UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________

FORM 10-Q

__________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~December 3031, 2010

Commission File Number 033-88878

Commission File	Registrant; State of Incorporation;	IRS Employer
Number	Address and Telephone Number	Identification No.

001-34974	Aeroflex Holding Corp.	01-0899019
	Delaware
	35 South Service Road
	P.O. Box 6022
	Plainview, NY 11803-0622
	(516) 694-6700

033-88878	Aeroflex Incorporated	11-1974412
	Delaware
	35 South Service Road
	P.O. Box 6022
	Plainview, NY 11803-0622
	(516) 694-6700

~~__________________________~~Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

~~AEROFLEX INCORPORATED~~Aeroflex Holding Corp. Yes ¨ No x Aeroflex Incorporated Yes x No ¨

~~(Exact~~Indicate ~~name~~by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of ~~Registrant~~Regulation asS-T ~~specified~~(§232.405 inof ~~its~~this chapter) ~~Charter~~during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

DELAWARE	11-1974412
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)
35 South Service Road
P.O. Box 6022
Plainview, N.Y.	11803-0622
(Address of principal executive offices)	(Zip Code)

Aeroflex Holding Corp.	Yes ¨	No ¨
Aeroflex Incorporated	Yes ¨	No ¨

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

~~(516) 694~~Large accelerated Accelerated Non-~~6700~~accelerated Smaller reporting filer filer filer company Aeroflex Holding Corp. ¨ ¨ x ¨ Aeroflex Incorporated ¨ ¨ x ¨

Indicate by check mark whether the registrants are shell companies (~~Registrant’s~~as defined in Rule ~~telephone~~12b-2 ~~number,~~of ~~including~~the ~~area~~Exchange ~~code~~Act).

~~________________________________________________~~Aeroflex Holding Corp. Yes ¨ No x Aeroflex Incorporated Yes ¨ No x

Number of shares of common stock outstanding as of February 9, 2011:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Aeroflex Holding Corp. -	84,789,180 shares
Aeroflex Incorporated -	1,000 shares

~~Indicate~~Aeroflex byIncorporated ~~check~~meets ~~mark whether~~ the ~~registrant~~conditions ~~has~~set ~~submitted~~forth ~~electronically~~in ~~and~~General ~~posted~~Instruction ~~on its~~H(1)(a) ~~corporate Web site, if any, every Interactive Data File required to be~~and ~~submitted~~(b) ~~and posted pursuant to Rule 405~~ of ~~Regulation~~Form S10-TQ ~~(§232.405~~and ofis ~~this chapter)~~therefore ~~during~~filing ~~the~~this ~~preceding~~Form 12with ~~months (or for such shorter period that~~ the ~~registrant~~ ~~was~~reduced ~~required to submit and post such files). Yes o No~~disclosure oformat.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):OVERVIEW

~~Large~~This quarterly ~~accelerated~~report ~~filer~~on oForm ~~Accelerated~~10-Q ~~filer~~for othe ~~Non-accelerated~~period ~~filer~~ended xDecember 31, 2010 is a combined quarterly report being separately filed by two registrants: Aeroflex Holding Corp. (Do“Aeroflex ~~not~~Holding”) ~~check~~and ifAeroflex Incorporated (“Aeroflex”), a direct ~~smaller~~wholly-owned ~~reporting~~subsidiary ~~company)~~of ~~Smaller~~Aeroflex ~~reporting~~Holding. ~~company~~Unless othe context provides otherwise, references to “we,” “our,” “the Company,” or “us” refer collectively to Aeroflex Holding and its subsidiary, Aeroflex, including Aeroflex’s consolidated subsidiaries.

~~Indicate~~Filing a bycombined ~~check~~report ~~mark~~which ~~whether~~contains ~~the~~full ~~registrant~~financial information of both Aeroflex Holding and its wholly owned subsidiary Aeroflex is both economical and efficient, as Aeroflex Holding is a ~~shell~~holding company ~~(as~~which ~~defined~~does innot ~~Rule~~conduct ~~12b~~business operations on its own -2 all business operations are conducted by Aeroflex and its consolidated subsidiaries. All assets, liabilities, income, expenses and cash flows presented for all periods represent those of ~~the~~Aeroflex and ~~Exchange~~its ~~Act~~subsidiaries, except for activity related to Aeroflex Holding’s equity and earnings per share. Aeroflex Holding’s only asset is its investment in Aeroflex. As such, other than any discussions of liquidity and capital resources (including indebtedness and cash flows), equity and earnings per share, controls and procedures, unregistered sales of equity securities, use of proceeds and any material differences between Aeroflex Holding and Aeroflex which would require separate disclosures, all information presented in this quarterly report will be combined and pertain to both Aeroflex Holding and Aeroflex.

~~Yes~~In ~~o No~~this xForm 10-Q, unless the context requires otherwise, references to (i) the term “Sponsors” refers collectively to affiliates of or funds managed by The Veritas Capital Fund III, L.P., Golden Gate Private Equity, Inc., and GS Direct, LLC, which indirectly control Aeroflex Holding, and (ii) “fiscal year” refers to the twelve months ended June 30 of the applicable year. For example, “fiscal 2010” refers to the twelve months ended June 30, 2010.

~~Indicate~~Aeroflex ~~the~~Holding’s ~~number~~board of ~~shares~~directors ~~outstanding~~authorized ofan ~~each~~increase of ~~the~~Aeroflex ~~issuer~~Holding’s authorized ~~classes~~shares of common stock to 300,000,000 and a as65,000,000 for 1 common stock split, both of which became effective on November 18, 2010. Aeroflex Holding’s stockholders’ equity has been retroactively adjusted to give effect to the ~~latest~~stock ~~practicable~~split ~~date~~for all periods presented by reclassifying the par value of the additional shares issued in connection with the split from additional paid-in capital to common stock. In addition, all share numbers and per share amounts in Aeroflex Holding’s consolidated financial statements have been retroactively adjusted to give effect to the stock split.

November 9, 2010	1,000
(Date)	(Number of Shares)

On November 19, 2010, Aeroflex Holding consummated an initial public offering (“IPO”) of common stock in which it sold 19,789,180 shares of common stock, par value of $.01 per share, at a price of $13.50 per share. Aeroflex Holding received net proceeds of $244.1 million from the IPO, after deducting underwriting discounts and offering expenses, including a $2.5 million transaction fee which was paid to affiliates of the Sponsors under the advisory agreement with them for services directly attributable to the equity offering (“Transaction Fee”). Aeroflex Holding used the net proceeds of the IPO to make a capital contribution to Aeroflex. In connection with the IPO, Aeroflex:

~~AEROFLEX INCORPORATED~~· Repurchased an aggregate of $186.6 million of its senior unsecured notes and senior subordinated unsecured term loans and paid the related expenses;

Paid a $16.9 million termination fee to affiliates of the Sponsors to terminate the advisory agreement with them, which, including the related write-off of prepaid advisory fees, resulted in an $18.1 million expense (“Termination Fee”); and

Entered into an amendment of the credit agreement with the lenders of its senior secured credit facility, for which a $3.3 million fee was paid to the lenders.

AEROFLEX HOLDING CORP.

AND SUBSIDIARIES

INDEX

	PART I: FINANCIAL INFORMATION	PAGE
		PAGE
Item 1	UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
	PART I: FINANCIAL INFORMATION
	September 30, 2010 and June 30, 2010	2
Item 1	FINANCIAL STATEMENTS OF AEROFLEX HOLDING CORP. AND SUBSIDIARIES
	UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	Unaudited Condensed Consolidated Balance Sheets
	Three Months Ended September 30, 2010 and 2009	3
	December 31, 2010 and June 30, 2010	2
	UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	Unaudited Condensed Consolidated Statements Of Operations
	Three Months Ended September 30, 2010 and 2009	4
	Three Months Ended December 31, 2010 and 2009	3
	NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	5 – 24
	Six Months Ended December 31, 2010 and 2009	4
Item 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS
	Unaudited Condensed Consolidated Statements Of Stockholders’ Equity and Comprehensive
	Three Months Ended September 30, 2010 and 2009	24 – 36
	Income (Loss)
Item 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	36
	Six Months Ended December 31, 2010	5
Item 4	CONTROLS AND PROCEDURES	36
	Unaudited Condensed Consolidated Statements Of Cash Flows
	Six Months Ended December 31, 2010 and 2009	6
	FINANCIAL STATEMENTS OF AEROFLEX INCORPORATED AND SUBSIDIARIES
	Unaudited Condensed Consolidated Balance Sheets
	December 31, 2010 and June 30, 2010	7
	Unaudited Condensed Consolidated Statements Of Operations
	Three Months Ended December 31, 2010 and 2009	8
	Six Months Ended December 31, 2010 and 2009	9
	Unaudited Condensed Consolidated Statements Of Stockholder’s Equity and Comprehensive
	Income (Loss)
	Six Months Ended December 31, 2010	10
	Unaudited Condensed Consolidated Statements Of Cash Flows
	Six Months Ended December 31, 2010 and 2009	11
	COMBINED NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	12 – 34
Item 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
	RESULTS OF OPERATIONS
	Three and Six Months Ended December 31, 2010 and 2009	35 – 50
Item 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	50
Item 4	CONTROLS AND PROCEDURES	50
	PART II: OTHER INFORMATION
Item 1	LEGAL PROCEEDINGS	3751
Item 1A	RISK FACTORS	3751
Item 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	37
Item 3	DEFAULTS UPON SENIOR SECURITIES	37
Item 4	[REMOVED AND RESERVED]	37
Item 5	OTHER INFORMATION	37
Item 6	EXHIBITS	37
SIGNATURE		38
EXHIBIT INDEX		39
CERTIFICATIONS		40-44

Item 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	51

Item 3	DEFAULTS UPON SENIOR SECURITIES	51

Item 4	[REMOVED AND RESERVED]	51

Item 5	OTHER INFORMATION	51

Item 6	EXHIBITS	52

SIGNATURE		53

EXHIBIT INDEX		54

CERTIFICATIONS

- 1 -

Aeroflex ~~Incorporated~~Holding Corp. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except share and per share data )

	September 30,			June 30,
	December 31,			June 30,
Assets	2010			2010
	2010			2010
Assets
Current assets:
Cash and cash equivalents	$	6570,~~130~~643		$	100,663
Accounts receivable, less allowance for doubtful accounts of $2,185 and $1,821		129,306			141,595
Marketable securities		8,357			-
Inventories		142,553			126,568
Accounts receivable, less allowance for doubtful
Deferred income taxes		26,938			28,018
accounts of $2,101 and $1,821		131,222			141,595
Prepaid expenses and other current assets		13,681			10,983
Inventories		153,880			126,568
Total current assets		377,608			407,827
Deferred income taxes		26,030			28,018
Property, plant and equipment, net		103,398			101,662
Prepaid expenses and other current assets		11,252			10,983
Non-current marketable securities, net		9,806			9,769
Total current assets		401,384			407,827
Deferred financing costs, net		19,790			20,983
Property, plant and equipment, net		99,889			101,662
Other assets		22,888			21,818
Non-current marketable securities, net		-			9,769
Intangible assets with definite lives, net		230,302			238,313
Deferred financing costs, net		17,435			20,983
Intangible assets with indefinite lives		114,168			109,894
Other assets		23,204			21,818
Goodwill		459,494			445,874
Intangible assets with definite lives, net		214,085			238,313
Total assets	$	1,337,454		$	1,356,140
Intangible assets with indefinite lives		113,844			109,894
Liabilities and Stockholder's Equity
Goodwill		458,034			445,874
Total assets	$	1,327,875		$	1,356,140
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt	$	360		$	21,817
Accounts payable		3736,~~851~~967			28,803
Advance payments by customers and deferred revenue		3023,~~218~~185			30,741
Income taxes payable		21,~~475~~654			4,615
Accrued payroll expenses		2219,~~590~~098			23,082
Accrued expenses and other current liabilities		5352,~~774~~944			58,817
Total current liabilities		~~147~~134,~~268~~208			167,875
Long-term debt		~~882~~695,~~463~~908			880,030
Deferred income taxes		~~130~~88,~~782~~066			138,849
Defined benefit plan obligations		5,~~684~~605			5,763
Other long-term liabilities		1412,~~103~~983			12,639
Total liabilities		1936,~~180,300~~770			1,205,156
Stockholder's equity:
Stockholders' equity:
Common stock, par value $.10 per share; authorized 1,000 shares; issued and outstanding 1,000 shares		-			-
Preferred stock $.01 par value; 50,000,000 shares authorized,
Additional paid-in capital		399,116			398,941
no shares issued and outstanding		-			-
Accumulated other comprehensive income (loss)		(41,763	)		(53,575	)
Common stock, par value $.01 per share; 300,000,000 shares
Accumulated deficit		(200,199	)		(194,382	)
authorized; 84,789,180 and 65,000,000 shares issued and outstanding		848			650
Total stockholder's equity		157,154			150,984
Additional paid-in capital		642,961			398,291
Total liabilities and stockholder's equity	$	1,337,454		$	1,356,140
Accumulated other comprehensive income (loss)		(41,102	)		(53,575	)
Accumulated deficit		(211,602	)		(194,382	)
Total stockholders' equity		391,105			150,984
Total liabilities and stockholders' equity	$	1,327,875		$	1,356,140

See combined notes to unaudited condensed consolidated financial statements.

- 2 -

Aeroflex Holding Corp. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(In thousands, except per share data)

	Three Months Ended December 31,
	2010			2009

Net sales	$	181,579		$	166,739
Cost of sales		86,739			80,081
Gross profit		94,840			86,658

Selling, general and administrative costs		38,266			31,573
Research and development costs		21,656			17,261
Amortization of acquired intangibles		15,843			15,514
Termination of Sponsor Advisory Agreement		18,133			-
Restructuring charges		6,293			64
		100,191			64,412
Operating income (loss)		(5,351	)		22,246

Other income (expense):
Interest expense		(20,713	)		(21,418	)
Loss on extinguishment of debt		(25,178	)		-
Gain from a bargain purchase of a business		173			-
Other income (expense), net		(378	)		422
Total other income (expense)		(46,096	)		(20,996	)

Income (loss) before income taxes		(51,447	)		1,250
Provision (benefit) for income taxes		(40,044	)		11,864

Net income (loss)	$	(11,403	)	$	(10,614	)

Net income (loss) per common share - Basic	$	(0.15	)	$	(0.16	)

Weighted average number of common shares outstanding - Basic		74,034			65,000

See combined notes to unaudited condensed consolidated financial statements.

- 3 -

Aeroflex Holding Corp. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(In thousands, except per share data)

	Six Months Ended December 31,
	2010			2009

Net sales	$	337,510		$	296,855
Cost of sales		162,844			145,124
Gross profit		174,666			151,731

Selling, general and administrative costs		74,969			61,703
Research and development costs		43,814			34,442
Amortization of acquired intangibles		31,806			31,119
Termination of Sponsor Advisory Agreement		18,133			-
Restructuring charges		8,092			251
Loss on liquidation of foreign subsidiary		-			7,696
		176,814			135,211
Operating income (loss)		(2,148	)		16,520

Other income (expense):
Interest expense		(41,951	)		(42,457	)
Loss on extinguishment of debt		(25,178	)		-
Gain from a bargain purchase of a business		173			-
Other income (expense), net		(407	)		479
Total other income (expense)		(67,363	)		(41,978	)

Income (loss) before income taxes		(69,511	)		(25,458	)
Provision (benefit) for income taxes		(52,291	)		5,699

Net income (loss)	$	(17,220	)	$	(31,157	)

Net income (loss) per common share - Basic	$	(0.25	)	$	(0.48	)

Weighted average number of common shares outstanding - Basic		69,517			65,000

See combined notes to unaudited condensed consolidated financial statements.

- 4 -

Aeroflex Holding Corp. and Subsidiaries

Unaudited Condensed Consolidated Statement of Stockholders' Equity

and Comprehensive Income (Loss)

(In thousands)

								Additional			Other
				Common Stock				Paid-in			Comprehensive			Accumulated			Comprehensive
	Total			Shares		Par Value		Capital			Income(Loss)			Deficit			Income (Loss)

Balance, June 30, 2010	$	150,984			65,000	$	650	$	398,291		$	(53,575	)	$	(194,382	)
Proceeds from issuance of common stock		244,097			19,789		198		243,899			-			-
Share-based compensation		1,026			-		-		1,026			-			-
Other changes		(255	)		-		-		(255	)		-			-
Other comprehensive income (loss)		12,473			-		-		-			12,473			-		$	12,473
Net income (loss)		(17,220	)		-		-		-			-			(17,220	)		(17,220	)
Balance, December 31, 2010	$	391,105			84,789	$	848	$	642,961		$	(41,102	)	$	(211,602	)	$	(4,747	)

See combined notes to unaudited condensed consolidated financial statements.

- 5 -

Aeroflex Holding Corp. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

	Six Months Ended December 31,
	2010			2009

Cash flows from operating activities:
Net income (loss)	$	(17,220	)	$	(31,157	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		41,534			41,774
Gain from a bargain purchase of a business		(173	)		-
Acquisition related adjustment to cost of sales		998			246
Loss on liquidation of foreign subsidiary		-			7,696
Loss on extinguishment of debt		25,178			-
Deferred income taxes		(55,926	)		2,437
Share-based compensation		1,026			1,045
Non - cash restructuring charges		4,860			-
Amortization of deferred financing costs		2,839			2,386
Paid in kind interest		2,434			8,857
Other, net		1,194			400
Change in operating assets and liabilities, net of effects from purchases of businesses:
Decrease (increase) in accounts receivable		13,629			12,136
Decrease (increase) in inventories		(24,214	)		(358	)
Decrease (increase) in prepaid expenses and other assets		(1,088	)		(4,319	)
Increase (decrease) in accounts payable, accrued expenses and other liabilities		(6,128	)		(19,030	)

Net cash provided by (used in) operating activities		(11,057	)		22,113

Cash flows from investing activities:
Payments for purchase of businesses, net of cash acquired		(23,591	)		-
Capital expenditures		(11,213	)		(8,401	)
Proceeds from sale of marketable securities		2,000			1,000
Proceeds from the sale of property, plant and equipment		741			845
Other, net		-			(11	)

Net cash provided by (used in) investing activities		(32,063	)		(6,567	)

Cash flows from financing activities:
Net proceeds from issuance of common stock		244,097			-
Repurchase of senior unsecured notes and senior subordinated unsecured term loans, including premiums and fees		(207,690	)		-
Debt repayments		(21,458	)		(4,012	)
Debt financing costs		(3,332	)		-

Net cash provided by (used in) financing activities		11,617			(4,012	)
Effect of exchange rate changes on cash and cash equivalents		1,483			(483	)

Net increase (decrease) in cash and cash equivalents		(30,020	)		11,051
Cash and cash equivalents at beginning of period		100,663			57,748
Cash and cash equivalents at end of period	$	70,643		$	68,799

See combined notes to unaudited condensed consolidated financial statements.

- 6 -

Aeroflex Incorporated and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except share and per share data )

	December 31,			June 30,
	2010			2010
Assets
Current assets:
Cash and cash equivalents	$	70,643		$	100,663
Marketable securities		8,357			-
Accounts receivable, less allowance for doubtful accounts of $2,101 and $1,821		131,222			141,595
Inventories		153,880			126,568
Deferred income taxes		26,030			28,018
Prepaid expenses and other current assets		11,252			10,983
Total current assets		401,384			407,827

Property, plant and equipment, net		99,889			101,662
Non-current marketable securities, net		-			9,769
Deferred financing costs, net		17,435			20,983
Other assets		23,204			21,818
Intangible assets with definite lives, net		214,085			238,313
Intangible assets with indefinite lives		113,844			109,894
Goodwill		458,034			445,874

Total assets	$	1,327,875		$	1,356,140

Liabilities and Stockholder's Equity
Current liabilities:
Current portion of long-term debt	$	360		$	21,817
Accounts payable		36,967			28,803
Advance payments by customers and deferred revenue		23,185			30,741
Income taxes payable		1,654			4,615
Accrued payroll expenses		19,098			23,082
Accrued expenses and other current liabilities		52,944			58,817
Total current liabilities		134,208			167,875

Long-term debt		695,908			880,030
Deferred income taxes		88,066			138,849
Defined benefit plan obligations		5,605			5,763
Other long-term liabilities		12,983			12,639
Total liabilities		936,770			1,205,156

Stockholder's equity:
Common stock, par value $.10 per share; 1,000 shares authorized, issued and outstanding		-			-
Additional paid-in capital		643,809			398,941
Accumulated other comprehensive income (loss)		(41,102	)		(53,575	)
Accumulated deficit		(211,602	)		(194,382	)
Total stockholder's equity		391,105			150,984

Total liabilities and stockholder's equity	$	1,327,875		$	1,356,140

See combined notes to unaudited condensed consolidated financial statements.

- 7 -

Aeroflex Incorporated and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(In thousands)

	Three Months Ended September 30,
	Three Months Ended December 31,
	2010			2009
Net sales	$	~~155~~181,~~931~~579		$	~~130~~166,~~116~~739
Cost of sales		7686,~~514~~739			6580,~~122~~081
Gross profit		7994,~~417~~840			6486,~~994~~658
Selling, general and administrative costs		3738,~~509~~266			3031,~~238~~573
Research and development costs		2221,~~742~~656			17,~~181~~261
Amortization of acquired intangibles		15,~~963~~843			15,~~605~~514
Loss on liquidation of foreign subsidiary		-			7,696
Termination of Sponsor Advisory Agreement		18,133			-
		76,214			70,720
Restructuring charges		6,293			64
Operating income (loss)		3,203			(5,726	)
		100,191			64,412
Operating income (loss)		(5,351	)		22,246
Other income (expense):
Interest expense		(2120,~~238~~713	)		(21,~~039~~418	)
Other income (expense), net		(29	)		57
Loss on extinguishment of debt		(25,178	)		-
Total other income (expense)		(21,267	)		(20,982	)
Gain from a bargain purchase of a business		173			-
Loss before income taxes		(18,064	)		(26,708	)
Other income (expense), net		(378	)		422
Provision (benefit) for income taxes		(12,247	)		(6,165	)
Total other income (expense)		(46,096	)		(20,996	)
Net loss	$	(5,817	)	$	(20,543	)
Income (loss) before income taxes		(51,447	)		1,250
Provision (benefit) for income taxes		(40,044	)		11,864
Net income (loss)	$	(11,403	)	$	(10,614	)

See combined notes to unaudited condensed consolidated financial statements.

- 8 -

Aeroflex Incorporated and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(In thousands)

	Six Months Ended December 31,
	2010			2009

Net sales	$	337,510		$	296,855
Cost of sales		162,844			145,124
Gross profit		174,666			151,731

Selling, general and administrative costs		74,969			61,703
Research and development costs		43,814			34,442
Amortization of acquired intangibles		31,806			31,119
Termination of Sponsor Advisory Agreement		18,133			-
Restructuring charges		8,092			251
Loss on liquidation of foreign subsidiary		-			7,696
		176,814			135,211
Operating income (loss)		(2,148	)		16,520

Other income (expense):
Interest expense		(41,951	)		(42,457	)
Loss on extinguishment of debt		(25,178	)		-
Gain from a bargain purchase of a business		173			-
Other income (expense), net		(407	)		479
Total other income (expense)		(67,363	)		(41,978	)

Income (loss) before income taxes		(69,511	)		(25,458	)
Provision (benefit) for income taxes		(52,291	)		5,699

Net income (loss)	$	(17,220	)	$	(31,157	)

See notes to unaudited condensed consolidated financial statements.

- 39 -

Aeroflex Incorporated and Subsidiaries

Unaudited Condensed Consolidated Statement of Stockholder's Equity

and Comprehensive Income (Loss)

(In thousands)

								Additional			Other
				Common Stock				Paid-in			Comprehensive			Accumulated			Comprehensive
	Total			Shares		Par Value		Capital			Income(Loss)			Deficit			Income (Loss)

Balance, June 30, 2010	$	150,984			1	$	-	$	398,941		$	(53,575	)	$	(194,382	)
Proceeds from capital contribution from Aeroflex Holding		244,097			-		-		244,097			-			-
Share-based compensation		1,026			-		-		1,026			-			-
Other changes		(255	)		-		-		(255	)		-			-
Other comprehensive income (loss)		12,473			-		-		-			12,473			-		$	12,473
Net income (loss)		(17,220	)		-		-		-			-			(17,220	)		(17,220	)
Balance, December 31, 2010	$	391,105			1	$	-	$	643,809		$	(41,102	)	$	(211,602	)	$	(4,747	)

See combined notes to unaudited condensed consolidated financial statements.

- 10 -

Aeroflex Incorporated and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

	Three Months Ended September 30,
	Six Months Ended December 31,
	2010			2009
Cash flows from operating activities:
Net income (loss)	$	(517,~~817~~220	)	$	(2031,~~543~~157	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		2041,~~886~~534			2141,~~246~~774
Gain from a bargain purchase of a business		(173	)		-
Acquisition related adjustment to cost of sales		998			246
Loss on liquidation of foreign subsidiary		-			7,696
Deferred income taxes		(13,305	)		(6,656	)
Loss on extinguishment of debt		25,178			-
Share-based compensation		513			489
Deferred income taxes		(55,926	)		2,437
Amortization of deferred financing costs		1,193			1,193
Share-based compensation		1,026			1,045
Paid in kind interest		2,434			4,363
Non - cash restructuring charges		4,860			-
Other, net		905			572
Amortization of deferred financing costs		2,839			2,386
Paid in kind interest		2,434			8,857
Other, net		1,194			400
Change in operating assets and liabilities, net of effects from purchases of businesses:
Decrease (increase) in accounts receivable		1613,~~607~~629			4012,~~066~~136
Decrease (increase) in inventories		(1124,~~964~~214	)		(~~3,729~~358	)
Decrease (increase) in prepaid expenses and other assets		(31,~~165~~088	)		(24,~~872~~319	)
Increase (decrease) in accounts payable, accrued expenses and other liabilities		(~~855~~6,128	)		(2819,~~605~~030	)
Net cash provided by (used in) operating activities		7(11,~~432~~057	)		1322,~~220~~113
Cash flows from investing activities:
Payment for purchase of business, net of cash acquired		(19,185	)		-
Payments for purchase of businesses, net of cash acquired		(23,591	)		-
Capital expenditures		(411,~~708~~213	)		(38,~~224~~401	)
Proceeds from sale of marketable securities		-2,000			1,000
Other, net		438			(236	)
Proceeds from the sale of property, plant and equipment		741			845
Net cash provided by (used in) investing activities		(23,455	)		(2,460	)
Other, net		-			(11	)
Net cash provided by (used in) investing activities		(32,063	)		(6,567	)
Cash flows from financing activities:
Debt repayments		(21,458	)		(1,313	)
Capital contribution from Aeroflex Holding		244,097			-
Net cash provided by (used in) financing activities		(21,458	)		(1,313	)
Repurchase of senior unsecured notes and senior subordinated unsecured term loans, including premiums and fees		(207,690	)		-
Effect of exchange rate changes on cash and cash equivalents		1,948			(191	)
Debt repayments		(21,458	)		(4,012	)
Net increase (decrease) in cash and cash equivalents		(35,533	)		9,256
Debt financing costs		(3,332	)		-
Net cash provided by (used in) financing activities		11,617			(4,012	)
Effect of exchange rate changes on cash and cash equivalents		1,483			(483	)
Net increase (decrease) in cash and cash equivalents		(30,020	)		11,051
Cash and cash equivalents at beginning of period		100,663			57,748
Cash and cash equivalents at end of period	$	6570,~~130~~643		$	6768,~~004~~799

See combined notes to unaudited condensed consolidated financial statements.

- 411 -

~~AEROFLEX~~COMBINED ~~INCORPORATED~~NOTES ~~AND~~TO ~~SUBSIDIARIES~~UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	Basis of Presentation

~~The~~Stock ~~accompanying unaudited condensed consolidated financial information of Aeroflex Incorporated and subsidiaries (the “Company”~~Split, ~~“we”,~~Initial orPublic ~~“our”)~~Offering ~~has been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”)~~ and ~~the~~Use ~~rules and regulations~~ of the United States Securities and Exchange Commission (“SEC”), and reflects all adjustments, consisting only of normal recurring adjustments, which in management’s opinion are necessary to state fairly the Company’s financial position as of September 30, 2010, results of operations for the three month periods ended September 30, 2010 and 2009 and cash flows for the three month periods ended September 30, 2010 and 2009. The June 30, 2010 balance sheet information has been derived from audited financial statements, but does not include all information or disclosures required by U.S. GAAP.Proceeds

This quarterly report for the period ended December 31, 2010 is a combined quarterly report being separately filed by two registrants: Aeroflex Holding Corp. (“Aeroflex Holding”) and Aeroflex Incorporated (“Aeroflex”), a direct wholly-owned subsidiary of Aeroflex Holding. Unless the context provides otherwise, references to “we,” “our,” “the Company,” or “us” refer collectively to Aeroflex Holding and its subsidiary, Aeroflex, including Aeroflex’s consolidated subsidiaries.

Filing a combined report which contains full financial information of both Aeroflex Holding and its wholly owned subsidiary Aeroflex is both economical and efficient, as Aeroflex Holding is a holding company which does not conduct business operations on its own - all business operations are conducted by Aeroflex and its consolidated subsidiaries. All assets, liabilities, income, expenses and cash flows presented for all periods represent those of Aeroflex and its subsidiaries, except for activity related to Aeroflex Holding’s equity and earnings per share. Aeroflex Holding’s only asset is its investment in Aeroflex. As such, other than any discussions of liquidity and capital resources (including indebtedness and cash flows), equity and earnings per share, controls and procedures, unregistered sales of equity securities, use of proceeds and any material differences between Aeroflex Holding and Aeroflex which would require separate disclosures, all information presented in this quarterly report will be combined and pertain to both Aeroflex Holding and Aeroflex.

Unless the context requires otherwise, references to (i) the term “Sponsors” refers collectively to affiliates of or funds managed by The Veritas Capital Fund III, L.P., Golden Gate Private Equity, Inc., and GS Direct, LLC, which indirectly control Aeroflex Holding, and (ii) “fiscal year” refers to the twelve months ended June 30 of the applicable year. For example, “fiscal 2010” refers to the twelve months ended June 30, 2010.

Aeroflex Holding’s board of directors authorized an increase of Aeroflex Holding’s authorized shares of common stock to 300,000,000 and a 65,000,000 for 1 common stock split, both of which became effective on November 18, 2010. Aeroflex Holding’s stockholders’ equity has been retroactively adjusted to give effect to the stock split for all periods presented by reclassifying the par value of the additional shares issued in connection with the split from additional paid-in capital to common stock. In addition, all share numbers and per share amounts in Aeroflex Holding’s consolidated financial statements have been retroactively adjusted to give effect to the stock split.

Repurchased an aggregate of $186.6 million of its senior unsecured notes and senior subordinated unsecured term loans and paid the related expenses;

- 12 -

Entered into an amendment of the credit agreement with the lenders of its senior secured credit facility, for which a $3.3 million fee was paid to the lenders.

Basis of Accounting

The accompanying unaudited condensed consolidated financial information of Aeroflex Holding and Aeroflex have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (“SEC”), and reflects all adjustments, consisting only of normal recurring adjustments, which in management’s opinion are necessary to state fairly the Company’s financial position as of December 31, 2010, the results of operations for the three and six month periods ended December 31, 2010 and 2009 and the cash flows for the six month periods ended December 31, 2010 and 2009. The June 30, 2010 balance sheet information has been derived from audited financial statements, but does not include all information or disclosures required by U.S. GAAP.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of sales and expenses during the reporting period. Actual results may differ from those estimates, and such differences may be material to the financial statements.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in Aeroflex Holding’s amended registration statement on Form S-1 filed with the ~~Company~~SEC on November 9, 2010 (“Aeroflex Holding’s ~~Annual~~Registration Statement”) and in Aeroflex’s annual ~~Report~~report on Form 10-K for the fiscal year ended June 30, 2010 (~~the~~”Aeroflex’s “Fiscal ~~2010~~ 2010 Form 10-K”).

~~During~~The ~~the~~accompanying ~~three~~condensed ~~months~~consolidated ~~ended~~financial ~~September~~statements ~~30,~~of ~~2010,~~Aeroflex weHolding ~~identified~~are essentially anidentical ~~overstatement~~to ~~of deferred~~the ~~income~~accompanying ~~tax~~condensed ~~liabilities~~consolidated ~~established~~financial statements inof ~~the~~Aeroflex, ~~fourth~~with ~~quarter~~the offollowing ~~fiscal~~significant ~~2009~~exceptions: ~~and~~Aeroflex ~~throughout~~Holding ~~fiscal~~has ~~2010~~84,789,180 ~~related~~shares toof ~~U.S.~~common ~~income~~stock ~~taxes~~outstanding ~~provided~~at ona ~~foreign~~par ~~source~~value ~~income~~of $.01 ~~After~~per ~~consideration~~share, of ~~both~~which ~~quantitative~~65,000,000 ~~and~~shares ~~qualitative~~are ~~factors,~~held by one shareholder we(as ~~determined~~a result of the ~~amounts~~65,000,000 ~~were~~for ~~not~~1 ~~material~~stock tosplit ~~any~~on ofNovember ~~those~~18, ~~prior~~2010) ~~period~~and ~~financial~~19,789,180 ~~statements~~shares orare ~~the~~held ~~fiscal~~by ~~2011~~public ~~estimated~~shareholders ~~results~~by ~~and~~virtue ~~thus~~of ~~corrected~~ the IPO on ~~balance~~November 19, 2010, which resulted in ~~the~~net ~~three~~proceeds ~~months~~of ~~ended~~$244.1 ~~September~~million ~~30,~~after deducting ~~2010~~underwriting discounts and offering expenses. ~~Accordingly~~ Aeroflex has 1,000 ~~the~~shares ~~consolidated~~of ~~balance~~common ~~sheet~~stock outstanding at ~~September~~a ~~30,~~par ~~2010~~value ~~presented~~of in$.10 ~~this~~per ~~Form~~share, ~~10-Q~~all of ~~has~~which ~~been~~are ~~adjusted~~held toby ~~reduce~~Aeroflex ~~deferred~~Holding, ~~income~~and ~~tax~~Aeroflex ~~liabilities~~received bya capital contribution of $3244.71 million~~, with~~ afrom ~~corresponding~~Aeroflex ~~increase~~Holding infrom ~~income~~the ~~tax~~net ~~benefit~~proceeds inof the ~~statement~~IPO. ofThe ~~operations~~combined ~~for~~notes to the ~~three~~condensed ~~months~~consolidated ~~ended~~financial ~~September~~statements ~~30, 2010. The~~are ~~adjustment~~essentially ~~did~~identical ~~not~~for ~~impact~~Aeroflex ~~the~~Holding ~~statement~~and ofAeroflex, ~~cash~~except ~~flows~~as noted.

Results of operations for interim periods are not necessarily indicative of results to be expected for the full fiscal year or any future periods.

- 13 -

Reclassifications

Certain reclassifications have been made to the fiscal 2010 consolidated financial statements to conform to the fiscal 2011 presentation.

2.	Accounting Pronouncements

Recently Adopted Accounting Pronouncements

On July 1, 2010, we adopted the authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) on the consolidation of variable interest entities. The new guidance requires revised evaluations of whether entities represent variable interest entities, ongoing assessments of control over such entities, and additional disclosures for variable interests. The adoption of this new guidance did not have an impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In January 2010, the FASB issued authoritative guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires a roll forward of activities on purchases, sales, issuance, and settlements on a gross basis of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). We believe the adoption on July 1, 2011 of the gross presentation of the Level 3 roll forward will not have aan ~~material~~ impact on our consolidated financial statements.

- 5 -

3.	Acquisition of Businesses and Intangible Assets

Test Evolution Corporation

On October 1, 2007, we purchased 40% of the outstanding stock of Test ~~Evolution~~ Evolution Corporation, or TEC, for $4.0 million. TEC, located in Massachusetts, develops and manufactures digital, analog and RF semiconductor automated test equipment. We ~~have~~ determined that we have control of this company and have consolidated TEC’s assets and liabilities and results of operations, all of which were insignificant, into our financial statements commencing October 1, 2007. On ~~August~~ August 5, 2010, we invested another $2.0 million in TEC. At ~~September 30~~December 31, 2010, as a result of this and other capital transactions, our ownership interest ~~increased~~ tois approximately 51%. The amounts attributable to the non-controlling interest in TEC’s equity and results of operations are not material to our consolidated financial statements and have been included in other long-term liabilities and other income (expense), respectively. TEC is included in our Test Solutions segment.

Radiation Assured Devices

On June 30, 2010, we acquired 100% of the stock of Radiation Assured Devices, Inc., or RAD, for $14.0 million in cash, plus contingent payments equal to 50% of the acquired company’s EBITDA (as defined in the agreement) for the five year period of fiscal 2011 to fiscal 2015, provided certain thresholds are met. The fair value of the contingent consideration as of December 31, 2010 was $7.9 million, of which $1.4 million was reflected in accrued expenses and other current liabilities and $6.5 million was reflected in other long-term liabilities. The fair value of the contingent consideration as of June 30, 2010 was $7.1 million and was reflected in other long-term liabilities and considered in the allocation of the purchase price. The $784,000 increase in the fair value of the contingent consideration was recorded in selling, general and administrative costs for the three and six months ended December 31, 2010. RAD, located in Colorado Springs, Colorado, uses commercial and specialty technologies to provide state of the art radiation engineering and qualification services, as well as to produce radiation hardened products for commercial and military spaceborne electronics. RAD is included in our Microelectronic Solutions segment.

- 14 -

Advanced Control Components

On ~~August~~ August 31, 2010, we acquired 100% of the stock of Advanced Control Components, Inc., or ACC, for $19.2 million in cash, which was net of a preliminary working capital adjustment made at closing. The purchase price is subject to a further working capital adjustment, based on the amount by which the final adjusted net working capital at the date of closing is lower than the target set forth in the purchase agreement. We currently estimate an additional $764,000 deficiency in adjusted net working capital, reducing the purchase price to $18.4 million. ACC, located in Eatontown, New Jersey, designs, manufacturers and markets a wide range of radio frequency, or RF, and microwave products for the military, civilian radar, scientific and ~~communications~~ communications markets. ACC is included in our Microelectronic Solutions segment.

We allocated the purchase price based on the estimated fair value of the assets acquired and liabilities assumed as follows:

(In thousands)
Current assets (excluding cash of $15)	$	4,~~961~~844
Property, plant and equipment		1,156
Other assets		60
Customer related intangibles		5,680
Non-compete arrangements		30
Tradenames		3,010
Goodwill		10,~~608~~072
Total assets acquired		2524,~~505~~852
Current liabilities		(2,~~744~~855	)
Deferred taxes		(3,576	)
Total liabilities assumed		(6,~~320~~431	)
Net assets acquired	$	1918,~~185~~421

The customer related intangibles and non-compete arrangements are being amortized on a straight-line basis over a range of 1 to 9 years. The tradenames have an indefinite life. The goodwill is not deductible for tax purposes.

On a pro forma basis, had the ACC acquisition taken place as of the beginning of the periods presented, our results of operations for those periods would not have been materially affected.

~~- 6~~Cash -Paid for the Purchase of Businesses

For the six months ended December 31, 2010, we had net cash outlays of $23.6 million for the purchase of businesses, net of cash acquired. This was primarily comprised of $18.4 million for the purchase of ACC and $5.6 million of contingent consideration payments related to fiscal 2010 ($4.6 million for Gaisler Research AB, acquired on June 30, 2008 and $1.0 million for Airflyte Electronics Company, acquired on June 26, 2009), partially offset by refunds for working capital adjustments for prior year acquisitions.

- 15 -

Intangible Assets with Definite Lives

The components of amortizable intangible assets were as follows:

September 30, 2010

June 30, 2010

December 31, 2010

June 30, 2010

(In thousands)

Gross

Carrying

Accumulated

Carrying

Accumulated

Amount

Amortization

Amount

Amortization

Developed technology

199,~~759~~309

~~104~~112,~~251~~592

197,422

94,672

Customer related intangibles

228,~~805~~551

~~101~~108,~~821~~386

222,026

94,656

Non-compete arrangements

10,~~335~~318

45,~~995~~421

10,087

4,420

Tradenames

3,~~326~~315

~~856~~1,009

3,184

658

Total

~~442~~441,~~225~~493

~~211~~227,~~923~~408

432,719

194,406

The aggregate amortization expense for amortizable intangible assets was $16.0 million and $15.6 million for the three months ended September 30, 2010 and 2009, respectively.

The estimated aggregate amortization expense for each of the twelve month periods ending September 30, is as follows:

	(In thousands)
2011	$	63,194
2012		61,470
2013		52,315
2014		24,730
2015		17,191

Goodwill

The carrying amount of goodwill, by segment, was as follows:

	Microelectronic			Test
	Solutions			Solutions		Total
	(In thousands)
Balance at June 30, 2010	$	287,136		$	158,738	$	445,874
Goodwill recorded for acquisition of ACC		10,608			-		10,608
Other		(40	)		-		(40	)
Impact of foreign currency translation		1,513			1,539		3,052
Balance at September 30, 2010	$	299,217		$	160,277	$	459,494

- 7 -

4.	Restructuring Charges

The following table sets forth the charges and payments related to the restructuring liability for the period indicated:

	Balance									Balance
	June 30,									~~September~~December 3031,
	2010		~~Three~~Six Months Ended ~~September~~December 3031, 2010							2010
								Effect of
	Restructuring							foreign		Restructuring
	Liability		Net Additions		Cash Payments			currency		Liability
			(In thousands)
Work force reduction	$	172	$	12,~~219~~651	$	(~~327~~1,212	)	$	2516	$	1,~~089~~627
Closure of facilities		632		~~580~~581		(~~533~~684	)		3528		~~714~~557
Total	$	804	$	13,~~799~~232	$	(~~860~~1,896	)	$	6044	$	12,~~803~~184

For the ~~three~~six months ended ~~September~~December 3031, 2010, we recorded aan $1.8.1 million charge in connection with continued restructuring activities of certain manufacturing operations~~, which consisted of $1.2 million of severance and other~~ related ~~costs related~~ to consolidation and reorganization efforts in our United Kingdom (“U.K.”) operations and in connection with one of our domestic components facilities located in ~~connection~~Whippany, ~~with~~New ~~the~~Jersey. ~~ACC~~We ~~acquisition~~are ~~and~~consolidating part ~~$580,000~~of our components operations by relocating a portion of our Whippany, New Jersey facility’s ~~closure~~production ~~costs~~to inour Ann Arbor, Michigan facility and a portion to our Eatontown, UNew Jersey facility.K In connection with this consolidation, we recorded a $4.9 ~~operations~~million impairment charge based on the fair value of the Whippany, New Jersey facility we intend to sell.

5. ~~Inventories~~Net Income (Loss) Per Common Share

The consolidated statements of operations for Aeroflex Holding present only basic net income (loss) per common share, as it does not have any potentially dilutive securities. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period.

Earning per share information is not presented for Aeroflex because, as a wholly-owned subsidiary of Aeroflex Holding, such information is not relevant.

- 16 -

6.	Inventories

Inventories consisted of the following:

	September 30,		June 30,
	December 31,		June 30,
	2010		2010
	(In thousands)
Raw materials	$	6882,~~320~~212	$	61,278
Work in process		5048,~~865~~782		44,022
Finished goods		2322,~~368~~886		21,268
	$	~~142~~153,~~553~~880	$	126,568

6. Product Warranty

We warrant our products against defects in design, materials and workmanship, generally for one year from their date of shipment. A provision for estimated future costs relating to these warranties is recorded in cost of sales when the related revenue is recognized. Quarterly we analyze our warranty liability for reasonableness based on a 15-month history of warranty costs incurred, the nature of the products shipped subject to warranty and anticipated warranty trends.

- 8 -

Activity for the three months ended September 30, 2010 related to our product warranty liability, which is reflected in Accrued Expenses and Other Current Liabilities in the accompanying consolidated balance sheets, was as follows:

(In thousands)
Balance at June 30, 2010	$	2,762
Provision for warranty obligations		681
Cost of warranty obligations		(627	)
Foreign currency impact		66
Balance at September 30, 2010	$	2,882

7.	Derivative Financial Instruments

We address certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. We enter into interest rate swap derivatives to manage the effects of interest rate movements on portions of our debt. We also enter into foreign currency forward contracts, not designated as hedging instruments, to protect us from fluctuations in exchange rates.

The fair values of our derivative financial instruments included in the consolidated balance sheets as of ~~September~~December 3031, 2010 and June 30, 2010 are presented as follows:

	Asset (Liability) Derivatives
	September 30, 2010				June 30, 2010
	December 31, 2010				June 30, 2010
	Balance Sheet				Balance Sheet
(In thousands)	Location	Fair Value(1)			Location	Fair Value(1)
Derivatives designated as hedging instruments:
Interest rate swap contracts	Accrued expenses and other current liabilities	$	(1,033	)	Accrued expenses and other current liabilities	$	(6,613	)
Derivatives not designated as hedging instruments:
Interest rate swap contracts	Accrued expenses and				Accrued expenses and
Foreign currency forward contracts	Prepaid expenses and other current assets		18		Accrued expenses and other current liabilities		(293	)
	other current liabilities	$	(3,747	)	other current liabilities	$	(6,613	)
Total derivatives, net		$	(1,015	)		$	(6,906	)
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Accrued expenses and				Accrued expenses and
	other current liabilities		(333	)	other current liabilities		(293	)
Total derivatives, net		$	(4,080	)		$	(6,906	)

(1) See Note 8 for further information about how the fair values of derivative assets and liabilities are determined.

- 917 -

The gains and losses related to our derivative financial instruments designated as hedging instruments for the three and six months ended ~~September~~December 3031, 2010 and 2009 were as as follows:

Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized on Derivatives in Other Comprehensive Income (Effective Portion) (1)
	Amount of Gain or (Loss)
	Three Months Ended September 30
	Recognized on Derivatives in
	2010			2009
Derivatives in Cash Flow	Other Comprehensive Income
	(In thousands)
Hedging Relationships	(Effective Portion) (1)
Interest rate swap contracts	$	(575	)	$	(3,081	)
	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2010			2009			2010			2009
	(In thousands)
Interest rate swap contracts	$	(37	)	$	(1,191	)	$	(612	)	$	(4,271	)

Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion) (1)
Location of Gain or (Loss)	Amount of Gain or (Loss)
	Three Months Ended September 30
Reclassified from Accumulated	Reclassified from
	2010			2009
Other Comprehensive Income	Accumulated Other Comprehensive Income
	(In thousands)
into Income (Effective Portion)	into Income (Effective Portion) (1)
Interest expense	$	(3,441	)	$	(3,401	)
	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2010			2009			2010			2009
	(In thousands)
Interest expense	$	(2,751	)	$	(3,781	)	$	(6,192	)	$	(7,182	)

(1) See Note 11 for additional information on changes to accumulated other comprehensive income (loss).

The amounts of the gains and losses related to our derivative financial instruments not designated as hedging instruments for the three and six months ended December ~~September 30~~31, 2010 and 2009 were as follows:

	Location of Gain or (Loss)		Amount of Gain or (Loss)
Derivatives Not	Location of Gain or (Loss)	Amount of Gain or (Loss)
Derivatives Not Designated	Recognized in Earnings on		Recognized in Earnings on
Designated as	Recognized in Earnings on	Recognized in Earnings on
as Hedging Instruments	Derivative		Derivative
Hedging Instruments	Derivative	Derivative
			Three Months Ended September 30,
		Three Months Ended						Six Months Ended
			2010		2009
		December 31,						December 31,
			(In thousands)
		2010			2009			2010		2009
Foreign currency forward contracts	Other income (expense)	$	(40)	$	318
		(In thousands)
Foreign currency forward contracts	Other income (expense)	$	351		$	(87	)	$	311	$	231

Interest Rate Swap Cash-Flow Hedges

We enter into interest rate swap contracts with counterparties that are rated investment grade to manage the effects of interest rate movements on portions of our debt. Such contracts effectively fix the borrowing rates on floating rate debt to limit the exposure against the risk of rising rates. We do not enter into interest rate swap contracts for speculative purposes. Our interest rate swap contracts outstanding as of ~~September~~December 3031, 2010, all of which were entered into in fiscal 2008 for an aggregate notional amount of $~~422~~300.70 million, ~~have~~mature ~~varying~~in ~~maturities through~~ February 2011.

- 18 -

Foreign Currency Contract Derivatives

Foreign currency contracts are used to protect us from fluctuations in exchange rates. We enter into foreign currency contracts, which are not designated as hedges. The change in fair value is included in other income (expense) as it occurs. As of ~~September~~December 3031, 2010, we had $4731.27 million of notional value foreign currency forward contracts maturing through ~~October~~January 2931, ~~2010~~2011. Notional amounts do not quantify risk or represent assets or liabilities of the Company, but are used in the calculation of cash settlements under the contracts.

- 10 -

8.	Fair Value Measurements

We account for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring the fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1:

Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level 2:

Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3:

Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instruments’ valuation.

The following table presents for each hierarchy level, financial assets and liabilities measured at fair value on a recurring basis:

	Quoted Prices in
	Active Markets		Significant Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs
As of September 30, 2010	(Level 1)		(Level 2)		(Level 3)		Total
As of December 31, 2010	(Level 1)		(Level 2)		(Level 3)		Total
	(In thousands)
Assets:
Non-current marketable securities	$	-	$	-	$	9,806	$	9,806
Current marketable securities	$	-	$	8,357	$	-	$	8,357
Foreign currency forward contracts		-		18		-		18
Total Assets	$	-	$	8,375	$	-	$	8,375
Liabilities:
Foreign currency forward contracts	$	-	$	333	$	-	$	333
Interest rate swap contracts	$	-	$	1,033	$	-	$	1,033
Interest rate swap contracts		-		3,747		-		3,747
Total Liabilities	$	-	$	4,080	$	-	$	4,080

	Quoted Prices in
	Active Markets		Significant Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs
As of June 30, 2010	(Level 1)		(Level 2)		(Level 3)		Total
	(In thousands)
Assets:
Non-current marketable securities	$	-	$	-	$	9,769	$	9,769
Liabilities:
Foreign currency forward contracts	$	-	$	293	$	-	$	293
Interest rate swap contracts		-		6,613		-		6,613
Total Liabilities	$	-	$	6,906	$	-	$	6,906

- 1119 -

The following table presents the changes in the carrying value of the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the ~~three~~six months ended ~~September~~December 3031, 2010:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Auction Rate Securities (In thousands)
	Fair Value Measurements
	Using Significant
	Unobservable Inputs
	(Level 3)
	Auction
	Rate
	Securities
	(In thousands)
Balance at June 30, 2010	$	9,769
Unrealized gain (loss) in accumulated other comprehensive income (loss)		37
Sold at par		(2,000	)
Balance at September 30, 2010	$	9,806
Transfer to Level 2		(9,045	)
Transfer of unrealized loss from accumulated other comprehensive income (loss) to realized loss recorded in other expense		688
Unrealized gain (loss) in accumulated other comprehensive income (loss)		588
Balance at December 31, 2010	$	-

~~Non-Current~~ Marketable Securities – ~~Non-current~~In December ~~marketable~~2010, ~~securities~~$2.0 ~~consist~~million of our auction rate securities ~~that~~were ~~currently~~sold ~~have~~at par. In noJanuary ~~active~~2011, ~~market~~the ~~from~~remaining ~~which we could obtain pricing~~$9. We0 ~~have~~million ~~classified~~of our auction rate securities aswere ~~Level~~sold 3at ~~as their~~an ~~valuation~~average ~~requires~~of ~~substantial~~92.4% ~~judgment and estimation~~ of ~~factors~~par. ~~that~~The ~~are~~resulting $688,000 ~~not~~realized ~~currently~~loss, ~~observable~~which inapproximated the ~~market~~other ~~due~~than totemporary ~~the~~impairment ~~lack of trading in the~~at ~~securities. To~~December ~~date~~31, we2010, ~~have~~was ~~collected~~recorded ~~all~~in ~~interest~~the ~~payments~~statement ~~on all~~ of ~~our~~operations ~~auction~~for ~~rate securities when due. Furthermore, we have~~ the ~~intent~~three and ~~are~~ ~~able~~six tomonths ~~hold~~ended ~~these~~December ~~securities~~31, ~~until~~2010. As ~~the~~of ~~credit~~December ~~markets~~31, ~~recover~~2010, orour auction ~~until~~rate ~~their maturities,~~securities ~~which~~are ~~range~~classified ~~from~~as ~~2037~~current ~~through~~marketable ~~2041~~securities, ~~if necessary. However~~since, as ~~based~~of onthe abalance ~~discounted~~sheet ~~cash flow analysis~~date, ~~which~~ ~~considered,~~we ~~among~~had ~~other~~firm ~~items,~~offers ~~the~~for ~~collateral~~their ~~underlying~~sale ~~the~~and ~~securities, the~~we ~~credit~~had ~~worthiness of~~ the intent ~~issuer,~~to ~~the~~sell ~~timing~~them. ofWe ~~future~~have ~~cash~~classified ~~flows~~auction ~~and liquidity~~rate ~~risks,~~securities atas ~~September~~Level 302, ~~2010,~~as their wevaluation ~~had~~is abased ~~$1.3~~on ~~million valuation allowance against~~ the ~~auction~~actual ~~rate~~selling ~~securities~~price.

As fair values have continued to be below cost, we have considered various factors in determining that at September 30, 2010 a credit loss did not exist and there was no requirement to recognize an other than temporary impairment charge, including the length of time and the extent to which the fair value has been below the cost basis, the timely receipt of all interest payments, the rating of the security, the relatively low volatility of the security’s fair value, the current financial condition of the issuer and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Foreign Currency Forward Contracts – The fair value of our foreign currency forward contracts were determined using a pricing model with all significant inputs based on observable market data such as measurement date spot and forward rates.

Interest Rate Swap Contracts – The fair value of our outstanding interest rate swap contracts were based on valuations received from the counterparties and corroborated by measurement date equivalent swap rates.

- 12 -

9.	Long Term Debt and Credit Agreements

~~The~~All indebtedness ~~fair~~has been incurred by Aeroflex; such indebtedness is reflected on ~~value~~the balance sheets of ~~our~~Aeroflex ~~debt~~Holding ~~instruments~~by ~~are~~virtue ~~summarized~~of asthe ~~follows:~~principles of consolidation.

	September 30, 2010
	Carrying		Estimated
	Amount		Fair Value
	(In thousands)
Senior secured B-1 term loan	$	372,651	$	361,472
Senior secured B-2 term loan		116,454		112,960
Senior unsecured notes		225,000		244,125
Senior subordinated unsecured term loan		167,973		145,297
Other		745		745
Total debt	$	882,823	$	864,599

All of the net proceeds of Aeroflex Holding’s IPO were used to make a capital contribution to Aeroflex to enable it to, among other things, tender for a portion of its senior unsecured notes and offer to repurchase a portion of its senior subordinated unsecured term loans. In December 2010, Aeroflex repurchased approximately $32.2 million of its senior unsecured notes and $154.4 million of its senior subordinated unsecured term loans. This resulted in a $25.2 million loss on extinguishment of debt, which is comprised of the following:

As· ~~of June~~an ~~30,~~11% ~~2010,~~premium ~~our~~paid ~~total~~on the debt ~~had~~repurchased, awhich ~~carrying~~amounted ~~value~~to of $~~901~~20.85 million ~~and a fair value of $877.7 million.~~;

~~The estimated~~· ~~fair~~the ~~values~~write-off of ~~each of our debt instruments are based on quoted market prices for~~ the ~~same or similar issues. Fair value estimates~~ related todeferred ~~our~~financing ~~debt instruments~~costs ~~are made at a specific point in time based on relevant market information. These estimates are subjective in nature and involve uncertainties and matters~~ of ~~significant judgments and therefore cannot be determined with precision~~$4. ~~Changes~~0 inmillion; ~~assumptions could significantly affect the estimates.~~and

As- of20 ~~September 30, 2010, we are in compliance with all of the covenants contained in our loan agreements.~~-

~~Interest paid~~· ~~was~~professional ~~$21.6~~fees ~~million and $22.0 million for the three months ended September 30, 2010 and 2009, respectively. Accrued interest~~ of $~~9.8 million and $13.9 million was included in accrued expenses and other current liabilities at September 30~~614, ~~2010 and June 30, 2010, respectively~~000.

On November 4, 2010, Aeroflex entered into an amendment of the credit agreement with the lenders of its senior secured credit facility, for which it paid a $3.3 million fee to the lenders which was recorded as deferred financing costs and $579,000 of other costs that were expensed as incurred, which allowed Aeroflex to, among other things:

increase the amount of cash it can spend for acquisitions of businesses from $20 million per year and a $100 million aggregate amount, to $200 million in the aggregate (with no annual limit), from the effective date of the amendment to the credit facility maturity date, August 15, 2014;

pay certain fees to affiliates of our Sponsors upon the completion of the Aeroflex Holding IPO. These fees were paid on November 24, 2010, and consisted of the $2.5 million Transaction Fee for services directly attributable to the equity offering, which was recorded as a reduction of additional paid-in capital, and the $16.9 million Termination Fee. The Termination Fee, when combined with the related write-off of prepaid advisory fees, amounted to an $18.1 million expense which was recorded in a separate line on the statement of operations entitled Termination of Sponsor Advisory Agreement; and

base its interest rate margin above LIBOR on a grid, with reference to its current credit rating. This increased the interest rate margin by 75 basis points for all tranches of debt within the secured credit facility.

The fair values of Aeroflex’s debt instruments are summarized as follows:

	December 31, 2010
	Carrying		Estimated
	Amount		Fair Value
	(In thousands)

Senior secured credit facility B-1 term loan	$	372,651	$	370,788
Senior secured B-2 term loan		116,454		114,707
Senior unsecured notes		192,845		209,237
Senior subordinated unsecured term loan		13,573		15,270
Other		745		745
Total debt	$	696,268	$	710,747

As of June 30, 2010, Aeroflex’s total debt had a carrying value of $901.8 million and a fair value of $877.7 million.

The estimated fair values of each of Aeroflex’s debt instruments are based on quoted market prices for the same or similar issues. Fair value estimates related to Aeroflex’s debt instruments are made at a specific point in time based on relevant market information. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

As of December 31, 2010, Aeroflex is in compliance with all of the covenants contained in the loan agreements.

Interest paid was $36.9 million and $30.6 million for the six months ended December 31, 2010 and 2009, respectively. Accrued interest of $12.9 million and $13.9 million was included in accrued expenses and other current liabilities at December 31, 2010 and June 30, 2010, respectively.

- 21 -

10.	Loss on Liquidation of Foreign Subsidiary

In connection with the 2003 acquisition of one of our wireless businesses in the U.K. ~~in 2003~~, we set up a foreign partnership to finance the acquisition. We invested $19.5 million in the partnership and the partnership advanced those funds to our foreign holding company in the form of a loan, the proceeds of which was used for the acquisition.

During the ~~quarter~~six months ended ~~September~~December 3031, 2009, the loan was fully repaid to the partnership, with interest, and we received a return of capital and dividends. The partnership has been substantially liquidated.

As a result of changes in foreign currency rates, there was a cumulative translation adjustment of $7.7 million remaining after substantially all of the assets have been returned to us and substantially all of the liabilities have been satisfied. In accordance with U.S. GAAP, this remaining cumulative translation adjustment has been expensed in the period during which the substantial liquidation of the partnership occurred and presented as a non-cash loss on liquidation of foreign subsidiary in our Condensed Consolidated Statement of Operations for the ~~quarter~~six months ended ~~September~~December 3031, 2009. This loss iswas not deductible for income tax purposes.

- 13 -

11.	Comprehensive Income

The components of comprehensive income (loss) were as follows:

	Three Months Ended September 30,
	Three Months Ended						Six Months Ended
	2010			2009
	December 31,						December 31,
(In thousands)
	2010			2009			2010			2009
Net income (loss)	$	(5,817	)	$	(20,543	)
	(In thousands)
Increase (decrease) in fair value of interest rate swap contracts, net of tax provision (benefit) of $1,113 and $124		1,753			196
Net income (loss)	$	(11,403	)	$	(10,614	)	$	(17,220	)	$	(31,157	)
Valuation allowance against non-current marketable securities		37			269
Increase (decrease) in fair value of interest rate swap contracts, net of tax provision (benefit) of $1,053, $961, $2,166 and $1,086		1,661			1,629			3,414			1,825
Foreign currency translation adjustment, net of tax of $680 and $0		10,022			5,884
Valuation allowance against non-current marketable securities		1,239			(47	)		1,276			222
Total comprehensive income (loss)	$	5,995		$	(14,194	)
Foreign currency translation adjustment, net of tax of $(55), $617, $625 and $617		(2,239	)		129			7,783			6,013
Total comprehensive income (loss)	$	(10,742	)	$	(8,903	)	$	(4,747	)	$	(23,097	)

Accumulated other comprehensive income (loss) was as follows:

	Unrealized
	Gain (Loss)			Valuation			Minimum			Foreign
	on Interest			Allowance Against			Pension			Currency
	Rate Swap			Non-Current			Liability			Translation
	Contracts			Marketable			Adjustment			Adjustment			Total
	(net of tax)			Securities			(net of tax)			(net of tax)			(net of tax)
	(In thousands)
Balance, June 30, 2010	$	(4,046	)	$	(1,276	)	$	(773	)	$	(47,480	)	$	(53,575	)
Three months' activity		1,753			37			-			10,022			11,812
Six months' activity		3,414			1,276			-			7,783			12,473
Balance, September 30, 2010	$	(2,293	)	$	(1,239	)	$	(773	)	$	(37,458	)	$	(41,763	)
Balance, December 31, 2010	$	(632	)	$	-		$	(773	)	$	(39,697	)	$	(41,102	)

- 22 -

The valuation allowance for non-current marketable securities is not adjusted for income taxes as it would create a capital loss carryforward upon realization for which we would record a valuation allowance against the related deferred tax asset.

~~Prior to~~Although ~~fiscal 2009, the foreign currency translation adjustments were not adjusted for income taxes~~ as ~~they~~of ~~related~~December to31, ~~indefinite~~2010 ~~investments~~deferred ~~in non-~~U.S. ~~subsidiaries. Deferred~~ ~~U.S.~~ income taxes have been provided on ~~certain~~ certain undistributed foreign earnings ~~for years subsequent to fiscal 2008 since we expect that substantially all~~ of ~~these~~a ~~earnings will be distributed to the~~ U.SK. As oflimited ~~September~~partnership 30subsidiary, ~~2010,~~ we have not recorded a deferred U.S. income tax on the foreign currency translation adjustment ~~created~~since byonly ~~the post-fiscal~~an ~~2008~~insignificant ~~undistributed~~amount ~~foreign~~relates ~~earnings~~to that subsidiary.

12.	Legal Matters

In March 2005, we sold the net assets of our shock and vibration control device manufacturing business, which we refer to as VMC. Under the terms of the sale agreements, we retained certain liabilities relating to adverse environmental conditions that existed at the premises occupied by VMC as of the date of sale. We recorded a liability for the estimated remediation costs related to adverse environmental conditions that existed at the VMC premises when it was sold. The accrued environmental liability at ~~September~~December 3031, 2010 was $1.6 5 million, of ~~which~~ which $322,000 was expected to be paid within one year.

-We 14have identified instances of noncompliance with the International Traffic in Arms Regulations (“ITAR”) in certain of our past business activities as well as in the pre-acquisition business activities of certain recently acquired companies. These include the inadvertent misclassification and/or export of products without the required license and the disclosure of controlled technology to certain foreign national employees. These matters were formally disclosed to the U.S. Department of State from time to time during the period from 2007 through 2010.

InFor example, in fiscal 2007, when we became aware that certain RadHard bidirectional ~~multipurpose~~ multipurpose transceivers sold by us since 1999 may have been subject to the ~~licensing~~ licensing jurisdiction of the U.S. Department of State in accordance with ITAR~~. Accordingly~~, we filed a Voluntary Disclosure with the ~~Directorate of Defense Trade Controls,~~ Department of State, describing the details of the possible inadvertent misclassification and identifying certain unauthorized exports from the United States to end-users in a number of countries, including China and Russia. ~~Simultaneously,~~Once weour ~~filed a Commodity Jurisdiction~~ request ~~providing~~for ~~detailed~~reclassification ~~information~~was ~~and~~denied ~~data supporting our contention that the product is not subject to ITAR~~ and ~~requesting~~ a determination that such product is not ITAR controlled. On November 15, 2007, we were informed that the U.S. Department of State had determined in response to our Commodity Jurisdiction request that the product is subject to the licensing jurisdiction of the U.S. Department of State in accordance with the ITAR. We requested reconsideration of this determination. On February 7, 2008, we filed an addendum to the above referenced Voluntary Disclosure advising the Directorate of Defense Trade Controls that other products sold by us, similar in nature to the transceiver described above, may also be subject to the ITAR. The Directorate of Defense Trade Controls agreed to extend our time to file such addendum to the Voluntary Disclosure until a decision was ~~rendered~~made with respect to our request for reconsideration of the determination in connection with the above-referenced Commodity Jurisdiction request. On August 5, 2008, we received a letter from the Office of Defense Trade Controls Compliance, or DTCC, requesting that ~~we provide documentation and/or information relating to our compliance initiatives after November 15, 2007 as well as~~ the ~~results of any~~ product reviews conducted by us, and indicating that a civil penalty against us could be warranted in connection with this matter following the review of such materials. We have provided all of the materials and documentation requested by the DTCC. Our request for reconsideration of the Commodity Jurisdiction request was ~~denied by the~~ ~~Directorate of Defense Trade Controls on August 19, 2008 which determined that the product is~~ subject to the licensing jurisdiction of the Department of State in accordance with ~~the~~ ITAR~~. Accordingly~~, on September 18, 2008, we filed an addendum to our Voluntary Disclosure identifying other products that may have been subject to the licensing jurisdiction of the U.S. Department of State in accordance with ~~the~~ ITAR but were inadvertently misclassified and exported without a license. ~~At this time it is not possible to determine whether any fines or other penalties will be asserted against us or the materiality of any outcome.~~

We have also identified other ITAR noncompliance in our past business activities as well as in the pre-acquisition business activities of certain recently acquired companies. These include the inadvertent export of products without a required license and the disclosure of controlled technology to certain foreign national employees. These matters were formally disclosed to the U.S. Department of State during 2009 and 2010. At this time it is not possible to determine whether any fines or other penalties will be asserted against us or the materiality of the outcome of any of these ~~outcome~~matters.

We are also involved in various other claims and legal actions that arise in the ordinary course of business. We do not believe that the ultimate resolution of any of these actions will have a material adverse effect on our business, results of operations, financial position, liquidity or capital resources.

13.	Business Segments

We are a global provider of radio frequency, or RF, and microwave integrated circuits, components and systems used in the design, development and maintenance of technically demanding, high-performance wireless communication systems. Our solutions include highly specialized microelectronic components and test and measurement equipment used by companies in the space, avionics, defense, commercial wireless communications, medical and other markets. Approximately 3130% and 32% of our sales for the three months ended ~~September~~December 3031, 2010 and 362009 and 31% and 34% for the ~~three~~ six months ended ~~September~~December 3031, 2010 and 2009 were to agencies of the United States government or to prime defense contractors or subcontractors of the United States government. No customer constituted more than 10% of sales during any of the periods presented. Inter-segment sales were not material and have been eliminated from the tables below.

- 1523 -

The majority of our operations are located in the United States. We also have operations in Europe and Asia, with our most significant operations in the ~~United Kingdom (“~~U.K.~~”).~~ Net sales from facilities located in the U.K. were approximately $42.8 million and $2342.10 million for the three months ended ~~September~~December 3031, 2010 and 2009 and $2680.35 million and $71.1 million for the ~~three~~six months ended ~~September~~December 3031, 2010 and 2009. Total assets of the U.K. operations were $~~171~~169.0 1 million as of ~~September~~ 30December 31, 2010 and $159.9 million as of June 30, 2010.

Net sales, based on the customers’ locations, attributed to the United States and other regions were as follows:

	Three Months Ended September 30,
	Three Months Ended				Six Months Ended
	2010		2009
	December 31,				December 31,
	(In thousands)
	2010		2009		2010		2009
United States of America	$	88,520	$	80,185
	(In thousands)
Europe and Middle East		30,302		28,467
United States of America	$	101,311	$	92,204	$	189,831	$	172,389
Asia and Australia		33,111		19,515
Europe and Middle East		34,356		34,242		64,658		62,709
Other regions		3,998		1,949
Asia and Australia		40,004		36,590		73,115		56,105
	$	155,931	$	130,116
Other regions		5,908		3,703		9,906		5,652
	$	181,579	$	166,739	$	337,510	$	296,855

- 1624 -

Selected financial data by segment is as follows:

	Three Months Ended September 30,
	Three Months Ended						Six Months Ended
	2010			2009
	December 31,						December 31,
	(In thousands)
	2010			2009			2010			2009
Net sales
	(In thousands)
Microelectronic solutions ("AMS")	$	77,305		$	67,361
Net sales
Test solutions ("ATS")		78,626			62,755
Microelectronic solutions ("AMS")	$	89,225		$	79,160		$	166,530		$	146,521
Net sales	$	155,931		$	130,116
Test solutions ("ATS")		92,354			87,579			170,980			150,334
Segment adjusted operating income
Net sales	$	181,579		$	166,739		$	337,510		$	296,855
- AMS	$	18,887		$	15,024
Segment adjusted operating income
- ATS		6,857			7,965
- AMS	$	22,942		$	21,887		$	41,829		$	36,911
General corporate expense		(2,414	)		(2,931	)
- ATS		17,171			20,186			24,028			28,151
Adjusted operating income		23,330			20,058
- General corporate expense		(2,849	)		(2,258	)		(5,263	)		(5,189	)
Amortization of acquired intangibles
Adjusted operating income		37,264			39,815			60,594			59,873
- AMS		(9,260	)		(8,836	)
Amortization of acquired intangibles
- ATS		(6,703	)		(6,769	)
- AMS		(9,196	)		(8,743	)		(18,456	)		(17,579	)
Business acquisition costs
- ATS		(6,647	)		(6,771	)		(13,350	)		(13,540	)
- Corporate		(190	)		-
Share-based compensation
Share-based compensation
- Corporate		(513	)		(556	)		(1,026	)		(1,045	)
- Corporate		(513	)		(489	)
Restructuring charges
Restructuring charges
- AMS		(5,555	)		-			(6,131	)		-
- AMS		(576	)		-
- ATS		(738	)		(64	)		(1,961	)		(251	)
- ATS		(1,223	)		(187	)
Business acquisition costs
Merger related expenses - Corporate		(715	)		(693	)
- Corporate		(92	)		-			(282	)		-
Loss on liquidation of foreign subsidiary - ATS		-			(7,696	)
Increase in fair value of acquisition contingent consideration liability
Current period impact of acquisition related adjustments:
- Corporate		(784	)		-			(784	)		-
Inventory - AMS		(183	)		(246	)
Merger related expenses - Corporate		(507	)		(771	)		(1,222	)		(1,464	)
Inventory - ATS		(447	)		-
Termination of Sponsor Advisory Agreement - Corporate		(18,133	)		-			(18,133	)		-
Depreciation - AMS		(117	)		(275	)
Loss on liquidation of foreign subsidiary - ATS		-			-			-			(7,696	)
Depreciation - ATS		(120	)		(506	)
Current period impact of acquisition related adjustments:
Depreciation - Corporate		(55	)		(55	)
Inventory - AMS		(368	)		-			(551	)		(246	)
Deferred revenue - ATS		(25	)		(32	)
Inventory - ATS		-			-			(447	)		-
Operating income (loss) (GAAP)		3,203			(5,726	)
Depreciation - AMS		(25	)		(265	)		(142	)		(540	)
Interest expense		(21,238	)		(21,039	)
Depreciation - ATS		21			(311	)		(99	)		(817	)
Other income (expense), net		(29	)		57
Depreciation - Corporate		(55	)		(55	)		(110	)		(110	)
Income (loss) before income taxes	$	(18,064	)	$	(26,708	)
Deferred revenue - ATS		(23	)		(33	)		(48	)		(65	)
Operating income (loss) (GAAP)		(5,351	)		22,246			(2,148	)		16,520
Interest expense		(20,713	)		(21,418	)		(41,951	)		(42,457	)
Loss on extinguishment of debt		(25,178	)		-			(25,178	)		-
Gain from a bargain purchase of a business		173			-			173			-
Other income (expense), net		(378	)		422			(407	)		479
Income (loss) before income taxes	$	(51,447	)	$	1,250		$	(69,511	)	$	(25,458	)

~~Management evaluates the operating results of our two segments based upon adjusted operating income, which is pre~~-~~tax~~ ~~operating income before costs related to~~25 ~~amortization of acquired intangibles, share~~-based compensation, restructuring expenses, business acquisition and merger related expenses, loss on liquidation of foreign subsidiary and the impact of any acquisition related adjustments. We have set out above our adjusted operating income by segment and in the aggregate, and have provided a reconciliation of adjusted operating income to operating income (loss) on a GAAP basis and income (loss) before income taxes for the periods presented.

Management evaluates the operating results of our two segments based upon adjusted operating income, which is pre-tax 17operating income before costs related to amortization of acquired intangibles, share-based compensation, restructuring expenses, business acquisition and merger related expenses, Termination of Sponsor Advisory Agreement, loss on liquidation of foreign subsidiary and the impact of any acquisition related adjustments. We have set out above our adjusted operating income by segment and in the aggregate, and have provided a reconciliation of adjusted operating income to operating income (loss) on a GAAP basis and income (loss) before income taxes for the periods presented.

14. ~~Guarantor/Non-Guarantor~~Income ~~Financial Information~~Taxes

The ~~following~~income ~~supplemental~~tax ~~condensed~~benefit ~~consolidating~~was ~~financial~~$52.3 ~~information~~million ~~sets~~for ~~forth, on an unconsolidated basis,~~ the ~~balance~~six ~~sheets~~months atended ~~September~~December 3031, 2010 ~~and June~~ ~~30,~~on ~~2010~~a ~~and~~pre-tax ~~the~~loss ~~statements~~ of ~~operations~~$69.5 ~~and~~million. We ~~cash~~had ~~flows~~an income tax provision for the ~~three~~six months ended ~~September~~December 3031, ~~2010 and~~ 2009 ~~for~~of ~~Aeroflex~~$5.7 ~~Incorporated~~million ~~(”Parent”), the Guarantor Subsidiaries and,~~ on a ~~combined~~pre-tax ~~basis,~~loss ~~the~~of $25.5 ~~Non-Guarantor Subsidiaries~~million. The ~~supplemental~~effective ~~condensed~~income ~~consolidating~~tax ~~financial~~rate ~~information~~for ~~reflects~~both ~~for~~periods ~~all~~differed from the ~~periods~~amount ~~presented,~~computed by applying the ~~investments~~U.S. ofFederal ~~Parent~~income intax ~~the~~rate ~~Guarantor~~to ~~Subsidiaries~~income asbefore ~~well~~income astaxes ~~investments~~primarily ofdue ~~Parent~~to ~~and~~foreign, ~~the~~state ~~Guarantor~~and ~~Subsidiaries~~local inincome ~~the~~taxes, including ~~Non-Guarantor~~U.S. ~~Subsidiaries,~~income intax ~~all~~on ~~cases~~certain ~~using~~foreign ~~the~~net ~~equity~~income, ~~method. For purposes~~since ofwe ~~this~~anticipate ~~note,~~that ~~Guarantor~~we ~~Subsidiaries~~will be ~~refer~~repatriating these earnings to the ~~subsidiaries~~U.S. The provisions are a combination of ~~Parent~~U.S. ~~that~~tax ~~have~~benefits ~~guaranteed~~on ~~principal~~domestic ~~debt~~losses ~~obligations~~and offoreign ~~Parent~~tax expense on foreign earnings. The ~~purchase~~ ~~price~~resulting ~~allocation~~projected ~~adjustments,~~net ~~including~~consolidated ~~applicable~~income ~~intangible~~tax ~~assets,~~benefit was then ~~arising~~applied ~~from~~to ~~business~~the ~~acquisitions~~projected ~~have~~consolidated ~~been~~pre-tax ~~pushed~~amount ~~down~~for the year to calculate the ~~applicable~~annual effective tax rate, which contributed to the high income tax benefit ~~subsidiary~~as ~~columns~~a ~~(see~~percentage ~~Note~~of 3)pre-tax loss.

~~Each~~During the three months ended September 30, 2010, we identified an overstatement of deferred income tax liabilities established in the ~~Guarantor~~fourth ~~Subsidiaries~~quarter isof ~~100%~~fiscal ~~owned~~2009 and bythroughout ~~the~~fiscal ~~Parent~~2010 ~~Company~~related to U.S. income taxes provided on unremitted foreign earnings. After consideration of both quantitative and ~~guarantees~~qualitative factors, we determined the ~~debt~~amounts onwere annot ~~unconditional~~material ~~and~~to ~~joint~~any of those prior period financial statements or the fiscal 2011 estimated results and ~~several~~thus corrected ~~basis~~the balance in the three months ended September 30, 2010. The adjustment resulted in a reduction of deferred income tax liabilities of $3.7 million, with a corresponding increase in income tax benefit in the statement of operations for the three months ended September 30, 2010. The adjustment did not impact the statement of cash flows.

The income tax benefit for the three and six months ended December 31, 2010 reflects various discrete items, including a $1.2 million income tax benefit for the retroactive reinstatement of the U.S. R&D credit and a reduction of $5.7 million of deferred tax liabilities related to U.S. income taxes previously provided on unremitted foreign earnings. As a direct result of Aeroflex Holding’s IPO, and related repurchase of a portion of Aeroflex’s debt, interest payments will decrease in the future. Consequently, we have changed our intent as to the amount and method of repatriations of foreign earnings, which resulted in the reduction of deferred tax liabilities.

The tax provision for the six months ended December 31, 2009 was affected by the unfavorable impact of a $7.7 million nondeductible loss on the liquidation of a foreign subsidiary, and the favorable impact of a $10.3 million loss for tax purposes on the write off of our investment in a foreign subsidiary in fiscal 2009. For financial statement purposes, the loss had been recognized in the prior periods, however, for tax purposes the loss was recognized at the time of divestiture, effective September 2009.

- 26 -

15.	Guarantor/Non-Guarantor Financial Information

The following supplemental condensed consolidating financial information sets forth, on an unconsolidated basis, the balance sheets at December 31, 2010 and June 30, 2010, the statements of operations for the three and six months ended December 31, 2010 and 2009 and the statements of cash flows for the six months ended December 31, 2010 and 2009 for Aeroflex (”Parent”), the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. The supplemental condensed consolidating financial information reflects for all periods presented, the investments of Parent in the Guarantor Subsidiaries as well as investments of Parent and the Guarantor Subsidiaries in the Non-Guarantor Subsidiaries, in all cases using the equity method. For purposes of this note, Guarantor Subsidiaries refer to the subsidiaries of Parent that have guaranteed principal debt obligations of Parent. The purchase price allocation adjustments, including applicable intangible assets, arising from business acquisitions have been pushed down to the applicable subsidiary columns (see Note 3).

Each of the Guarantor Subsidiaries is 100% owned directly or indirectly by the Parent and guarantees the debt on an unconditional and joint and several basis.

Aeroflex Incorporated

Condensed Consolidating Statement of Operations

For the Three Months Ended ~~September~~December 3031, 2010

(In thousands)

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net sales	$	-		$	~~109~~127,~~597~~062		$	4756,~~935~~409		$	(1,~~601~~892	)	$	~~155~~181,~~931~~579
Cost of sales		-			5564,~~723~~034			2224,~~448~~915			(12,~~657~~210	)		7686,~~514~~739
Gross profit		-			5363,~~874~~028			2531,~~487~~494			56318			7994,~~417~~840
Selling, general and administrative costs		34,~~887~~800			2122,~~737~~814			1110,~~885~~652			-			3738,~~509~~266
Research and development costs		-			13,~~647~~800			97,~~095~~856			-			2221,~~742~~656
Amortization of acquired intangibles		-			13,~~685~~553			2,~~278~~290			-			15,~~963~~843
Operating income (loss)		(3,887	)		4,805			2,229			56			3,203
Termination of Sponsor Advisory Agreement		18,133			-			-			-			18,133
Restructuring charges		-			5,555			738			-			6,293
Operating income (loss)		(22,933	)		7,306			9,958			318			(5,351	)
Other income (expense):
Interest expense		(2120,~~226~~697	)		(1216	)		-			-			(2120,~~238~~713	)
Other income (expense), net		7			98			(134	)		-			(29	)
Loss on extinguishment of debt		(25,178	)		-			-			-			(25,178	)
Intercompany charges		19,878			(19,279	)		(599	)		-			-
Gain from a bargain purchase of a business		-			-			173			-			173
Income (loss) before income taxes		(5,228	)		(14,388	)		1,496			56			(18,064	)
Other income (expense), net		(292	)		20			(106	)		-			(378	)
Provision (benefit) for income taxes		(237	)		(2,954	)		372			(9,428	)		(12,247	)
Intercompany charges		20,146			(19,560	)		(586	)		-			-
Equity income (loss) of subsidiaries		(826	)		1,199			-			(373	)		-
Income (loss) before income taxes		(48,954	)		(12,250	)		9,439			318			(51,447	)
Net income (loss)	$	(5,817	)	$	(10,235	)	$	1,124		$	9,111		$	(5,817	)
Provision (benefit) for income taxes		(28,837	)		(6,551	)		1,699			(6,355	)		(40,044	)
Equity income (loss) of subsidiaries		8,714			7,288			-			(16,002	)		-
Net income (loss)	$	(11,403	)	$	1,589		$	7,740		$	(9,329	)	$	(11,403	)

- 1827 -

Condensed Consolidating Statement of Operations
For the Three Months Ended September 30, 2009
(In thousands)
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net sales	$	-		$	97,895		$	33,390		$	(1,169	)	$	130,116
Cost of sales		-			51,320			14,993			(1,191	)		65,122
Gross profit		-			46,575			18,397			22			64,994
Selling, general and administrative costs		4,169			18,213			7,856			-			30,238
Research and development costs		-			10,686			6,495			-			17,181
Amortization of acquired intangibles		-			13,383			2,222			-			15,605
Loss on liquidation of foreign subsidiary		-			7,696			-			-			7,696
Operating income (loss)		(4,169	)		(3,403	)		1,824			22			(5,726	)
Other income (expense):
Interest expense		(21,022	)		(17	)		-			-			(21,039	)
Other income (expense), net		381			(106	)		(218	)		-			57
Intercompany charges		19,794			(19,318	)		(476	)		-			-
Income (loss) before income taxes		(5,016	)		(22,844	)		1,130			22			(26,708	)
Provision (benefit) for income taxes		(4,436	)		(2,690	)		219			742			(6,165	)
Equity income (loss) of subsidiaries		(19,963	)		702			-			19,261			-
Net income (loss)	$	(20,543	)	$	(19,452	)	$	911		$	18,541		$	(20,543	)

Aeroflex Incorporated

~~- 19~~Condensed -Consolidating Statement of Operations

Condensed Consolidating Balance Sheet
As of September 30, 2010
(In thousands)
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	29,289		$	(2,109	)	$	37,950		$	-		$	65,130
Accounts receivable, net		-			75,810			53,496			-			129,306
Inventories		-			103,767			40,039			(1,253	)		142,553
Deferred income taxes		3,827			23,114			(3	)		-			26,938
Prepaid expenses and other current assets		3,672			5,368			4,641			-			13,681
Total current assets		36,788			205,950			136,123			(1,253	)		377,608
Property, plant and equipment, net		12,417			69,483			21,498			-			103,398
Non-current marketable securities, net		9,806			-			-			-			9,806
Deferred financing costs, net		19,790			-			-			-			19,790
Other assets		13,935			6,645			2,308			-			22,888
Intangible assets with definite lives, net		-			199,874			30,428			-			230,302
Intangible assets with indefinite lives		-			88,414			25,754			-			114,168
Goodwill		(10	)		415,200			44,304			-			459,494
Total assets	$	92,726		$	985,566		$	260,415		$	(1,253	)	$	1,337,454
Liabilities and Stockholder's Equity
Current liabilities:
Current portion of long-term debt	$	-		$	360		$	-		$	-		$	360
Accounts payable		4			18,817			19,030			-			37,851
Advance payments by customers and deferred revenue		-			17,910			12,308			-			30,218
Income taxes payable		528			259			1,688			-			2,475
Accrued payroll expenses		2,758			17,778			2,054			-			22,590
Accrued expenses and other current liabilities		25,940			13,308			14,526			-			53,774
Total current liabilities		29,230			68,432			49,606			-			147,268
Long-term debt		882,078			385			-			-			882,463
Deferred income taxes		15,598			110,083			14,529			(9,428	)		130,782
Defined benefit plan obligations		5,684			-			-			-			5,684
Other long-term liabilities		1,537			8,281			4,285			-			14,103
Intercompany investment		(308,715	)		79,354			229,361			-			-
Intercompany receivable/payable		(839,214	)		873,971			(34,273	)		(484	)		-
Total liabilities		(213,802	)		1,140,506			263,508			(9,912	)		1,180,300
Stockholder's equity		306,528			(154,940	)		(3,093	)		8,659			157,154
Total liabilities and stockholder's equity	$	92,726		$	985,566		$	260,415		$	(1,253	)	$	1,337,454

For the Three Months Ended December 31, 2009

~~- 20~~(In -thousands)

Condensed Consolidating Balance Sheet
As of June 30, 2010
(In thousands)
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Assets
Net sales	$	-		$	120,120		$	47,969		$	(1,350	)	$	166,739
Current assets:
Cost of sales		-			60,394			20,910			(1,223	)		80,081
Cash and cash equivalents	$	75,187		$	(3,821	)	$	29,297		$	-		$	100,663
Gross profit		-			59,726			27,059			(127	)		86,658
Accounts receivable, net		-			88,051			53,544			-			141,595
Selling, general and administrative costs		3,640			18,942			8,991			-			31,573
Inventories		-			94,669			33,209			(1,310	)		126,568
Research and development costs		-			11,460			5,801			-			17,261
Deferred income taxes		4,939			23,224			(145	)		-			28,018
Amortization of acquired intangibles		-			13,276			2,238			-			15,514
Prepaid expenses and other current assets		3,046			2,840			5,097			-			10,983
Restructuring charges		-			-			64			-			64
Total current assets		83,172			204,963			121,002			(1,310	)		407,827
Operating income (loss)		(3,640	)		16,048			9,965			(127	)		22,246
Property, plant and equipment, net		12,491			69,150			20,021			-			101,662
Other income (expense):
Non-current marketable securities, net		9,769			-			-			-			9,769
Interest expense		(21,399	)		(17	)		(2	)		-			(21,418	)
Deferred financing costs, net		20,983			-			-			-			20,983
Other income (expense), net		(40	)		480			(18	)		-			422
Other assets		13,634			6,385			1,799			-			21,818
Intercompany charges		19,797			(19,318	)		(479	)		-			-
Intangible assets with definite lives, net		-			207,849			30,464			-			238,313
Income (loss) before income taxes		(5,282	)		(2,807	)		9,466			(127	)		1,250
Intangible assets with indefinite lives		-			85,404			24,490			-			109,894
Provision (benefit) for income taxes		(364	)		2,199			2,046			7,983			11,864
Goodwill		(10	)		404,632			41,252			-			445,874
Equity income (loss) of subsidiaries		(5,696	)		6,932			-			(1,236	)		-
Total assets	$	140,039		$	978,383		$	239,028		$	(1,310	)	$	1,356,140
Net income (loss)	$	(10,614	)	$	1,926		$	7,420		$	(9,346	)	$	(10,614	)
Liabilities and Stockholder's Equity
Current liabilities:
Current portion of long-term debt	$	21,457		$	360		$	-		$	-		$	21,817
Accounts payable		4			14,376			14,423			-			28,803
Advanced payments by customers and deferred revenue		-			19,091			11,650			-			30,741
Income taxes payable		969			43			3,603			-			4,615
Accrued payroll expenses		2,198			18,834			2,050			-			23,082
Accrued expenses and other current liabilities		33,904			12,598			12,315			-			58,817
Total current liabilities		58,532			65,302			44,041			-			167,875
Long-term debt		879,645			385			-			-			880,030
Deferred income taxes		15,835			109,570			13,444			-			138,849
Defined benefit plan obligations		5,763			-			-			-			5,763
Other long-term liabilities		1,595			8,303			2,741			-			12,639
Intercompany investment		(287,515	)		60,154			227,361			-			-
Intercompany receivable/payable		(842,950	)		878,174			(34,740	)		(484	)		-
Total liabilities		(169,095	)		1,121,888			252,847			(484	)		1,205,156
Stockholder's equity:		309,134			(143,505	)		(13,819	)		(826	)		150,984
Total liabilities and stockholder's equity	$	140,039		$	978,383		$	239,028		$	(1,310	)	$	1,356,140

- 2128 -

Condensed Consolidating Statement of Cash Flows
For the Three Months Ended September 30, 2010
(In thousands)
							Non-
				Guarantor			Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(5,817	)	$	(10,235	)	$	1,124		$	9,111		$	(5,817	)
Changes in operating assets and liabilities and non-cash items included in net income (loss)		(18,514	)		33,651			7,223			(9,111	)		13,249
Net cash provided by (used in) operating activities		(24,331	)		23,416			8,347			-			7,432
Cash flows from investing activities:
Payment for purchase of business, net of cash acquired		-			(19,185	)		-			-			(19,185	)
Capital expenditures		(109	)		(2,746	)		(1,853	)		-			(4,708	)
Other, net		-			227			211			-			438
Net cash provided by (used in) investing activities		(109	)		(21,704	)		(1,642	)		-			(23,455	)
Cash flows from financing activities:
Debt repayments		(21,458	)		-			-			-			(21,458	)
Net cash provided by (used in) financing activities		(21,458	)		-			-			-			(21,458	)
Effect of exchange rate changes on cash and cash equivalents		-			-			1,948			-			1,948
Net increase (decrease) in cash and cash equivalents		(45,898	)		1,712			8,653			-			(35,533	)
Cash and cash equivalents at beginning of period		75,187			(3,821	)		29,297			-			100,663
Cash and cash equivalents at end of period	$	29,289		$	(2,109	)	$	37,950		$	-		$	65,130

Aeroflex Incorporated

~~- 22~~Condensed -Consolidating Statement of Operations

Condensed Consolidating Statement of Cash Flows
For the Three Months Ended September 30, 2009
(In thousands)
							Non-
				Guarantor			Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(20,543	)	$	(19,452	)	$	911		$	18,541		$	(20,543	)
Changes in operating assets and liabilities and non-cash items included in net income (loss)		38,477			21,245			(7,418	)		(18,541	)		33,763
Net cash provided by (used in) operating activities		17,934			1,793			(6,507	)		-			13,220
Cash flows from investing activities:
Capital expenditures		(171	)		(2,195	)		(858	)		-			(3,224	)
Proceeds from sale of marketable securities		1,000			-			-			-			1,000
Other, net		(355	)		47			72			-			(236	)
Net cash provided by (used in) investing activities		474			(2,148	)		(786	)		-			(2,460	)
Cash flows from financing activities:
Debt repayments		(1,313	)		-			-			-			(1,313	)
Net cash provided by (used in) financing activities		(1,313	)		-			-			-			(1,313	)
Effect of exchange rate changes on cash and cash equivalents		-			-			(191	)		-			(191	)
Net increase (decrease) in cash and cash equivalents		17,095			(355	)		(7,484	)		-			9,256
Cash and cash equivalents at beginning of period		31,221			(15	)		26,542			-			57,748
Cash and cash equivalents at end of period	$	48,316		$	(370	)	$	19,058		$	-		$	67,004

For the Six Months Ended December 31, 2010

~~- 23~~(In -thousands)

15. Subsequent Events

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated

Net sales	$	-		$	236,659		$	104,344		$	(3,493	)	$	337,510
Cost of sales		-			119,359			47,352			(3,867	)		162,844
Gross profit		-			117,300			56,992			374			174,666
Selling, general and administrative costs		8,687			44,373			21,909			-			74,969
Research and development costs		-			27,447			16,367			-			43,814
Amortization of acquired intangibles		-			27,238			4,568			-			31,806
Termination of Sponsor Advisory Agreement		18,133			-			-			-			18,133
Restructuring charges		-			6,131			1,961			-			8,092
Operating income (loss)		(26,820	)		12,111			12,187			374			(2,148	)

Other income (expense):
Interest expense		(41,923	)		(28	)		-			-			(41,951	)
Loss on extinguishment of debt		(25,178	)		-			-			-			(25,178	)
Gain from a bargain purchase of a business		-			-			173			-			173
Other income (expense), net		(285	)		118			(240	)		-			(407	)
Intercompany charges		40,024			(38,839	)		(1,185	)		-			-
Income (loss) before income taxes		(54,182	)		(26,638	)		10,935			374			(69,511	)
Provision (benefit) for income taxes		(29,074	)		(9,505	)		2,071			(15,783	)		(52,291	)
Equity income (loss) of subsidiaries		7,888			8,487			-			(16,375	)		-
Net income (loss)	$	(17,220	)	$	(8,646	)	$	8,864		$	(218	)	$	(17,220	)

~~Registration~~- ~~Statement~~29 ~~Filing~~-

~~On November 5, 2010, our parent corporation,~~ Aeroflex ~~Holding Corp., filed an~~ amended registration statement with the SEC relating to the proposed initial public offering of its common stock. Aeroflex Holding Corp. is offering to sell 17,250,000 shares at a price per share between $13.50 and $15.50.Incorporated

~~Debt Tender~~Condensed ~~Offer~~Consolidating Statement of Operations

InFor ~~connection with~~ the ~~initial~~Six ~~public~~Months ~~offering,~~Ended aDecember ~~portion of the net proceeds will be used to make a capital contribution to the Company to enable us to~~31, among other things, tender for a portion of our senior notes and offer to purchase a portion of our senior subordinated unsecured term loans. On November 5, 2010 we commenced the tender offer, which is conditional upon, among other things, the closing of Aeroflex Holding Corp.’s initial public offering of its common stock. We expect to purchase an aggregate of approximately $175 million of senior notes and term loans at a premium to face value, which is anticipated to result in a loss on partial extinguishment of debt and the write-off of the related deferred financing costs.2009

~~Amendment to Senior Secured~~(In ~~Credit Agreement~~thousands)

On November 4, 2010, we entered into an agreement with the lenders of our senior secured credit facility, for which we paid a $3.3 million fee, to amend our credit agreement to, among other things:

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated

Net sales	$	-		$	218,015		$	81,359		$	(2,519	)	$	296,855
Cost of sales		-			111,714			35,824			(2,414	)		145,124
Gross profit		-			106,301			45,535			(105	)		151,731
Selling, general and administrative costs		7,808			37,156			16,739			-			61,703
Research and development costs		-			22,146			12,296			-			34,442
Amortization of acquired intangibles		-			26,659			4,460			-			31,119
Restructuring charges		-			-			251			-			251
Loss on liquidation of foreign subsidiary		-			7,696			-			-			7,696
Operating income (loss)		(7,808	)		12,644			11,789			(105	)		16,520

Other income (expense):
Interest expense		(42,421	)		(34	)		(2	)		-			(42,457	)
Other income (expense), net		341			374			(236	)		-			479
Intercompany charges		39,591			(38,636	)		(955	)		-			-
Income (loss) before income taxes		(10,297	)		(25,652	)		10,596			(105	)		(25,458	)
Provision (benefit) for income taxes		(4,799	)		(492	)		2,265			8,725			5,699
Equity income (loss) of subsidiaries		(25,659	)		7,634			-			18,025			-
Net income (loss)	$	(31,157	)	$	(17,526	)	$	8,331		$	9,195		$	(31,157	)

·- increase the amount of cash we can spend for acquisitions of businesses from $20 million per year and a $100 million aggregate amount, to $200 million in the aggregate, from the effective date of the amendment to the credit facility maturity date, August 15, 2014, with no annual cap;30 -

~~· permit us to pay, upon the completion of the~~ Aeroflex ~~Holding Corp. initial public offering, a $2.5 million transaction fee and a $16.9 million termination fee for the termination of the Advisory Agreement, in lieu of future advisory fees, and;~~ Incorporated

·Condensed Consolidating ~~set~~Balance our interest rate margin, based on our current credit rating. Our current credit rating would increase our interest rate margin by 75 basis points for all tranches of debt within the secured credit facility.Sheet

As of December 31, 2010

(In thousands)

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	31,727		$	1,449		$	37,467		$	-		$	70,643
Marketable securities		8,357			-			-			-			8,357
Accounts receivable, net		-			72,603			58,619			-			131,222
Inventories		-			111,810			43,004			(934	)		153,880
Deferred income taxes		2,773			23,266			(9	)		-			26,030
Prepaid expenses and other current assets		1,385			5,695			4,172			-			11,252
Total current assets		44,242			214,823			143,253			(934	)		401,384

Property, plant and equipment, net		12,493			65,839			21,557			-			99,889
Deferred financing costs, net		17,435			-			-			-			17,435
Other assets		13,850			7,048			2,306			-			23,204
Intangible assets with definite lives, net		-			186,320			27,765			-			214,085
Intangible assets with indefinite lives		-			88,414			25,430			-			113,844
Goodwill		(10	)		414,257			43,787			-			458,034
Total assets	$	88,010		$	976,701		$	264,098		$	(934	)	$	1,327,875

Liabilities and Stockholder's Equity
Current liabilities:
Current portion of long-term debt	$	-		$	360		$	-		$	-		$	360
Accounts payable		4			17,326			19,637			-			36,967
Advance payments by customers and deferred revenue		-			12,950			10,235			-			23,185
Income taxes payable		(1,254	)		259			2,649			-			1,654
Accrued payroll expenses		1,528			15,814			1,756			-			19,098
Accrued expenses and other current liabilities		20,131			17,349			15,464			-			52,944
Total current liabilities		20,409			64,058			49,741			-			134,208

Long-term debt		695,523			385			-			-			695,908
Deferred income taxes		(13,239	)		103,683			13,403			(15,781	)		88,066
Defined benefit plan obligations		5,605			-			-			-			5,605
Other long-term liabilities		2,210			6,909			3,864			-			12,983
Intercompany investment		(308,309	)		78,947			229,362			-			-
Intercompany receivable/payable		(848,195	)		883,360			(34,682	)		(483	)		-
Total liabilities		(445,996	)		1,137,342			261,688			(16,264	)		936,770

Stockholder's equity		534,006			(160,641	)		2,410			15,330			391,105
Total liabilities and stockholder's equity	$	88,010		$	976,701		$	264,098		$	(934	)	$	1,327,875

- 31 -

Aeroflex Incorporated

Condensed Consolidating Balance Sheet

As of June 30, 2010

(In thousands)

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	75,187		$	(3,821	)	$	29,297		$	-		$	100,663
Accounts receivable, net		-			88,051			53,544			-			141,595
Inventories		-			94,669			33,209			(1,310	)		126,568
Deferred income taxes		4,939			23,224			(145	)		-			28,018
Prepaid expenses and other current assets		3,046			2,840			5,097			-			10,983
Total current assets		83,172			204,963			121,002			(1,310	)		407,827

Property, plant and equipment, net		12,491			69,150			20,021			-			101,662
Non-current marketable securities, net		9,769			-			-			-			9,769
Deferred financing costs, net		20,983			-			-			-			20,983
Other assets		13,634			6,385			1,799			-			21,818
Intangible assets with definite lives, net		-			207,849			30,464			-			238,313
Intangible assets with indefinite lives		-			85,404			24,490			-			109,894
Goodwill		(10	)		404,632			41,252			-			445,874
Total assets	$	140,039		$	978,383		$	239,028		$	(1,310	)	$	1,356,140

Liabilities and Stockholder's Equity
Current liabilities:
Current portion of long-term debt	$	21,457		$	360		$	-		$	-		$	21,817
Accounts payable		4			14,376			14,423			-			28,803
Advanced payments by customers and deferred revenue		-			19,091			11,650			-			30,741
Income taxes payable		969			43			3,603			-			4,615
Accrued payroll expenses		2,198			18,834			2,050			-			23,082
Accrued expenses and other current liabilities		33,904			12,598			12,315			-			58,817
Total current liabilities		58,532			65,302			44,041			-			167,875

Long-term debt		879,645			385			-			-			880,030
Deferred income taxes		15,835			109,570			13,444			-			138,849
Defined benefit plan obligations		5,763			-			-			-			5,763
Other long-term liabilities		1,595			8,303			2,741			-			12,639
Intercompany investment		(287,515	)		60,154			227,361			-			-
Intercompany receivable/payable		(842,950	)		878,174			(34,740	)		(484	)		-
Total liabilities		(169,095	)		1,121,888			252,847			(484	)		1,205,156

Stockholder's equity:		309,134			(143,505	)		(13,819	)		(826	)		150,984
Total liabilities and stockholder's equity	$	140,039		$	978,383		$	239,028		$	(1,310	)	$	1,356,140

- 32 -

Aeroflex Incorporated

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended December 31, 2010

(In thousands)

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated

Cash flows from operating activities:
Net income (loss)	$	(17,220	)	$	(8,646	)	$	8,864		$	(218	)	$	(17,220	)
Changes in operating assets and liabilities andnon-cash items included in net income (loss)		(33,876	)		38,809			1,012			218			6,163
Net cash provided by (used in) operating activities		(51,096	)		30,163			9,876			-			(11,057	)
Cash flows from investing activities:
Payments for purchase of businesses, net of cash acquired		(5,621	)		(17,970	)		-			-			(23,591	)
Capital expenditures		(360	)		(7,389	)		(3,464	)		-			(11,213	)
Proceeds from sale of marketable securities		2,000			-			-			-			2,000
Proceeds from sale of property, plant and equipment		-			466			275			-			741
Net cash provided by (used in) investing activities		(3,981	)		(24,893	)		(3,189	)		-			(32,063	)

Cash flows from financing activities:
Capital contribution from Aeroflex Holding		244,097			-			-			-			244,097
Repurchase of senior unsecured notes and senior subordinated unsecured term loans, including premiums and fees		(207,690	)		-			-			-			(207,690	)
Debt repayments		(21,458	)		-			-			-			(21,458	)
Debt financing costs		(3,332	)		-			-			-			(3,332	)
Net cash provided by (used in) financing activities of continuing operations		11,617			-			-			-			11,617
Effect of exchange rate changes on cash and cash equivalents		-			-			1,483			-			1,483
Net increase (decrease) in cash and cash equivalents		(43,460	)		5,270			8,170			-			(30,020	)
Cash and cash equivalents at beginning of period		75,187			(3,821	)		29,297			-			100,663
Cash and cash equivalents at end of period	$	31,727		$	1,449		$	37,467		$	-		$	70,643

- 33 -

Aeroflex Incorporated

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended December 31, 2009

(In thousands)

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated

Cash flows from operating activities:
Net income (loss)	$	(31,157	)	$	(17,526	)	$	8,331		$	9,195		$	(31,157	)
Changes in operating assets and liabilities and non-cash items included in net income (loss)		56,201			22,336			(16,072	)		(9,195	)		53,270
Net

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