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 and Nine Months Ended September 30, 2009 and 2008

Revenues

                                                  Three Months Ended        Three Months Ended         Nine Months Ended          Nine Months Ended
                                                  September 30, 2009        September 30, 2008         September 30, 2009        September 30, 2008

Revenue                                           $       13,709             $         20,087          $       41,216              $        58,661
Percent change from year ago period                        (31.8 %)                      14.0 %                 (29.7 %)                      15.6 %

Revenues decreased 31.8% in the three months ended September 30, 2009 and 29.7% in the nine months ended September 30, 2009 compared to the same periods in 2008 as both scanning receiver and antenna product lines experienced declines. In the three months ended September 30, 2009 versus the comparable period in the prior year, approximately 23% of the decline is attributable to antennas and approximately 8% of the decline is attributable to scanning receivers. In the nine months ended September 30, 2009 versus the comparable period in the prior year, approximately 19% of the decline is attributable to antennas and approximately 10% of the decline is attributable to scanning receivers. Antenna revenues were lower in our distribution and OEM channels, reflecting particular softness in land mobile radio systems, continued delays in mobile WiMAX rollout, and defense related antenna sales. Scanning receiver revenues were lower due to reduced capital expenditures levels worldwide and due to delays in carrier spending caused by the transition from Evolution Date Optimized to the Long-Term Evolution technology standard for communication networks.

Gross Profit

                                                      Three Months Ended         Three Months Ended         Nine Months Ended          Nine Months Ended
                                                      September 30, 2009         September 30, 2008         September 30, 2009        September 30, 2008

Gross profit                                          $        6,426              $         9,560           $       19,155              $        28,034
Percentage of revenue                                           46.9 %                       47.6 %                   46.5 %                       47.8 %
Percent of revenue change from year ago period                  (0.7 %)                       2.9 %                   (1.3 %)                       3.2 %

Gross margin of 46.9% in the three months ended September 30, 2009 was 0.7% lower than the comparable period in fiscal 2008. Scanners contributed 0.3% of the margin percentage decrease and antennas contributed 0.4% of the margin percentage decrease in the three months ended September 30, 2009 versus the comparable period in 2008. Gross margin of 46.5% in the nine months ended September 30, 2009 was 1.3% lower than the comparable period in fiscal 2008. Scanners contributed 0.7% of the margin percentage decrease and antennas contributed 0.6% of the margin percentage decrease in the nine months ended September 30, 2009 versus the comparable period in 2008. In the three months and nine months ended September 30, 2009, the lower gross margin reflects the cost of lower overall volume over our fixed costs.

Research and Development

                                                     Three Months Ended         Three Months Ended          Nine Months Ended          Nine Months Ended
                                                     September 30, 2009         September 30, 2008         September 30, 2009         September 30, 2008

Research and development                              $         2,673            $         2,591             $         8,010            $         7,387
Percentage of revenues                                           19.5 %                     12.9 %                      19.4 %                     12.6 %
Percent change from year ago period                               3.2 %                     20.2 %                       8.4 %                      0.1 %

Research and development expenses increased approximately $0.1 million for the three months ended September 30, 2009 and increased

approximately $0.6 million for the nine months ended September 30, 2009 compared to the comparable periods in 2008. During the nine months ended September 30, 2009, expenses were higher than the comparable period in the prior year because we invested in the development of new scanning receivers and because of the acquisition of certain assets of Bluewave in March 2008 and Wi-Sys in January 2009. During the integration of the Bluewave and Wi-Sys acquisitions, we incurred incremental engineering expenses.

Sales and Marketing

                                                       Three Months Ended          Three Months Ended          Nine Months Ended          Nine Months Ended
                                                       September 30, 2009          September 30, 2008         September 30, 2009         September 30, 2008

Sales and marketing                                    $        1,845              $        2,543              $       5,841              $       8,180
Percentage of revenues                                           13.5 %                      12.7 %                     14.2 %                     13.9 %
Percent change from year ago period                             (27.4 %)                    (10.0 %)                   (28.6 %)                    (0.6 %)

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 September 30, 2009 and decreased approximately $2.3 million for the nine months ended September 30, 2009 compared to the same periods in fiscal 2008. These decreases are 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          Nine Months Ended          Nine Months Ended
                                                         September 30, 2009          September 30, 2008         September 30, 2009         September 30, 2008

General and administrative                               $        2,169              $        2,619              $       7,245              $       8,372
Percentage of revenues                                             15.8 %                      13.0 %                     17.6 %                     14.3 %
Percent change from year ago period                               (17.2 %)                    (16.3 %)                   (13.5 %)                   (13.7 %)

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 $0.5 million for the three months ended September 30, 2009 and approximately $1.1 million for the nine months ended September 30, 2009 compared to the same periods in fiscal 2008. For the three months ended September 30, 2009, the expense decrease is due to $0.2 million lower stock compensation expense for employees in general and administrative functions and $0.3 million due to corporate cost reductions. For the nine months ended September 30, 2009, the expense decrease is due to $0.7 million lower stock compensation expense for employees in general and administrative functions and $0.4 million due to corporate cost reductions.

Amortization of Intangible Assets

                                                     Three Months Ended         Three Months Ended          Nine Months Ended          Nine Months Ended
                                                     September 30, 2009         September 30, 2008         September 30, 2009         September 30, 2008

Amortization of other intangible assets                $         553              $         552              $         1,660            $         1,544
Percentage of revenues                                           4.0 %                      2.7 %                        4.0 %                      2.6 %

Amortization was unchanged in the three months ended September 30, 2009 compared to the same period in 2008. Amortization expense related to the Wi-Sys acquisition in January 2009 offset the impact from the sale of product lines to SWTS in October 2008. Amortization increased approximately $0.1 million in the nine months ended September 30, 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          Nine Months Ended          Nine Months Ended
                                                       September 30, 2009         September 30, 2008         September 30, 2009         September 30, 2008

Restructuring charges                                     $         -                $         -               $         494              $         364
Percentage of revenues                                              -                          -                         1.2 %                      0.6 %

There were no restructuring charges incurred during the three months ended September 30, 2009. During the nine months ended September 30, 2009, we recorded $0.2 million expense related to Wi-Sys restructuring and $0.3 million expense related to antenna operations.
In order to reduce costs with the antenna operations in the Bloomingdale, Illinois location, we terminated thirteen employees during the three months ended March 31, 2009 and terminated five additional employees during three months ended June 30, 2009. During the nine months ended September 30, 2009, we recorded $0.3 million in restructuring expense for severance payments for these eighteen employees.
During the second quarter 2009, we exited the Ottawa, Canada location related to the Wi-Sys acquisition and integrated their operations in our Bloomingdale, Illinois location. The restructuring expense of $0.2 million relates to employee severance, lease termination, and other shut down costs.
During the nine months ended September 30, 2008, we incurred charges of approximately $0.3 million related to employee severance costs related to the reduction of corporate overhead and $0.1 million related to adjustments to our UMTS restructuring reserves. We streamlined our corporate overhead structure to reduce general and administrative expenses

Impairment of Goodwill

                                                     Three Months Ended         Three Months Ended          Nine Months Ended          Nine Months Ended
                                                     September 30, 2009         September 30, 2008         September 30, 2009         September 30, 2008

Impairment of goodwill                                  $         -                $         -               $         1,485             $         -
Percentage of revenues                                            -                          -                           3.6 %                     -

In March 2009, we recorded goodwill impairment of $1.5 million. This amount represented the remaining $0.4 million of goodwill for Licensing and the $1.1 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 book value at March 31, 2009. We considered this market capitalization deficit as a triggering event. For testing goodwill for impairment. Loss on sale of product lines and related note receivable

                                                     Three Months Ended         Three Months Ended          Nine Months Ended          Nine Months Ended
                                                     September 30, 2009         September 30, 2008         September 30, 2009         September 30, 2008

Loss on sale of product lines and realted note
receivable                                              $         -               $         882              $         454              $         882
Percentage of revenues                                            -                         4.4 %                      1.1 %                      1.5 %

In the fourth quarter of 2008 we sold certain antenna products and related assets to SWTS. SWTS purchased the intellectual property, dedicated inventory, and certain fixed assets related to four of our antenna product families for $0.7 million, payable in installments at close and over a period of 18 months. The four product families represent the last remaining products acquired by us through our acquisition of Sigma in July 2005. SWTS and Sigma are unrelated. In the year ended December 31, 2008, we recorded a $0.9 million loss on sale of product lines, separately within operating expenses in the consolidated statements of operations. The net loss included the book value of the assets sold to SWTS, impairment charges, and incentive payments due the new employees of SWTS, net of the proceeds due to us. We sold inventory with a net book value of $0.8 million and wrote off intangible assets including goodwill of $0.5 million. The intangible asset write-off was the net book value and the goodwill write-off was a pro-rata portion of goodwill. We paid incentive payments of $0.1 million and calculated $0.5 million in proceeds based on the principal value of the installment payments excluding imputed interest. At June 30, 2009, we reserved for the $0.5 million receivable balance from SWTS due to uncertainty of collection. The reserve was recorded as a loss on sale of product line and related note receivable in the condensed consolidated statements of operations.

Gain on sale of assets and related royalties

                                                     Three Months Ended         Three Months Ended          Nine Months Ended          Nine Months Ended
                                                     September 30, 2009         September 30, 2008         September 30, 2009         September 30, 2008

Gain on sale of assets and related royalties            $         -               $         200              $         400              $         600
Percentage of revenues                                            -                         1.0 %                      1.0 %                      1.0 %

All royalty amounts represent royalties from Conexant. Payments under the royalty agreement with Conexant were completed at June 30, 2009. We do not expect any additional royalties.

Other Income, Net

                                                     Three Months Ended         Three Months Ended          Nine Months Ended          Nine Months Ended
                                                     September 30, 2009         September 30, 2008         September 30, 2009         September 30, 2008

Other income, net                                      $         375              $         120              $         742              $         1,557
Percentage of revenues                                           2.7 %                      0.6 %                      1.8 %                        2.7 %

Other income, net consists primarily of interest income and foreign exchange gains and losses. Other income, net increased in the three months ended September 30, 2009 compared to the comparable period in 2008 due primarily to $0.2 million of realized gains related to the CSCP fund. Other income, net decreased in the nine months ended September 30, 2009 compared to the comparable period in 2008 due to lower interest income. For the three months ended September 30, 2009 and 2008, interest income was $0.1 million and $0.2 million, respectively. For the nine months ended September 30, 2009 and 2008, interest income was $0.5 million and $1.5 million, respectively. Interest income decreased due to lower cash balances in 2009 compared to 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 September 30, 2009 and 2008, we recorded foreign exchange gains (losses) of $0 and ($134), respectively. In the nine months ended September 30, 2009 and 2008, we recorded foreign exchange gains (losses) of $(34) and $84, respectively.

Provision (Benefit) for Income Taxes

                                                       Three Months Ended         Three Months Ended         Nine Months Ended          Nine Months Ended
                                                       September 30, 2009         September 30, 2008        September 30, 2009         September 30, 2008

Provision (benefit) for income taxes                   $          316                     ($10,216 )                    ($981 )                  ($8,451 )
Effective tax rate                                              (72.0 %)                   (1474.2 %)                    20.0 %                   -244.1 %

The tax rate for the nine months ended September 30, 2009 differs from the statutory rate of 34% because of permanent differences, foreign taxes and from revisions to the tax rates due to changes in income tax projections. The tax rate for the nine months ended September 30, 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. At September 30, 2009, we had a $1.2 million valuation allowance on our deferred tax assets. The valuation allowance 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            Three Months Ended          Nine Months Ended         Nine Months Ended
                                                      Ended September 30,            September 30,              September 30,             September 30,
                                                              2009                       2008                       2009                       2008
Net income from discontinued operations                  $          -               $         157               $         -              $        37,035

We had no activity related to discontinued operations in the three months and nine months ended September 30, 2009 and we do not anticipate any activity in discontinued operations in the remainder of 2009. Discontinued operations for the three months ended September 30, 2008 included a $0.1 million benefit for state income taxes. Discontinued operations for the nine months ended September 30, 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 $23.2 million.
Stock-based compensation expense
Total stock compensation expense for the three months ended September 30, 2009 was $0.7 million in the condensed consolidated statement of operations, which included $0.7 million of restricted stock amortization and $0.1 million for stock option and stock purchase plan expenses and a reversal of stock bonuses . . .