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

                                    FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

For the fiscal year ended August 30, 2002
                                       OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

For the transition period from ______________________ to ______________________

                           Commission file No. 0-11003
                               WEGENER CORPORATION

             (Exact name of registrant as specified in its charter)

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

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

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 623-0096

                 REGISTRANT'S WEB SITE: HTTP://WWW.WEGENER .COM

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                          Common Stock, $.01 par value

                                (Title of class)

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

                              YES [X]        NO [ ]

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

     As of November 5, 2002, 12,280,723 shares of registrant's Common Stock were
outstanding  and  the  aggregate  market  value  of the  Common  Stock  held  by
nonaffiliates was $8,347,778 based on the last sale price of the Common Stock as
quoted on the NASDAQ  Small-Cap Market on such date. (The officers and directors
of the registrant,  and owners of over 10% of the registrant's common stock, are
considered affiliates for purposes of this calculation.)

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

                              YES [ ]        NO [X]

     As of the last business day of the  registrant's  most  recently  completed
second  fiscal  quarter the  aggregate  market value of the Common Stock held by
non-affiliates  was $9,182,555  based on the last sale price of the Common Stock
as quoted on the NASDAQ Small-Cap Market on such date.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive  Proxy  Statement  pertaining to the January 21,
2003 Annual  Meeting of  Stockholders,  only to the extent  expressly  so stated
herein, are incorporated herein by reference into Part III.

================================================================================

<PAGE>

                               WEGENER CORPORATION
                                    FORM 10-K
                           YEAR ENDED AUGUST 30, 2002
                                      INDEX


                                     PART I

                                                                            Page
Item 1.   Business.............................................................2
Item 2.   Properties...........................................................8
Item 3.   Legal Proceedings....................................................8
Item 4.   Submission of Matters to a Vote of Security Holders..................8

                                     PART II

Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters..................................................8
Item 6.   Selected Financial Data.............................................10
Item 7.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations...............................10
Item 7a.  Quantitative and Qualitative Disclosures About Market Risk..........19
Item 8.   Financial Statements and Supplementary Data.........................19
Item 9.   Changes in and Disagreements With Accountants on
            Accounting and Financial Disclosures..............................39

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant..................39
Item 11.  Executive Compensation..............................................39
Item 12.  Security Ownership of Certain Beneficial Owners
            and Management and Related Stockholder Matters....................39
Item 13.  Certain Relationships and Related Transactions......................39
Item 14.  Controls and Procedures.............................................39

                                     PART IV

Item 15.  Exhibits, Financial Statement Schedules, and
            Reports on Form 8-K...............................................40

                                       1
<PAGE>

                                     PART I

ITEM 1.   BUSINESS

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

     (a)  General development of business.


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

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

     (b)  Financial information about segments.

     Segment  information  contained  in Note 10 to the  consolidated  financial
statements  contained  in this report is  incorporated  herein by  reference  in
response to this item.

     (c)  Narrative description of business.

SATELLITE  COMMUNICATIONS  ELECTRONICS.  WCI  is an  international  provider  of
digital  solutions for video,  audio and  broadcast  data  networks.  Throughout
fiscal 2002 our customers continued to convert from analog to digital technology
for a variety of  reasons.  Applications  include  broadcast  television,  cable
television,  radio networks, business television,  distance education,  business
music, satellite paging and financial information distribution. WCI services the
products  that it sells.  The Company  warrants its products for a period of one
year.  There were no significant  warranty  claims  outstanding as of August 30,
2002.

     Throughout  fiscal  2002 and fiscal  2001,  WCI  continued  to produce  and
develop  digital  compression  products to aid our  customers  in their  digital
conversions.  Wegener's  digital  products  are in use  worldwide  in  broadcast
television,  distance learning,  radio,  cable television,  and private business
networks.  In terms of new orders,  digital  products  are the  fastest  growing
product  line for the  Company.  As expected,  demand for the  Company's  analog
products has continued to decline following market demand for, and the Company's
emphasis on, digital technology.

DIGITAL  COMMUNICATIONS.  The demand for digital products is being driven by the
high cost of satellite capacity and consumer demand for more channels. Satellite
capacity is scarce due to  pressures  on both the supply and demand sides of the
market. On the supply side, satellites are extremely expensive to build, launch,
and  maintain.  The  useful  life of a  satellite  is  limited  by the amount of
positioning  fuel that can be carried.  Also,  the  placement of  satellites  is
regulated  by the Federal  Communications  Commission  (FCC) and  therefore  the
number of  satellites  within  range of any given  location is  limited.  On the
demand side,  the cost of receive  hardware is being  steadily  reduced  through
advancing  technology,  and  high  volume  manufacturing  efficiency.   This  is
evidenced by the trend in both television and radio toward narrowcasting to well
defined market segments as opposed to  broadcasting  to the general  population.
Digital compression  technology allows a four to ten-fold,  or more, increase in
the  throughput  of a  satellite  channel.  For the  network,  this  compression
represents an opportunity to reduce the cost of satellite use. For the satellite
operator it represents an opportunity  to increase the revenues  generated by an
expensive asset. Due to existing satellite transponder contracts and the cost of
replacing existing analog hardware,  the digital conversion of

                                       2
<PAGE>

major networks is taking longer than anticipated.  These network conversions are
expected  to occur in the near  future,  but it is  impossible  to  predict  the
precise timing of customer internal decision processes.  Management believes the
market as a whole has considerable built up demand for digital technology.

Significant WCI order and revenue activity during fiscal 2002 include:

BROADCAST TELEVISION MARKET

     During the first quarter of fiscal 2002 the Company  completed  shipment of
UNITY5000  receivers  to FOX  Digital.  These  receivers  enabled FOX Digital to
transmit the Super Bowl XXXVI game to all broadcast  affiliates using the latest
technology available. The Company expects additional opportunities for its Unity
digital receivers in the broadcast television market during the next 24 months.

BROADCAST RADIO MARKET

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

CABLE TELEVISION MARKET

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

     During fiscal 2002 the Company  introduced a new line of products  designed
to allow the economical  addition of broadcast HDTV signals to cable  television
systems.   This  product  line,  our  DTV700  series,  is  expected  to  provide
significant  revenues  throughout  fiscal 2003 and beyond.  Initial shipments to
customers occurred during the first quarter of fiscal 2003.

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

BUSINESS BROADCAST MARKET

     During  fiscal  2002 the  Company  completed  shipments  of the  previously
announced  $7.4 million order to Roberts  Communications  Network.  This complex
satellite  transmission  system is in daily use to provide targeted  horseracing
broadcasts to Roberts subscribers throughout the USA. Additional revenue in this
market segment is expected to continue for the next 24 months and beyond.

     During  fiscal 2002 the Company  continued to ship  against the  previously
announced $30 million order to a major  international  private network operator.
Both the Company and the  customer  continue to view the contract as critical to
their business plans.  Shipments are expected to continue  against this contract
as specified throughout fiscal 2003 and beyond.

     During fiscal 2002, extensive  development has been devoted to new products
for this market  segment  including the iPump Media Server.  This product allows
for commercial  satellite network  operators to send television  programs over a
satellite link for targeted playback in specific locations at specific times. In
simple  terms,  it is a highly  specialized  commercial  version  of a  consumer
personal video recorder. Initial orders for this product are

                                       3
<PAGE>

expected  in fiscal  2003 and the iPump  product  line is  expected  to  provide
significant  revenue to the  Company  during the next 24 months and  beyond.  In
addition,  this product has wide ranging  applications and revenue  potential in
all  of the  market  segments  served  by the  Company,  (broadcast  television,
broadcast radio, cable television, and business broadcasting).

          (iii) Manufacturing and suppliers.

     During fiscal 2002 and fiscal 2001,  the Company  contracted  with offshore
manufacturers  for certain  finished  goods.  Raw  materials  consist of passive
electronic components, electronic circuit boards and fabricated sheet metal. WCI
purchases   approximately   one-half  of  its  raw   materials   directly   from
manufacturers  and the other half is purchased  from  distributors.  Passive and
active  components  include  parts such as  resistors,  integrated  circuits and
diodes. WCI uses approximately ten distributors and three contract manufacturers
to  supply  its  electronic  components.   WCI  often  uses  a  single  contract
manufacturer or subcontractor to supply a total sub-assembly or turnkey solution
for higher volume  products.  Direct suppliers  provide sheet metal,  electronic
circuit  boards  and other  materials  built to  specifications.  WCI  maintains
relationships  with  approximately  20 direct  suppliers.  Most of the Company's
materials are available from a number of different suppliers;  however,  certain
components used in existing and future  products are currently  available from a
single or limited sources.  Although the Company believes that all single-source
components  currently  are  available  in adequate  quantities,  there can be no
assurance  that  shortages  or  unanticipated  delivery  interruptions  will not
develop  in the  future.  Any  disruption  or  termination  of supply of certain
single-source  components could have an adverse effect on the Company's business
and results of operations.

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

     The Company holds certain  patents with respect to some of its products and
markets its services and  products  under  various  trademarks  and  tradenames.
Additionally, the Company licenses certain analog audio processing technology to
several   manufacturing   companies   which   generated   royalty   revenues  of
approximately  $120,000,  $230,000, and $257,000 in fiscal 2002, 2001, and 2000,
respectively.  These royalty license  agreements renew annually unless cancelled
by the licensee on the expiration  date.  Although the Company believes that the
patents and trademarks  owned are of value, the Company believes that success in
its industry will be dependent upon new product introductions,  frequent product
enhancements,  and customer support and service. However, the Company intends to
protect its rights when, in its view, these rights are infringed upon.

          (v)  Seasonal variations in business.

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

          (vi) Working capital practices.

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

          (vii) Dependence upon a limited number of customers.

     The Company sells to a variety of domestic and  international  customers on
an  open-unsecured  account basis.  These customers  principally  operate in the
cable  television,   broadcast  business  music,   private  network,   and  data
communications industries. Sales to Roberts Communications Network and Muzak and
affiliates  accounted  for  approximately  27.9% and 27.5% of revenues in fiscal
2002,  respectively.  Sales to FOX  Digital  and FOX  Sports Net  accounted  for
approximately 34.7% of revenues in fiscal 2001. At August 30, 2002, one customer
accounted for

                                       4
<PAGE>

more than 10% of the  Company's  accounts  receivable.  At August 31, 2001,  two
customers  accounted  for more than 10% of the  Company's  accounts  receivable.
Sales to a relatively small number of major customers have typically comprised a
majority of the Company's revenues. This trend is expected to continue in fiscal
2003.  There can be no assurance that the loss of one or more of these customers
would not have a material adverse effect on the Company's operations.

          (viii) Backlog of orders.

     The Company's  backlog is comprised of undelivered,  firm customer  orders,
which are  scheduled  to ship  within  18  months.  The  Company's  backlog  was
approximately  $10,700,000  at August 30, 2002,  and  $19,057,000  at August 31,
2001.  One  customer  accounted  for 85.5% of the  backlog at August  30,  2002.
Reference  is  hereby  made to the  information  contained  in  MD&A,  which  is
incorporated herein by reference in response to this item.

     Approximately $8,700,000 of the August 30, 2002 backlog is expected to ship
during  fiscal  2003.  One customer  accounted  for 82.2% of the August 30, 2002
backlog scheduled to ship during fiscal 2003.

          (ix) Government contracts.

     Not applicable.

          (x)  Competitive Conditions.

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

Broadcast Television

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

Cable Television

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

                                       5
<PAGE>

Broadcast Radio Networks

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

Business Broadcasting

     Competition in the business  broadcasting  market segment  generally  comes
from  smaller  companies  with  unique  products  tailored  to the  needs of the
customer.  The  Company  feels that this  market  segment is one where it enjoys
competitive advantages.  Business music networks, for example,  continue to rely
on the Company's powerful network control and targeting capabilities to maximize
every  advertising  dollar.  New products such as the iPump digital media server
will allow business broadcasting networks to benefit from satellite broadcasting
technologies  without requiring large amounts of satellite cost.  Competition in
this field remains  limited and the Company expects to be among the industry key
players over the next 24 months.

          (xi) Research and development activities.

     The  Company's   research  and  development   activities  are  designed  to
strengthen  and broaden  its  existing  products  and systems and to develop new
products  and  systems.  A  major  portion  of  the  fiscal  2002  research  and
development  expenses  were  spent in the  digital  video  product  area.  WCI's
research and development expenses totaled $2,410,000 in fiscal 2002,  $2,689,000
in fiscal 2001, and $3,048,000 in fiscal 2000. Additional  information contained
on pages 2-4 and in MD&A in this report is  incorporated  herein by reference in
response to this item.

          (xii) Environmental Regulation.

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

          (xiii) Number of employees.

     As of August 30, 2002, the Company had 83 full time  employees  employed by
the  WCI  manufacturing   subsidiary  and  no  employees   employed  by  Wegener
Corporation  or Wegener  Communications  International,  Inc. No  employees  are
parties to a  collective  bargaining  agreement  and the Company  believes  that
employee relations are good.

     (d)  Financial information about geographic areas.

     Information  contained in Note 10 to the consolidated  financial statements
contained in this report is incorporated herein by reference in response to this
item.

                                       6
<PAGE>


EXECUTIVE OFFICERS OF THE REGISTRANT

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

NAME AND BUSINESS EXPERIENCE                 AGE       OFFICE HELD

ROBERT A. PLACEK                             64   Chairman of the Board,
President and Chief Executive Officer of          President and Chief
the Company since August 1987 and                 Executive Officer of the
Director of the Company since July 1987.          Company
Chairman of the Board since 1995.
Chairman and Chief Executive Officer and
Director of WCI since 1979. President of
WCI from October 1979 to June 1998 and
from March 2002 to present.

NED L. MOUNTAIN                              54   Executive Vice President
Executive Vice President of WCI since             of WCI
March 2002. Senior Vice President of
Business Development of WCI 1996-2002.
Vice President European Operations of
WCI 1994-1995. Numerous Sales and
Marketing positions 1981-1994. Corporate
Senior Engineer of UA-Columbia
Cablevision 1979-1981.

C. TROY WOODBURY, JR.                        55   Treasurer and Chief
Treasurer and Chief Financial Officer of          Financial Officer of the
the Company since June 1988 and Director          Company and WCI
since 1989. Treasurer and Chief
Financial Officer of WCI since 1992.
Senior Vice President of Finance of WCI
since March 2002. Executive Vice
President of WCI from July 1995 to March
2002. Chief Operating Officer of WCI
from September 1992 to June 1998. Group
Controller for Scientific-Atlanta, Inc.
from March 1975 to June 1988.

JAMES T. TRAICOFF                            52   Controller of the Company
Controller of the Company since November          and WCI
1991; Controller of WCI since July 1988;
Controller for BBL Industries, Inc. from
April 1985 to July 1988.

                                        7
<PAGE>

ITEM 2.   PROPERTIES

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

ITEM 3.   LEGAL PROCEEDINGS

     On June 25, 2002, a complaint was filed in the U.S.  District Court for the
District of Nevada by StarGuide  Digital Networks,  Inc., a Nevada  corporation,
against  Wegener   Communications,   Inc.  (StarGuide  Digital  Network,   Inc.,
Plaintiff,  v.  Wegener  Communications,  Inc.,  and  John  Scaggs,  Defendants)
alleging that WCI had infringed two United States patents held by StarGuide.  On
July 10,  2002,  StarGuide  filed its First  Amended  Complaint  and added  John
Scaggs,  an employee of WCI, as a defendant.  StarGuide filed its Second Amended
Complaint  on July 17,  2002.  Counts I and II of the Second  Amended  Complaint
allege claims of patent  infringement  against WCI relating to two U.S. Patents.
The remaining  counts relate to the  employment of John Scaggs by WCI, his brief
decision   to  become  an   employee  of   StarGuide,   and   alleged   acts  of
misappropriation  of  StarGuide's  trade  secrets  by WCI and John  Scaggs.  The
plaintiff seeks preliminary and permanent  injunctions enjoining WCI for further
patent infringement, compensatory damages, enhanced and punitive damages for any
willful  infringement  or interference  with contract,  and costs and attorney's
fees.  WCI timely  answered the  Complaints and denied all liability in full. In
addition,   WCI  filed  counterclaims   against  StarGuide  seeking  declaratory
judgements  that WCI is not  infringing the patents in suit and that the patents
in suit are invalid or otherwise unenforceable.  Wegener is vigorously defending
this suit.  Further  proceedings  in the case have been deferred by the court to
allow the parties to engage in settlement discussions. Management of the Company
does not  believe  that the  outcome  of this  litigation  will have a  material
adverse effect on the Company's financial condition or results of operations.

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

     Not applicable

                                     PART II

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

     The Company's Common Stock is traded on the NASDAQ Small-Cap Market (NASDAQ
symbol:  WGNR). As of November 6, 2002, there were approximately 386* holders of
record of Common Stock.  *(This number does not reflect beneficial  ownership of
shares held in nominee name).

                                       8
<PAGE>

The  quarterly  ranges of high and low  closing  sale prices for fiscal 2002 and
2001 were as follows:

                              FISCAL 2002                    Fiscal 2001
                           HIGH         LOW               High          Low
                          ------------------             -------------------
First Quarter             $1.24        $ .50             $2.44          $.78
Second Quarter             1.22          .82              1.56           .56
Third Quarter              1.63          .84              1.20           .68
Fourth Quarter             1.39          .90              1.20           .66

     The Company has not paid any cash  dividends on its Common  Stock.  For the
foreseeable future, the Company's Board of Directors does not intend to pay cash
dividends,  but  rather  plans to  retain  earnings  to  support  the  Company's
operations  and  growth.  Furthermore,  the  Company is  prohibited  from paying
dividends in accordance with its bank loan agreement, as more fully described in
MD&A and in Note 6 to the financial statements of this report.

     The following table summarizes  information as of August 30, 2002 regarding
the Company's  common stock  reserved for issuance  under the  Company's  equity
compensation plans.

<TABLE>
<CAPTION>
                                                                     Number of Securities
                                  Number of           Weighted-      Remaining Available
                                  Securities           Average       for Future Issuance
                                to be Issued       Exercise Price      Under the Plans
                               Upon Exercise of    of Outstanding   (Excluding Securities
                             Outstanding Options      Options       Reflected in Column (a)
      Plan Category                  (a)                 (b)                  (c)
--------------------------------------------------- ---------------------------------------
<S>                               <C>                  <C>                 <C>
Equity Compensation Plans         1,335,425            $ 1.37              1,019,075
  Approved by Security
  Holders
Equity Compensation Plans           100,000            $ 5.63                     --
  Not Approved by
  Security Holders(1)
--------------------------------------------------- ---------------------------------------

Total                             1,435,425            $ 1.67              1,019,075
===========================================================================================
</TABLE>

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

                                       9
<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA

                             SELECTED FINANCIAL DATA
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                Year ended
-------------------------------------------------------------------------------------------------------
                                      AUGUST 30,   August 31,   September 1,   September 3,  August 28,
                                         2002         2001          2000          1999         1998
-------------------------------------------------------------------------------------------------------
<S>                                   <C>          <C>           <C>           <C>          <C>
Revenue                               $   23,459   $   20,333    $   22,894    $   25,259   $   34,255

Net earnings (loss)                          808       (1,976)       (3,329)          213        2,760

Net earnings (loss) per share
    Basic                             $      .07   $     (.17)   $     (.28)   $      .02   $      .24
    Diluted                           $      .07   $     (.17)   $     (.28)   $      .02   $      .23
Cash dividends paid per share (1)             --           --            --            --           --
-------------------------------------------------------------------------------------------------------

Total assets                          $   18,700   $   18,660    $   24,147   $   24,954    $   25,905
Long-term obligations inclusive
    of current maturities                     10           55           578        1,205         1,829
=======================================================================================================
</TABLE>

(1)  The Company has never paid cash  dividends on its common stock and does not
     intend to pay cash dividends in the foreseeable future

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

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

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

     The Company  operates on a 52-53 week fiscal year.  The fiscal year ends on
the Friday nearest to August 31. Fiscal years 2002,  2001, and 2000 contained 52
weeks. All references  herein to 2002, 2001, and 2000, refer to the fiscal years
ending August 30, 2002, August 31, 2001, and September 1, 2000, respectively.

                                       10
<PAGE>

RESULTS OF OPERATIONS

     Net earnings for the year ended  August 30, 2002,  were  $808,000 or $0 .07
per diluted share, compared to a net loss of $(1,976,000) or $(0.17) per diluted
share for the year ended  August 31,  2001,  and a net loss of  $(3,329,000)  or
$(0.28) per diluted share for the year ended September 1, 2000.

     Revenues for fiscal 2002 increased  $3,126,000 or 15.4% to $23,459,000 from
$20,333,000 in fiscal 2001. Direct Broadcast Satellite (DBS) revenues (including
service  revenues) in fiscal 2002  increased  $3,833,000 or 20.7% to $22,386,000
from $18,553,000 in fiscal 2001.  Telecom and Custom Product revenues  decreased
$707,000 or 39.7% in fiscal 2002 to $1,073,000  from  $1,780,000 in fiscal 2001.
Revenues  were  $5,275,000  for the fourth  quarter of fiscal  2002  compared to
revenues of $6,205,000  for the fourth  quarter of fiscal 2001.  The increase in
DBS  revenues  in fiscal  2002 was a result of a high  backlog  of orders at the
beginning of fiscal 2002 compared to the beginning of fiscal 2001.  Shipments of
network  equipment,  which  initially began in the first quarter of fiscal 2002,
were  completed  to Roberts  Communications  to provide  television  coverage of
horseracing  to  off-track  betting  venues  throughout  the United  States.  In
accordance  with  a  multi-year  contract  to  provide  programming  to  network
subscribers,  revenue was recognized on digital receivers beginning initially in
the  fourth  quarter  of  fiscal  2001 and  continued  throughout  fiscal  2002.
Additionally,  during fiscal 2002, shipments of digital receivers were completed
to FOX  Digital  and FOX Sports  Net for their  broadcast  and cable  television
networks.  The Telecom and Custom Product Group revenue  decrease in fiscal 2002
was  primarily  due to lower  levels of shipments  of cable  television  headend
products to distributors as a result of a continued slowdown in purchases by the
major cable television  operators.  They continue to be impacted by overcapacity
and tightened credit availability in the telecom industry.

     Revenues for fiscal 2001 decreased  $2,561,000 or 11.2% to $20,333,000 from
$22,894,000 in fiscal 2000. Direct Broadcast Satellite (DBS) revenues (including
service  revenues) in fiscal 2001  decreased  $1,357,000 or 6.8% to  $18,553,000
from $19,910,000 in fiscal 2000.  Telecom and Custom Product revenues  decreased
$1,205,000 or 40.4% in fiscal 2001 to $1,780,000 from $2,985,000 in fiscal 2000.
Revenues  were  $6,205,000  for the fourth  quarter of fiscal  2001  compared to
revenues of $4,124,000  for the fourth  quarter of fiscal 2000.  The decrease in
DBS  revenues in fiscal  2001 was due to delayed  product  introductions  by the
Company and delayed purchasing  decisions in the digital satellite  transmission
market.  Industry-wide new product  introductions,  as well as increased pricing
competition,  contributed to the expanded range of choices  available to buyers.
The  Telecom  and Custom  Product  Group  revenue  decrease  in fiscal  2001 was
primarily due to lower levels of shipments of cable television  headend products
to  distributors  as a result of a  slowdown  in  purchases  by the major  cable
television  operators.  Major cable television operators were adversely affected
by a tightening of credit availability to the telecom industry, a drop in market
capitalization  for the sector and an overbuilding of capacity which resulted in
delayed capital spending decisions.

     WCI's backlog of orders  scheduled to ship within eighteen months decreased
$8,357,000  or 43.9% to  $10,700,000  at August 30, 2002,  from  $19,057,000  at
August 31,  2001.  The  decline in the  Company's  backlog  has been caused by a
slowdown  in capital  spending  due to the  slowdown in the  economy,  delays by
customers  in  expanding  existing  networks,  and  the  timing  of new  product
introductions by the Company.  The August 31, 2001 backlog increased  $9,847,000
or 106.9% to  $19,057,000  from  $9,210,000 at September 1, 2000.  Approximately
$8,700,000  of the August 30,  2002,  backlog is expected to ship during  fiscal
2003.  One customer  accounted for 85.5% of the Company's  backlog at August 30,
2002 and for 82.2% of the  backlog  expected  to ship during  fiscal  2003.  The
Company has limited revenue  visibility for the first quarter of fiscal 2003. It
is anticipated  that revenues for the first quarter of fiscal 2003 will decrease
compared to the fourth  quarter of fiscal  2002 and will result in an  operating
loss for the period.  Although no assurances may be given,  the Company believes
it will  record  sufficient  new orders in fiscal  2003 to achieve  fiscal  year
profitability,  although  there  can  be  fluctuations  in  quarter  to  quarter
operating results due to the timing of orders received.

     International  sales are generated through a direct sales  organization and
through  foreign  distributors.  International  sales were $1,473,000 or 6.3% of
revenues in fiscal 2002,  compared to  $2,794,000 or 13.7% of revenues in fiscal
2001,  and  $4,150,000  or 18.1%  of  revenues  in  fiscal  2000.  International
shipments are generally project specific and revenues, therefore, are subject to
variations  from year to year. All  international  sales are denominated in U.S.
dollars.  Additional  financial  information on geographic  areas is provided in
Note 10 of the consolidated financial statements.

                                       11
<PAGE>

     Gross  profit as a percent of sales was 33.3% in fiscal  2002,  compared to
21.3% in fiscal  2001 and 21.1% in fiscal  2000.  Gross  profit  margin  dollars
increased  $3,488,000 or 80.5% to  $7,822,000 in fiscal 2002 from  $4,334,000 in
fiscal 2001. Fiscal 2000 gross profit margin dollars amounted to $4,819,000. The
increases in margin dollars and percentages in fiscal 2002 were mainly due to 1)
higher  revenue  during the period which  resulted in lower unit fixed  overhead
costs, 2) a reduction in  manufacturing  labor and overhead costs as a result of
the Company's  cost  reduction  program  initiated in fiscal 2001,  and 3) lower
offshore contract manufacturing costs of certain DBS products. Profit margins in
fiscal  2002  included   inventory  reserve  charges  of  $800,000  compared  to
$1,325,000  in fiscal 2001.  Gross  profit  margin was  unfavorably  impacted in
fiscal 2001 by higher unit fixed costs due to the decrease in sales volumes.

     Selling,  general, and administrative (SG&A) expenses decreased $644,000 or
13.6% to  $4,101,000  in  fiscal  2002 from  $4,745,000  in  fiscal  2001.  As a
percentage of revenues, selling, general, and administrative expenses were 17.5%
of revenues in fiscal 2002 and 23.3% in fiscal 2001.  During the fourth  quarter
of fiscal  2001 tax  reimbursement  features  were  removed  from  common  stock
options.  As a result, SG&A expenses in fiscal 2002 were not subject to variable
stock  option  compensation  adjustments  compared  to a benefit of  $488,000 in
fiscal 2001.  Excluding  this  benefit,  SG&A  decreased  $1,132,000 or 21.6% in
fiscal 2002 compared to fiscal 2001.  SG&A reductions in fiscal 2002 were mainly
due to personnel reductions,  lower sales incentive commissions as a result of a
decrease in fiscal 2002  orders,  and cost  reduction  efforts in  discretionary
spending  items.  The dollar  decrease of  expenses  in fiscal 2002  compared to
fiscal 2001 includes decreases in 1) compensation expense of $710,000, 2) travel
expenses of $171,000,  and 3) trade show and  advertising  expenses of $138,000.
The Company  expects to  continue  to monitor  SG&A costs in relation to revenue
levels and make adjustments as necessary if revenues do not increase as planned.

     Selling, general, and administrative expenses decreased $2,496,000 or 34.5%
to  $4,745,000  in fiscal  2001 from  $7,241,000  in fiscal  2000.  These  costs
decreased in fiscal 2001 primarily due to cost reduction  efforts which resulted
in lower personnel,  travel,  marketing,  software implementation,  and facility
expenses;  termination  of an agreement with a financial  relations  firm; and a
decrease in variable stock option compensation  expenses. The dollar decrease of
expenses  in fiscal  2001  compared  to fiscal  2000  includes  decreases  in 1)
advertising expense of $116,000, 2) repairs and maintenance expense of $201,000,
3) consulting expense of $287,000 principally  associated with the completion of
installation  of a  new  manufacturing  and  financial  information  system,  4)
professional  fees of $131,000,  5) outside sales agent  commissions of $408,000
due to lower  international  revenues and completion of certain  domestic orders
subject to agent  commissions,  6) travel expenses of $131,000,  7) salaries and
benefits costs of $457,000,  and 8) non-cash stock variable option  compensation
expense of $977,000 due to the decline in market price of the  Company's  common
stock.

     General corporate expenses included in selling, general, and administrative
expense  were  approximately  $510,000,  $658,000,  and $805,000 in fiscal 2002,
2001, and 2000, respectively. The decrease in fiscal 2002 corporate expenses was
due to termination,  in fiscal 2001, of an agreement with a financial  relations
firm.

     Research  and  development  expenditures,  including  capitalized  software
development  costs,  were  $2,983,000  or  12.7% of  revenues  in  fiscal  2002,
$3,073,000  or 15.1% of  revenues in fiscal  2001,  and  $3,689,000  or 16.1% of
revenues in fiscal 2000. The decrease in expenditures in fiscal 2002 compared to
fiscal 2001 was  primarily  due to decreases  in labor and overhead  costs which
were offset by higher engineering consulting costs. The decrease in expenditures
in fiscal  2001  compared  to fiscal  2000 was  primarily  due to  decreases  in
overhead and  engineering  consulting  costs due to the completion of contracted
engineering  development projects related to DBS products.  Software development
costs totaling $573,000,  $384,000,  and $641,000 were capitalized during fiscal
2002, 2001, and 2000, respectively.  The increases in capitalized software costs
during fiscal 2002 compared to 2001 are due to increased  expenditures on COMPEL
network  control  software  and  software  associated  with  new  digital  video
products.  Research and development  expenses,  excluding  capitalized  software
development  costs,  were  $2,410,000  or  10.3% of  revenues  in  fiscal  2002,
$2,689,000  or 13.2% of  revenues in fiscal  2001,  and  $3,048,000  or 13.3% of
revenues  in  fiscal  2000.  The  Company   expects  fiscal  2003  research  and
development  expenditures  to approximate  fiscal 2002 levels as it continues to
develop and enhance DBS products.

     Interest  expense was $64,000 in fiscal 2002  compared to $60,000 in fiscal
2001 and $88,000 in fiscal 2000. Interest expense in fiscal 2002 was principally
associated with letters of credit commitments and bank float charges

                                       12
<PAGE>

on lockbox collections.  The increase during fiscal 2002 was due primarily to an
increase in the average  outstanding letter of credit commitment  balances.  The
decrease in fiscal 2001 was due  primarily to a decrease in total  indebtedness.
The Company  believes  that  interest  expense in fiscal  2003 will  approximate
fiscal 2002 expense.

     Interest  income was $33,000 in fiscal  2002  compared to $71,000 in fiscal
2001 and $334,000 in fiscal 2000.  The decrease in fiscal 2002 was mainly due to
lower investment yields.  Interest income is expected to decrease in fiscal 2003
due to expected lower average outstanding balances of cash and cash equivalents.

     Fiscal  2002  income tax expense of  $473,000  was  comprised  of a current
federal income tax benefit of $114,000 from receipt of  alternative  minimum tax
refunds as a result of federal  income tax law changes and deferred  federal and
state income tax expenses of $549,000  and $38,000,  respectively.  Net deferred
tax assets  decreased  $587,000 to $2,848,000 at August 30, 2002 from $3,435,000
at  August  31,  2001.  The  decrease  was  principally  due to  current  period
utilization  of net  operating  loss  carryforwards  and refunds of  alternative
minimum  tax  credits.  Realization  of  deferred  tax  assets is  dependent  on
generating  sufficient future taxable income prior to the expiration of the loss
and  credit  carryforwards.  Although  realization  is not  assured,  management
believes it is more likely than not that all of the  deferred tax assets will be
realized based on the Company's  backlog,  financial  projections  and operating
history.  The amount  considered  realizable  could be reduced if  estimates  of
future taxable income during the  carryforward  period are reduced.  Fiscal 2001
income tax benefit was comprised of a deferred  federal and state tax benefit of
$1,049,000  and  $63,000,  respectively.  Fiscal  2000  income tax  benefit  was
comprised  of a current  federal and state  income tax  benefit of $262,000  and
$123,000,  respectively,  and a  deferred  federal  and  state  tax  benefit  of
$1,409,000  and  $101,000,  respectively.  A  reconciliation  of  the  Company's
effective  income tax rate as compared to the statutory U.S.  income tax rate is
provided in Note 7 of the consolidated financial statements.

                                       13
<PAGE>

CRITICAL ACCOUNTING POLICIES

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

REVENUE  RECOGNITION  -  The  Company's  revenue  recognition  policies  are  in
compliance  with Staff  Accounting  Bulletin No. 101,  "Revenue  Recognition  in
Financial  Statements," as published by the staff of the Securities and Exchange
Commission.  Revenue is recognized when persuasive evidence of an agreement with
the customer exists,  products are shipped or title passes pursuant to the terms
of the agreement with the customer, the amount due from the customer is fixed or
determinable,  collectibility  is  reasonably  assured,  and when  there  are no
significant future performance  obligations.  Service revenues are recognized at
the time of performance. The Company recognizes revenue in certain circumstances
before  delivery  has  occurred   (commonly  referred  to  as  "bill  and  hold"
transactions).  In such  circumstances,  amongst other things, risk of ownership
has  passed to the  buyer,  the buyer has made a  written  fixed  commitment  to
purchase the finished goods,  the buyer has requested the finished goods be held
for future  delivery as scheduled  and  designated  by them,  and no  additional
performance  obligations  exist by the  Company.  For  these  transactions,  the
finished goods are segregated from inventory and normal billing and credit terms
are granted.  For the period ending August 30, 2002, revenues to one customer in
the  amount of  $1,554,000  were  recorded  prior to  delivery  as bill and hold
transactions.  At August  30,  2002,  accounts  receivable  for  these  revenues
amounted to $794,000 and were paid in full subsequent to August 30, 2002.

These policies require  management,  at the time of the  transaction,  to assess
whether the  amounts due are fixed or  determinable,  collection  is  reasonably
assured,  and if future  performance  obligations  exist.  These assessments are
based on the terms of the agreement with the customer,  past history, and credit
worthiness of the  customer.  If management  determines  that  collection is not
reasonably assured or future performance  obligations exist, revenue recognition
is deferred until these conditions are satisfied.

INVENTORY  RESERVES - Inventories  are valued at the lower of cost (at standard,
which  approximates  actual  cost on a  first-in,  first-out  basis) or  market.
Inventories include the cost of raw materials, labor and manufacturing overhead.
The Company  makes  inventory  reserve  provisions  for  obsolete or slow moving
inventories as necessary to properly reflect inventory value. These reserves are
to provide for items that are  potentially  slow  moving,  excess,  or obsolete.
Changes in market  conditions,  lower than expected customer demand, and rapidly
changing  technology  could  result  in  additional  obsolete  and  slow  moving
inventory  that is unsaleable or saleable at reduced  prices which could require
additional inventory reserve provisions. At August 30, 2002, inventories, net of
reserve provisions, amounted to $3,921,000.

CAPITALIZED   SOFTWARE  COSTS  -  Software  development  costs  are  capitalized
subsequent to  establishing  technological  feasibility.  Capitalized  costs are
amortized  based on the larger of the amounts  computed using (a) the ratio that
current  gross  revenues  for each  product  bears to the total of  current  and
anticipated  future gross  revenues  for that  product or (b) the  straight-line
method over the  remaining  estimated  economic  life of the  product.  Expected
future  revenues and  estimated  economic  lives are subject to revisions due to
market conditions, technology changes, and other factors resulting in shortfalls
of expected  revenues or reduced economic lives which could result in additional
amortization  expense or write-offs.  At August 30, 2002,  capitalized  software
costs, net of accumulated amortization, amounted to $642,000.

DEFERRED TAX ASSET VALUATION  ALLOWANCE - Deferred tax assets are recognized for
deductible temporary differences,  net operating loss carryforwards,  and credit
carryforwards  if it is more  likely  than  not that  the tax  benefits  will be
realized.  Realization  of the  Company's  deferred  tax assets is  dependent on
generating  sufficient future taxable income prior to the expiration of the loss
and  credit  carryforwards.  Although  realization  is not  assured,  management
believes it is more likely than not that all of the  deferred tax assets will be
realized based on the Company's  backlog,  financial  projections  and operating
history. The amount of the deferred tax assets considered  realizable,  however,
could be reduced if estimates of further taxable income during the  carryforward
period are reduced. Any reduction in the realizable value of deferred tax assets
would result in a charge to income tax expense in the period such  determination
was made. At August 30, 2002, deferred tax assets amount to

                                       14
<PAGE>

$2,848,000 of which $561,000 relates to net operating loss  carryforwards  which
expire in fiscal 2020 and 2021 and $98,000 of general  business  and foreign tax
credits expiring fiscal 2004.

ACCOUNTS  RECEIVABLE  VALUATION - The Company maintains  allowances for doubtful
accounts for estimated  losses  resulting from the inability of our customers to
make  required  payments.  If the financial  condition of our customers  were to
deteriorate,  resulting  in an  impairment  of their  ability to make  payments,
additional  allowances may be required.  At August 30, 2002, accounts receivable
net of allowances for doubtful accounts amounted to $3,038,000.

LIQUIDITY AND CAPITAL RESOURCES

     At August 30, 2002,  the Company's  primary  sources of liquidity were cash
and cash equivalents of $5,118,000 and a $5,000,000 bank loan facility. Cash and
cash equivalents increased $3,191,000 in fiscal 2002.

     Cash  provided  by  operating  activities  in  fiscal  2002 was  $3,986,000
compared to  $1,265,000  in fiscal 2001.  Cash used by operating  activities  in
fiscal 2000 was  $4,236,000.  Fiscal 2002 net  earnings  adjusted  for  non-cash
expenses  provided cash of $4,200,000  while  changes in  inventories  and other
assets  provided cash of $2,809,000.  Changes in accounts  receivable,  accounts
payable, accrued expenses, and customer deposits used cash of $3,023,000.

     Cash used by investing  activities  was $720,000 in fiscal 2002 compared to
$860,000 in fiscal 2001 and $1,748,000 in fiscal 2000.  Cash used in fiscal 2002
includes  property  and  equipment  expenditures  of $147,000,  and  capitalized
software  additions of $573,000.  Property and equipment  expenditures  were for
planned  additions of principally  manufacturing and engineering test equipment.
Fiscal 2003  expenditures  for investing  activities are expected to approximate
fiscal 2002 levels.

     Cash used by financing  activities was $75,000 in fiscal 2002,  $551,000 in
fiscal 2001, and $802,000 in fiscal 2000. In fiscal 2002,  financing  activities
used cash of $45,000 for scheduled repayments of long-term obligations,  $56,000
for debt issuance costs, and provided $25,000 of cash from the exercise of stock
options.  At  August  30,  2002,  scheduled  fiscal  2003  debt  repayments  are
approximately $6,000.

     Net accounts  receivable  increased  $1,962,000 to $3,038,000 at August 30,
2002, from $1,076,000 at August 31, 2001, compared to $4,111,000 at September 1,
2000.  The increase in fiscal 2002 was primarily  due to a higher  percentage of
shipments  occurring  in the last  month of the fourth  quarter  of fiscal  2002
compared to the same period of fiscal 2001, and early collection on account from
a major  customer  in the  fourth  quarter of fiscal  2001.  The  allowance  for
doubtful accounts was $352,000 at August 30, 2002,  $305,000 at August 31, 2001,
and $166,000 at September 1, 2000. Write-offs,  net of recoveries in fiscal 2002
were $108,000.  Net recoveries were $19,000 in fiscal 2001.  Write-offs,  net of
recoveries in fiscal 2000 were  $52,000.  Increases to the allowance and charges
to general and administrative  expense were $155,000 in fiscal 2002, $120,000 in
fiscal 2001, and $45,000 in fiscal 2000.

     Inventory before reserves decreased  $3,941,000 to $7,701,000 at August 30,
2002,  from  $11,642,000  at August 31, 2001.  The decrease was primarily due to
increased  sales and management  efforts to decrease  inventory  levels.  During
fiscal 2002,  inventory reserves were increased by provisions charged to cost of
sales of  $800,000.  The  increase in the  provision  was to provide  additional
reserves for 1) slower moving analog Telecom  products,  2) excess digital audio
inventories,  and 3) potentially  slow-moving inventories of earlier generations
of other  digital  products.  These  products  continue  to sell but at  reduced
quantities.  During fiscal 2001, inventory reserves were increased by provisions
charged to cost of sales of $1,325,000 and $1,246,000 in fiscal 2000.  Inventory
reserves were  decreased by write-offs of $1,176,000 in fiscal 2002 and $613,000
in fiscal 2001.  During fiscal 2002 and 2001 decreases in  inventories  provided
cash of $2,765,000 and $1,296,000,  respectively.  In fiscal 2000,  increases in
inventory used cash of $4,864,000.

                                       15
<PAGE>

     During the third  quarter of fiscal  2002,  WCI's  bank loan  facility  was
amended to provide a maximum available credit limit of $5,000,000 with sublimits
as defined.  The amended loan facility  matures on June 30, 2003, or upon demand
and requires an annual facility fee of 1% of the maximum credit limit.  The loan
facility  consists of a term loan and a revolving line of credit with a combined
borrowing limit of $5,000,000,  bearing interest at the bank's prime rate (4.75%
at August 30, 2002).

     The term loan facility provides for a maximum of $1,000,000 for advances of
up to 80% of the cost of equipment acquisitions.  Principal advances are payable
monthly over sixty months with a balloon payment due at maturity.  The revolving
line of credit is  subject  to  availability  advance  formulas  of 80%  against
eligible accounts receivable; 20% of eligible raw materials inventories;  20% of
eligible  work-in-process  kit inventories;  and 40% to 50% of eligible finished
goods  inventories.  Advances  against  inventory  are  subject to a sublimit of
$2,000,000.  At August 30, 2002, no balances were  outstanding  on the revolving
line of  credit  or the  equipment  term  loan  portions  of the loan  facility.
Additionally,  at August 30, 2002,  approximately  $3,243,000 net of outstanding
letters of credit in the amount of $1,319,000  was available to borrow under the
advance formulas.

     The  Company is  required  to  maintain a minimum  tangible  net worth with
annual  increases  at each  fiscal  year end  commencing  with fiscal year 2003,
retain  certain key  employees,  limit  expenditures  of Wegener  Corporation to
$600,000 per fiscal year,  maintain certain financial  ratios,  and is precluded
from paying  dividends.  At August 30, 2002, the Company was in compliance  with
all loan facility covenants. The Company believes that the amended loan facility
along  with cash and cash  equivalent  balances  will be  sufficient  to support
operations through fiscal 2003.

     During the second  quarter  of fiscal  2001,  the  Company  entered  into a
manufacturing and purchasing  agreement for certain finished goods  inventories.
The  agreement  is a  firm  commitment  by  the  Company  to  purchase,  over  a
twelve-month period, amounts ranging from approximately $2,565,000 to $3,287,000
depending on actual products purchased. Pursuant to the agreement, at August 30,
2002, remaining and outstanding  purchase  commitments amounted to $241,000.  In
addition,   during   fiscal  2001,   the  Company   entered  into  a  cancelable
manufacturing and purchasing  agreement for finished goods inventories for which
the Company has firm customer  order  commitments.  The Company had  outstanding
purchase  commitments  under this  agreement of  $1,319,000  at August 30, 2002.
Subsequent to August 30, 2002, the Company  committed to an additional  $913,000
of inventory  purchases.  Pursuant to the above agreements,  at August 30, 2002,
the Company had outstanding letters of credit in the amount of $1,319,000.

     The Company has never paid cash  dividends on its common stock and does not
intend to pay cash dividends in the foreseeable future.

     A summary of the Company's long-term  contractual  obligations as of August
30, 2002 consisted of:


                                               OPERATING          PURCHASE
                             DEBT               LEASES          COMMITMENTS
                           --------            --------          ----------
     Fiscal 2003           $  6,000            $227,000          $1,560,000
     Fiscal 2004              4,000             224,000                  --
     Fiscal 2005                 --             114,000                  --
     Fiscal 2006                 --               2,000                  --
                           --------            --------          ----------
     Total                 $ 10,000            $567,000          $1,560,000
                           ========            ========          ==========

                                       16
<PAGE>

IMPACT OF INFLATION

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

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In July 2001, the FASB issued Statements of Financial  Accounting Standards
No. 141, "Business  Combinations" (SFAS 141),  Statement of Financial Accounting
Standards  No. 142,  "Goodwill  and Other  Intangible  Assets"  (SFAS 142),  and
Statement No. 143,  "Accounting for Asset  Retirement  Obligations"  (SFAS 143).
SFAS 141  requires  all  business  combinations  to be  accounted  for using the
purchase  method of accounting  and is effective  for all business  combinations
initiated  after June 30,  2001.  SFAS 142  requires  goodwill  to be tested for
impairment under certain  circumstances,  and written off when impaired,  rather
than being amortized as previous standards  required.  SFAS 142 is effective for
fiscal  years  beginning  after  December  15,  2001.  Implementation  of  these
pronouncements had no significant impact on the Company's financial statements.

     SFAS 143 requires  entities to record the fair value of a liability  for an
asset  retirement  obligation  in the  period  in  which  it is  incurred  and a
corresponding  increase in the carrying amount of the related  long-lived asset.
Statement No. 143 is effective for fiscal years  beginning  after June 15, 2002.
The Company does not expect SFAS 143 to have a material  impact on its financial
condition and results of operations.

     In August 2001,  the FASB issued  Statement  No. 144,  "Accounting  for the
Impairment or Disposal of Long-Lived  Assets"  (SFAS 144).  SFAS 144  supersedes
Statement No. 121,  "Accounting for the Impairment of Long-Lived  Assets and for
Long-Lived Assets to Be Disposed Of" and the accounting and reporting provisions
of  Accounting  Principals  Board  Opinion  No. 30,  "Reporting  the  Results of
Operations-Reporting  the Effects of  Disposal  of a Segment of a Business,  and
Extraordinary,  Unusual and Infrequently  Occurring Events and Transactions" for
the disposal of a segment of a business.  Under  Statement No. 144,  goodwill is
excluded   from  its  scope.   Additionally,   Statement   No.  144  utilizes  a
probability-weighted   cash  flow   estimation   approach  and   establishes   a
"primary-asset"  approach to  determine  the cash flow  estimation  period for a
group of assets. Statement No. 144 is effective for fiscal years beginning after
December  15,  2001.  The  Company  does not expect  SFAS 144 to have a material
impact on its financial condition and results of operations.

     In July 2002,  the FASB issued  statement  no. 146,  "Accounting  for Costs
Associated  with Exit or  Disposal  Activities,"  (SFAS 146) which is  effective
January 1, 2003. SFAS 146 provides that an exit cost liability should not always
be recorded at the date of an entity's  commitment to an exit plan,  but instead
should be recorded when the obligation is incurred.  An entity's commitment to a
plan, by itself,  does not create an obligation  that meets the  definition of a
liability. The Company does not expect SFAS 146 to have a material impact on its
financial condition and results of operation.

OUTLOOK:  ISSUES AND UNCERTAINTIES

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

     WCI competes with companies that have substantially greater resources and a
larger number of products, as well as with small specialized companies.  Through
relationships with technology partners and original equipment manufacturer (OEM)
suppliers,  the Company has positioned itself to provide end-to-end solutions to
its customers.

                                       17
<PAGE>

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

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

     The Company has invested a  significant  amount of  financial  resources to
acquire  certain raw  materials,  to incur  direct labor and to contract to have
specific  outplant  procedures  performed on  inventory in process.  The Company
purchased this inventory  based upon  previously  known backlog and  anticipated
future  sales  given  existing  knowledge  of  the  marketplace.  The  Company's
inventory reserve of $3,781,000 at August 30, 2002, is to provide for items that
are potentially slow moving, excess, or obsolete.  Changes in market conditions,
lower than expected  customer  demand,  and rapidly  changing  technology  could
result in additional  obsolete and  slow-moving  inventory that is unsaleable or
saleable at reduced  prices.  No  estimate  can be made of a range of amounts of
loss from  obsolescence  that might occur should the Company's sales efforts not
be successful.

     Sales to a  relatively  small  number  of major  customers  have  typically
comprised a majority  of the  Company's  revenues  and that trend is expected to
continue  throughout fiscal 2003 and beyond.  Future revenues are subject to the
timing of significant orders from customers and are difficult to forecast.  As a
result,  future  revenue  levels may  fluctuate  from  quarter to  quarter.  One
customer  accounted for 85.5% of the backlog at August 30, 2002 and for 82.2% of
the backlog scheduled to ship during fiscal 2003.

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

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

     The  Company  has made  significant  investments  in  capitalized  software
principally  related to digital  audio and video  products.  At August 30, 2002,
capitalized software costs were $642,000. These costs are amortized based on the
larger of the amounts  computed  using (a) the ratio that current gross revenues
for each product bears to

                                       18
<PAGE>

the total of current and  anticipated  future gross revenues for that product or
(b) the straight-line  method over the remaining  estimated economic life of the
product.  Expected future  revenues and estimated  economic lives are subject to
revisions  due to market  conditions,  technology  changes,  and  other  factors
resulting in shortfalls of expected revenues or reduced economic lives.

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

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  Company's  exposure to market rate risk for changes in interest  rates
relates  primarily to its  revolving  line of credit and cash  equivalents.  The
interest  rate on  certain  advances  under  the line of  credit  and term  loan
facility  fluctuates  with the  bank's  prime  rate.  There  were no  borrowings
outstanding at August 30, 2002, subject to variable interest rate fluctuations.

     At August 30, 2002, cash equivalents  consisted of bank commercial paper in
the  amount  of  $2,900,000  and  variable  rate  municipals  in the  amount  of
$2,000,000.  The cash  equivalents have maturities of less than three months and
therefore are subject to minimal market risk.

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

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                                                                            Page

Report of Independent Certified Public Accountants............................20

Consolidated Statements of Operations
   Years ended August 30, 2002, August 31, 2001, and September 1, 2000........21

Consolidated Balance Sheets
   As of August 30, 2002 and August 31, 2001..................................22

Consolidated Statements of Shareholders' Equity
   Years ended August 30, 2002, August 31, 2001, and September 1, 2000........23

Consolidated Statements of Cash Flows
   Years ended August 30, 2002, August 31, 2001, and September 1, 2000........24

Notes to Consolidated Financial Statements....................................25

Consolidated Supporting Schedules Filed:

Schedule II-Valuation and Qualifying Accounts
   Years ended August 30, 2002, August 31, 2001, and September 1, 2000........42

                                       19
<PAGE>

              MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

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

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

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

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


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


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


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders of Wegener Corporation
Duluth, Georgia

     We have audited the  accompanying  consolidated  balance  sheets of Wegener
Corporation and subsidiaries as of August 30, 2002, and August 31, 2001, and the
related  consolidated  statements of operations,  shareholders'  equity and cash
flows  for each of three  years in the  period  ended  August  30,  2002.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all  material  respects,  the  consolidated  financial  position  of  Wegener
Corporation and subsidiaries as of August 30, 2002, and August 31, 2001, and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended August 30, 2002 in  conformity  with  accounting
principles generally accepted in the United States of America.

                                /s/ BDO Seidman, LLP

Atlanta, Georgia                    BDO Seidman, LLP
November 5, 2002

                                       20
<PAGE>

Wegener Corporation and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                            Year ended
                                                           --------------------------------------------
                                                            AUGUST 30,      August 31,     September 1,
                                                               2002            2001           2000
-------------------------------------------------------------------------------------------------------
<S>                                                        <C>             <C>             <C>
Revenue                                                    $ 23,458,923    $ 20,332,899    $ 22,894,314
-------------------------------------------------------------------------------------------------------

Operating costs and expenses
    Cost of products sold                                    15,636,657      15,998,989      18,075,326
        (including non-cash equity related charges
        of $31,256, $37,294, and $47,520, respectively)
    Selling, general and administrative                       4,101,062       4,744,913       7,240,636
        (including non-cash equity related charges
        (benefits) of $58,807, $(365,641), and
        $729,632, respectively)
    Research and development                                  2,409,949       2,688,844       3,047,754
        (including non-cash equity related charges of
        $68,006, $75,688, and $84,844, respectively)
-------------------------------------------------------------------------------------------------------

Operating costs and expenses                                 22,147,668      23,432,746      28,363,716
-------------------------------------------------------------------------------------------------------

Operating income (loss)                                       1,311,255      (3,099,847)     (5,469,402)
    Interest expense                                            (64,061)        (59,929)        (88,085)
    Interest income                                              33,386          71,475         333,597
-------------------------------------------------------------------------------------------------------

Earnings (loss) before income taxes                           1,280,580      (3,088,301)     (5,223,890)

Income tax expense (benefit)                                    473,000      (1,112,000)     (1,895,000)
-------------------------------------------------------------------------------------------------------

Net earnings (loss)                                        $    807,580    $ (1,976,301)   $ (3,328,890)
=======================================================================================================

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

Shares used in per share calculation
    Basic                                                    12,160,865      11,943,048      11,798,458
    Diluted                                                  12,229,240      11,943,048      11,798,458
=======================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       21
<PAGE>

Wegener Corporation and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                                    AUGUST 30,      August 31,
                                                       2002            2001
--------------------------------------------------------------------------------
ASSETS

Current
    Cash and cash equivalents                      $  5,117,756    $  1,926,723
    Accounts receivable                               3,037,762       1,076,420
    Inventories                                       3,920,673       7,485,883
    Deferred income taxes                             2,225,000       2,207,000
    Other                                                90,066         134,095
--------------------------------------------------------------------------------

          Total current                              14,391,257      12,830,121

Property and equipment, net                           2,995,332       3,664,292
Capitalized software costs, net                         641,710         895,442
Deferred income taxes                                   623,000       1,228,000
Other assets                                             48,556          42,617
--------------------------------------------------------------------------------

                                                   $ 18,699,855    $ 18,660,472
================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
    Accounts payable                               $  1,424,101    $  1,694,923
    Accrued expenses                                  1,409,369       2,009,482
    Customer deposits                                   777,023         813,125
    Current maturities of long-term obligations           6,120          44,695
--------------------------------------------------------------------------------

          Total current liabilities                   3,616,613       4,562,225

Long-term obligations, less current maturities            4,294          10,379
--------------------------------------------------------------------------------

          Total liabilities                           3,620,907       4,572,604
--------------------------------------------------------------------------------

Commitments and contingencies

Shareholders' equity
    Common stock, $.01 par value; 20,000,000
      shares authorized; 12,314,575 shares issued       123,146         123,146
    Additional paid-in capital                       19,513,977      19,751,694
    Deficit                                          (4,401,830)     (5,209,410)
    Less treasury stock, at cost                       (156,345)       (577,562)
--------------------------------------------------------------------------------

Total shareholders' equity                           15,078,948      14,087,868
--------------------------------------------------------------------------------
                                                   $ 18,699,855    $ 18,660,472
================================================================================

See accompanying notes to consolidated financial statements.

                                       22
<PAGE>

Wegener Corporation and Subsidiaries

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                 Common Stock           Additional      Retained              Treasury Stock
                                                 ------------             Paid-in       Earnings              --------------
                                             Shares        Amount         Capital       (Deficit)          Shares         Amount
------------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>             <C>             <C>             <C>
BALANCE at September 3, 1999               12,314,575   $    123,146   $ 19,492,570    $     95,781         632,459    $   (931,728)

    Treasury stock reissued through
       stock options and 401(k) plan               --             --        155,810              --        (249,988)        292,691
    Treasury stock purchased                       --             --             --              --          99,000        (398,470)
    Value of stock options granted for
       services                                    --             --        175,188              --              --              --
    Value of stock                                 --
       option compensation                         --             --        349,000              --              --              --
    Tax benefit of stock
       options exercised                           --             --        152,000              --              --              --
    Net loss for the year                          --             --             --      (3,328,890)             --              --
------------------------------------------------------------------------------------------------------------------------------------

BALANCE at September 1, 2000               12,314,575   $    123,146   $ 20,324,568    $ (3,233,109)        481,471    $ (1,037,507)

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

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

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

BALANCE AT AUGUST 30, 2002                 12,314,575   $    123,146   $ 19,513,977    $ (4,401,830)         72,977    $   (156,345)
====================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       23
<PAGE>

Wegener Corporation and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                         Year ended
                                                         --------------------------------------------
                                                          AUGUST 30,      August 31,     September 1,
                                                             2002            2001            2000
-----------------------------------------------------------------------------------------------------

CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
<S>                                                      <C>             <C>             <C>
    Net earnings (loss)                                  $    807,580    $ (1,976,301)   $ (3,328,890)
    Adjustments to reconcile net earnings (loss) to
           cash provided by operating activities
        Depreciation and amortization                       1,692,485       1,769,984       1,710,389
        Issuance of treasury stock for
            benefit plan                                      158,119         188,378         197,808
        Tax benefit of stock
            options exercised                                      --              --         152,000
        Non-cash stock option
            compensation                                           --        (488,130)        489,000
        Other non-cash expenses                                    --          47,093         175,188
        Provision for bad debts                               155,000         120,000          45,000
        Provision for inventory reserves                      800,000       1,325,000       1,246,000
        Provision (benefit) for deferred income taxes         587,000      (1,112,000)     (1,510,000)
        Warranty provisions                                        --              --         215,000
        Changes in assets and liabilities
            Accounts receivable                            (2,116,342)      2,914,407      (1,537,531)
            Inventories                                     2,765,210       1,295,893      (4,863,963)
            Other assets                                       44,029         (85,480)        194,638
            Accounts payable and accrued expenses            (870,935)     (1,470,597)      1,387,011
            Customer deposits                                 (36,102)     (1,263,236)      1,192,295
-----------------------------------------------------------------------------------------------------

                                                            3,986,044       1,265,011      (4,236,055)
-----------------------------------------------------------------------------------------------------

CASH USED FOR INVESTMENT ACTIVITIES
    Property and equipment expenditures                      (147,478)       (476,176)     (1,106,558)
    Capitalized software additions                           (572,718)       (384,068)       (641,060)
-----------------------------------------------------------------------------------------------------

                                                             (720,196)       (860,244)     (1,747,618)
-----------------------------------------------------------------------------------------------------

CASH USED FOR FINANCING ACTIVITIES
    Repayment of long-term debt and capitalized
        lease obligations                                     (44,660)       (541,511)       (626,788)
    Proceeds from long-term debt                                   --          18,114              --
    Purchase of treasury stock                                     --              --        (398,470)
    Loan facility fees                                        (55,536)        (27,500)        (27,500)
    Proceeds from stock options exercised                      25,381              --         250,693
-----------------------------------------------------------------------------------------------------

                                                              (74,815)       (550,897)       (802,065)
-----------------------------------------------------------------------------------------------------

Increase (decrease) in cash and cash equivalents            3,191,033        (146,130)     (6,785,738)
Cash and cash equivalents, beginning of year                1,926,723       2,072,853       8,858,591
-----------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                   $  5,117,756    $  1,926,723    $  2,072,853
=====================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       24
<PAGE>

Wegener Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

FISCAL YEAR.  The Company  operates on a 52-53 week fiscal year. The fiscal year
ends on the Friday  nearest  to August  31.  Fiscal  2002,  2001,  and 2000 each
contained 52 weeks. All references  herein to 2002, 2001, and 2000 relate to the
fiscal  years ended August 30, 2002,  August 31,  2001,  and  September 1, 2000,
respectively.

CASH  EQUIVALENTS.  Cash equivalents  consist of highly liquid  investments with
original  maturities  of  three  months  or  less.  At  August  30,  2002,  cash
equivalents consisted of bank commercial paper in the amount of $2,900,000,  and
variable rate  municipals in the amount of $2,000,000.  At August 31, 2001, cash
equivalents consisted of bank commercial paper in the amount of $1,815,000.

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

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

REVENUE   RECOGNITION.   The  Company's  revenue  recognition  policies  are  in
compliance  with Staff  Accounting  Bulletin  No 101,  "Revenue  Recognition  in
Financial  Statements," as published by the staff of the Securities and Exchange
Commission.  Revenue is recognized when persuasive evidence of an agreement with
the customer exists,  products are shipped or title passes pursuant to the terms
of the agreement with the customer, the amount due from the customer is fixed or
determinable,  collectibility  is  reasonably  assured,  and when  there  are no
significant future performance  obligations.  Service revenues are recognized at
the  time  of  performance.  The  Company  has  recognized  revenue  in  certain
circumstances  before delivery has occurred  (commonly  referred to as "bill and
hold"  transactions).  In such  circumstances,  amongst  other  things,  risk of
ownership has passed to the buyer, the buyer has made a written fixed commitment
to purchase the finished goods, the buyer has requested the finished goods to be
held for future  delivery as scheduled and designated by them, and no additional
performance  obligations  exist by the  Company.  For  these  transactions,  the
finished goods are segregated from inventory and normal billing and credit terms
are granted.  For the period ending August 30, 2002, revenues to one customer in
the  amount of  $1,554,000  were  recorded  prior to  delivery  as bill and hold
transactions.  At August  30,  2002,  accounts  receivable  for  these  revenues
amounted to $794,000 and were paid in full subsequent to August 30, 2002.

The  policies  require  management,  at the time of the  transaction,  to assess
whether the  amounts due are fixed or  determinable,  collection  is  reasonably
assured,  and if future  performance  obligations  exist.  These assessments are
based on the terms of the agreement with the customer,  past history, and credit
worthiness of the  customer.  If management  determines  that  collection is not
reasonably assured or future performance  obligations exist, revenue recognition
is deferred until these conditions are satisfied.

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

                                       25
<PAGE>

Wegener Corporation and Subsidiaries

RESEARCH  AND  DEVELOPMENT/CAPITALIZED  SOFTWARE  COSTS.  The  Company  expenses
research and development costs, including expenditures related to development of
the Company's software products that do not qualify for capitalization. Software
development  costs are  capitalized  subsequent  to  establishing  technological
feasibility.  Capitalized costs are amortized based on the larger of the amounts
computed  using (a) the ratio that current gross revenues for each product bears
to the total of current and  anticipated  future gross revenues for that product
or (b) the straight-line  method over the remaining  estimated  economic life of
the product.  Expected future revenues and estimated  economic lives are subject
to revisions due to market  conditions,  technology  changes,  and other factors
resulting in shortfalls of expected revenues or reduced economic lives. Software
development  costs  capitalized  during  fiscal 2002,  2001,  and 2000,  totaled
$573,000, $384,000, and $641,000,  respectively.  Amortization expense, included
in cost of  goods  sold,  was  $826,000,  $698,000,  and  $533,000  for the same
periods,   respectively.   Capitalized   software  costs,   net  of  accumulated
amortization, were $642,000 at August 30, 2002, and $895,000 at August 31, 2001.
Accumulated  amortization  amounted  to  $4,555,000  at  August  30,  2002,  and
$3,729,000 at August 31, 2001.

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

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

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

EARNINGS  PER  SHARE.  Basic and  diluted  net  earnings  (loss)  per share were
computed in  accordance  with SFAS No.  128,  "Earnings  per  Share."  Basic net
earnings per share are  computed by dividing  net  earnings  available to common
shareholders  (numerator)  by the  weighted  average  number  of  common  shares
outstanding  (denominator)  during the period and exclude the dilutive effect of
stock  options.  Diluted net  earnings  per share gives  effect to all  dilutive
potential common shares  outstanding  during a period.  In computing diluted net
earnings  per  share,  the  average  stock  price  for  the  period  is  used in
determining  the number of shares  assumed to be  reacquired  under the treasury
stock method from the hypothetical exercise of stock options.

                                       26
<PAGE>

Wegener Corporation and Subsidiaries

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

                                                   Year ended
                                   --------------------------------------------
                                    AUGUST 30,      August 31,     September 1,
                                       2002            2001            2000
                                   --------------------------------------------
BASIC
    Net earnings (loss)            $    807,580    $ (1,976,301)   $ (3,328,890)
                                   --------------------------------------------

    Weighted average shares
        outstanding                  12,160,865      11,943,048      11,798,458
                                   --------------------------------------------

    Net earnings (loss) per share  $        .07    $       (.17)   $       (.28)
                                   ============================================

DILUTED
    Net earnings (loss)            $    807,580    $ (1,976,301)   $ (3,328,890)
                                   --------------------------------------------

    Weighted average shares
        outstanding                  12,160,865      11,943,048      11,798,458

    Effect of dilutive potential
        common shares:
            Stock options                68,375              --              --
                                   --------------------------------------------

    Total                            12,229,240      11,943,048      11,798,458
                                   --------------------------------------------

    Net earnings (loss) per share  $        .07    $       (.17)   $       (.28)
                                   ============================================

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

                                                   Year ended
                                   --------------------------------------------
                                    AUGUST 30,      August 31,     September 1,
                                       2002            2001            2000
                                   --------------------------------------------
Common stock options:
    Number of shares                 882,550         1,034,050       1,188,800
    Range of exercise prices      $1.41 TO $5.63   $.63 to $5.63   $.75 to $5.63
                                   ============================================

FINANCIAL  INSTRUMENTS.  The Company's financial instruments consist of cash and
cash equivalents, trade accounts receivable,  accounts payable, accrued expenses
and long  and  short-term  borrowings.  The  fair  value  of  these  instruments
approximates   their  recorded  value.  The  Company  does  not  have  financial
instruments with off-balance  sheet risk. The fair value estimates were based on
market information available to management as of August 30, 2002.

Financial  instruments that potentially subject the Company to concentrations of
market/credit  risk consist  principally of cash and cash  equivalents and trade
accounts  receivable.  The Company  invests cash  through a high  credit-quality
financial institution.  A concentration of credit risk may exist with respect to
trade  receivables,  as a  substantial  portion of the  Company's  customers are
affiliated with the cable television, business broadcast, and telecommunications
industries.  The  Company  performs  ongoing  credit  evaluations  of  customers
worldwide  and  generally  does  not  require  collateral  from  its  customers.
Historically,  the Company has not  experienced  significant  losses  related to
receivables  from individual  customers or groups of customers in any particular
industry or geographic area.

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

                                       27
<PAGE>

Wegener Corporation and Subsidiaries

RECENTLY ISSUED ACCOUNTING  STANDARDS.  In July 2001, the FASB issued Statements
of Financial Accounting  Standards No. 141, "Business  Combinations" (SFAS 141),
Statement  of  Financial  Accounting  Standards  No.  142,  "Goodwill  and Other
Intangible  Assets" (SFAS 142),  and Statement  No. 143,  "Accounting  for Asset
Retirement  Obligations" (SFAS 143). SFAS 141 requires all business combinations
to be accounted for using the purchase method of accounting and is effective for
all  business  combinations  initiated  after June 30,  2001.  SFAS 142 requires
goodwill to be tested for impairment  under certain  circumstances,  and written
off when impaired,  rather than being amortized as previous standards  required.
SFAS 142 is  effective  for fiscal  years  beginning  after  December  15, 2001.
Implementation  of  these  pronouncements  had  no  significant  impact  on  the
Company's financial statements.

SFAS 143 requires  entities to record the fair value of a liability for an asset
retirement  obligation in the period in which it is incurred and a corresponding
increase in the carrying amount of the related  long-lived asset.  Statement No.
143 is effective  for fiscal years  beginning  after June 15, 2002.  The Company
does not expect SFAS 143 to have a material impact on its financial condition or
results of operations.

In  August  2001,  the  FASB  issued  Statement  No.  144,  "Accounting  for the
Impairment or Disposal of Long-Lived  Assets,"  (SFAS 144).  SFAS 144 supersedes
Statement No. 121,  "Accounting for the Impairment of Long-Lived  Assets and for
Long-Lived Assets to Be Disposed Of" and the accounting and reporting provisions
of  Accounting  Principals  Board  Opinion  No. 30,  "Reporting  the  Results of
Operations--Reporting  the Effects of  Disposal of a Segment of a Business,  and
Extraordinary,  Unusual and Infrequently  Occurring Events and Transactions" for
the disposal of a segment of a business.  Under  Statement No. 144,  goodwill is
excluded   from  its  scope.   Additionally,   Statement   No.  144  utilizes  a
probability-weighted   cash  flow   estimation   approach  and   establishes   a
"primary-asset"  approach to  determine  the cash flow  estimation  period for a
group of assets. Statement No. 144 is effective for fiscal years beginning after
December  15,  2001.  The  Company  does not expect  SFAS 144 to have a material
impact on its financial condition or results of operations.

In July  2002,  the  FASB  issued  Statement  No.  146,  "Accounting  for  Costs
Associated  with Exit or  Disposal  Activities,"  (SFAS 146) which is  effective
January 1, 2003. SFAS 146 provides that an exit cost liability should not always
be recorded at the date of an entity's  commitment to an exit plan,  but instead
should be recorded when the obligation is incurred.  An entity's commitment to a
plan, by itself,  does not create an obligation  that meets the  definition of a
liability. The Company does not expect SFAS 146 to have a material impact on its
financial condition or results of operations.

RECLASSIFICATIONS. Certain reclassifications have been made to the 2001 and 2000
financial statements to conform to the 2002 presentation.

                                       28
<PAGE>

Wegener Corporation and Subsidiaries

2.   ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:

                                               AUGUST 30,       August 31,
                                                  2002             2001
--------------------------------------------------------------------------------
     Accounts receivable - trade             $  3,314,046     $  1,237,403
     Other receivables                             75,308          144,038
--------------------------------------------------------------------------------
                                                3,389,354        1,381,441

     Less allowance for doubtful accounts        (351,592)        (305,021)
--------------------------------------------------------------------------------

                                             $  3,037,762     $  1,076,420
================================================================================

3.   INVENTORIES
Inventories are summarized as follows:

                                             AUGUST 30,         August 31,
                                                2002               2001
--------------------------------------------------------------------------------
     Raw materials                         $  2,917,924       $  3,097,056
     Work-in-process                          1,639,620          5,332,635
     Finished goods                           3,143,736          3,212,686
--------------------------------------------------------------------------------
                                              7,701,280         11,642,377

     Less inventory reserves                 (3,780,607)        (4,156,494)
--------------------------------------------------------------------------------

                                           $  3,920,673       $  7,485,883
================================================================================

The Company has invested a significant amount of financial  resources to acquire
certain raw  materials,  to incur direct labor and to contract to have  specific
outplant  procedures  performed  on certain  inventory  in process.  The Company
purchased this inventory based upon prior backlog and  anticipated  future sales
based upon  existing  knowledge  of the  marketplace.  The  Company's  inventory
reserve of approximately  $3,781,000 at August 30, 2002, is to provide for items
that are  potentially  slow-moving,  excess,  or  obsolete.  Changes  in  market
conditions, lower than expected customer demand, and rapidly changing technology
could result in additional obsolete and slow-moving inventory that is unsaleable
or saleable at reduced prices.  No estimate can be made of a range of amounts of
loss from obsolescence  that are reasonably  possible should the Company's sales
efforts not be successful.

4.   PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:

<TABLE>
<CAPTION>
                                        Estimated
                                       Useful Lives       AUGUST 30,       August 31,
                                         (Years)             2002             2001
--------------------------------------------------------------------------------------
<S>                                        <C>          <C>               <C>
     Land                                      -        $    707,210      $    707,210
     Buildings and improvements             3-30           3,742,790         3,752,521
     Machinery and equipment                 3-5           8,398,260         7,962,624
     Furniture and fixtures                    5             513,316           500,216
     Application software                    3-5             734,590         1,055,590
--------------------------------------------------------------------------------------
                                                          14,096,166        13,978,161
     Less accumulated depreciation
         and amortization                                (11,100,834)      (10,313,869)
--------------------------------------------------------------------------------------

                                                        $  2,995,332      $  3,664,292
======================================================================================
</TABLE>

                                       29
<PAGE>

Wegener Corporation and Subsidiaries

Depreciation  expense for fiscal 2002,  2001,  and 2000,  totaled  approximately
$816,000,  $1,000,000,  and  $1,120,000,  respectively.  Assets recorded under a
capital  lease  included in property and equipment at August 30, 2002 and August
31, 2001, are machinery and equipment of approximately  $613,000 and accumulated
amortization of approximately $613,000 and $609,000, respectively.

5.   ACCRUED EXPENSES
Accrued expenses consist of the following:

                                    AUGUST 30,           August 31,
                                      2002                 2001
-----------------------------------------------------------------------
     Compensation                  $  527,688           $  653,886
     Royalties                        235,444              312,658
     Warranty                          96,136              222,457
     Taxes and insurance              194,074              237,230
     Commissions                      139,399               94,674
     Professional fees                127,176              200,045
     Other                             89,452              288,532
-----------------------------------------------------------------------
                                   $1,409,369           $2,009,482
=======================================================================

6.   FINANCING AGREEMENTS
REVOLVING LINE-OF-CREDIT AND TERM LOAN FACILITY

During the third quarter of fiscal 2002, WCI's bank loan facility was amended to
provide a  maximum  available  credit  limit of  $5,000,000  with  sublimits  as
defined.  The amended loan facility matures on June 30, 2003, or upon demand and
requires an annual  facility  fee of 1% of the maximum  credit  limit.  The loan
facility  consists of a term loan and a revolving line of credit with a combined
borrowing limit of $5,000,000,  bearing interest at the bank's prime rate (4.75%
at August 30, 2002).

The term loan facility  provides for a maximum of $1,000,000  for advances of up
to 80% of the cost of  equipment  acquisitions.  Principal  advances are payable
monthly  over 60 months with a balloon  payment due at maturity.  The  revolving
line of credit is  subject  to  availability  advance  formulas  of 80%  against
eligible accounts receivable; 20% of eligible raw materials inventories;  20% of
eligible  work-in process kit inventories;  and 40% to 50% of eligible  finished
goods  inventories.  Advances  against  inventory  are  subject to a sublimit of
$2,000,000.  The loan is secured by a first lien on  substantially  all of WCI's
assets and  guaranteed by Wegener  Corporation.  At August 30, 2002, no balances
were  outstanding  on the revolving  line of credit or the  equipment  term loan
portions of the loan facility.  Additionally,  at August 30, 2002, approximately
$3,243,000 net of outstanding  letters of credit in the amount of $1,319,000 was
available to borrow in  accordance  with the  revolving  line of credit  advance
formulas.

The Company is required  to  maintain a minimum  tangible  net worth with annual
increases  at each fiscal  year end  commencing  with  fiscal year 2003,  retain
certain key employees, limit expenditures of Wegener Corporation to $600,000 per
fiscal year,  maintain certain  financial  ratios,  and is precluded from paying
dividends.  At August 31,  2002,  the  Company was in  compliance  with all loan
facility  covenants.  The Company  believes that the amended loan facility along
with cash and cash equivalent  balances will be sufficient to support operations
through fiscal 2003.

                                       30
<PAGE>

Wegener Corporation and Subsidiaries

     LONG-TERM OBLIGATIONS
     Long-term obligations consist of:
<TABLE>
<CAPTION>
                                                                       AUGUST 30,    August 31,
                                                                          2002          2001
-----------------------------------------------------------------------------------------------
<S>                                                                   <C>             <C>
     Mortgage note, collateralized by real estate and cross
         collateralized under the loan facility                       $       --      $38,843
     Other long-term obligations, collateralized by equipment             10,414       16,231
-----------------------------------------------------------------------------------------------
                                                                          10,414       55,074
     Less current maturities                                              (6,120)     (44,695)
-----------------------------------------------------------------------------------------------

                                                                       $   4,294      $10,379
===============================================================================================
</TABLE>

At August 30, 2002, other long-term  obligations consisted of a promissory note,
bearing interest at 4.9% per annum, with monthly principal and interest payments
of $543 through May 2004.

A summary of future maturities of long-term debt obligations follows:

                                                  Debt
                Fiscal Year                    Maturities
             -----------------------------------------------
                   2003                        $  6,120
                   2004                           4,294
             -----------------------------------------------
                  Total                        $ 10,414
             ===============================================

7.   INCOME TAXES
The provision for income tax expense (benefit) consists of the following:

                                                   Year ended
--------------------------------------------------------------------------------
                                   AUGUST 30,       August 31,      September 1,
                                      2002             2001             2000
--------------------------------------------------------------------------------
Current
    Federal                      $   (114,000)    $         --     $   (262,000)
    State                                  --               --         (123,000)
--------------------------------------------------------------------------------

                                     (114,000)              --         (385,000)
--------------------------------------------------------------------------------
Deferred
    Federal                           549,000       (1,049,000)      (1,409,000)
    State                              38,000          (63,000)        (101,000)
--------------------------------------------------------------------------------

                                      587,000       (1,112,000)      (1,510,000)
--------------------------------------------------------------------------------

Total                            $    473,000     $ (1,112,000)    $ (1,895,000)
================================================================================

                                       31
<PAGE>

Wegener Corporation and Subsidiaries

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

                                                     Year ended
                                    --------------------------------------------
                                    AUGUST 30,      August 31,      September 1,
                                       2002            2001             2000
                                    --------------------------------------------
Statutory U.S. income tax rate         34.0%          (34.0)%          (34.0)%
State taxes, net of federal
    benefits                            1.9            (1.3)            (3.0)
Non-deductible expenses                  .7              .3               .2
Expired tax credits, net                 --              --              1.5
Other, net                               .3            (1.0)            (1.0)
--------------------------------------------------------------------------------
Effective income tax rate              36.9           (36.0)%          (36.3)%
================================================================================

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

                                                   AUGUST 30,       August 31,
                                                      2002             2001
--------------------------------------------------------------------------------
Deferred tax assets (liabilities):
    Accounts receivable and inventory reserves    $  2,057,000     $  1,860,000
    Accrued expenses                                   208,000          347,000
    Net operating loss carryforwards                   561,000        1,183,000
    General business credit carryforwards               98,000          106,000
    AMT credit carryovers                              138,000          249,000
    Depreciation                                       143,000          114,000
    Capitalized software costs                        (244,000)        (340,000)
    Other                                             (113,000)         (84,000)
--------------------------------------------------------------------------------
Net deferred tax asset                            $  2,848,000     $  3,435,000
================================================================================
Consolidated balance sheet classifications:
    Current deferred tax asset                    $  2,225,000     $  2,207,000
    Noncurrent deferred tax asset                      623,000        1,228,000
--------------------------------------------------------------------------------
    Net deferred tax asset                        $  2,848,000     $  3,435,000
================================================================================

Net deferred tax assets decreased $587,000 to $2,848,000 at August 30, 2002. The
decrease was  principally  due to decreases in net operating loss  carryforwards
and receipt of tax  refunds of  $114,000  as a result of federal  income tax law
changes.  Net deferred tax assets  increased  $1,112,000 to $3,435,000 at August
31, 2001 from  $2,323,000 at September 1, 2000. The increase was principally due
to net  operating  loss  carryforwards  and  increases  in  inventory  reserves.
Realization of deferred tax assets is dependent on generating  sufficient future
taxable  income prior to the  expiration  of the loss and credit  carryforwards.
Although realization is not assured,  management believes it is more likely than
not that all of the deferred tax assets will be realized  based on the Company's
backlog, financial projections and operating history. The amount of the deferred
tax assets considered realizable,  however, could be reduced in the near term if
estimates of further taxable income during the carryforward period are reduced.

At August 30, 2002, the Company had a federal net operating loss carryforward of
$1,604,000,  which  expires in fiscal 2020 and fiscal  2021.  Additionally,  the
Company had general  business  and foreign tax credit  carryforwards  of $98,000
expiring fiscal 2004 and an alternative minimum tax credit of $138,000.

No  provision  for  deferred tax  liability  had been made on the  undistributed
earnings of the Foreign Sales  Corporation  as the earnings will not be remitted
in the foreseeable future and are considered permanently invested. The amount of
the  unrecognized  deferred  tax  liability  for the  undistributed  earnings of
$627,000 was approximately $213,000.

                                       32
<PAGE>

Wegener Corporation and Subsidiaries

8.   COMMON STOCK AND STOCK OPTIONS.

1998 INCENTIVE  PLAN. On February 26, 1998, the  stockholders  approved the 1998
Incentive  Plan (the  "1998  Plan").  The Plan  provides  for awards of up to an
aggregate of 2,000,000  shares of common stock which may be  represented  by (i)
incentive or non-qualified stock options, (ii) stock appreciation rights (tandem
and  free-standing),  (iii)  restricted  stock,  (iv)  deferred  stock,  or  (v)
performance units entitling the holder, upon satisfaction of certain performance
criteria, to awards of common stock or cash. In addition, the 1998 Plan provides
for loans and supplemental cash payments to persons participating in the Plan in
connection with awards granted. Eligible participants include officers and other
key employees,  non-employee directors, consultants and advisors of the Company.
The  exercise  price per share in the case of  incentive  stock  options and any
tandem  stock  appreciation  rights may be not less than 100% of the fair market
value on the date of grant  or,  in the case of an  option  granted  to a 10% or
greater stockholder,  not less than 110% of the fair market value on the date of
grant.  The exercise  price for any other option and stock  appreciation  rights
shall  be at least  75% of the fair  market  value  on the  date of  grant.  The
exercise period for non-qualified stock options may not exceed ten years and one
day from the date of the grant, and the expiration period for an incentive stock
option or stock appreciation  rights shall not exceed ten years from the date of
the grant (five years for a 10% or greater stockholder).  The 1998 plan contains
an  automatic  option  grant  program  to  non-employee  members of the Board of
Directors.  Such members will each be granted an option to purchase 2,000 shares
of common stock on the last day of each December on which regular trading occurs
on the NASDAQ Stock Market,  at an exercise price equal to the fair market value
of such stock on the date of grant. Such options will be exercisable  during the
period  of ten  years  and one day from the  date of  grant of the  option.  The
automatic  grant in fiscal 2002 was  suspended;  however,  on January 22,  2002,
non-employee  directors  were granted  options to purchase  40,900  shares at an
exercise price of $1.00.  The effective date of the 1998 plan is January 1, 1998
and the plan has a ten-year term.  During fiscal 2002 options for 552,375 shares
of common stock were granted at  exercises  prices  ranging from $ .60 to $1.03.
Additionally,  options for 25,000  shares were  forfeited and options for 22,000
shares were exercised at prices ranging from $ .60 to $ .67.  During fiscal 2001
options for 6,000 shares of common  stock were  granted at an exercise  price of
$.63 and options for 148,000 shares were  forfeited.  During fiscal 2000 options
for 283,550 and 200,000 shares of common stock were granted with exercise prices
of $2.31 and $5.63,  respectively.  At August 30,  2002,  options for  1,019,075
shares of common stock were available for future issuance.

1989 DIRECTORS'  INCENTIVE PLAN. On January 9, 1990, the  stockholders  approved
the Wegener  Corporation  1989  Directors'  Incentive  Plan  permitting  certain
participating  directors  of the  Company to be  eligible  to receive  incentive
awards  consisting  of common stock of the Company,  performance  units or stock
appreciation  rights payable in stock or cash, or non-qualified stock options to
purchase  such  stock,  or any  combination  of  the  foregoing,  together  with
supplemental  cash  payments.  During the second  quarter  of fiscal  1995,  the
Company amended the 1989 Directors'  Stock Option Plan to increase the aggregate
number of shares of common  stock  that may be awarded  from  100,000 to 300,000
shares;  to remove the  ineligibility  provision for certain  directors;  and to
grant annually to each non-employee  director,  options to purchase 2,000 shares
of common  stock at an exercise  price  equal to the fair  market  value of such
stock on the date of grant. The exercise price per share for non-qualified stock
options or stock  appreciation  rights shall not be less than 85% of fair market
value  on the  date  the  award  is made or not  more  than  nine  trading  days
immediately preceding such date. The expiration period for a non-qualified stock
option shall be ten years and one day from the date of the grant. The expiration
period for stock appreciation rights, including any extension,  shall not exceed
ten years from the date of grant.  This plan  terminated  and expired  effective
December 1, 1999.  However,  at August 30, 2002,  options for 281,500  shares of
common stock remained outstanding under the 1989 Directors' Incentive Plan.

1988  INCENTIVE  PLAN. On January 10, 1989, the  stockholders  approved the 1988
Incentive Plan  providing to key employees  other than directors of the Company,
incentive  awards  consisting  of  common  stock,  performance  units  or  stock
appreciation  rights payable in stock or cash,  incentive or non-qualified stock
options to  purchase  stock,  or any  combination  of the above,  together  with
supplemental  cash payments.  The aggregate  number of shares issuable under the
1988 plan is 750,000 common shares.  The exercise price per share in the case of
incentive stock options and any tandem stock  appreciation  rights will be equal
to 100% of the fair market  value or, in the case of an option  granted to a 10%
or greater  stockholder,  l10% of the fair market value.  The exercise price for
any other option and stock appreciation rights shall be at least 85% of the fair
market  value on the  date the  option  is  granted.  The  exercise  period  for
non-qualified  stock options shall be ten years and one day from the date of the
grant,  and the  expiration  period  for an  incentive  stock  option  or  stock
appreciation  rights  shall not  exceed  ten years  from the date of the  grant.
During  fiscal 2002 options for 7,500  shares of common stock were  exercised at
$1.44 and options for 96,500 shares were  forfeited.  During fiscal 2001 options
for 12,750  shares of common  stock were  forfeited.  This plan  terminated  and
expired  December  1, 1998.  However,  at August 30,  2002,  options for 114,000
shares of common stock remained outstanding under the 1988 Incentive Plan.

                                       33
<PAGE>

Wegener Corporation and Subsidiaries

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

<TABLE>
<CAPTION>
                                                                               Weighted
                                             Number          Range of           Average
                                           of Shares      Exercise Prices    Exercise Price
-------------------------------------------------------------------------------------------
<S>                                        <C>             <C>                    <C>
Outstanding at
    September 3, 1999                        920,750        $.75 - 1.78           $l.43
       Granted                               483,550        2.31 - 5.63            3.68
       Exercised                            (174,500)       1.41 - 1.47            1.44
       Forfeited or cancelled                (41,000)              1.44            1.44
-------------------------------------------------------------------------------------------
Outstanding at
    September 1, 2000                      1,188,800       $ .75 - 5.63           $2.35
       Granted                                 6,000                .63             .63
       Exercised                                  --                 --              --
       Forfeited or cancelled               (160,750)       1.41 - 5.63            4.25
-------------------------------------------------------------------------------------------
Outstanding at
    August 31, 2001                        1,034,050       $ .75 - 5.63           $2.04
       Granted                               552,375         .60 - 1.03             .90
       Exercised                             (29,500)        .60 - 1.44             .86
       Forfeited or cancelled               (121,500)       1.44 - 2.31            1.56
-------------------------------------------------------------------------------------------
OUTSTANDING AT
    AUGUST 30, 2002                        1,435,425       $ .63 - 5.63           $1.67
AVAILABLE FOR ISSUE AT
    AUGUST 30, 2002                        1,019,075                 --              --
-------------------------------------------------------------------------------------------
Options exercisable at
    AUGUST 30, 2002                        1,135,425       $ .75 - 5.63           $1.89
    August 31, 2001                          995,800       $ .75 - 5.63           $2.06
-------------------------------------------------------------------------------------------

Weighted average fair value of options        Per Share             Aggregate
    granted during the year ended           Option Value               Total
--------------------------------------------------------------------------------
AUGUST 30, 2002                                $ .47                 $ 256,706
August 31, 2001                                $ .34                 $   2,040
September 1, 2000                              $1.33                 $ 370,009
--------------------------------------------------------------------------------
</TABLE>

The weighted average remaining contractual life of options outstanding at August
30, 2002, was 4.4 years.

The Company  applies APB Opinion No. 25 in  accounting  for its stock  incentive
plan and, accordingly, no compensation cost has been recognized for its employee
stock options in the financial statements, except as noted below. If the Company
had  elected  to  recognize  compensation  cost based on the fair value at grant
dates for options issued under the plans  described  above,  consistent with the
method  prescribed by SFAS No. 123, net earnings  (loss) and earnings (loss) per
share would have approximated the pro forma amounts indicated below:

                                                   Year ended
                                 -----------------------------------------------
                                  AUGUST 30,       August 31,      September 1,
                                     2002             2001             2000
--------------------------------------------------------------------------------
Net earnings (loss)
    As Reported                  $    807,580     $ (1,976,301)    $ (3,328,890)
    Pro Forma                         684,596       (2,154,540)      (3,690,941)
--------------------------------------------------------------------------------
Earnings (loss) per share
    As Reported
        Basic                    $        .07     $       (.17)    $       (.28)
        Diluted                           .07             (.17)            (.28)
    Pro Forma
        Basic                             .06             (.18)            (.31)
        Diluted                           .06             (.18)            (.31)
================================================================================

                                       34
<PAGE>

Wegener Corporation and Subsidiaries

The fair value of stock  options used to compute pro forma net  earnings  (loss)
and earnings  (loss) per share  disclosures  is the  estimated  present value at
grant date  using the  Black-Scholes  option  pricing  model with the  following
weighted average assumptions for 2002, 2001, and 2000: no dividend yield for all
years;  expected volatility of 75% in 2002, 80% in 2001, and 75% in 2000, a risk
free  interest  rate of 5.0% in 2002 and  2001,  6.3% in 2000,  and an  expected
option life of 3.0 years in 2002 and 2001, and 3.9 years in 2000.

During  fiscal  2001,  options for 402,500  shares of common stock at a weighted
average exercise price of $1.54, were deemed to be variable stock options. These
options required the recognition of compensation expense based on the difference
between the exercise  price and the fair market value of the stock at the end of
a reporting period. For the year ended August 31, 2001, a non-cash  compensation
benefit  of  $488,000  was  included  in  selling,  general  and  administrative
expenses.  For the year ended September 1, 2000, a non-cash compensation expense
of $489,000 was included in selling, general and administrative expenses. During
the fourth quarter of fiscal 2001 tax  reimbursement  features were removed from
common stock options. As a result, fiscal 2002 SG&A expenses were not subject to
variable stock option compensation adjustments.

On January 25, 2000,  the Company  entered  into an  agreement  with RCG Capital
Markets  Group,  Inc. to provide a national  financial  relations  program.  The
agreement  was for an eighteen  month  period and  provided for a monthly fee of
$6,000 and stock options for 200,000 shares of Wegener  Corporation common stock
exercisable  for a period of five  years  from the date of grant at  $5.625  per
share.  Options for 100,000  shares vested upon  execution of the agreement with
the remaining  options for 100,000 shares vesting upon completion of agreed upon
performance  criteria. In accordance with EITF Issue No. 96-18 and SFAS No. 123,
these  options  were  measured  on January  25,  2000,  for fair value using the
Black-Scholes  option pricing model.  The fair value of the options  amounted to
$445,000  and was  amortized  to  expense  over the  eighteen-month  term of the
agreement. The options for 100,000 shares of common stock related to performance
criteria were forfeited July 25, 2001, upon  expiration of the agreement.  Since
the stated  performance  criteria were not met, none of the  underlying  options
were deemed vested and earned.  As such, the fair value of the forfeited options
amounting  to  $222,000  was  credited to  selling,  general and  administrative
expenses at the date of  forfeiture.  For the year ended  August 31, 2001, a net
charge of $47,000 was included in selling, general, and administrative expenses.
For the year ended  September  1, 2000,  charges of  $175,000  were  included in
selling,  general and administrative  expenses.  At August 30, 2002, options for
100,000  shares were vested and  outstanding.  Pursuant  to the  agreement,  the
Company has  granted  certain  registration  rights to RCG  covering  the shares
underlying the options.

STOCK REPURCHASE PROGRAM. On January 28, 1999, the Board of Directors approved a
stock repurchase program  authorizing the repurchase of up to one million shares
of its common  stock.  As of August 31,  2001,  the Company had  repurchased  an
aggregate of 485,500 shares of its common stock in open market  transactions  at
an average price of $2.27. The stock  repurchase  program was not renewed by the
Board of Directors on January 23, 2001.

                                       35
<PAGE>

Wegener Corporation and Subsidiaries

9.   EMPLOYEE BENEFIT PLANS

WCI has a profit-sharing plan covering  substantially all employees.  Amounts to
be  contributed  to the plan each year are  determined at the  discretion of the
Board of Directors subject to legal limitations.  No contributions were declared
for fiscal years 2002, 2001, and 2000.

Eligible  WCI  employees  are  permitted  to make  contributions,  up to certain
regulatory  limits,  to the plan on a tax deferred basis under Section 401(k) of
the Internal  Revenue  Code.  The plan provides for a minimum  company  matching
contribution on a quarterly  basis at the rate of 25% of employee  contributions
with a quarterly  discretionary match. During fiscal years 2002, 2001, and 2000,
an  additional   discretionary   matching   contribution   of  25%  of  employee
contributions was made for all quarters.  All matching  contributions are in the
form of  Company  stock  or cash at the  discretion  of the  Company's  Board of
Directors.  Matching  Company  contributions  in the form of common  stock  were
approximately  $158,000 in fiscal 2002, $188,000 in fiscal 2001, and $198,000 in
fiscal 2000.

10.  SEGMENT INFORMATION AND SIGNIFICANT CUSTOMERS

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

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

                                                    Year ended
                                    --------------------------------------------
                                     AUGUST 30,      August 31,     September 1,
                                        2002            2001            2000
--------------------------------------------------------------------------------

     Direct Broadcast Satellite     $ 21,932,974    $ 18,038,738    $ 19,478,042
     Telecom and Custom Products       1,073,345       1,779,988       2,984,593
     Service                             452,604         514,173         431,679
--------------------------------------------------------------------------------

                                    $ 23,458,923    $ 20,332,899    $ 22,894,314
================================================================================

Revenues by geographic areas are as follows:

                                                    Year ended
                                    --------------------------------------------
                                     AUGUST 30,      August 31,     September 1,
                                        2002            2001            2000
--------------------------------------------------------------------------------
     Geographic Area
         United States              $ 21,986,074    $ 17,539,328    $ 18,744,547
         Canada                          576,733         111,096          41,747
         Europe                          387,524       1,074,642       1,619,724
         Asia                            219,778         122,762          63,242
         Latin America and Mexico         69,522       1,366,070       2,059,456
         Other                           219,292         119,001         365,598
--------------------------------------------------------------------------------

                                    $ 23,458,923    $ 20,332,899    $ 22,894,314
================================================================================

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

                                       36
<PAGE>

Wegener Corporation and Subsidiaries

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

                                                Year ended
     -----------------------------------------------------------------------
                                 AUGUST 30,      August 31,     September 1,
                                    2002            2001            2000
     -----------------------------------------------------------------------
     Customer 1                     27.9%            (a)%            (a)%
     Customer 2                     27.5             (a)            11.1
     Customer 3                     11.1            34.7             (a)
     Customer 4                      (A)             (a)            16.2

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

Sales to a relatively small number of major customers have typically comprised a
majority  of the  Company's  revenues  and that trend is  expected  to  continue
throughout fiscal 2003 and beyond.  Future revenues are subject to the timing of
significant  orders from  customers and are difficult to forecast.  As a result,
future revenue levels may fluctuate from quarter to quarter.

At August 30, 2002,  one customer  accounted  for more than 10% of the Company's
accounts  receivable.  At August 31, 2001, two customers accounted for more than
10% of the Company's accounts receivable.  When deemed appropriate,  the Company
uses  letters-of-credit  and  credit  insurance  to  mitigate  the  credit  risk
associated with foreign sales.

11.  STATEMENTS OF CASH FLOWS

Interest payments were approximately  $64,000,  $70,000, and $88,000, for fiscal
years 2002, 2001, and 2000, respectively.  Income tax refunds received in fiscal
2002 and 2001 were  $208,000 and  $532,000,  respectively.  No income taxes were
paid in 2000. Non-cash financing activities in fiscal 2002 included:  1) 167,111
shares of treasury  stock  reissued for 401(k)  matching  Company  contributions
valued at approximately  $158,000.  Non-cash financing activities in fiscal 2001
included:  1) 211,883  shares of treasury  stock  reissued  for 401(k)  matching
Company contributions valued at approximately $188,000, 2) non-cash stock option
compensation benefit of $488,000, and 3) fair value of stock options granted for
services  valued at  $47,000.  Non-cash  financing  activities  in  fiscal  2000
included:  1) 75,488  shares of  treasury  stock  reissued  for 401(k)  matching
Company contributions valued at approximately $198,000, 2) non-cash stock option
compensation  expense of $489,000,  and 3) stock  options for 200,000  shares of
common stock granted in exchange for financial relations services to be provided
over an eighteen  month  period.  The options  were valued at $445,000  and were
expensed over the eighteen month period. During fiscal 2000, $175,000 related to
the option value was charged to selling, general, and administrative expenses.

12.  COMMITMENTS AND CONTINGENCIES

During  the  second  quarter  of  fiscal  2001,  the  Company   entered  into  a
manufacturing and purchasing  agreement for certain finished goods  inventories.
The  agreement  is a  firm  commitment  by  the  Company  to  purchase,  over  a
twelve-month period, amounts ranging from approximately $2,565,000 to $3,287,000
depending on actual products purchased. Pursuant to the agreement, at August 30,
2002, remaining purchase commitments amounted to $241,000.  In addition,  during
fiscal 2001, the Company entered into a cancelable  manufacturing and purchasing
agreement for finished goods inventories for which the Company has firm customer
order commitments.  The Company had outstanding  purchase commitments under this
agreement of $1,051,000 at August 30, 2002.  Subsequent to August 30, 2002,  the
Company committed to an additional $913,000 of inventory purchases.  Pursuant to
the above agreements, at August 30, 2002, the Company had outstanding letters of
credit in the amount of $1,319,000.

The Company  leases certain office and  manufacturing  facilities,  vehicles and
equipment under long-term  non-cancelable  operating  leases that expire through
fiscal 2006.  Future minimum lease  commitments  are  approximately  as follows:
2003-$227,000, 2004-$224,000, 2005-$114,000, 2006-$2,000. Rent expense under all
leases was approximately $243,000, $273,000, and $314,000 for fiscal years 2002,
2001, and 2000, respectively.

                                       37
<PAGE>

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

13.  QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                            Quarter
                                  ------------------------------------------------------------    ------------
                                      First          Second           Third          Fourth           Year
                                  ------------------------------------------------------------    ------------
FISCAL 2002
<S>                               <C>             <C>             <C>             <C>             <C>
   REVENUE                        $  6,032,616    $  5,860,702    $  6,290,810    $  5,274,795    $ 23,458,923
   GROSS PROFIT                      1,965,894       2,084,349       2,198,219       1,573,804       7,822,266
   OPERATING INCOME                    224,984         414,613         610,327          61,331       1,311,255
   NET EARNINGS                        132,165         255,946         379,498          39,971         807,580
   NET EARNINGS PER SHARE
         BASIC                            0.01            0.02            0.03             (A)            0.07
         DILUTED                          0.01            0.02            0.03             (A)            0.07

          (A)  LESS THAN $ .01 PER SHARE

Fiscal 2001
   Revenue                        $  4,997,581    $  3,766,210    $  5,364,599    $  6,204,509    $ 20,332,899
   Gross profit                        781,184         468,900       1,380,886       1,702,940       4,333,910
   Operating income (loss) (1)        (952,105)     (1,909,146)       (665,388)        426,792      (3,099,847)
   Net earnings (loss)                (584,257)     (1,226,241)       (435,837)        270,034      (1,976,301)
   Net earnings (loss) per share
         Basic                           (0.05)          (0.10)          (0.04)           0.02           (0.17)
         Diluted                         (0.05)          (0.10)          (0.04)           0.02           (0.17)
</TABLE>

          (1)  The first quarter of fiscal 2001 includes a variable stock option
               compensation benefit of $484,000.

                                       38
<PAGE>

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

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information  contained  under the caption  "ELECTION OF  DIRECTORS"  in the
Proxy   Statement   pertaining  to  the  January  21,  2003  Annual  Meeting  of
Stockholders  ("Proxy Statement") is incorporated herein by reference in partial
response to this item.  See also Item 1.  "Business - Executive  Officers of the
Registrant" on page 8 of this Report.

ITEM 11.  EXECUTIVE COMPENSATION

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

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

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

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

ITEM 14.  CONTROLS AND PROCEDURES

     Within 90 days prior to the filing date of this report, the Company carried
out an  evaluation,  under the  supervision  and with the  participation  of the
Company's management,  including the Chief Executive Officer (CEO) and the Chief
Financial  Officer (CFO) of the effectiveness of the design and operation of the
Company's  disclosure  controls and procedures.  Based on that  evaluation,  the
Company's CEO and CFO have concluded that the Company's  disclosure controls and
procedures (as defined in Rule 13a-14 of the Securities Exchange Act of 1934, as
amended) are effective.  There have been no significant changes in the Company's
internal  controls or in other  factors  that could  significantly  affect these
internal controls subsequent to the completion of their evaluation.

                                       39
<PAGE>

                                     PART IV

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

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

Report of Independent Certified Public Accountants.

Consolidated Balance Sheets - August 30, 2002, and August 31, 2001.

Consolidated  Statements of Operations - Years ended August 30, 2002, August 31,
2001, and September 1, 2000.

Consolidated  Statements of Shareholders'  Equity - Years ended August 30, 2002,
August 31, 2001, and September 1, 2000.

Consolidated  Statements of Cash Flows Years - ended August 30, 2002, August 31,
2001, and September 1, 2000.

Notes to Consolidated Financial Statements.

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

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

               Schedule  II-Valuation and Qualifying Accounts Years ended August
               30, 2002, August 31, 2001, and September 1, 2000.

     (a)  (3)  The exhibits  filed in response to Item 601 of Regulation S-K are
               listed in the Exhibit Index on pages 43 and 44.

     (b)       There  were no reports  on Form 8-K filed for the  Quarter  ended
               August 30, 2002.

     (c)       See Part IV, Item 14(a) (3).

     (d)       Not applicable.

                                       40
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders of Wegener Corporation
Duluth, Georgia

     The audits  referred to in our report dated  November 5, 2002,  relating to
the consolidated  financial  statements of Wegener Corporation and subsidiaries,
which  is  contained  in Item 8 of this  Form  10-K  included  the  audit of the
financial  statement  schedule listed in the  accompanying  index. The financial
statement  schedule  is the  responsibility  of the  Company's  management.  Our
responsibility  is to express an opinion  on the  financial  statement  schedule
based on our audits.

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


                                          /s/ BDO Seidman, LLP
Atlanta, Georgia                              BDO Seidman, LLP
November 5, 2002

                                       41
<PAGE>

                                   SCHEDULE II
                      WEGENER CORPORATION AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                    Balance at      Charged to                                     Balance at
                                    Beginning       Costs and                                        End of
                                    of Period        Expenses      Write-offs      Recoveries        Period
                                    ---------        --------      ----------      ----------        ------
Allowance for doubtful
  account receivable:
<S>                               <C>             <C>             <C>             <C>             <C>
YEAR ENDED AUGUST 30, 2002        $    305,021    $    155,000    $   (108,429)   $         --    $    351,592

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

Year ended September 1, 2000      $    172,585    $     45,000    $    (58,748)   $      6,741    $    165,578


Inventory Reserves:

YEAR ENDED AUGUST 30, 2002        $  4,156,494    $    800,000    $ (1,175,887)   $         --    $  3,780,607

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

Year ended September 1, 2000      $  2,198,494    $  1,246,000    $         --    $         --    $  3,444,494
</TABLE>

                                       42
<PAGE>

EXHIBIT INDEX

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

Exhibit Number      Description of Document
--------------      -----------------------

     *3.1           By-Laws (Reg. No. 2-81795, Exhibits 3(a) and 3(b)).

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

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

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

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

     *4.3           Promissory Note dated April 8, 1996, in favor of Lyon Credit
                    Corporation   and  Wegener   Communications,   Inc.  in  the
                    principal amount of $600,000 (1996 10Q, filed July 11, 1996,
                    Exhibit 4.1).

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

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

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

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

                                       43
<PAGE>

Exhibit Number      Description of Document
--------------      -----------------------

     *10.1          1988  Incentive  Plan (1989 10-K,  filed  November 30, 1989,
                    Exhibit 10.2).

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

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

     *10.4          1989  Directors'  Incentive Plan (1990 10-K,  filed November
                    29, 1990, Exhibit 10.9).

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

     *10.5          1998  Incentive  Plan  (1998  Form  S-8,   Registration  No.
                    333-51205, filed April 28, 1998, Exhibit 10.1).

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

     23             Consent of BDO Seidman, LLP.

     99.1           Certification of Chief Executive Officer Regarding  Periodic
                    Report Containing  Financial  Statements Pursuant to Section
                    906 of the Sarbanes-Oxley Act of 2002.

     99.2           Certification of Chief Financial Officer Regarding  Periodic
                    Report Containing  Financial  Statements Pursuant to Section
                    906 of the Sarbanes-Oxley Act of 2002.

                                       44
<PAGE>

                                   SIGNATURES

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

WEGENER CORPORATION
Date:  November 26, 2002                By   /s/ Robert A. Placek
                                             -----------------------------------
                                                 Robert A. Placek
                                                 President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities indicated on this 26th day of November 2002.

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

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

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

/s/ James T. Traicoff              Controller
-----------------------------
James T. Traicoff

/s/ James H. Morgan, Jr.           Director
-----------------------------
James H. Morgan, Jr.

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

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

                                       45
<PAGE>

 CERTIFICATION OF CHIEF EXECUTIVE OFFICER REGARDING PERIODIC REPORT CONTAINING
 FINANCIAL STATEMENTS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert A. Placek, the Chief Executive Officer of Wegener Corporation, certify
that:

(1)  I have reviewed this annual report on Form 10-K for the period ended August
     30, 2002 of Wegener Corporation;

(2)  Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

(3)  Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

(4)  The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     (b)  evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     (c)  presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of our disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

(5)  The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent functions):

     (a)  all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

(6)  The  registrant's  other  certifying  officers and I have indicated in this
     annual report whether there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.

                                        Date: November 26, 2002

                                        /s/Robert A. Placek

                                        NAME:  ROBERT A. PLACEK
                                        TITLE: CHAIRMAN OF THE BOARD, PRESIDENT
                                               AND CHIEF EXECUTIVE OFFICER

                                       46
<PAGE>

 CERTIFICATION OF CHIEF FINANCIAL OFFICER REGARDING PERIODIC REPORT CONTAINING
 FINANCIAL STATEMENTS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, C. Troy Woodbury,  Jr., the Chief Financial  Officer of Wegener  Corporation,
certify that:

(1)  I have reviewed this annual report on Form 10-K for the period ended August
     30, 2002 of Wegener Corporation;

(2)  Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

(3)  Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

(4)  The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     (b)  evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     (c)  presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of our disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

(5)  The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent functions):

     (a)  all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

(6)  The  registrant's  other  certifying  officers and I have indicated in this
     annual report whether there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.

                                   Date: November 26, 2002

                                   /s/ C. Troy Woodbury, Jr.
                                   NAME:  C. TROY WOODBURY, JR.
                                   TITLE: TREASURER AND CHIEF FINANCIAL OFFICER

                                       47
<PAGE>

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

James H. Morgan, Jr., Esq.
Partner
Smith, Gambrell & Russell, LLP

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

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

Thomas G. Elliot
Senior Vice President of
Technical Projects
CableLabs

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

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

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

James T. Traicoff
Controller


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

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

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

ANNUAL MEETING
The annual meeting of stockholders will be held on January 21, 2003 at 7:00 p.m.
at the Corporate Headquarters.

COMMON STOCK NASDAQ
NASDAQ Small-Cap Market Symbol:
WGNR

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

WEB SITE
HTTP://WWW.WEGENER.COM


QUARTERLY COMMON
STOCK PRICES
The  Company's  common  stock is  traded on the  NASDAQ  Small-Cap  Market.  The
quarterly  ranges of high and low  closing  sale prices for fiscal 2002 and 2001
were as follows:

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

FISCAL YEAR ENDING AUGUST 30, 2002

First Quarter                             $1.24         $ .50
Second Quarter                             1.22           .82
Third Quarter                              1.63           .84
Fourth Quarter                             1.39           .90

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

FISCAL YEAR ENDING AUGUST 31, 2001

First Quarter                             $2.44         $ .78
Second Quarter                             1.56           .56
Third Quarter                              1.20           .68
Fourth Quarter                             1.20           .66

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

The Company had  approximately  386* shareholders of record at November 6, 2002.
The  Company  has never paid cash  dividends  on its  common  stock and does not
intend to pay cash dividends in the foreseeable  future.
*(This  number does not reflect  beneficial  ownership of shares held in nominee
names).

                                       48
<PAGE>