Powerwave Technologies (PWAV)

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with SFAS No. 123 (Revised 2004), Share-Based Payment (SFAS 123R). Under the fair value recognition provision of SFAS 123R, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options granted according to the Black-Scholes-Merton option pricing model and a single option award approach. The fair value of restricted stock awards is based on the closing market price of the Company’s Common Stock on the date of grant.

Stock-based compensation expense was recognized as follows in the consolidated statement of operations (in thousands):

As of March 29, 2009, unrecognized compensation expense related to the unvested portion of the Company’s stock-based awards and employee stock purchase plan was approximately $4.9 million, net of estimated forfeitures of $1.9 million, which is expected to be recognized over a weighted-average period of 1.7 years.

The Black-Scholes-Merton option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation methods require the input of highly subjective assumptions including the weighted average risk-free interest rate, the expected life, and the expected stock price volatility. The weighted average risk-free interest rate was determined based upon actual U.S. treasury rates over a one to ten year horizon and the actual life of options granted. The Company grants options with either a five year or ten year life. The expected life is based on the Company’s actual historical option exercise experience. For the employee stock purchase plan, the actual life of 6 months is utilized in this calculation. The expected life was determined based upon actual option grant lives over a 10 year period. The Company has utilized various market sources to calculate the implied volatility factor utilized in the Black-Scholes-Merton option valuation model. These included the implied volatility utilized in the pricing of options on the Company’s Common Stock as well as the implied volatility utilized in determining market prices of the Company’s outstanding convertible notes. Using the Black-Scholes-Merton option valuation model, the estimated weighted average fair value of options granted during the first quarter of fiscal years 2009 and 2008 were $0.43 per share and $1.60 per share, respectively.

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POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Tabular amounts in thousands, except per share data)

The fair value of options granted under the Company’s stock incentive plans during the first three months of fiscal 2009 and 2008 was estimated on the date of grant according to the Black-Scholes-Merton option-pricing model utilizing the multiple option approach and the following weighted-average assumptions:

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with SFAS No. 123 (Revised 2004), Share-Based Payment (SFAS 123R). Under the fair value recognition provision of SFAS 123R, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options granted using the Black-Scholes-Merton option pricing model and a single option award approach. The fair value of restricted stock awards is based on the closing market price of the Company’s common stock on the date of grant.

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POWERWAVE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(tabular amounts in thousands, except per share data)

Stock-Based Compensation

The Company accounts for stock based compensation in accordance with SFAS No. 123 (Revised 2004), “Share-Based Payment” (SFAS No. 123R). SFAS 123R requires the recognition of compensation expense, using a fair-value based method, for costs related to all share-based payments including stock options and stock issued under the Company’s employee stock plans. SFAS 123R requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service periods in the consolidated statements of operations. The Company estimates the fair value of stock options using the Black-Scholes option pricing model.

During the three months ended March 30, 2008 and April 1, 2007, the Company recognized total compensation expense of $1.3 million and $1.1 million respectively.

Stock-based compensation expense was recognized as follows in the consolidated statement of operations (in thousands):

As of March 30, 2008, unrecognized compensation expense related to the unvested portion of the Company’s stock options and employee stock purchase plan awards was approximately $5.4 million, net of estimated forfeitures of $2.1 million, which is expected to be recognized over a weighted-average period of 1.5 years.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation methods require the input of highly subjective assumptions including the weighted average risk-free interest rate, the expected life, and the expected stock price volatility. The weighted average risk-free interest rate was determined based upon actual U.S. treasury rates over a one to ten year horizon, based upon the actual life of options granted. The Company grants options with either a five year or ten year life. The expected life is based on the Company’s actual historical option exercise experience. For the employee stock purchase plan, the actual life of 6 months is utilized in this calculation. The expected life was determined based upon actual option grant lives over a 10 year period. The Company has utilized various market sources to calculate the implied volatility factor utilized in the Black-Scholes option valuation model. These included the implied volatility utilized in the pricing of options on the Company’s common stock as well as the implied volatility utilized in determining market prices of the Company’s outstanding convertible notes. Using the Black-Scholes option valuation model, the estimated weighted average fair value of options granted during the first quarter of fiscal years 2008 and 2007 were $1.60 per share and $2.55 per share, respectively.

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The fair value of options granted under the Company’s stock incentive plans during the first three months of fiscal 2008 and 2007 was estimated on the date of grant using the Black-Scholes option-pricing model utilizing the multiple option approach and the following weighted-average assumptions:

(1) Stock-based Compensation

For stock options granted from June 1, 1999 through November 7, 2002, the stock-based compensation expense recorded under IFRS was $0.094 million and $0.018 million higher in the year ended December 31, 2006 and the fiscal year ended January 1, 2006, respectively, than the amount recorded under US GAAP. For stock options granted after November 7, 2002, there was no difference in the stock-based compensation expense recorded between IFRS and US GAAP.

Stock-based compensation

The business participates in various group share option schemes, under which share options are granted to certain employees. The granting of the share options is a share-based payment. Under IFRS, compensation expense has been charged on shares granted since November 7, 2002. The group uses a mathematical model on the date of grant to estimate the fair value when the option vests, with this fair value being recognized over the period the employee performs related services. In respect of these options, the accounting treatment under US GAAP results in no difference.

From June 1, 1999, the group elected to use the fair value method in Statement of Financial Accounting Standards 123 (“SFAS 123”) in determining compensation expense under US GAAP. Under this method, the fair value of all options granted under group schemes from that date is determined at the date of grant and expensed over the requisite service period. For options granted between June 1, 1999 and November 7, 2002 this has led to an accounting charge under US GAAP in the fiscal year ended May 31, 2006 which is £107,000 lower than reported under IFRS, whereas the charge reported under US GAAP at May 31, 2005 is £88,000 higher than reported under IFRS.

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Notes to the

Financial Statements

for the years ended 31 May 2006 and 31 May 2005

Deferred compensation expense remaining to be expensed at May 31, 2006 was £611,000.

Stock based compensation (continued)

At 1 December 2005 the group adopted FASB Statement No. 123 (Revised 2004), “Share Based Payment” (“SFAS 123R”), which replaces SFAS 123, “Accounting for Stock Based Compensation”, and supersedes APB Opinion 25, “Accounting for Stock Issued to Employees”. The group has elected to apply the modified prospective method under SFAS 123R which has not had a material impact on the combined financial statements.

The deferred tax arising on the stock based compensation adjustment results in a deferred tax asset of £763,000 at 31 May 2005 and £774,000 at 31 May 2006. A full valuation allowance has been made against these amounts.

(1) Stock-based Compensation

For stock options granted from June 1, 1999 through November 7, 2002, the stock-based compensation expense recorded under IFRS was $0.094 million and $0.018 million higher in the six months ended July 2, 2006 and the fiscal year ended January 1, 2006, respectively, than the amount recorded under US GAAP. For stock options granted after November 7, 2002, there was no difference in the stock-based compensation expense recorded between IFRS and US GAAP.

Stock-based compensation

The business participates in various group share option schemes, under which share options are granted to certain employees. The granting of the share options is a share-based payment. Under IFRS, compensation expense has been charged on shares granted since November 7, 2002. The group uses a mathematical model on the date of grant to estimate the fair value when the option vests, with this fair value being recognized over the period the employee performs related services. In respect of these options, the accounting treatment under US GAAP results in no difference.

From June 1, 1999, the group elected to use the fair value method in Statement of Financial Accounting Standards 123 (“SFAS 123”) in determining compensation expense under US GAAP. Under this method, the fair value of all options granted under group schemes from that date is determined at the date of grant and expensed over the requisite service period. For options granted between June 1, 1999 and November 7, 2002 this has led to an accounting charge under US GAAP in the fiscal year ended May 31, 2006 which is £107,000 lower than reported under IFRS, whereas the charge reported under US GAAP at May 31, 2005 is £88,000 higher than reported under IFRS.

F-23

Notes to the

Financial Statements

for the years ended 31 May 2006 and 31 May 2005

Deferred compensation expense remaining to be expensed at May 31, 2006 was £611,000.

Stock based compensation (continued)

At 1 December 2005 the group adopted FASB Statement No. 123 (Revised 2004), “Share Based Payment” (“SFAS 123R”), which replaces SFAS 123, “Accounting for Stock Based Compensation”, and supersedes APB Opinion 25, “Accounting for Stock Issued to Employees”. The group has elected to apply the modified prospective method under SFAS 123R which has not had a material impact on the combined financial statements.

The deferred tax arising on the stock based compensation adjustment results in a deferred tax asset of £763,000 at 31 May 2005 and £774,000 at 31 May 2006. A full valuation allowance has been made against these amounts.

Stock-Based Compensation

In December 2002, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, which (i) amended SFAS No. 123, Accounting for Stock-Based Compensation to add two new transitional approaches when changing from the Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees intrinsic value method of accounting for stock-based employee compensation to the SFAS No. 123 fair value method and (ii) amends APB Opinion No. 28, Interim Financial Reporting to call for disclosure of SFAS No. 123 pro forma information on a quarterly basis.

Pro forma information regarding net loss is required by SFAS No. 123, and has been determined as if employee stock options had been accounted for under the fair value method of that statement. The pro forma effects of stock-based compensation on net income (loss) have been estimated at the date of grant using the Black-Scholes option pricing model based on the following weighted average assumptions for the three and six months ended July 29, 2005 and July 30, 2004: risk-free interest rates of 3.875% and 4%, respectively, dividend yields of 0%, expected volatility of 80.8%, 81.6%, 81.0% and 81.6%, respectively, and a weighted average expected life of the option of four and five years, respectively. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because REMEC’s employee stock options and rights under the employee stock purchase plan have characteristics significantly different from those of traded options, and because changes in the subjective assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair market value of its employee stock options or the rights granted under the employee stock purchase plan.

The following is a summary of the pro forma effects on reported net loss for the periods indicated as if compensation expense had been based on the fair value of the options at their grant date as prescribed by SFAS No. 123. For purposes of the pro forma disclosures, the estimated fair value of the options and the shares granted under the employee stock purchase plan is amortized to expense over their respective vesting or option periods.

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Pro forma information is as follows (in 000’s):