in 1998 to $75.2 billion in 2003.

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<PAGE> 27

In response to both capacity and level of service demands, mobile service
providers are expanding their current infrastructure and implementing new
wireless technologies, such as third generation, or 3G, networks. Third
generation technology ultimately will replace first and second generation
technologies. The level of technology advancement used in wireless mobile
networks is generally grouped into the following three categories: (1) first
generation, or 1G, networks which feature analog technology that provides voice
and low speed data services; (2) second generation, or 2G, networks which
feature digital technology, including PCS, and (3) third generation, or 3G,
networks which feature increased capacity and data speeds that permit wireless
transmission of integrated voice, video and data traffic. Digital technology
provides network service providers and subscribers with advantages over analog
technology, including increased system capacity, secure voice communications,
short messaging service and other enhanced services. 3G technology can be
implemented with new infrastructure or as an equipment overlay to existing 2G
networks. Network service providers have begun to upgrade their networks to 3G
levels as regulatory agencies around the world have begun to license the
frequency band for this digital technology. For example, Japan has awarded 3G
licenses, and Europe and the U.S. are expected to follow over the next several
years.

CABLE AND FIBER OPTIC BROADBAND ACCESS IS COSTLY TO DEPLOY AND COPPER WIRE
HAS OTHER LIMITATIONS. There are presently three non-wireless technologies used
to provide broadband access by communication service providers; digital
subscriber lines which are enhanced copper wire lines, coaxial cables and fiber
optics.

-- Digital subscriber lines, or DSL, have a data transmission rate of up
to 1.5 million bits per second, or Mbps. While the necessary copper
infrastructure for DSL is already in place through existing telephone
copper wires, transmission rates and availability are limited by the
quality of the subscriber's existing copper wire infrastructure and
the distance from the telephone company switch.

-- Coaxial cable has a data transmission rate of up to 10 Mbps. As with
DSL, the basic analog cable infrastructure for residential use is
already in place. However, existing cable networks must be upgraded
to provide for two-way data transmission, and many businesses are not
currently wired for cable.

-- Fiber optic cable networks have data transmission rates of up to 10
billion bits per second, or Gbps, the fastest rate of any current
broadband access solution. However, fiber optic cable networks are
very expensive to deploy and may be too costly for the data
transmission needs of many subscribers.

To increase capacity, these land-line networks require right-of-way access
and involve a labor intensive process of physically laying wires or cables in
order to connect consumers to the network backbone. As a result of the
difficulties in deploying additional wires or cables, increased demand for
communication access may create a "last mile bottleneck" between subscribers and
the backbone of these land-line networks.

LIMITATIONS OF EXISTING ACCESS TECHNOLOGIES ARE DRIVING THE DEPLOYMENT OF
FIXED WIRELESS BROADBAND SOLUTIONS. New fixed access wireless technology offers
quality of service comparable to land-line alternatives at data transmission
speeds significantly faster than copper wire networks or coaxial cable. In
addition, wireless solutions are able to be deployed in a much shorter time and
at a much lower cost than fiber optic solutions. Broadband wireless solutions
now in deployment include point-to-point and point-to-multipoint technologies.

Point-to-point wireless systems generally have data transmission rates of
up to 155Mbps. Point-to-point systems have traditionally been deployed for high
capacity transport applications between two wireless telephone networks.
Recently, they have been used to interconnect digital cellular networks. Point-
to-point wireless networks can also provide a last-mile connection for high
capacity enterprises such as large office buildings, hospitals and universities.

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<PAGE> 28

Point-to-multipoint wireless systems have data transmission rates of up to
500Mbps shared among multiple end users by means of a single central hub radio.
One advantage of point-to-multipoint over point-to-point wireless systems is
reduced customer equipment costs. Additionally, allocation of bandwidth is based
on demand and, therefore, customers only pay for what they use. As a result,
point-to-multipoint systems can provide cost effective last-mile access to
customers that do not have as much traffic as point-to-point customers.

THE TELECOMMUNICATIONS MARKET REQUIRES RAPID PRODUCT DEVELOPMENT CYCLES AND
TIME-TO-MARKET IS A KEY COMPETITIVE ADVANTAGE THAT WIRELESS OEMS SEEK. As the
demand for wireless products such as cell phones and Internet appliances
increases and the competition among wireless telecommunications OEM providers
intensifies, so does the need for OEMs to introduce products more quickly and to
expand the capacity of their infrastructure. These OEMs subsequently place
pressures on their supply chain by requiring increasingly shortened development
times as well as considerable manufacturing capacity. Suppliers to these OEMs
must therefore have the operational efficiencies that allow them to design and
manufacture new products quickly and in volume.

THE SIGNAL SOLUTION

We design, manufacture and market sophisticated RF components and subsytems
that are used in broadband wireless equipment, digital cellular/PCS wireless
infrastructure equipment and defense applications. The following key elements of
our solution include a library of circuit designs, expertise in millimeter wave
frequency, a broad product offering and short cycle times in both product
development and manufacturing:

DESIGN EXPERTISE COUPLED WITH A LIBRARY OF RECONFIGURABLE AND REUSABLE
ELEMENTS LEADING TO RAPID DESIGN AND PROTOTYPE CAPABILITY. We have built a
library of application specific proprietary circuit designs that allows us to
rapidly and economically combine these circuits into custom subsystems that meet
our customers' application specific needs. This library of circuits allows us to
design products from customer concepts to working prototypes in very short
development cycle times for subsystems of this type.

Our broad RF, microwave and millimeter wave in-house design expertise
allows us to work with our customers in optimizing solutions for broadband
wireless systems and wireless infrastructure equipment. This design expertise
also allows rapid modification of the prototype for a robust design ready for
high volume manufacturing. We believe that this ability to migrate from
prototype to volume production in a short period of time is an important
competitive advantage in the wireless market.

BROAD PRODUCT PORTFOLIO OF COMPONENTS THAT CAN BE INTEGRATED INTO COMPLETE
RF OUTDOOR UNITS. We offer a broad range of products including microwave and
millimeter wave modules, integrated transceivers across the frequency spectrum
from 3.5Ghz to 40.0Ghz, synthesizers and Intermediate Frequency, or IF,
converter modules. We are also able to integrate these components into complete
RF outdoor units, or ODUs, and effectively execute the demanding and complex
test sequences required for high capacity digital radios. Our product portfolio
enables our customers to select products ranging from RF modules to complete
ODUs that complement and add to their internal capabilities.

DESIGN EXPERTISE IN THE MILLIMETER WAVE SPECTRUM. A considerable amount of
the growth in the broadband access market is occurring in frequency ranges
between 18Ghz to 40Ghz, or the millimeter wave region. Through our acquisition
of Advanced Frequency Products in December 1999 and our expertise in military
electronics, we believe that we are in a leadership position in this area due to
our ability to integrate our library of application-specific millimeter wave
circuit elements into complete product solutions for the customer. In contrast
to products in the lower frequency ranges, or the microwave region, millimeter
wave products are difficult to design because they require exacting tolerances
and performance specifications. The design of millimeter wave products also
requires a complete understanding of electromagnetic theory and of monolithic
microwave integrated circuits, or MMICs. We believe that our subsystems exhibit
the highest performance levels in the industry and that our robust designs allow
for high volume, high yield manufacturing.

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<PAGE> 29

DESIGN EXPERTISE IN COMPONENTS FOR BASE STATION INFRASTRUCTURE
EQUIPMENT. We have developed a family of Power Combiner/Switch products that
allow the manufacturers of cellular telephone base station equipment to
efficiently generate and manage the distribution of signal transmission power,
as well as provide redundancy in the event of an amplifier failure. Operating in
the lower microwave region of the spectrum, approximately 900Mhz and 1.9Ghz,
these products are characterized by extremely low signal loss, signal phase
balance, and the ability to handle RF power in excess of 500 watts. These
products are particularly suited to Code Division Multiple Access, or CDMA,
applications. We were able to rapidly apply our expertise in designing
ruggedized RF components and assemblies for demanding defense customers to the
design of circuitry for this commercial application. We have developed a
repeatable method of switching high power RF signals with minimum insertion
loss. Our patent-pending approach for balancing the phase characteristics has
been a valuable differentiator in our Power Combiner/Switch products. This
product family provides enhanced system reliability for our customers' installed
base station equipment and extremely low loss of signals for the demanding
wireless telecommunications equipment manufacturers.

OUR "LEAN ENTERPRISE" APPROACH RESULTS IN SHORT CYCLE TIMES, MANUFACTURING
AND OPERATIONAL EXCELLENCE AND OFFSHORE MANUFACTURING FOR SCALABILITY AND
REDUCED COST. Lean thinking maps the entire value stream for a product and
eliminates waste. These principles can have profound effects on an enterprise
including rapid product development and manufacturing cycle times, both of which
are highly valued by the telecommunications industry. Reduced inventory,
improved yield, lower labor and an empowered work force create significant
improvement in gross margin and cash flow.

The integration of our design and production process improves our ability
to address wireless equipment providers' quantity and time-to-market
requirements for our wireless component subsystems and ODUs. We believe our
in-house ability to design and manufacture our products in a modular fashion is
critical to our ability to introduce new products which meet the evolving needs
of our customers in a rapid and cost-effective manner. In order to speed
development time and reduce the costs of production, we employ concurrent
engineering techniques. These include the joint participation of our suppliers
and customers in product design and planning of the manufacturing process.

As part of our lean enterprise initiative, we have formed an alliance with
an assembly and test operation in Asia that has adopted the concepts we value in
manufacturing. This operation is capable of executing the entire manufacturing
process through assembly and test for the complex subsystem assemblies required
for our wireless products. As a result, we are able to rapidly respond to
fluctuations in the demand forecast from our customers and have demonstrated
high rate manufacturing with outstanding yields and product quality.

STRATEGY

Our vision is to leverage our recent success in the broadband wireless
point-to-point market and utilize our military electronics experience to become
the leading supplier of technologically superior and innovative products. We
intend to become the supplier of choice for OEMs in the wireless communications
infrastructure market and to major defense contractors, by the following
strategy:

LEVERAGE OUR SUCCESS IN THE BROADBAND WIRELESS POINT-TO-POINT MARKET TO
EXPAND INTO THE RAPIDLY GROWING POINT-TO-MULTIPOINT MARKET. We have won
significant contract awards from major wireless OEMs for products in the low,
mid and high capacity point-to-point radio market. We plan to build on this
success to expand into the point-to-multipoint broadband access market. Our
product portfolio and knowledge of point-to-point products, such as
transceivers, synthesizers and IF modules, can be readily adapted by our design
team to the point-to-multipoint market.

EXTEND OUR MILITARY ELECTRONICS TECHNOLOGY AND EXPERTISE INTO COMMERCIAL
MARKETS. The intellectual property, manufacturing skills and design expertise
gained from our defense heritage enable us to bring to the commercial wireless
market an unsurpassed product portfolio which spans the broadband wireless
frequency spectrum. From our experience in the defense industry, our staff of
design engineers has developed expertise in wireless telecommunications and
related leading-edge technologies. We intend to
26
<PAGE> 30

expand upon our core team of engineers to further penetrate the commercial
wireless communications equipment industry.

BUILD UPON OUR SUCCESS IN WIRELESS MOBILE INFRASTRUCTURE POWER
COMBINER/SWITCH PRODUCTS TO CAPTURE A GREATER PERCENTAGE OF THE ELECTRONIC
CONTENT OF BASE STATIONS. We offer Power Combiner/Switch products to CDMA base
station OEMs. We have successfully penetrated Tier I and Tier II customers who
supply base station equipment for the CDMA market. CDMA is the fastest growing
segment of the digital cellular/PCS mobile wireless market and is a key
technology for the third generation worldwide standard for mobile wireless
communications. We intend to expand our product offerings and increase our
marketing and key account management staff to capture a greater percentage of
the electronic content of the base station.

INCREASE PENETRATION OF TIER I WIRELESS OEMS. Most Tier I wireless
suppliers, such as Motorola, Ericsson, Lucent and Nokia, offer a wide range of
wireless equipment. This includes infrastructure for the mobile market,
infrastructure for the wireless broadband access and transport market and
cellular handsets and wireless Internet appliances. We have successfully
penetrated most Tier II and two Tier I wireless OEMs in both the wireless
broadband access and mobile wireless base station infrastructure markets. We
intend to use our Tier II wireless OEMs as reference accounts to expand our Tier
I presence globally. In addition, we plan to leverage our position at Tier I
accounts to expand our opportunities.

PURSUE STRATEGIC ALLIANCES AND ACQUISITIONS IN ORDER TO DEVELOP NEXT
GENERATION PRODUCTS AND TECHNOLOGY. In our highly competitive markets, it is
difficult for any one company to pursue a broad enough portfolio of intellectual
property to sustain a leadership position. To build upon our strong technology
position, we intend to form alliances with companies that possess key technology
and to augment our existing position by acquiring specialized technology
companies that complement our product offerings and market strategies. We will
pursue companies that add specific skills or expand our market position,
including companies that have a unique or complementary technology or product.

CONTINUE SIGNIFICANT INVESTMENT IN RESEARCH AND DEVELOPMENT. Research and
development alliances are key to our continuous product evolution and we will
continue to seek relationships to sustain and refresh our product portfolio. Our
R&D strategy will continue to focus on developing new products and new circuit
elements to add to our existing library. In addition, we intend to improve the
performance of our existing products and focus on new ways to use materials,
assembly technology and MMIC technology. A portion of our R&D budget will be
devoted to the development of "breakthrough technology" in order to further
position us as a technology leader in the commercial wireless market and in
selected areas of the defense electronics market.

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<PAGE> 31

PRODUCTS

We currently offer a wide range of products to serve the commercial
wireless and defense electronics markets. We categorize these products as
follows:

COMMERCIAL WIRELESS PRODUCTS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
PRODUCTS DESCRIPTION APPLICATION
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Single Components Basic building blocks for RF Perform elementary amplification
modules. single RF functions such as
isolation, amplification,
detection and conversion.
--------------------------------------------------------------------------------------------------------
IF & RF Modules Building blocks for radio Provide basic RF functions in
subsystems. They include low broadband wireless systems and
noise amplifiers, power are often used to rapidly
amplifiers, frequency converters develop product prototypes.
and frequency multipliers.
--------------------------------------------------------------------------------------------------------
Oscillators & Synthesizers Heart of all radio architectures Provide highly stable, tunable,
as they generate the prime RF low noise RF reference signals
frequency. enabling the receive and
transmit functions.
--------------------------------------------------------------------------------------------------------
Integrated Transceivers Combine the IF and RF receive Transmit and receive data in a
and transmit modules of a radio variety of broadband wireless
system into one package. applications.
--------------------------------------------------------------------------------------------------------
Outdoor Units, or ODUs Provide complete radio Used in nearly all types of
functionality in a single, broadband wireless systems as a
environmentally sealed package. complete RF subsystem in point
They include a transceiver to point and multipoint
module and associated applications.
electronics and control section.
ODUs transmit and receive RF
signals containing digital data
to and from one or more other
outdoor units.
--------------------------------------------------------------------------------------------------------
Power Combiner/Switches Combine the output power from Deployed in mobile wireless
separate highly linear basestations in cellular and PCS
transmitters to obtain the telecommunication networks.
necessary transmit power.
--------------------------------------------------------------------------------------------------------
</TABLE>

28
<PAGE> 32

DEFENSE PRODUCTS

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
PRODUCTS DESCRIPTION APPLICATION
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RF, microwave and millimeter wave Frequency and power determinate Perform the elementary functions
components, including oscillators, components that are the basic such as isolation, amplification,
amplifiers, switches, filters, building blocks for RF and microwave switching, filtering, signal
mixers, doublers, discriminators, modules and assemblies. detection and frequency and power
detectors, isolators, circulators, steering and conversion in military
power dividers and combiners multi-function assemblies.
------------------------------------------------------------------------------------------------------------------
Frequency Synthesizers and Assemblies and their integrated RF, Perform the critical frequency
Converters microwave and millimeter wave steering, determination and
components, with associated conversion functions used in
electronic control circuits that military Multi-Function Assemblies,
perform frequency and power or MFAs, and subsystems.
determinate functions, conversion,
steering and control.
-------------------------------------------------------------------------------------------------------------------
MFAs and Microwave Integrated Combine the function of RF, When integrated with other MFAs/
Assemblies, or MIAs microwave and millimeter wave MIAs, form the subsystems for
components and in most cases military electronic applications.
frequency synthesizers or oscillator Applications include Electronic
assemblies and converters with Warfare, or EW, Radar, ELINT,
associated control electronics to COMINT, IFF, missile and
perform a high level of frequency communications systems.
determinate conversion and control,
power steering and management
functions.
-------------------------------------------------------------------------------------------------------------------
Power Supplies and DC/DC, AC/DC, Perform the electronic voltage and Provides power to electronic
DC/AC Power Converters direct/alternating current and power devices, assemblies, subassemblies,
steering, conversion, amplification, subsystems and systems. All military
filtering and control function airborne, ground-based, space-based,
required to power all electronics. and sea- based, defense electronics
require these assemblies to operate.
-------------------------------------------------------------------------------------------------------------------
TWTA, Traveling Wave Tube Integrated power supply electronics Many military airborne,
Amplifiers and microwave power amplifiers. They ground-based, space-based, and
perform the electronic voltage and sea-based, defense electronics
direct/alternating current and power require these types of assemblies.
steering, conversion, amplification,
filtering and control function
driving power amplifiers. These
assemblies provide the output power
for transmitters.
-------------------------------------------------------------------------------------------------------------------
Transmitters Integrated power supply electronics, Military airborne, ground-based,
TWTAs. power amplifiers, MFAs and RF space- based, and sea-based, defense
and microwave components. They electronics require use of these
perform function of transmitting the assemblies.
frequency and power for systems.
-------------------------------------------------------------------------------------------------------------------
IF/HF/UHF Matrix Switches and Integrated signal switching When integrated with other MFAs/
Filters components and assemblies coupled MIAs, form the subsystems of
with associated control and electronic subsystems and systems.
management electronics. They perform Applications include Secure
RF, IF, HF, UHF and microwave Communications, COMINT, EW, Radar,
multi-path signal frequency steering and ELINT systems.
and filtering.
-------------------------------------------------------------------------------------------------------------------
</TABLE>

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<PAGE> 33

CUSTOMERS

We sell our commercial wireless communications products primarily to OEMs,
that in turn integrate our products into wireless infrastructure equipment
solutions sold to network service providers. In addition, we also sell certain
niche products directly to network service providers. Some of our customers for
commercial wireless subsystems include the following:

<TABLE>
<S> <C>
- Alcatel - Sagem
- Digital Microwave - Siemens
- Giganet - Spectrian
- Helioss - Tadiran
- P-Com - Witcom
</TABLE>

We also offer our defense electronics equipment to major U.S. defense prime
contractors for integration into larger systems. Some of our customers for
defense electronics equipment include the following:
<TABLE>
<S> <C>
- Boeing - Northrop Grumman
- British Aerospace - Raytheon
- Harris - TRW
- Lockheed Martin
</TABLE>

Our principal defense customers are prime contractors and military agencies
of the U.S. government and certain foreign countries. With the exception of
Raytheon, which accounted for 18%, 23%, and 20% of our net sales in 1999, 1998,
and 1997, respectively, we believe that the loss of any single customer would
not have a material adverse effect on our sales.

SALES AND MARKETING

We market our products worldwide through our own domestic sales force and a
network of knowledgeable independent sales representatives and distributors. Our
sales force is comprised of divisional marketing vice presidents, regional sales
managers, sales personnel and support staff.

Our sales managers are responsible for coordinating the independent sales
representatives and have extensive knowledge of government and commercial
programs within their respective regions. They also advise our engineering,
manufacturing and management personnel of anticipated trends and the
requirements of our customers.

The key to our sales and marketing strategy is to develop long-term
relationships with our customers and to have our products designed into our
customers' systems. This is achieved by regular communications and meetings
between our personnel at all levels and our counterparts in the customer's
organization. We actively seek to form strategic alliances with our customers
through volume purchase agreements.

MANUFACTURING

We believe that a principal reason for our success is the quality of our
product design, engineering, manufacturing and testing capabilities. These
capabilities enable us to design and engineer products that meet or exceed our
customers' demanding specifications for performance and reliability and to
manufacture the products at competitive prices.

Since our founding in 1982, we have been manufacturing products for the
defense industry. As a supplier to the defense industry, we are subject to its
rigorous specifications. We adhere closely to the principles of total quality
management, and we are ISO-9001 certified.

30
<PAGE> 34

We practice what we consider to be proprietary methods for the high volume
design, production and testing of wireless subsystems and outdoor units. Our
concurrent processes and automated component assembly and test enable us to
achieve high volume, high quality production while providing competitive
solutions for our customers. We maintain engineering product design and related
support systems at each of our operating facilities. In addition, as part of our
lean enterprise initiative, we have formed an alliance with an assembly and test
operation in Asia that has adopted the concepts we value in manufacturing. This
operation is capable of executing the entire manufacturing process through
assembly and test for the complex subsystem assemblies required for our wireless
products. As a result, we are able to rapidly respond to fluctuations in the
demand forecast from our customers and have demonstrated high rate manufacturing
with outstanding yields and product quality.

We attempt to utilize standard parts and components that are available from
multiple vendors. However, certain components used in our products are available
from only single sources, and other components are available from only a limited
number of sources. Despite the risks associated with purchasing components from
single sources or from a limited number of sources, we have made the strategic
decision to select single source or limited source suppliers in order to obtain
higher quality goods and lower pricing, and to receive more timely delivery and
maintain quality control.

BACKLOG

At June 30, 2000, we had a backlog of unshipped orders of $94.7 million,
comprised of $23.0 million of commercial wireless backlog and $71.7 million of
defense backlog. At June 30, 1999, we had a backlog of unshipped orders of $76.8
million, comprised of $1.0 million of commercial wireless backlog and $75.8
million of defense backlog. We expect to ship all of the June 30, 2000 backlog
within 2000, except for approximately $46.1 million, comprised of $13.6 million
of commercial wireless backlog and $32.5 million of defense backlog, which will
be shipped in later periods.

COMPETITION

We compete in the global commercial wireless industry. In the commercial
market our primary competitors include Anaren, Celeritek, Dover Industries,
Endwave, M/A-Com, MTI, REMEC and SPC Electronics.

Reduced spending by the U.S. government and many of its allies has
intensified competition in defense electronics. In the defense market, we
compete with Filtronics, Herley, M/A-Com, REMEC, and Stellex.

We believe competition in both the commercial and defense segments is based
primarily on price, product performance, reliability and customer support, and
we compete effectively in all of these areas. Our continued success will depend
in part on our ability to develop and introduce innovative, low cost, quality
products that meet or exceed customers' specifications.

It is our opinion that our technological legacy and financial strength will
make us a strong competitor in both the commercial wireless and defense
electronics markets. Some of our competitors have greater financial and
operating resources than we do. In addition, certain of our customers have
technological capabilities in our product areas and could choose to manufacture
certain products themselves rather than to purchase from suppliers such as
ourselves.

EMPLOYEES

As of June 30, 2000, we had 672 full-time employees at our various
divisions. No employees are represented by unions. We believe our relations with
our employees are good.

INTELLECTUAL PROPERTY

We hold patents issued in the United States and certain European countries.
While we consider our patents to be of some value, we believe that our
technological position depends primarily on the technical
31
<PAGE> 35

competence and the creative ability of our engineering staff in the areas of
product design and manufacturing processes, as well as our closely held
proprietary information. We require our key personnel to execute confidentiality
agreements. We also rely on a combination of copyrights and trademarks to
protect certain of our intellectual property.

RESEARCH AND DEVELOPMENT

Continuing investments in research and development are critical to our
ongoing product evolution and market position. We place strong emphasis on R&D
that improves our existing products and technologies. We also place strong
emphasis on R&D for new wireless product offerings that focus on the high growth
segments of the commercial wireless market and military product offerings that
we believe show the greatest production potential for the next few years. We
work closely with our customers to determine the key product attributes and
performance specifications that are demanded by the marketplace. We perform R&D
activities in all of our operations, with each location focused to capitalize on
its engineering talents and technology portfolios. A key R&D strategy is to form
alliances with companies which possess key technologies to sustain and refresh
our product portfolio. A portion of our R&D budget will be devoted to the
development of "breakthrough technology" in order to further position us as a
technology leader in the commercial wireless market and selected defense
opportunities. Research and development expenses were $777,000 for 1997,
$274,000 for 1998, and $1.8 million for 1999.

GOVERNMENT REGULATION

All of our operations are subject to compliance with regulatory
requirements of federal, state and municipal authorities, including regulations
concerning employment obligations and affirmative action, workplace safety and
protection of the environment. While compliance with applicable regulations has
not adversely affected our operations in the past, there can be no assurance
that we will continue to be in compliance in the future or that these
regulations will not change.

In particular, we must comply with detailed government procurement and
contracting regulations and with U.S. government security regulations, certain
of which carry substantial penalty provisions for nonperformance or
misrepresentation in the course of negotiations. Our failure to comply with our
government procurement, contracting or security obligations could result in
penalties or our suspension from government contracting, which would have a
material adverse effect on our results of operations.

We are required to maintain a U.S. government facility security clearance
at each of our locations. This clearance could be suspended or revoked if we are
found not to be in compliance with applicable security regulations. Any such
revocation or suspension would delay our delivery of our products to customers.
Although we have adopted policies directed at ensuring our compliance with
applicable regulations and there have been no suspensions or revocations of any
of our facilities, there can be no assurance that the approved status of our
facilities will continue without interruption. U.S. government regulations
require a license for the export of advanced weapons systems. Changes in U.S.
government policies towards the export of these systems may impact our
international business.

PROPERTIES

Our principal executive offices are located in Danvers, Massachusetts. Our
principal operating facilities, containing light manufacturing and associated
engineering and support services, are located in four states:

ARIZONA

- We own a modern 84,260 square foot building in Chandler.

CALIFORNIA

- We lease a modern 54,280 square foot building in Sunnyvale.

32
<PAGE> 36

- The lease does not include utilities, maintenance and repairs, insurance
and real estate taxes.

- The lease expires in 2003.

- The current annual rent is $670,896 with an average annual escalation of
approximately 6.6% through the term of the lease.

FLORIDA

- We own a modern 68,000 square foot building in Fort Walton Beach.

MASSACHUSETTS

- We own a modern 25,000 square foot building in Webster and a modern
40,350 square foot building in Beverly.

We believe that our properties are in good operating condition and repair
and consider our facilities to be suitable and adequate for our current and
reasonably foreseeable future activities. We believe that there is capacity at
our facilities to absorb acquired businesses of a certain size and product lines
and/or internal growth. The properties owned by us are all subject to either
mortgages or industrial revenue bond financing.

LEGAL PROCEEDINGS

We are involved from time to time in litigation incidental to our business.
Ongoing legal proceedings include the following:

WEYMOUTH ENVIRONMENTAL CONTAMINATION. In April 1996, we sold our
manufacturing facility in Weymouth, Massachusetts but retained the environmental
liability and responsibility associated with groundwater contaminants present at
and associated with the site. This site has been classified as a Tier 1A
disposal site by the Massachusetts Department of Environmental Protection, or
DEP, as a result of past releases of petroleum based solvents. Environmental
assessment reports prepared by independent consultants indicate that
contaminants present in the Town of Weymouth well field across the street from
the facility are similar to those reportedly released at the site and still
present in the groundwater at the site; however, these reports also indicate
that the contaminants do not exceed safe drinking water levels in the finished
water after normal treatment. Other contaminants which did not originate at the
facility have also been detected in the well field.

In accordance with the applicable provisions of the Massachusetts
Contingency Plan, we have completed our investigation of the site and have
submitted an evaluation of remedial alternatives to the DEP. The recommended
remedial alternative involves continued operation of the currently operating
groundwater remediation system with the addition of a supplemental well. The DEP
has not approved our remedial action plan and suggested that we consider that
the recommended remedial plan could include well head treatment at Weymouth
Winter Street well No. 2. We are currently evaluating this approach. We have
been informed that no recovery of costs incurred in the treatment of the ground
water at the facility is possible under existing insurance arrangements. It is
not possible at this stage of the proceedings to predict whether the DEP will
approve the recommended alternative, and if not, the specific remedial actions,
if any, that it will require.

SUNNYVALE INDEMNIFICATION CLAIM EATON. Eaton Corporation has filed a suit
against us in U.S. District Court, Northern District of California, alleging
that we have a contractual duty to indemnify Eaton Corporation for costs
incurred as a result of environmental contamination and subsequent remediation.
The claim is based upon allegations that we assumed certain liabilities when we
acquired one of the divisions of Eaton Corporation. The indemnification claim
was dismissed at the trial level, but the Ninth Circuit of the U.S. Court of
Appeals has reversed this decision. We have filed a counterclaim against Eaton
Corporation alleging fraud and misrepresentation. A trial date for Eaton
Corporation's claim and our counterclaim has not been scheduled. Eaton
Corporation has informed us that if it prevails on all

33
<PAGE> 37

of its claims and we are unsuccessful on our counterclaim, they believe that
they could be entitled to damages in the range of $8 million to $10 million.
While the likely outcome of the case is uncertain, we believe that we have
meritorious defenses to Eaton Corporation's claims and that we have a valid
counterclaim.

TRANSISTOR DEVICES, INC. V. SIGNAL TECHNOLOGY CORPORATION. On October 29,
1999, Transistor Devices, Inc. filed suit in the Superior Court in Morris
County, New Jersey, against our Keltec division. We removed the case to the U.S.
District Court for the District of New Jersey, where it is currently pending.
The complaint alleges that Keltec is liable for defamation and intentional
interference with contractual relations based on alleged statements made by
Keltec's President to representatives of Lockheed Martin Corporation in
connection with Lockheed Martin's solicitation of bids for the design and
manufacture of a certain power supply unit in August 1999. Transistor Devices
claims that the alleged statements were intended to injure its reputation and
interfere with its bid and prospective economic advantage with Lockheed Martin.

In December 1999, Keltec denied the allegations set forth in the complaint
and filed counterclaims against Transistor Devices for breach of contract and
breach of the implied covenant of good faith and fair dealing. Keltec claims
that Transistor Devices' bid to Lockheed Martin directly contravenes the non-
compete provisions in an asset purchase agreement executed by Transistor Devices
and Keltec on December 6, 1996. Our insurer is defending this case. We are
uncertain of the likely outcome of the case.

SEC INVESTIGATION. The Boston District Office of the Securities and
Exchange Commission has advised us that it is conducting an informal inquiry
arising from our restatement in 1998 of our financial statements for 1996, 1997
and the first quarter of 1998. In connection with this inquiry, the Boston
District Office has requested that we voluntarily produce certain documents and
we have done so. We understand that this inquiry is ongoing and intend to
continue to cooperate.

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<PAGE> 38

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors and their ages as of August 2, 2000
are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
George E. Lombard...................... 60 Chairman of the Board of Directors, Chief Executive
Officer
James V. DiLorenzo..................... 59 President and Chief Operating Officer
Robert N. Nelsen....................... 52 Chief Financial Officer and Vice President
David Parker........................... 52 Corporate Vice President of Human Resources and
Administration
John Cotumaccio........................ 56 Senior Corporate Vice President of Operations and
President of Keltec Operation
George Hreczuck........................ 62 President of Systems Operation
Daniel Gallagher....................... 56 President of Olektron Operation
Gene Joles............................. 51 President of Arizona Operation
Joseph Mersereau....................... 50 President of California Operation
Thomas G. McInerney.................... 62 Director
Bernard P. O'Sullivan.................. 71 Director
Joseph Schneider....................... 48 Director
Larry L. Hansen........................ 70 Director
Harvey C. Krentzman.................... 73 Director
Thomas F. Skelly....................... 65 Director
</TABLE>

George E. Lombard has served as the Chairman of the Board of Directors and
Chief Executive Officer since 1998. In addition, Mr. Lombard served as our
President until March 1999. From 1995 to 1998, Mr. Lombard served as President
of L-3 Communications Corporation's Display Systems Division, formerly Loral
Information Displays. Prior to that, he was a Vice President of Unisys. Mr.
Lombard's career includes over 36 years of experience in the aerospace industry,
26 of which were with Lockheed Corporation, where Mr. Lombard held several key
management positions. MBA, University of Southern California, 1987.

James V. DiLorenzo, Ph.D. has served as the President and Chief Operating
Officer since 1999. From 1995 until 1999, Dr. DiLorenzo served as general
manager of Raytheon Microelectronics, a commercial electronics division of
Raytheon. He led the division to convert state-of-the-art defense technology to
commercial applications. Previously, he served as Vice President of Research and
Development for Microwave Semiconductor Corp. and department head at AT&T's Bell
Labs. Dr. DiLorenzo has over 25 years of senior management experience in the
electronics industry. Ph.D., State University of New York, 1967.

Robert N. Nelsen has served as the Chief Financial Officer and Vice
President since 1998. From 1993 to 1998, Mr. Nelsen served as Vice President of
Finance for L-3 Communications Display Systems, a successor of Loral Corp. and
Lockheed Martin. Prior to that, he was Vice President of Finance of Miltope
Corp. Mr. Nelsen has 30 years of experience of increasing responsibility in
finance management positions. BS, Hofstra University, 1972.

David Parker has served as the Corporate Vice President of Human Resources
& Administration since 1998. From 1995 to 1998, Mr. Parker served as Director of
Human Resources for L-3 Communications Display Systems, a successor of Loral
Corp. and Lockheed Martin. Prior to that, he was Assistant Director of Human
Resources of Reynolds Electrical and Engineering and Manager of Human Resources
of Honeywell, Inc. and Burroughs Corporation. Mr. Parker has 25 years of
experience of increasing responsibility in human resources management positions.
MS, Florida State University, 1970.

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<PAGE> 39

John Cotumaccio has served as Senior Vice President of Operations and
President of the Keltec Operation since 1998. From 1996 to 1998, Mr. Cotumaccio
served as Vice President of Operations at L-3 Communications Display Systems.
Prior to that he was Director of Manufacturing at Lockheed Martin Defense
Systems. Previously, he was Director of Operations for Loral Electronic Systems.
Mr. Cotumaccio's distinguished career in operation management spans more than 20
years and includes planning and establishing manufacturing companies throughout
the U.S. and Turkey. BS, New York University, 1965.

George Hreczuck has served as President of Systems Operation since 1995.
Since joining the Systems Operation in 1972, he has held progressive individual
and management assignments including Vice President and General Manager,
Operations Manager and Engineer. Previously, Mr. Hreczuck was a Program Engineer
for Adam Russell Inc.

Daniel Gallagher has served as the President of Olektron Operation since
1999. From 1998 to 1999, Mr. Gallagher served as President of Microwave Device
Technology Corporation, Westford, MA. Mr. Gallagher was retired from 1996 to
1998. From 1989 to 1996, he was Vice President and General Manager of Alpha
Industries' Microwave Group, Woburn, MA, responsible for transforming the
Microwave Group from primarily a military business to a supplier in the rapidly
growing commercial wireless communications market. Previously, Mr. Gallagher
spent more than 21 years at M/A-COM, Lowell, MA, in increasing responsibilities,
including Vice President and General Manager of M/A-COM's Advanced Semiconductor
Division and President of its Components Marketing subsidiary. Mr. Gallagher's
career in the electronics industry includes some 30 years in both defense and
commercial telecommunications markets. BS, Paisley College of Science &
Technology, Great Britain, 1966.

Gene Joles has served as the President of Arizona Operation since 1991. Mr.
Joles has over 27 years of progressive management experience in the electronics
industry. Prior to joining us, he spent nine years at M/A-COM Active Assemblies
Division in various sales and management positions including Vice President and
General Manager of the Division. Mr. Joles gained his technical expertise while
at Omni Spectra where he held various technical and management positions. BS,
BA, University of Phoenix, 1984.

Joseph Mersereau has served as the President of California Operation since
April 2000. Mr. Mersereau has been with us for eight years and has held various
positions at the California Operation including director of new business
development, regional sales manager and director of engineering. Mr. Merserau
has more than 25 years of experience in new product development of microwave
components and subsystems. Prior to joining us, Mr. Mersereau was a product line
manager at Western Microwave from 1985 to 1991 and lead engineer for GaAs FET
Amplifier development at TRW Microwave from 1982 to 1985.

Thomas G. McInerney has served as Director since 1999. General McInerney is
President of TG McInerney Consulting. From 1996 to 1999, he was President and
Chief Executive Officer of Business Executives for National Security, or BENS.
Previously, from 1994 to 1996, he was Vice President, Command and Control C(4)I
Programs for Loral Defense Systems-Eagan, formerly Unisys Electronic Systems
division. In July 1994, General McInerney ended his 35 year military career when
he retired as the Assistant Vice Chief of Staff of the Air Force with the rank
of Lieutenant General. General McInerney currently serves on the boards of
directors of Armed Forces Bank, Worldwide Flight Services, Pan Am International
Flight Academy, and Alloy Surfaces Company. MA, George Washington University,
1973.

Bernard P. O'Sullivan has served as Director since 1981 and was Chairman of
the Board from May 1990 through March 1994. He is also one of our founders.
Prior to his retirement on May 31, 1987, he was President of O'Sullivan and
Murphy, Inc., a manufacturers' representative selling microwave components that
he founded in May 1975. BA, Boston College, 1952.

Joseph Schneider has served as Director since 1996. He is the President
and founder of JSA Partners, Inc., a strategic management consulting firm that
specializes in the aerospace and defense industry. Prior to founding JSA
Partners, Inc. in 1997, Mr. Schneider was a consultant with A.T. Kearney,

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<PAGE> 40

Inc. Mr. Schneider was the founder and President of JSA International, Inc. from
December 1981 until August 1994. After Electronic Data Systems Corporation
acquired JSA International, Inc. in August 1994, Mr. Schneider was President of
EDS/JSA International. Mr. Schneider serves on the board of directors of United
Industrial Corporation and is the Chairman of JSA Research, Inc. From 1972 to
1977, Mr. Schneider served as an infantry officer primarily in the U.S. Army
Airborne and Special Forces units. MBA, Harvard Business School, 1979.

Larry L. Hansen has served as Director since 1991. Mr. Hansen was
Executive Vice President of Tylan General, a sales and service center for
pressure and flow products, from December 1989 until his retirement in January
1991. He is also a director of Electro Scientific Industries, Inc. and Micrel,
Inc. MBA, University of Utah, 1969.

Harvey C. Krentzman has served as Director since 1981. Mr. Krentzman is
also one of our founders. He has been President of Advanced Management
Associates Inc., financial and management consultants, for more than 40 years.
Mr. Krentzman is the Vice Chairman of the board of trustees of the Boston
Symphony Orchestra and Northeastern University, a trustee of Beth Israel
Deaconess, the Norman Rockwell Museum and the U.S.S. Constitution Museum, and is
an honorary trustee of the Woods Hole Oceanographic Institution. Mr. Krentzman
serves on the boards of directors of Jones & Vining, Inc., Arley Corporation,
Bell Manufacturing Corporation and Inspectron Corporation. MBA, Harvard Business
School, 1952.

Thomas F. Skelly has served as Director since 1999. Prior to joining us,
Mr. Skelly worked at The Gillette Company for 30 years, the last 17 of which he
served as Senior Vice President of Finance and Chief Financial Officer. Mr.
Skelly is a certified public accountant. MBA, Babson College, 1966.

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<PAGE> 41

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information regarding beneficial ownership
of common stock as of June 30, 2000 by:

- each person or entity who is known by us to own beneficially 5% or more
of our common stock;

- each of our directors and our executive officers;

- all executive officers and directors as a group; and

- the selling shareholders.

Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission. In computing the number
of shares beneficially owned by a person and the percentage ownership of that
person, shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of June 30, 2000 are deemed
outstanding. These shares, however, are not deemed outstanding for the purposes
of computing the percentage ownership of any other person. Applicable percentage
of ownership after offering for each listed shareholder is based on an assumed
10,175,137 shares of common stock outstanding, including shares sold by us in
this offering and assuming exercise of the underwriter's over-allotment option,
together with applicable options for such shareholders. Except as indicated
below and pursuant to applicable community property laws, each stockholder named
in the table has sole voting and investment power with respect to the shares set
forth opposite such stockholder's name. Unless otherwise indicated, the address
for each of the following stockholders is c/o Signal Technology Corporation, 222
Rosewood Drive, Danvers, MA 01923.

Percentage of beneficial ownership is based on:

- 7,845,137 shares outstanding as of June 30, 2000, and

- 10,175,137 shares outstanding after completion of this offering.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING NUMBER OF OWNED AFTER OFFERING
----------------------- SHARES BEING ---------------------
NAME AND ADDRESS NUMBER PERCENT OFFERED NUMBERS PERCENT
---------------- ---------- -------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND OFFICERS
John Cotumaccio......................... 23,750(1) * -- 23,750 *
James V. DiLorenzo...................... 75,086(2) 1.0% -- 75,086 *
Daniel Gallagher........................ 12,318 * -- 12,318 *
Larry L. Hansen......................... 26,666 * -- 26,666 *
George Hreczuck......................... 11,666(3) * -- 11,666 *
Gene L. Joles........................... 50,266(4) * -- 50,266 *
Harvey C. Krentzman..................... 12,000(5) * -- 12,000 *
George E. Lombard....................... 311,626(6) 3.8% -- 311,626 3.0%
Thomas G. McInerney..................... 6,250(7) * -- 6,250 *
Joseph Merserau......................... 2,750(8) * -- 2,750 *
Robert N. Nelsen........................ 113,126(9) 1.4% -- 113,126 1.1%
Bernard P. O'Sullivan................... 577,958(10) 7.4% 66,667 511,291 5.0%
David Parker............................ 18,604(11) * -- 18,604 *
Joseph Schneider........................ 41,500(12) * -- 41,500 *
Thomas F. Skelly........................ 6,250(13) * -- 6,250 *
All directors and executive officers as
a group (15 persons).................. 1,289,816(14) 15.4% 66,667 1,223,149 11.4%
PRINCIPAL STOCKHOLDERS
Caleb Loring, III....................... 1,238,889(15) 15.8% 133,333 1,105,556 10.9%
c/o Essex Associates
400 Essex Street
Beverly Farms, MA 01915
David L. Babson and Company, Inc. ...... 447,800(16) 5.7% -- 447,800 4.4%
One Memorial Drive
Cambridge, MA 02142
</TABLE>

38
<PAGE> 42

------------
* less than one percent

Note: Unless otherwise indicated, the persons shown have sole voting and
investment power over the shares listed. Includes options exercisable as
of June 30, 2000, or within 60 days after such date.

(1) Includes 5,000 shares subject to exercisable options.

(2) Includes 70,000 shares subject to exercisable options.

(3) Includes 5,000 shares subject to exercisable options.

(4) Includes 40,000 shares subject to exercisable options.

(5) Does not include 1,238,889 shares held by several trusts for the benefit
of Mr. Krentzman's family members. Mr. Krentzman does not have voting or
investment power over such shares and disclaims beneficial ownership over
all such shares.

(6) Includes 287,500 shares subject to exercisable options.

(7) Includes 6,250 shares subject to exercisable options.

(8) Includes 2,750 shares subject to exercisable options.

(9) Includes 95,000 shares subject to exercisable options.

(10) Includes 210,967 shares held directly by Mr. O'Sullivan and 73,500 shares
held jointly with Mr. O'Sullivan's spouse. Also includes 114,000 shares
held by a trust for the benefit of Mr. O'Sullivan's children, 61,500
shares held in a trust for the benefit of Mr. O'Sullivan's grandchildren,
and 117,991 shares over which Mr. O'Sullivan has the right to vote but of
which William L. Murphy has the exclusive right to dispose and the
exclusive pecuniary interest; Mr. O'Sullivan disclaims beneficial
ownership with respect to all of such shares. Does not include 74,867
shares held directly by Mr. O'Sullivan's spouse.

(11) Includes 5,000 shares subject to exercisable options.

(12) Includes 25,000 shares subject to exercisable options.

(13) Includes 6,250 shares subject to exercisable options.

(14) See footnotes (1) through (13).

(15) Includes 1,238,889 shares held by a trust for the benefit of certain
family members and other relatives of Harvey C. Krentzman.

(16) Information has been obtained from a Schedule 13G, dated February 9, 2000,
filed by David L. Babson and Company Incorporated with the Securities and
Exchange Commission.

(17) Information has been obtained from a Schedule 13G, dated February 3, 2000,
filed by Dimensional Fund Advisors Inc. with the Securities and Exchange
Commission.

39
<PAGE> 43

UNDERWRITING

Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Needham & Company, Inc.,
Ferris, Baker Watts, Incorporated and Tucker Anthony Cleary Gull, have severally
agreed to purchase from us and the selling shareholders the following respective
number of shares of common stock at a public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus. We are selling 2,000,000 shares and the selling shareholders are
selling 200,000 shares.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Needham & Company, Inc......................................
Ferris, Baker Watts, Incorporated...........................
Tucker Anthony Cleary Gull..................................
Total............................................. 2,200,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all
shares of the common stock offered hereby, other than those covered by the
over-allotment option described below, if any of these shares are purchased.

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

We have granted to the underwriters an option, exercisable no later than 30
days after the date of this prospectus, to purchase up to 330,000 additional
shares of common stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus. The
underwriters may exercise this option only to cover over-allotments made in
connection with the sale of the common stock offered hereby. To the extent that
the underwriters exercise this option, each of the underwriters will become
obligated, subject to conditions, to purchase approximately the same percentage
of additional shares of common stock as the number of shares of common stock to
be purchased by it in the above table bears to the total number of shares of
common stock offered hereby. We will be obligated, pursuant to the option, to
sell these additional shares of common stock to the underwriters to the extent
the option is exercised. If any additional shares of common stock are purchased,
the underwriters will offer the additional shares on the same terms as those on
which the 2,000,000 shares are being offered.

The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is currently expected to be approximately 5.6% of
the public offering price. We have agreed to pay the underwriters the following
compensation, assuming either no exercise or full exercise by the underwriters
of the underwriters' over-allotment option:

<TABLE>
<CAPTION>
TOTAL
-----------------------------------------
PER SHARE NO EXERCISE FULL EXERCISE
--------- ----------- -------------
<S> <C> <C> <C>
Paid by Signal Technology Corporation............ $ $ $
Paid by selling stockholders..................... $ $ $
</TABLE>

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

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

40
<PAGE> 44

Our directors, officers and some of our other stockholders have agreed not
to offer, sell, contract to sell or otherwise dispose of, or enter into any
transaction that is designed to or could be expected to, result in the
disposition of any shares of our common stock or other securities convertible
into or exchangeable or exercisable for shares of our common stock or
derivatives of our common stock owned by these persons prior to this offering or
common stock issuable upon exercise of options or warrants held by these persons
for a period of 180 days after the effective date of the registration statement
of which this prospectus is part without the prior written consent of Needham &
Company, Inc. This consent may be given any time without public notice. We have
entered into a similar agreement with the representatives of the underwriters,
except that we may grant options and sell shares pursuant to our Amended and
Restated 1992 Equity Incentive Plan, 1982 Equity Incentive Plan and Employee
Stock Purchase Plan, without Needham & Company, Inc.'s consent.

In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with this offering, thus creating a
short position in our common stock for their own account. A short position
results when an underwriter sells more shares of common stock than that
underwriter is committed to purchase. "Covered" short sales are sales made in an
amount not greater than the underwriter's over-allotment option to purchase
additional shares in this offering. The underwriters may close out any covered
short position by either exercising their over-allotment option or purchasing
shares in the open market. In determining the source of shares to close out the
covered short position, the underwriters will consider, among other things, the
price of shares available for purchase in the open market as compared to the
price at which they may purchase shares through the over-allotment option.
"Naked" short sales are sales in excess of the over-allotment option. The
underwriters must close out any naked short position by purchasing shares in the
open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of
the shares in the open market after pricing that could adversely affect
investors who purchase in this offering. Additionally, to stabilize the market
price of our common stock, the underwriters may bid for, and purchase, shares of
our common stock in the open market. Finally, Needham & Company, Inc., on behalf
of the underwriters, may also reclaim selling concessions allowed to an
underwriter or dealer if the underwriting syndicate repurchases shares
distributed by that underwriter or dealer. Any of these activities may have the
effect of raising or maintaining the market price of our common stock, or
preventing or retarding a decline in the market price of our common stock. As a
result, the price of our common stock may be higher than the price that might
otherwise exist in the open market. These transactions may be effected on the
Nasdaq National Market or otherwise. The underwriters are not required to engage
in these activities and, if commenced, may end any of these activities at any
time.

In connection with this offering, certain underwriters and selling group
members, if any, or their respective affiliates who are qualifying registered
market makers on the Nasdaq National Market, may engage in passive market making
transactions in our common stock on the Nasdaq National Market in accordance
with Regulation M under the Securities Exchange Act of 1934 during the two
business day period before commencement of offers or sales of the common stock
offered by means of this prospectus. The passive market making transactions must
comply with applicable volume and price limits, and be identified as such. In
general, a passive market maker may display its bid at a price not in excess of
the highest independent bid for the security; if all independent bids are
lowered below the passive market maker's bid, however, such bid must then be
lowered when certain purchase limits are exceeded.

Our common stock is listed on the Nasdaq Stock Market's National Market
under the symbol "STCO."

LEGAL MATTERS

Bingham Dana LLP, Boston, Massachusetts, will pass upon the validity of the
common stock offered in this offering. Roger D. Feldman, a partner at Bingham
Dana LLP, is our Secretary. One attorney at

41
<PAGE> 45

Bingham Dana LLP owns, in the aggregate, 4,500 shares of our common stock.
Choate, Hall & Stewart will pass upon legal matters in connection with this
offering for the underwriters.

EXPERTS

The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31, 1999 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the reporting requirements of the Securities Exchange Act
of 1934 and file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy these reports, proxy
statements and other information at the SEC's public reference facilities at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, Seven World
Trade Center, 13th Floor, New York, New York 10048 and at Northwest Atrium
Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You can
request copies of these documents by writing to the SEC and paying a fee for the
copying cost. Please call the SEC at 1-800-SEC-0330 for more information about
the operation of the public reference facilities. SEC filings are also available
at the SEC's Web site at http://www.sec.gov. Our common stock is listed on the
Nasdaq National Market, and you can read and inspect our filings at the offices
of the National Association of Securities Dealers, Inc. at 1735 K Street,
Washington, D.C. 20006.

The SEC allows us to "incorporate by reference" information that we file
with them. Incorporation by reference allows us to disclose important
information to you by referring you to those other documents. The information
incorporated by reference is an important part of this prospectus, and
information that we file later with the SEC will automatically update and
supersede this information. We filed a Registration Statement on Form S-3 under
the Securities Act of 1933 with the SEC with respect to the common stock being
offered pursuant to this prospectus. This prospectus omits certain information
contained in the Registration Statement on Form S-3, as permitted by the SEC.
You should refer to the Registration Statement on Form S-3, including the
exhibits, for further information about us and the common stock being offered
pursuant to this prospectus. Statements in this prospectus regarding the
provisions of certain documents filed with, or incorporated by reference in, the
Registration Statement are not necessarily complete and each statement is
qualified in all respects by that reference. Copies of all or any part of the
Registration Statement, including the documents incorporated by reference or the
exhibits, may be obtained upon payment of the prescribed rates at the offices of
the SEC listed above.

Upon written or oral request, we will provide without charge to each person
to whom a copy of this prospectus has been delivered a copy of any information
that was incorporated by reference in the prospectus, other than exhibits to
documents, unless the exhibits are specifically incorporated by reference into
the prospectus. We will also provide upon request, without charge to each person
to whom a copy of this prospectus has been delivered, a copy of all documents
filed by us from time to time with the SEC pursuant to the Exchange Act of 1934.
Requests for copies should be directed to Robert N. Nelsen, Chief Financial
Officer, Signal Technology Corporation, 222 Rosewood Drive, Danvers, MA 01923.
Telephone requests may be directed to Robert N. Nelsen, (978) 774-2281.

42
<PAGE> 46

INFORMATION WE ARE INCORPORATING BY REFERENCE

We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:

-- our Annual Report on Form 10-K for the year ended December 31, 1999,
filed on March 30, 2000;

-- our current reports on Form 8-K filed on July 21, 2000, and our
Quarterly Reports on Form 10-Q filed in respect of the three-month
period ended June 30, 2000 and filed on August 2, 2000, and in
respect of the three-month period ended March 31, 2000 and filed on
May 15, 2000;

-- the description of our common stock contained in our registration
statement on Form S-1 (File No. 33-61124) filed with the SEC on April
16, 1993, including any amendments or reports filed for the purpose
of updating that description.

You may request a copy of these filings at no cost, other than exhibits
unless those exhibits are specifically incorporated by reference herein, by
writing, telephoning or e-mailing us at the following address:

Signal Technology Corporation
222 Rosewood Drive
Danvers, MA 01923
Attn: Chief Financial Officer
Phone: (978) 774-2281
e-mail: [email protected]

This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information incorporated by reference or provided in
this prospectus. No one else is authorized to provide you with different
information. We are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of this
document.

43
<PAGE> 47

SIGNAL TECHNOLOGY CORPORATION (LOGO)
<PAGE> 48

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses in connection with the issuance and distribution of the
securities being registered are set forth in the following table (all amounts
except the registration fee and the listing fee are estimated):

<TABLE>
<S> <C>
SEC Registration Fee........................................ $13,700
NASD Fee.................................................... 5,600
Nasdaq Listing Fee.......................................... 17,500
Printing and Engraving Expenses............................. 100,000
Legal Fees and Expenses..................................... 175,000
Blue Sky Fees and Expenses (including legal fees)........... 5,000
Transfer Agent and Registrar's Fees......................... 5,000
Accountants' Fees and Expenses.............................. 100,000
Miscellaneous Costs......................................... 28,200
-------
Total............................................. 450,000
</TABLE>

All expenses in connection with the issuance and distribution of the
securities being offered shall be borne by Signal.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Delaware General Corporation Law Section 102(b)(7) enables a corporation in
its original certificate of incorporation or in an amendment thereto validly
approved by stockholders, to eliminate or limit personal liability of members of
its Board of Directors for violations of a director's fiduciary duty of care.
However, the elimination or limitation shall not apply where there has been a
breach of the duty of loyalty, failure to act in good faith, engaging in
intentional misconduct or knowingly violating a law, paying a dividend or
approving a stock repurchase which is deemed illegal or obtaining an improper
personal benefit. Our Certificate of Incorporation, as amended, includes the
following language:

A director of the Corporation shall not in any one year be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, as the same
exists or hereafter may be amended, or (iv) for any transaction from
which the director derived an improper personal benefit, only to the
extent of directors' fees (including committee fees and attendance
fees) paid during such year by the Corporation to such director for
serving as a director of the Corporation. Any repeal or modification
of this paragraph by the stockholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Corporation existing at the
time of such repeal or modification.

In addition, all of our directors and certain of our key officers have
entered into indemnification agreements with us that provide for indemnification
to the fullest extent permitted by law with respect to actions or proceedings
conducted in which such directors or officers incur expenses by virtue of
actions or omissions by such persons in connection with their service as
directors or officers of our company.

II-1
<PAGE> 49

ITEM 16. EXHIBITS

EXHIBITS

<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation, as amended to date
(incorporated by reference to the corresponding exhibit to
our Registration Statement on Form S-1, as amended and filed
on April 16, 1993. File no. 33-61124).
3.2 By-Laws, as amended to date (incorporated by reference to
the corresponding exhibit filed as part of our Annual Report
on Form 10-K for the year ended December 31, 1993 and filed
on April 1, 1994).
4.1 Specimen certificate for shares of Common Stock
4.2 Rights Agreement dated as of January 26, 1999 between Signal
and BankBoston, N.A. as Rights Agent (incorporated by
reference to Exhibit 99.1 to our Report on Form 8-K filed on
February 10, 1999. File no. 000-21770).
5 Opinion of Bingham Dana LLP
23.1 Consent of Bingham Dana LLP (included in Exhibit 5)
23.2 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (included in the signature pages to this
registration statement)
</TABLE>

ITEM 17. UNDERTAKINGS

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

We hereby undertake that, for purposes of determining any liability under
the Securities Act, each filing of our annual report pursuant to section 13(a)
or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

We hereby undertake that:

(1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-2
<PAGE> 50

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant, Signal Technology Corporation, certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form S-3
and has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Boston, in The
Commonwealth of Massachusetts, on this 2nd day of August, 2000.

Signal Technology Corporation

By: /s/ GEORGE E. LOMBARD
------------------------------------
George E. Lombard
Chairman of the Board and
Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby appoint each of Roger D.
Feldman, Tycho H.E. Stahl and Robert Nelsen severally, acting alone and without
the other, his true and lawful attorney-in-fact with the authority to execute in
the name of each such person, any and all amendments (including without
limitation, post-effective amendments) to this Registration Statement on Form
S-3, to sign any and all additional registration statements relating to the same
offering of securities as this Registration Statement that are filed pursuant to
Rule 462(b) of the Securities Act, and to file such registration statements with
the Securities and Exchange Commission, together with any exhibits thereto and
other documents therewith, necessary or advisable to enable the registrant to
comply with the Securities Act, and any rules, regulations and requirements of
the Securities and Exchange Commission in respect thereof, which amendments may
make such other changes in the Registration Statement as the aforesaid
attorney-in-fact executing the same deems appropriate.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ GEORGE E. LOMBARD Chief Executive Officer and Chairman of
------------------------------------------ the Board of Directors August 2, 2000
George E. Lombard

/s/ JAMES V. DILORENZO President August 2, 2000
------------------------------------------
James V. DiLorenzo

/s/ ROBERT N. NELSEN Chief Financial Officer and Principal
------------------------------------------ Accounting Officer August 2, 2000
Robert N. Nelsen

/s/ THOMAS G. MCINERNEY Director August 2, 2000
------------------------------------------
Thomas G. McInerney

/s/ BERNARD P. O'SULLIVAN Director August 2, 2000
------------------------------------------
Bernard P. O'Sullivan

Director August 2, 2000
------------------------------------------
Joseph Schneider
</TABLE>

II-3
<PAGE> 51

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ LARRY L. HANSEN Director August 2, 2000
------------------------------------------
Larry L. Hansen

/s/ HARVEY C. KRENTZMAN Director August 2, 2000
------------------------------------------
Harvey C. Krentzman

/s/ THOMAS F. SKELLY Director August 2, 2000
------------------------------------------
Thomas F. Skelly
</TABLE>

II-4
<PAGE> 52

EXHIBIT INDEX

EXHIBITS

<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement
4.1 Specimen certificate for shares of Common Stock
5 Opinion of Bingham Dana LLP
23.1 Consent of Bingham Dana LLP (included in Exhibit 5)
23.2 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (included in the signature pages to this
registration statement)
</TABLE>