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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

(Mark One)
[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
                                   ACT OF 1934
For the fiscal year ended August 29, 2003
                                       OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

For the transition period from________________________to _______________________

                           Commission file No. 0-11003

                               WEGENER CORPORATION
             (Exact name of registrant as specified in its charter)

              DELAWARE                                     81-0371341
     (State of incorporation)                           (I.R.S. Employer
                                                       Identification No.)

11350 TECHNOLOGY CIRCLE, DULUTH, GEORGIA                   30097-1502
(Address of principal executive offices)                   (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 623-0096
                 REGISTRANT'S WEB SITE: HTTP://WWW.WEGENER .COM
        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                          Common Stock, $.01 par value
                                (Title of class)

     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
                        ---                          ---

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,  and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).

                    YES                           NO  X
                        ---                          ---

     As of the last business day of the  registrant's  most  recently  completed
second fiscal  quarter,  the aggregate  market value of the Common Stock held by
non-affiliates  was $10,628,519 based on the last sale price of the Common Stock
as  quoted on the  NASDAQ  Small-Cap  Market on such  date.  (The  officers  and
directors of the registrant,  and owners of over 10% of the registrant's  common
stock, are considered affiliates for purposes of this calculation.)

     As of November 20, 2003,  12,398,551  shares of  registrant's  Common Stock
were outstanding

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive  Proxy  Statement  pertaining to the January 20,
2004 Annual  Meeting of  Stockholders,  only to the extent  expressly  so stated
herein, are incorporated herein by reference into Part III.

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<PAGE>

                               WEGENER CORPORATION
                                    FORM 10-K
                           YEAR ENDED August 29, 2003
                                      INDEX

                                     PART I

                                                                            Page
Item 1.   Business.............................................................2

Item 2.   Properties..........................................................10

Item 3.   Legal Proceedings...................................................10

Item 4.   Submission of Matters to a Vote of Security.........................11

                                     PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder
          Matters.............................................................11

Item 6.   Selected Financial Data.............................................12

Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations.................................13

Item 7a.  Quantitative and Qualitative Disclosures About Market Risk..........21

Item 8.   Financial Statements and Supplementary Data.........................22

Item 9.   Changes in and Disagreements With Accountants on
          Accounting and Financial Disclosures................................43

Item 9A.  Controls and Procedures.............................................43

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant..................43

Item 11.  Executive Compensation..............................................43

Item 12.  Security Ownership of Certain Beneficial Owners and
          Management and Related Stockholder Matters..........................43

Item 13.  Certain Relationships and Related Transactions......................43

Item 14.  Principal Accountant Fees and Services..............................43

                                     PART IV

Item 15.  Exhibits, Financial Statement Schedules,
          and Reports on Form 8-K.............................................44

<PAGE>

                                     PART I

ITEM 1.   BUSINESS

     Wegener  Corporation,  the Registrant,  together with its subsidiaries,  is
referred to herein as the "Company" or "WGNR."

     (a)  General development of business.

     Wegener Corporation was formed in 1977 and is a Delaware  corporation.  The
Company conducts its continuing  business through Wegener  Communications,  Inc.
(WCI), its wholly-owned  subsidiary,  and Wegener Communications  International,
Inc., a wholly-owned subsidiary of WCI.

     WCI was formed in April 1978 and is a Georgia corporation. Its wholly-owned
subsidiary, Wegener Communications International, Inc., is a Small Foreign Sales
Corporation.  WCI, a market leader in digital and analog compression technology,
designs and manufactures communications transmission and receiving equipment for
the business broadcast, data communications, internet, cable and broadcast radio
and television industries for worldwide markets.

     (b)  Financial information about segments.

     Segment  information  contained  in Note 11 to the  consolidated  financial
statements  contained  in this report is  incorporated  herein by  reference  in
response to this item.

     (c)  Narrative description of business.

     SERVING THE LARGEST  NETWORKS AND  BROADCASTERS.  Wegener is an  innovative
company that develops  proprietary  as well as  standards-based  digital  video,
audio and data  technology.  These  products  constitute  the  Direct  Broadcast
Satellite (DBS) revenues of the Company. Wegener's technology serves some of the
largest  broadcasters in the industry,  including FOX, NBC, ABC, MSNBC,  Turner,
ESPN and The Weather Channel, as well as some of the largest private networks in
the world,  including GE Medical  Networks,  Muzak LLC, Roberts  Communications,
Inc.  and  Autotote  Systems,  Inc.,  and  Swedish  companies  ATG and  TERACOM.
Wegener's  technology  also  serves the  burgeoning  high-definition  television
("HDTV") market. For example,  HDNet, a leader in high-definition  broadcasting,
selected  Wegener's  products  for delivery of all its  high-definition  sports,
entertainment and news networks.

     BROAD LINE OF SOLUTIONS.  Wegener's  solutions make customized regional and
national  broadcasting  a  reality.   Wegener  has  developed   state-of-the-art
technology  to store  digital  video  broadcasts,  mix them with  other  digital
information  and allow  them to be  replayed  at any time.  Wegener's  family of
products  include  the new  iPUMP(R)  Media  Server,  the  MediaPlan(R)  content
management  system,  the COMPEL(R) Network Control System and UNITY(R) broadcast
products, which enables broadcasters,  cable operators, and service providers of
all  sizes  to meet  the  challenge  of  cost-effectively  implementing  digital
solutions  that can grow  from the  delivery  of  basic  broadcast  to  advanced
service.

     MEETING MARKET DEMAND. Wegener believes that it provides the only complete,
end-to-end  solution  available  today for managing the creation,  distribution,
storage,  and consumption of all forms of electronic  media,  including  digital
video, audio and data. Wegener's iPUMP(R), MediaPlan(R), and COMPEL(R) family of
products give networks the ability to manage and distribute  video combined with
other content, such as Internet applications, which are technically superior and
cost-effective. Management believes Wegener provides the only solution with this
depth of functionality available from a single source.

                                       2
<PAGE>

     The  demand  for  digital  products  is being  driven  by the high  cost of
satellite capacity and end-user demand for more targeted programming.  Wegener's
products  were  developed to meet these demands as the adoption of digital video
broadcasting  grows and enables  broader  technology  applications,  which allow
networks to customize  programming  for end users.  The markets  Wegener  serves
include cable and broadcast  television,  radio networks,  business  television,
distance education, business music and satellite paging.

     -    PRIVATE NETWORK OPPORTUNITY. The iPUMP(R) Media Server is the first of
          Wegener's  family of new  products  to address  the  growing  needs of
          private   networks.   The   iPUMP(R)   family   of   product   enables
          next-generation  private  networks  to mix  data  with  video to allow
          schools,   companies  and  retailers,  among  others,  to  give  their
          students,  employees  and  customers,  respectively,  true  multimedia
          functionality.  The digital nature of the content  permits  searching,
          ordering and managing content in order to make customized  programming
          available to a  particular  user or group of users,  allowing  them to
          stop, repeat and take their time viewing or learning the information.

     -    HDTV AND CABLE  OPPORTUNITY.  Wegener  developed  the  technology  and
          equipment to launch one of the first new satellite networks devoted to
          distribution  of  high-definition  signals  to cable.  Its  technology
          processes  digital signals for satellite  transmission and places them
          on  cable  networks  enabling  consumers  to watch  programs  on HDTV.
          Additionally,  Wegener's  sophisticated  technology  captures  digital
          signals  broadcast  by TV  stations  for  insertion  and use on  cable
          channels.

     PRODUCTS DEVELOPED WITH MAJOR CUSTOMERS. Wegener developed its suite of new
products  in  conjunction  with and at the request of its major  customers,  who
needed a complete  end-to-end  content  distribution  system to accommodate  the
convergence of multiple media, including both live broadcast and video-on-demand
("VOD"), with Internet Protocol.

     THREE YEARS IN DEVELOPMENT. In 2000, Wegener announced and began developing
the iPUMP(R)  family of digital  storage  products to help its customers  better
utilize  satellite  bandwidth  and digital  broadcast  signals to provide  their
end-users with true multimedia  functionality.  The first of these products will
begin shipping during fiscal 2004. Wegener will continue to develop,  launch and
ship  additional  products  within the iPUMP(R),  MediaPlan(R),  COMPEL(R),  and
UNITY(R) product families.

     SUPERIOR  TECHNOLOGY.  The  importance  of Wegener's new family of iPUMP(R)
products lies in their ability to combine multiple types of media (video, audio,
Internet), allow networks to store, manage and customize such media, then replay
it live or on demand.  Wegener's core  technology  allows networks to target and
store this content digitally and allows users to access it at any time, not only
when a  broadcast  is live.  Wegener  believes  that its  technolgy  is the only
end-to-end  total solution for storing and  effectively  managing these networks
and the digital content they distribute.

     DIGITAL  CONVERSIONS.  Throughout  fiscal 2003 our  customers  continued to
convert from analog to digital, and WCI continued to produce and develop digital
compression and decompression products to aid them in the conversions. Wegener's
digital products are in use worldwide.  The demand for digital products is being
driven by the high cost of  satellite  capacity  and  consumer  demand  for more
channels.  Satellite  capacity is scarce due to pressures on both the supply and
demand  sides of the  market.  On the  supply  side,  satellites  are  extremely
expensive  to build,  launch,  and  maintain.  The useful life of a satellite is
limited  by the  amount of  positioning  fuel  that can be  carried.  Also,  the
placement of  satellites is regulated by the Federal  Communications  Commission
(FCC) and therefore the number of satellites  within range of any given location
is limited.  On the demand side, the cost of receive  hardware is being steadily
reduced through advancing technology and high volume  manufacturing  efficiency.
This is evidenced by the trend in both television and radio toward narrowcasting
to well  defined  market  segments  as opposed to  broadcasting  to the  general
population.  Digital compression  technology allows a four to ten-fold, or more,
increase  in the  throughput  of a  satellite  channel.  For the  network,  this
compression  represents an  opportunity to reduce the cost of satellite use. For
the satellite  operator it represents  an  opportunity  to increase the revenues
generated by an expensive  asset.  The conversion of existing analog networks to
digital technology is underway throughout the industries that WCI services.  The
slow  economy  over the last 2 years has  caused the  conversions  to occur more
slowly than  expected.  Typically  the  conversions  are tied to  expiration  of
satellite contracts, some of

                                       3
<PAGE>

which are likely to expire  over the next 36  months.  Management  believes  the
market as a whole has considerable built up demand for digital technology.

SIGNIFICANT FISCAL 2003 WCI ORDER AND REVENUE ACTIVITY:

     -    BROADCAST TELEVISION MARKET. WCI's long-standing relationship with FOX
          Digital  continued during fiscal 2003. The Company expects  additional
          opportunities  for its  Unity  digital  receivers,  as  well as  other
          products,  in the  broadcast  television  market  during  the  next 24
          months.

     -    BROADCAST  RADIO  MARKET.  Numerous  small orders  continue to provide
          revenue as Wegener equipment-based radio networks add affiliates.  The
          Company remains active in the pursuit of new business opportunities in
          this market segment,  but revenue  potential during the next 24 months
          is uncertain.

     -    CABLE TELEVISION MARKET. The Company continues to aggressively  pursue
          business   opportunities   with  major  cable  programmers  where  the
          advantages of the COMPEL  network  control system give us an edge over
          more established and larger competitors.

     -    During fiscal 2003 the Company  began  shipping a new line of products
          designed to allow the economical addition of broadcast HDTV signals to
          cable  television  systems.  This  product  line,  the DTV700  series,
          provided  an  additional  stream of revenue  throughout  fiscal  2003.
          Encouraged by market  acceptance of the product line,  WCI will expand
          the DTV  series  during  fiscal  2004.  An OEM  agreement  for the DTV
          product line with  Scientific  Atlanta was signed  during fiscal 2003,
          which will continue through fiscal 2004.

     -    Sales  of  legacy  analog  equipment  to  cable  television  companies
          continue  to  decline  as  expected   resulting  from  cable  industry
          consolidation   and  conversions  from  analog  to  digital  satellite
          transmission technology.

     -    BUSINESS  BROADCAST  MARKET.  During  fiscal  2003,  WCI  continued to
          provide its products  around the world to serve private  networks such
          as the horse  racing and business  music  industries.  These  networks
          utilize  Wegener  products'  core  strength in  targeted  programming.
          Additional  revenue in this market segment is expected to continue for
          the foreseeable future.

     -    Fiscal  2003 saw the  continuation  of  WCI's  shipments  against  the
          previously  announced  $30  million  order  to a  major  international
          private  network  operator.  By the  conclusion of the  contract,  the
          customer  will have created the largest  network of Wegener  receivers
          deployed to date.  Both the Company and the customer  continue to view
          the  contract as  critical  to their  business  plans.  Shipments  are
          expected to continue  against this  contract as  specified  throughout
          fiscal 2004 and beyond.

     -    Extensive development has been devoted to new products for this market
          during fiscal 2003  including the iPump Media Server and the MediaPlan
          uplink control software. These products allow for commercial satellite
          network  operators to send  television  programs over a satellite link
          for  targeted  playback  in  specific  locations  at  specific  times.
          Shipments  of these  products  are  expected  to  provide  significant
          revenue to the Company for the foreseeable future. In addition,  these
          products have wide ranging  applications and revenue  potential in all
          the markets  served by the Company  (broadcast  television,  broadcast
          radio, cable television, and business broadcasting).

                                       4
<PAGE>

     CUSTOMER  SERVICE.  WCI services the  products  that it sells.  The Company
warrants  its  products  for a period of one  year.  There  were no  significant
warranty claims outstanding as of August 29, 2003.

          (iii) Manufacturing and suppliers.

     During fiscal 2003 and fiscal 2002,  the Company  contracted  with offshore
manufacturers  for a significant  amount of its finished  goods.  The Company is
currently  working with three offshore  manufacturers.  Raw materials consist of
passive  electronic  components,  electronic circuit boards and fabricated sheet
metal.  WCI  purchases  approximately  20% of its raw  materials  directly  from
manufacturers  and the other 80% are purchased  from  distributors.  Passive and
active  components  include  parts such as  resistors,  integrated  circuits and
diodes. WCI uses  approximately ten distributors and two contract  manufacturers
to  supply  its  electronic  components.   WCI  often  uses  a  single  contract
manufacturer or subcontractor to supply a total sub-assembly or turnkey solution
for higher volume  products.  Direct suppliers  provide sheet metal,  electronic
circuit  boards  and other  materials  built to  specifications.  WCI  maintains
relationships  with  approximately  20 direct  suppliers.  Most of the Company's
materials are available from a number of different suppliers;  however,  certain
components used in existing and future  products are currently  available from a
single or limited sources.  Although the Company believes that all single-source
components  currently  are  available  in adequate  quantities,  there can be no
assurance  that  shortages  or  unanticipated  delivery  interruptions  will not
develop  in the  future.  Any  disruption  or  termination  of supply of certain
single-source  components could have an adverse effect on the Company's business
and results of operations.

          (iv) Patents, trademarks, licenses, franchises and concessions held.

     The Company holds certain  patents with respect to some of its products and
markets its services and  products  under  various  trademarks  and  tradenames.
Additionally, the Company licenses certain analog audio processing technology to
several   manufacturing   companies   which   generated   royalty   revenues  of
approximately  $141,000,  $120,000, and $230,000 in fiscal 2003, 2002, and 2001,
respectively.  These royalty license  agreements renew annually unless cancelled
by the licensee on the expiration  date.  Although the Company believes that the
patents and trademarks  owned are of value, the Company believes that success in
its industry will be dependent upon new product introductions,  frequent product
enhancements,  and customer support and service. However, the Company intends to
protect its rights when, in its view, these rights are infringed upon.

     During  the second  quarter  of fiscal  2003,  WCI  entered  into a license
agreement with StarGuide Digital  Networks,  Inc., a Nevada  Corporation.  These
limited licenses were granted to WCI under a number of StarGuide patents related
to delivering  IP data by satellite  and  store/forward  audio.  These  licenses
extend to and conclude upon the last to expire of any licensed  patent.  WCI has
agreed  to pay  StarGuide  a  running  royalty  on  certain  of WCI's  products.
Management of the Company believes that these royalties will not have a material
adverse effect on the Company's financial condition or results of operations.

          (v)  Seasonal variations in business.

     There  do  not  appear  to be any  seasonal  variations  in  the  Company's
business.

          (vi) Working capital practices.

     Information  contained  under  the  caption  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations" (MD&A) in this report
is incorporated herein by reference in response to this item.

                                       5
<PAGE>

          (vii) Dependence upon a limited number of customers.

     The Company sells to a variety of domestic and  international  customers on
an  open-unsecured  account basis.  These customers  principally  operate in the
cable  television,   broadcast  business  music,   private  network,   and  data
communications  industries.  Sales to Roberts  Communications  Network and Muzak
accounted  for  approximately  16.3%  and  39.3% of  revenues  in  fiscal  2003,
respectively.  Sales to Roberts  Communications Network and Muzak and affiliates
accounted  for  approximately  27.9%  and  27.5% of  revenues  in  fiscal  2002,
respectively.   Sales  to  FOX  Digital  and  FOX  Sports  Net   accounted   for
approximately  11.1% of  revenues in fiscal 2002 and 34.7% of revenues in fiscal
2001.  At August 29,  2003,  two  customers  accounted  for more than 10% of the
Company's  accounts  receivable.  At August 30, 2002, one customer accounted for
more than 10% of the Company's accounts receivable.  Sales to a relatively small
number of major  customers have typically  comprised a majority of the Company's
revenues.  This trend is expected to  continue in fiscal  2004.  There can be no
assurance  that  the  loss of one or more of these  customers  would  not have a
material adverse effect on the Company's operations.

          (viii) Backlog of orders.

     The Company's  backlog is comprised of undelivered,  firm customer  orders,
which are  scheduled  to ship within 18 months.  The  Company's  eighteen  month
backlog was approximately  $12,699,000 at August 29, 2003, $10,700,000 at August
30, 2002, and  $19,057,000 at August 31, 2001. One customer  accounted for 85.4%
of the backlog at August 29, 2003.  Reference is hereby made to the  information
contained in MD&A, which is incorporated herein by reference in response to this
item.  The  total  multi-year  backlog  at  August  29,  2003 was  approximately
$24,470,000.

     Approximately $9,190,000 of the August 29, 2003 backlog is expected to ship
during  fiscal  2004.  One customer  accounted  for 78.6% of the August 29, 2003
backlog scheduled to ship during fiscal 2004.

          (ix) Government contracts.

     Not applicable.

          (x)  Competitive Conditions.

     WCI competes both with companies that have substantially  greater resources
and  with   small-specialized   companies.   Competitive  forces  are  generally
predictable for each of the markets served by the Company. Through relationships
with component and  integrated  solution  providers,  the Company has positioned
itself to provide  complete  end-to-end  digital  video and audio systems to its
customers.

Broadcast Television

     Competition   in  the  market  for  the  Company's   broadcast   television
electronics products,  including digital video equipment, is driven by features,
timeliness,  performance,  and price.  The  Company's  broadcast  digital  video
products  in  production  are  competitively  priced,  with  unique,   desirable
features.  Due to the large number of potential end users,  both small and large
competitors continue to emerge. The Company believes it has positioned itself to
capitalize on the market trends in this business through careful  development of
its product and market  strategies,  which have proven  successful in increasing
revenues  from this sector.  It must be emphasized  that the overall  market for
professional  satellite  broadcast  products is very  specialized  and  somewhat
limited.  The Company's long term strategic  relationships  within the broadcast
industry  help  assure  that it will  generally  be  exposed to  whatever  sales
opportunities develop.

                                       6
<PAGE>

Cable Television

     In the cable  television  market the Company  believes that the competitive
position  for many of its  products is  dominant.  However,  these  products are
competing with those of significant  and  well-established  firms.  WCI believes
that it  maintains a  competitive  advantage  in the cable and  broadcast  video
markets  for  advertising-supported  networks  through  its  ability  to provide
regionalized  programming and control. The Company's success in this market will
depend to a great extent on how much emphasis is placed on a network's desire to
target  advertising  and other  messages.  Major networks remain to be converted
from analog to digital and the Company continues to pursue  opportunities  where
it  perceives  its  products  will  provide  value-added  features  over  larger
competitors.  Legacy  products for analog audio and network  digital cue signals
continue  to  provide  revenue,  but  this  revenue  is  projected  to  diminish
substantially  over  the next 24  months  due to  increased  growth  in  digital
services.

Broadcast Radio Networks

     Competition  for radio network  products,  including the Company's  digital
audio products, is very aggressive and pricing is very competitive.  The Company
believes  that its  continued  success  in all of its  markets  will  depend  on
aggressive  marketing  and product  development.  This market is limited and new
conversions to digital technology are not expected to bring significant  revenue
opportunities  during  the  next  24  months  due to  remaining  useful  life of
presently installed systems.

Business Broadcasting

     Competition in the business  broadcasting  market segment  generally  comes
from  smaller  companies  with  unique  products  tailored  to the  needs of the
customer.  The  Company  feels that this  market  segment is one where it enjoys
competitive advantages.  Business music networks, for example,  continue to rely
on the Company's powerful network control and targeting capabilities to maximize
every  advertising  dollar.  New products such as the iPump digital media server
will allow business broadcasting networks to benefit from satellite broadcasting
technologies  without requiring large amounts of satellite cost.  Competition in
this field is increasing,  although still limited, and the Company expects to be
among the industry key players.

          (xi) Research and development activities.

     The  Company's   research  and  development   activities  are  designed  to
strengthen  and broaden  its  existing  products  and systems and to develop new
products  and  systems.  A  major  portion  of  the  fiscal  2003  research  and
development  expenses  were  spent in the  digital  video  product  area.  WCI's
research and development expenses totaled $2,853,000 in fiscal 2003,  $2,410,000
in fiscal 2002, and $2,689,000 in fiscal 2001. Additional  information contained
on pages 2-5 and in MD&A in this report is  incorporated  herein by reference in
response to this item.

          (xii) Environmental Regulation.

     Federal,  state  and  local  pollution  control  requirements  have  had no
material  effect upon the  capital  expenditures,  earnings  or the  competitive
position of the Company.

          (xiii) Number of employees.

     As of August 29, 2003, the Company had 87 full time  employees  employed by
the  WCI  manufacturing   subsidiary  and  no  employees   employed  by  Wegener
Corporation  or Wegener  Communications  International,  Inc. No  employees  are
parties to a  collective  bargaining  agreement  and the Company  believes  that
employee relations are good.

                                       7
<PAGE>

          (d)  Financial information about geographic areas.

     As described in Note 11 to the consolidated  financial statements contained
in this report is incorporated herein by reference in response to this item.

          (e)  Available information.

               Not applicable

     The Company's Web site is http://www.wegener.com

                                       8
<PAGE>

EXECUTIVE OFFICERS OF THE REGISTRANT

The  executive  officers  of the  Company,  for  purposes  of section  401(b) of
Regulation S-K, are as follows:

NAME AND BUSINESS EXPERIENCE             AGE                 OFFICE HELD

ROBERT A. PLACEK                          65            Chairman of the Board,
President and Chief Executive                           President and Chief
Officer of the Company since                            Executive Officer of
August 1987 and Director of                             the Company
the Company since July 1987.
Chairman of the Board since
1995. Chairman and Chief
Executive Officer and Director
of WCI since 1979. President
of WCI from October 1979 to
June 1998 and from March 2002
to present.

NED L. MOUNTAIN                           55            Executive Vice
Executive Vice President of                             President of WCI
WCI since March 2002 and
Director of the Company since
May 2003. Senior Vice
President of Business
Development of WCI 1996-2002.
Vice President European
Operations of WCI 1994-1995.
Numerous Sales and Marketing
positions 1981-1994. Corporate
Senior Engineer of UA-Columbia
Cablevision 1979-1981.

C. TROY WOODBURY, JR.                     56            Treasurer and Chief
Treasurer and Chief Financial                           Financial Officer of
Officer of the Company since                            the Company and WCI
June 1988 and Director since
1989. Treasurer and Chief
Financial Officer of WCI since
1992. Senior Vice President of
Finance of WCI since March
2002. Executive Vice President
of WCI from July 1995 to March
2002. Chief Operating Officer
of WCI from September 1992 to
June 1998. Group Controller
for Scientific-Atlanta, Inc.
from March 1975 to June 1988.

                                        9
<PAGE>

ITEM 2.   PROPERTIES

     The  executive  offices of the  Company  are  located  at 11350  Technology
Circle, Duluth, Georgia 30097-1502.  This 40,000 square foot facility,  which is
located on a 4.7 acre site, was purchased by WCI in February 1987. During August
1989,  WCI  purchased an  additional  4.4 acres of adjacent  property.  WCI also
leases a 21,000 square foot manufacturing facility in Alpharetta,  Georgia under
a five-year  lease expiring during the second quarter of fiscal 2005. The annual
rent is  approximately  $136,000  for the first three (3) years and $143,000 for
the fourth and fifth years.  WCI's 40,000  square foot facility and 4.4 acres of
adjacent  land are  pledged as  collateral  under the  Company's  line of credit
facility.

ITEM 3.   LEGAL PROCEEDINGS

RADYNE  COMSTREAM INC. AND WC ACQUISITION  CORPORATION,  PLAINTIFFS,  V. WEGENER
CORPORATION, DEFENDANT, Civil Action No. 03-421-KAJ
On April 23, 2003,  WC  Acquisition  Corporation,  a wholly owned  subsidiary of
Radyne ComStream,  Inc., commenced an all-cash,  all-shares tender offer for all
outstanding  shares of Wegener  Corporation  (Wegener)  common stock not already
owned by WC Acquisition  Corporation.  Wegener's Board of Directors appointed an
Independent  Committee  to  investigate  the  offer,  and  after  reviewing  the
Independent Committee's  recommendation,  Wegener's Board issued a press release
which  reflected  their findings that the offer was priced too low and therefore
tendering  shares was not in the best  interest of  Wegener's  shareholders.  On
April 24, 2003,  Radyne ComStream,  Inc. and WC Acquisition  Corporation filed a
complaint  in the U.S.  District  Court for the  District  of  Delaware  against
Wegener  arising out of this tender offer.  The  Plaintiffs  requested  that the
Court enter a  declaratory  judgment that the public  disclosures  and documents
filed  with  the  Securities  and  Exchange  Commission  by the  Plaintiffs,  in
connection  with the tender offer,  fully comply with all  applicable  laws. The
Plaintiffs  also sought an injunction  against  Wegener,  as well as against its
agents and  employees,  from  making  any false or  misleading  statements  with
respect to the tender  offer and an award of  Plaintiffs'  costs and  attorneys'
fees.  Wegener filed an answer to this Complaint on May 15, 2003, and denied all
of the  substantive  allegations of the Complaint.  In its answer,  Wegener also
asserted counterclaims,  alleging that the tender offer was illegal, and done in
violation  of ss. 14 of the  Williams  Act.  On June 27,  2003,  the  Plaintiffs
dismissed this lawsuit.

RADYNE COMSTREAM,  INC. AND WC ACQUISITION  CORPORATION  PLAINTIFFS,  V. WEGENER
CORPORATION,  ROBERT A. PLACEK,  THOMAS G. ELLIOT, JAMES H. MORGAN, JR., C. TROY
WOODBURY,  JR.,  WENDELL BAILEY AND JOE K. PARKS,  DEFENDANTS,  Civil Action No.
20279-NC
On April 24,  2003,  WC  Acquisition  Corporation  and  Radyne  ComStream,  Inc.
commenced an action against Wegener,  Robert A. Placek,  Thomas G. Elliot, James
H. Morgan,  Jr., C. Troy Woodbury,  Jr.,  Wendell Bailey and Joe K. Parks in the
Court of Chancery for the State of Delaware in and for New Castle  County.  Each
of the  individuals  named in the Complaint as Defendants are (or were) officers
and/or directors of Wegener. Plaintiffs asserted that these individuals violated
their  fiduciary  duties by  failing to approve  the tender  offer and  proposed
merger,  by failing to exempt the tender  offer from  Section 203 of the General
Corporation  Law of the State of  Delaware,  by failing  to render  inapplicable
Article  Eighth of  Wegener's  Certificate  of  Incorporation,  and by  adopting
anti-takeover devices. Plaintiffs sought to have the Court compel the Defendants
to approve the proposed acquisition, enjoin the Defendants from applying Section
203 of the General  Corporation  Law of the State of Delaware and Article Eighth
of Wegener's  Certificate of Incorporation,  and enjoin Wegener,  its agents and
its  employees,   from  adopting  any  other  measure  which  could  impede  the
acquisition  or  other  attempts  by the  Plaintiffs  to  acquire  Wegener.  The
Complaint also sought an award of Plaintiffs' costs and attorneys' fees. Wegener
filed an  answer  to this  Complaint  on May 19,  2003,  and  denied  all of the
substantive  allegations  of the Complaint.  On June 26, 2003,  this lawsuit was
dismissed.

JERRY LEUCH,  PLAINTIFF, V. ROBERT A. PLACEK, THOMAS G. ELLIOT, JOE K. PARKS, C.
TROY WOODBURY, JR., WENDELL BAILEY, NED MOUNTAIN AND WEGENER CORPORATION,  Civil
Action No.20361-NC
On June 20,  2003,  Jerry Leuch  commenced  an action  styled as a direct  class
action and a derivative action against Robert A. Placek,  Thomas G. Elliot,  Joe
K. Parks,  C. Troy  Woodbury,  Jr.,  Wendell  Bailey,  Ned  Mountain and Wegener
Corporation  in the Court of Chancery of the State of  Delaware,  In and For New
Castle County.  The Plaintiff  alleges that the individual  defendants  violated
their fiduciary duties due to him and other shareholders, the

                                       10
<PAGE>

members of the alleged class, as well as Wegener.  The relief Plaintiff seeks is
as follows:  a declaration  that the  Defendants  must consider and evaluate all
bona fide offers to purchase all of the outstanding shares of Wegener consistent
with their fiduciary  duties;  a declaration that this action is properly styled
as  a  class  action;  an  injunction   against  proceeding  with  any  business
combination  which  benefited  the  individual   defendants  and  an  injunction
requiring  that any  conflicts  of  interest be resolved in favor of the Wegener
shareholders;  and a declaration removing the anti-takeover  measures enacted by
Wegener's  Board of Directors.  The Complaint also seeks an award of Plaintiff's
costs and  attorneys'  and other  fees.  An answer  has been  filed by  Wegener,
denying  all  substantive  allegations  in the  complaint.  Management  does not
believe  that the  ultimate  outcome  of this  litigation  will have a  material
adverse effect on its financial condition or results of operations.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable

                                     PART II

ITEM 5.   MARKET FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDER
          MATTERS

     The Company's Common Stock is traded on the NASDAQ Small-Cap Market (NASDAQ
symbol: WGNR). As of November 20, 2003, there were approximately 377* holders of
record of Common Stock.  *(This number does not reflect beneficial  ownership of
shares held in nominee name).

     The  quarterly  ranges of high and low sale prices for fiscal 2003 and 2002
were as follows:

                                  FISCAL 2003               Fiscal 2002
                              -------------------       -------------------
                               HIGH          LOW         High          Low
     First Quarter            $ 1.07       $  .60       $ 1.32       $  .50
     Second Quarter             1.10          .69         1.25          .80
     Third Quarter              1.72          .73         1.70          .81
     Fourth Quarter             2.49         1.29         1.47          .90

     The Company has not paid any cash  dividends on its Common  Stock.  For the
foreseeable future, the Company's Board of Directors does not intend to pay cash
dividends,  but  rather  plans to  retain  earnings  to  support  the  Company's
operations  and  growth.  Furthermore,  the  Company is  prohibited  from paying
dividends in accordance with its bank loan agreement, as more fully described in
MD&A and in Note 7 to the consolidated  financial  statements  contained in this
report.

                                       11
<PAGE>

     The following table summarizes  information as of August 29, 2003 regarding
the Company's  common stock  reserved for issuance  under the  Company's  equity
compensation plans.

                                                                    Number of
                                                                   Securities
                                                                    Remaining
                                                                  Available for
                                     Number of       Weighted-   Future Issuance
                                     Securities       Average    Under the Plans
                                    to be Issued     Exercise      (Excluding
                                   Upon Exercise     Price of      Securities
                                   of Outstanding   Outstanding   Reflected in
                                      Options         Options      Column (a)
   Plan Category                        (a)             (b)            (c)
--------------------------------------------------------------------------------
Equity Compensation Plans
   Approved by Security
   Holders                           1,228,425         $1.39         972,575
Equity Compensation Plans
   Not Approved by Security
   Holders(1)                          100,000         $5.63              --
--------------------------------------------------------------------------------
Total                                1,328,425         $1.71         972,575
================================================================================

(1)  Represents a compensation arrangement pursuant to an agreement with a third
     party to provide a national  financial  relations  program for the Company,
     which agreement terminated in fiscal 2001.

ITEM 6.   SELECTED FINANCIAL DATA

                             SELECTED FINANCIAL DATA
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                Year ended
-------------------------------------------------------------------------------------------------------
                                    AUGUST 29,    August 30,    August 31,   September 1,  September 3,
                                       2003          2002          2001          2000          1999
-------------------------------------------------------------------------------------------------------
<S>                                 <C>           <C>           <C>           <C>           <C>
Revenue                             $   20,133    $   23,459    $   20,333    $   22,894    $   25,259

Operating income (loss)                   (240)        1,311        (3,100)       (5,469)          132

Net earnings (loss)                         88           808        (1,976)       (3,329)          213

Net earnings (loss) per share
   Basic                            $       (a)   $      .07    $     (.17)   $     (.28)   $      .02
   Diluted                          $       (a)   $      .07    $     (.17)   $     (.28)   $      .02

Cash dividends paid per share (1)           --            --            --            --            --
-------------------------------------------------------------------------------------------------------

Total assets                        $   18,168    $   18,700    $   18,660    $   24,147    $   24,954

Long-term obligations inclusive
   of current maturities                     4            10            55           578         1,205
=======================================================================================================
</TABLE>

(a)  Less than $.01 per share

(1)  The Company has never paid cash  dividends on its common stock and does not
     intend to pay cash dividends in the foreseeable future.  Additionally,  the
     Company's line of credit precludes the payment of dividends.

                                       12
<PAGE>

ITEM 7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS OF OPERATIONS

     Certain   statements   contained   in  this  filing  are   "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995, such as statements  relating to financial  results,  future business or
product  development  plans,  research  and  development   activities,   capital
spending,  financing  resources or capital structure,  the effects of regulation
and competition,  and are thus prospective.  Such forward-looking statements are
subject to risks,  uncertainties  and other  factors,  which could cause  actual
results to differ  materially  from future results  expressed or implied by such
forward-looking  statements.  Potential risks and uncertainties include, but are
not limited to, economic  conditions,  customer plans and  commitments,  product
demand,  government  regulation,  rapid technological  developments and changes,
performance  issues with key  suppliers  and  subcontractors,  delays in product
development   and   testing,    material   availability,    new   and   existing
well-capitalized competitors, and other uncertainties detailed from time to time
in the Company's periodic Securities and Exchange Commission filings.

     The Company manufactures satellite communications equipment through Wegener
Communications, Inc. (WCI), a wholly-owned subsidiary. WCI manufactures products
for transmission of audio, data and video via satellite.

     The Company  operates on a 52-53 week fiscal year.  The fiscal year ends on
the Friday nearest to August 31. Fiscal years 2003,  2002, and 2001 contained 52
weeks. All references  herein to 2003, 2002, and 2001, refer to the fiscal years
ending August 29, 2003, August 30, 2002, and August 31, 2001, respectively.

RESULTS OF OPERATIONS

     Net earnings for the year ended August 29, 2003,  were $88,000 or less than
$0.01 per  diluted  share,  compared  to net  earnings  of $808,000 or $0.07 per
diluted share for the year ended August 30, 2002, and a net loss of $(1,976,000)
or $(0.17) per diluted share for the year ended August 31, 2001. Net earnings in
fiscal  2003  included  after tax  charges  of  $623,000,  related  to legal and
professional  fees  incurred in  defending  the Company  against an  unsolicited
hostile takeover attempt by Radyne ComStream, Inc. and related litigation.

     Revenues for fiscal 2003 decreased  $3,326,000 or 14.2% to $20,133,000 from
$23,459,000 in fiscal 2002. Direct Broadcast Satellite (DBS) revenues (including
service  revenues) in fiscal 2003  decreased  $3,664,000 or 16.4% to $18,722,000
from $22,386,000 in fiscal 2002.  Telecom and Custom Product revenues  increased
$338,000 or 31.5% in fiscal 2003 to $1,411,000  from  $1,073,000 in fiscal 2002.
The  decrease in DBS  revenues in fiscal 2003 was  primarily a result of a lower
backlog of orders at the  beginning of fiscal 2003  compared to the beginning of
fiscal 2002. Revenues and order backlog are subject to the timing of significant
orders  from  customers,  and as a result  revenue  levels  may  fluctuate  on a
quarterly  and  yearly  basis.  Revenues  were  adversely  impacted  by  delayed
purchasing  decisions in the digital satellite  transmission  market and delayed
product introductions by the Company. Fiscal 2002 revenues included shipments of
network equipment to Roberts  Communications to provide  television  coverage of
horseracing  to  off-track  betting  venues  throughout  the  United  States and
shipments  of  digital  receivers  to FOX  Digital  and FOX Sports Net for their
broadcast  and  cable  television  networks.  Revenues  to these  two  customers
decreased  approximately  $5,563,000  in fiscal 2003  compared  to fiscal  2002.
Decreases in revenues were partially offset by approximately  $494,000 of earned
deposits  which are not  expected  to recur in  future  reporting  periods.  The
Telecom and Custom Products Group revenue  increase in fiscal 2003 was primarily
due to an increase in orders from a distributor to provide commercial  insertion
equipment to a cable television operator.

     Revenues for fiscal 2002 increased  $3,126,000 or 15.4% to $23,459,000 from
$20,333,000 in fiscal 2001. Direct Broadcast Satellite (DBS) revenues (including
service  revenues) in fiscal 2002  increased  $3,833,000 or 20.7% to $22,386,000
from $18,553,000 in fiscal 2001.  Telecom and Custom Product revenues  decreased
$707,000 or 39.7% in fiscal 2002 to $1,073,000  from  $1,780,000 in fiscal 2001.
The  increase in DBS  revenues in fiscal 2002 was a result of a high  backlog of
orders at the beginning of fiscal 2002 compared to the beginning of fiscal 2001.
Shipments of network  equipment,  which  initially began in the first quarter of
fiscal 2002, were completed to Roberts

                                       13
<PAGE>

Communications  to provide  television  coverage  of  horseracing  to  off-track
betting venues  throughout the United  States.  In accordance  with a multi-year
contract to provide programming to network  subscribers,  revenue was recognized
on digital  receivers  beginning  initially in the fourth quarter of fiscal 2001
and  continued  throughout  fiscal  2002.  Additionally,   during  fiscal  2002,
shipments of digital  receivers were completed to FOX Digital and FOX Sports Net
for their  broadcast  and cable  television  networks.  The  Telecom  and Custom
Product Group revenue  decrease in fiscal 2002 was primarily due to lower levels
of shipments of cable television headend products to distributors as a result of
a slowdown in  purchases  by the major  cable  television  operators  which were
impacted  by  overcapacity  and  tightened  credit  availability  in the telecom
industry.

     WCI's backlog of orders  scheduled to ship within 18 months was $12,699,000
at August 29, 2003,  compared to $10,700,000 at August 30, 2002, and $19,057,000
at August  31,  2001.  The total  multi-year  backlog at August  29,  2003,  was
approximately $24,470,000. The Company's backlog has been impacted by a slowdown
in capital spending, delays by customers in expanding existing networks, and the
delayed  timing  of new  product  introductions  by the  Company.  Approximately
$9,190,000  of the August 29,  2003,  backlog is expected to ship during  fiscal
2004.  One customer  accounted for 85.4% of the Company's  backlog at August 29,
2003 and for 78.6% of the backlog  expected to ship during fiscal 2004. Sales to
a relatively small number of major customers have typically comprised a majority
of the Company's  revenues and that trend is expected to continue.  (See note 11
to the consolidated  financial  statements,  Segment Information and Significant
Customers.) Future revenues are subject to the timing of significant orders from
customers and are difficult to forecast. As a result, the Company expects future
revenue  levels to fluctuate  from quarter to quarter.  It is  anticipated  that
revenues  for the first  quarter of fiscal  2004 will  decrease  compared to the
fourth  quarter  of fiscal  2003 and will  result in an  operating  loss for the
period. Although no assurances may be given, the Company believes it will record
sufficient  new orders in fiscal 2004 to achieve fiscal year  profitability  and
increased  revenues compared to fiscal 2003,  although there can be fluctuations
in quarter to quarter operating results due to the timing of orders received.

     International  sales are generated through a direct sales  organization and
through  foreign  distributors.  International  sales were  $839,000  or 4.2% of
revenues  compared  to  $1,473,000  or 6.3% of  revenues  in  fiscal  2002,  and
$2,794,000  or 13.7% of revenues in fiscal  2001.  International  shipments  are
generally  project specific and revenues,  therefore,  are subject to variations
from year to year  based on the timing of  customer  orders.  All  international
sales are  denominated  in U.S.  dollars.  Additional  financial  information on
geographic  areas  is  provided  in  Note  11  of  the  consolidated   financial
statements.

     Gross  profit as a percent of sales was 37.3% in fiscal  2003  compared  to
33.3% in fiscal 2002,  and 21.3% in fiscal 2001.  Gross  profit  margin  dollars
decreased  $312,000  or 4.0% to  $7,510,000  in fiscal 2003 from  $7,822,000  in
fiscal 2002. Fiscal 2001 gross profit margin dollars amounted to $4,334,000. The
increase  in margin  percentages  in fiscal 2003 was mainly due to a product mix
with lower variable cost components and lower inventory reserve provisions.  The
decrease in margin dollars in fiscal 2003 compared to fiscal 2002 was mainly due
to lower  revenues  during the period.  Profit  margins in fiscal 2003  included
inventory  reserve  charges of $75,000  compared to $800,000 in fiscal 2002. The
decrease in inventory  reserve  charges in fiscal 2003 from 2002 was a result of
improved  material  planning  controls and efforts to reduce  inventory  levels.
Significant  reserves  were made in fiscal  2002 for  slow-moving  and  obsolete
inventories.  Gross  profit  margins were  favorably  impacted in fiscal 2002 by
lower unit fixed costs due to the  increase  in sales  volumes,  cost  reduction
programs and lower manufacturing costs of certain DBS products.

     Selling,  general, and administrative (SG&A) expenses increased $797,000 or
19.4% to  $4,898,000  in  fiscal  2003 from  $4,101,000  in  fiscal  2002.  As a
percentage of revenues,  SG&A expenses were 24.3% of revenues in fiscal 2003 and
17.5% in  fiscal  2002.  SG&A  expenses  in fiscal  2003  included  $974,000  in
corporate legal and  professional  fees related to defending the Company against
an unsolicited  hostile takeover attempt by Radyne  ComStream,  Inc. and related
litigation.  These  expenses  were offset by  decreases  in certain  expenses of
$177,000,  primarily  depreciation,  bad debt provisions and outside sales agent
commissions, which were offset by higher legal fees of WCI.

     SG&A expenses decreased $644,000 or 13.6% to $4,101,000 in fiscal 2002 from
$4,745,000 in fiscal 2001. As a percentage of revenues, SG&A expenses were 17.5%
of revenues in fiscal 2002 and 23.3% in fiscal 2001.

                                       14
<PAGE>

During the fourth  quarter  of fiscal  2001,  tax  reimbursement  features  were
removed from common stock  options.  As a result,  SG&A  expenses in fiscal 2002
were not subject to variable stock option compensation adjustments compared to a
benefit of $488,000 in fiscal  2001.  Excluding  this  benefit,  SG&A  decreased
$1,132,000 or 21.6% in fiscal 2002 compared to fiscal 2001.  SG&A  reductions in
fiscal  2002 were mainly due to  personnel  reductions,  lower  sales  incentive
commissions  as a result of a decrease in fiscal 2002 orders and cost  reduction
efforts in  discretionary  spending  items.  The dollar  decrease of expenses in
fiscal 2002  compared  to fiscal  2001  includes  decreases  in 1)  compensation
expense of  $710,000,  2) travel  expenses  of  $171,000,  and 3) trade show and
advertising expenses of $138,000.

     General  corporate  expenses  included in SG&A expense  were  approximately
$1,568,000, $510,000, and $658,000, in fiscal 2003, 2002 and 2001, respectively.
The increase in fiscal 2003 corporate expenses was primarily due to the $974,000
in legal and  professional  fees  related to  defending  the Company  against an
unsolicited takeover attempt by Radyne ComStream, Inc.

     Research  and  development  expenditures,  including  capitalized  software
development  costs,  were  $4,230,000  or  21.0% of  revenues  in  fiscal  2003,
$2,983,000  or 12.7% of  revenues in fiscal  2002,  and  $3,073,000  or 15.1% of
revenues in fiscal 2001. The increases in  expenditures  in fiscal 2003 compared
to fiscal 2002 were due to increases in engineering  consulting costs, prototype
parts  expenses,  and personnel  costs  primarily  related to the development of
iPump  Media  Server,  Unity  4600  digital  receiver,  and the DTV  series  700
products.  The decrease in  expenditures  in fiscal 2002 compared to fiscal 2001
was primarily due to decreases in labor and overhead  costs which were offset by
higher  engineering   consulting  costs.  Software  development  costs  totaling
$1,377,000, $573,000, and $384,000 were capitalized during fiscal 2003, 2002 and
2001,  respectively.  The increases in capitalized  software costs during fiscal
2003  compared  to 2002 are due to  increased  expenditures  on  COMPEL  network
control software,  the iPump Media Server and DTV series 700 products.  Research
and development expenses, excluding capitalized software development costs, were
$2,853,000 or 14.2% of revenues in fiscal 2003,  $2,410,000 or 10.3% of revenues
in fiscal 2002,  and $2,689,000 or 13.2% of revenues in fiscal 2001. The Company
expects fiscal 2004 research and development  expenditures to approximate fiscal
2003 levels as it continues to develop and enhance DBS products.

     Interest  expense was $69,000 in fiscal 2003  compared to $64,000 in fiscal
2002 and $60,000 in fiscal 2001. Interest expense in fiscal 2003 was principally
associated with letters of credit  commitments and bank float charges on lockbox
collections.  The increases during fiscal 2003 and 2002 were due primarily to an
increase in the average  outstanding letter of credit commitment  balances.  The
Company believes that interest  expense in fiscal 2004 will  approximate  fiscal
2003 expense.

     Interest  income was $57,000 in fiscal  2003  compared to $33,000 in fiscal
2002 and $71,000 in fiscal 2001.  The increase in fiscal 2003 compared to fiscal
2002 was  mainly due to higher  average  outstanding  balances  of cash and cash
equivalents.  The decrease in fiscal 2002 compared to fiscal 2001 was mainly due
to lower  investment  yields.  Interest income is expected to decrease in fiscal
2004  due to  expected  lower  average  outstanding  balances  of cash  and cash
equivalents.

     Fiscal 2003 income tax benefit of $340,000 was comprised of a current state
income tax benefit of $50,000  and  deferred  federal and state tax  benefits of
$85,000 and  $205,000,  respectively.  The fiscal 2003 state income tax benefits
were  favorably  impacted  primarily  by state  income tax  credits of  $199,000
related  to Georgia  retraining  credits.  Net  deferred  tax  assets  increased
$290,000 to $3,138,000 at August 29, 2003. The increase was  principally  due to
state  income tax  credits of  $199,000  and  increases  in net  operating  loss
carryforwards.  Realization  of deferred tax assets is  dependent on  generating
sufficient  future taxable income prior to the expiration of the loss and credit
carryforwards.  At August 29, 2003, the Company had a federal net operating loss
carryforward of $2,900,000,  which expires  beginning  fiscal 2020 through 2023.
Additionally,   the  Company  had  general   business  and  foreign  tax  credit
carryforwards  of $98,000  expiring  fiscal  2004 , an  alternative  minimum tax
credit of $138,000 and state  income tax credits of $199,000  expiring in fiscal
2009. Although realization is not assured, management believes it is more likely
than not that all of the  deferred  tax  assets  will be  realized  based on the
Company's  backlog,  financial  projections  and operating  history.  The amount
considered  realizable  could be reduced if estimates of future  taxable  income
during the  carryforward  period are reduced.  Fiscal 2002 income tax expense of
$473,000 was comprised of a current  federal income tax benefit of $114,000 from
receipt of alternative minimum tax refunds as a result of federal

                                       15
<PAGE>

income tax law changes and  deferred  federal and state  income tax  expenses of
$549,000 and $38,000,  respectively.  Net deferred tax assets decreased $587,000
to  $2,848,000  at August  30,  2002 from  $3,435,000  at August 31,  2001.  The
decrease was principally due to current period utilization of net operating loss
carryforwards and refunds of alternative minimum tax credits. Fiscal 2001 income
tax  benefit  was  comprised  of a  deferred  federal  and state tax  benefit of
$1,049,000  and  $63,000,   respectively.  A  reconciliation  of  the  Company's
effective  income tax rate as compared to the statutory U.S.  income tax rate is
provided in Note 8 of the consolidated financial statements.

CRITICAL ACCOUNTING POLICIES

Certain accounting policies are very important to the portrayal of the Company's
financial  condition and results of  operations  and require  management's  most
subjective or difficult judgements. These policies are as follows:

REVENUE  RECOGNITION  -  The  Company's  revenue  recognition  policies  are  in
compliance  with Staff  Accounting  Bulletin No. 101,  "Revenue  Recognition  in
Financial  Statements," as published by the staff of the Securities and Exchange
Commission.  Revenue is recognized when persuasive evidence of an agreement with
the customer exists,  products are shipped or title passes pursuant to the terms
of the agreement with the customer, the amount due from the customer is fixed or
determinable, collectibility is reasonably assured, and there are no significant
future performance  obligations.  Service revenues are recognized at the time of
performance.  The Company  recognizes  revenue in certain  circumstances  before
delivery has occurred (commonly referred to as "bill and hold" transactions). In
such  circumstances,  among other  things,  risk of ownership  has passed to the
buyer,  the buyer has made a written  fixed  commitment to purchase the finished
goods, the buyer has requested the finished goods be held for future delivery as
scheduled and  designated by them,  and no  additional  performance  obligations
exist by the Company. For these transactions,  the finished goods are segregated
from  inventory  and normal  billing and credit terms are granted.  For the year
ended August 29, 2003, revenues to one customer in the amount of $3,049,000 were
recorded  prior to delivery as bill and hold  transactions.  At August 29, 2003,
accounts  receivable for these revenues  amounted to $1,395,000 and were paid in
full subsequent to August 29, 2003.

These policies require  management,  at the time of the  transaction,  to assess
whether the  amounts due are fixed or  determinable,  collection  is  reasonably
assured and no future performance obligations exist. These assessments are based
on  the  terms  of  the   agreement   with  the   customer,   past  history  and
creditworthiness  of the customer.  If management  determines that collection is
not  reasonably  assured  or  future  performance   obligations  exist,  revenue
recognition is deferred until these conditions are satisfied.

The  Company's  principal  sources  of  revenues  are from the sales of  various
satellite  communications  equipment.  Imbedded  in the  Company's  products  is
internally developed software of varying applications. Historically, the Company
has not sold or marketed  its  software  separately  or  otherwise  licensed its
software  apart from the related  communications  equipment.  Should the Company
begin to market or sell software whereby it is more than an incidental component
of the  hardware,  the  Company  will  recognize  software  license  revenue  in
accordance with SOP No. 97-2,  "Software Revenue  Recognition" as amended by SOP
No. 98-9, "Software Revenue Recognition, with Respect to Certain Transactions".

INVENTORY  RESERVES - Inventories  are valued at the lower of cost (at standard,
which  approximates  actual  cost on a  first-in,  first-out  basis) or  market.
Inventories include the cost of raw materials, labor and manufacturing overhead.
The Company makes inventory  reserve  provisions  based on a review of inventory
quantities on hand, estimated sales forecasts,  new products being developed and
technology  changes to properly reflect  inventory value.  These reserves are to
provide for items that are potentially slow-moving,  excess or obsolete. Changes
in market  conditions,  lower than expected customer demand and rapidly changing
technology could result in additional obsolete and slow-moving inventory that is
unsaleable  or  saleable  at  reduced  prices  which  could  require  additional
inventory reserve provisions.  At August 29, 2003,  inventories,  net of reserve
provisions, amounted to $2,143,000.

CAPITALIZED   SOFTWARE  COSTS  -  Software  development  costs  are  capitalized
subsequent to  establishing  technological  feasibility.  Capitalized  costs are
amortized  based on the larger of the amounts  computed using (a) the ratio that
current  gross  revenues  for each  product  bears to the total of  current  and
anticipated  future gross  revenues  for that  product or (b) the  straight-line
method over the  remaining  estimated  economic  life of the  product.  Expected
future  revenues and  estimated  economic  lives are subject to revisions due to
market conditions,  technology changes and other factors resulting in shortfalls
of expected  revenues or reduced economic lives which could result in additional
amortization  expense or write-offs.  At August 29, 2003,  capitalized  software
costs, net of accumulated amortization, amounted to $1,304,000.

DEFERRED TAX ASSET VALUATION  ALLOWANCE - Deferred tax assets are recognized for
deductible temporary differences,  net operating loss carryforwards,  and credit
carryforwards  if it is more  likely  than  not that  the tax  benefits  will be
realized.  Realization  of the  Company's  deferred  tax assets is  dependent on
generating  sufficient future taxable income prior to the expiration of the loss
and credit carryforwards. Although realization is not

                                       16
<PAGE>

assured, management believes it is more likely than not that all of the deferred
tax  assets  will  be  realized  based  on  the  Company's  backlog,   financial
projections  and  operating  history.  The  amount of the  deferred  tax  assets
considered realizable, however, could be reduced if estimates of further taxable
income  during  the  carryforward  period  are  reduced.  Any  reduction  in the
realizable  value of deferred  tax assets would result in a charge to income tax
expense in the period such determination was made.

At August  29,  2003,  deferred  tax assets  amounted  to  $3,138,000,  of which
$1,043,000  relates to net operating loss  carryforwards  which expire in fiscal
2020 through 2023,  $98,000 of general business and foreign tax credits expiring
fiscal 2004 and state tax credits of $199,000 expiring fiscal 2009.

ACCOUNTS  RECEIVABLE  VALUATION - The Company maintains  allowances for doubtful
accounts for estimated  losses  resulting from the inability of its customers to
make  required  payments.  If the financial  condition of our customers  were to
deteriorate,  resulting  in an  impairment  of their  ability to make  payments,
additional  allowances may be required.  At August 29, 2003, accounts receivable
net of allowances for doubtful accounts amounted to $3,560,000.

LIQUIDITY AND CAPITAL RESOURCES

     At August 29, 2003,  the Company's  primary  sources of liquidity were cash
and cash equivalents of $4,213,000 and a $5,000,000 bank loan facility. Cash and
cash equivalents decreased $905,000 in fiscal 2003.

     Cash  provided  by  operating  activities  in  fiscal  2003 was  $1,792,000
compared to  $3,986,000  in fiscal 2002.  Cash used by operating  activities  in
fiscal 2001 was  $1,265,000.  Fiscal 2003 net  earnings  adjusted  for  non-cash
expenses provided cash of $1,498,000 while changes in inventories  provided cash
of  $1,703,000.  Changes  in  accounts  receivable,  accounts  payable,  accrued
expenses and customer deposits used cash of $1,409,000.

     Cash used by investing activities was $2,673,000 in fiscal 2003 compared to
$720,000 in fiscal 2002 and $860,000 in fiscal 2001.  In fiscal 2003,  investing
activities  used cash of  $584,000  for  property  and  equipment  expenditures,
$1,377,000 for capitalized software additions and $711,000 for license agreement
expenditures  and legal  expenses  related  to the  filing of  applications  for
various patents and  trademarks.  Property and equipment  expenditures  were for
planned  additions of principally  manufacturing and engineering test equipment.
Fiscal 2004  expenditures  for investing  activities are expected to approximate
fiscal 2003 levels.

     Cash used by financing  activities  was $24,000 in fiscal 2003,  $75,000 in
fiscal 2002, and $551,000 in fiscal 2001. In fiscal 2003,  financing  activities
used cash of $6,000 for scheduled repayments of long-term  obligations,  $50,000
for debt issuance costs and provided  $32,000 of cash from the exercise of stock
options.  At  August  29,  2003,  scheduled  fiscal  2004  debt  repayments  are
approximately $4,000.

     Net accounts  receivable  increased  $522,000 to  $3,560,000  at August 29,
2003, from  $3,038,000 at August 30, 2002,  compared to $1,706,000 at August 31,
2001.  The  increase in fiscal 2003 was  primarily  due to early  collection  on
account  from a major  customer  in the  fourth  quarter  of  fiscal  2002.  The
allowance  for doubtful  accounts  was $355,000 at August 29, 2003,  $352,000 at
August 30, 2002 and $305,000 at August 31, 2001.  Write-offs in fiscal 2003 were
$27,000 and $108,000 in fiscal 2002. Net recoveries in fiscal 2001 were $19,000.
Increases to the  allowance  and charges to general and  administrative  expense
were  $30,000 in fiscal  2003,  $155,000 in fiscal  2002 and  $120,000 in fiscal
2001.

     Inventory before reserves decreased  $2,068,000 to $5,633,000 at August 29,
2003,  from  $7,701,000  at August 30, 2002.  The decrease was  primarily due to
management  efforts  to lower  inventory  levels  in line  with  backlog,  sales
forecasts and the timing of new products  being  developed.  During fiscal 2003,
inventory  reserves  were  increased by  provisions  charged to cost of sales of
$75,000. The increase in the provision was to provide additional reserves for 1)
slower-moving  analog  products,  2) excess  digital audio  inventories,  and 3)
potentially  slow-moving  inventories  of earlier  generations  of other digital
products. These products continue to sell but at

                                       17
<PAGE>

reduced  quantities.  During fiscal 2002,  inventory  reserves were increased by
provisions  charged to cost of sales of $800,000 and  $1,325,000 in fiscal 2001.
Inventory  reserves were  decreased by write-offs of $365,000 in fiscal 2003 and
$1,176,000  in fiscal  2002.  During  fiscal  2003,  2002 and 2001  decreases in
inventories   provided  cash  of   $1,703,000,   $2,765,000,   and   $1,296,000,
respectively.

     WCI's bank loan  facility  provides  a maximum  available  credit  limit of
$5,000,000 with sublimits as defined.  The amended loan facility matures on June
30,  2004,  or upon  demand and  requires  an annual  facility  fee of 1% of the
maximum credit limit. The loan facility  consists of a term loan and a revolving
line of credit with a combined  borrowing limit of $5,000,000,  bearing interest
at the bank's prime rate (4.00% at August 29, 2003).

     The term loan facility provides for a maximum of $1,000,000 for advances of
up to 80% of the cost of equipment acquisitions.  Principal advances are payable
monthly over sixty months with a balloon payment due at maturity.  The revolving
line of credit is  subject  to  availability  advance  formulas  of 80%  against
eligible accounts receivable; 20% of eligible raw materials inventories;  20% of
eligible  work-in-process  kit inventories;  and 40% to 50% of eligible finished
goods  inventories.  Advances  against  inventory  are  subject to a sublimit of
$2,000,000.  At August 29, 2003, no balances were  outstanding  on the revolving
line of  credit  or the  equipment  term  loan  portions  of the loan  facility.
Additionally,  at August 29, 2003, approximately $2,530,000,  net of outstanding
letters of credit in the amount of $2,172,000, was available to borrow under the
advance formulas of the revolving line of credit.

     The  Company is  required  to  maintain a minimum  tangible  net worth with
annual  increases  at each  fiscal  year end  commencing  with fiscal year 2003,
retain  certain key  employees,  limit  expenditures  of Wegener  Corporation to
$1,400,000  in fiscal 2003 and  $600,000  per fiscal year  thereafter,  maintain
certain financial ratios, and is precluded from paying dividends.  At August 29,
2003,  the Company  was in  compliance  with all loan  facility  covenants.  The
Company  believes  that the  amended  loan  facility  along  with  cash and cash
equivalent  balances  will be sufficient to support  operations  through  fiscal
2004.  While no  assurances  may be given,  WCI  believes,  upon  maturity,  the
existing loan facility will be renewed on substantially similar terms.

     During the second  quarter of fiscal  2003,  the Company  entered  into two
manufacturing and purchasing  agreements for certain finished goods inventories.
The   agreements   committed  the  Company  to  purchase   $2,116,000   over  an
eighteen-month period,  beginning in the third quarter of fiscal 2003. At August
29, 2003,  outstanding  purchase  commitments  under these agreements  amount to
$2,049,000.  In addition,  the Company maintains a cancelable  manufacturing and
purchasing  agreement of finished  goods  inventories  for which the Company has
firm  customer  order   commitments.   The  Company  had  outstanding   purchase
commitments  under this agreement of $1,261,000 at August 29, 2003.  Pursuant to
the above agreements, at August 29, 2003, the Company had outstanding letters of
credit in the amount of $2,172,000.

     The Company has never paid cash  dividends on its common stock and does not
intend  to pay cash  dividends  in the  foreseeable  future.  Additionally,  the
Company's line of credit precludes the payment of dividends.

     A summary of the Company's long-term  contractual  obligations as of August
29, 2003 consisted of:

                                          Payments Due by Period
                           ----------------------------------------------------
Contractual Obligations       Total       One Year     2 -3 Years    4 -5 Years
-----------------------    ----------    ----------    ----------    ----------
Debt                       $    4,000    $    4,000    $       --    $       --
Operating leases              346,000       224,000       118,000         4,000
Purchase commitments        3,310,000     3,310,000            --            --
                           ----------    ----------    ----------    ----------
Total                      $3,660,000    $3,538,000    $  118,000    $    4,000
                           ==========    ==========    ==========    ==========

                                       18
<PAGE>

IMPACT OF INFLATION

     The Company does not believe that  inflation  has had a material  impact on
revenues or expenses during its last three fiscal years.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In November  2002,  the FASB issued  FASB  Interpretation  No. 45 (FIN 45),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees  of  Indebtedness  of  Others."  FIN  45  requires  certain
guarantees  to be recorded at fair value  regardless of the  probability  of the
loss. The adoption did not have a material impact on the Company's  consolidated
financial statements.

     In January  2003,  the FASB  issued  FASB  Interpretation  No. 46 (FIN 46),
"Consolidation of Variable Interest Entities,  an Interpretation of ARB No. 51."
FIN 46 requires  certain  variable  interest  entities to be consolidated by the
primary  beneficiary of the entity if the equity  investors in the entity do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  entity to  finance  its  activities  without
additional  subordinated  financial  support  from  other  parties.  FIN  46  is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to  February  1, 2003,  the  provisions  of FIN 46 must be applied for the first
interim or annual period beginning after December 15, 2003. The Company believes
that the adoption of this standard will have no material impact on its financial
position and results of operations.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition  and  Disclosure."  SFAS No. 148 provides  alternative
methods  of  transition  for a  voluntary  change  to the fair  value  method of
accounting for stock-based employee  compensation as originally provided by SFAS
No. 123, "Accounting for Stock-Based Compensation."  Additionally,  SFAS No. 148
amends the  disclosure  requirements  of SFAS No. 123 in both annual and interim
financial  statements.  The  disclosure  requirements  shall  be  effective  for
financial  reports for interim  periods  beginning  after December 15, 2002. The
Company adopted the disclosure  portion of this statement for the fiscal quarter
ended May 30,  2003.  The  adoption  did not have any  impact  on the  Company's
consolidated financial position or results of operations.

     In May  2003,  the  FASB  issued  SFAS No.  150,  "Accounting  for  Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes  standards for how an issuer  classifies and measures in its
statement   of   financial   position   certain   financial   instruments   with
characteristics  of both  liabilities  and equity.  It  requires  that an issuer
classify a financial  instrument  that is within its scope as a liability (or an
asset in some  circumstances)  because  that  financial  instrument  embodies an
obligation of the issuer. Many of such instruments were previously classified as
equity.  The statement is effective for  financial  instruments  entered into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first  interim  period  beginning  after June 15,  2003,  except  for  mandatory
redeemable financial  instruments of nonpublic entities.  The statement is to be
implemented  by  reporting  the  cumulative  effect  of a change  in  accounting
principle  for  financial  instruments  created  before the issuance date of the
statement and still existing at the beginning of the interim period of adoption.
Restatement  is not  permitted.  On  November  7,  2003  the FASB  deferred  the
classification  and  measurement  provisions  of SFAS No.  150 as they  apply to
certain  mandatory  redeemable   non-controlling  interests.  This  deferral  is
expected to remain in effect while these provisions are further evaluated by the
FSAB.  Management  believes that the adoption of this  statement will not have a
significant  impact on the  financial  position,  results of  operations or cash
flows of the Company.

OUTLOOK:  ISSUES AND UNCERTAINTIES

     The market for the Company's  products is characterized by rapidly changing
technology,  evolving  industry  standards and frequent  product  introductions.
Product introductions are generally characterized by increased

                                       19
<PAGE>

functionality and better quality,  sometimes at reduced prices. The introduction
of products  embodying new technology may render existing  products obsolete and
unmarketable  or  marketable  at  substantially  reduced  prices.  The Company's
ability to successfully develop and introduce on a timely basis new and enhanced
products that embody new  technology,  and achieve levels of  functionality  and
price  acceptable to the market,  will be a significant  factor in the Company's
ability  to  grow  and  remain  competitive.  If  the  Company  is  unable,  for
technological  or other  reasons,  to develop  competitive  products in a timely
manner in  response  to changes in the  industry,  the  Company's  business  and
operating results will be materially and adversely affected.

     WCI competes with companies that have substantially greater resources and a
larger number of products, as well as with small specialized companies.  Through
relationships with technology partners and original equipment manufacturer (OEM)
suppliers,  the Company has positioned itself to provide end-to-end solutions to
its  customers.  Competition  in the market for the Company's  MPEG-2  broadcast
television electronics products, including digital video equipment, is driven by
timeliness,  performance  and  price.  The  Company's  broadcast  digital  video
products  in  production  are  competitively  priced,  with  unique,   desirable
features.  The COMPEL  Network  Control System meets customer needs by providing
regionalization  of receiver  control and spot  advertisement.  Due to the large
number of  potential  end users,  both small and large  competitors  continue to
emerge.  The Company  believes it has  positioned  itself to  capitalize  on the
market trends in this business  through  careful  development of its product and
market strategies, which have proven successful in increasing revenues from this
sector. In the cable television market the Company believes that the competitive
position for many of its products is strong.  However,  the UNITY product family
competes  with  significant  and  established  firms.  Other  products for cable
television include  proprietary cueing and network control devices.  Competition
for radio network products,  including the Company's digital audio products,  is
very aggressive and pricing is very  competitive.  The Company believes that its
continued success in all of its markets will depend on aggressive  marketing and
product development.

     The  demand  for  digital  products  is being  driven  by the high  cost of
satellite capacity and increasing demand for video and multi-media  content. The
digital  conversion  of major  networks is expected to continue,  but it remains
difficult to predict the precise  timing and number of customers  converting  to
digital.  Management  believes the market as a whole has  considerable  built-up
demand for digital technology.  Although no assurances can be given, the Company
expects  to  directly  benefit  from  this  increase  in  demand.  There  may be
fluctuations  in the Company's  revenues and  operating  results from quarter to
quarter due to several factors,  including the timing of significant orders from
customers and the timing of new product introductions by the Company.

     The Company has invested a  significant  amount of  financial  resources to
acquire  certain raw  materials,  to incur  direct labor and to contract to have
specific  outplant  procedures  performed on  inventory in process.  The Company
purchased this inventory  based upon  previously  known backlog and  anticipated
future  sales  given  existing  knowledge  of  the  marketplace.  The  Company's
inventory reserve of $3,490,000 at August 29, 2003, is to provide for items that
are potentially slow-moving,  excess or obsolete.  Changes in market conditions,
lower than expected customer demand and rapidly changing technology could result
in additional obsolete and slow-moving  inventory that is unsaleable or saleable
at reduced  prices.  No estimate  can be made of a range of amounts of loss from
obsolescence  that  might  occur  should  the  Company's  sales  efforts  not be
successful.

     Sales to a  relatively  small  number  of major  customers  have  typically
comprised a majority of the  Company's  revenues,  and that trend is expected to
continue  throughout fiscal 2003 and beyond.  Future revenues are subject to the
timing of significant orders from customers and are difficult to forecast.  As a
result,  future  revenues may  fluctuate  from quarter to quarter.  One customer
accounted  for  85.4% of the  backlog  at August  29,  2003 and for 78.6% of the
backlog scheduled to ship during fiscal 2004.

     The Company's gross margin percentage is subject to variations based on the
product mix sold in any period and on sales volumes.  Start-up costs  associated
with new product  introductions could adversely impact costs and future margins.
The  Company  is  very   focused  on   controlling   both  direct  and  indirect
manufacturing costs and other operating  expenses.  These costs will be adjusted
as necessary if revenues do not increase as planned.  Management  believes  that
digital  compression  technology may be profitably  employed to create increased
demand for its satellite  receiving equipment if those products are manufactured
in a high volume, standardized production environment.

                                       20
<PAGE>

     Certain raw materials,  video  sub-components and licensed video processing
technologies  used in existing and future products are currently  available from
single or limited sources.  Although the Company believes that all single-source
components  are  currently  available  in adequate  quantities,  there can be no
assurance  that  shortages  or  unanticipated  delivery  interruptions  will not
develop  in the  future.  Any  disruption  or  termination  of supply of certain
single-source components or technologies could have a material adverse effect on
the Company's business and results of operations.

     The  Company  has made  significant  investments  in  capitalized  software
principally  related to digital  audio and video  products.  At August 29, 2003,
capitalized  software costs were $1,304,000.  These costs are amortized based on
the  larger of the  amounts  computed  using (a) the ratio  that  current  gross
revenues for each product bears to the total of current and  anticipated  future
gross  revenues  for that  product,  or (b) the  straight-line  method  over the
remaining  estimated economic life of the product.  Expected future revenues and
estimated  economic  lives are subject to  revisions  due to market  conditions,
technology  changes  and other  factors  resulting  in  shortfalls  of  expected
revenues or reduced economic lives.

     The   industry  in  which  the   Company   operates  is  subject  to  rapid
technological advances and frequent product  introductions.  The Company expects
to remain  committed to research  and  development  expenditures  as required to
compete  effectively and maintain pace with the rapid  technological  changes in
the communications  industry and to support innovative engineering and design in
its future products.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  Company's  exposure to market rate risk for changes in interest  rates
relates  primarily to its  revolving  line of credit and cash  equivalents.  The
interest  rate on  certain  advances  under  the line of  credit  and term  loan
facility  fluctuates  with the  bank's  prime  rate.  There  were no  borrowings
outstanding at August 29, 2003, subject to variable interest rate fluctuations.

     At August 29, 2003, cash equivalents  consisted of bank commercial paper in
the  amount  of  $1,850,000  and  variable  rate  municipals  in the  amount  of
$2,000,000.  The cash  equivalents have maturities of less than three months and
therefore are subject to minimal market risk.

     The Company does not enter into derivative financial instruments. All sales
and purchases are denominated in U.S. dollars.

                                       21
<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                                                            Page

Report of Independent Certified Public Accountants............................23

Consolidated Statements of Operations
   Years ended August 29, 2003, August 30, 2002, and August 31, 2001..........24

Consolidated Balance Sheets
   As of August 29, 2003 and August 30, 2002..................................25

Consolidated Statements of Shareholders' Equity
   Years ended August 29, 2003, August 30, 2002, and August 31, 2001..........26

Consolidated Statements of Cash Flows
   Years ended August 29, 2003, August 30, 2002, and August 31, 2001..........27

Notes to Consolidated Financial Statements....................................28

Consolidated Supporting Schedules Filed:

Schedule II-Valuation and Qualifying Accounts
   Years ended August 29, 2003, August 30, 2002, and August 31, 2001..........46

                                       22
<PAGE>

              MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

     The management of Wegener  Corporation is responsible  for the accuracy and
consistency of all the information contained in the annual report, including the
accompanying  consolidated  financial  statements.  These  statements  have been
prepared to conform with generally accepted accounting principles appropriate to
the  circumstances  of the Company.  The  statements  include  amounts  based on
estimates and judgments as required.

     Wegener  Corporation  maintains  internal  accounting  controls designed to
provide reasonable  assurance that the financial records are accurate,  that the
assets of the Company are safeguarded, and that the financial statements present
fairly the consolidated financial position, results of operations and cash flows
of the Company.

     The Audit  Committee  of the Board of  Directors  reviews  the scope of the
audits and the findings of the independent  certified  public  accountants.  The
auditors meet regularly with the Audit  Committee to discuss audit and financial
reporting issues, with and without management present.

     BDO Seidman,  LLP the Company's  independent  certified public accountants,
has audited the financial  statements  prepared by management.  Their opinion on
the statements is presented below.


/s/ Robert A. Placek

Robert A. Placek,
President, Chief Executive Officer
and Chairman of the Board


/s/ C. Troy Woodbury, Jr.

C. Troy Woodbury, Jr.
Treasurer and Chief Financial Officer


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders of Wegener Corporation
Duluth, Georgia

     We have audited the  accompanying  consolidated  balance  sheets of Wegener
Corporation and subsidiaries as of August 29, 2003, and August 30, 2002, and the
related  consolidated  statements of operations,  shareholders'  equity and cash
flows  for each of three  years in the  period  ended  August  29,  2003.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all  material  respects,  the  consolidated  financial  position  of  Wegener
Corporation and subsidiaries as of August 29, 2003, and August 30, 2002, and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended August 29, 2003 in  conformity  with  accounting
principles generally accepted in the United States of America.


                                        /s/ BDO Seidman, LLP

Atlanta, Georgia                        BDO Seidman, LLP
November 14, 2003

                                       23
<PAGE>

Wegener Corporation and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                      Year ended
                                                     ---------------------------------------------
                                                       AUGUST 29,      August 30,      August 31,
                                                          2003            2002            2001
--------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>
Revenue                                              $ 20,133,180    $ 23,458,923    $ 20,332,899
--------------------------------------------------------------------------------------------------

Operating costs and expenses
   Cost of products sold                               12,622,799      15,636,657      15,998,989
    (including non-cash equity related charges of
    $11,688, $31,256, and $37,294, respectively)
   Selling, general and administrative                  4,897,864       4,101,062       4,744,913
    (including non-cash equity related charges
    (benefits) of $17,360, $58,807,and $(365,641),
    respectively)
   Research and development                             2,852,573       2,409,949       2,688,844
    (including non-cash equity related charges of
    $27,872, $68,006, and $75,688, respectively)
--------------------------------------------------------------------------------------------------

Operating costs and expenses                           20,373,236      22,147,668      23,432,746
--------------------------------------------------------------------------------------------------

Operating income (loss)                                  (240,056)      1,311,255      (3,099,847)
   Interest expense                                       (69,165)        (64,061)        (59,929)
   Interest income                                         56,980          33,386          71,475
--------------------------------------------------------------------------------------------------

Earnings (loss) before income taxes                      (252,241)      1,280,580      (3,088,301)

Income tax expense (benefit)                             (340,000)        473,000      (1,112,000)
--------------------------------------------------------------------------------------------------

Net earnings (loss)                                  $     87,759    $    807,580    $ (1,976,301)
==================================================================================================

Net earnings (loss) per share
   Basic                                             $         (a)   $        .07    $       (.17)
   Diluted                                           $         (a)   $        .07    $       (.17)
==================================================================================================

Shares used in per share calculation
   Basic                                               12,328,571      12,160,865      11,943,048
   Diluted                                             12,479,866      12,229,240      11,943,048
==================================================================================================
</TABLE>

(a)  Less than $.01 per share

          See accompanying notes to consolidated financial statements.

                                       24
<PAGE>

Wegener Corporation and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                                    AUGUST 29,      August 30,
                                                       2003            2002
--------------------------------------------------------------------------------
ASSETS

Current
   Cash and cash equivalents                       $  4,213,252    $  5,117,756
   Accounts receivable                                3,560,127       3,037,762
   Inventories                                        2,142,835       3,920,673
   Deferred income taxes                              2,109,000       2,225,000
   Other                                                143,397          90,066
--------------------------------------------------------------------------------

      Total current assets                           12,168,611      14,391,257

Property and equipment, net                           2,913,551       2,995,332
Capitalized software costs, net                       1,304,416         641,710
Deferred income taxes                                 1,029,000         623,000
Other assets                                            752,003          48,556
--------------------------------------------------------------------------------

                                                   $ 18,167,581    $ 18,699,855
================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
   Accounts payable                                $  1,195,034    $  1,424,101
   Accrued expenses                                   1,432,749       1,409,369
   Customer deposits                                    254,667         777,023
   Current maturities of long-term obligations            4,320           6,120
--------------------------------------------------------------------------------

      Total current liabilities                       2,886,770       3,616,613

Long-term obligations, less current maturities               --           4,294
--------------------------------------------------------------------------------

      Total liabilities                               2,886,770       3,620,907
--------------------------------------------------------------------------------

Commitments and contingencies

Shareholders' equity
   Common stock, $.01 par value; 20,000,000
    shares authorized; 12,381,251 and
    12,314,575 shares respectively, issued
    and outstanding                                     123,813         123,146
   Additional paid-in capital                        19,471,069      19,513,977
   Deficit                                           (4,314,071)     (4,401,830)
   Less treasury stock, at cost; 0 and 72,977
    shares, respectively                                     --        (156,345)
--------------------------------------------------------------------------------

Total shareholders' equity                           15,280,811      15,078,948
--------------------------------------------------------------------------------
                                                   $ 18,167,581    $ 18,699,855
================================================================================

          See accompanying notes to consolidated financial statements.

                                       25
<PAGE>

Wegener Corporation and Subsidiaries

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                             Common Stock            Additional      Retained             Treasury Stock
                                             ------------             Paid-in        Earnings             --------------
                                         Shares        Amount         Capital        (Deficit)         Shares         Amount
--------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>          <C>            <C>             <C>                <C>          <C>
BALANCE at September 1, 2000           12,314,575   $    123,146   $ 20,324,568    $ (3,233,109)        481,471    $ (1,037,507)

   Treasury stock reissued through
    401(k) plan                                --             --       (271,567)             --        (211,883)        459,945
   Value of stock options granted
    for services                               --             --         47,093              --              --              --
   Value of stock
    option compensation                        --             --       (348,400)             --              --              --
   Net loss for the year                       --             --             --      (1,976,301)             --              --
--------------------------------------------------------------------------------------------------------------------------------

BALANCE at August 31, 2001             12,314,575   $    123,146   $ 19,751,694    $ (5,209,410)        269,588    $   (577,562)

   Treasury stock reissued through
    stock options and 401(k) plan              --             --       (237,717)             --        (196,611)        421,217
   Net earnings for the year                   --             --             --         807,580              --              --
--------------------------------------------------------------------------------------------------------------------------------

BALANCE at August 30, 2002             12,314,575   $    123,146   $ 19,513,977    $ (4,401,830)         72,977    $   (156,345)

   Issuance of shares through
    stock options and 401(k) plan          66,676            667        (42,908)             --         (72,977)        156,345
   Net earnings for the year                   --             --             --          87,759              --              --
--------------------------------------------------------------------------------------------------------------------------------

BALANCE AT AUGUST 29, 2003             12,381,251   $    123,813   $ 19,471,069    $ (4,314,071)             --    $         --
================================================================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       26
<PAGE>

Wegener Corporation and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                       Year ended
                                                      ---------------------------------------------
                                                       AUGUST 29,      August 30,      August 31,
                                                          2003            2002            2001
---------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>
CASH PROVIDED BY OPERATING ACTIVITIES
   Net earnings (loss)                                $     87,759    $    807,580    $ (1,976,301)
   Adjustments to reconcile net earnings (loss) to
    cash provided by operating activities
      Depreciation and amortization                      1,513,179       1,692,485       1,769,984
      Issuance of treasury stock for
       benefit plan                                         82,409         158,119         188,378
      Non-cash stock option
       compensation                                             --              --        (488,130)
      Other non-cash expenses                                   --              --          47,093
      Provision for bad debts                               30,000         155,000         120,000
      Provision for inventory reserves                      75,000         800,000       1,325,000
      Provision (benefit) for deferred income taxes       (290,000)        587,000      (1,112,000)
      Changes in assets and liabilities
         Accounts receivable                              (552,365)     (2,116,342)      2,914,407
         Inventories                                     1,702,838       2,765,210       1,295,893
         Other assets                                      (53,331)         44,029         (85,480)
         Accounts payable and accrued expenses            (280,687)       (870,935)     (1,470,597)
         Customer deposits                                (522,356)        (36,102)     (1,263,236)
---------------------------------------------------------------------------------------------------
                                                         1,792,446       3,986,044       1,265,011
---------------------------------------------------------------------------------------------------

CASH USED FOR INVESTMENT ACTIVITIES
   Property and equipment expenditures                    (584,245)       (147,478)       (476,176)
   Capitalized software additions                       (1,377,359)       (572,718)       (384,068)
   License agreements, patents, and trademark
    expenditures                                          (710,947)             --              --
---------------------------------------------------------------------------------------------------
                                                        (2,672,551)       (720,196)       (860,244)
---------------------------------------------------------------------------------------------------

CASH USED FOR FINANCING ACTIVITIES
   Repayment of long-term debt and capitalized
    lease obligations                                       (6,094)        (44,660)       (541,511)
   Proceeds from long-term debt                                 --              --          18,114
   Loan facility fees                                      (50,000)        (55,536)        (27,500)
   Proceeds from stock options exercised                    31,695          25,381              --
---------------------------------------------------------------------------------------------------
                                                           (24,399)        (74,815)       (550,897)
---------------------------------------------------------------------------------------------------

Increase (decrease) in cash and cash equivalents          (904,504)      3,191,033        (146,130)
Cash and cash equivalents, beginning of year             5,117,756       1,926,723       2,072,853
---------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                $  4,213,252    $  5,117,756    $  1,926,723
===================================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       27
<PAGE>

Wegener Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION.  The financial  statements
include the  accounts of Wegener  Corporation  (WGNR)  (the  "Company")  and its
wholly-owned   subsidiaries.   Wegener   Communications,   Inc.  (WCI)  designs,
manufactures and distributes satellite  communications  electronics equipment in
the U.S., and internationally through Wegener Communications International, Inc.
All significant  intercompany  balances and transactions have been eliminated in
consolidation.

USE OF ESTIMATES.  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,  the
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period.  Examples include provisions for bad debts,  inventory  obsolescence and
warranties. Actual results could vary from these estimates.

FISCAL YEAR.  The Company  operates on a 52-53 week fiscal year. The fiscal year
ends on the Friday  nearest  to August  31.  Fiscal  2003,  2002,  and 2001 each
contained 52 weeks. All references  herein to 2003, 2002, and 2001 relate to the
fiscal  years ended  August 29,  2003,  August 30,  2002,  and August 31,  2001,
respectively.

CASH  EQUIVALENTS.  Cash equivalents  consist of highly liquid  investments with
original  maturities  of  three  months  or  less.  At  August  29,  2003,  cash
equivalents consisted of bank commercial paper in the amount of $1,850,000,  and
variable rate  municipals in the amount of $2,000,000.  At August 30, 2002, cash
equivalents  consisted of bank commercial  paper in the amount of $2,900,000 and
variable rate municipals in the amount of $2,000,000.

INVENTORIES.  Inventories  are stated at the lower of cost (at  standard,  which
approximates actual cost on a first-in,  first-out basis) or market. Inventories
include the cost of raw materials, labor and manufacturing overhead. The Company
makes  provisions  for  obsolete or  slow-moving  inventories  as  necessary  to
properly reflect inventory value.

PROPERTY, EQUIPMENT AND DEPRECIATION. Property and equipment are stated at cost.
Certain   assets   financed  under  lease   contracts  have  been   capitalized.
Depreciation  is computed over the  estimated  useful lives of the assets on the
straight-line  method for financial reporting and accelerated methods for income
tax purposes.  Substantial betterments to property and equipment are capitalized
and repairs and maintenance are expensed as incurred.

OTHER ASSETS.  Other assets consist primarily of technology  licenses,  patents,
trademarks, and loan facility fees. Costs of license agreements are amortized on
a straight-line  basis over their estimated useful lives. Legal expenses related
to the  filing  of patent  and  trademark  applications  are  capitalized.  Upon
issuance  these costs will also be amortized on a  straight-line  basis over the
lesser of the legal life or their estimated  useful lives.  Annual loan facility
fees are amortized equally over twelve months.

REVENUE   RECOGNITION.   The  Company's  revenue  recognition  policies  are  in
compliance  with Staff  Accounting  Bulletin  No 101,  "Revenue  Recognition  in
Financial  Statements," as published by the staff of the Securities and Exchange
Commission.  Revenue is recognized when persuasive evidence of an agreement with
the customer exists,  products are shipped or title passes pursuant to the terms
of the agreement with the customer, the amount due from the customer is fixed or
determinable, collectibility is reasonably assured, and there are no significant
future performance  obligations.  Service revenues are recognized at the time of
performance.  The Company has recognized revenue in certain circumstances before
delivery has occurred (commonly referred to as "bill and hold" transactions). In
such  circumstances,  among other  things,  risk of ownership  has passed to the
buyer,  the buyer has made a written  fixed  commitment to purchase the finished
goods, the buyer has requested the finished goods to be held for future delivery
as scheduled and designated by them, and no additional  performance  obligations
exist by the Company. For these transactions,  the finished goods are segregated
from inventory and normal  billing and credit terms are granted.  For the period
ended August 29, 2003, revenues to one customer in the amount of $3,049,000 were
recorded  prior to delivery as bill and hold  transactions.  At August 29, 2003,
accounts  receivable for these revenues  amounted to $1,395,000 and were paid in
full subsequent to August 29, 2003.

The  policies  require  management,  at the time of the  transaction,  to assess
whether the  amounts due are fixed or  determinable,  collection  is  reasonably
assured,  and no future  performance  obligations  exist.  These assessments are
based on the  terms  of the  agreement  with  the  customer,  past  history  and
creditworthiness of the customer. If

                                       28
<PAGE>

Wegener Corporation and Subsidiaries

management  determines  that  collection  is not  reasonably  assured  or future
performance  obligations  exist,  revenue  recognition  is deferred  until these
conditions are satisfied.

The  Company's  principal  sources  of  revenues  are from the sales of  various
satellite  communications  equipment.  Imbedded  in the  Company's  products  is
internally developed software of varying applications. Historically, the Company
has not sold or marketed  its  software  separately  or  otherwise  licensed its
software  apart from the related  communications  equipment.  Should the Company
begin to market or sell software whereby it is more than an incidental component
of the  hardware,  the  Company  will  recognize  software  license  revenue  in
accordance with SOP No. 97-2,  "Software Revenue  Recognition" as amended by SOP
No. 98-9, "Software Revenue Recognition, with Respect to Certain Transactions".

In accordance with EITF Issue 00-10,  "Accounting for Shipping and Handling Fees
and Costs," the Company included all shipping and handling billings to customers
in revenues, and freight costs incurred for product shipments have been included
in cost of products sold.

RESEARCH  AND  DEVELOPMENT/CAPITALIZED  SOFTWARE  COSTS.  The  Company  expenses
research and development costs, including expenditures related to development of
the Company's software products that do not qualify for capitalization. Software
development  costs are  capitalized  subsequent  to  establishing  technological
feasibility.  Capitalized costs are amortized based on the larger of the amounts
computed  using (a) the ratio that current gross revenues for each product bears
to the total of current and  anticipated  future gross revenues for that product
or (b) the straight-line  method over the remaining  estimated  economic life of
the product.  Expected future revenues and estimated  economic lives are subject
to revisions  due to market  conditions,  technology  changes and other  factors
resulting in shortfalls of expected revenues or reduced economic lives. Software
development  costs  capitalized  during  fiscal 2003,  2002,  and 2001,  totaled
$1,377,000, $573,000, and $384,000, respectively. Amortization expense, included
in cost of  goods  sold,  was  $715,000,  $826,000,  and  $698,000  for the same
periods,   respectively.   Capitalized   software  costs,   net  of  accumulated
amortization,  were  $1,304,000  at August 29, 2003,  and $642,000 at August 30,
2002.  Accumulated  amortization  amounted to $5,270,000 at August 29, 2003, and
$4,555,000 at August 30, 2002.

LONG-LIVED ASSETS. Long-lived assets are reviewed for impairment whenever events
or changes in  circumstances  indicate that the carrying  amount of an asset may
not be recoverable. If the sum of the expected future undiscounted cash flows is
less  than the  carrying  amount  of the  asset,  a loss is  recognized  for the
difference between the fair value and carrying value of the asset.

STOCK BASED COMPENSATION. The Company has adopted the disclosure-only provisions
of Statement of Financial  Accounting  Standards (SFAS) No. 123, "Accounting for
Stock-Based   Compensation,"  as  amended  by  SFAS  No.  148,  "Accounting  for
Stock-Based  Compensation - Transition and Disclosure,"  but applies  Accounting
Principles  Board  Opinion  (APB)  No.  25,  "Accounting  for  Stock  Issued  to
Employees" and related  interpretations  in accounting for its plans.  Under APB
No. 25, when the  exercise  price of employee  stock  options  equals the market
price of the underlying  stock on the date of grant, no compensation  expense is
recognized.

The following table includes disclosures required by SFAS No. 123, as amended by
SFAS No. 148, and illustrates the effect on net earnings (loss) and net earnings
(loss)  per share as if the  Company  had  applied  the fair  value  recognition
provisions of SFAS No. 123:

                                       29
<PAGE>

Wegener Corporation and Subsidiaries

                                                    Year ended
--------------------------------------------------------------------------------
                                    AUGUST 29,      August 30,      August 31,
                                       2003            2002            2001
--------------------------------------------------------------------------------
Net earnings (loss)
   As Reported                     $     87,759    $    807,580    $ (1,976,301)
   Add:
      Compensation cost
      included in reported
      net earnings (loss)                    --              --             --
   Deduct:
      Compensation cost
      using the fair value
      method, net of tax                (53,519)       (122,984)      (178,239)
--------------------------------------------------------------------------------
   Pro Forma                       $     34,240    $    684,596    $ (2,154,540)
================================================================================
Earnings (loss) per share
   As Reported
      Basic                        $        (a)    $        .07    $       (.17)
      Diluted                               (a)             .07            (.17)
   Pro Forma
      Basic                                 (a)             .06            (.18)
      Diluted                               (a)             .06            (.18)
================================================================================

(a)  Less than $.01 per share

The fair  value of each  option  was  estimated  on the date of grant  using the
Black-Scholes   option  pricing  model  with  the  following   weighted  average
assumptions:

                                                    Year ended
--------------------------------------------------------------------------------
                                    AUGUST 29,      August 30,      August 31,
                                       2003            2002            2001
--------------------------------------------------------------------------------
Risk free interest rate               4.75%           5.00%           5.00%
Expected term                        3 years         3 years         3 years
Volatility                              90%             75%             80%
Expected annual dividends              none            none            none

The weighted average fair value of options granted was as follows:

                                                    Year ended
--------------------------------------------------------------------------------
                                    AUGUST 29,      August 30,      August 31,
                                       2003            2002            2001
--------------------------------------------------------------------------------
Per share option value             $        .86    $        .47    $        .34
Aggregate total                    $     46,530    $    256,706    $      2,040
================================================================================

INCOME TAXES.  Income taxes are based on income  (loss) for financial  reporting
purposes and reflect a current tax  liability  (asset) for the  estimated  taxes
payable  (recoverable)  in the  current  year tax return and changes in deferred
taxes.  Deferred tax assets or liabilities  are recognized for the estimated tax
effects of temporary  differences between financial reporting and taxable income
(loss) and for tax credit and loss  carryforwards  based on enacted tax laws and
rates.  Valuation  allowances are  established to reduce  deferred tax assets to
amounts that the Company expects are more likely than not realizable.

EARNINGS  PER  SHARE.  Basic and  diluted  net  earnings  (loss)  per share were
computed in  accordance  with SFAS No.  128,  "Earnings  per  Share."  Basic net
earnings per share are computed by dividing net earnings available to

                                       30
<PAGE>

Wegener Corporation and Subsidiaries

common shareholders  (numerator) by the weighted average number of common shares
outstanding  (denominator)  during the period and exclude the dilutive effect of
stock  options.  Diluted net  earnings  per share gives  effect to all  dilutive
potential common shares  outstanding  during a period.  In computing diluted net
earnings  per  share,  the  average  stock  price  for  the  period  is  used in
determining  the number of shares  assumed to be  reacquired  under the treasury
stock method from the hypothetical exercise of stock options.

The following tables represent required  disclosure of the reconciliation of the
earnings  and  shares of the basic and  diluted  net  earnings  (loss) per share
computations:

                                                     Year ended
                                     -------------------------------------------
                                      AUGUST 29,     August 30,     August 31,
                                         2003          2002            2001
                                     -------------------------------------------
BASIC
   Net earnings (loss)               $     87,759   $    807,580   $ (1,976,301)
                                     -------------------------------------------
   Weighted average shares
    outstanding                        12,328,571     12,160,865     11,943,048
                                     -------------------------------------------
   Net earnings (loss) per share     $        (a)   $        .07   $       (.17)
                                     ===========================================
DILUTED
   Net earnings (loss)               $     87,759   $    807,580   $ (1,976,301)
                                     -------------------------------------------
   Weighted average shares
    outstanding                        12,328,571     12,160,865     11,943,048

   Effect of dilutive potential
    common shares:
      Stock options                       151,295         68,375             --
                                     -------------------------------------------
   Total                               12,479,866     12,229,240     11,943,048
                                     -------------------------------------------
   Net earnings (loss) per share     $        (a)   $        .07   $       (.17)
                                     ===========================================

(a)  Less than $.01 per share

Stock options  excluded from the diluted  earnings (loss) per share  calculation
due to their anti-dilutive effect are as follows:

                                                   Year ended
                               -------------------------------------------------
                                 AUGUST 29,        August 30,       August 31,
                                    2003              2002             2001
                               -------------------------------------------------
Common stock options:
   Number of shares                796,050           882,550         1,034,050
   Range of exercise prices    $1.41 to $5.63    $1.41 to $5.63    $.63 to $5.63
                               =================================================

FINANCIAL  INSTRUMENTS.  The Company's financial instruments consist of cash and
cash equivalents, trade accounts receivable,  accounts payable, accrued expenses
and long  and  short-term  borrowings.  The  fair  value  of  these  instruments
approximates   their  recorded  value.  The  Company  does  not  have  financial
instruments with off-balance  sheet risk. The fair value estimates were based on
market information available to management as of August 29, 2003.

Financial  instruments that potentially subject the Company to concentrations of
market/credit  risk consist  principally of cash and cash  equivalents and trade
accounts  receivable.  The Company  invests cash  through a high  credit-quality
financial institution.  A concentration of credit risk may exist with respect to
trade  receivables,  as a  substantial  portion of the  Company's  customers are
affiliated with the cable television,  business broadcast and telecommunications
industries.  The  Company  performs  ongoing  credit  evaluations  of  customers
worldwide and

                                       31
<PAGE>

Wegener Corporation and Subsidiaries

generally does not require collateral from its customers. Management reviews its
accounts  receivable  on a regular basis to determine if any such amounts may be
potentially uncollectible. The Company includes any balances that are determined
to be uncollectible,  along with a general reserve, in its overall allowance for
doubtful  accounts.  After all attempts to collect a receivable  have failed the
receivable  is written off against the  allowance.  Based on  management's  best
estimate it believes the Company's  allowance for doubtful  accounts is adequate
as presented.  Historically,  the Company has not experienced significant losses
related to receivables  from individual  customers or groups of customers in any
particular industry or geographic area.

FOREIGN  CURRENCY.  The U.S.  dollar is the  Company's  functional  currency for
financial reporting. International sales are made and remitted in U.S. dollars.

RECENTLY  ISSUED  ACCOUNTING  STANDARDS.  In November 2002, the FASB issued FASB
Interpretation  No.  45  (FIN  45),   "Guarantor's   Accounting  and  Disclosure
Requirements for Guarantees,  Including  Indirect  Guarantees of Indebtedness of
Others."  FIN 45  requires  certain  guarantees  to be  recorded  at fair  value
regardless of the  probability of the loss. The adoption did not have a material
impact on the Company's consolidated financial statements.

In  January  2003,  the  FASB  issued  FASB  Interpretation  No.  46  (FIN  46),
"Consolidation of Variable Interest Entities,  an Interpretation of ARB No. 51."
FIN 46 requires  certain  variable  interest  entities to be consolidated by the
primary  beneficiary of the entity if the equity  investors in the entity do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  entity to  finance  its  activities  without
additional  subordinated  financial  support  from  other  parties.  FIN  46  is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to  February  1, 2003,  the  provisions  of FIN 46 must be applied for the first
interim or annual period beginning after December 15, 2003. The Company believes
that the adoption of this standard will have no material impact on its financial
position and results of operations.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation - Transition  and  Disclosure."  SFAS No. 148 provides  alternative
methods  of  transition  for a  voluntary  change  to the fair  value  method of
accounting for stock-based employee  compensation as originally provided by SFAS
No. 123, "Accounting for Stock-Based Compensation."  Additionally,  SFAS No. 148
amends the  disclosure  requirements  of SFAS No. 123 in both annual and interim
financial  statements.  The  disclosure  requirements  shall  be  effective  for
financial  reports for interim  periods  beginning  after December 15, 2002. The
Company adopted the disclosure  portion of this statement for the fiscal quarter
ended May 30,  2003.  The  adoption  did not have any  impact  on the  Company's
consolidated financial position or results of operations.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures in its statement
of financial position certain financial instruments with characteristics of both
liabilities  and  equity.  It  requires  that an  issuer  classify  a  financial
instrument  that is  within  its  scope  as a  liability  (or an  asset  in some
circumstances)  because that financial  instrument embodies an obligation of the
issuer.  Many of such  instruments  were  previously  classified as equity.  The
statement is effective for financial  instruments entered into or modified after
May 31, 2003,  and  otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatory  redeemable financial
instruments  of  nonpublic  entities.  The  statement  is to be  implemented  by
reporting  the  cumulative  effect  of a  change  in  accounting  principle  for
financial  instruments  created  before the issuance  date of the  statement and
still existing at the beginning of the interim  period of adoption.  Restatement
is not permitted.  On November 7,2003 the FASB deferred the  classification  and
measurement  provisions  of SFAS  No.  150 as they  apply to  certain  mandatory
redeemable  non-controlling  interests.  This  deferral is expected to remain in
effect while these  provisions  are further  evaluated  by the FSAB.  Management
believes that the adoption of this statement will not have a significant  impact
on the financial position, results of operations or cash flows of the Company.

RECLASSIFICATIONS. Certain reclassifications have been made to the 2002 and 2001
financial statements to conform to the 2003 presentation.

                                       32
<PAGE>

Wegener Corporation and Subsidiaries

2.   ACCOUNTS RECEIVABLE

Accounts receivable are summarized as follows:

                                                    AUGUST 29,      August 30,
                                                       2003            2002
--------------------------------------------------------------------------------
     Accounts receivable - trade                   $  3,838,644    $  3,314,046
     Other receivables                                   76,143          75,308
--------------------------------------------------------------------------------
                                                      3,914,787       3,389,354

     Less allowance for doubtful accounts              (354,660)       (351,592)
--------------------------------------------------------------------------------

                                                   $  3,560,127    $  3,037,762
================================================================================

3.   INVENTORIES

Inventories are summarized as follows:

                                                    AUGUST 29,      August 30,
                                                       2003            2002
--------------------------------------------------------------------------------
     Raw materials                                 $  2,347,542    $  2,917,924
     Work-in-process                                    951,078       1,639,620
     Finished goods                                   2,334,578       3,143,736
--------------------------------------------------------------------------------
                                                      5,633,198       7,701,280

     Less inventory reserves                         (3,490,363)     (3,780,607)
--------------------------------------------------------------------------------

                                                   $  2,142,835    $  3,920,673
================================================================================

The Company has invested a significant amount of financial  resources to acquire
certain raw  materials,  to incur direct labor and to contract to have  specific
outplant  procedures  performed  on certain  inventory  in process.  The Company
purchased this inventory based upon prior backlog and  anticipated  future sales
based upon  existing  knowledge  of the  marketplace.  The  Company's  inventory
reserve of approximately  $3,490,000 at August 29, 2003, is to provide for items
that  are  potentially  slow-moving,  excess  or  obsolete.  Changes  in  market
conditions,  lower than expected customer demand and rapidly changing technology
could result in additional obsolete and slow-moving inventory that is unsaleable
or saleable at reduced prices.  No estimate can be made of a range of amounts of
loss from obsolescence  that are reasonably  possible should the Company's sales
efforts not be successful.

4.   PROPERTY AND EQUIPMENT

Major classes of property and equipment consist of the following:

                                      Estimated
                                     Useful Lives   AUGUST 29,      August 30,
                                       (Years)         2003            2002
--------------------------------------------------------------------------------
     Land                                 --       $    707,210    $    707,210
     Buildings and improvements         3-30          3,746,690       3,742,790
     Machinery and equipment             3-5          8,952,095       8,398,260
     Furniture and fixtures                5            514,915         513,316
     Application software                3-5            737,090         734,590
--------------------------------------------------------------------------------
                                                     14,658,000      14,096,166

     Less accumulated depreciation
        and amortization                            (11,744,449)    (11,100,834)
--------------------------------------------------------------------------------

                                                    $ 2,913,551     $ 2,995,332
================================================================================

Depreciation  expense for fiscal 2003,  2002,  and 2001,  totaled  approximately
$666,000,  $816,000,  and  $1,000,000,  respectively.  Assets  recorded  under a
capital  lease  included in property and equipment at August 29, 2003 and August
30, 2002, are machinery and equipment of approximately  $613,000 and accumulated
amortization of approximately $613,000.

                                       33
<PAGE>

Wegener Corporation and Subsidiaries

5.   OTHER ASSETS

Other assets consisted of the following:

                                                 AUGUST 29, 2003
--------------------------------------------------------------------------------
                                                   ACCUMULATED
                                       COST        AMORTIZATION         NET
--------------------------------------------------------------------------------
License agreements                 $    570,000    $    (82,500)   $    487,500
Patents                                 174,369              --         174,369
Trademarks                               41,578              --          41,578
Loan facility fees                       50,000          (8,333)         41,667
Other                                     6,889              --           6,889
--------------------------------------------------------------------------------
                                   $    842,836    $    (90,833)   $    752,003
================================================================================

                                                 August 30, 2002
--------------------------------------------------------------------------------
                                                   Accumulated
                                       Cost        Amortization         Net
--------------------------------------------------------------------------------
Loan facility fees                 $     50,000    $     (8,333)   $     41,667
Other                                     6,889              --           6,889
--------------------------------------------------------------------------------
                                   $     56,889    $     (8,333)   $     48,556
================================================================================

Amortization expense of other assets amounted to $133,000,  $50,000, and $52,000
for fiscal years 2003, 2002, and 2001, respectively.

The Company conducts an on-going review of its intellectual  property rights and
potential  trademarks.  During fiscal 2003,  the Company  incurred  $174,000 and
$42,000 of legal expenses  related to filing of applications for various patents
and trademarks,  respectively. Upon issuance, these costs will be amortized over
their  estimated  useful lives.  License  agreements  are  amortized  over their
estimated  useful life of five years.  Loan  facility  fees are  amortized  over
twelve months.

6.   ACCRUED EXPENSES

Accrued expenses consist of the following:

                                                     AUGUST 29,     August 30,
                                                        2003           2002
--------------------------------------------------------------------------------
Compensation                                        $    570,977   $    527,688
Royalties                                                261,639        235,444
Warranty                                                  65,651         96,136
Taxes and insurance                                       41,503        194,074
Commissions                                              168,832        139,399
Professional fees                                        245,129        127,176
Other                                                     79,018         89,452
--------------------------------------------------------------------------------
                                                    $  1,432,749   $  1,409,369
================================================================================

7.   FINANCING AGREEMENTS

REVOLVING LINE OF CREDIT AND TERM LOAN FACILITY

WCI's bank loan facility provides a maximum available credit limit of $5,000,000
with sublimits as defined.  The loan facility  matures on June 30, 2004, or upon
demand and requires an annual  facility fee of 1% of the maximum  credit  limit.
The loan facility  consists of a term loan and a revolving line of credit with a
combined  borrowing  limit of $5,000,000,  bearing  interest at the bank's prime
rate (4.00% at August 29, 2003).

                                       34
<PAGE>

Wegener Corporation and Subsidiaries

The term loan facility  provides for a maximum of $1,000,000  for advances of up
to 80% of the cost of  equipment  acquisitions.  Principal  advances are payable
monthly  over 60 months with a balloon  payment due at maturity.  The  revolving
line of credit is  subject  to  availability  advance  formulas  of 80%  against
eligible accounts receivable; 20% of eligible raw materials inventories;  20% of
eligible  work-in process kit inventories;  and 40% to 50% of eligible  finished
goods  inventories.  Advances  against  inventory  are  subject to a sublimit of
$2,000,000.  The loan is secured by a first lien on  substantially  all of WCI's
assets and  guaranteed by Wegener  Corporation.  At August 29, 2003, no balances
were  outstanding  on the revolving  line of credit or the  equipment  term loan
portions of the loan facility.  Additionally,  at August 29, 2003, approximately
$2,530,000 net of outstanding  letters of credit in the amount of $2,172,000 was
available to borrow in  accordance  with the  revolving  line of credit  advance
formulas.

The Company is required  to  maintain a minimum  tangible  net worth with annual
increases  at each fiscal  year end  commencing  with  fiscal year 2003,  retain
certain key employees,  limit expenditures of Wegener  Corporation to $1,400,000
in fiscal  2003 and  $600,000  per  fiscal  year  thereafter,  maintain  certain
financial ratios,  and is precluded from paying  dividends.  At August 29, 2003,
the Company was in  compliance  with all loan  facility  covenants.  The Company
believes that the loan  facility  along with cash and cash  equivalent  balances
will  be  sufficient  to  support  operations  through  fiscal  2004.  While  no
assurances may be given, WCI believes, upon maturity, the existing loan facility
will be renewed on substantially similar terms.

8.   INCOME TAXES

The provision for income tax expense (benefit) consists of the following:

                                                    Year ended
--------------------------------------------------------------------------------
                                    AUGUST 29,      August 30,      August 31,
                                       2003            2002            2001
--------------------------------------------------------------------------------
Current
   Federal                         $         --    $   (114,000)   $         --
   State                                (50,000)             --              --
--------------------------------------------------------------------------------
                                        (50,000)       (114,000)             --
--------------------------------------------------------------------------------
Deferred
   Federal                              (85,000)        549,000      (1,049,000)
   State                               (205,000)         38,000         (63,000)
--------------------------------------------------------------------------------
                                       (290,000)        587,000      (1,112,000)
--------------------------------------------------------------------------------
Total                              $   (340,000)   $    473,000    $ (1,112,000)
================================================================================

The effective  income tax rate differs from the U.S.  federal  statutory rate as
follows:

                                                    Year ended
--------------------------------------------------------------------------------
                                    AUGUST 29,      August 30,      August 31,
                                       2003            2002            2001
--------------------------------------------------------------------------------
Statutory U.S. income tax rate       (34.0)%           34.0%         (34.0)%
State taxes, net of federal
   benefits                          (99.8)             1.9           (1.3)
Non-deductible expenses                1.6               .7             .3
Other, net                            (2.6)              .3           (1.0)
--------------------------------------------------------------------------------
Effective income tax rate           (134.8)%           36.9%         (36.0)%
================================================================================

                                       35
<PAGE>

Wegener Corporation and Subsidiaries

Deferred  tax  assets  and  liabilities  that  arise  as a result  of  temporary
differences are as follows:

                                                    AUGUST 29,      August 30,
                                                       2003            2002
--------------------------------------------------------------------------------
Deferred tax assets (liabilities):
   Accounts receivable and inventory reserves      $  1,957,000    $  2,057,000
   Accrued expenses                                     179,000         208,000
   Net operating loss carryforwards                   1,043,000         561,000
   Credit carryforwards                                 297,000          98,000
   AMT credit carryovers                                138,000         138,000
   Depreciation                                         121,000         143,000
   Capitalized software costs                          (496,000)       (244,000)
   Other                                               (101,000)       (113,000)
--------------------------------------------------------------------------------
Net deferred tax asset                             $  3,138,000    $  2,848,000
================================================================================
Consolidated balance sheet classifications:
   Current deferred tax asset                      $  2,109,000    $  2,225,000
   Noncurrent deferred tax asset                      1,029,000         623,000
--------------------------------------------------------------------------------
   Net deferred tax asset                          $  3,138,000    $  2,848,000
================================================================================

Net deferred tax assets increased $290,000 to $3,138,000 at August 29, 2003. The
increase  was  principally  due to state  income  tax  credits of  $199,000  and
increases in net operating loss carryforwards. Net deferred tax assets decreased
$587,000 to $2,848,000 at August 30, 2002. The decrease was  principally  due to
decreases  in net  operating  loss  carryforwards  and receipt of tax refunds of
$114,000 as a result of federal income tax law changes.  Realization of deferred
tax assets is dependent on generating  sufficient future taxable income prior to
the expiration of the loss and credit carryforwards. Although realization is not
assured, management believes it is more likely than not that all of the deferred
tax  assets  will  be  realized  based  on  the  Company's  backlog,   financial
projections  and  operating  history.  The  amount of the  deferred  tax  assets
considered  realizable,  however, could be reduced in the near term if estimates
of further taxable income during the carryforward period are reduced.

At August 29, 2003, the Company had a federal net operating loss carryforward of
$2,900,000, which expires beginning fiscal 2020 through 2023. Additionally,  the
Company had general  business  and foreign tax credit  carryforwards  of $98,000
expiring  fiscal 2004, an  alternative  minimum tax credit of $138,000 and state
income tax credits of $199,000 expiring in fiscal 2009.

9.   COMMON STOCK AND STOCK OPTIONS.

1998 INCENTIVE  PLAN. On February 26, 1998, the  stockholders  approved the 1998
Incentive  Plan (the  "1998  Plan").  The Plan  provides  for awards of up to an
aggregate of 2,000,000  shares of common stock which may be  represented  by (i)
incentive or non-qualified stock options, (ii) stock appreciation rights (tandem
and  free-standing),  (iii)  restricted  stock,  (iv)  deferred  stock,  or  (v)
performance units entitling the holder, upon satisfaction of certain performance
criteria, to awards of common stock or cash. In addition, the 1998 Plan provides
for loans and supplemental cash payments to persons participating in the Plan in
connection with awards granted. Eligible participants include officers and other
key employees,  non-employee directors, consultants and advisors of the Company.
The  exercise  price per share in the case of  incentive  stock  options and any
tandem  stock  appreciation  rights may be not less than 100% of the fair market
value on the date of grant  or,  in the case of an  option  granted  to a 10% or
greater stockholder,  not less than 110% of the fair market value on the date of
grant.  The exercise  price for any other option and stock  appreciation  rights
shall  be at least  75% of the fair  market  value  on the  date of  grant.  The
exercise period for non-qualified stock options may not exceed ten years and one
day from the date of the grant,  and the expiration  period for incentive  stock
options or stock appreciation rights shall not exceed ten years from the date of
the grant (five years for a 10% or greater stockholder).  The 1998 plan contains
an  automatic  option  grant  program  to  non-employee  members of the Board of
Directors.  Such members will each be granted an option to purchase 3,000 shares
of common stock on the last day of each December on which regular trading occurs
on the NASDAQ Stock Market,  at an exercise price equal to the fair market value
of such stock on the date of grant. Such options will be exercisable  during the
period  of ten  years  and one day from the  date of  grant of the  option.  The
automatic grants in fiscal 2003 and 2002 were suspended; however, on January 21,
2003 and January 22, 2002, non-

                                       36
<PAGE>

Wegener Corporation and Subsidiaries

employee  directors were granted options to purchase 9,000 shares at an exercise
price of $1.09 and 40,900  shares at an exercise  price of $1.00,  respectively.
The  effective  date of the  1998  plan is  January  1,  1998 and the plan has a
ten-year  term.  During  fiscal 2003,  options for 54,000 shares of common stock
were  granted  to  outside  directors  and  employees   pursuant  to  employment
agreements at exercise prices ranging from $ .91 to $2.09. Additionally, options
for 7,500 shares were  forfeited and options for 23,000 shares were exercised at
$ .84 and $1.47.  During fiscal 2002, options for 552,375 shares of common stock
were  granted at  exercise  prices  ranging  from $ .60 to $1.03.  Additionally,
options for 25,000  shares  were  forfeited  and options for 22,000  shares were
exercised at prices ranging from $ .60 to $ .67. During fiscal 2001, options for
6,000  shares of common  stock were  granted at an  exercise  price of $ .63 and
options  for 148,000  shares were  forfeited.  At August 29,  2003,  options for
972,575 shares of common stock were available for future issuance.

1989 DIRECTORS'  INCENTIVE PLAN. On January 9, 1990, the  stockholders  approved
the Wegener  Corporation  1989  Directors'  Incentive  Plan  permitting  certain
participating  directors  of the  Company to be  eligible  to receive  incentive
awards  consisting  of common stock of the Company,  performance  units or stock
appreciation  rights payable in stock or cash, or non-qualified stock options to
purchase  such  stock,  or any  combination  of  the  foregoing,  together  with
supplemental  cash  payments.  During the second  quarter  of fiscal  1995,  the
Company amended the 1989 Directors'  Stock Option Plan to increase the aggregate
number of shares of common  stock  that may be awarded  from  100,000 to 300,000
shares;  to remove the  ineligibility  provision for certain  directors;  and to
grant annually to each non-employee  director,  options to purchase 2,000 shares
of common  stock at an exercise  price  equal to the fair  market  value of such
stock on the date of grant. The exercise price per share for non-qualified stock
options or stock  appreciation  rights shall not be less than 85% of fair market
value  on the  date  the  award  is made or not  more  than  nine  trading  days
immediately preceding such date. The expiration period for a non-qualified stock
option shall be ten years and one day from the date of the grant. The expiration
period for stock appreciation rights, including any extension,  shall not exceed
ten years from the date of grant.  This plan  terminated  and expired  effective
December 1, 1999.  During fiscal 2003,  options for 16,500 shares were exercised
at $ .75.  At August  29,  2003,  options  for  265,000  shares of common  stock
remained outstanding under the 1989 Directors' Incentive Plan.

1988  INCENTIVE  PLAN. On January 10, 1989, the  stockholders  approved the 1988
Incentive Plan  providing to key employees  other than directors of the Company,
incentive  awards  consisting  of  common  stock,  performance  units  or  stock
appreciation  rights payable in stock or cash,  incentive or non-qualified stock
options to  purchase  stock,  or any  combination  of the above,  together  with
supplemental  cash payments.  The aggregate  number of shares issuable under the
1988 plan is 750,000 common shares.  The exercise price per share in the case of
incentive stock options and any tandem stock  appreciation  rights will be equal
to 100% of the fair market  value or, in the case of an option  granted to a 10%
or greater  stockholder,  l10% of the fair market value.  The exercise price for
any other option and stock appreciation rights shall be at least 85% of the fair
market  value on the  date the  option  is  granted.  The  exercise  period  for
non-qualified  stock options shall be ten years and one day from the date of the
grant,  and  the  expiration   period  for  incentive  stock  options  or  stock
appreciation  rights  shall not  exceed  ten years  from the date of the  grant.
During fiscal 2003,  options for 114,000 shares of common stock were  forfeited.
During fiscal 2002,  options for 7,500 shares of common stock were  exercised at
$1.44 and options for 96,500 shares were forfeited.  During fiscal 2001, options
for 12,750  shares of common  stock were  forfeited.  This plan  terminated  and
expired  December 1, 1998.  At August 29, 2003,  no options for shares of common
stock remained outstanding under the 1988 Incentive Plan.

                                       37
<PAGE>

Wegener Corporation and Subsidiaries

A summary of stock option transactions for the above plans follows:

                                                                    Weighted
                                    Number        Range of           Average
                                  of Shares    Exercise Prices   Exercise Price
--------------------------------------------------------------------------------
Outstanding at
    September 1, 2000             1,188,800     $ .75 - 5.63           $2.35
       Granted                        6,000              .63             .63
       Exercised                         --               --              --
       Forfeited or cancelled      (160,750)     1.41 - 5.63            4.25
================================================================================
Outstanding at
    August 31, 2001               1,034,050     $ .75 - 5.63           $2.04
       Granted                      552,375       .60 - 1.03             .90
       Exercised                    (29,500)      .60 - 1.44             .86
       Forfeited or cancelled      (121,500)     1.44 - 2.31            1.56
================================================================================
Outstanding at
    August 30, 2002               1,435,425      $.63 - 5.63           $1.67
       Granted                       54,000       .91 - 2.09            1.65
       Exercised                    (39,500)      .75 -  .84             .80
       Forfeited or cancelled      (121,500)     1.41 - 2.31            1.47
================================================================================
OUTSTANDING AT
    AUGUST 29, 2003               1,328,425     $ .63 - 5.63           $1.71
AVAILABLE FOR ISSUE AT
    AUGUST 29, 2003                 972,575               --              --
================================================================================
Options exercisable at
    AUGUST 29, 2003               1,293,425     $ .63 - 5.63           $1.70
    August 30, 2002               1,135,425     $ .75 - 5.63           $1.89
================================================================================

The weighted average remaining contractual life of options outstanding at August
29, 2003, was 3.9 years.

During  fiscal  2001,  options for 402,500  shares of common stock at a weighted
average exercise price of $1.54 were deemed to be variable stock options.  These
options required the recognition of compensation expense based on the difference
between the exercise  price and the fair market value of the stock at the end of
a reporting period. For the year ended August 31, 2001, a non-cash  compensation
benefit of $488,000 was included in SG&A expenses.  During the fourth quarter of
fiscal 2001, tax reimbursement  features were removed from common stock options.
As a result, fiscal 2002 SG&A expenses were not subject to variable stock option
compensation adjustments.

On January 25, 2000,  the Company  entered  into an  agreement  with RCG Capital
Markets  Group,  Inc. to provide a national  financial  relations  program.  The
agreement  was for an 18 month  period and  provided for a monthly fee of $6,000
and stock  options  for  200,000  shares of  Wegener  Corporation  common  stock
exercisable  for a period of five  years  from the date of grant at  $5.625  per
share.  Options for 100,000  shares vested upon  execution of the agreement with
the remaining  options for 100,000 shares vesting upon completion of agreed upon
performance  criteria. In accordance with EITF Issue No. 96-18 and SFAS No. 123,
these  options  were  measured  on January  25,  2000,  for fair value using the
Black-Scholes  option pricing model.  The fair value of the options  amounted to
$445,000 and was  amortized to expense over the 18 month term of the  agreement.
The options for 100,000 shares of common stock related to  performance  criteria
were forfeited July 25, 2001, upon expiration of the agreement. Since the stated
performance  criteria were not met, none of the  underlying  options were deemed
vested and earned. As such, the fair value of the forfeited options amounting to
$222,000 was credited to SG&A expenses at the date of  forfeiture.  For the year
ended August 31, 2001, a net charge of $47,000 was included in SG&A expenses. At
August 29,  2003,  options  for  100,000  shares  were  vested and  outstanding.
Pursuant to the agreement,  the Company has granted certain  registration rights
to RCG covering the shares underlying the options.

10.  EMPLOYEE BENEFIT PLANS

WCI has a profit-sharing plan covering  substantially all employees.  Amounts to
be  contributed  to the plan each year are  determined at the  discretion of the
Board of Directors subject to legal limitations.  No contributions were declared
for fiscal years 2003, 2002 and 2001.

                                       38
<PAGE>

Wegener Corporation and Subsidiaries

Eligible  WCI  employees  are  permitted  to make  contributions,  up to certain
regulatory  limits,  to the plan on a tax deferred basis under Section 401(k) of
the Internal  Revenue  Code.  The plan provides for a minimum  company  matching
contribution on a quarterly  basis at the rate of 25% of employee  contributions
with a quarterly  discretionary  match. During fiscal years 2003, 2002 and 2001,
an  additional   discretionary   matching   contribution   of  25%  of  employee
contributions was made for all quarters.  All matching  contributions are in the
form of  Company  stock  or cash at the  discretion  of the  Company's  Board of
Directors.  During the first five months of fiscal 2003, matching  contributions
were made in the form of Company  stock with the  remainder of the fiscal year's
contributions  made in the form of cash.  Fiscal 2003 matching  contributions of
$189,000  consisted  of  $132,000 in the form of cash and $57,000 in the form of
Company stock.  Matching  Company  contributions  of $158,000 in fiscal 2002 and
$188,000 in fiscal 2001 were in the form of common stock.

11.  SEGMENT INFORMATION AND SIGNIFICANT CUSTOMERS

SFAS  No.  131,  "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information," established standards for the way that public business enterprises
report information about operating segments in their financial  statements.  The
standard defines  operating  segments as components of an enterprise about which
separate financial  information is available that is evaluated  regularly by the
chief  operating  decision  maker in deciding how to allocate  resources  and in
assessing performance.  Based on these standards the Company has determined that
it operates in a single operating segment: the manufacture and sale of satellite
communications equipment.

In this single  operating  segment the Company has three  sources of revenues as
follows:

                                                    Year ended
                                     -------------------------------------------
                                      AUGUST 29,     August 30,     August 31,
                                         2003           2002           2001
--------------------------------------------------------------------------------
Direct Broadcast Satellite           $ 18,152,647   $ 21,932,974   $ 18,038,738
Telecom and Custom Products             1,411,493      1,073,345      1,779,988
Service                                   569,040        452,604        514,173
--------------------------------------------------------------------------------
                                     $ 20,133,180   $ 23,458,923   $ 20,332,899
================================================================================

Revenues by geographic areas are as follows:

                                                    Year ended
                                     -------------------------------------------
                                      AUGUST 29,     August 30,     August 31,
                                         2003           2002           2001
--------------------------------------------------------------------------------
Geographic Area
   United States                     $ 19,293,956   $ 21,986,074   $ 17,539,328
   Canada                                 314,625        576,733        111,096
   Europe                                 262,958        387,524      1,074,642
   Asia                                   147,318        219,778        122,762
   Latin America and Mexico                18,366         69,522      1,366,070
   Other                                   95,957        219,292        119,001
--------------------------------------------------------------------------------
                                     $ 20,133,180   $ 23,458,923   $ 20,332,899
================================================================================

Revenues  attributed  to  geographic  areas  are  based on the  location  of the
customer.  All of the  Company's  long-lived  assets  are  located in the United
States.

                                       39
<PAGE>

Wegener Corporation and Subsidiaries

The Company  sells to a variety of domestic  and  international  customers on an
open-unsecured  account basis. These customers  principally operate in the cable
television,  broadcast business music,  private network and data  communications
industries.  Customers  representing  10% or more of the year's  revenues are as
follows:

                                                    Year ended
                                     -------------------------------------------
                                      AUGUST 29,     August 30,     August 31,
                                         2003           2002           2001
     ---------------------------------------------------------------------------
     Customer 1                         39.3%          27.5%           (a)
     Customer 2                         16.3%          27.9%           (a)
     Customer 3                          (a)           11.1%          34.7%

     (a)  Revenues for the year were less than 10% of total revenues.

Sales to a relatively small number of major customers have typically comprised a
majority  of the  Company's  revenues  and that trend is  expected  to  continue
throughout fiscal 2004 and beyond.  Future revenues are subject to the timing of
significant  orders from  customers and are difficult to forecast.  As a result,
future revenue levels may fluctuate from quarter to quarter.

At August 29, 2003,  two customers  accounted for more than 10% of the Company's
accounts  receivable.  At August 30, 2002, one customer  accounted for more than
10% of the Company's accounts receivable.  When deemed appropriate,  the Company
uses  letters  of credit and  credit  insurance  to  mitigate  the  credit  risk
associated with foreign sales.

12.  STATEMENTS OF CASH FLOWS

Interest  payments were  approximately  $69,000,  $64,000 and $70,000 for fiscal
years 2003, 2002 and 2001,  respectively.  Income tax refunds received in fiscal
2002 and 2001 were  $208,000 and  $532,000,  respectively.  No income taxes were
paid or received in 2003. Non-cash financing activities in fiscal 2003 included:
72,977  shares of treasury  stock  reissued  and 27,176  shares of common  stock
issued  for  401(k)  matching  Company  contributions  valued  at  approximately
$82,000.  Non-cash financing activities in fiscal 2002 included:  167,111 shares
of treasury stock reissued for 401(k) matching Company  contributions  valued at
approximately  $158,000.  Non-cash financing activities in fiscal 2001 included:
1)  211,883  shares of  treasury  stock  reissued  for 401(k)  matching  Company
contributions  valued  at  approximately  $188,000,  2)  non-cash  stock  option
compensation benefit of $488,000, and 3) fair value of stock options granted for
services valued at $47,000.

13.  COMMITMENTS AND CONTINGENCIES

During  the  second  quarter  of  fiscal  2003,  the  Company  entered  into two
manufacturing and purchasing  agreements for certain finished goods inventories.
The  agreements  committed the Company to purchase  $2,116,000  over an 18 month
period,  beginning  in the third  quarter of fiscal  2003.  At August 29,  2003,
outstanding  purchase commitments under these agreements amounted to $2,049,000.
In addition,  the Company  maintains a cancelable  manufacturing  and purchasing
agreement of finished goods  inventories for which the Company has firm customer
order commitments.  The Company had outstanding  purchase commitments under this
agreement of $1,261,000 at August 29, 2003. Pursuant to the above agreements, at
August 29, 2003, the Company had outstanding  letters of credit in the amount of
$2,172,000.

The Company  leases certain office and  manufacturing  facilities,  vehicles and
equipment under long-term  non-cancelable  operating  leases that expire through
fiscal 2007.  Future minimum lease  commitments  are  approximately  as follows:
2004-$224,000,   2005-$114,000,   2006-$4,000,  2007-$2,000,  2008-$2,000.  Rent
expense under all leases was approximately  $242,000,  $243,000 and $273,000 for
fiscal years 2003, 2002 and 2001, respectively.

From time to time in the ordinary  course of business,  the Company has become a
defendant in various  types of legal  proceedings.  Management  does not believe
that these  proceedings  individually or in the aggregate,  will have a material
adverse  effect on the Company's  financial  position,  results of operations or
cash flows. In June 2002, a complaint was filed against WCI in federal  district
court in Nevada by StarGuide Digital Networks,  Inc. (StarGuide Digital Network,
Inc., Plaintiff, v. Wegener Communications,  Inc., and John Scaggs,  Defendants)
alleging  patent  infringement  by  WCI  and  seeking  injunctions,  unspecified
compensatory  and punitive  damages and costs and attorneys'  fees. WCI answered
the complaint denying all liability and filed  counterclaims  against StarGuide.
In the

                                       40
<PAGE>

Wegener Corporation and Subsidiaries

first  quarter of fiscal 2003,  WCI and John Scaggs  reached an  agreement  with
StarGuide settling all disputes between the parties. The terms of the settlement
are  confidential but include  StarGuide's  grant of limited licenses to Wegener
under a number of StarGuide  patents.  WCI has agreed to pay StarGuide a running
royalty  on  certain  products.  Management  of the  Company  believes  that the
settlement  will not have a material  adverse effect on the Company's  financial
condition or results of operations.

On April 23, 2003,  WC  Acquisition  Corporation,  a wholly owned  subsidiary of
Radyne ComStream,  Inc., commenced an all-cash,  all-shares tender offer for all
outstanding  shares of Wegener  Corporation  (Wegener)  common stock not already
owned by WC Acquisition  Corporation.  Wegener's Board of Directors appointed an
Independent  Committee  to  investigate  the  offer,  and  after  reviewing  the
Independent Committee's  recommendation,  Wegener's Board issued a press release
which  reflected  their findings that the offer was priced too low and therefore
tendering  shares was not in the best  interest of  Wegener's  shareholders.  On
April 24, 2003,  Radyne ComStream,  Inc. and WC Acquisition  Corporation filed a
complaint  in the U.S.  District  Court for the  District  of  Delaware  against
Wegener  arising out of this tender offer.  The  Plaintiffs  requested  that the
Court enter a  declaratory  judgment that the public  disclosures  and documents
filed  with  the  Securities  and  Exchange  Commission  by the  Plaintiffs,  in
connection  with the tender offer,  fully comply with all  applicable  laws. The
Plaintiffs  also sought an injunction  against  Wegener,  as well as against its
agents and  employees,  from  making  any false or  misleading  statements  with
respect to the tender  offer and an award of  Plaintiffs'  costs and  attorneys'
fees.  Wegener filed an answer to this Complaint on May 15, 2003, and denied all
of the  substantive  allegations of the Complaint.  In its answer,  Wegener also
asserted counterclaims,  alleging that the tender offer was illegal, and done in
violation  of ss. 14 of the  Williams  Act.  On June 27,  2003,  the  Plaintiffs
dismissed this lawsuit.

On April 24,  2003,  WC  Acquisition  Corporation  and  Radyne  ComStream,  Inc.
commenced an action against Wegener,  Robert A. Placek,  Thomas G. Elliot, James
H. Morgan,  Jr., C. Troy Woodbury,  Jr.,  Wendell Bailey and Joe K. Parks in the
Court of Chancery for the State of Delaware in and for New Castle  County.  Each
of the  individuals  named in the Complaint as Defendants are (or were) officers
and/or directors of Wegener. Plaintiffs asserted that these individuals violated
their  fiduciary  duties by  failing to approve  the tender  offer and  proposed
merger,  by failing to exempt the tender  offer from  Section 203 of the General
Corporation  Law of the State of  Delaware,  by failing  to render  inapplicable
Article  Eighth of  Wegener's  Certificate  of  Incorporation,  and by  adopting
anti-takeover devices. Plaintiffs sought to have the Court compel the Defendants
to approve the proposed acquisition, enjoin the Defendants from applying Section
203 of the General  Corporation  Law of the State of Delaware and Article Eighth
of Wegener's  Certificate of Incorporation,  and enjoin Wegener,  its agents and
its  employees,   from  adopting  any  other  measure  which  could  impede  the
acquisition  or  other  attempts  by the  Plaintiffs  to  acquire  Wegener.  The
Complaint also sought an award of Plaintiffs' costs and attorneys' fees. Wegener
filed an  answer  to this  Complaint  on May 19,  2003,  and  denied  all of the
substantive  allegations  of the Complaint.  On June 26, 2003,  this lawsuit was
dismissed.

On June 20,  2003,  Jerry Leuch  commenced  an action  styled as a direct  class
action and a derivative action against Robert A. Placek,  Thomas G. Elliot,  Joe
K. Parks,  C. Troy  Woodbury,  Jr.,  Wendell  Bailey,  Ned  Mountain and Wegener
Corporation  in the Court of Chancery of the State of  Delaware,  In and For New
Castle County.  The Plaintiff  alleges that the individual  defendants  violated
their  fiduciary  duties due to him and other  shareholders,  the members of the
alleged class, as well as Wegener.  The relief Plaintiff seeks is as follows:  a
declaration  that the Defendants must consider and evaluate all bona fide offers
to  purchase  all of the  outstanding  shares of Wegener  consistent  with their
fiduciary  duties;  a declaration that this action is properly styled as a class
action;  an injunction  against  proceeding with any business  combination which
benefited  the  individual  defendants  and an  injunction  requiring  that  any
conflicts  of interest be resolved in favor of the Wegener  shareholders;  and a
declaration  removing the  anti-takeover  measures enacted by Wegener's Board of
Directors. The Complaint also seeks an award of Plaintiff's costs and attorneys'
and other  fees.  An answer has been filed by Wegener,  denying all  substantive
allegations  in the  complaint.  Management  does not believe  that the ultimate
outcome of this litigation will have a material  adverse effect on its financial
condition or results of operations.

14.  GUARANTEES

Warranty
The Company  warrants its products for a 12 to 14 month period  beginning at the
date of shipment.  The warranty  provides for repair or replacement of defective
products  returned  during the warranty  period at no cost to the customer.  The
Company  expenses  costs for routine  warranty  repairs as incurred.  Additional
provisions are made for non-routine warranty repairs based on estimated costs to
repair at the point in time in which the warranty claim is  identified.  Accrued
warranty  liabilities amounted to $66,000 at August 29, 2003. For the year ended
August 29,  2003 the  accrual  was  reduced by $30,000  for  satisfied  warranty
claims.  There was no warranty expense  recognized  during the year ended August
29, 2003.

                                       41
<PAGE>

Wegener Corporation and Subsidiaries

Letters of Credit
Wegener  Communications,  Inc.,  the Company's  wholly owned  subsidiary  (WCI),
provides standby letters of credit in the ordinary course of business to certain
suppliers  pursuant to manufacturing  and purchasing  agreements.  At August 29,
2003, outstanding letters of credit amounted to $2,172,000.

Financing Agreements
The Company guarantees the bank loan facility of WCI. The bank facility provides
a maximum available credit limit of $5,000,000.  At August 29, 2003, no balances
were outstanding on the loan facility.

15.  QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                              Quarter
                                    ------------------------------------------------------------    ------------
                                        First          Second          Third           Fourth           Year
                                    ------------------------------------------------------------    ------------
<S>                                 <C>             <C>             <C>             <C>             <C>
FISCAL 2003
   REVENUE                          $  3,945,118    $  5,219,152    $  6,254,459    $  4,714,451    $ 20,133,180
   GROSS PROFIT                        1,301,208       1,874,297       2,441,736       1,893,140       7,510,381
   OPERATING INCOME (LOSS)              (583,587)        187,755         195,159(b)      (39,383)(b)    (240,056)
   NET EARNINGS (LOSS)                  (369,546)        116,657         122,968         217,680(c)       87,759
   NET EARNINGS (LOSS) PER SHARE
      BASIC                                (0.03)           0.01            0.01            0.02              (a)
      DILUTED                              (0.03)           0.01            0.01            0.02              (a)

     (a)  Less than $ .01 per share

Fiscal 2002
   Revenue                          $  6,032,616    $  5,860,702    $  6,290,810    $  5,274,795    $ 23,458,923
   Gross profit                        1,965,894       2,084,349       2,198,219       1,573,804       7,822,266
   Operating income (loss)               224,984         414,613         610,327          61,331       1,311,255
   Net earnings (loss)                   132,165         255,946         379,498          39,971         807,580
   Net earnings (loss) per share
      Basic                                 0.01            0.02            0.03             (a)            0.07
      Diluted                               0.01            0.02            0.03             (a)            0.07
</TABLE>

     (a)  Less than $ .01 per share
     (b)  Includes  $809,000  in the third  quarter  and  $165,000 in the fourth
          quarter of corporate legal and professional  fees related to defending
          the Company against an unsolicited  hostile takeover attempt by Radyne
          ComStream, Inc., and related litigation.
     (c)  Includes $199,000 of state income tax credits earned.

                                       42
<PAGE>

ITEM 9.   CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

     None.

ITEM 9A.  CONTROLS AND PROCEDURES

     The  Company  carried  out an  evaluation  pursuant  to Rule  13a-15 of the
Securities Exchange Act of 1934, as amended,  under the supervision and with the
participation of the Company's management, including the Chief Executive Officer
(CEO) and the Chief Financial  Officer (CFO), of the effectiveness of the design
and operation of the Company's  disclosure controls and procedures as of the end
of the period covered by this Report. Based upon that evaluation,  the Company's
CEO and CFO have concluded that the Company's disclosure controls and procedures
are effective.  There has been no change in the Company's  internal control over
financial  reporting that has materially  affected,  or is reasonably  likely to
materially affect, the Company's internal control over financial reporting.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information  contained  under the caption  "ELECTION OF  DIRECTORS"  in the
Proxy   Statement   pertaining  to  the  January  20,  2004  Annual  Meeting  of
Stockholders  ("Proxy Statement") is incorporated herein by reference in partial
response to this item.  See also Item 1.  "Business - Executive  Officers of the
Registrant" on page 9 of this Report.

ITEM 11.  EXECUTIVE COMPENSATION

     Information contained under the caption "EXECUTIVE  COMPENSATION" contained
in the Proxy Statement is  incorporated  herein by reference in response to this
item.

ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

     Information contained under the captions "ELECTION OF DIRECTORS," "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" and "EQUITY  COMPENSATION
PLAN  INFORMATION"  contained in the Proxy Statement is  incorporated  herein by
reference in response to this item.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information contained under the caption "CERTAIN  RELATIONSHIPS AND RELATED
TRANSACTIONS"  contained  in the  Proxy  Statement  is  incorporated  herein  by
reference in response to this item.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Information  contained  in the Proxy  Statement is  incorporated  herein by
reference in response to this item.

                                       43
<PAGE>

                                    PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)  (1)  The  following   consolidated  financial  statements  of  Wegener
Corporation  and  subsidiaries  and the related Report of Independent  Certified
Public Accountants thereon are filed as part of this report:

Report of Independent Certified Public Accountants.

Consolidated Balance Sheets - August 29, 2003, and August 30, 2002.

Consolidated  Statements of Operations - Years ended August 29, 2003, August 30,
     2002, and August 31, 2001.

Consolidated  Statements of Shareholders'  Equity - Years ended August 29, 2003,
     August 30, 2002, and August 31, 2001.

Consolidated  Statements of Cash Flows - Years ended August 29, 2003, August 30,
     2002, and August 31, 2001.

Notes to Consolidated Financial Statements.

     Separate  financial  statements of the Registrant have been omitted because
the Registrant is primarily a holding company and all  subsidiaries  included in
the consolidated financial statements are wholly-owned.

     (a)  (2)  The  following  consolidated  financial  statements  schedule for
               Wegener  Corporation and subsidiaries,  and the related Report of
               Independent  Certified  Public  Accountants are included  herein,
               beginning on page 42:

               Schedule  II-Valuation and Qualifying Accounts Years ended August
               29, 2003, August 30, 2002, and August 31, 2001.

     (a)  (3)  The exhibits  filed in response to Item 601 of Regulation S-K are
               listed in the Exhibit Index on pages 44 and 45.

     (b)       Reports on Form 8-K during the fourth  quarter  ended  August 29,
               2003:

               Current Report on Form 8-K dated as of May 1, 2003, and filed May
               6,  2003,  disclosing  Amended  and  Restated  By-laws of Wegener
               Corporation  (Exhibit 3.1) and Stockholder Rights Agreement dated
               as of May 1, 2003,  between  Wegener  Corporation  and Securities
               Transfer Corporation, as Rights Agent (Exhibit 4.1).

               Current  Report on Form 8-K dated June 17, 2003,  furnishing  its
               press release  regarding its results for the third fiscal quarter
               ended May 30, 2003.

     (c)       See Part IV, Item 15(a) (3).

     (d)       Not applicable.

                                       44
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders of Wegener Corporation
Duluth, Georgia

     The audits  referred to in our report dated November 14, 2003,  relating to
the consolidated  financial  statements of Wegener Corporation and subsidiaries,
which  is  contained  in Item 8 of this  Form  10-K  included  the  audit of the
financial  statement  schedule listed in the  accompanying  index. The financial
statement  schedule  is the  responsibility  of the  Company's  management.  Our
responsibility  is to express an opinion  on the  financial  statement  schedule
based on our audits.

     In our opinion,  such financial  statement schedule presents fairly, in all
material respects, the information set forth therein.


                                        /s/ BDO Seidman, LLP
Atlanta, Georgia                        BDO Seidman, LLP
November 14, 2003

                                       45
<PAGE>

                                   SCHEDULE II
                      WEGENER CORPORATION AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                   Balance at    Charged to                                    Balance at
                                   Beginning     Costs and                                       End of
                                   of Period      Expenses       Write-offs     Recoveries       Period
                                   ---------      --------       ----------     ----------       ------
Allowance for doubtful
account receivable:
<S>                              <C>            <C>            <C>             <C>            <C>
YEAR ENDED AUGUST 29, 2003       $    351,592   $     30,000   $    (26,932)   $         --   $    354,660

Year ended August 30, 2002       $    305,021   $    155,000   $   (108,429)   $         --   $    351,592

Year ended August 31, 2001       $    165,578   $    120,000   $    (45,136)   $     64,579   $    305,021


Inventory Reserves:

YEAR ENDED AUGUST 29, 2003       $  3,780,607   $     75,000   $   (365,244)   $         --   $  3,490,363

Year ended August 30, 2002       $  4,156,494   $    800,000   $ (1,175,887)   $         --   $  3,780,607

Year ended August 31, 2001       $  3,444,494   $  1,325,000   $   (613,000)   $         --   $  4,156,494
</TABLE>

                                       46
<PAGE>

EXHIBIT INDEX

     The following  documents are filed as exhibits to this report.  An asterisk
identifies those exhibits  previously filed and incorporated herein by reference
below. For each such asterisked  exhibit there is shown below the description of
the  previous  filing.  Exhibits  which are not  required  for this  report  are
omitted.   Exhibits   10.3  through  10.5  identify   management   contracts  or
compensatory plans.

Exhibit Number      Description of Document
--------------      -----------------------
*3.1                By-Laws (Reg. No. 2-81795, Exhibits 3(a) and 3(b)).

*3.2                Certificate of Incorporation as amended through May 4, 1989,
                    (1989 10-K, filed November 30, 1989, Exhibit 3.2).

*3.3                Amendment to Certificate of Incorporation  (1997 10-Q, filed
                    June 27, 1997, Exhibit 3.1).

*3.4                Amended and Restated  By-laws (Form 8-K,  dated as of May 1,
                    2003 and filed May 6, 2003, Exhibit 3.1).

*4.0                See By-Laws and Certificate of  Incorporation,  Exhibits 3.1
                    and 3.2. See Articles II and VIII of the By-Laws and Article
                    IV of the Certificate.

*4.1                Loan and  Security  Agreement  and Demand Note dated June 5,
                    1996,  by  and  between  Wegener  Communications,  Inc.  and
                    LaSalle   National  Bank  respecting   $8,500,000   combined
                    revolving  credit  note  and term  note  (1996  10-K,  filed
                    November 27, 1996, Exhibit 4.1).

*4.5                Loan and Security  Agreement - First  Amendment dated August
                    4, 1998,  by and between  Wegener  Communications,  Inc. and
                    LaSalle  National  Bank  respecting   $10,000,000   combined
                    revolving credit note and term note.

*4.6                Loan and Security Agreement - Third Amendment dated December
                    11, 2000, by and between Wegener  Communications,  Inc., and
                    LaSalle  National  Bank  respecting   $10,000,000   combined
                    revolving  credit note and term note. (2001 10-Q filed April
                    16, 2001, Exhibit 4.1.)

*4.7                Loan and Security  Agreement - Fourth  Amendment dated March
                    28, 2002, by and between Wegener  Communications,  Inc., and
                    LaSalle   National  Bank  respecting   $5,000,000   combined
                    revolving  credit  note and term note  (2002 10-Q filed June
                    28, 2002, Exhibit 4.1.)

                    No other  long-term debt instrument of the Registrant or its
                    subsidiaries  authorizes  indebtedness  exceeding 10% of the
                    total assets of the  Registrant  and its  subsidiaries  on a
                    consolidated  basis and the Registrant  hereby undertakes to
                    provide the Commission  upon request with any long-term debt
                    instrument not filed herewith.

*4.8                Loan and Security Agreement - Fifth Amendment dated June 27,
                    2003,  by  and  between  Wegener  Communications,  Inc.  and
                    LaSalle   National  Bank  respecting   $5,000,000   combined
                    revolving  credit note and term note.  (2003 10-Q filed July
                    9, 2003, Exhibit 4.1.)

*4.9                Stockholder  Rights  Agreement (Form 8-K, dated as of May 1,
                    2003 and filed May 6, 2003, Exhibit 4.1).

                                       47
<PAGE>

Exhibit Number      Description of Document
--------------      -----------------------
*10.1               License Agreement, Distributorship and Supply Agreement, and
                    Purchase Pooling and Warehouse Agreement dated May 28, 1994,
                    by  and  between  Wegener  Communications,  Inc.  and  Cross
                    Technologies,  Inc.  (1995 10-K,  filed  December  15, 1994,
                    Exhibit 10.4).

*10.2               Wegener  Communications,  Inc. Profit Sharing Plan and Trust
                    dated January 1, 1982, amended and restated as of January 1,
                    1984. (1987 10-K, dated and filed November 25, 1987, Exhibit
                    10.14).

*10.3               1989  Directors'  Incentive Plan (1990 10-K,  filed November
                    29, 1990, Exhibit 10.9).

*10.3.1             Amendment  to  1989  Directors'   Incentive  Plan  effective
                    February  1, 1995,  (1995 10-K,  filed  December  13,  1996,
                    Exhibit 10.4.1).

*10.4               1998  Incentive  Plan  (1998  Form  S-8,   Registration  No.
                    333-51205, filed April 28, 1998, Exhibit 10.1).

*10.5               Form of Agreement between Wegener  Corporation and Robert A.
                    Placek,  Ned  L.  Mountain,   and  C.  Troy  Woodbury,   Jr.
                    respecting  severance  payments  in the  event of  change of
                    control  (Schedule  14D-9,  filed May 6, 2003,  Exhibit  (e)
                    (1)).

14.1                Wegener Corporation Code of Business Conduct and Ethics.

*21                 Subsidiaries  of the Registrant  (1990 10-K,  filed November
                    29, 1990, Exhibit 22).

23                  Consent of BDO Seidman, LLP.

31.1                Certification  of the Chief  Executive  Officer  pursuant to
                    Section 302 of the Sarbanes-Oxley Act of 2002.

31.2                Certification  of the Chief  Financial  Officer  pursuant to
                    Section 302 of the Sarbanes-Oxley Act of 2002.

32.1                Certification  of the Chief  Executive  Officer  pursuant to
                    Section 906 of the Sarbanes-Oxley Act of 2002.

32.2                Certification  of the Chief  Financial  Officer  pursuant to
                    Section 906 of the Sarbanes-Oxley Act of 2002.

                                       48
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

WEGENER CORPORATION
Date:  November 26, 2003                By /s/ Robert A. Placek
                                          ----------------------------------
                                          Robert A. Placek
                                          President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities indicated on this 26th day of November 2003.

Signature                          Title
---------                          -----


/s/ Robert A. Placek               President, Chief Executive Officer and
-----------------------------      Chairman of the Board (Principal Executive
Robert A. Placek                   Officer)


/s/ C. Troy Woodbury, Jr.          Treasurer and Chief Financial Officer,
-----------------------------      Director (Principal Financial and Accounting
C. Troy Woodbury, Jr.              Officer)


/s/ Ned L. Mountain                Director, Executive Vice President of WCI
-----------------------------
Ned L. Mountain


/s/ Joe K. Parks                   Director
-----------------------------
Joe K. Parks


/s/ Thomas G. Elliot               Director
-----------------------------
Thomas G. Elliot


/s/ Wendell H. Bailey              Director
-----------------------------
Wendell H. Bailey

                                       49
<PAGE>

DIRECTORS
Robert A. Placek
Chairman of the Board,
President and Chief
Executive Officer
Wegener Corporation

Ned L. Mountain
Executive Vice President
Wegener Communications, Inc.

C. Troy Woodbury, Jr.
Treasurer and Chief
Financial Officer
Wegener Corporation

Joe K. Parks
Retired, Previously
Laboratory Director,
Systems Development Laboratory
Georgia Tech Research Institute
Georgia Institute of Technology

Thomas G. Elliot
Senior Vice President of
Technical Projects
CableLabs

Wendell H. Bailey
President & Chief Executive
Officer of Strategic
Technology International

OFFICERS
Robert A. Placek
Chairman of the Board,
President and Chief
Executive Officer

Ned L. Mountain
Executive Vice President
Wegener Communications, Inc.

C. Troy Woodbury, Jr.
Treasurer and Chief
Financial Officer

INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
BDO Seidman, LLP
285 Peachtree Center Avenue
Suite 800
Atlanta, Georgia 30303-1230

TRANSFER AGENT
Securities Transfer Corporation
2591 Dallas Parkway
Suite 102
Frisco, Texas 75034

CORPORATE
HEADQUARTERS
11350 Technology Circle
Duluth/Atlanta, Georgia 30097-1502

ANNUAL MEETING
The annual meeting of stockholders
will be held on January 20, 2004
at 7:00 p.m. at the Corporate
Headquarters.

COMMON STOCK NASDAQ
NASDAQ Small-Cap Market Symbol: WGNR

FORM 10-K REPORT
Wegener Corporation's Annual Report
on Form 10-K, filed with the Securities
and Exchange Commission, is available
free of charge by written request to:
   Elaine Miller, Secretary
   Investor Relations
   Wegener Corporation
   11350 Technology Circle
   Duluth, Georgia 30097-1502

WEB SITE
HTTP://WWW.WEGENER.COM

QUARTERLY COMMON
STOCK PRICES
The Company's common stock is traded
on the NASDAQ Small-Cap Market. The
quarterly ranges of high and low sale
prices for fiscal 2003 and 2002 were
as follows:

                     High     Low
----------------------------------

FISCAL YEAR ENDING AUGUST 29, 2003

First Quarter       $1.07    $ .60

Second Quarter       1.10      .69

Third Quarter        1.72      .73

Fourth Quarter       2.49     1.29

----------------------------------

FISCAL YEAR ENDING AUGUST 30, 2002

First Quarter        $1.32   $ .50

Second Quarter        1.25     .80

Third Quarter         1.70     .81

Fourth Quarter        1.47     .90

----------------------------------

The Company had approximately  377*
shareholders of record at November
20, 2003. The Company has never paid
cash dividends on its common stock
and does not intend to pay cash
dividends in the foreseeable future.
*(This number does not reflect
beneficial ownership of shares held
in nominee names).

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