Current Economic Environment
We believe the current economic conditions have reduced spending by consumers and businesses in markets into which we sell our products in response to tighter credit, negative financial news and the continued uncertainty of the global economy. Consequently, the global demand for our products has also decreased. This decrease in demand is having a negative impact on our revenues, results of operations, and overall business. It is uncertain how long the current economic conditions will last or how quickly any subsequent economic recovery will occur. If the economy or markets into which we sell our products continue to slow or any subsequent economic recovery is slow to occur, our business, financial condition and results of operations could be further materially and adversely affected.
Results of Operations
Three Months Ended March 31, 2009 and 2008

Revenues

                                          Three Months Ended     Three Months Ended
                                            March 31, 2009         March 31, 2008
   Revenue                                $       14,139          $         18,300
   Percent change from year ago period             (22.7 %)                   10.1 %

Revenues decreased 22.7% in the three months ended March 31, 2009 compared to the same period in 2008 as both scanning receiver and antenna product lines experienced declines. In the three months ended March 31, 2009 versus the prior year, approximately 20% of the decline is attributable to antennas and approximately 3% of the decline is attributable to scanning receivers. Antenna revenues were lower in our distribution and OEM channels, reflecting declines in LMR and U.S. defense-related revenues. Scanning receiver revenue was lower due to reduced capital expenditures levels worldwide.

Gross Profit

                                                                    Three Months Ended         Three Months Ended
                                                                      March 31, 2009             March 31, 2008
Gross profit                                                        $        6,671              $         8,766
Percentage of revenue                                                         47.2 %                       47.9 %
Percent of revenue change from year ago period                                (0.7 %)                       3.2 %

The gross margin of 47.2% in the three months ended March 31, 2009 was approximately 0.7% lower than the comparable period in fiscal 2008. Antennas contributed 0.6% of the margin percentage decrease and scanning receivers contributed 0.1% of the margin percentage decrease in the three months ended March 31, 2009. In the first quarter 2009, a higher mix of scanning receiver revenues offset costs of lower volume over our fixed costs.

Research and Development

                                         Three Months Ended       Three Months Ended
                                           March 31, 2009           March 31, 2008
  Research and development                $         2,688         $        2,186
  Percentage of revenues                             19.0 %                 11.9 %
  Percent change from year ago period                23.0 %                (15.2 %)

Research and development expenses increased approximately $0.5 million for the three months ended March 31, 2009 compared to the comparable period in 2008. Expenses were higher than the prior year because we invested in the development of new scanning receivers and due to the acquisition of certain assets of Bluewave in March 2008 and Wi-Sys in January 2009.

Sales and Marketing

                                          Three Months Ended      Three Months Ended
                                            March 31, 2009          March 31, 2008
  Sales and marketing                     $        2,083           $         2,763
  Percentage of revenues                            14.7 %                    15.1 %
  Percent change from year ago period              (24.6 %)                    0.9 %

Sales and marketing expenses include costs associated with the sales and marketing employees, sales representatives, product line management, and trade show expenses.
Sales and marketing expenses decreased approximately $0.7 million for the three months ended March 31, 2009 compared to the same period in fiscal 2008. This decrease was due to the headcount reductions in several unproductive international sales offices and due to lower commissions to sales people and manufacturers representatives. The headcount reductions occurred in the third and fourth quarters of 2008.

General and Administrative

                                         Three Months Ended       Three Months Ended
                                           March 31, 2009           March 31, 2008
 General and administrative              $        2,553           $        2,772
 Percentage of revenues                            18.1 %                   15.1 %
 Percent change from year ago period               (7.9 %)                 (19.5 %)

General and administrative expenses include costs associated with the general management, finance, human resources, information technology, legal, insurance, public company costs, and other operating expenses to the extent not otherwise allocated to other functions.
General and administrative expenses decreased approximately $0.2 million for the three months ended March 31, 2009 compared to the same period in fiscal 2008. The expense decrease is due to lower stock compensation expense for employees in general and administrative functions.

Amortization of Intangible Assets

                                           Three Months Ended      Three Months Ended
                                             March 31, 2009          March 31, 2008
Amortization of other intangible assets      $         553           $         440
Percentage of revenues                                 3.9 %                   2.4 %

Amortization increased approximately $0.1 million in the three months ended March 31, 2009 compared to the same period in 2008 due to the intangible amortization from the acquisitions of Bluewave in March 2008 and Wi-Sys in January 2009.

Restructuring Charges

                                   Three Months Ended      Three Months Ended
                                     March 31, 2009          March 31, 2008
         Restructuring charges       $         154           $         377
         Percentage of revenues                1.1 %                   2.1 %

During the three months ended March 31, 2009, we eliminated headcount to lower costs in our antenna operations. We incurred restructuring charges of approximately $0.2 million related to employee severance costs. During the three months ended March 31, 2008, we streamlined our corporate overhead structure to reduce general and administrative expenses. We incurred charges of approximately $0.3 million related to employee severance costs related to the reduction of corporate overhead.

Impairment of Goodwill

                                   Three Months Ended      Three Months Ended
                                     March 31, 2009          March 31, 2008
         Impairment of goodwill     $         1,262            $      0
         Percentage of revenues                 8.9 %                 -

In March 2009, we recorded goodwill impairment of $1.3 million in accordance with FAS 142. This amount represented the remaining $0.4 million of goodwill for Licensing and the $0.9 million in goodwill recorded with the Wi-Sys acquisition in January 2009. We tested our goodwill for impairment because our market capitalization was below our carrying value at March 31, 2009. We considered this market capitalization deficit as a triggering event in accordance with FAS 142.

Gain on sale of assets and related royalties

                                                                   Three Months Ended         Three Months Ended
                                                                     March 31, 2009             March 31, 2008
Gain on sale of assets and related royalties                         $         200              $         200
Percentage of revenues                                                         1.4 %                      1.1 %

All royalty amounts represent royalties from Conexant. Payments under the royalty agreement with Conexant run through June 30, 2009.

Other Income, Net

                                   Three Months Ended      Three Months Ended
                                     March 31, 2009          March 31, 2008
         Other income, net           $         165           $         784
         Percentage of revenues                1.2 %                   4.3 %

Other income, net consists primarily of interest income and foreign exchange gains and losses. Other income, net decreased in the three months ended March 31, 2009 compared to the comparable period in 2008 due to lower interest income and lower foreign exchange gains. For the three months ended March 31, 2009 and 2008, interest income was $0.2 million and $0.6 million, respectively. Interest income decreased due to lower cash balances in the first quarter 2009 compared to the first quarter 2008 and because of lower interest rates. The cash balance during the first quarter 2008 includes the proceeds from the sale of MSG. We subsequently used a portion of the cash for a cash dividend and for repurchases of our common stock. In the three months ended March 31, 2009 and 2008, we recorded foreign exchange gains (losses) of $(30) and $166, respectively.

Provision (Benefit) for Income Taxes

                                           Three Months Ended     Three Months Ended
                                             March 31, 2009         March 31, 2008
   Provision (benefit) for income taxes     $         (723 )       $          737
   Effective tax rate                                 32.3 %                 60.8 %

The tax rate for the three months ended March 31, 2009 differs from the statutory rate of 35% because of permanent differences and valuation allowances for certain temporary differences.
The tax rate for the three months ended March 31, 2008 differs from the statutory rate of 35% because of permanent differences, valuation allowances for certain temporary differences, and due to the recognition of tax expense net of foreign tax credits related to expected repatriation of foreign source income. We maintain valuation allowances due to uncertainties regarding realizability. The $1.2 million valuation allowance at March 31, 2009

relates to deferred tax assets in tax jurisdictions in which we no longer have significant operations. On a regular basis, management evaluates the recoverability of deferred tax assets and the need for a valuation allowance. At such time as it is determined that it is more likely than not that the deferred tax assets are realizable, the valuation allowance will be reduced. We regularly evaluate our estimates and judgments related to uncertain tax positions and, when necessary, establish contingency reserves to account for our uncertain tax positions. As we obtain more information via the settlement of tax audits and through other pertinent information, these projections and estimates are reassessed and may be adjusted accordingly. These adjustments may result in significant income tax provisions or provision reversals.

Discontinued operations

                                            Three Months Ended     Three Months Ended
                                              March 31, 2009         March 31, 2008
 Net income from discontinued operations        $      0            $         36,693

We had no activity related to discontinued operations in the three months ended March 31, 2009 and we do not anticipate any activity in discontinued operations in 2009. Discontinued operations for the three months ended March 31, 2008 included the gain on the sale of MSG of $60.3 million in addition to net loss from operations of $0.3 million and income tax expense of $23.3 million. Stock-based compensation expense
In the three months ended March 31, 2009, we recognized stock-based compensation expense of $0.8 million in the condensed consolidated statements of operations for continuing operations, which included $0.7 million of restricted stock and $0.1 million for stock options and stock bonuses. Total stock compensation expense for continuing operations for the three months ended March 31, 2008 was $1.1 million, which included $0.7 million for restricted stock amortization, $0.2 million for stock option expense, and $0.2 million for stock bonuses. The following table summarizes the stock-based compensation expense by income statement line item for the three months ended March 31, 2009 and March 31, 2008, respectively:

                                                Three Months Ended
                                                     March 31,
                                                2009           2008
                Cost of revenues              $    112       $     92
                Research and development           139            154
                Sales and marketing                137            154
                General and administrative         430            748

                Total continuing operations        818          1,148
                Discontinued operations              -            187

                Total                         $    818       $  1,335

Liquidity and Capital Resources

                                                                        Three Months Ended
                                                                             March 31,
                                                                      2009               2008
Net (loss) income from continuing operations                      $   (1,514 )       $     475
Charges for depreciation, amortization, stock-based
compensation, and other non-cash items                                 2,169               756
Changes in operating assets and liabilities                              694               740

Net cash provided by operating activities                              1,349             1,971
Net cash provided by (used in) investing activities                  (10,388 )           8,981
Net cash provided by (used in) financing activities                      116            (5,931 )
Net cash provided by discontinued operations                      $        -         $  61,343

Cash and cash equivalents at end of period                        $   35,891         $  93,047
Short-term investments at end of quarter                              27,010             9,931
Long-term investments at end of quarter                               14,319            15,432
Short-term borrowings at end of quarter                                    -               111
Working capital at the end of quarter                             $   82,015         $  99,632

Liquidity and Capital Resources Overview At March 31, 2009, our cash and investments were approximately $77.2 million and we had working capital of $82.0 million. The decrease in cash and investments of $0.6 million at March 31, 2009 compared to December 31, 2008 is due to the acquisition of Wi-Sys ($2.3 million), offset by positive cash flow from operations.
Within operating activities, we are historically a net generator of operating funds from our income statement activities and a net user of operating funds for balance sheet expansion. Due to our lower revenues in the first quarter 2009 and related balance sheet contraction, we were a net generator of funds from our balance sheet during the first quarter of 2009.
Within investing activities, capital spending historically ranges between 3% and 5% of our revenues. The primary use of capital is for manufacturing and development engineering requirements. We historically have significant transfers between investments and cash as we rotate our large cash and short-term investment balances between money market funds, which are accounted for as cash equivalents, and other investment vehicles. We have a history of supplementing our organic revenue growth with acquisitions of product lines or companies, resulting in significant uses of our cash and short-term investment balance from time to time. We expect the historical trend for capital spending and the variability caused by moving money between cash and investments and periodic merger and acquisition activity to continue in the future.
Within financing activities, we have historically generated funds from the exercise of stock options and proceeds from the issuance of common stock through our Purchase Plan and used funds to repurchase shares of our common stock through our share repurchase programs. The result of this activity being a net user of funds versus a net generator of funds is largely dependent on our stock price during any given year. Due to our historically low stock price, there was no cash received from the exercise of stock options in the three months ended March 31, 2009.
Operating Activities:
Operating activities provided $1.3 million of net cash during the three months ended March 31, 2009 primarily due to a net contraction in the balance sheet. Reduction in accounts receivables provided $4.4 million in funds. The net receivable reduction was attributable to receivable collections and a $4.1 million decrease in revenues during the three months ended March 31, 2009 compared to the previous quarter. Payments of accounts payable and accrued liabilities used $1.5 million and $1.7 million of cash, respectively. Our accrued liabilities declined due to payment of year end 2008 bonuses and commissions. Accounts payable were lower due at March 31, 2009 compared to December 31, 2008 because we reduced our inventory purchases due to the decline in revenues.
Operating activities provided $2.0 million of net cash during the three months ended March 31, 2008. In the three months ended March 31,

2008, the income statement was a net generator of cash of $1.2 million of funds through net income, depreciation, amortization, stock compensation and restructuring. The balance sheet provided $0.7 million in funds during the three months ended March 31, 2008. The collection of receivables provided $3.3 million in funds, offsetting $3.0 million use of funds for payment of accrued liabilities. The receivable collections included $1.9 million of MSG accounts receivables from December 31, 2007 that were retained by us. Investing Activities:
Our investing activities used $10.4 million of cash in the three months ended March 31, 2009. We rotated $10.6 million of cash into short and long term investments. We also used $2.3 million for the acquisition of Wi-Sys in January 2009. Redemptions of short-term investments from our shares in the Bank of America affiliated fund, the Columbia Strategic Cash Portfolio ("CSCP") provided $2.5 million during the three months ended March 31, 2009. In December 2007, we received notification that the CSCP, in which we had invested $38.9 million as of December 31, 2007, was being closed to new subscriptions or redemptions, resulting in our inability to immediately redeem our investments for cash. The fair value of our investment in this fund was based on the net asset value of the fund, and was classified as "Short-Term Investments" on our Consolidated Balance Sheet. At March 31, 2009, the fair value of our investment in this fund was $6.2 million and we classified approximately $3.6 million of the CSCP investment as short-term investment securities and approximately $2.6 million as long-term investment securities at March 31, 2009. We expect the liquidation of the long-term investment portion could take years to complete.
Our investing activities provided $9.0 million of cash in the three months ended March 31, 2008 primarily due to $13.1 million in cash redemptions of short-term investments from the CSCP. We also used $3.9 million for the asset purchase of Bluewave and $0.4 million for capital expenditures during the three months ended March 31, 2008.
Financing Activities:
Cash flow from financing activities provided $0.1 million for the three months ended March 31, 2009. Shares purchased through the Purchase Plan contributed $0.2 million and we used $0.1 million to repurchase our common stock under share repurchase programs.
Cash flow from financing activities consumed $5.9 million for the three months ended March 31, 2008. We used $7.6 million to repurchase our common stock under share repurchase programs. Tax benefits from stock compensation and proceeds from the sale of common stock related to stock option exercises and shares purchased through the Purchase Plan contributed $1.7 million for the three months ended March 31, 2008.
Discontinued Operations:
Discontinued operations provided $61.3 million during the three months ended March 31, 2008. This was a result of the gain related to the sale to Smith Micro . . .