UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   Form 10-KSB

                                   (Mark One)
        [ X ] Annual report under Section 13 or 15 (d) of the Securities
                              Exchange Act of 1934

                  For the fiscal year ended January 1, 2000, or

                [ ] Transition report under Section 13 or 15 (d)
                     of the Securities Exchange Act of 1934


             For the transition period from _________ to __________


                         Commission file number 0-11880

                            HYTEK MICROSYSTEMS, INC.
                 (Name of small business issuer in its charter)

                              California 94-2234140
                (State or other jurisdiction of (I.R.S. Employer
               incorporation or organization) Identification No.)

                 400 Hot Springs Road, Carson City, Nevada 89706
               (Address of principal executive offices) (Zip Code)

         Issuer's telephone number, including area code: (775) 883-0820

    Securities registered pursuant to Section 12(b) of the Exchange Act: None

             Securities registered pursuant to Section 12(g) of the
                                 Exchange Act:

                           Common Stock, no par value
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 ______

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of  registrant's  knowledge,  in the  definitive  proxy or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

Revenues  of the Issuer for the most recent  fiscal  year ended  January 1, 2000
were: $5,215,000.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant  (based on the  average of the bid and asked  prices  reported on the
National  Association of Securities Dealers Automated  Quotation (NASDAQ) system
on  March  24,  2000)  was  approximately  $28,300,000.  For  purposes  of  such
calculation,  shares of Common Stock held by each executive officer and director
and by each person who owns more than 5% of the  outstanding  Common  Stock have
been  excluded  in that  such  persons  may be  deemed  to be  affiliates.  This
determination of affiliate status is not necessarily a conclusive  determination
for other purposes.

As of March 24,  2000,  the issuer had  outstanding  3,166,458  shares of Common
Stock, no par value.

                       DOCUMENTS INCORPORATED BY REFERENCE

Parts of the Company's  definitive  Proxy  Statement  for its Annual  Meeting of
Shareholders to be held on May 19, 2000 (the "Proxy Statement") are incorporated
by reference into Part III of this Annual Report on Form 10-KSB.

Transitional Small Business Disclosure Format (check one):    Yes       No  X
                                                                 ---       ---
<PAGE>

                                     PART I
                                     ------

ITEM 1.  DESCRIPTION OF BUSINESS.

     Hytek Microsystems,  Inc. ("Hytek" or the "Company") designs, manufactures,
markets and sells custom and standard hybrid microcircuits.  These microcircuits
utilize thick film technology and consist of conductive and non-conductive  inks
that are bonded onto a substrate and  interconnected  with various  subminiature
electronic  components to form a hybrid microcircuit.  Further, the Company uses
other technologies such as Low Temperature Co-fired Ceramic substrates (LTCC) to
produce hybrid circuits. In addition to custom hybrid microcircuits, the Company
also  manufactures  delay lines,  thermo-electric  cooler  controllers and laser
diode driver standard products.

Hytek was  incorporated as a California  corporation on January 4, 1974.  Unless
the context  otherwise  requires,  the terms "Hytek" and the "Company"  refer to
Hytek Microsystems, Inc. See Note 1 of Notes to Financial Statements.

Net  revenues  in 1999  decreased  58% from 1998 levels as the result of a major
order  cancellation by the Company's largest customer.  The Company had net loss
of $1,138,000 in 1999 as compared to net income of $2,092,000  during 1998.  See
"Management's  Discussion  and Analysis or Plan of Operation" in Part II, Item 6
hereof.

This Annual Report on Form 10-KSB contains forward-looking statements within the
meaning of Section  27A of the  Securities  Act of 1933 and  Section  21E of the
Securities  Exchange Act of 1934.  Actual results could differ  materially  from
those  projected in the  forward-looking  statements  as a result of a number of
risks and  uncertainties,  including,  but not limited to, the risk  factors set
forth in  "Management's  Discussion  and Analysis or Plan of  Operation--Factors
Affecting  Future  Results"  and  elsewhere  in this  report.  The  Company  has
attempted  to  identify  forward-looking   statements  by  placing  an  asterisk
immediately  following  the sentence or phrase  containing  the  forward-looking
statement(s).  Statements  made  herein are as of the date of the filing of this
Form 10-KSB  with the  Securities  and  Exchange  Commission,  and should not be
relied upon as of any  subsequent  date.  The Company  expressly  disclaims  any
obligation to update information presented herein, except as required by law.

Products and Markets

     Products  manufactured  by the  Company  are  sold  primarily  to  original
equipment manufacturers (OEMs) serving the oil exploration,  military, satellite
systems,  industrial electronics and opto-electronic markets.  Approximately 84%
of the Company's  net revenues in 1999 were derived from  products  designed and
manufactured to meet a particular customer's  specifications.  The remaining 16%
of net  revenues in 1999 were  derived from  standard  products  designed by the
Company's engineering staff.

<PAGE>

     During 1999,  approximately 27% of the Company's revenues were derived from
commercial and industrial  private sector programs as compared to  approximately
71% in 1998.  Sales to the military,  aerospace and government  sector accounted
for 63% of total revenues in 1999 and accounted for 29% of 1998 total  revenues.
1999 sales to the military,  aerospace and government  sector were slightly down
in absolute dollars from 1998 levels.

     From 1987, when the Company was certified under MIL-Standard-1772,  through
1994, sales of military,  aerospace and government products increased.  1995 was
the first year that the  Company  experienced  a decline in the sale of military
and government  products.  Sales to the military and government sector increased
again in both 1997 and 1998 and declined slightly in 1999. The Company continues
to pursue business in the military market and is actively  seeking to expand its
customer base in this area.* Offshore producers with  significantly  lower costs
have in the  past  been  precluded  from  participating  in many  U.S.  military
applications;  however,  it is not certain that this  preclusion  will remain in
effect in the  future.  Military  products  are  subject to much more  stringent
manufacturing  criteria than commercial  products and have in the past commanded
significantly  higher  prices.  However,  there is  growing  trend  in  military
procurement to buy to the "best  commercial  standards" or  "commercial  off the
shelf" (COTS)  criteria,  which may have a negative  impact on margins in future
military  business.  The  Company  intends  to  continue  its  efforts to remain
competitive in this market. *

     While domestic  defense and  military-related  spending  programs have been
reduced over the past several  years,  there  remains a large global  market for
these  products  and systems.  U. S. defense  contractors  are  supplying  these
products to "allied"  nations who continue to build their defense  capabilities.
The  Company is  currently  doing  business  with  defense  contractors  who are
participating  in this area and expects to continue to be an active  participant
in this market.*

     Segments of the commercial  custom hybrid market have  historically been an
extremely competitive,  low margin arena. In many commercial applications,  such
as automotive, audio and video products and certain communications applications,
U.S.   manufacturers  are  competing   against  offshore   producers  that  have
significantly  lower costs.  However,  there are certain segments of this market
that require high  reliability  custom hybrid  products.  Such high  reliability
products  command  higher  prices  and  margins.  It is in this  segment  of the
commercial market where the Company has been successful during recent years.

     During  1999,  the Company has  continued  to pursue  opportunities  in the
medical device and medical  instrumentation  markets and is currently  producing
hybrid devices for a major medical instrument manufacturer.  The Company intends
to increase its efforts to further expand in this market.*

     Historically,  a substantial  majority of the Company's  revenues have been
derived   from  custom   products   that  are   manufactured   to  a  customer's
specifications for a unique  application.  This has held true for the past three
years with the custom product  percentage of total revenues  increasing from 88%
in 1995 to 96% in 1998 and dropping back down to 84% in 1999.

       In  February  1993,  the  Company  announced  a new  standard  commercial
product, the Thermo-Electric Cooler Controller (TECC), which has applications in
fiber optic communications and various "detector" product markets.  During 1994,
additional  TECC  devices were  designed and  introduced.  These  products  have
received favorable response from the marketplace and have been shipped to a wide
variety of customers. During 1999, sales of TECC products more than doubled over
the prior year.  Further,  during 1995,  the Company  introduced  its High Speed
Laser  Diode  Driver  (HSLDD).  The Company has  subsequently  introduced  three
additional  design  versions of the Laser Diode Driver.  The Company expects the
market for these products to grow as new communications  technologies  develop.*
The  Company  believes  the market  for these  opto-electronic  products  offers
significant  potential  for growth and intends to devote  additional  effort and
resources to expanding its presence in this market.

<PAGE>

Hybrid Circuit Technology

     Complex electrical  circuits require the integration,  in a single package,
of various resistors,  transistors and other components. The principal packaging
technologies  used in producing  electrical  circuits  include  printed  circuit
boards,  integrated  circuits,  thick film  hybrid  circuits,  thin film  hybrid
circuits  and co-fired  ceramic  hybrid  circuits.  These  technologies  are not
interchangeable  in  all  applications,   and  the  extent  to  which  they  are
interchangeable depends on such requirements as size,  performance,  reliability
and cost.

     Thick film hybrid circuit technology,  the Company's primary  manufacturing
technology,  is a subminiature electronic packaging method. The term "thick film
network"  describes  a method  for screen  printing  conductors,  resistors  and
capacitors  onto a ceramic  substrate.  This thick film network becomes a hybrid
circuit when components such as integrated circuits, semiconductors,  capacitors
and inductors are added to the network in order to form a functioning electrical
circuit.

     Theoretically,  hybrid  circuit  packaging  techniques  can be  employed in
virtually  any  electronic  application,  but they have various  advantages  and
disadvantages in any given application as compared with alternative  techniques.
In general, the alternative  techniques are printed circuit designs,  integrated
circuits and thin film hybrid technology.

     In those  applications  in which either hybrid  circuits or printed circuit
boards  can be  used,  hybrid  circuits  often  offer  the  advantages  of  size
reduction, increased performance, reduced cost and proprietary design.

     Hybrid circuit  packaging  techniques are generally  chosen over integrated
circuit  designs if the circuits are  difficult to  integrate,  or if the higher
cost  of  an  integrated  circuit  is  not  warranted.   For  example,   circuit
applications  requiring  inductors,  large  capacitors  or devices  from several
semiconductor  technologies  cannot currently be integrated into a silicon chip.
However,  as integrated  circuit  technology  advances  rapidly,  integration is
improving  and the  advantages  of hybrid  technology  have been  eroding  away.
Despite this erosion,  not all applications  have proven adaptable to integrated
circuit technology; therefore; the Company believes that hybrid technology is an
attractive alternative for certain applications.

     While thin film hybrid  technology  allows for greater size  reductions and
more  compact  circuits  than does thick film  hybrid  technology,  it is a more
expensive  process and  requires a much  larger  initial  investment  in process
equipment. As a result of these cost differences, there continues to be a market
for hybrid circuits produced with thick film technology.

     In past years, all of the microcircuits produced by Hytek were manufactured
using thick film  hybrid  circuit  packaging  techniques,  including  thick film
screen print, firing and laser trimming,  chip and wire assembly,  and automatic
testing.  During 1998,  the Company  began to produce a small number of circuits

<PAGE>

utilizing Low Temperature  Co-fired Ceramic (LTCC)  substrates.  This technology
increases the  uniformity of the substrate  layers,  yielding a higher number of
conductive  layers on a  substrate.  As a result,  LTCC  technology  can produce
higher  density,  more  complex  circuits  than  standard  thick-film  substrate
technology.  The Company will  continue to seek and develop  additional  process
technologies  in the  future  that  could  enable  the  Company  to  offer  more
sophisticated circuits than those currently provided by Hytek. *

Product Applications

     Custom products  accounted for  approximately 84% of the Company's sales in
1999.  These products serve a variety of  applications  in the oil  exploration,
military, satellite systems, industrial electronics and opto-electronic markets.
In the  production  of custom  products,  the  Company  generally  accepts  full
responsibility for product design,  having received  blueprints and/or input and
output specifications from the potential customer. In many cases, prototypes are
developed  and  delivered to the  customer,  and are  evaluated by the customer,
before a firm order for  production  quantities is placed.  In the case of a new
custom product, a typical production cycle time from initial customer contact to
shipment of the product in commercial  quantities  would be 20 to 30 weeks.  The
Company places a strong  emphasis on developing a working  relationship  between
its own  engineering  staff and the  engineering  staff of a potential  customer
during the product development phase.

     Standard products accounted for approximately 16% of the Company's sales in
1999. These products consist of delay lines,  thermo-electric cooler controllers
and laser diode driver  products  produced  for  applications  in the  military,
industrial electronic systems and communications markets.

     Within the primary markets served by the Company's customers, the following
are some  applications in which the Company's  custom and standard  products are
currently being used:

          Oil   Exploration  --  seismic  data   acquisition   and   geophysical
          measurement equipment.

          Military --  communications,  guidance systems,  control circuitry and
          avionics.

          Satellite Systems -- power monitoring and control circuits.

          Industrial  Electronic  Systems  --  measurement  and  diagnostics  on
          rotating machinery.

          Opto-Electronics  - sub-miniature  temperature  controls,  laser diode
          drivers for data transmission.

          Automatic Test Equipment -- integrated circuit test systems.

Marketing

     The Company markets its products in the United States through its own sales
staff and through  independent  sales  representatives.  At January 1, 2000, the
Company's  direct sales staff  consisted of four  employees  operating  from the

<PAGE>

Company's principal office in Carson City. In addition, at such date the Company
had eleven  independent  sales  representatives  located  throughout  the United
States and one independent  representative  located in Israel.  The Company also
has distributors in France, Germany, Japan and Sweden.

     In addition to this marketing organization,  the Company uses its technical
engineering  staff to assist in its marketing  effort. In this marketing effort,
the Company first seeks to identify product types with component  functions that
can be  well  served  utilizing  hybrid  circuit  packaging.  The  Company  then
identifies  and  contacts the  manufacturers  or proposed  manufacturers  of the
particular  product  types.  The  initial  contact  is  usually  made by a sales
representative  for the geographic  area. If the proposed sale involves a custom
product,  the Company's in-house design and engineering staff supports the sales
effort.  In addition,  senior  members of management of the Company are directly
involved in the marketing and sales activities of the Company.

     The Company  continues  to identify  certain  existing  and  potential  new
customers  who it feels offer greater  potential for increased  levels of future
business. The Company strives to maintain a higher level of contact and customer
support for these "key accounts".

     The Company's  Carson City,  Nevada  facility is certified and qualified to
MIL-PRF-38534,   Class  H  and  Class  K   (previously   Mil-Std-1772)   .  This
certification  is a prerequisite to participate in certain  military  contracts,
and is  subject  to  periodic  audits  by the  U.S.  government.  Loss  of  this
certification  would have a material  adverse  impact on the Company's  business
prospects  and  financial  condition.  Further,  the Company is certified to the
international quality standard ISO 9001.

Customers

     During 1999,  the  Company's  five largest  customers  accounted  for 48 %
of the Company's net revenues.  In 1999, Chesapeake Sciences Corp. and TRW, Inc.
accounted  for 11% and  10% of net  sales,  respectively.  In  1998,  Chesapeake
Sciences Corp. accounted for 64% of the Company's net revenues.

Manufacturing

     Each hybrid  product  produced by the  Company  passes  through a number of
complex processes,  each of which requires a high degree of skill and precision.
Occasionally  in the  past,  the  Company  has  experienced  isolated  technical
manufacturing  problems  that have  resulted  in a material  negative  impact on
quarterly   results.   While  the   Company  has  taken  steps  to  improve  its
manufacturing  processes and  equipment,  any future  manufacturing  problems on
major  customer  programs  could have a  material  adverse  effect on  operating
results.

     The thick-film hybrid manufacturing process begins with a blueprint, which,
in the case of a custom product,  is produced by, or with the assistance of, the
customer.  This blueprint is the basis for an engineering print that the Company
produces, which in turn serves to provide a set of artwork for each product. The
artwork  consists  of up to 20  photographic  negatives,  one for each  layer of
imprint on the substrate  described below. The artwork is then  photographically
reduced  and used to generate  stainless  steel  screens,  which are used in the
printing process.

<PAGE>

     The screens are used to print on substrates,  which are generally miniature
ceramic wafers.  Metallic  conductive and non-conductive  inks (thick films) are
printed on the substrates.  Those films, when fired, will conduct and resist the
flow of  electric  current.  The  drying or firing  process  is  achieved  using
temperature-controlled furnaces, typically operating in the range of 525(degree)
Celsius to 935(degree) Celsius.  Each printing must be fired before the next one
is started.

     After  printing,  resistance  values are adjusted by high  precision  laser
trimming.  Laser cuts are made in the  resistive  films to alter the  resistance
value, using computer-controlled  laser equipment.  During the trimming process,
the   electrical    characteristics   are   simultaneously   re-tested   against
specification before the substrate is passed to assembly.

     In  assembly,  which  is  primarily  a  manual  process,  other  electronic
components,  such  as  integrated  circuits,   semiconductors,   capacitors  and
inductors,  are added to the thick film  substrate,  thus  resulting in a hybrid
circuit.  Positioning  is  critical,  and  the  work  is  primarily  done  under
microscopes.   Wire  bonding,  using  miniaturized  wire,  is  also  done  under
microscopes.  Wire bonding provides the electrical  connection from the attached
components to the printed  substrate.  The wire bonding process is very critical
to the overall  yield and  efficiency  of the  manufacturing  cycle.  The hybrid
circuit is then packaged and hermetically sealed in metal, ceramic or plastic.

     Much of the Company's test equipment is automated and computer  controlled,
each unit being  subjected to tests at various points in the production  process
as well as to a final test by the  quality  assurance  staff.  Product  yield is
dependent on environmental  control as well as stringent  process and production
controls.

     The  primary  materials  from  which the  Company  manufactures  its hybrid
products are  resistive  materials  (wire,  alloys and inks),  ceramic bases and
electronic components (primarily integrated circuits, capacitors and inductors).
The raw materials and components  that Hytek  purchases are generally  available
from several sources. Some of the Company's major suppliers include Aegis, Inc.,
E. I. DuPont,  Electro Science Laboratories,  Hi-Rel Products,  Inc., Semi-Films
Inc., Harris  Semiconductor,  Inc. and Micross  Components,  Inc..  Although the
Company has at times experienced long lead times with respect to deliveries from
its vendors,  the Company believes that adequate  alternative  sources of supply
are currently available for a majority of the Company's materials  requirements.
Nevertheless,  any major  disruption in the delivery of raw materials from these
suppliers  would  have  a  material  adverse  impact  on  the  Company's  future
operations.

     Government   regulations  impose  various  environmental  controls  on  the
chemicals  used  in  electronics  manufacturing.  The  Company  employs  various
safeguards to avoid the discharge of harmful  materials into the environment and
believes that its activities conform to present state and federal  environmental
regulations. However, there can be no assurance that the Company will not in the
future be exposed to increased costs relating to required clean-up or compliance
with ever-tightening regulations. The Company complies with new federal labeling
regulations, which took effect in May 1993, regarding the use of Ozone Depleting
Chemicals  (ODCs) as set forth in the  Clean Air Act of 1990.  The new  labeling
requirements  have had only a minor cost  impact on  operations.  At the present
time,  the  Company is not aware of any other  proposed  or  pending  government
regulation  that would have a material  impact on the  operations  or  financial

<PAGE>

condition of the  Company.  However,  there can be no assurance  that any future
government  regulation  would  not  have a  material  impact  on  the  Company's
operations or financial condition.

Engineering and Development

     The growth in sales  volume  over the past  three  years has been in custom
hybrid  products,  which require  intensive  engineering  effort from the design
phase  through  final  release  to  production.  As a result,  the  Company  has
maintained  its  technical  engineering  staff  during  1999 in spite of adverse
business conditions.

     During 1999 and 1998 the Company spent $853,000 and $945,000, respectively,
on its total engineering efforts. Of these amounts,  approximately  $171,000 and
$236,000 were spent on new product or process  research and  development in 1999
and 1998,  respectively.  All amounts  spent on research  and  development  were
internally funded.

     The Company's last new standard product introduced was the High Speed Laser
Diode Driver,  in the spring of 1995. Sales of this product have been minimal to
date,  which the  Company  attributes  to the high  unit  cost of the  device as
originally designed. As a result, the Company re-designed and released in 1997 a
"cost  reduced"  version of the Laser Diode Driver,  which it hopes will be more
suitable for volume commercial  applications.* In addition, two additional Laser
Diode  Drivers  models  were  introduced  in 1997 to cover  expanded  power  and
frequency ranges.

Competition

     Because of the  variety of  applications  in the  markets it serves,  and a
military market that has been diminishing in size, the Company faces significant
competition  from a variety of sources.  Many of the Company's  competitors have
substantially  greater  financial,  marketing,  manufacturing,  engineering  and
management  resources than the Company.  However,  the Company believes that its
smaller size, in some  instances,  provides for greater  flexibility  in meeting
customer  requirements,  and is not  necessarily  detrimental  to the  Company's
competitive position.

     The Company believes that the hybrid circuit industry  includes large OEMs,
such as IBM, TRW, Inc. and Western  Electric,  that manufacture  exclusively for
their own use (so  called  "captive"  manufacturers),  and other  OEMs,  such as
Teledyne Industries,  Inc., that manufacture for both their own use and for sale
to others.  Some of these  large  "captive"  and OEM hybrid  manufacturers  have
curtailed or reduced their internal hybrid operations and begun to procure their
hybrid requirements from outside sources. The Company believes that this has led
to increased opportunities for the entire hybrid circuit industry.

     In  addition,  there exists a large number of  independent  hybrid  circuit
manufacturers,  such as the Company,  that  manufacture  exclusively for sale to
others. In past years certain of these manufacturers have left the custom hybrid
arena to specialize in defined markets such as medical or memory hybrids.  These

<PAGE>

changes have created additional opportunities for the Company.  Further, over 30
of the known independent manufacturers are certified to MIL-PRF-38534, as is the
Company.  The  Company's  current  share of the overall  hybrid  circuit  market
remains small.

     In those  applications  where hybrid  circuits and integrated  circuits are
interchangeable,   hybrid  circuit   manufacturers   often  compete  with  major
integrated circuit manufacturers.

     The primary factors of competition in the markets served by the Company are
product reliability,  timely delivery,  price,  performance and stability of the
manufacturer.  The Company  believes that it generally  competes  favorably with
respect  to all of these  factors;  however,  stability  has been a  concern  to
certain of the Company's customers in past years.

Trademarks, Patents and Licenses

     The Company, at this time, has one registered patent (No. 5,521,933) on its
Back-matched  Laser  Diode  Driver,  which  will  expire  in 2013.  As other new
products are developed,  the Company intends to pursue  trademarks or patents as
appropriate.  The Company  currently  has no  registered  trademarks or licenses
material to the conduct of its business.

Employees

     As of  January  1,  2000,  the  Company  employed  a total of 70  full-time
employees and 1 part-time employee, of whom 49 were in manufacturing,  4 were in
marketing  and  sales,  15 were in  engineering  and  development  and 3 were in
administration.  The Company's success depends in part on its ability to attract
and  retain  skilled  personnel,  for whom there is strong  demand.  None of the
Company's employees are covered under a collective bargaining agreement, and the
Company has not experienced any labor strike or related work stoppage.

Government Contracts

     During 1999, the Company  derived  approximately  63% of its total revenues
from military or  government-funded  contracts and subcontracts.  Such contracts
and  subcontracts  generally  contain  provisions  allowing  termination for the
convenience of the  government.  In the event of such  termination,  the Company
would  generally be entitled to receive a termination  settlement  consisting of
(i) the contract  price for completed  items accepted by the government or prime
contractor  and (ii) the Company's  costs  incurred in the  performance  of work
completed prior to termination,  together with a reasonable profit on such work.
During  1999,  the  Company  experienced  no  such  termination  for  government
convenience.

ITEM 2.  DESCRIPTION OF PROPERTY.

     The Company currently leases a total of approximately 25,000 square feet of
manufacturing,  engineering and support  facilities in two adjacent buildings in
Carson City, Nevada. The main building,  consisting of 23,800 square feet, has a
lease term through June 2005,  with an option to extend for an  additional  five
years.  The  main  facility  is  currently  operating  at  approximately  40% of
capacity.  The Company  believes  that this facility has  sufficient  additional
manufacturing  capacity to significantly  increase  production  levels with only
minor increases in manufacturing overhead costs. *

<PAGE>

     The second adjacent facility consists of approximately 1,200 square feet of
office  space  utilized  by the  Company's  Engineering  Department.  This lease
expires  March 31,  2000 and has no formal  option to extend.  This  property is
standard  commercial  office  space  and the  Company  does not  anticipate  any
difficulty in retaining this space after the formal initial lease expires.*


ITEM 3.  LEGAL PROCEEDINGS.

     At January 1, 2000, there were no material legal proceedings pending.


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

     The Company  did  not  submit  any  matters to a  vote of security  holders
during the fourth quarter of the fiscal year ended January 1, 2000.

EXECUTIVE OFFICERS OF THE COMPANY

     Information  concerning  the executive  officers of the Company who are not
also directors of the Company is set forth below:

     Jon B.  Presnell,  age 49, was  promoted to the position of  Vice-President
and General  Manager of Custom  Products for the Company in October 1993. In May
1998, Mr.  Presnell's  title was changed to  Vice-President  and Chief Operating
Officer. Mr. Presnell has been an employee of the Company since 1980, and served
as General  Manager of the Carson City facility  from May 1987 through  December
1988.  From January 1989 until October 1993, Mr.  Presnell served as Director of
Sales and Marketing of the Company.  Prior to joining  Hytek,  Mr.  Presnell was
employed as an Electrical Engineer for Texas Instruments, Inc.

    Sally  B.  Chapman,  age  45,  re-joined   the  Company  in   May  1998,  as
Controller.  In July 1998,  Ms.  Chapman was  promoted to the  position of Chief
Financial Officer and Corporate  Secretary.  Ms. Chapman has 20 years experience
as an  accountant  and chief  financial  officer in various  industries  and was
previously employed as Accounting Manager for Hytek from June 1995 to June 1996.
From 1997 until April 1998,  Ms.  Chapman was Chief  Financial  Officer for Four
Corner Paper, a paper manufacturing and distribution  company. From 1990 through
1994,  Ms.  Chapman was  Controller  for Sun Bird Security  Systems,  a security
systems and service provider.

                                     PART II
                                     -------

ITEM 5.       MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         Incorporated  by reference to the table on page F-2 of this Form 10-KSB
entitled "Selected  Quarterly Financial Data (unaudited)" and the text following
such table.

<PAGE>

ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

      For purposes of this  discussion,  all dollar amounts have been rounded to
the nearest $1,000 and all percentages have been rounded to the nearest 1%.

     This Management's  Discussion and Analysis contains certain forward-looking
statements  within the meaning of Section 27A of the  Securities Act of 1933 and
Section 21E of the Securities  Exchange Act of 1934. Actual results could differ
materially from those projected in the forward-looking statements as a result of
a number of risks and  uncertainties,  including  the risk  factors set forth in
"Factors  Affecting  Future  Results"  below and  elsewhere in this Report.  The
Company has  attempted  to  identify  forward-looking  statements  by placing an
asterisk   immediately   following  the  sentence  or  phrase   containing   the
forward-looking  statement(s).  Statements  made  herein  are as of the  date of
filing of this Form 10-KSB with the  Securities  and  Exchange  Commission,  and
should not be relied  upon as of any  subsequent  date.  The  Company  expressly
disclaims  any  obligation to update  information  presented  herein,  except as
required by law.

Results of Operations

     Net sales in 1999 were  $5,215,000,  a 58% decrease  from 1998 net sales of
$12,533,000.  The large  decrease  in net sales is  directly  attributable  to a
production "hold" and subsequent  cancellation of orders by Chesapeake  Sciences
Corp. ("Chesapeake"), the Company's largest customer for the past several years.
Revenues from Chesapeake were  approximately  $557,000 in 1999 as compared to $8
million in 1998. During 1999,  approximately 63% of the Company's net sales were
derived  from sales of products to military,  aerospace  and  government  funded
agencies  (as compared to 29% in 1998) and  approximately  27% were derived from
sales for commercial or industrial applications (as compared to 71% in 1998).

     Cost of sales was  $4,620,000,  or 89% of net revenues in 1999, as compared
to $8,337,000,  or 67% of net revenues in 1998. The increase in cost of sales as
a percentage  of net revenues is primarily  the result of spreading  fixed costs
over a significantly smaller revenue base.

     Engineering and  development  expenses were $853,000 in 1999, or 16% of net
revenues,  as compared to $945,000, or 8% of net revenues, in 1998. The increase
in these  expenses  as a  percentage  of net  sales in 1999  was the  result  of
spreading these costs over a much smaller revenue base. During 1999, the Company
retained all of its  engineering  and  technical  staff as these  resources  are
essential for future growth.

     Selling, general and administrative expenses were $1,050,000, or 20% of net
revenues,  in 1999, as compared to $1,149,000,  or 9% of net revenues,  in 1998.
This  decrease in dollar  amount is  primarily  attributable  to  reductions  in
supplies, recruiting and relocation and legal and data processing expenses.

     Interest income was $182,000 for 1999, as compared to $92,000 in 1998, as a
result  of  interest  payments  from  Chesapeake  as  specified  in  the  "Final

<PAGE>

Settlement  Agreement".  The Company had interest  expense of $12,000 in 1999 as
compared to $35,000  interest  expense in 1998. The interest expense incurred in
1999 and 1998  results  from loan and  capital  lease  obligations  utilized  to
finance new production equipment.

     In 1999, the Company had no federal income tax provision, as compared to an
income tax provision of $66,000 for 1998.


Information and Data Processing Systems ( Year 2000 )

     The Company relies on an internal  computer  network for much of its day-to
day  operating  and  financial  information.  The software for this network is a
commercial  `off-the-shelf'  package  provided  and  maintained  by a  reputable
supplier.  Software  upgrades  provided  and  installed  by the supplier and the
Company's  internal efforts on its over 40 workstations  have been successful in
eliminating any internal Year 2000 problems as of the date of this filing.

     In addition,  the Company has not  experienced  any  significant  Year 2000
problems through its customers, suppliers or financial institutions.

     The cost of the Company's  preparations  for Year 2000  computer  readiness
have been  approximately  $40,000.  All costs have been funded through operating
cash flow.


Factors Affecting Future Results

     There are a number of factors  that could  significantly  affect the future
results  of  operations  of the  Company,  including,  but not  limited  to, the
following.

      In previous  years the Company has been very  dependent  on a single large
customer,  Chesapeake  Sciences Corp. When Chesapeake  placed its orders on hold
early in 1999,  the Company  began  negotiations  to recover its  investment  in
inventory and overhead costs associated with this program. The "Final Settlement
Agreement"  executed  by the Company and  Chesapeake  sets forth a schedule  for
payments of principal  and  interest  such that the Company  should  recover its
total investment by September,  2000. As of the date of this writing ( March 24,
2000)  Chesapeake has made its scheduled  principal  payments,  and is one month
behind on interest  payments.  The Company has not recorded the Final Settlement
Agreement  amount.  The Company records  payments  received as deferred  revenue
until inventory is shipped, at which time the revenue is recognized. Any failure
of Chesapeake to meet its financial  obligations under this agreement would have
a serious  negative  effect on the  Company's  operating  results and  financial
stability.

     The Company's  current 2000 revenue  estimate is based on a combination  of
firm backlog and a forecast of various  orders  anticipated to "book" during the
first half of the year.  In the event that  forecast  orders do not become  firm
business, or are "booked" later in the year than anticipated, the 2000 estimated
revenue range could be subject to further downward revision.

<PAGE>

     During 1999, the Company  realized 63% of its net revenues from  government
or military/aerospace  funded sources. A significant portion of this business is
dependent  on the Company  maintaining  its  MIL-PRF-  38534  certification  and
qualification.  While the Company fully  expects to maintain this  certification
and qualification  (*), the loss of same would have a material adverse impact on
the Company's ability to capture this type of business.

     The positive side of the  military/aerospace  and government market is that
current media reports  indicate  that the  electronics  sector of this market is
anticipated to remain stable and perhaps increase in the future.

     The  Company is  currently  dependent  on the custom  product  market for a
substantial majority of its revenue.  Custom products accounted for 84% of total
revenues in 1999.  This market is  generally  more  volatile  than the  standard
product  market,  requiring  longer product lead time and greater  investment in
product  design and  manufacturing  in  advance  of  shipment  and  payment.  In
addition,  the high  concentration  in the custom  market  requires  significant
investment in  inventories,  which could be at financial  risk in the event of a
major  customer  cancellation  such  as the  Chesapeake  cancellation  in  1999.
Further,  the custom product market is considerably  more  competitive  than the
market  for the  Company's  standard  products.  The  Company  must  maintain  a
cost-effective  structure  and  operation  to remain  competitive  in the custom
product market.  Any failure of the Company to remain  competitive in the custom
product market would have a material adverse effect on the Company's  results of
operations and financial condition.

     The Company's  standard products accounted for 16% of net revenues in 1999.
This was a significant  percentage and dollar  increase over the prior year. Our
opto-electronic products,  primarily Thermo-Electric Cooler Controllers (TECCs),
showed a significant gain in revenues.  The Company intends to vigorously pursue
expansion  in  this  market  area  through  the  use  of  sales,  marketing  and
engineering  development resources.  Should this strategy prove fruitless,  this
expenditure would have a negative impact on operating results.

     The  continuing  healthy state of the economy still supports a heavy demand
for skilled  employees.  The  Company's  ability to meet  varying  demand and to
develop new products that  contribute  to future sales growth is dependent  upon
the  attraction and retention of qualified  employees,  for whom there is strong
demand.  Any failure of the Company to attract  and retain  qualified  personnel
could have a material adverse effect on the Company's  results of operations and
financial  condition.  In spite of the significant  decline in revenues in 1999,
the Company did not lay off any of its technical  staff,  as these employees are
essential to our efforts to enter new markets and capture new business.

     The Company is dependent on certain key  suppliers  of raw  materials.  See
"Manufacturing"  in Part I, Item 1 hereof.  Any major  disruption  in production
capability  by these  suppliers  would have an adverse  impact on the  Company's
future operations.

Liquidity and Capital Resources

     During 1999,  total assets  decreased by  $1,478,000  and the net effect of
changes in current  assets and  current  liabilities  resulted  in a net working
capital decrease of $887,000.

<PAGE>

     The Company had $2,515,000 in cash and cash  equivalents at January 1, 2000
as compared to  $2,637,000 at the 1998 fiscal year end. This decrease is the net
result of $52,000  generated by operating  activities  (primarily  collection of
accounts receivable and depreciation, offset by net losses), $9,000 generated by
issuance of employee  stock  options,  $29,000  used for the purchase of capital
equipment and $155,000 used for principal  payments on capital lease obligations
and long-term debt.

     Accounts  receivable  decreased during 1999 to $728,000 at January 1, 2000,
as compared to  $1,918,000  at the 1998 fiscal year end. The primary  reason for
this large  decrease was a  significantly  lower level of  shipments  during the
entire  year as a result of the  Chesapeake  cancellation.  At  January 1, 2000,
accounts in excess of 60 days  totaled 1% of total  receivables,  as compared to
25% at January 2, 1998.

     Total  inventories  increased  slightly to $2,606,000 at January 1, 2000 as
compared  to  $2,482,000  at  January  2,  1999.  See Notes 2 and 11 of Notes to
Financial Statements for a comparison of inventory components. As noted above, a
significant  portion of the  inventory  relates to the  Chesapeake  program  and
carries the risk of potential future write-down.

     Property,   plant  and  equipment,  net  of  accumulated  depreciation  and
amortization,  decreased  by  $325,000  during  1999 as a result  of only  minor
additions  to  machinery  and  equipment  during the year of $29,000,  offset by
fiscal 1999 depreciation and amortization of $354,000.

     Accounts  payable were $265,000 at January 1, 2000, as compared to $312,000
at 1998 fiscal year end.  This  decrease  results from a lower level of business
activity during the year.

     Accrued  employee  compensation  and  benefits  decreased  by  $270,000  to
$134,000  from the prior  fiscal  year end.  This  decrease  results  from lower
year-end  employment  levels and the  absence  of profit  sharing  accruals.  At
January 1, 2000,  there was no accrual for the employee  profit  sharing plan as
compared to $225,000 at January 2, 1999.

     Customer  deposits  were  $32,000 at January 1, 2000 as  compared  to $0 at
January 2, 1999.

     Accrued warranty,  commissions and other accrued  liabilities were $285,000
at January 1, 2000, as compared to $194,000 at January 2, 1999. This increase is
primarily  attributable to a $97,000 accrual for a customer pricing  adjustment,
which was made at yearend.

     At January 1, 2000,  the Company had Capital Lease  obligations  of $39,000
with Bank of the West (successor to SierraWest  Bank),  which are secured by the
related equipment. The total amount is classified as short-term debt.

      The Company did not recognize any federal  income tax expense during 1999.
The Company has remaining future tax credit carryforwards for Federal income tax
purposes at January 1, 2000 of approximately $134,000.  These carryforwards will
not expire.

        On  October  23,  1998,  the  Company  renewed  its line of credit  with
SierraWest Bank. At that time, the line of credit was increased by $600,000 to a

<PAGE>

total of $1,000,000. This line of credit is for a term of 18 months, expiring in
May 2000, and bears interest at the prime rate. SierraWest Bank was subsequently
acquired  by Bank of the West and the  line of  credit  remains  in  effect.  At
January 1, 2000, the Company was in compliance  with all of the covenants of the
loan  agreement  and no  amounts  were  outstanding.  This  line  of  credit  is
collateralized by substantially all of the Company's assets. Management believes
that cash  generated  from  operations  during 2000,  together  with its line of
credit,  will provide sufficient cash to meet operating needs without additional
financing  activity  through 2000. * However,  should the Company need to pursue
additional  debt or equity  financing in the future,  there is no certainty that
such financing could be obtained or that the terms on which it might be obtained
would be favorable.

Future Outlook

     While 1999 was a  disappointing  year for both  shareholders  and employees
alike, we have made some positive accomplishments that will hopefully contribute
to greater stability and growth in the future.

     We  have  increased  our  outside  sales  organization  to  cover  expanded
geographical  areas and reach a broader  range of  customers.  We  believe  this
expansion has already had a positive  effect on sales of the Company's  standard
products. Advertising,  promotional and trade show activity increased in 1999 to
further  enhance  our  name  recognition  in the  marketplace.  We  believe  the
expansion of our sales and  marketing  effort,  which will  continue  during the
ensuing year, will provide positive returns in the future.

     The strong growth in our  opto-electronic  standard products,  particularly
Thermo-electric Cooler Controllers (TECCs), was a positive note for fiscal 1999.
The Company intends to expand its depth and variety of products  offered in this
market during fiscal 2000 and beyond.

      The military, aerospace,  industrial and medical markets continue to be an
important part of the Company's future. We will continue to pursue new customers
and  applications  in these markets while  striving to provide the best possible
service to our existing customer base.  Continued  broadening of our product and
customer base, coupled with a return to profitability,  will be our primary goal
over the foreseeable future.

     The  outlook  for the  ensuing  fiscal  year is one of  cautious  optimism.
Management  believes  that fiscal 2000 has the  potential  to show  considerable
improvement over 1999 results.

ITEM 7.  FINANCIAL STATEMENTS

     The financial  statements of the Company  (including  the notes thereto) at
January 1, 2000 and January 2, 1999 and for the years then ended, and the report
of independent  auditors thereon, are included herein on pages F- 3 through F-21
of this Form 10-KSB.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     Not applicable.

<PAGE>

                                    PART III
                                    --------

ITEM 9.  DIRECTORS,  EXECUTIVE OFFICERS,  PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

     Information regarding directors of the Company is to be set forth under the
heading  "Election of Directors - Nominees for Director" in the Company's  Proxy
Statement and is hereby incorporated herein by reference.

     Information  regarding  the  executive  officers of the Company who are not
also a directors  of the Company is included in Part I of this Form 10-KSB under
the heading  "Executive  Officers  of the  Company"  and is hereby  incorporated
herein by reference.

     Information  regarding  compliance  with  Section  16(a) of the  Securities
Exchange Act of 1934 is to be set forth under the heading "Election of Directors
- Section 16(a)  Beneficial  Ownership  Reporting  Compliance"  in the Company's
Proxy Statement and is hereby incorporated herein by reference.

ITEM 10.  EXECUTIVE COMPENSATION.

     Information regarding the Company's  remuneration of its executive officers
and   directors   is  to  be  set  forth  under  the   headings   "Election   of
Directors-Executive    Compensation",    "Election    of    Directors-Directors'
Compensation"  and  "Election  of  Directors--Directors'  Option  Plan"  in  the
Company's  Proxy  Statement,   which  information  is  incorporated   herein  by
reference.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Information  regarding the security  ownership of certain beneficial owners
and  management  is to be set forth under the heading  "Election  of Directors -
Security  Ownership" in the Company's  Proxy  Statement,  which  information  is
incorporated herein by reference.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Not applicable.

ITEM 13.      EXHIBITS AND REPORTS  ON FORM 8-K.

         (a)  Exhibits
              The exhibit index at page X-1, which follows the signature pages,
              is hereby  incorporated by reference into this Item 13 (a).

<PAGE>

         (b)  Reports on Form 8-K
              There were no Current Reports on Form 8-K filed during the fourth
              quarter of the Company's fiscal year ended January 1, 2000.

<PAGE>

                            HYTEK MICROSYSTEMS, INC.

       Index to Selected Quarterly Financial Data and Financial Statements

                                                                  Reference Page
                                                                  in Form 10-KSB
                                                                  --------------
Selected Quarterly Financial Data (unaudited)  .  .  .  .  .  .  .  .  .    F-2

Balance Sheet, January 1, 2000
    and January 2, 1999          .  .  .  .  .  .  .  .  .  .  .  .  .  .   F-3

Statement of Operations for the Years ended
    January 1, 2000 and January 2, 1999      .  .  .  .  .  .  .  .  .   .  F-4

Statement of Shareholders' Equity for the
    Years ended January 1, 2000 and January 2, 1999   .  .  .  .  .  .  .   F-5

Statement of Cash Flows for the Years Ended
    January 1, 2000 and January 2, 1999   .  .  .  .  .  .  .  .  .  .  .   F-6

Notes to Financial Statements   .  .  .  .  .  .  .  .  .  .  .  .  .  .  . F-7

Report of Independent Auditors    .  .  .  .  .  .  .  .  .  .  .  .  .  . F-20

Consent of Independent Auditors  .  .  .  .  .  .  .  .  .  .  .  .  .  .  F-21

                                      F-1
<PAGE>


                            HYTEK MICROSYSTEMS, INC.

                  Selected Quarterly Financial Data (unaudited)

                      (In thousands, except per share data)

<TABLE>

                                                                        Quarter Ended
                                -----------------------------------------------------------------------------------------
                                                  FISCAL 1999                                FISCAL 1998
                                --------------------------------------------   ------------------------------------------
                                Jan. 1,00    Oct. 2,99  Jul. 3,99  Apr. 3,99   Jan. 2,99  Oct. 3,99  Jul. 4,99  Apr. 4,98
                                ---------    ---------  ---------  ---------   ---------  ---------  ---------  ---------
<S>                             <C>          <C>         <C>       <C>         <C>        <C>        <C>        <C>

Net revenues                      $ 1,212    $ 1,015    $ 1,271    $ 1,717     $ 2,230    $ 3,026    $ 3,690    $ 3,587

Gross profit                      $   208    $    47    $    47    $   293     $   370    $ 1,094    $ 1,325    $ 1,407

Net income (loss)                 $  (136)   $  (396)   $  (372)   $  (234)    $  (169)   $   516    $   827    $   918

Net income (loss) per share -
  basic                           $ (0.04)     (0.13)   $ (0.12)   $ (0.08)    $ (0.06)   $   0.17   $   0.28   $   0.31

Net income (loss) per share -
  diluted                         $ (0.04)   $ (0.13)   $ (0.12)   $ (0.08)    $ (0.06)   $   0.16   $   0.26   $   0.29

Market price range per share

        High                      $  2.25    $  1.78    $  1.94    $  3.69     $  4.25    $  4.75    $  5.06    $   3.75
        Low                       $  1.50    $  1.28    $  1.38    $  1.38     $  2.38    $  3.38    $  3.75    $   1.94

</TABLE>

From March 26, 1992 through July 24, 1998, the Company's Common Stock was traded
on the OTC Bulletin Board. Since July 27, 1998 Hytek's Common Stock has been
quoted and traded on the NASDAQ Small Cap Market. The range of prices reported
above indicates the high and low bid quotations as provided by the National
Quotation Bureau, Inc. Such quotations reflect inter-dealer prices, without
retail mark-ups, mark-downs or commissions and may not represent actual
transactionss.

As of March 1, 2000, there were approximately 201 holders of record of the
Company's Common Stock.

The Company has never paid any cash dividends on its Common Stock and has no
intentions of paying cash dividends in the foreseeable future. Per the terms of
its loan agreement with SierraWest Bank, the Company is prohibited from paying
cash dividends at this time.

                                      F-2

<PAGE>

                            Hytek Microsystems, Inc.
                                  Balance Sheet

                       January 1, 2000 and January 2, 1999

<TABLE>
                                                                           1999               1998
                                                                   ----------------------------------------
<S>                                                                <C>                   <C>
Assets
Current assets:
   Cash and cash equivalents                                          $   2,514,635       $   2,637,182
   Trade accounts receivable, net of allowance for doubtful
     accounts of $50,000 in 1999 and 1998                                   727,918           1,918,265
   Inventories                                                            2,606,389           2,481,707
   Prepaid expenses and deposits                                             74,271              38,932
                                                                   ----------------------------------------
Total current assets                                                      5,923,213           7,076,086

Deferred income taxes                                                       200,000             200,000

Plant and equipment, at cost, less accumulated depreciation and
   amortization                                                             674,151             999,027
                                                                   ----------------------------------------
Total assets                                                          $   6,797,364       $   8,275,113
                                                                   ========================================
Liabilities and shareholders' equity Current liabilities:
   Accounts payable                                                   $     265,203       $     312,430
   Accrued employee compensation and benefits                               134,445             404,284
   Accrued warranty, commissions, and other                                 284,913             193,509
   Customer deposits                                                         32,308                   -
   Current portion of long-term debt                                              -              48,313
   Current obligations under capital leases                                  38,708              53,850
                                                                   ----------------------------------------
Total current liabilities                                                   755,577           1,012,386

Long-term debt, less current portion                                              -              52,736
Long-term obligations under capital leases                                        -              38,709

Commitments and contingencies

Shareholders' equity:
   Common stock, no par value:
     Authorized shares - 7,500,000
     Issued and outstanding shares - 3,064,758 at January 1, 2000
       and 3,039,758 at January 2, 1999                                   5,016,468           5,007,093
   Retained earnings                                                      1,025,319           2,164,189
                                                                   ----------------------------------------
Total shareholders' equity                                                6,041,787           7,171,282
                                                                   ----------------------------------------
Total liabilities and shareholders' equity                            $   6,797,364       $   8,275,113
                                                                   ========================================

</TABLE>

See Accompanying Notes

                                      F-3
<PAGE>

                            Hytek Microsystems, Inc.

                             Statement of Operations

                 Years ended January 1, 2000 and January 2, 1999

<TABLE>

                                                                          1999                1998
                                                                   ----------------------------------------
<S>                                                                <C>                       <C>
Net sales                                                            $     5,215,314         $12,533,045

Cost of sales                                                              4,620,090           8,336,635
Engineering and development                                                  852,841             945,312
Selling, general and administrative expenses                               1,050,448           1,149,194
                                                                   ----------------------------------------
                                                                           6,523,379          10,431,141
                                                                   ----------------------------------------
Operating income (loss)                                                   (1,308,065)          2,101,904

Interest income, net                                                         169,995              56,826
                                                                   ----------------------------------------
Income (loss) before provision for income taxes                           (1,138,070)          2,158,730

Income tax provision                                                             800              66,435
                                                                   ----------------------------------------
Net income (loss)                                                     $   (1,138,870)     $    2,092,295
                                                                   ========================================
Basic earnings (loss) per share                                       $        (0.37)     $         0.70
                                                                   ========================================
Diluted earnings (loss) per share                                     $        (0.37)     $         0.66
                                                                   ========================================
Shares used in calculating basic earnings
   (loss) per share                                                        3,061,128           3,004,721
                                                                   ========================================
Shares used in calculating diluted earnings
   (loss) per share                                                        3,061,128           3,159,724
                                                                   ========================================

</TABLE>

See accompanying notes.

                                      F-4
<PAGE>

                            Hytek Microsystems, Inc.

                        Statement of Shareholders' Equity

                 Years ended January 1, 2000 and January 2, 1999

<TABLE>
                                                Common Stock
                                       -------------------------------
                                                                           Retained
                                           Shares          Amount          Earnings            Total
                                       --------------- --------------- ------------------ -----------------
<S>                                    <C>             <C>             <C>                <C>
Balance at January 3, 1998                 2,941,424   $    4,974,676    $        71,894  $    5,046,570

   Net income                                      -                -          2,092,295       2,092,295

   Issuance of stock                          98,334           32,417                  -          32,417
                                       --------------- --------------- ------------------ -----------------
Balance at January 2, 1999                 3,039,758        5,007,093          2,164,189       7,171,282

   Net loss                                        -                -         (1,138,870)     (1,138,870)

   Issuance of stock                          25,000            9,375                  -           9,375
                                       --------------- --------------- ------------------ -----------------
Balance at January 1, 2000                 3,064,758   $    5,016,468    $     1,025,319  $    6,041,787
                                       =============== =============== ================== =================

</TABLE>

See accompanying notes.

                                       F-5

<PAGE>

                            Hytek Microsystems, Inc.

                             Statement of Cash Flows

                Increase (Decrease) in Cash and Cash Equivalents

                 Years ended January 1, 2000 and January 2, 1999

<TABLE>

                                                                             1999             1998
                                                                       ------------------------------------
<S>                                                                    <C>                <C>
Operating activities
Net income (loss)                                                        $   (1,138,870)   $   2,092,295
Adjustments to reconcile net income (loss) to net cash provided by
    operating activities:
     Depreciation and                                                           353,755          273,407
     amortization
     Changes in operating assets and liabilities:
       Trade accounts receivable, net                                         1,190,347          595,403
       Inventories                                                             (124,682)          99,682
       Prepaid expenses and deposits                                            (35,339)          11,103
       Accounts payable                                                         (47,227)        (995,905)
       Accrued employee compensation and benefits                              (269,839)          54,559
       Accrued warranty, commissions, and other                                  91,404          (13,060)
       Customer deposits                                                         32,308          (28,464)
                                                                       ------------------------------------
Net cash provided by operating activities                                        51,857        2,089,020

Investing activities
Purchases of equipment                                                          (28,879)        (516,589)
                                                                       ------------------------------------
Net cash used in investing activities                                           (28,879)        (516,589)

Financing activities
Principal payments on long-term debt                                           (101,049)         (43,951)
Principal payments on capital lease obligations                                 (53,851)        (113,234)
Proceeds from issuance of common stock                                            9,375           32,417
                                                                       ------------------------------------
Net cash used in financing activities                                          (145,525)        (124,768)
                                                                       ------------------------------------
Net increase (decrease) in cash and cash equivalents                           (122,547)       1,447,663
Cash and cash equivalents at beginning of year                                2,637,182        1,189,519
                                                                       ------------------------------------
Cash and cash equivalents at end of year                                 $    2,514,635    $   2,637,182
                                                                       ====================================
</TABLE>

See accompanying notes.

                                      F-6

<PAGE>

                            Hytek Microsystems, Inc.

                          Notes to Financial Statements

                 Years ended January 1, 2000 and January 2, 1999

1.   Accounting Policies

Description of Business

The  principal  business of Hytek  Microsystems,  Inc.  (the  "Company")  is the
engineering,   manufacturing   and  sale  of  hybrid   microcircuits.   Products
manufactured   by  the  Company  are  sold   primarily  to  original   equipment
manufacturers (OEMs) serving the oil exploration,  military,  satellite systems,
industrial  electronic  system,  opto-electronics  and automatic  test equipment
markets.  The  Company  markets  its  products  through  its own sales staff and
through independent sales representatives.

Basis of Presentation

The Company operates under a 52/53 week fiscal year, with the year end being the
Saturday  nearest  December 31st. The year ended January 1, 2000 ("fiscal 1999")
was a 52-week year, and the year ended January 2, 1999 ("fiscal  1998") was also
a 52-week year.

Concentration of Credit Risk (Note 11)

The Company  performs  ongoing credit  evaluations  of its customers'  financial
condition,   and   generally   requires  no  collateral   from  its   customers.
Non-performance  by these  parties  would  result in  losses up to the  recorded
amount of the related  receivables.  Management does not anticipate  significant
non-performance,   and  believes  the  Company  has   adequately   provided  for
uncollectible receivables in the Company's allowance for doubtful accounts.

During  1999,  the Company  realized  63% of its  revenues  from  government  or
military/aerospace  funded  sources.  In fiscal  1999,  the Company had sales to
Chesapeake Sciences and TRW that accounted for 11% and 10%, respectively, of net
sales.  In fiscal 1998,  sales to these two companies  accounted for 64% and 6%,
respectively, of net sales. The products sold to Chesapeake Sciences are used in
the eventual  production of off-shore  geophysical  oil  exploration  equipment.
During fiscal 1999, sales to Chesapeake  Sciences  decreased  significantly as a
result of  depressed  crude oil  prices and an  over-abundance  of the world oil
supply (see Note 11).

                                       F-7

<PAGE>

                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)

1.   Accounting Policies (continued)

Cash and Cash Equivalents

Cash and cash  equivalents  consist of cash and money market funds with original
maturities of less than ninety days.  The fair value of the Company's  financial
instruments  approximated their carrying value at January 1, 2000 and January 2,
1999. The Company maintains the majority of its cash and cash equivalents in one
financial institution.

During  fiscal  1999 and 1998,  the  Company  paid  income  taxes of $31,000 and
$45,000, respectively, and interest of $12,000 and $35,000, respectively.

Inventories (Notes 2 and 11)

Inventories  are  stated at the lower of cost  (determined  using the  first-in,
first-out  method),  or market.  Due to its  nature,  certain  of the  Company's
inventory  at  January 1, 2000 and  January 2, 1999 is subject to  technological
change and potential obsolescence.  Management does not anticipate these amounts
to be material,  and believes that they have adequately  provided for any losses
that may result.

Plant and Equipment

Plant  and  equipment  are  stated  at  cost.  Depreciation  is  provided  on  a
straight-line  basis over the  estimated  useful lives of the assets,  generally
three to five years.  Leasehold  improvements are amortized over the term of the
lease or their estimated useful lives, whichever is shorter.

Revenue Recognition

Sales are  recorded  by the  Company  and title  passes  to the  customer,  upon
shipment of the product from the Company's factory.

                                       F-8

<PAGE>

                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)

1.   Accounting Policies (continued)

Stock-Based Compensation

In accordance with the provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has
elected to follow  Accounting  Principles Board Opinion No. 25,  "Accounting for
Stock Issued to Employees" ("APB 25") and related  interpretations in accounting
for its employee stock option plans.  Under APB 25, if the exercise price of the
Company's  employee  stock  options  equals  or  exceeds  the fair  value of the
underlying  stock on the date of grant as determined  by the Company's  Board of
Directors, no compensation expense is recognized (see Notes 6 and 7).

Income Taxes

Deferred tax assets and  liabilities  are  determined  based on the  differences
between  financial  reporting  and tax bases of assets and  liabilities  and are
measured  using the  enacted  tax rates and laws that will be in effect when the
temporary differences are expected to reverse. Additionally, deferred tax assets
and liabilities are separated into current and non-current  amounts based on the
classification  of the related assets and  liabilities  for financial  reporting
purposes.

Research and Development Costs

Research and  development  costs are charged to operations as incurred,  and are
included in engineering and development  expenses on the accompanying  statement
of operations. During fiscal 1999 and 1998, such costs amounted to approximately
$171,000 and $236,000, respectively.

Product Warranty Costs

The Company has provided a liability for estimated future product warranty costs
based upon historical experience and anticipated warranty costs.

Advertising Costs

The Company  expenses the costs of all  advertising  campaigns and promotions as
they are incurred.  Total advertising  expense for fiscal 1999 and 1998 amounted
to approximately $30,000 and $26,000,  respectively, and is included in selling,
general and administrative expenses on the accompanying statement of operations.

                                       F-9


<PAGE>

                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)

1.   Accounting Policies (continued)

Use of Estimates in Preparation of Financial Statements

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Actual results could differ materially from those estimates.

2.   Inventories (Note 11)

Inventories consist of the following:

<TABLE>
                                       1999               1998
                               ----------------------------------------
<S>                             <C>                  <C>
Finished goods                     $     557,689       $     164,268
Work-in-process                          781,142           1,031,896
Raw materials                          1,267,558           1,285,543
                               ----------------------------------------
                               ----------------------------------------
                                   $   2,606,389       $   2,481,707
                               ========================================
</TABLE>

3.   Plant and Equipment

Plant and equipment consists of the following:

<TABLE>

                                        1999               1998
                                ----------------------------------------
<S>                                 <C>                <C>
Leasehold improvements              $     519,957       $     519,957
Machinery and equipment                 3,393,511           3,370,279
Furniture and fixtures                     29,900              25,888
                                ----------------------------------------
                                        3,943,368           3,916,124
Less accumulated depreciation
and amortization                       (3,269,217)         (2,917,097)
                                ----------------------------------------
                                ----------------------------------------
                                    $     674,151       $     999,027
                                ========================================

</TABLE>

                                      F-10

<PAGE>

                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)

4.   Income Taxes

The significant components of the Company's deferred tax assets are as follows:

<TABLE>
                                               1999                1998
                                        ----------------------------------------
<S>                                       <C>                 <C>
Deferred tax assets:
     Net operating loss carryforwards      $     381,330       $           -
     Credit carryforwards                        133,465             134,100
     Other                                       241,020             215,748
                                        ----------------------------------------
Total deferred tax assets                        755,815             349,848
Valuation allowance                             (555,815)           (149,848)
                                        ----------------------------------------
Net deferred tax assets                    $     200,000       $     200,000
                                        ========================================

</TABLE>

For the year ended  January 1, 2000,  the  valuation  allowance was increased by
$395,671 due to the Company's recent operating history.

The  provision  (benefit)  for income taxes  differs from the  provision  amount
computed by applying the  statutory  federal tax rate to income before taxes due
to the following:

<TABLE>

                                              1999               1998
                                      --------------------------------------
<S>                                      <C>                 <C>
Computed expected tax (benefit)           $   (397,711)       $    744,491
Nondeductible expenses                           2,040               2,152
Benefit of operating loss
 carryforward                                        -            (656,230)
Benefit of AMT tax credit                            -             (47,675)
State taxes, net                                   800              23,697
Increase in valuation allowance                395,671                   -
                                      --------------------------------------
                                          $        800        $     66,435
                                      ======================================

</TABLE>

As of  January  1,  2000,  the  Company  had net  operating  loss and tax credit
carryforwards  for federal income tax purposes of  approximately  $1,121,560 and
$133,000,  respectively.  These net operating loss  carryforwards will expire in
2020.

                                      F-11

<PAGE>

                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)

5.       Earnings per Share

The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>

                                                                           1999               1998
                                                                   ----------------------------------------
<S>                                                                 <C>                 <C>
Numerator:
   Net income (loss)                                                 $   (1,138,870)     $    2,092,295

Denominator:
   Denominator for basic earnings (loss) per share -
     weighted average shares                                              3,061,128           3,004,721
   Effect of dilutive securities:
     Employee stock options                                                       -             155,003
                                                                   ----------------------------------------
   Denominator for diluted earnings (loss) per share -
adjusted weighted average shares and assumed conversions
                                                                          3,061,128           3,159,724
                                                                   ========================================

Basic earnings (loss) per share                                      $         (.37)     $          .70
                                                                   ========================================

Diluted earnings (loss) per share                                    $         (.37)     $          .66
                                                                   ========================================

</TABLE>

Options to purchase  45,000 shares of common stock at prices  ranging from $4.88
to $5.00 per share were outstanding during fiscal 1998, but were not included in
the  computation  of diluted  earnings per share  because the options'  exercise
prices were  greater  than the average  market  price of the common  shares and,
therefore,  the effect  would be  anti-dilutive.  For the year ended  January 1,
2000, all outstanding  options were excluded from the computation of diluted net
loss per share  because the effect would be  anti-dilutive.  Therefore,  diluted
loss per share would be the same as basic loss per share.

                                      F-12

<PAGE>

                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)

6.   Stock Option Plans

1991 and 1981 Stock Option Plans

In May 1999,  the Board of  Directors  of the Company  (the  "Board"),  with the
consent of its  shareholders,  authorized  an  increase  to the number of shares
reserved  for  issuance  under the 1991 Stock  Option Plan (the "1991  Plan") to
500,000  shares of common  stock.  The 1991 Plan expires in May 2001 and 136,667
shares were  available for future grant as of January 1, 2000. The Company had a
1981  Incentive  Stock Option Plan (the "1981 Plan") that expired in August 1991
and there were outstanding  options to purchase 35,000 shares under this Plan at
January 1, 2000.  Outstanding  stock options under the two plans are exercisable
cumulatively in annual  increments  that range between  one-third and one-fourth
each year  beginning  one year after the grant date.  Options  granted under the
1991 Plan and the 1981 Plan have terms of five years. However, in February 1995,
the  Board  extended  the term of  certain  options  under the 1981 Plan by five
years,  deferring  expiration  until 2000.  The exercise price of these extended
options was in excess of the fair market value of the Company's  common stock at
the date of extension.

A summary of the  Company's  1981 and 1991  Plans'  stock  option  activity  and
related information for fiscal 1999 and 1998 are as follows:

<TABLE>

                                                      1999                                1998
                                       ---------------------------------      ---------------------------------
                                                         Weighted-Average                     Weighted-Average
                                           Options        Exercise Price        Options        Exercise Price
                                       ------------------------------------------------------------------------
<S>                                       <C>             <C>                 <C>            <C>
Outstanding-beginning of year               225,000         $   2.37            258,334         $   1.40
Granted                                      45,000             1.76             55,000             4.49
Exercised                                   (25,000)             .38            (68,334)             .39
Canceled                                          -                -            (20,000)            2.38
                                       ------------------------------------------------------------------------

Outstanding-end of year                     245,000         $   2.46            225,000         $   2.37
                                       ========================================================================

Exercisable at end of year                  118,750         $   2.10            102,500         $   1.28

Weighted-average fair value of
   options granted during the year                          $   1.20                            $   3.03

</TABLE>

                                      F-13

<PAGE>

                            Hytek Microsystems, Inc.
                    Notes to Financial Statements (continued)

6.   Stock Option Plans (continued)

Exercise  prices for  options  outstanding  under the two Plans as of January 1,
2000 ranged from $.38 to $5.00. The weighted-average  remaining contractual life
of those  options is 3.5 years.  A summary of the  outstanding  and  exercisable
options at January 1, 2000, segregated by exercise price ranges, is as follows:

<TABLE>

                           Options Outstanding                                    Exercisable Options
--------------------------------------------------------------------------- --------------------------------
                                                        Weighted-Average
                                       Weighted-           Remaining                           Weighted-
  Exercise Price                        Average           Contractual                           Average
      Range             Number       Exercise Price     Life (in years)         Number      Exercise Price
------------------- --------------- ----------------- --------------------- --------------- ----------------
<S>                   <C>              <C>               <C>                  <C>              <C>
$.38                       35,000              $.38              0.8               35,000          $.38
$1.56 - $2.13              85,000              1.75              3.3               25,000          1.88
$2.30 -  $3.07             80,000              2.72              2.3               47,500          2.81
$4.88 -  $5.00             45,000              4.97              3.4               11,250          4.97
                    ---------------                                         ---------------
                          245,000             $2.46              2.5              118,750         $2.10
                    ===============                                         ===============

</TABLE>

1991 Directors' Stock Option Plan

Under the 1991 Directors'  Stock Option Plan (the  "Directors'  Plan"),  200,000
shares of the  Company's  common  stock had been  reserved  for  issuance  as of
January  1,  2000,  of which  options to  purchase  120,000  shares at per share
exercise  prices that range from $.19 to $2.69 had been granted  (100,000 shares
had been granted as of January 2, 1999).  The  Directors'  Plan provides for the
automatic  grant of an option to purchase  15,000 shares upon first  becoming an
outside director (a "First Option").  In September 1997, the Directors' Plan was
amended  whereby  non-employee  directors who serve on the Board of Directors of
the Company for five years or more receive an automatic grant of 5,000 shares (a
"Subsequent Option") on the last business day of each fiscal year at an exercise
price equaling the fair value of the Company's stock on such date. At January 1,
2000,  January 2, 1999 and January 3, 1998,  options to purchase an aggregate of
20,000 shares (60,000  shares total) were granted to the four outside  directors
under this  amendment.  First Options  granted under the Directors' Plan vest on
and become exercisable cumulatively on the first, second and third anniversaries
of the grant date.  Subsequent  Options vest and become fully exercisable on the
first anniversary of the grant date. The Directors' Plan expires February 2001.

                                      F-14

<PAGE>

                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)

6.   Stock Option Plans (continued)

A summary of the  Company's  Directors'  Plan stock option  activity and related
information for fiscal 1999 and 1998 are as follows:

<TABLE>

                                                       1999                                1998
                                       -----------------------------------     --------------------------------
                                                          Weighted-Average                    Weighted-Average
                                            Options        Exercise Price       Options        Exercise Price
                                       ------------------------------------------------------------------------
<S>                                       <C>            <C>                  <C>            <C>
Outstanding-beginning of year                55,000      $    1.86               65,000      $     .83
Granted                                      20,000           1.81               20,000           2.69
Exercised                                         -              -              (30,000)           .19
                                       ------------------------------------------------------------------------

Outstanding-end of year                      75,000     $     1.85               55,000     $     1.86
                                       ========================================================================

Exercisable at end of year                   55,000     $     1.86               35,000     $     1.38

Weighted average fair value of
   options granted during the year                      $     1.33                          $     1.96

</TABLE>

Exercise  prices per share for options  outstanding as of January 1, 2000 ranged
from $.19 to $2.69.  The  weighted-average  remaining  contractual life of those
options is 7.4 years. A summary of the outstanding  and  exercisable  directors'
options at January 1, 2000, segregated by exercise price ranges, is as follows:

<TABLE>

                           Options Outstanding                                    Exercisable Options
--------------------------------------------------------------------------- --------------------------------
                                                        Weighted-Average
                                       Weighted-           Remaining                           Weighted-
  Exercise Price                        Average           Contractual                           Average
      Range             Number       Exercise Price     Life (in years)         Number      Exercise Price
------------------- --------------- ----------------- --------------------- --------------- ----------------
<S>                   <C>              <C>              <C>                   <C>               <C>
   $.19                    15,000          $.19              1.1               15,000              $.19
   $1.81                   20,000          1.81             10.0                    -                 -
   $2.28-2.69              40,000          2.49              8.5               40,000              2.49
                    ---------------                                     ---------------
                           75,000         $1.85              7.4               55,000             $1.86
                    ===============                                     ===============

</TABLE>
                                      F-15

<PAGE>

                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)

7.   Stock-Based Compensation

The Company has three  stock-based  compensation  plans:  The 1991 Stock  Option
Plan, the 1981 Incentive Stock Option Plan, and the 1991 Directors' Stock Option
Plan, all of which are described in Note 6 above.

Pro forma information regarding net income and earnings per share is required by
SFAS 123,  which also  requires  that the  information  be  determined as if the
Company has  accounted  for its employee  stock  options  granted  subsequent to
December 31, 1994 under the fair value method of that Statement.  The fair value
for these  options  was  estimated  at the date of grant  using a  Black-Scholes
option pricing model with the following  weighted-average  assumptions  for 1999
and 1998,  respectively:  risk-free  interest  rates of 6.7% and 4.8%,  dividend
yields of 0% and 0%;  volatility  factors of the  expected  market  price of the
Company's common stock of .854 and .863, and a weighted-average expected life of
the options of 4.7 and 4.7 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options,  which have no vesting  restrictions and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective assumptions,  including the expected stock price volatility.  Because
the  Company's  employee  stock  options  have   characteristics   significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

                                      F-16

<PAGE>

                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)

7.   Stock-Based Compensation (continued)

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense  over the vesting  period of the options.  The effect of
applying  SFAS 123's  fair  value  method to the  Company's  stock-based  awards
results in pro forma information as follows:

<TABLE>

                                                    1999               1998
                                            ------------------------------------
<S>                                           <C>                 <C>
Net income (loss) as reported                 $   (1,138,870)     $    2,092,295
                                            ====================================

Pro forma net income (loss)                   $   (1,260,585)     $    2,039,444
                                            ====================================
Earnings (loss) per share as reported:
     Basic                                    $        (.37)      $         .70
                                            ====================================
     Diluted                                  $        (.37)      $         .66
                                            ====================================
   Pro forma earnings (loss) per share:
     Basic                                    $        (.41)      $         .68
                                            ====================================
     Diluted                                  $        (.41)      $         .65
                                            ====================================

</TABLE>

Because SFAS 123 is applicable  only to options  granted  subsequent to December
15, 1994, its pro forma effect will not be fully reflected until 2000.

8.   Profit Sharing Plan

In February 1995, the Company's  Board adopted the 1995 Profit Sharing Plan (the
"Profit Sharing Plan"),  which is available to all eligible full-time  employees
of the Company,  except executive officers of the Company, as defined. Under the
Profit  Sharing Plan, the Company will  distribute to employees  between 10% and
15% of the Company's pre-tax income, as defined. The distribution  percentage is
at the discretion of the Company's  Board. The Plan, which terminates by its own
terms in December  2005,  may be terminated or amended at any time by the Board.
During fiscal 1999 and 1998, the Board authorized $0 and $225,000, respectively,
in profit  sharing  distributions  to  employees,  which  amount is  included in
accrued employee compensation and benefits in the accompanying balance sheet.

                                      F-17


<PAGE>

                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)

9.   Long-Term Debt

In October  1998,  the  Company  renewed an  existing  revolving  business  loan
agreement  (the "Loan  Agreement")  with a bank under  which it may borrow up to
$1,000,000  at the bank's  prime  rate  (aggregating  8.5% at January 1,  2000).
Interest is payable monthly up to the maturity date, May 15, 2000, at which time
all  unpaid   principal  and  interest   become  due.  The  Loan   Agreement  is
collateralized  by the  Company's  inventory and accounts  receivable.  The Loan
Agreement imposes certain limitations on the payment of dividends and incurrence
of additional  indebtedness.  At January 1, 2000, the Company had no outstanding
borrowings under this Loan Agreement.

10.  Commitments and Contingencies

Leases

The Company leases its  administrative  and production  facility and also leases
certain operating  equipment under  noncancelable  operating lease  arrangements
with terms in excess of one year.  The  Company  also leases  certain  equipment
under noncancelable lease arrangements that are accounted for as capital leases.
Plant and equipment  includes  assets under capital leases  amounting to $89,662
(net of  accumulated  amortization  of $68,564) and $121,307 (net of accumulated
amortization  of $36,919) at January 1, 2000 and January 2, 1999,  respectively.
These capital leases are secured by the related equipment.

The aggregate  future  minimum lease payments  under  noncancelable  capital and
operating leases are as follows at January 1, 2000:

<TABLE>

                                                   Capital        Operating
                                                   Leases           Leases
                                         ---------------------------------------
<S>                                          <C>                <C>
2000                                         $    39,992        $     188,000
2001                                                   -              189,000
2002                                                   -              194,000
2003                                                   -              199,000
2004                                                   -              200,000
Thereafter                                             -              288,000
                                          --------------------------------------
Total minimum payments                            39,992        $   1,258,000
                                                              ==================
Less amount representing interest                 (1,284)
                                          --------------------
Present value of minimum lease payments           38,708
Less current obligations                         (38,708)
                                          --------------------
Long-term obligations                        $         -
                                          ====================

</TABLE>

                                      F-18

<PAGE>

                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)

10.  Commitments and Contingencies (continued)

The  Company's   total  rental  expense   charged  to  operations   amounted  to
approximately $276,000 and $287,000 in fiscal 1999 and 1998, respectively.

Legal Proceedings

In the course of business,  the Company occasionally receives inquiries relating
to various legal matters. In the opinion of management,  any liability resulting
from such  inquiries  will not have a material  adverse  effect on the Company's
financial position or results of operations.

11.      Chesapeake Inventory

On  February  25,  1999,  the Company  was  notified  by its  largest  customer,
Chesapeake  Sciences  Corp.,  to place all open orders on an  indefinite  "hold"
status,  citing  continuing  depressed crude oil prices and an over-abundance of
the world oil supply. Chesapeake subsequently canceled all remaining undelivered
items on these purchase orders.  On August 17, 1999, the Company entered into an
agreement (the "Final Settlement  Agreement") with Chesapeake whereby Chesapeake
will pay to the Company $2.3  million,  plus  interest at 9.5% per year, in full
and final settlement of all claims by the Company related to the cancellation of
these  purchase  orders.  Final payment of $1.4 million is to be received by the
Company in August 2000. At any time after any  principal  payment is received by
the Company,  Chesapeake  shall have the right to order specified  quantities of
the related inventory,  provided the aggregate value of such quantities does not
exceed the total principal payments received by the Company. The Company has not
recorded the Final  Settlement  Agreement  amount.  The Company records payments
received as deferred  revenue until the inventory is shipped,  at which time the
revenue is  recognized.  The Company has  recorded a liability  in the amount of
$32,308 on the accompanying  balance sheet for principal  payments received from
Chesapeake  in excess of  quantities  of inventory  shipped to  Chesapeake as of
January 1, 2000.

At January 1, 2000,  approximately $1.4 million of the Company's total inventory
balance  related to the Chesapeake  program.  While the Company may have certain
rights to recover costs under the Final Settlement Agreement, there is currently
no assurance  that all inventory  costs can or will be recovered.  The potential
for a write-down of inventory exists in the event Chesapeake  defaults under the
Final Settlement Agreement. Management of the Company has reserved approximately
$300,000 against the inventory at January 1, 2000.

                                      F-19

<PAGE>

                         Report of Independent Auditors

The Board of Directors and Shareholders
Hytek Microsystems, Inc.

We have audited the accompanying balance sheet of Hytek Microsystems, Inc. as of
January 1, 2000 and January 2, 1999,  and the related  statements of operations,
shareholders'  equity,  and cash flows for the years then ended. 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. 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 financial position of Hytek  Microsystems,  Inc. at
January 1, 2000 and January 2, 1999,  and the results of its  operations and its
cash flows for the years then ended in  conformity  with  accounting  principles
generally accepted in the United States.


Reno, Nevada                                                /s/Ernst & Young LLP
January 28, 2000

                                      F-20

<PAGE>

                                  Exhibit 23.1

                        CONSENT OF INDEPENDENT AUDITORS


We consent to the incorporation by reference in the Prospectuses  constituting a
part of the  Registration  Statements on Form S-8 (File Nos.  2-90789,  33-7452,
33-28848,  33-61717,  33-42836 and 333-27899)  pertaining to the Incentive Stock
Option Plan,  the Key Employee  Stock  Purchase Plan, the 1991 Stock Option Plan
and the 1991 Directors' Stock Option Plan, of our report dated January 28, 2000,
with respect to the financial statements of Hytek Microsystems, Inc.

                                                            /s/Ernst & Young LLP


Reno, Nevada
March 23, 2000

                                      F-21

<PAGE>

                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

HYTEK MICROSYSTEMS, INC.


                                                       By:  /s/ Charles S. Byrne
                                                                Charles S. Byrne
                                                             President and Chief
                                                               Executive Officer

                                                          Date:   March 24, 2000

                                POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE  PRESENTS,  that each person whose  signature
appears below  constitutes  and appoints  Charles S. Byrne and Shou-Chen Yih, or
either  of  them,  his  or  her   attorney-in-fact,   each  with  the  power  of
substitution,  for him or her in any and all capacities,  to sign any amendments
to this  Annual  Report  on Form  10-KSB,  and to file the same,  with  exhibits
thereto and other  documents in connection  therewith,  with the  Securities and
Exchange  Commission,  hereby  ratifying  and  confirming  all that each of said
attorneys-in-fact,  or his or her substitute or substitutes,  may do or cause to
be done by virtue hereof.

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.

   SIGNATURE                     TITLE                         DATE

/s/ Charles S. Byrne          President and Chief          March 24, 2000
Charles S. Byrne              Executive Officer,
                              Director

/s/ Sally B. Chapman          Chief Financial Officer      March 24, 2000
Sally B. Chapman              (Principal financial and
                              accounting officer)

                                      S-1

<PAGE>


   SIGNATURE                      TITLE                        DATE

/s/ Robert Boschert            Director                     March 24, 2000
Robert Boschert

/s/ Edward W. Moose            Director                     March 24, 2000
Edward W. Moose

/s/ Edward Y. Tang             Director                     March 24, 2000
Edward Y. Tang

/s/ Shou-Chen Yih              Director                     March 24, 2000
Shou-Chen Yih

                                      S-2

<PAGE>

                            HYTEK MICROSYSTEMS, INC.

                          Annual Report on Form 10-KSB
                    for the fiscal year ended January 1, 2000

                                  EXHIBIT INDEX

(The  Registrant  will furnish to any shareholder who so requests a copy of this
Annual  Report on Form  10-KSB,  including a copy of any Exhibit  listed  below,
provided  that the  Registrant  may require  payment of a reasonable  fee not to
exceed its expense in furnishing any such Exhibit.)

<TABLE>

Exhibit
Number            Exhibit Description
-------------     --------------------------------------------------------------
<S>               <C>

3.1 (1)           Amended and Restated Articles of Incorporation
                  filed on February 10, 1983.

3.2 (2)           Certificate of Amendment of Articles of
                  Incorporation filed June 28, 1988.

3.3 (X)           Composite Article of Incorporation, as amended
                  through June 28, 1988.

3.4 (9)           Amended and Restated Bylaws, as amended
                  through July 27, 1992.

4.1               Reference Exhibits 3.1, 3.2, 3.3 and 3.4.

9.1 (4)           Shareholders' Agreement dated as of April 9, 1990.

10.1a (8) (*)     Incentive Stock Option Plan, as amended
                  July 27, 1992.

10.1b (5) (*)     Forms of Incentive Stock Option Agreement and
                  Non-statutory Stock Option Agreement used under
                  Incentive Stock Option Plan.

10.2 (10) (*)     Form of Amendment to Option Agreements of
                  Charles S. Byrne, Jay L. Kimball and Jonathan B.
                  Presnell.

10.3a (11) (*)   1991 Stock Option Plan, as amended
                 February 7, 1997.

10.3b (8) (*)    Form of  Agreement  used  under the 1991  Stock
                 Option Plan.

</TABLE>

                         X-1 (Footnotes at end of index)

<PAGE>

<TABLE>
Exhibit
Number            Exhibit Description
-------------     --------------------------------------------------------------
<S>               <C>

10.4 (12) (*)     1991 Directors' Stock Option Plan as amended
                  September 11, 1997, and form of Agreement thereunder.

10.5a (3) (*)     Key Employee Stock Purchase Plan.

10.5b (5) (*)     Form of Stock Purchase Agreement used under
                  the Key Employee Stock Purchase Plan.

10.6 (7) (*)      Form of Indemnification Agreement entered into
                  by the Registrant with each of its directors and
                  executive officers.

10. 7 (6)         Proprietary Information Agreement dated
                  as of March 25, 1992, between James M. Phalan
                  and the Registrant.

10.8 (13)         Line of Credit Agreement dated October 23,
                  1998 between HytekMicrosystems, Inc. and
                  SierraWest Bank.

10.9              Lease dated March 12, 1990 for the facility at 400 Hot Springs
                  Road, Carson City, Nevada.

10.10             Fiscal 1998 Incentive Compensation Agreement
                  with Charles S. Byrne.

10.11             Fiscal 1998 Incentive Compensation Agreement
                  with Jonathan B. Presnell.

10.12 (12)        Promissory Note and Line of Credit  Agreement dated
                  October 14, 1997 between Hytek Microsystems, Inc.
                  and SierraWest Bank.

10.13 (14)        Final Settlement Agreement with Chesapeake Sciences Corp.
                  dated August 17, 1999.

13.1              President's Letter to Shareholders dated
                  April 1, 2000, which together with
                  this Form 10-KSB comprises the Registrant's
                  1999 Annual Report to Shareholders.

21.1              The Registrant has no subsidiaries.

23.1              Consent of Independent Auditors
                  (see page F- 21).

24.1              Power of Attorney (see page S-1).

27.1              Financial Data Schedule.

</TABLE>

                                       X-2

<PAGE>

<TABLE>

Footnotes:
----------
<S>               <C>
(1)               Incorporated by reference to Exhibit filed with the
                  Registration Statement on Form S-1 (File No. 2-82140).

(2)               Incorporated  by reference to Exhibit filed with the Quarterly
                  Report on Form 10-Q for the quarter ended July 2, 1988.

(3)               Incorporated  by  reference  to Exhibit  filed with the Annual
                  Report on Form 10-K for the year ended December 29, 1990.

(4)               Incorporated  by  reference  to Exhibit  filed with the Annual
                  Report on Form 10-K for the year ended December 30, 1989.

(5)               Incorporated  by  reference  to Exhibit  filed with the Annual
                  Report on Form 10-K for the year ended December 31, 1986.

(6)               Incorporated  by  reference  to Exhibit  filed with the Annual
                  Report on Form 10-K for the year ended December 28, 1991.

(7)               Incorporated  by  reference  to Exhibit  filed with the Annual
                  Report on Form 10-K for the year ended December 31, 1988.

(8)               Incorporated by reference to Exhibit filed with the Quarterly
                  Report on Form 10-Q for the quarter ended September 26,
                  1992.

(9)               Incorporated by reference to the Exhibit filed with the
                  Quarterly Report on Form 10-Q for the quarter ended
                  June 27, 1992.

(10)              Incorporated  by  reference  to Exhibit  filed with the Annual
                  Report on Form 10-KSB for the year ended December 31, 1994.

(11)              Incorporated  by  reference  to Exhibit  filed with the Annual
                  Report on Form 10-KSB for the year ended December 28, 1996.

(12)              Incorporated  by reference to Exhibit filed with the Quarterly
                  Report On Form  10-QSB for the  quarter  ended  September  27,
                  1997.

(13)              Incorporated  by  reference  to the  Exhibit  filed  with  the
                  Quarterly  Report On Form 10-QSB for the quarter ended October
                  3, 1998.

(14)              Incorporated  by reference to Exhibit filed with the quarterly
                  report on Form 10-QSB for the period ended October 2, 1999.

(*)               Management contract or compensatory plan or arrangement in
                  which any director or executive officer named in the
                  Registrant's  Annual  Report on Form 10-KSB or Proxy Statement
                  has participated or participates.

(X)               Incorporated by reference to Exhibit filed with the Annual
                  Report on Form 10-KSB for the year ended January 2, 1999.

</TABLE>

                                       X-3