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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 31, 2001
                                       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 16, 2001,  12,111,261  shares of  registrant's  Common Stock
were  outstanding  and the  aggregate  market  value of the Common Stock held by
nonaffiliates  was $11,847,759  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.)

                       DOCUMENTS INCORPORATED BY REFERENCE
     Portions of the definitive  Proxy  Statement  pertaining to the January 22,
2002 Annual  Meeting of  Stockholders,  only to the extent  expressly  so stated
herein, are incorporated herein by reference into Part III.

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<PAGE>

                               WEGENER CORPORATION
                                    FORM 10-K
                           YEAR ENDED August 31, 2001
                                      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 Stock and Related
          Stockholder Matters..................................................8
Item 6.   Selected Financial Data..............................................9
Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations..................................9
Item 7a.  Quantitative and Qualitative Disclosures About Market Risk..........16
Item 8.   Financial Statements and Supplementary Data.........................16
Item 9.   Changes in and Disagreements With Accountants on Accounting
          and Financial Disclosures...........................................34

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant..................34
Item 11.  Executive Compensation..............................................34
Item 12.  Security Ownership of Certain Beneficial Owners
          and Management......................................................34
Item 13.  Certain Relationships and Related Transactions......................34

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and
          Reports on Form 8-K.................................................35

                                       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.

          (i)  Principal products produced and services rendered, and

          (ii) Status of a product or segment.

SATELLITE  COMMUNICATIONS  ELECTRONICS.  WCI  is an  international  provider  of
digital  solutions for video,  audio and broadcast data  networks.  Applications
include  broadcast  television,   cable  television,   radio  network,  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 31, 2001.

     Throughout  fiscal  2001 and fiscal  2000,  WCI  continued  to produce  and
develop digital compression  products.  During fiscal 1997 WCI introduced COMPEL
network control  software and the UNITY Digital  Broadcast  product family.  WCI
continues to ship these products  against  purchase  orders it receives.  COMPEL
provides  networks with  unparalleled  ability to  regionalize  programming  and
commercials through total receiver control. COMPEL also allows network operators
to remotely  control  uplinks  providing  bandwidth  on demand.  COMPEL  control
capability is integrated into the UNITY digital satellite  receivers.  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 technology 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. The

                                       2
<PAGE>

reduction in the cost of network hardware increases the economic  feasibility of
a greater number of networks.  This is evidenced by the trend in both television
and radio towards  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 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.

Major products introduced by WCI during fiscal 2001 include:

     o    The UNITY500IP receiver provides IP data to 15 Mbps and MPEG-2 digital
          video in one unit.  Using standard DVB MPE protocol over the satellite
          link, the UNITY500IP  provides a virtual Ethernet satellite relay. The
          UNITY500IP  is ideal for fat-pipe data  transmission  to the Internet,
          business television users,  satellite service providers,  broadcasting
          and cable data networking applications.

     o    WCI introduced the ENVOY Lite, a low cost version of the ENVOY Digital
          Video  Courier  that  integrates   advanced   encoding  and  modulator
          technology in a compact 2-RU  package.  The ENVOY Lite provides a cost
          effective  alternative for  newsgathering  operations to balance their
          need to  complete  multiple  projects in a timely  fashion  with their
          increased  budgetary   constraints.   The  ENVOY  Lite  is  MPEG-2/DVB
          compliant and contains an integrated EN 301 210  multi-mode  modulator
          that supports QPSK, 8PSK and 16QAM modulations. The ENVOY also handles
          MPEG 4:2:2 and 4:2:0 video  profiles.  The unit  supports both PAL and
          NTSC.

Fiscal year 2001 saw a mix of repeat orders from  existing  customers as well as
orders from new customers. Orders received during FY2001 included:

BUSINESS   TELEVISION/DISTANCE   LEARNING/PRIVATE   NETWORKS.   Businesses   and
educational  institutions  use WCI's  analog and  digital  products  to transmit
programming to remote locations.

     o    Roberts  Communications  placed a $7.4  million  order for a  complete
          network to provide  television  coverage of horse  racing to off track
          betting  venues  throughout  the USA.  Elements of this sale  included
          multiple Compel systems with "Bandwidth on Demand" features as well as
          four thousand  UNITY500 MPEG-2 digital video receivers.  Delivery will
          be completed by the third quarter of fiscal 2002.

     o    WCI received a $30 million  order for UNITY series  digital  receivers
          and a Compel  uplink  management  system  to  deliver  programming  to
          network  subscribers.  WCI will ship  products for this order over the
          next five  years.  Initial  shipments  began in the fourth  quarter of
          fiscal 2001.  WCI is  scheduled to ship $1.5 million  worth of product
          per quarter for the life of the contract.

     o    WCI  received  a $2  million  order  from a major  private  network to
          provide  MediaPlan,  a Compel module that supports the  scheduling and
          delivery of multimedia  content to WCI multimedia  equipped IRD's. WCI
          will  ship this  order  over an  eighteen-month  period  beginning  in
          February 2002.

     o    TERACOM AB (Sweden) also placed add-on orders for UNITY500  receivers.
          Equipment delivery was completed during fiscal 2001.

CABLE  TELEVISION  DISTRIBUTION.  During  fiscal 2001,  WCI received  additional
orders for the UNITY4000.

     o    Fox  Digital  placed an add-on  order for  several  hundred  UNITY4000
          receivers for their expanding  network needs.  Equipment  delivery has
          been completed.

                                       3
<PAGE>

TELEVISION AND RADIO BROADCASTING.  Broadcasters use WCI equipment to distribute
digital audio, analog audio, video and cue/network control signals.

     o    American  Broadcasting  Corporation (ABC) ordered 225 UNITY4422 MPEG-2
          digital video receivers to be used by affiliates in digital  satellite
          newsgathering operations. The majority of equipment was shipped during
          fiscal 2001.  The balance of the equipment is scheduled to ship by the
          second quarter of fiscal 2002.

     o    GE  Americom  placed an order for  UNITY4422  receivers  to be used in
          projects  related to the NASA space  station and  television  coverage
          from the space station.  This order was shipped during fiscal 2001 and
          system is operational per NASA specifications.

     o    TV Azteca placed add-on orders for UNITY4422 receivers. This order was
          shipped during fiscal 2001.

     o    Fox Broadcasting  placed add-on orders for UNITY5000  receivers.  This
          order was shipped during the first quarter of 2002.

     o    WCI  received  an order  from Salem  Music  Network  for UNITY  series
          digital  receivers  and a Compel uplink  management  system to deliver
          programming to network subscribers. The majority of this order shipped
          during  fiscal  2001.  The  remaining  equipment  is scheduled to ship
          during the second quarter of fiscal 2002.

OPTICAL  FIBER  AND  TERRESTRIAL  MICROWAVE.  Most  of  WCI's  products  used on
satellite  communication  links are easily used on existing  microwave  or fiber
circuits.  Typical  applications  are digital  video links,  plus voice and data
circuits that accompany a video signal.

     o    DIRECTV ordered and received  UNITY4422  receivers that added to their
          existing  "local into local"  backhaul  project which  shipped  during
          fiscal 2001. In addition,  DIRECTV has ordered and received  UNITY5000
          receivers  for use in special  applications.  This  equipment  shipped
          during the first quarter of fiscal 2002.

          (iii) Manufacturing and suppliers.

     During 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  twenty  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  $230,000,  $257,000,  and $73,000 in fiscal 2001, 2000, and 1999,
respectively.  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.

                                       4
<PAGE>

          (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 FOX Digital and FOX Sports Net accounted for
approximately 34.7% of revenues in fiscal 2001. Sales to Autotote Communications
Services and MegaHertz  accounted for approximately  16.2% and 11.1% of revenues
in fiscal 2000,  respectively.  Sales to FOX/Liberty Networks,  L.L.C. accounted
for  approximately  19.2% of revenues in 1999. At August 31, 2001, two customers
accounted for more than 10% of the Company's accounts  receivable.  At September
1, 2000,  four 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 2002.  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 eighteen  months.  The Company's  backlog was
approximately  $19,057,000  at August 31, 2001,  and  $9,210,000 at September 1,
2000.  Reference is hereby made to the information  contained in MD&A,  which is
incorporated herein by reference in response to this item.

     Approximately  $15,885,000  of the August 31,  2001  backlog is expected to
ship during fiscal 2002.

          (ix) Government contracts.

     Not applicable.

          (x)  Competitive Conditions.

     WCI competes with companies that have substantially  greater resources,  as
well as with small specialized  companies.  Through relationships with component
and integrated solution providers,  the Company has positioned itself to provide
end-to-end  digital video and audio  solutions to its customers.  Competition in
the market for the Company's MPEG-2 broadcast television  electronics  products,
including  digital video equipment,  is driven by timeliness,  performance,  and
price.  The  Company's  broadcast  digital  video  products  in  production  are
competitively priced, with unique,  desirable features.  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 dominant. However, the

                                       5
<PAGE>

UNITY product family is competing with  significant and 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.  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.

          (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  2001  research  and
development  expenses  were  spent in the  digital  video  product  area.  WCI's
research and development expenses totaled $2,689,000 in fiscal 2001,  $3,048,000
in fiscal 2000, and $2,924,000 in fiscal 1999. 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 31, 2001, the Company had 89 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                               63      President,
President and Chief Executive Officer                  Chief Executive Officer
of the Company since August 1987 and                   and Chairman of the Board
Director of the Company since July 1987.               of the 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.

KEITH N. SMITH                                 43      President of WCI
Director of the Company since March
1999. President of WCI since June 1998.
Vice President, Business Development of
WCI from March 1997 to June 1998.
Co-founder and Vice President/General
Manager of Microspace Communications
Corporation from April 1989 through May
1995. From June 1995 until February
1997, Mr. Smith and his wife pursued a
sailing sabbatical.

C. TROY WOODBURY, JR.                          54      Treasurer and
Treasurer and Chief Financial Officer of               Chief Financial Officer
the Company since June 1988 and Director               of the Company and WCI
since 1989. Treasurer and Chief
Financial Officer of WCI since 1992.
Executive Vice President of WCI since
July 1995. 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                              51      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 is subject to a mortgage note
securing  the  indebtedness.  WCI's 4.4 acres of  adjacent  land are  pledged as
collateral under the Company's line of credit facility.

ITEM 3. LEGAL PROCEEDINGS

     No material  legal  proceedings  involving the Company or its  subsidiaries
were pending as of November 14, 2001.

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

     Not applicable

                                     PART II

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

     The Company's Common Stock is traded on the NASDAQ Small-Cap Market (NASDAQ
symbol: WGNR). As of November 14, 2001, there were approximately 389* holders of
record of Common Stock.  *(This number does not reflect beneficial  ownership of
shares held in nominee names).

The  quarterly  ranges of high and low  closing  sale prices for fiscal 2001 and
2000 were as follows:

                                       FISCAL 2001           Fiscal 2000
                                       -----------           -----------
                                     HIGH        LOW       High        Low
     First Quarter                  $ 2.44     $  .78     $ 3.44     $ 1.63
     Second Quarter                   1.56        .56       8.19       2.13
     Third Quarter                    1.20        .68       8.00       2.00
     Fourth Quarter                   1.20        .66       3.41       1.44

     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
the MD&A section of this report.

                                       8
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

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

<TABLE>
<CAPTION>
                                                               Year ended
                                   ----------------------------------------------------------------
                                   AUGUST 31,   September 1,  September 3,  August 28,   August 29,
                                      2001          2000          1999         1998         1997
---------------------------------------------------------------------------------------------------
<S>                                 <C>           <C>           <C>          <C>          <C>
Revenue                             $ 20,333      $ 22,894      $ 25,259     $ 34,255     $ 21,812

Net earnings (loss)                   (1,976)       (3,329)          213        2,760       (1,809)

Net earnings (loss) per share
   Basic                            $   (.17)     $   (.28)     $    .02     $    .24     $   (.19)
   Diluted                          $   (.17)     $   (.28)     $    .02     $    .23     $   (.19)

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

Total assets                        $ 18,660      $ 24,147      $ 24,954     $ 25,905     $ 25,614

Long-term obligations inclusive
   of current maturities                  55           578         1,205        1,829        3,667
---------------------------------------------------------------------------------------------------
</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.

                                       9
<PAGE>

RESULTS OF OPERATIONS

     Net loss for the year ended August 31, 2001,  was  $(1,976,000)  or $(0.17)
per diluted share, compared to a net loss of $(3,329,000) or $(0.28) per diluted
share for the year ended  September  1, 2000,  and net  earnings  of $213,000 or
$0.02 per diluted share for the year ended September 1, 1999.

     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 over building of capacity which resulted in
delaying capital spending decisions.

     Fiscal 2000  revenues  decreased  $2,365,000  or 9.4% to  $22,894,000  from
fiscal  1999  revenues of  $25,259,000.  DBS  revenues in fiscal 2000  decreased
$2,342,000 or 10.5% to $19,910,000 from $22,252,000 in fiscal 1999.  Telecom and
Custom  Product  revenues  decreased  $22,000 or less than 1% in fiscal  2000 to
$2,985,000  from  $3,007,000  in fiscal  1999.  The  decrease in DBS revenues in
fiscal 2000 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 2000 was primarily due to the continued
lower  levels  of  shipments  of cue and  control  equipment  to  provide  local
commercial insertion capabilities to cable television headend systems.

     WCI's backlog of orders  scheduled to ship within eighteen months increased
$9,847,000  or 106.9% to  $19,057,000  at August 31, 2001,  from  $9,210,000  at
September 1, 2000. The September 1, 2000 backlog  decreased  $6,481,000 or 41.3%
to $9,210,000 from $15,691,000 at September 3, 1999.  Approximately  $15,885,000
of the August 31, 2001, backlog is expected to ship during fiscal 2002. Although
no assurance  may be given,  the Company  believes it will book  sufficient  new
orders  in fiscal  2002 to  improve  operating  results,  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 $2,794,000 or 13.7% of
revenues in fiscal 2001,  compared to  $4,150,000 or 18.1% of revenues in fiscal
2000,  and  $3,494,000  or 13.8%  of  revenues  in  fiscal  1999.  International
shipments are generally project specific and revenues, therefore, are subject to
variations  from year to year.  Fiscal 2000 included  large sales to a broadcast
television  network  in Mexico  and to a  national  broadcast  agency in Sweden.
Management  believes that  international  sales could  increase as more business
opportunities become available for WCI products in the future. 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.

     Gross profit decreased  $485,000 or 10.1% in fiscal 2001 compared to fiscal
2000.  Gross profit as a percent of sales was 21.3% in fiscal 2001,  compared to
21.1% in fiscal 2000 and 32.5% in fiscal 1999. The decrease in margin dollars in
fiscal 2001 was mainly due to lower revenues during the period which resulted in
higher  unit  fixed  overhead  costs.  Profit  margins in fiscal  2001  included
inventory  reserve charges of $1,325,000  compared to $1,246,000 in fiscal 2000,
and were  favorably  impacted  by lower  variable  costs.  Gross  profit  margin
percentages were unfavorably  impacted in fiscal 2000 by a product mix of higher
variable  cost  components  and higher unit fixed  costs due to the  decrease in
sales  volumes.  Profit margins in fiscal 2000  included:  1) inventory  reserve
charges of  $1,246,000  compared  to  $750,000  in fiscal  1999 and 2)  warranty
provisions of $215,000 compared to $150,000 in fiscal 1999.

                                       10
<PAGE>

     Selling,  general, and administrative  (SG&A) expenses decreased $2,496,000
or 34.5% to  $4,745,000  in fiscal 2001 from  $7,241,000  in fiscal  2000.  As a
percentage of revenues, selling, general, and administrative expenses were 23.3%
of revenues in fiscal 2001 and 31.6% 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  option  compensation  expenses  of
$977,000  due to the decline in market  price of WGNR common  stock.  During the
fourth  quarter of fiscal 2001 tax  reimbursement  features  were  removed  from
common stock options.  As a result,  future SG&A expenses will not be subject to
variable stock option compensation adjustments.  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 increased $2,094,000 or 40.7% to
$7,241,000 in fiscal 2000 from $5,147,000 in fiscal 1999. The dollar increase of
expenses  in fiscal  2000  compared  to fiscal  1999  includes  increases  in 1)
advertising  expense of $94,000,  2) repairs and maintenance expense of $73,000,
3) consulting expense of $72,000,  4) depreciation and amortization of $135,000,
5) taxes and licenses of $103,000,  6) professional fees of $366,000, 7) outside
sales agent commissions of $210,000, 8) travel expenses of $120,000, 9) salaries
and benefit  costs of  $356,000,  and 10)  non-cash  stock  option  compensation
expenses of $489,000.

     General corporate expenses included in selling, general, and administrative
expense  were  approximately  $658,000,  $805,000,  and $467,000 in fiscal 2001,
2000,  and 1999,  respectively.  The  corporate  expenses  include  $436,000  of
professional  fees,  including  a  non-cash  charge of  $47,000  related  to the
amortization  of the fair  value of stock  options,  pursuant  to the  Company's
agreement with RCG Capital Markets Group,  Inc. to provide a national  financial
relations  program.  This  agreement was not renewed when it expired  during the
fourth quarter of fiscal 2001.

     Research  and  development  expenditures,  including  capitalized  software
development  costs,  were  $3,073,000  or  15.1% of  revenues  in  fiscal  2001,
$3,689,000  or 16.1% of  revenues in fiscal  2000,  and  $3,331,000  or 13.2% of
revenues in fiscal 1999. The decrease in expenditures in fiscal 2001 compared to
fiscal 2000 was  primarily  due to decreases in overhead  costs and  engineering
consulting due to the completion of contracted engineering  development projects
related  to  DBS  products.   The  Company  expects  fiscal  2002  research  and
development  expenditures  to approximate  fiscal 2001 levels as it continues to
develop and enhance DBS products.  Software development costs totaling $384,000,
$641,000,  and $407,000 were  capitalized  during fiscal 2001,  2000,  and 1999,
respectively.  The increase in  expenditures  in fiscal 2000  compared to fiscal
1999 was  primarily  due to increases in consulting  and  engineering  labor and
related support costs. Research and development expenses,  excluding capitalized
software development costs, were $2,689,000 or 13.2% of revenues in fiscal 2001,
$3,048,000  or 13.3% of  revenues in fiscal  2000,  and  $2,924,000  or 11.6% of
revenues in fiscal 1999.

     Interest expense  decreased 32% in fiscal 2001 compared to fiscal 2000, and
decreased 41% in fiscal 2000 compared to fiscal 1999. The decrease during fiscal
2001 and fiscal 2000 was due primarily to a decrease in total indebtedness.  The
Company  believes that interest expense in fiscal 2002 will increase as a result
of an expected increase in the line of credit.

     Interest  income was $71,000 in fiscal 2001  compared to $334,000 in fiscal
2000 and  $355,000  in fiscal  1999.  The  decrease  in fiscal 2001 was due to a
decrease in the average  outstanding balance of cash and cash equivalents due to
a continued use of cash.  Interest income is expected to decrease in fiscal 2002
due to expected lower average outstanding balances of cash and cash equivalents.

     Fiscal  2001 income tax benefit  was  comprised  of a deferred  federal and
state income tax benefit of $1,049,000 and $63,000,  respectively.  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  (which  expire in fiscal 2020 and fiscal  2021) and  increases in
inventory reserves. Realization of deferred tax assets is dependent on

                                       11
<PAGE>

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 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.  Fiscal 1999 income tax
expense  was  comprised  of a current  federal  and state  income tax expense of
$480,000 and $55,000, respectively, and a deferred federal and state tax benefit
of  $366,000  and  $44,000,  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.

     The Company  operates on a 52-53 week fiscal year.  The fiscal year ends on
the Friday  nearest to August 31. Fiscal years 2001 and 2000 contained 52 weeks,
while fiscal 1999 contained 53 weeks.  All references  herein to 2001, 2000, and
1999 refer to the fiscal years ending  August 31, 2001,  September 1, 2000,  and
September 3, 1999, respectively.

LIQUIDITY AND CAPITAL RESOURCES

     Cash provided by operating  activities in fiscal 2001 was $1,265,000.  Cash
used by operating  activities  in fiscal 2000 was  $4,236,000.  Cash provided by
operating  activities  was  $4,787,000  in  fiscal  1999.  Fiscal  2001 net loss
adjusted for non-cash  expenses used cash of $126,000  while changes in accounts
receivable  and  inventories  provided cash of  $4,210,000.  Changes in accounts
payable,  accrued  expenses,  customer  deposits  and other  assets used cash of
$2,819,000.

     Cash used by investment  activities was $860,000 in fiscal 2001 compared to
$1,748,000  in fiscal 2000 and  $1,041,000  in 1999.  Cash used in 2001 includes
property and  equipment  expenditures  of  $476,000,  and  capitalized  software
additions of  $384,000.  Property and  equipment  expenditures  were for planned
additions of principally  manufacturing  and engineering test equipment.  Fiscal
2002 expenditures for investment  activities are expected to approximate  fiscal
2001 levels.

     Cash used by financing  activities was $551,000 in fiscal 2001, $802,000 in
fiscal 2000, and $1,380,000 in fiscal 1999. In fiscal 2001, financing activities
used cash of $542,000 for scheduled repayments of long-term obligations, $28,000
for debt issuance costs, and provided $18,000 of cash from borrowings. At August
31, 2001, scheduled fiscal 2002 debt repayments are approximately $45,000.

     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.  This stock  repurchase  program was not renewed by the Board of
Directors on January 23, 2001, and no common stock was repurchased during fiscal
2001.

     Net accounts  receivable  decreased  $3,035,000  or 73.8% to  $1,076,000 at
August 31, 2001, from $4,111,000 at September 1, 2000, compared to $2,618,000 at
September  3, 1999.  The  decrease in fiscal 2001 was  primarily  due to a lower
percentage  of shipments  occurring  in the last month of the fourth  quarter of
fiscal 2001 compared to the same period of fiscal 2000, and early  collection on
account from a major customer in the fourth quarter of fiscal 2001.  Also, there
were no  recoverable  income taxes at August 31,  2001,  compared to $659,000 at
September 1, 2000.  The allowance  for doubtful  accounts was $305,000 at August
31, 2001,  $166,000 at September 1, 2000, and $173,000 at September 3, 1999. Net
recoveries were $19,000 in fiscal 2001. Write-offs, net of recoveries, in fiscal
2000  and  1999  were  $52,000  and  $124,000,  respectively.  Increases  to the
allowance  and charges to general and  administrative  expense were  $120,000 in
fiscal 2001, $45,000 in fiscal 2000, and $40,000 in fiscal 1999.

                                       12
<PAGE>

     Inventory before reserves decreased $1,909,000 to $11,642,000 at August 31,
2001,  from  $13,551,000 at September 1, 2000. The decrease was primarily due to
the  completion of shipments to a major customer in the fourth  quarter.  During
fiscal 2001,  inventory reserves were increased by provisions charged to cost of
sales of  $1,325,000.  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 2000, inventory reserves were increased by provisions
charged to cost of sales of  $1,246,000  and by $750,000 in fiscal 1999.  During
fiscal 2001 decreases in inventories provided cash of $1,296,000. In fiscal 2000
and fiscal 1999,  increases in inventory  used cash of $4,864,000  and $118,000,
respectively.

     During the second quarter of fiscal 2001, WCI's existing bank loan facility
was amended and maintained a maximum  available credit limit of $10,000,000 with
sublimits as defined.  The renewed loan  facility  matures on June 21, 2003,  or
upon demand and requires an annual  facility  fee of $27,500 plus an  additional
 .50% of $3,000,000  if  borrowings,  at any time,  exceed  $5,500,000.  The loan
facility  consists  of 1) a term  loan and a  revolving  line of  credit  with a
combined  borrowing  limit of $8,500,000,  bearing  interest at the bank's prime
rate (6.5% at August 31,  2001) and 2) a real  estate  advance  facility  with a
maximum  borrowing limit of $1,500,000  bearing  interest at a fixed rate of 225
basis points over the bank's cost of funds at the date of disbursement.

     The term loan portion  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 material 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 real estate advance  portion of the loan facility  provides for
advances of up to 70% of the appraised value of certain real property.  Advances
for real  property  are payable in 35 equal  principal  payments  with a balloon
payment due at maturity.

     The  Company is  required  to  maintain a minimum  tangible  net worth with
annual  increases at each fiscal year end  commencing  with fiscal 1997,  retain
certain key employees, limit expenditures of Wegener Corporation to $600,000 per
fiscal year,  and is precluded  from paying  dividends.  At August 31, 2001, the
Company was in  violation  of the  tangible  net worth and  Wegener  Corporation
annual  spending  limit  covenants  with respect to which the bank has granted a
waiver. As a result of the convenant violations, the bank has the right to amend
any terms of the loan facility.  It is possible that the maximum  available line
of credit  could be reduced,  the annual  facility fee could  increase,  and the
interest rate on the term loan and the revolving line of credit could  increase.
The Company  believes  that it will be necessary to borrow on the line of credit
during fiscal 2002 and that the existing  facility will be sufficient to support
fiscal 2002 operations.  As a result of an expected  increase in the utilization
of the line of credit  during  fiscal  2002,  interest  expense is  expected  to
increase in fiscal 2002.  While no assurances may be given, the Company believes
that it will continue to be able to obtain waivers prior to requiring any future
borrowings on the line of credit.  However, if the Company is unable to meet the
minimum  tangible net worth  covenant or obtain a waiver,  it may be required to
obtain other debt or equity  financing  and no  assurance  can be given that the
Company would in such event be able to secure new financing. The loan facility's
outstanding balance under real property advances was $39,000 at August 31, 2001,
and  $505,000 at  September  1, 2000.  At August 31,  2001,  $1,240,000,  net of
outstanding  letters of credit in the amount of  $2,878,000,  was  available  to
borrow under the accounts  receivable and inventory advance formulas.  At August
31,  2001,  no balances  were  outstanding  under the  accounts  receivable  and
inventory  advances.  Additionally,  Wegener  Corporation  guarantees  the  loan
facility.

     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 31,
2001,  the  Company had  outstanding  purchase  commitments  of  $1,192,000.  In
addition,  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 $1,621,000 at August 31, 2001.  Subsequent to August 31, 2001,  the
Company committed to an additional $973,000 of inventory purchases.  Pursuant to
the above agreements, at August 31, 2001, the Company had outstanding letters of
credit in the amount of $2,878,000.

                                       13
<PAGE>

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

     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.  Fifty  percent of the  options  granted  vested  upon  execution  of the
agreement with the balance  vesting upon  completion of agreed upon  performance
criteria.   Pursuant  to  the  agreement,   the  Company  has  granted   certain
registration  rights to RCG  covering  the shares  underlying  the  options.  In
accordance  with EITF Issue No.  96-18 and SFAS No.  123,  the fair value of the
stock  options  calculated  at the grant  date  using the  Black-Scholes  option
pricing  model  amounted to  $445,000.  The fair value was a scheduled  non-cash
charge to earnings over the eighteen month term of the agreement.  During fiscal
2001,  options for 100,000 shares of common stock were forfeited upon expiration
of the agreement.  The fair value of the forfeited options amounting to $222,000
was  credited to selling,  general,  and  administrative  expenses in the fourth
quarter of fiscal  2001.  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 31, 2001,  options for 100,000
shares were vested.

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.  The Company is currently not
affected by SFAS 141 or SFAS 142 as there are no  transactions  covered by these
pronouncements.

     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.

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

                                       14
<PAGE>

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

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

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

     The Company has invested a  significant  amount of  financial  resources to
acquire  certain raw  materials,  to incur  direct labor and to contract to have
specific  outplant  procedures  performed on  inventory in process.  The Company
purchased this inventory  based upon  previously  known backlog and  anticipated
future  sales  given  existing  knowledge  of  the  marketplace.  The  Company's
inventory reserve of $4,156,000 at August 31, 2001, 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.

     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.

                                       15
<PAGE>

     The  Company  has made  significant  investments  in  capitalized  software
principally  related to digital  audio and video  products.  At August 31, 2001,
capitalized software costs were $895,000. These costs are amortized based on the
larger of the amounts  computed  using (a) the ratio that current gross revenues
for each  product  bears to the total of current and  anticipated  future  gross
revenues for that  product or (b) the  straight-line  method over the  remaining
estimated  economic life of the product.  Expected future revenues and estimated
economic  lives are subject to revisions  due to market  conditions,  technology
changes,  and other  factors  resulting in  shortfalls  of expected  revenues or
reduced economic lives.

     The   industry  in  which  the   Company   operates  is  subject  to  rapid
technological advances and frequent product  introductions.  The Company expects
to remain  committed to research  and  development  expenditures  as required to
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 31, 2001, subject to variable interest rate fluctuations.

     At August 31, 2001, cash  equivalents  consisted of commercial paper in the
amount of $1,815,000.  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

Consolidated Statements of Operations
   Years ended August 31, 2001, September 1, 2000, and September 3, 1999......17

Consolidated Balance Sheets
   As of August 31, 2001 and September 1, 2000................................18

Consolidated Statements of Shareholders' Equity
   Years ended August 31, 2001, September 1, 2000, and September 3, 1999......19

Consolidated Statements of Cash Flows
   Years ended August 31, 2001, September 1, 2000, and September 3, 1999......20

Notes to Consolidated Financial Statements....................................21

Report of Independent Certified Public Accountants............................36

Consolidated Supporting Schedules Filed:

Schedule II-Valuation and Qualifying Accounts
   Years ended August 31, 2001, September 1, 2000, and September 3, 1999......37

                                       16
<PAGE>

Wegener Corporation and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                         Year ended
                                         --------------------------------------------
                                          AUGUST 31,     September 1,    September 3,
                                             2001            2000            1999
--------------------------------------------------------------------------------------
<S>                                      <C>             <C>             <C>
Revenue                                  $ 20,332,899    $ 22,894,314    $ 25,259,155
--------------------------------------------------------------------------------------

Operating costs and expenses
   Cost of products sold                   15,998,989      18,075,326      17,055,600
   Selling, general and administrative      4,744,913       7,240,636       5,147,117
   Research and development                 2,688,844       3,047,754       2,924,097
--------------------------------------------------------------------------------------

Operating costs and expenses               23,432,746      28,363,716      25,126,814
--------------------------------------------------------------------------------------

Operating income (loss)                    (3,099,847)     (5,469,402)        132,341
   Interest expense                           (59,929)        (88,085)       (149,288)
   Interest income                             71,475         333,597         355,220
--------------------------------------------------------------------------------------

Earnings (loss) before income taxes        (3,088,301)     (5,223,890)        338,273

Income tax expense (benefit)               (1,112,000)     (1,895,000)        125,000
--------------------------------------------------------------------------------------

Net earnings (loss)                      $ (1,976,301)   $ (3,328,890)   $    213,273
======================================================================================

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

Shares used in per share calculation
   Basic                                   11,943,048      11,798,458      11,849,383
   Diluted                                 11,943,048      11,798,458      12,007,270
======================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       17
<PAGE>

Wegener Corporation and Subsidiaries

                          CONSOLIDATED BALANCE SHEETS

                                                    AUGUST 31,     September 1,
                                                       2001            2000
--------------------------------------------------------------------------------
ASSETS

Current
   Cash and cash equivalents                       $  1,926,723    $  2,072,853
   Accounts receivable                                1,076,420       4,110,827
   Inventories                                        7,485,883      10,106,776
   Deferred income taxes                              2,207,000       1,858,000
   Other                                                134,095          62,573
--------------------------------------------------------------------------------

      Total current                                  12,830,121      18,211,029

Property and equipment, net                           3,664,292       4,207,183
Capitalized software costs, net                         895,442       1,209,139
Deferred income taxes                                 1,228,000         465,000
Other assets                                             42,617          54,311

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

                                                   $ 18,660,472    $ 24,146,662
================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
   Accounts payable                                $  1,694,923    $  2,781,470
   Accrued expenses                                   2,009,482       2,533,262
   Customer deposits                                    813,125       2,076,361
   Current maturities of long-term obligations           44,695         539,628
--------------------------------------------------------------------------------

      Total current liabilities                       4,562,225       7,930,721

Long-term obligations, less current maturities           10,379          38,843
--------------------------------------------------------------------------------

      Total liabilities                               4,572,604       7,969,564
--------------------------------------------------------------------------------

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                        19,751,694      20,324,568
   Deficit                                           (5,209,410)     (3,233,109)
   Less treasury stock, at cost                        (577,562)     (1,037,507)
--------------------------------------------------------------------------------

Total shareholders' equity                           14,087,868      16,177,098
--------------------------------------------------------------------------------
                                                   $ 18,660,472    $ 24,146,662
================================================================================

See accompanying notes to consolidated financial statements.

                                       18
<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 August 28, 1998               12,314,575        123,146     19,407,417        (117,492)        358,546        (332,926)

   Treasury stock reissued through
      stock options and 401(k) plan               --             --         85,153              --        (112,587)        104,542
   Treasury stock purchased                       --             --             --              --         386,500        (703,344)
   Net earnings for the year                      --             --             --         213,273              --              --
-----------------------------------------------------------------------------------------------------------------------------------

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)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       19
<PAGE>

Wegener Corporation and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     Year ended
                                                     ------------------------------------------
                                                      AUGUST 31,    September 1,   September 3,
                                                         2001           2000           1999
-----------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>            <C>
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
   Net earnings (loss)                               $(1,976,301)   $(3,328,890)   $   213,273
   Adjustments to reconcile net earnings (loss) to
      cash provided by operating activities
      Depreciation and amortization                    1,769,984      1,710,389      1,649,546
      Issuance of treasury stock for
         compensation expenses                           188,378        197,808        176,398
      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                            120,000         45,000         40,000
      Provision for inventory reserves                 1,325,000      1,246,000        750,000
      Provision for deferred income taxes             (1,112,000)    (1,510,000)      (410,000)
      Warranty provisions                                     --        215,000        150,000
      Changes in assets and liabilities
         Accounts receivable                           2,914,407     (1,537,531)     2,656,642
         Inventories                                   1,295,893     (4,863,963)      (118,420)
         Other assets                                    (85,480)       194,638       (239,380)
         Accounts payable and accrued expenses        (1,470,597)     1,387,011       (180,525)
         Customer deposits                            (1,263,236)     1,192,295         99,445
-----------------------------------------------------------------------------------------------

                                                       1,265,011     (4,236,055)     4,786,979
-----------------------------------------------------------------------------------------------

CASH USED FOR INVESTMENT ACTIVITIES
   Property and equipment expenditures                  (476,176)    (1,106,558)      (634,239)
   Capitalized software additions                       (384,068)      (641,060)      (406,486)
-----------------------------------------------------------------------------------------------

                                                        (860,244)    (1,747,618)    (1,040,725)
-----------------------------------------------------------------------------------------------

CASH USED FOR FINANCING ACTIVITIES
   Repayment of long-term debt and capitalized
      lease obligations                                 (541,511)      (626,788)    (1,983,251)
   Proceeds from long-term debt                           18,114             --      1,359,508
   Purchase of treasury stock                                 --       (398,470)      (703,344)
   Debt issuance costs                                   (27,500)       (27,500)       (66,633)
   Proceeds from stock options exercised                      --        250,693         13,297
-----------------------------------------------------------------------------------------------

                                                        (550,897)      (802,065)    (1,380,423)
-----------------------------------------------------------------------------------------------

(Decrease) increase in cash and cash equivalents        (146,130)    (6,785,738)     2,365,831
Cash and cash equivalents, beginning of year           2,072,853      8,858,591      6,492,760
-----------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year               $ 1,926,723    $ 2,072,853    $ 8,858,591
===============================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       20
<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 2001 and fiscal 2000  contained
52 weeks,  while fiscal 1999 contained 53 weeks. All references  herein to 2001,
2000,  and 1999 relate to the fiscal years ending August 31, 2001,  September 1,
2000, and September 3, 1999, respectively.

CASH  EQUIVALENTS.  Cash equivalents  consist of highly liquid  investments with
original  maturities  of  three  months  or  less.  At  August  31,  2001,  cash
equivalents  consisted of bank commercial paper in the amount of $1,815,000.  At
September 1, 2000, cash  equivalents  consisted of a $1,125,000 bank certificate
of deposit, and variable rate municipals in the amount of $500,000.

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 are financed under lease  contracts that have been  capitalized.
Aggregate lease payments, discounted at appropriate rates, have been recorded as
long-term  debt,  the  related  leased  assets  have been  capitalized,  and the
amortization of such assets is included in depreciation expense. 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. Product sales and services are recorded when the product is
shipped or the service is rendered to the customer, all significant  contractual
obligations  have  been  satisfied  and  the  collectibility  of  the  resulting
receivable is reasonably assured.  The Company adopted Staff Accounting Bulletin
No 101, "Revenue Recognition in Financial  Statements" ("SAB 101") in the fourth
quarter of fiscal 2001.  The adoption of SAB 101 did not have a material  impact
on the Company's operating results or financial position.

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 the technological
feasibility of a product. 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 2001, 2000, and
1999,  totaled  $384,000,  $641,000,  and $406,000,  respectively.  Amortization
expense, included in cost of goods sold was $698,000, $533,000, and $518,000 for
the same periods,  respectively.  Capitalized software costs, net of accumulated
amortization,  were $895,000 at August 31, 2001,  and $1,209,000 at September 1,
2000.  Accumulated  amortization  amounted to $3,729,000 at August 31, 2001, and
$3,031,000 at September 1, 2000.

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

                                       21
<PAGE>

Wegener Corporation and Subsidiaries

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
realizeable.

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 is computed by dividing  net  earnings  available  to common
shareholders  (numerator)  by the  weighted  average  number  of  common  shares
outstanding  (denominator) during the period and excludes 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 exercise of stock options.

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

                                                    Year ended
                                   ---------------------------------------------
                                    AUGUST 31,     September 1,    September 3,
                                       2001            2000            1999
                                   ---------------------------------------------
BASIC
   Net earnings (loss)             $ (1,976,301)   $ (3,328,890)   $    213,273
                                   ---------------------------------------------
   Weighted average shares
      outstanding                    11,943,048      11,798,458      11,849,383
                                   ---------------------------------------------
   Net earnings (loss) per share   $       (.17)   $       (.28)   $        .02
                                   ============================================
DILUTED
   Net earnings (loss)             $ (1,976,301)   $ (3,328,890)   $    213,273
                                   ---------------------------------------------
   Weighted average shares
      outstanding                    11,943,048      11,798,458      11,849,383

   Effect of dilutive potential
      common shares:
      Stock options                          --              --         157,887
                                   ---------------------------------------------
   Total                             11,943,048      11,798,458      12,007,270
                                   ---------------------------------------------
   Net earnings (loss) per share   $       (.17)   $       (.28)   $        .02
                                   ============================================

                                       22
<PAGE>

Wegener Corporation and Subsidiaries

Options and convertible debentures excluded from the diluted earnings (loss) per
share calculation due to their anti-dilutive effect are as follows:

                                                    Year ended
                                  ----------------------------------------------
                                    AUGUST 31,     September 1,    September 3,
                                       2001            2000            1999
                                  ----------------------------------------------
Common stock options:
   Number of shares                 1,034,050       1,188,800         6,000
   Range of exercise prices       $.63 to $5.63   $.75 to $5.63       $1.78
                                  ==============================================

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  bank  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 31, 2001.

Financial  instruments that potentially subject the Company to concentrations of
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.

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. The
Company  is  currently  not  affected  by SFAS 141 or SFAS  142 as there  are no
transactions covered by these pronouncements.

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.

RECLASSIFICATIONS. Certain reclassifications have been made to the 2000 and 1999
financial statements to conform to the 2001 presentation.

                                       23
<PAGE>

Wegener Corporation and Subsidiaries

2.   ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:

                                                    AUGUST 31,      September 1,
                                                       2001             2000
--------------------------------------------------------------------------------
     Accounts receivable - trade                   $ 1,237,403      $ 3,474,717
     Recoverable income taxes                               --          659,000
     Other receivables                                 144,038          142,688
--------------------------------------------------------------------------------
                                                     1,381,441        4,276,405

     Less allowance for doubtful accounts             (305,021)        (165,578)
--------------------------------------------------------------------------------

                                                   $ 1,076,420      $ 4,110,827
================================================================================

3.   INVENTORIES
Inventories are summarized as follows:

                                                    AUGUST 31,      September 1,
                                                       2001             2000
--------------------------------------------------------------------------------
     Raw materials                                 $ 3,097,056      $ 4,176,521
     Work-in-process                                 5,332,635        5,539,578
     Finished goods                                  3,212,686        3,835,171
--------------------------------------------------------------------------------
                                                    11,642,377       13,551,270

     Less inventory reserves                        (4,156,494)      (3,444,494)
--------------------------------------------------------------------------------

                                                   $ 7,485,883      $10,106,776
================================================================================

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  $4,156,000 at August 31, 2001, is to provide for items
that are  potentially  slow  moving,  excess,  or  obsolete.  Changes  in market
conditions, lower than expected customer demand, and rapidly changing technology
could result in additional obsolete and slow-moving inventory that is unsaleable
or saleable at reduced prices.  No estimate can be made of a range of amounts of
loss from obsolescence  that are reasonably  possible should the Company's sales
efforts not be successful.

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

                                     Estimated
                                    Useful Lives    AUGUST 31,     September 1,
                                      (Years)          2001            2000
--------------------------------------------------------------------------------
     Land                                 --       $    707,210    $    707,210
     Buildings and improvements         3-30          3,752,521       3,752,521
     Machinery and equipment             3-5          7,962,624       7,786,454
     Furniture and fixtures                5            500,216         689,845
     Application software                3-5          1,055,590       1,034,675
--------------------------------------------------------------------------------
                                                     13,978,161      13,970,705
     Less accumulated depreciation
         and amortization                           (10,313,869)    (9,763,522)
--------------------------------------------------------------------------------

                                                   $  3,664,292    $  4,207,183
================================================================================

Depreciation  expense for fiscal 2001,  2000,  and 1999,  totaled  approximately
$1,000,000,  $1,120,000  and $888,000,  respectively.  Assets  recorded  under a
capital  lease  included in  property  and  equipment  at August 31,  2001,  and
September 1, 2000,  are machinery and  equipment of  approximately  $613,000 and
accumulated amortization of approximately $609,000 and $578,000, respectively.

                                       24
<PAGE>

Wegener Corporation and Subsidiaries

5.   ACCRUED EXPENSES
Accrued expenses consist of the following:
                                                    AUGUST 31,      September 1,
                                                       2001             2000
--------------------------------------------------------------------------------

     Compensation                                  $   653,886      $   631,940
     Royalties                                         312,658          443,490
     Warranty                                          222,457          347,423
     Taxes and insurance                               237,230          397,252
     Commissions                                        94,674          225,724
     Professional fees                                 200,045          152,611
     Other                                             288,532          334,822
--------------------------------------------------------------------------------
                                                   $ 2,009,482      $ 2,533,262
================================================================================

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

WCI's  bank loan  facility  provides  for a maximum  available  credit  limit of
$10,000,000  with  sublimits as defined.  The loan facility  matures on June 21,
2003,  or upon demand and  requires an annual  facility  fee of $27,500  plus an
additional .5% of $3,000,000 if borrowings, at any time, exceed $5,500,000.  The
loan facility  consists of 1) a term loan and a revolving  line of credit with a
combined  borrowing  limit of $8,500,000,  bearing  interest at the bank's prime
rate (6.5% at August 31,  2001) and 2) a real  estate  advance  facility  with a
maximum  borrowing limit of $1,500,000  bearing  interest at a fixed rate of 225
basis points over the bank's cost of funds at the date of disbursement.

The term loan portion 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.  The real estate advance  portion of the loan facility  provides for
advances of up to 70% of the appraised value of certain real property.  Advances
for real  property  are payable in 35 equal  principal  payments  with a balloon
payment due at maturity.

At August 31, 2001, the loans were secured by a first lien on substantially  all
of WCI's  assets.  The Company is required  to maintain a minimum  tangible  net
worth with annual  increases at each fiscal year end commencing with fiscal year
1997, retain certain key employees, limit expenditures of Wegener Corporation to
$600,000 per fiscal year, and is precluded from paying dividends.  At August 31,
2001,  the  Company  was in  violation  of the  tangible  net worth and  Wegener
Corporation  annual  spending limit covenants as to which the bank has granted a
waiver. As a result of the covenant violations,  the bank has the right to amend
any terms of the loan facility.  It is possible that the maximum  available line
of credit  could be reduced,  the annual  facility fee could  increase,  and the
interest rate on the term loan and the revolving line of credit could  increase.
The Company  believes  that it will be necessary to borrow on the line of credit
during fiscal year 2002.  While no assurances may be given, the Company believes
that it will  continue to be able to obtain  waivers  prior to requiring  future
borrowings on the line of credit.  However, if the Company is unable to meet the
minimum  tangible net worth  covenant or obtain a waiver,  it may be required to
obtain other debt or equity financing.  The loan facility's  outstanding balance
under real  property  advances was $39,000 at August 31,  2001,  and $505,000 at
September  1,  2000,  respectively.  At  August  31,  2001,  $1,240,000,  net of
outstanding  letters of credit in the amount of  $2,878,000,  was  available  to
borrow under the accounts receivable and inventory advance formulas. No balances
were outstanding under the accounts  receivable and inventory advances at August
31, 2001. Additionally, Wegener Corporation guarantees the loan facility.

                                       25
<PAGE>

Wegener Corporation and Subsidiaries

LONG-TERM OBLIGATIONS
Long-term obligations consist of:

                                                    AUGUST 31,      September 1,
                                                       2001             2000
--------------------------------------------------------------------------------
Mortgage note, monthly principal $38,843 plus
   interest at 6.519% collateralized by real
   estate and cross collateralized under the
   loan facility                                   $    38,843      $   504,960
Other long-term obligations, collateralized
   by equipment                                         16,231           73,511
--------------------------------------------------------------------------------
                                                        55,074          578,471

Less current maturities                                (44,695)        (539,628)
--------------------------------------------------------------------------------

                                                   $    10,379      $    38,843
================================================================================

At August 31, 2001,  other  long-term  obligations  include 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
                    -----------------------------------------
                            2002              $44,695
                            2003                6,120
                            2004                4,259
                    -----------------------------------------
                           Total              $55,074
                    =========================================

The Company  leases certain office and  manufacturing  facilities,  vehicles and
equipment under long-term  non-cancelable  operating  leases that expire through
fiscal 2005.  Future minimum lease  commitments  are  approximately  as follows:
2002-$231,000;  2003-$229,000;  2004-$228,000; 2005-$118,000. Rent expense under
all leases was approximately  $273,000,  $314,000, and $225,000 for fiscal years
2001, 2000, and 1999, respectively.

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

                                            Year ended
     ----------------------------------------------------------------------
                        AUGUST 31,         September 1,        September 3,
                           2001                2000                1999
     ----------------------------------------------------------------------
     Current
        Federal        $        --         $  (262,000)        $   480,000
        State                   --            (123,000)             55,000
     ----------------------------------------------------------------------
                                --            (385,000)            535,000
     ----------------------------------------------------------------------
     Deferred
        Federal         (1,049,000)         (1,409,000)           (366,000)
        State              (63,000)           (101,000)            (44,000)
     ----------------------------------------------------------------------
                        (1,112,000)         (1,510,000)           (410,000)
     ----------------------------------------------------------------------
     Total             $(1,112,000)        $(1,895,000)        $   125,000
     ======================================================================

                                       26
<PAGE>

Wegener Corporation and Subsidiaries

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

                                                    Year ended
                                      -------------------------------------
                                      AUGUST 31,   September 1, September 3,
                                         2001          2000         1999
     ----------------------------------------------------------------------
     Statutory U.S. income tax rate    (34.0)%        (34.0)%        34.0%
     State taxes, net of federal
        benefits                        (1.3)          (3.0)          2.0
     Foreign sales corporation benefit    --             --          (5.0)
     Non-deductible expenses              .3             .2           4.3
     Expired tax credits, net             --            1.5            --
     Other, net                         (1.0)          (1.0)          1.7
     ----------------------------------------------------------------------
     Effective income tax rate         (36.0)%        (36.3)%        37.0%
     ======================================================================

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

                                                    AUGUST 31,      September 1,
                                                       2001             2000
--------------------------------------------------------------------------------
Deferred tax assets (liabilities):
   Accounts receivable and inventory reserves      $ 1,860,000      $ 1,520,000
   Accrued expenses                                    347,000          338,000
   Net operating loss carryforwards                  1,183,000          404,000
   General business credit carryforwards               106,000          106,000
   AMT credit carryovers                               249,000          249,000
   Depreciation                                        114,000           64,000
   Capitalized software costs                         (340,000)        (463,000)
   Other                                               (84,000)         105,000
--------------------------------------------------------------------------------
Net deferred tax asset                             $ 3,435,000      $ 2,323,000
================================================================================
Consolidated balance sheet classifications:
   Current deferred tax asset                      $ 2,207,000      $ 1,858,000
   Noncurrent deferred tax asset                     1,228,000          465,000
--------------------------------------------------------------------------------
   Net deferred tax asset                          $ 3,435,000      $ 2,323,000
================================================================================

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.  Net deferred
tax assets increased $1,510,000 to $2,323,000 at September 1, 2000 from $813,000
at September 3, 1999. The increase was principally due to net operating loss and
tax credit  carryforwards  and  increases in inventory  reserves in fiscal 2000.
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 31, 2001, the Company had a federal net operating loss carryforward of
$3,337,000,  which  expires in fiscal 2020 and fiscal  2021.  Additionally,  the
Company had general  business and foreign tax credit  carryforwards  of $106,000
expiring fiscal 2004 and an alternative minimum tax credit of $249,000.

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.

                                       27
<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 1,000,000  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
effective  date of the 1998 plan is  January 1, 1998 and the plan has a ten-year
term.  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 31,
2001,  options  for 550,450  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.  During fiscal 1999,  options for 2,000 shares
of common stock were granted at an exercise price of $1.78. Additionally, during
fiscal  1999  options for 50,000  shares of common  stock with  exercise  prices
ranging from $1.53 to $12.13 were cancelled and reissued at an exercise price of
$1.41. This plan terminated and expired effective December 1, 1999.

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 2001 options for 12,750  shares of common  stock were  forfeited.
During fiscal 1999,  options for 105,000 shares of common stock with an exercise
price of $2.00 were cancelled and reissued at an exercise  price of $1.41.  This
plan terminated and expired December 1, 1998.

                                       28
<PAGE>

Wegener Corporation and Subsidiaries

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

                                                                    Weighted
                                   Number.          Range of         Average
                                  of Shares      Exercise Prices  Exercise Price
--------------------------------------------------------------------------------
Outstanding at
 August 28, 1998                   736,000        $ .75 - 12.13       $ 1.63
   Granted or reissued             369,000          1.41 - 1.78         1.45
   Exercised                        (9,000)                1.44         1.44
   Forfeited or cancelled         (175,250)         1.44 -12.13         2.33
--------------------------------------------------------------------------------
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
AVAILABLE FOR ISSUE AT
 AUGUST 31, 2001                   550,450                   --           --
================================================================================
Options exercisable at
 AUGUST 31, 2001                   995,800        $  .75 - 5.63       $ 2.06
 September 1, 2000                 697,050        $  .75 - 5.63       $ 2.04
================================================================================

Weighted average fair value of options           Per Share          Aggregate
   granted during the year ended               Option Value           Total
--------------------------------------------------------------------------------
AUGUST 31, 2001                                   $   .34          $     2,040
September 1, 2000                                    1.33              370,009
September 3, 1999                                     .68              140,535
================================================================================

The weighted average remaining contractual life of options outstanding at August
31, 2001, was 4.1 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 changed to the pro forma amounts indicated below:

                                                 Year ended
                                 ------------------------------------------
                                  AUGUST 31,    September 1,   September 3,
                                     2001           2000           1999
     ----------------------------------------------------------------------
     Net earnings (loss)
        As Reported              $(1,976,301)   $(3,328,890)   $   213,273
        Pro Forma                 (2,154,540)    (3,690,941)        46,662
     ----------------------------------------------------------------------
     Earnings (loss) per share
        As Reported
           Basic                 $      (.17)   $      (.28)   $       .02
           Diluted                      (.17)          (.28)           .02
        Pro Forma
           Basic                        (.18)          (.31)           .00
           Diluted                      (.18)          (.31)           .00
     ======================================================================

                                       29
<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 2001, 2000, and 1999: no dividend yield for all
years;  expected volatility of 80% in 2001, 75% in 2000, and 50% in 1999; a risk
free  interest  rate of 5.0% in  2001,  6.3% in 2000,  and 5.0% in 1999;  and an
expected  option life of 3.0 years in 2001,  3.9 years in 2000, and 3.3 years in
1999.

At August 31,  2001,  options for 402,500  shares of common  stock at a weighted
average exercise price of $1.54, are deemed to be variable stock options.  These
options require 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,  future SG&A expenses will not be 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.  Fifty  percent of the  options  granted  vested  upon  execution  of the
agreement with the balance  vesting upon  completion of agreed upon  performance
criteria.   Pursuant  to  the  agreement,   the  Company  has  granted   certain
registration  rights to RCG  covering  the shares  underlying  the  options.  In
accordance  with EITF Issue No.  96-18 and SFAS No.  123,  the fair value of the
stock  options  calculated  at the grant  date  using the  Black-Scholes  option
pricing  model  amounted to  $445,000.  The fair value was a scheduled  non-cash
charge to earnings over the eighteen month term of the agreement.  During fiscal
2001,  options for 100,000 shares of common stock were forfeited upon expiration
of the agreement.  The fair value of the forfeited options amounting to $222,000
was  credited to selling,  general,  and  administrative  expenses in the fourth
quarter of fiscal  2001.  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 31, 2001,  options for 100,000
shares were vested and outstanding.

OTHER  OPTIONS,  AWARDS AND  WARRANTS.  During  fiscal 1999,  options for 22,500
common shares,  with an exercise price of $2.44 per share expired.  In addition,
stock awards  issued under the 1988  Incentive  Plan of 12,500  shares  remained
outstanding at August 31, 2001.

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,  and no common  stock was  repurchased
during fiscal 2001.

                                       30
<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 2001, 2000, and 1999.

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 2001, 2000, and 1999,
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  $188,000 in fiscal 2001, $198,000 in fiscal 2000, and $176,000 in
fiscal 1999.

10.  SEGMENT INFORMATION AND SIGNIFICANT CUSTOMERS
During 1999, the Company adopted SFAS No. 131 "Disclosures  about Segments of an
Enterprise and Related Information" which establishes 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 31,   September 1, September 3,
                                         2001          2000         1999
     ----------------------------------------------------------------------
     Direct Broadcast Satellite    $18,038,738   $19,478,042   $21,500,769
     Telecom and Custom Products     1,779,988     2,984,593     3,007,288
     Service                           514,173       431,679       751,098
     ----------------------------------------------------------------------
                                   $20,332,899   $22,894,314   $25,259,155
     ======================================================================

Revenues by geographic areas are as follows:

                                                    Year ended
                                      -------------------------------------
                                      AUGUST 31,   September 1, September 3,
                                         2001          2000         1999
     ----------------------------------------------------------------------
     Geographic Area
        United States              $17,539,328   $18,744,547   $21,765,145
        Canada                         111,096        41,747     1,585,004
        Europe                       1,074,642     1,619,724     1,136,041
        Asia                           122,762        63,242        66,420
        Latin America and Mexico     1,366,070     2,059,456       617,146
        Other                          119,001       365,598        89,399
     ----------------------------------------------------------------------
                                   $20,332,899   $22,894,314   $25,259,155
     ======================================================================

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.

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.  In fiscal 2001 and fiscal 1999,  one  customer  and its  affiliates
accounted  for 34.7% and 19.2% of revenues,  respectively.  In fiscal 2000,  two
different  customers  accounted  for 16.2% and 11.1% of revenues,  respectively.
These  customers  represent  revenues  principally  within the Direct  Broadcast
Satellite product line. At

                                       31
<PAGE>

Wegener Corporation and Subsidiaries

August 31, 2001,  two  customers  accounted  for more than 10% of the  Company's
accounts  receivable.  At September 1, 2000,  four 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.  STATEMENT OF CASH FLOWS
Interest payments were approximately $70,000,  $88,000, and $159,000, for fiscal
years 2001, 2000, and 1999, respectively.  Income tax refunds received in fiscal
2001 were $532,000. No income taxes were paid in 2000. Income taxes paid in 1999
were $253,000. 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
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 31,
2001,  the  Company had  outstanding  purchase  commitments  of  $1,192,000.  In
addition,  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 $1,621,000 at August 31, 2001.  Subsequent to August 31, 2001,  the
Company committed to an additional $973,000 of inventory purchases.  Pursuant to
the above agreements, at August 31, 2001, the Company had outstanding letters of
credit in the amount of $2,878,000.

13.  QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                          Quarter
                               -------------------------------------------------------------   -------------
                                   First          Second           Third          Fourth           Year
                               -------------------------------------------------------------   -------------
<S>                            <C>             <C>             <C>             <C>             <C>
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)         (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)
   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)

Fiscal 2000
   Revenue                     $  7,014,503    $  7,170,016    $  4,585,371    $  4,124,424    $ 22,894,314
   Gross profit                   2,326,600       2,560,353         250,356        (273,321)      4,818,988
   Operating income (loss)         (340,160)     (2,257,041)       (420,134)     (2,452,067)     (5,469,402)
   Net earnings (loss)             (166,809)     (1,401,384)       (191,332)     (1,569,365)     (3,328,890)
   Earnings (loss) per share
      Basic                           (0.02)          (0.12)          (0.02)          (0.13)          (0.28)
      Diluted                         (0.02)          (0.12)          (0.02)          (0.13)          (0.28)
</TABLE>

The first quarter of fiscal 2001 includes a variable  stock option  conpensation
benefit of $484,400.  During  fiscal 2000  variable  stock  option  compensation
expenses (benefits) were recorded as follows:  first quarter - $376,000;  second
quarter - $2,542,000; third quarter - $(2,289,000); fourth quarter - $(140,000).

                                       32
<PAGE>

Wegener Corporation and Subsidiaries

              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 31, 2001, and September 1, 2000, and
the related consolidated statements of operations, shareholders' equity and cash
flows  for each of three  years in the  period  ended  August  31,  2001.  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  generally  accepted  auditing
standards.  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  31,  2001,  and  September  1,  2000,  and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended  August 31, 2001 in  conformity  with  generally
accepted accounting principles.

                                        /s/ BDO Seidman, LLP

Atlanta, Georgia                        BDO Seidman, LLP
October 19, 2001

                                       33
<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  22,  2002  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

     Information  contained  under the  captions  "ELECTION  OF  DIRECTORS"  and
"SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT"  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.

                                       34
<PAGE>

                                     PART IV

ITEM 14. 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:

Consolidated Balance Sheets - August 31, 2001, and September 1, 2000.

Consolidated  Statements of Operations - Years ended August 31, 2001,  September
1, 2000, and September 3, 1999.

Consolidated  Statements of Shareholders'  Equity - Years ended August 31, 2001,
September 1, 2000, and September 3, 1999.

Consolidated  Statements of Cash Flows Years - ended August 31, 2001,  September
1, 2000, and September 3, 1999.

Notes to Consolidated Financial Statements.

Report of Independent Certified Public Accountants.

     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 40:

               Schedule  II-Valuation and Qualifying Accounts Years ended August
               31, 2001, September 1, 2000, and September 3, 1999.

     (a)  (3)  The exhibits  filed in response to Item 601 of Regulation S-K are
               listed in the Exhibit Index on pages 41 and 42.

     (b)       There  were no reports  on Form 8-K filed for the  Quarter  ended
               August 31, 2001.

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

     (d)       Not applicable.

                                       35
<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  October 19, 2001,  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
October 19, 2001

                                       36
<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
                                             ---------     --------    ----------    ----------     ------
<S>                                          <C>          <C>          <C>           <C>          <C>
Allowance for doubtful account receivable:

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

Year ended September 3, 1999                 $  256,991   $   40,000   $ (124,406)   $       --   $  172,585

Inventory Reserves:

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

Year ended September 3, 1999                 $1,439,520   $  750,000   $       --    $    8,974   $2,198,494
</TABLE>

                                       37
<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.)

                    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.

                                       38
<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.

                                       39
<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 29, 2001                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 19th day of November 2001.

Signature                        Title

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

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

 /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

                                       40
<PAGE>

<TABLE>
<CAPTION>
<S>                                <C>                                    <C>
DIRECTORS                          INDEPENDENT CERTIFIED                  QUARTERLY COMMON
Robert A. Placek                   PUBLIC ACCOUNTANTS                     STOCK PRICES
Chairman of the Board,             BDO Seidman, LLP                       The Company's common stock is traded
President and Chief                285 Peachtree Center Avenue            on the NASDAQ Small-Cap Market.
Executive Officer                  Suite 800                              The quarterly ranges of high and low
Wegener Corporation                Atlanta, Georgia 30303-1230            closing sale prices for fiscal 2001
                                                                          and 2000 were as follows:
James H. Morgan, Jr., Esq.         TRANSFER AGENT
Partner                            Securities Transfer Corporation                              High      Low
Smith, Gambrell & Russell, LLP     2591 Dallas Parkway                    -------------------------------------
                                   Suite 102                              FISCAL YEAR ENDING AUGUST 31, 2001
C. Troy Woodbury, Jr.              Frisco, Texas 75034
Treasurer and Chief                                                       First Quarter        $2.44     $ .78
Financial Officer                  CORPORATE
Wegener Corporation                HEADQUARTERS                           Second Quarter        1.56       .56
                                   11350 Technology Circle
Keith N. Smith                     Duluth/Atlanta, Georgia 30097-1502     Third Quarter         1.20       .68
President, Wegener
Communications, Inc.               ANNUAL MEETING                         Fourth Quarter        1.20       .66
                                   The annual meeting of stockholders     -------------------------------------
Joe K. Parks                       will be held on January 22, 2002 at
Retired, Previously                7:00 p.m. at the Corporate             FISCAL YEAR ENDING SEPTEMBER 1, 2000
Laboratory Director,               Headquarters.
Systems Development Laboratory                                            First Quarter        $3.44     $1.63
Georgia Tech Research Institute    COMMON STOCK NASDAQ
Georgia Institute of Technology    NASDAQ Small-Cap Market Symbol:        Second Quarter        8.19      2.13
                                   WGNR
Thomas G. Elliot                                                          Third Quarter         8.00      2.00
Senior Vice President of           FORM 10-K REPORT
Technical Projects                 Wegener Corporation's Annual Report    Fourth Quarter        3.41      1.44
CableLabs                          on Form 10-K, filed with the           -------------------------------------
                                   Securities and Exchange Commission,
OFFICERS                           is available free of charge by         The Company had approximately 389*
Robert A. Placek                   written request to:                    shareholders of record at November 14,
Chairman of the Board,                Elaine Miller, Secretary            2001. The Company has never paid
President and Chief                   Investor Relations                  cash dividends on its common stock and
Executive Officer                     Wegener Corporation                 does not intend to pay cash dividends
                                      11350 Technology Circle             in the foreseeable future.
Keith N. Smith                        Duluth, Georgia 30097-1502          *(This number does not reflect
President, Wegener                                                        beneficial ownership of shares held in
Communications, Inc.               WEB SITE                               nominee names).
                                   HTTP://WWW.WEGENER.COM
C. Troy Woodbury, Jr.
Treasurer and Chief
Financial Officer

James T. Traicoff
Controller
</TABLE>

                                       41