The following discussion may be understood more fully by reference to the financial statements, notes to the financial statements, and management's discussion and analysis contained in our Annual Report on Form 10-K for the year ended August 31, 2008, filed with the Securities and Exchange Commission.

General

RF Monolithics, Inc., or RFM, was organized in 1979 as a Texas corporation and converted to a Delaware corporation in 1994. We design, develop, manufacture and market solutions-driven and technology-enabled wireless connectivity products for a broad range of wireless applications - from individual standard and custom components to modules for comprehensive industrial wireless sensor networks and machine-to-machine, or M2M, technology. We have two lines of business-Wireless Solutions and Wireless Components.

Our Wireless Solutions business includes Virtual Wire® Short-range Radios, Radio Frequency Integrated Circuits, or RFIC's, and wireless module products. The products are various types of radios and the networks that manage and use these radios. Our goal is to provide customers with a wide variety of alternative products for their wireless network applications. Our product offerings include miniature radios that are very short range with ultra low-power consumption. We also market standard and custom OEM radio modules as well as packaged radio products that have longer range and increased data rates.

Our Wireless Components business includes filters, frequency control modules and low-power components. Our goal is to provide simple, cost effective solutions that fit our customers' specialty applications.

Executive Summary

The market place profiles in which our two business groups operate are materially distinct from one another. The Wireless Components business is characterized by a very competitive environment that has declining average selling prices and frequent product innovation. This market includes several large competitors who have superior financial and other resources. We have competed successfully for 30 years by cultivating close customer relationships with a diverse group of customers who offer varied applications and

serve diverse markets and geographic locations. In contrast, our Wireless Solutions business is characterized as a developing market with only a generalized definition of products, services, markets and applications. Competition varies and typically consists of a broad range of competitors, many of whom are similar in size and resources to us.

Our strengths include: (a) our ability to identify and capitalize on trends in a rapidly growing wireless marketplace; (b) our capability to develop products and services that have superior technical characteristics; (c) our expertise to assist our customers in incorporating our products into their applications; and
(d) our demonstrated ability to manufacture high quality cost-effective products made by our contract manufacturers in volume with short lead times. Our manufacturing capabilities are greatly enhanced by our relationships with several domestic and offshore contractors.

Our Wireless Components business, which historically was our core business, has declined in sales due to decreased average selling prices in several intensely competitive markets and due to our loss of market share to competing technologies. In addition, the Wireless Component business will likely be negatively impacted by recent economic difficulties, especially for the automotive market. As a result, we have focused our product and market development efforts on products for our Wireless Solutions business which we feel offer a technical edge and have greater gross margin potential, while continuing to find niche component opportunities.

A key factor in our combined sales performance is successfully developing and selling new products in volumes adequate to offset the decline in prices and unit sales volumes of our older products. A key factor in our combined gross margin performance is reducing our costs (through innovation, assisting our contractors in achieving lower costs of manufacture, and increased volume) and improving our product mix towards higher margin products to offset expected declines in average selling prices. The Cirronet acquisition was a key part of our strategy to grow sales with new products that have higher margin potential.

With only four exceptions, we generated positive operating cash flows in the ten most recent quarters, including our last two fiscal years since our acquisitions to expand our Wireless Solutions business. See the section below entitled Actions to Improve Liquidity for discussion of cash flows for the current period. Our ability to maintain positive cash flows is dependent on our success in restructuring our expense levels in relation to sales. See the next section below entitled Current Business Conditions and Actions to Improve Profitability for discussion of our restructuring program. In any case, the amount of positive cash flow may decrease or occasionally turn negative due to fluctuating revenues, declining margins, escalating operating costs, the need for increased working capital to support increased sales, or increased spending to support growth programs. We feel we currently have the financial resources necessary to execute our business plans.

Current Business Conditions and Actions to Improve Profitability

As we expected, the worsening economic situation had a very substantial effect on us in our recent quarters, resulting in significantly lower sales, somewhat lower gross margins and a significant net loss from operations. Many of our markets, particularly the automotive and construction related industrial sectors, have been severely impacted. We believe that our sales to automotive and construction related industrial markets will continue to be materially adversely affected for at least the next few quarters. While we believe some of our business, including medical and some industrial markets, may weather the recession better than other markets, it is clear that there will continue to be weakness in many of our markets. Economic conditions in several markets remain difficult to predict, so we cannot say when or how much any recovery might be, or even whether or not there could be a further decline in sales.

In response to expected sales declines and economic uncertainties, we have taken aggressive actions in recent quarters to align expense levels with anticipated lower sales levels. As we continue to restructure the Company, we are committed to the following actions:

b. In our prior quarter we reduced our workforce by approximately 36% and we reduced it another 10% at the end of the current quarter. Also in the prior quarter we implemented a 10% across-the-board salary reduction. The first reduction was in effect for the entire quarter, while the second one had very little impact. The full impact of both reductions will be in effect for our fourth quarter.

c. Suspended our 401(k) match and we have suspended cash compensation in the form of quarterly retainers and meeting fees for our outside directors.

d. We continue to focus our sales efforts on markets that face less economic pressure, such as the medical market. This has the effect of improving our overall gross margins, since these markets have higher gross margin potential than more competitive markets such as the automotive or consumer markets.

e. In addition to personnel-related reductions, we implemented other cost reduction measures and will continue to adjust our business structure.

These actions were in addition to a series of actions that we had taken in the previous two years to reduce our costs by approximately $9 million on an annual basis. A partial result of this cost reduction was that operating expenses (without restructuring and impairment expenses) decreased $1 million between our first quarter and our second quarter and another $500,000 in our current quarter. In addition, our gross margins improved 170 basis points from our second quarter to our third quarter. In addition, our overall breakeven sales point for profitability has been reduced to the $7.0 million to $7.5 million range, compared to $12.4 million in our first quarter. We did incur a net charge of $1.5 million for intangible asset impairment (net of deferred income tax benefit) in the current quarter. However, that was a non-cash charge as evidenced by our positive Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") for the current quarter. The associated restructuring expense for severance and other nonrecurring costs in our third fiscal quarter were approximately $0.1 million. See the EBITDA table immediately after the section below entitled Actions to Improve Liquidity.

We will continue to take the actions required to restructure our business to produce positive operating cash flow and to return to overall profitability when economic conditions permit. While our cost reductions have resulted in a much lower cost business model, current economic conditions make forecasting future profitability very difficult.

Actions to Improve Liquidity

Our operating results for the second quarter caused a violation of the financial covenants in our Credit and Security Agreement dated August 29, 2007 as amended, or Credit Agreement with Wells Fargo Bank, N.A., or the Bank. Under the terms of the Credit Agreement, we were required, for the quarter ended February 28, 2009, to achieve certain standards for net income (as adjusted per the Credit Agreement) and debt service coverage which were not attained. The Credit Agreement provides that, upon non-compliance with such financial covenants, the Bank may take various actions, including among other things any one or more of the following: (i) terminate its commitment to make advances to the Company,
(ii) declare the balance of the indebtedness, in the amount of approximately $4.7 million as of May 31, 2009, due and payable, or (iii) exercise its rights as a secured creditor by taking possession of or otherwise liquidating some or all its collateral.

The Bank's right to take these actions was suspended by a forbearance agreement ("Forbearance Agreement") dated May 12, 2009 with an expiration date of July 31, 2009. The only covenants under the

Forbearance Agreement are levels of profitability and capital expenditures for the months of April, May, June and July 2009. The Company was in compliance with those covenants for the months of April and May. We expect to be in compliance with the covenants for the months of June and July.

At the expiration of the Forbearance Agreement, we expect to either extend it for another three months or to enter into an agreement with new financial covenants. We continue to have access to available funds under the revolver. Should the Forbearance Agreement expire and the Bank exercise the aforementioned rights, and if we are unable to secure other financing, we may not be able to continue as a going concern.

We had various appraisals performed on our collateral property. Given current economic conditions, the appraisals were at lower levels than in better economic times, and our advance rates have been reduced accordingly. The change in advance rates has resulted in a significant reduction in our cash availability of approximately $600,000, and put pressure on our operations. Our primary response to this situation was to reduce costs via actions discussed in the preceding section. The objective was to generate positive operating cash flow during this period of economic downturn. Those actions have generated positive operating cash flow of approximately $3.0 million during our last three quarters. A significant portion of that positive operating cash flow was derived from collecting accounts receivable in excess of declining sales. However, we believe that as sales have leveled out, a declining level of sales generating excess collections of receivables is not likely to be a significant source of funds. Another source of operating cash flow has been a reduction in inventory that we have targeted and achieved. We were very successful in doing this, with a $3.3 million dollar reduction so far this year. This was 35% of our prior year's inventory balance. We have targeted additional inventory reductions, although they are likely to be less than we have seen in recent quarters. The reductions in accounts receivable and inventory have been partially offset by reductions in accounts payable and accrued expenses, as we have paid down those liabilities.

Beyond reducing our working capital requirements, we believe we have put in place a cost structure that is capable of generating positive EBITDA at current sales levels. This in fact occurred in our current quarter. We believe maintaining a cost structure that is designed to generate a positive EBITDA at sales levels below what we expect is our primary method of assuring near-term liquidity. Our EBITDA for the current quarter was a positive $84,000. This was a large improvement over the comparable quarter of the prior year of a negative $439,000, largely a result of our cost reduction programs. And in contrast with our $3.5 million year-to-date GAAP loss, year-to-date EBITDA was only a negative $148,000. See the EBITDA table immediately after this section.

In a temporary response to the reduction in availability, we have worked with our suppliers to extend payment terms. This resulted in an increase in accounts payable of almost $500,000 in our previous quarter. In the current quarter, we have paid this balance down by almost $500,000, so our accounts payable balance is back to first quarter levels. This still represents some stretching of terms with our suppliers, which so far has been possible. While we intend to continue to pay down our accounts payable balances and maintain favorable terms with our suppliers, there can be no assurance that this can be done. A significant interruption in the flow of material from our suppliers due to credit term issues would have a material adverse effect on our operations and, in the absence of additional financing, result in our insolvency.

As described in Note 4 to our condensed Consolidated Financial Statements, another action that we took was to refinance our remaining term loan debt with our primary lender by arranging a new loan with another financial institution secured by a deed of trust lien on our Dallas headquarters facility. The refinancing eliminated the quarterly payments to service the term loan debt over the next two quarters. The refinancing was completed in April 2009, when we entered in to a commercial loan agreement for $900,000 that calls for monthly payments of $5,000 plus accrued interest at the current annual rate of 6.5%. The commercial loan agreement provides for 59 monthly payments of $5,000 each with the 60th payment being the balance of the loan. The proceeds of this loan were used to pay off the Bank term loan and to reduce our revolving line of credit.

It is our objective to continue to generate positive cash flow, service our bank debt and keep in good standing with our suppliers in the immediate future, although this cannot be assured due to the economic uncertainties we face.

The following table sets forth, for the three and nine months ended May 31, 2009 and 2008, the calculation for EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) that is referred to in this report (in thousands):

                                            Three Months                Nine Months
                                           Ended May 31,               Ended May 31,
                                         2009          2008          2009          2008
   Net Loss                            $ (1,975 )    $ (1,419 )    $ (3,514 )    $ (1,408 )

   Add back:
   Interest expense                         162           153           466           513

   Taxes                                   (113 )          25          (100 )          38

   Depreciation                             241           281           772           976

   Amortization:
   Patents                                   63            56           192           137
   Intangibles from acquisitions (1)      1,583           374         1,704         1,122
   Stock compensation                       123            91           332           363

   Total amortization                     1,769           521         2,228         1,622
   (1) Includes impairment

   EBITDA                              $     84      $   (439 )    $   (148 )    $  1,741

EBITDA is an important liquidity measurement used by financial institutions to measure a company's capability to fund operations. EBITDA is also used by our management to measure our performance in achieving necessary cost reductions. The table above shows that for the current quarter, we have achieved a slightly positive ongoing cash flow breakeven level as measured by EBITDA.

Further discussion of EBITDA and its measurement value is in other sections of this report entitled Current Business Conditions and Actions to Improve Profitability and Impact of Reduced Borrowing Availability.

Critical Accounting Policies

We prepare our financial statements in conformity with accounting principles generally accepted in the United States. As such, we are required to make certain estimates and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the periods presented. We described our most significant accounting policies, which we believe are the most critical to aid in fully understanding and evaluating reported financial results, in our Annual Report filed with the Securities and Exchange Commission on November 24, 2008 on Form 10-K. Those policies continue to be our most critical accounting policies for the period covered by this filing.

Results of Operations

In this next section we will discuss our financial statements. In this discussion, we will make comparisons between the following periods, which we believe are relevant to understanding trends in our business:

• The current quarter and current year-to-date period, each ended May 31, 2009, of the fiscal year ending August 31, 2009, in comparison to the comparable quarter of the prior year and prior year-to-date period, each ended May 31, 2008 of the fiscal year ended August 31, 2008.

• Certain comparisons with the three months ended February 28, 2009 (previous quarter) are provided where we believe it is useful to the understanding of trends.

The selected financial data for the periods presented may not be indicative of our future financial condition or results of operations.

The following table illustrates operating results for the four quarters of fiscal 2008 and the first three quarters of fiscal 2009 (in thousands, except percentage data). These figures will be used when discussing trends in the following section. The reported amounts for fiscal 2008 have been adjusted from previous quarterly reports because of classification of discontinued operations.

                                                           Fiscal 2008                                      Fiscal 2009
                                                          Quarter Ended                                    Quarter Ended
                                       Nov. 30       Feb. 29        May 31        Aug. 31       Nov. 30       Feb. 28        May 31
Sales by product area:
Wireless Solutions Group:
Virtual Wire®Radio products            $  3,642      $  3,773      $  3,061      $   2,799      $  2,937      $  2,502      $  2,330
Cirronet modules                          3,330         2,754         2,457          3,154         2,766         1,924         1,310

Subtotal                                  6,972         6,527         5,518          5,953         5,703         4,426         3,640
Wireless Components Group:
Filters                                   5,880         3,895         4,830          4,141         3,939         1,259         1,889
Frequency control modules                   651           506           951            796           574           223           260
Low-power components                      2,264         2,803         1,480          1,494         1,151           690           745

Subtotal                                  8,795         7,204         7,261          6,431         5,664         2,172         2,894

Total Sales                              15,767        13,731        12,779         12,384        11,367         6,598         6,534
Cost of sales                             9,868         8,279         8,136          7,816         7,150         4,342         4,187


Gross profit                              5,899         5,452         4,643          4,568         4,217         2,256         2,347
% of sales-Wireless Solutions              52.2 %        50.7 %        47.9 %         49.6 %        49.6 %        38.5 %        39.5 %
% of sales-Wireless Components             25.7 %        29.7 %        27.5 %         25.1 %        24.5 %        25.5 %        31.4 %
% of sales-Total                           37.4 %        39.7 %        36.3 %         36.9 %        37.1 %        34.2 %        35.9 %

Operating expenses:
Research and development                  1,789         1,842         1,803          1,667         1,266         1,046           818
Sales and marketing                       2,196         2,185         2,092          1,930         1,814         1,140         1,020
General and administrative                1,183         1,066           984          1,068         1,011           910           742
Restructuring and impairment                 99           (44 )         265         16,192           (67 )         460         1,634

Total                                     5,267         5,049         5,144         20,857         4,024         3,556         4,214


Income from operations                      632           403          (501 )      (16,289 )         193        (1,300 )      (1,867 )
Other expense, net                          (65 )        (169 )        (160 )         (174 )        (173 )        (154 )        (163 )


Income (loss) before income taxes           567           234          (661 )      (16,463 )          20        (1,454 )      (2,030 )
Income tax expense (benefit)                  8             5            25           (163 )           5             8          (113 )


Income (loss)-continuing operations         559           229          (686 )      (16,300 )          15        (1,462 )      (1,917 )
Loss-discontinued operations               (446 )        (331 )        (733 )       (3,181 )         (61 )         (31 )         (58 )

Net Income (loss)                      $    113      $   (102 )    $ (1,419 )    $ (19,481 )    $    (46 )    $ (1,493 )    $ (1,975 )

The following table sets forth, for the three and nine months ended May 31, 2009 and 2008, (a) the percentage relationship of certain items from our statements of operations to sales and (b) the percentage change in these items between the current period and the comparable period of the prior year:

                                             Percentage of Total Sales                      Percentage Change From
                                       Three Months              Nine Months           Three Months        Nine Months
                                       Ended May 31,            Ended May 31,           Ended May           Ended May
                                     2009         2008        2009         2008        2008 to 2009        2008 to 2009
Sales                                  100 %       100 %        100 %       100 %               (49 )%              (42 )%
Cost of sales                           64          64           64          62                 (49 )               (40 )

Gross profit                            36          36           36          38                 (50 )               (45 )

Research and development                13          14           13          13                 (55 )               (42 )
Sales and marketing                     16          16           16          15                 (51 )               (39 )
General and administrative              11           8           11           8                 (25 )               (18 )
Restructuring and impairment            25           2            8           1                 517                 433

Total operating expenses                65          40           48          37                 (18 )               (24 )

Income from operations                 (29 )        (4 )        (12 )         1                (273 )              (657 )
Other expense, net                      (2 )        (1 )         (2 )        (1 )                 2                  24

Income before income taxes             (31 )        (5 )        (14 )         0                (207 )            (2,574 )
Income tax expense                       2           0            0           0                (552 )              (363 )

Net income (loss)-continuing ops.      (29 )        (5 )        (14 )         0                (179 )            (3,398 )
Net loss-discontinued operations        (1 )        (6 )          0          (3 )               (92 )               (90 )

Net income (loss)                      (30 )%      (11 )%       (14 )%       (3 )%              (39 )%             (150 )%

Sales

Overall Sales Trends for the Current Quarter Compared to the Prior Year and Previous Quarter

Total sales decreased 49% in the current quarter compared to the comparable quarter of the prior year and 1% from the previous quarter. The primary reason for the decrease from the comparable quarter of the prior year was a reduction in the number of units sold for each of our product lines resulting from the economic downturn. Wireless Components sales, which include sales to automotive and consumer markets, were down 60%. Wireless Solutions sales, which include some markets like medical that were not so adversely affected by the economy, decreased 34%.

Compared to the previous quarter, sales appear to have leveled out on an overall basis. However, the trends were different for our two business units due to corresponding changes in the number of units sold. Wireless Component sales increased 33% as some automotive markets recovered from very depressed levels in our second quarter, particularly satellite radio filters. Wireless Solutions Sales decreased 18% from the previous quarter as the recession had a continuing effect on industrial markets related to the construction industry (European . . .