<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

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

                                  FORM 10-KSB

(Mark One)
[ X ]  Annual report under Section 13 or 15 (d) of the Securities Exchange 
       Act of 1934  [No fee required] 

          For the fiscal year ended DECEMBER 28, 1996, or

[   ]  Transition report under Section 13 or 15 (d) of the  Securities Exchange
       Act of 1934 [No fee required] 

       For the transition period from _________ to __________  

                          Commission file number 0-11880

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

           California                                         94-2234140

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

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

Issuer's telephone number, including area code:  (702) 883-0820

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

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

                    Common Stock, no par value
                         (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by 
Section 13 or 15(d) of the  Exchange Act during the past 12 months (or for 
such shorter period that the registrant was required to file such reports), 
and (2) has been subject to such filing requirements for the past 90 days.   
                              Yes ___X___         No  ______

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

Revenues of the Issuer for the most recent fiscal year ended December 28, 
1996 were:  $8,641,000.                           

The aggregate market value of the voting stock held by non-affiliates of the 
registrant (based on the average of the bid and asked prices reported on the 
Over the Counter bulletin board of the National Association of Securities 
Dealers, Inc.) on March 17, 1997 was approximately $2,866,023.  For purposes 
of such calculation,  shares of Common Stock held by each executive officer 
and director and by each person who owns more than 5% of the outstanding 
Common Stock have been excluded in that such persons may be deemed to be 
affiliates. This determination of affiliate status is not necessarily a 
conclusive determination for other purposes.

As of March 17, 1997, the issuer had outstanding 2,941,424 shares of Common 
Stock, no par value.

                      DOCUMENTS INCORPORATED BY REFERENCE

Parts of the Company's definitive Proxy Statement for its Annual Meeting of 
Shareholders to be held on May 16, 1997 (the "Proxy Statement") are 
incorporated by reference into Part III of this Annual Report on Form 10-KSB.


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                                   PART I
                                   ------

ITEM 1.  DESCRIPTION OF BUSINESS.
         ------------------------

     Hytek Microsystems, Inc.  ("Hytek" or the "Company") designs, 
manufactures, markets and sells custom and standard hybrid microcircuits.  
These microcircuits utilize thick film technology and consist of conductive 
and non-conductive inks that are bonded onto a substrate and interconnected 
with various subminiature electronic components to form a hybrid 
microcircuit.  In addition to custom thick film hybrid microcircuits, the 
Company also manufactures delay lines, thermo-electric cooler controllers and 
laser diode driver standard products.

Net  revenues in 1996 increased 60%  from 1995 levels. The Company had a net 
income of $1,927,000 in 1996 as compared to a net income of $521,000 during 
1995.  During 1996, the Company had strong positive cash flow  and 
experienced an overall  increase in total assets and working capital position 
from the 1995 year-end.  See "Management's Discussion and Analysis or Plan of 
Operation" in Part II, Item 6 hereof.

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

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

PRODUCTS AND MARKETS

     Products manufactured by the Company are sold primarily to original 
equipment manufacturers (OEMs) serving the oil exploration, military, 
computing, telecommunications, and industrial markets.  Approximately 94% of 
the Company's net revenues in 1996 were derived from products designed and 
manufactured to meet a particular customer's specifications.  The remaining 
6% of net revenues in 1996 were derived from standard products designed by 
the Company's engineering staff.

     During 1996,  approximately 76% of the Company's revenues were derived 
from commercial and industrial private sector programs as compared to 
approximately 70% in 1995. Sales to the military and government sector 
increased in total dollar volume during 1996. However, this volume was 
reduced as a percentage of total revenues in 1996 due to the large overall 
increase in total revenues.

     From 1987, when the Company was certified under MIL-Standard-1772,  
through 1994, sales of military and government products  increased.  1995 was 
the first year that the Company  experienced a decline in the sale of 
military and government products.  Although sales to the military and 
government sector increased in 1996, these sales did not keep pace with the 
Company's overall growth for the year.  The Company continues to pursue 
business in the military market and in 1996 received a significant military 
order, which will be reflected in future revenues when shipped.  Offshore 
producers with significantly lower costs have in the


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past been precluded from participating in many U.S. military applications; 
however, it is not certain that this preclusion will remain in effect in the 
future.  Military products are subject to much more stringent manufacturing 
criteria than the commercial products and have in the past commanded 
significantly higher prices.  The Company intends to continue its efforts to 
remain competitive in the military market. *

     The apparent end of the "Cold War" and the reduction in overall global 
tension, together with an apparent congressional goal of a balanced federal 
budget has put considerable uncertainty into the future of defense and 
government related spending programs.  In the past two years, the Company has 
experienced a decrease in business for weapon systems related products, while 
simultaneously experiencing an increase in business for satellite 
communications and satellite systems related products.   While the management 
of the Company believes that the outlook for increased military business is 
uncertain,  we currently intend to continue  active participation in the 
military and government marketplace.*

     The commercial custom hybrid market has historically been an extremely 
competitive, low margin arena.  In many commercial applications, U.S. 
manufacturers are competing against offshore producers that have 
significantly lower costs.  However, there are certain segments of this 
market that require high reliability custom hybrid products.  Such high 
reliability products command higher prices and margins.  It is in this 
segment of the commercial market where the Company has been successful during 
1995 and 1996. 

     Historically, a substantial majority of the Company's revenues have been 
derived from custom products that are manufactured to a customer's 
specifications for a unique application.  This has held true for the past two 
years with the custom product percentage of total revenues increasing from 
88% in 1995 to 94% in 1996.  

       In February 1993, the Company announced a new standard commercial 
product, the Thermo-Electric Cooler Controller (TECC), which has applications 
in fiber optic communications and various "detector" product markets.  During 
1994, additional TECC devices were designed and introduced.  These products 
have received favorable response from the marketplace and have been shipped 
to a wide variety of customers.  Further, during 1995, the Company introduced 
its High Speed Laser Diode Driver (HSLDD).  The Company expects the market 
for these products to grow as new communications technologies develop.* The 
Company continues to support these products in addition to its established 
digital delay line products.

HYBRID CIRCUIT TECHNOLOGY

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

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


                                      3
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     Theoretically, hybrid circuit packaging techniques can be employed in 
virtually any electronic application, but they have various advantages and 
disadvantages in any given application as compared with alternative  
techniques. In general, the alternative techniques are printed circuit 
designs, integrated circuits and thin film hybrid technology.

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

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

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

     All of the microcircuits currently produced by Hytek are manufactured 
using thick film hybrid circuit packaging techniques, including thick film 
screen print, firing and laser trimming, chip and wire assembly, and 
automatic testing. The Company may, however, seek to develop additional 
process technologies in the future that could enable the Company to offer 
more sophisticated circuits than those currently provided by Hytek. *

PRODUCT APPLICATIONS

     Custom products accounted for approximately 94% of the Company's sales 
in 1996.  These products serve a variety of applications in the oil 
exploration, military, computing, telecommunications, and industrial markets. 
In the production of custom products, the Company generally accepts full 
responsibility for product design, having received blueprints and/or input 
and output specifications from the potential customer.  In many cases, 
prototypes are developed and delivered to the customer, and are evaluated by 
the customer, before a firm order for production quantities is placed.  In 
the case of a new custom product, a typical production cycle time from 
initial customer contact to shipment of the product in commercial quantities 
would be 20 to 30 weeks.  The Company places a strong emphasis on developing 
a working relationship between its own engineering staff and the engineering 
staff of a potential customer during the product development phase.

     Standard products accounted for approximately 6% of the Company's sales 
in 1996.  These products consist of delay lines, thermo-electric cooler 
controllers and laser diode driver products produced for applications in the 
military, computing, industrial electronic systems, telecommunications, and 
automatic test equipment markets.

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

          OIL EXPLORATION -- seismic data acquisition and geophysical
          measurement equipment.


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          MILITARY -- communications, guidance systems, delay lines, fuses, and
          avionics.
     
          COMPUTING -- delay lines, VLSI thick film packages, gate arrays, disk
          drive controllers, dynamic memory and networking circuits for data 
          processing. 
     
          TELECOMMUNICATIONS -- video systems, fiber optical data transmission
          networks, solid state relays, subscriber line interface circuits,
          paging systems and custom logic arrays.
          
          INDUSTRIAL ELECTRONIC SYSTEMS -- measurement and diagnostics on 
          rotating machinery.
     
          AUTOMATIC TEST EQUIPMENT --  Integrated circuit test systems.
          
MARKETING

     The Company markets its products in the United States through its own 
sales staff and through independent sales  representatives.  At December 28, 
1996, the Company's direct sales staff consisted of three employees operating 
from the Company's principal office in Carson City.  In addition, at such 
date the Company had three independent sales representatives located 
throughout the United States and one independent representative located in 
Israel.  In addition, the Company has distributors in Australia, France, 
Germany, Japan, Korea and Sweden.

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

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

     The Company's Carson City, Nevada facility is MIL-Standard-1772 
certified and qualified.  This certification is a prerequisite to participate 
in certain military contracts, and is subject to periodic audits by the U.S. 
government. Loss of the MIL-Standard-1772 certification would have a material 
adverse impact on the Company's business prospects and financial condition.

CUSTOMERS

     During 1996, the Company's five largest customers accounted for 83% of 
the Company's net revenues.  Those customers were Chesapeake Sciences 
Corporation (62%), TRW, Inc. (12%), Carleton Technologies, Inc. (4%), 
Lockheed-Martin Corporation (3%), and Litton Applied Technology, Inc. (2%).  
The Company anticipates a continuing business relationship with all of these 
customers in the future. * A large portion (54%) of the Company's backlog of 
orders for 1997 and beyond is attributable to Chesapeake Sciences 
Corporation.  Any lengthy disruption in the supply of materials for the 
Chesapeake Sciences program would have a significant negative effect on 
revenues and earnings.  Any delay in scheduled shipments to, or cancellation 
of orders by Chesapeake, would have a material adverse effect on the 
Company's business, results of operations and financial condition.  See 
"Factors Affecting Future Results", page 10.


                                      5
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MANUFACTURING

     Each hybrid product produced by the Company passes through a number of 
complex processes, each of which requires a high degree of skill and 
precision.

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

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

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

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

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

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

     Government regulations impose various environmental controls on the 
chemicals used in electronics manufacturing.  The Company employs various 
safeguards to avoid the discharge of harmful materials into the environment 
and believes that its activities conform to present state and federal 
environmental regulations. However, there can be no assurance that the 
Company 


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will not in the future be exposed to increased costs relating to required 
clean-up or compliance with ever-tightening regulations. * The Company 
complies with new federal labeling regulations, which took effect in May 
1993, regarding the use of Ozone Depleting Chemicals (ODCs) as set forth in 
the Clean Air Act of 1990. The new labeling requirements  have had only a 
minor cost impact on operations.  At the present time, the Company is not 
aware of any other proposed or pending government regulation that would have 
a material impact on the operations or financial condition of the Company. *  
However, there can be no assurance that any future government regulation 
would not have a material impact on the Company's operations or financial 
condition.

ENGINEERING AND DEVELOPMENT  

     The growth in sales volume over the past two years has been in custom 
hybrid products which require intensive engineering effort from the design 
phase through final release to production.  As a result, the amount of effort 
committed to research and new standard product development has been minimal 
over the past two years.  

     During 1996 and 1995, the Company spent $650,000 and $592,000, 
respectively, on its total engineering efforts.  Of these amounts, it is 
estimated that approximately $65,000 and $89,000 were spent on new product 
research and development in 1996 and 1995, respectively.

     The Company's last new standard product introduced was the High Speed 
Laser Diode Driver, in the spring of 1995.  Sales of this product have been 
minimal to date, which the Company attributes to the high unit cost of the 
device as currently designed.  As a result, the Company is currently 
designing and prototyping a "cost reduced" version of the Laser Diode Driver, 
which it hopes will be more suitable for volume commercial applications.*     

COMPETITION

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

     The Company believes that the hybrid circuit industry includes large 
OEMs, such as IBM, TRW, Inc. and Western Electric, that manufacture 
exclusively for their own use (so called "captive" manufacturers), and other 
OEMs, such as Teledyne Industries, Inc.  and Hughes Aircraft Co., that 
manufacture for both their own use and for sale to others.  Some of these 
large "captive" and OEM hybrid manufacturers have curtailed or reduced their 
internal hybrid operations and begun to procure their hybrid requirements 
from outside sources.   The Company believes that this has led to increased 
opportunities for the entire hybrid circuit industry.  
     
     In addition, there exists a large number of independent hybrid circuit 
manufacturers, such as the Company, that manufacture exclusively for sale to 
others.  In the past year certain of these manufacturers have left the custom 
hybrid arena to specialize in defined markets such as medical or memory 
hybrids. These changes have created additional opportunities for the Company. 
Further, over 30 of the known independent manufacturers are certified to 
MIL-Standard-1772, as is the Company.  The Company's current share of the 
overall hybrid circuit market is small.
     
     In those applications where hybrid circuits and integrated circuits are 
interchangeable, hybrid circuit manufacturers often compete with major 
integrated circuit manufacturers.


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

TRADEMARKS, PATENTS AND LICENSES

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

EMPLOYEES

     As of December 28, 1996, the Company employed a total of 70 full-time 
employees, of whom 52 were in manufacturing, 3 were in marketing and sales, 
13 were in engineering and development and 2 were in administration. The 
Company's success depends in part on its ability to attract and retain 
skilled personnel, for whom there is strong demand.   None of the Company's 
employees are covered under a collective bargaining agreement, and the 
Company has not experienced any labor strike or related work stoppage.

GOVERNMENT CONTRACTS

     During 1996, the Company derived approximately 24% of its total revenues 
from government contracts and subcontracts.  Such contracts and subcontracts 
generally contain provisions allowing termination for the convenience of the 
government.  In the event of such termination, the Company would generally be 
entitled to receive a termination settlement consisting of (i) the contract 
price for completed items accepted by the government or prime contractor and 
(ii) the Company's costs incurred in the performance of work completed prior 
to termination, together with a reasonable profit on such work.  During 1996, 
the Company experienced no such termination for government convenience.

ITEM 2.   DESCRIPTION OF PROPERTY.

     The Company currently leases a total of approximately 23,800 square feet 
of manufacturing, engineering and support facilities in a single building in 
Carson City, Nevada.  The current lease term runs through June 2000.  The 
facility is currently operating at approximately 50% of capacity.  The 
Company believes that this facility has sufficient additional manufacturing  
capacity to significantly increase production levels with only minor 
increases in manufacturing overhead costs. *

ITEM 3.   LEGAL PROCEEDINGS.

     Not applicable.

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

     The Company did not submit any matters to a vote of security holders 
during the fourth quarter of the fiscal year ended December 28, 1996.


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                EXECUTIVE OFFICERS OF THE COMPANY

     Information concerning the executive officer of the Company who is not 
also a director of the Company is set forth below:
     
     Jon B. Presnell, age 46, was promoted to the position of Vice-President 
and General Manager of Custom Products for the Company in October 1993.  Mr. 
Presnell has been an employee of the Company since 1980, and served as 
General Manager of the Carson City facility from May 1987 through December 
1988.  From January 1989 until October 1993, Mr. Presnell served as Director 
of Sales and Marketing of the Company.  Prior to joining Hytek,  Mr. Presnell 
was employed as an Electrical Engineer for Texas Instruments, Inc.

                                    PART II

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

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

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

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

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

RESULTS OF OPERATIONS

     Net revenues in 1996 were $8,641,000, a 60% increase from 1995 net 
revenues of $5,409,000.  The increase in net revenues is attributable to 
increased unit shipments to Chesapeake Sciences Corporation ("Chesapeake"), 
TRW Inc. and other customers during 1996.  Sales to Chesapeake represented 
62% of the Company's net revenues in both 1996 and 1995.

     During 1996, approximately 76% of the Company's net revenues were 
derived from sales of products for commercial and industrial uses  and 
approximately 24% were derived from sales  for military or government 
applications.  

     Cost of sales increased to $5,599,000, or 65% of net revenues in 1996, 
as compared to $3,784,000, or 70% of net revenues in 1995.  The increase in 
dollar amount is the result of the higher volume of products shipped in 1996. 
The decrease in cost of sales as a percentage of net revenues is primarily 
the result of spreading fixed costs over a larger revenue base, partially 


                                      9
<PAGE>

offset by an increase in the cost of direct materials to 37% of net revenues 
in 1996 as compared to 35% of net revenues in 1995.  

     Engineering and development expenses were $650,000 in 1996, or 8% of net 
revenues, as compared to $592,000, or 11% of net revenues, in 1995.  The 
increase in these expenses in 1996  is the result of increased staffing 
levels required to support higher sales volume.

     Selling, general and administrative expenses were $675,000, or 8% of net 
revenues, in 1996, as compared to $513,000, or 9% of net revenues, in 1995.  
This increase in dollar amount is attributable to increased compensation 
costs resulting from salary adjustments, together with increases in sales 
commission expense, advertising expense, bad debt reserves and 
shareholder-related expenses, partially offset by reductions in legal 
expenses.  Revenues generated from Chesapeake are not subject to sales 
commission expense.  The decrease in selling, general and administrative 
expense as a percentage of net revenues results from revenues increasing 
faster than expenses.

     Interest income was $13,000 for 1996, as compared to $3,000 in 1995, 
reflecting higher  average balances in the Company's money market account 
during portions of 1996.  The Company had interest expense of $3,000 in 1996 
as compared to $2,000 interest expense in 1995.  The interest expense 
incurred in 1996 resulted from a short-term borrowing on the Company's line 
of credit.

     In 1996 the Company recorded a deferred tax benefit of $200,000 as 
compared to no tax benefit or liability for 1995.  The deferred tax benefit 
relates to the operating loss and credit carryforwards at December 28, 1996 
that the Company expects to realize in future periods.

FACTORS AFFECTING FUTURE RESULTS

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

     Currently, the Company is very dependent on a single large customer, 
Chesapeake. Chesapeake, which accounted for 62% of the Company's 1996 net 
revenues, accounts for $3,474,000, or 54%, of the 1996 ending backlog.  The 
loss of business from Chesapeake, cancellation of orders by  Chesapeake or 
major rescheduling of delivery dates to Chesapeake would have a material 
adverse effect on the Company's business. The Company experienced a minor 
rescheduling of orders from Chesapeake during 1996.  Fortunately, this 
rescheduling did not have a significant impact on operating results.  
However, any future recheduling of significant magnitude would have a 
significant adverse effect on operating results.

     A disruption in Chesapeake's operations, or their loss of financial 
stability, would have a major adverse impact on the Company's future 
operations. Further, the products for Chesapeake are ultimately utilized in 
undersea geophysical oil exploration.  Consequently, any major changes, 
either positive or negative, in the nature of the world-wide oil market, or 
significant changes in the demand for oil, could have a major impact on the 
Company's future business with Chesapeake Sciences. 

     During 1996, the Company realized 24% of its net revenues from 
government or military funded sources.  A significant portion of this 
business is dependent on the Company maintaining its MIL-STD-1772 
certification and qualification. While the Company fully expects to maintain 
this certification and qualification (*), the loss of same would have a 
material adverse impact on the Company's ability to capture this type of 
business.  In addition, the potential for additional decreases in defense 
spending exists and could adversely affect future operations.


                                      10
<PAGE>

     The Company is currently dependent on the custom product market for a 
substantial majority of its revenue.  For example, custom products accounted 
for 88% of total revenues in 1995 and 94% of total revenues in 1996. This 
market is generally more volatile than the standard product market.  Further, 
the custom product market is considerably more competitive than the market 
for the Company's standard products.  The Company must maintain a 
cost-effective structure and operation to remain competitive in the custom 
product market.  Any failure of the Company to remain competitive in the 
custom product market would have a material adverse effect on the Company's 
results of operations and financial condition.

     The recent growth in sales volume has put considerable load on the 
Company's engineering resources.  Currently, the Company has only 12 
full-time engineering and development employees.  The Company's ability to 
develop new products and to continue to contribute to sales growth is 
dependent upon the attraction and retention of such employees, for whom there 
is strong demand. Any failure of the Company to attract and retain qualified 
engineering personnel could have a material adverse effect on the Company's 
results of operations and financial condition.

     The Company is dependent on certain key suppliers of raw materials.  Any 
major disruption in production capability by these suppliers would have an 
adverse impact on the Company's future operations.

LIQUIDITY AND CAPITAL RESOURCES

     During 1996, total assets increased by $1,789,000 and the net effect of 
changes in current assets and current liabilities resulted in a net working 
capital increase of $1,575,000.

     The Company had $1,427,000 in cash and cash equivalents at December 28, 
1996, as compared to $93,000 at the 1995 fiscal year end.  This increase is 
the net  result of $1,510,000 generated from operating activities (primarily 
operating income), and proceeds from the exercise of stock options of 
$49,000, partially offset by $225,000 used for the purchase of equipment.

     Accounts receivable remained stable during 1996.  Accounts receivable 
were $1,126,000 at December 28, 1996, as compared to $1,180,000 at the 1995 
fiscal year end.   Further, as a result of increased sales volumes and the 
addition of new customers, the Company increased its allowance for doubtful 
accounts by $30,000 during 1996, to a total allowance of $50,000.  At 
December 28, 1996 accounts in excess of 60 days totaled 21% of total 
receivables, as compared to less than 1% at December 30,1995.  This was the 
result of delayed payments from two large customers at year end.  Such items 
have subsequently been collected.

     Inventories remained stable during 1996 totaling $1,269,000 at December 
28, 1996 as compared to $1,240,000 at the 1995 fiscal year end.

     Property, plant and equipment, net of accumulated depreciation, 
increased by $269,000 during 1996 as a result of additions to machinery and 
equipment during the year of $327,000 offset by fiscal 1996 depreciation of 
$58,000.  

     Accounts payable were $268,000 at December 28, 1996 as compared to 
$674,000 at 1995 fiscal year end.  This decrease is attributable to improved 
cash flow, which allowed the Company to pay its suppliers in a more timely 
manner during 1996.

     Accrued employee compensation and benefits increased  by $158,000 from 
the prior fiscal year end.  This increase is attributable to an increase in 
the number of employees during 1996 and increased accruals for the employee 
profit sharing plan resulting from increased profitability.


                                      11
<PAGE>

At December 28, 1996, $175,000 had been accrued for the employee profit 
sharing plan as compared to $75,000 at December 30, 1995.

     Customer prepayments were $172,000 at December 28, 1996 as compared to 
$179,000 at December 30, 1995.  This change is the net result of $88,000 in 
additional customer prepayments received in 1996, offset by $95,000 in prior 
year prepayments recorded as sales.

     Accrued warranty,  commissions and other accrued liabilities were 
$169,000 at December 30, 1995 as compared to $205,000 at December 30, 1995.  
This decrease is attributable to normal ongoing accruals,  offset by 
reductions in accrued sales commissions.

     In December 1996, the Company entered into an Continuing Master 
Equipment Lease agreement with Sierra West Bank.  The lease agreement bears 
an annual interest rate of 10.75% and has a term of three years. This lease 
is secured by the related equipment.  Under this agreement, the Company 
acquired $101,969 of production test equipment, which is accounted for as a 
capital lease.  The current portion of this indebtedness is $33,990 at 
December 28, 1996.  The remaining portion, $67,979, is classified as 
long-term debt.  No such equipment lease agreement was in place at December 
30, 1995.  

     There are no income taxes payable at December 28, 1996 as the Company 
utilized a portion of its net operating loss carryforwards to offset the 
income taxes computed on its 1996 earnings.  The Company has remaining net 
operating loss carryforwards for Federal  income tax purposes at December 28, 
1996 of approximately $4.3 million.  These carryforwards will expire between 
2004 and 2008.

     At December 28, 1996, the Company had long-term debt of $67,979 
outstanding its Continuing Master Lease Agreement as described above.   
Further, as of December 13, 1996, the Company renewed its line of credit for 
$100,000 with Sierra Bank of Nevada.  This line of credit is for a term of 
one year and bears  interest  at the prime rate plus 2.00%.  At December 28, 
1996, the Company was in compliance with all of the covenants of the loan 
agreement and no amounts were outstanding.  This line of credit is 
collateralized by substantially all of the Company's assets.  Management 
believes that cash generated from operations during 1997, together with its 
line of credit, will provide sufficient cash to meet operating needs without  
additional financing activity through 1997. *  However, should the Company 
need to  pursue additional debt or equity financing in the future, there is 
no certainty that such financing could be obtained or that the terms on which 
it might be obtained would be favorable.

FUTURE OUTLOOK

     The Company's backlog of unfilled customer orders at December 28, 1996, 
has decreased by approximately 18% from the prior fiscal year end.  Backlog 
at December 28, 1996 was $6,474,000 as compared to $7,912,000 at December 30, 
1995. The decrease in backlog is primarily due to the fact that orders 
received from Chesapeake in 1996 were significantly below the level received 
in 1995.  While the Company is currently not aware of any further future 
declines in the volume of Chesapeake orders, there can be no assurance that 
such future declines will not take place.

     At this time, based on current backlog, the Company anticipates that 
revenues for the ensuing fiscal year could be 20% to 25% below those for 
fiscal 1996. *  

     In addition, because customers may place orders for delivery at various 
times throughout the year, and because of the possibility of customer changes 
in delivery schedules or cancellation of orders, the Company's backlog or 
revenue projections as of any particular date may not be a reliable indicator 
of actual future sales.  


                                      12
<PAGE>

ITEM 7.   FINANCIAL STATEMENTS

     The financial statements of the Company (including the notes thereto) at 
December 28, 1996 and December 30, 1995 and for the years then ended, and the 
report of independent auditors thereon, are included herein on pages F-3 
through F-17 of this Form 10-KSB.

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

     Not applicable.

                                   PART III

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

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

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

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

ITEM 10.  EXECUTIVE COMPENSATION.

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

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

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

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Not applicable.


                                      13
<PAGE>

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

     (a)        EXHIBITS
                
                The exhibit index at page X-1, which follows the signature 
          pages, is hereby incorporated by reference into this Item 13 (a).
                         
     (b)        REPORTS ON FORM 8-K

                There were no Current Reports on Form 8-K filed during the 
          fourth quarter of the Company's fiscal year ended December 28, 1996.


                                      14
<PAGE>

                           HYTEK MICROSYSTEMS, INC.

     INDEX TO SELECTED QUARTERLY FINANCIAL DATA AND FINANCIAL STATEMENTS


                                                             REFERENCE PAGE
                                                             IN FORM 10-KSB
                                                             --------------

Selected Quarterly Financial Data (unaudited)  .  .  .  .  .  .  F-2

Balance Sheet, December 28, 1996
    and December 30, 1995   .  .  .  .  .  .  .  .  .  .  .  .   F-3

Statement of Income and Accumulated Deficit for the 
    Years ended December 28, 1996 and December 30, 1995   .  .   F-4

Statement of Cash Flows for the Years Ended
    December 28, 1996 and December 30, 1995 .  .  .  .  .  .  .  F-5

Notes to Financial Statements   .  .  .  .  .  .  .  .  .  .  .  F-6

Report of Independent Auditors  .  .  .  .  .  .  .  .  .  .  .  F-16

Consent of Independent Auditors .  .  .  .  .  .  .  .  .  .  .  F-17



                                      F-1
<PAGE>


                           HYTEK MICROSYSTEMS, INC.

                 SELECTED QUARTERLY FINANCIAL DATA  (UNAUDITED)

                      (In thousands, except per share data)
<TABLE>
<CAPTION>
                                     ------------------------------------------------------------------------------------
                                                                         QUARTER ENDED
                                     ------------------------------------------------------------------------------------
                                                      FISCAL    1996                           FISCAL    1995
                                     -----------------------------------------     --------------------------------------

                                       Dec. 28   Sept. 28   Jun. 29   Mar. 30      Dec. 30   Sept. 30   Jul. 1   Apr. 1
                                       -------   --------   -------   -------      -------   --------   ------   ------
<S>                                  <C>         <C>        <C>       <C>          <C>       <C>        <C>      <C> 
Net revenues                          $ 1,881    $ 2,095    $ 2,628   $ 2,037      $ 1,880   $ 1,309    $ 1,380  $  840 

Gross profit                          $   872    $   688    $   836   $   644      $   562   $   436    $   455  $  172 

Net income (loss)                     $   686    $   368    $   518   $   354      $   284   $   167    $   176  $ (106)

Net income (loss) per share           $  0.22    $  0.12    $  0.17   $  0.11      $  0.09   $  0.06    $  0.06  $(0.04)

Market price range per share    High  $  2.63    $  2.81    $  3.19   $  3.19      $  3.25   $  3.13    $  0.69  $  0.19
                                Low   $  1.44    $  1.25    $  2.31   $  1.75      $  1.50   $  0.38    $  0.06  $  0.06
------------------------------------------------------------------------------------------------------------------------
</TABLE>

     Since January 1992, the Company's Common Stock has been traded in the 
over-the-counter market but has not been quoted on the National Association 
of Securities Dealers, Inc. Automated Quotation (NASDAQ) System. Since March 
26, 1992, Hytek's Common Stock has been quoted on the OTC Bulletin Board. The 
range of prices reported above indicates the high and low bid quotations as 
provided by the National Quotation Bureau, Inc.  Such quotations reflect 
inter-dealer prices, without retail markups, mark-downs or commissions and 
may not represent actual transactions.

     As of March 17, 1997, there were approximately 220 holders of record
of the Company's Common Stock.

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


                                      F-2
<PAGE>


                             Hytek Microsystems, Inc.

                                 Balance Sheet

                     December 28, 1996 and December 30, 1995

                                                         1996           1995
                                                   ----------------------------
ASSETS                                             
Current assets:                                    
 Cash and cash equivalents                           $ 1,426,716    $    92,995
 Trade accounts receivable, net of allowance for    
   doubtful accounts of $50,000 in 1996 and        
   $20,000 in 1995                                     1,125,817      1,179,847
 Inventories                                           1,268,881      1,239,785
 Prepaid expenses and deposits                            42,503         31,585
                                                   ----------------------------
Total current assets                                   3,863,917      2,544,212

Deferred income taxes                                    200,000          --

Plant and equipment, at cost, less accumulated 
 depreciation and amortization                           370,362        101,375

                                                   ----------------------------
Total assets                                         $ 4,434,279    $ 2,645,587
                                                   ----------------------------
                                                   ----------------------------


LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Accounts payable                                    $   268,462    $   673,531
 Accrued employee compensation and benefits              349,498        191,267
 Accrued warranty, commissions, and other                169,376        204,747
 Customer deposits                                       172,080        178,664
 Current obligations under capital lease                  33,990          --
                                                   ----------------------------
Total current liabilities                                993,406      1,248,209

Long-term obligations under capital lease                 67,979          --

Commitments (NOTE 9)

Shareholders' equity:
 Common stock, no par value:
  Authorized shares - 7,500,000 
  Issued and outstanding shares - 2,933,091 at 
   December 28, 1996 and 2,811,425 at December 
   30, 1995                                            4,962,677      4,913,806
 Accumulated deficit                                  (1,589,783)    (3,516,428)
                                                   ----------------------------
Total shareholders' equity                             3,372,894      1,397,378

                                                   ----------------------------
Total liabilities and shareholders' equity           $ 4,434,279    $ 2,645,587
                                                   ----------------------------
                                                   ----------------------------

SEE ACCOMPANYING NOTES.


                                      F-3
<PAGE>

                            Hytek Microsystems, Inc.

                   Statement of Income and Accumulated Deficit

                 Years ended December 28, 1996 and December 30, 1995

                                                  1996             1995
                                             -----------------------------
Net revenues                                  $ 8,640,890     $ 5,409,072

Cost of sales                                   5,599,417       3,783,726
Engineering and development                       649,608         592,395
Selling, general and administrative expenses      675,305         513,258
                                             -----------------------------
                                                6,924,330       4,889,379
                                             -----------------------------

Operating income                                1,716,560         519,693

Interest income, net                               10,085           1,348
                                             -----------------------------
Income before benefit for income taxes          1,726,645         521,041

Income tax benefit                                200,000           --
                                             -----------------------------

Net income                                      1,926,645         521,041

Accumulated deficit:
 Beginning of year                             (3,516,428)     (4,037,469)
                                             -----------------------------
 End of year                                  $(1,589,783)    $(3,516,428)
                                             -----------------------------
                                             -----------------------------

Net income per common and dilutive common 
 equivalent share                             $      0.62     $      0.18
                                             -----------------------------
                                             -----------------------------



SEE ACCOMPANYING NOTES.


                                      F-4
<PAGE>

                            Hytek Microsystems, Inc.

                            Statement of Cash Flows

                 Increase (Decrease) in Cash and Cash Equivalents

                Years ended December 28, 1996 and December 30, 1995

                                                     1996             1995
                                                  -------------------------
OPERATING ACTIVITIES
Net income                                        $1,926,645     $ 521,041
Adjustments to reconcile net income to net cash 
 provided by (used in) operating activities:
  Depreciation and amortization                       58,253        36,063
  Changes in operating assets and liabilities:
    Trade accounts receivable, net                    54,030      (714,568)
    Inventories                                      (29,096)     (737,945)
    Prepaid expenses and deposits                    (10,918)       (1,387)
    Deferred income taxes                           (200,000)        --
    Other assets                                       --            5,958
    Accounts payable                                (405,069)      387,674
    Accrued employee compensation and benefits       158,231        82,193
    Accrued warranty, commissions, and other         (35,371)        8,088
    Customer deposits                                 (6,584)      162,000
                                                  -------------------------
Net cash provided by (used in) operating 
  activities                                       1,510,121      (250,883)


INVESTING ACTIVITIES
Purchases of equipment                              (225,271)      (67,208)

FINANCING ACTIVITIES
Proceeds from borrowings on line of credit            50,000         --
Principal payments on line of credit                 (50,000)        --
Proceeds from issuance of common stock                48,871        27,531
                                                  -------------------------
                                                      48,871        27,531
                                                  -------------------------

Net increase (decrease) in cash and cash 
 equivalents                                       1,333,721      (290,560)
Cash and cash equivalents at beginning of year        92,995       383,555
                                                  -------------------------
Cash and cash equivalents at end of year          $1,426,716     $  92,995
                                                  -------------------------
                                                  -------------------------

SEE ACCOMPANYING NOTES.


                                      F-5
<PAGE>

                            Hytek Microsystems, Inc.

                          Notes to Financial Statements

                Years ended December 28, 1996 and December 30, 1995

1.   ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS  

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

BASIS OF PRESENTATION

The accompanying financial statements have been prepared in conformity with 
generally accepted accounting principles which require the Company's 
management to make estimates and assumptions that affect the amounts reported 
therein. Actual results could vary from such estimates.  In addition, certain 
reclassifications have been made to prior years' financial statements to 
conform with the 1996 presentation.  The Company uses a 52/53 week fiscal 
year ending on the last Saturday in December.  The years ended December 28, 
1996 and December 30, 1995 were 52 week years.

CONCENTRATION OF CREDIT RISK

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

In 1996, the Company had sales to Chesapeake Sciences and TRW which 
aggregated 62% and 12%, respectively, of net revenues.  The products sold to 
Chesapeake Sciences are used in the eventual production of off-shore 
geophysical oil exploration equipment.  Any volatility in the oil market 
could affect the operating results of the Company.  In 1995, the Company had 
sales to Chesapeake Sciences which aggregated 62% of net revenues.


                                      F-6
<PAGE>

                           Hytek Microsystems, Inc.

                  Notes to Financial Statements (continued)

1.   ACCOUNTING POLICIES (CONTINUED)

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and money market funds with 
maturities of less than ninety days.  The Company maintains the majority of 
its cash and cash equivalents in one financial institution.  During 1996, the 
Company entered into non-cash investing activities whereby machinery and 
equipment acquisitions were capitalized under capital leases in the amount of 
$101,969.  This activity occurred at year end and as such no depreciation was 
recorded on these assets for the year ending December 28, 1996.  The fair 
value of the Company's financial instruments approximated their carrying 
value at December 28, 1996 and December 30, 1995.

INVENTORIES

Inventories are stated at the lower of cost (determined using the first-in, 
first-out method), or market.  Due to its nature, certain of the Company's 
inventory at December 28, 1996 and December 30, 1995 is subject to 
technological change and potential obsolescence.  Management does not 
anticipate these amounts to be material, and believes that they have 
adequately provided for any losses that may result.

PLANT AND EQUIPMENT

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

EARNINGS PER SHARE OF COMMON STOCK

Net income per share of common stock is computed by dividing net income by 
the weighted average number of shares of common stock and dilutive common 
stock equivalents outstanding during the period.  The weighted average shares 
used to compute net income per share is approximately 3,087,000 and 2,910,000 
in 1996 and 1995, respectively.  Fully diluted per share amounts are the same 
as primary per share amounts for the periods presented.


                                      F-7
<PAGE>

                              Hytek Microsystems, Inc.

                     Notes to Financial Statements (continued)

1.   ACCOUNTING POLICIES (CONTINUED)

STOCK-BASED COMPENSATION

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

INCOME TAXES

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

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to operations as incurred, and are 
included in engineering and development expenses on the accompanying 
statement of income and accumulated deficit.  During the years ended December 
28, 1996 and December 30, 1995, such costs amounted to approximately $65,000 
and $89,000, respectively.

ADVERTISING COSTS

The Company expenses the costs of all advertising campaigns and promotions as 
they are incurred.  Total advertising expense for the years ended December 
28, 1996 and December 30, 1995 amounted to approximately $43,000 and $9,000, 
respectively, and is included in selling, general and administrative expenses 
on the accompanying statement of income and accumulated deficit.


                                      F-8
<PAGE>

                            Hytek Microsystems, Inc.

                   Notes to Financial Statements (continued)


2.   INVENTORIES

Inventories consist of the following:

                                            1996         1995
                                        ------------------------
Finished goods                          $  217,270    $   21,100
Work-in-process                            772,462       547,590
Raw materials                              279,149       671,095
                                        ------------------------
                                        $1,268,881    $1,239,785
                                        ------------------------
                                        ------------------------

3.   PLANT AND EQUIPMENT

Plant and equipment consists of the following:

                                                      1996          1995
                                                  -------------------------
Leasehold improvements                            $   441,219   $   425,604
Machinery and equipment                             2,428,780     2,105,467
Furniture and fixtures                                 10,972        10,972
Construction in progress                                    -        11,686
                                                  -------------------------
                                                    2,880,971     2,553,729
Less accumulated depreciation and amortization     (2,510,609)   (2,452,354)
                                                  -------------------------
                                                  $   370,362   $   101,375
                                                  -------------------------
                                                  -------------------------

4.   INCOME TAXES

The significant components of the Company's deferred tax assets as of December
28, 1996 and December 30, 1995 are as follows:

                                                    1996           1995
                                                ----------------------------
Deferred tax assets:
     Net operating loss carryforwards           $  1,432,610    $  1,993,000
     Credit carryforwards                            210,572               -
     Other                                           180,575         186,000
                                                ----------------------------
Total deferred tax assets                          1,823,757       2,179,000
Valuation allowance                               (1,623,757)     (2,179,000)
                                                ----------------------------
Net deferred tax assets                         $    200,000    $          -
                                                ----------------------------
                                                ----------------------------


                                     F-9

<PAGE>


                            Hytek Microsystems, Inc.

                   Notes to Financial Statements (continued)


4.   INCOME TAXES (CONTINUED)

The valuation allowance as of December 30, 1995 was approximately $2,179,000,
resulting in a net decrease in the allowance of approximately $556,000 for the
year ended December 28, 1996.

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

                                                   1996          1995
                                               --------------------------
Computed expected tax                          $   587,000     $  177,000
Nondeductible expenses                              10,000          2,000
Benefit of operating loss carryforward            (597,000)      (179,000)
Valuation allowance adjustment                    (200,000)             -
                                               --------------------------
                                               $  (200,000)    $        -
                                               --------------------------
                                               --------------------------

The valuation allowance adjustment arose as a result of the Company's profitable
results of operations in 1996 and 1995.

As of December 28, 1996, the Company had a net operating loss and tax credit
carryforwards for Federal income tax purposes of approximately $4.3 million and
$213,000, respectively.  These carryforwards will expire between 2004 and 2008. 
Future utilization of the Company's net operating losses may be subject to an
annual limitation in amount if there is a greater than fifty percent change in
ownership, as defined in Section 382 of the Internal Revenue Code of 1986, as
amended.


                                     F-10
<PAGE>

                            Hytek Microsystems, Inc.

                   Notes to Financial Statements (continued)


5.   STOCK OPTION PLANS 

1991 AND 1981 STOCK OPTION PLANS

In February 1995, the Board of Directors of the Company (the "Board"), with the
consent of its shareholders, authorized an increase to the number of shares
reserved for issuance under the 1991 Stock Option Plan (the "1991 Plan") to
276,175 shares of common stock.  In February 1997, the Board authorized a
further increase in the number of shares reserved for issuance under the 1991
Plan to 376,175, subject to shareholder approval. The 1991 Plan expires May 2001
and 26,175 shares were available for future grant as of December 28, 1996. The
Company had a 1981 Incentive Stock Option Plan (the "1981 Plan") that expired in
August 1991 and there were 95,000 options outstanding under this Plan at
December 28, 1996.  Outstanding stock options under the two plans are
exercisable cumulatively in annual increments of one-third each year beginning
one year after the grant date.  Options granted under the 1991 Plan and the 1981
Plan have terms of five years.  However, in February 1995, the Board extended
the term of options under the 1981 Plan by five years, deferring expiration
until 2000.  The exercise price of these extended options was in excess of the
fair market value of the Company's common stock at the date of extension.

A summary of the Company's 1981 and 1991 Plans' stock option activity and
related information for the years ended December 28, 1996 and December 30, 1995
are as follows:

<TABLE>
<CAPTION>
                                                       1995                            1996
                                            ---------------------------------------------------------------
                                                        Weighted-Average                   Weighted-Average
                                             Options     Exercise Price       Options       Exercise Price
                                            ---------------------------------------------------------------
<S>                                         <C>              <C>             <C>               <C>
Outstanding-beginning of year                300,000         $  .42           270,000          $   .53
Granted                                      185,000            .58            90,000             2.68
Exercised                                    (60,000)           .46          (106,666)             .43
Canceled                                    (155,000)           .38           (20,000)            1.91
                                            ---------------------------------------------------------------

Outstanding-end of year                      270,000         $  .53           233,334          $  1.30
                                            ---------------------------------------------------------------
                                            ---------------------------------------------------------------

Exercisable at end of year                   221,666         $  .41           136,667          $   .45

Weighted-average fair value of 
  options granted during the year                            $ 1.44                            $  2.68
</TABLE>


                                      F-11

<PAGE>

                            Hytek Microsystems, Inc.

                   Notes to Financial Statements (continued)


5.   STOCK OPTION PLANS (CONTINUED)

Exercise prices for options outstanding under the two Plans as of December 28,
1996 ranged from $.38 to $3.07.  The weighted-average remaining contractual life
of those options is 3.7 years.  A summary of the outstanding and exercisable
options at December 28, 1996, segregated by exercise price ranges, is as
follows:

<TABLE>
<CAPTION>
                           Options Outstanding                                Exercisable Options
-----------------------------------------------------------------------------------------------------
                                                       Weighted-Average
                                        Weighted-          Remaining                    Weighted-
Exercise Price                           Average          Contractual                    Average
    Range              Number         Exercise Price     Life (in years)    Number    Exercise Price
-----------------------------------------------------------------------------------------------------
<S>                   <C>                 <C>                  <C>          <C>             <C>
 $.38 -    $.41       128,334              $.39                3.3          128,334         $.39
          $1.44        25,000              1.44                3.6            8,333         1.44
$2.38 -   $3.07        80,000              2.72                4.5                -            -
                      -------                                               -------
                      233,334             $1.30                3.7          136,667         $.45
                      -------                                               -------
                      -------                                               -------
</TABLE>

1991 DIRECTORS' STOCK OPTION PLAN

Under the 1991 Directors' Stock Option Plan (the "Directors' Plan"), 100,000
shares of the Company's common stock had been reserved for issuance as of
December 28, 1996, of which options to purchase 60,000 shares at an exercise
price of $0.1875 had been granted. 15,000 of the 60,000 exercisable options had
been exercised as of December 28, 1996.  Options granted under the Directors'
Plan become exercisable cumulatively on the first, second and third
anniversaries of the grant date.  The Directors' Plan expires February 2001.


                                   F-12

<PAGE>

                            Hytek Microsystems, Inc.

                   Notes to Financial Statements (continued)

5.   STOCK OPTION PLANS (CONTINUED)

A summary of the Company's Directors Plan's stock option activity and related
information for the years ended December 28, 1996 and December 30, 1995 are as
follows:

<TABLE>
<CAPTION>
                                                     1995                        1996
                                         --------------------------------------------------------
                                                   Weighted-Average             Weighted-Average
                                         Options    Exercise Price    Options    Exercise Price
                                         --------------------------------------------------------
<S>                                      <C>          <C>            <C>             <C>  
Outstanding-beginning of year            60,000       $  .19          60,000         $ .19
Granted                                       -            -               -             -
Exercised                                     -            -         (15,000)          .19
Forfeited                                     -            -               -             -
                                         --------------------------------------------------------

Outstanding-end of year                  60,000       $  .19          45,000         $ .19
                                         --------------------------------------------------------
                                         --------------------------------------------------------

Exercisable at end of year               60,000       $  .19          45,000         $ .19
</TABLE>

Exercise prices for options outstanding as of December 28, 1996 were all $.19
per share.  The weighted-average remaining contractual life of those options is
4.2 years.

6.   STOCK-BASED COMPENSATION

The Company has three stock-based compensation plans:  The 1991 Stock Option
Plan, The 1981 Incentive Stock Option Plan, and the 1991 Directors' Stock Option
Plan, all of which are described in Note 5.

Pro forma information regarding net income and earnings per share is required by
Statement 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of that Statement.  The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1996
and 1995, respectively: risk-free interest rates of 6.42% and 6.2%, dividend
yields of 0% and 0%; volatility factors of the expected market price of the
Company's common stock of .952 and .952, and a weighted-average expected life of
the options of 4.5 and 4 years.


                                     F-13
<PAGE>

                            Hytek Microsystems, Inc.

                   Notes to Financial Statements (continued)

6.   STOCK-BASED COMPENSATION (CONTINUED)

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

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the vesting period of the options.  The effect of
applying SFAS 123's fair value method to the Company's stock-based awards
results in net income and earnings per share that are not materially different
from amounts reported.

7.   PROFIT SHARING PLAN

In February 1995 the Company's Board adopted the 1995 Profit Sharing Plan (the
"Profit Sharing Plan") which is available to all eligible full-time employees of
the Company, except executive officers of the Company, as defined. Under the
Profit Sharing Plan, the Company will distribute to employees between 10% and
15% of the Company's pre-tax income, as defined.  The distribution percentage is
at the discretion of the Company's Board.  The Plan, which terminates by its own
terms in December 2005, may be terminated or amended at any time by the Board. 
During the years ended December 28, 1996 and December 30, 1995, the Board
authorized $175,000 and $75,000, respectively, in profit sharing distributions
to employees, which amount is included in accrued employee compensation and
benefits in the accompanying balance sheet.

8.   BUSINESS LOAN AGREEMENT

In December 1996, the Company entered into a revolving business loan agreement
(the "Loan Agreement") with a bank under which it may borrow up to $100,000 at
the bank's prime rate plus 2.0% (aggregating 10.25% at December 28, 1996). 
Interest accrued shall be due and payable monthly up to the maturity date,
December 10, 1997, at which time all unpaid principal and interest become due. 
The Loan Agreement is collateralized by substantially all of the Company's
assets. The Loan Agreement imposes certain limitations on the payment of
dividends and incurrence of additional indebtedness.  At December 28, 1996, the
Company had no outstanding borrowings under this Loan Agreement.


                                    F-14

<PAGE>

9.   COMMITMENTS

The Company leases its administrative and production facility and also leases 
certain operating equipment under noncancelable operating lease arrangements 
with terms in excess of one year.  The Company also leases certain equipment 
under noncancelable lease arrangements that are accounted for as capital 
leases. Equipment under capital lease arrangements and included in plant and 
equipment aggregated $101,970 at December 28, 1996.  These capital leases are 
secured by the related equipment.

The aggregate future minimum lease payments under noncancelable capital and
operating leases are as follows at December 28, 1996:

                                               Capital      Operating
                                                Leases       Leases
                                              -----------------------
     1997                                     $  39,217    $  172,000
     1998                                        39,217       172,000
     1999                                        39,225       172,000
     2000                                             -        89,000
                                              -----------------------
     Total minimum payments                     117,659    $  605,000
                                                           ----------
                                                           ----------
     Less amount representing interest          (15,690)
                                               --------
     Present value of minimum lease payments    101,969
     Less current obligations                   (33,990)
                                               --------
     Long-term obligations                    $  67,979
                                               --------
                                               --------

The Company's net rental expense charged to operations amounted to approximately
$252,000 and $199,000 in 1996 and 1995, respectively.


                                      F-15

<PAGE>

                        Report of Independent Auditors

The Board of Directors and Shareholders
Hytek Microsystems, Inc.

We have audited the accompanying balance sheet of Hytek Microsystems, Inc. at
December 28, 1996 and December 30, 1995, and the related statements of income
and accumulated deficit, and cash flows for the years then ended.  These
financial statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with 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 financial position of Hytek Microsystems, Inc. at
December 28, 1996 and December 30, 1995, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.

                                              /s/ Ernst & Young, LLP
Reno, Nevada 
February 7, 1997


                                     F-16
<PAGE>

                                                              Exhibit 23.1

                           CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Prospectuses constituting 
a part of the Registration Statements on Form S-8 (File Nos. 2-90789, 
33-7452, 33-28848, 33-61717, and 33-42836) pertaining to the Incentive Stock 
Option Plan, the Key Employee Stock Purchase Plan, the 1991 Stock Option Plan 
and the 1991 Directors' Stock Option Plan, of our report dated February 7, 
1997 with respect to the financial statements of Hytek Microsystems, Inc.

                                               /s/ Ernst & Young LLP

Reno, Nevada
March 21, 1997



                                     F-17

<PAGE>

                                   SIGNATURES

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

                                        HYTEK MICROSYSTEMS, INC.

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

                                        Date:   March 17, 1997

                                POWER OF ATTORNEY

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

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

         SIGNATURE                         TITLE                     DATE 
------------------------         --------------------------     --------------

  /s/ Charles S. Byrne           President and Chief            March 17, 1997
  ---------------------          Executive Officer
     Charles S. Byrne            (Principal Executive
                                 Officer), Chief Financial
                                 Officer (Principal Financial
                                 and Accounting Officer)
                                 and Director


                                      S-1
<PAGE>

         SIGNATURE                         TITLE                     DATE 
------------------------         --------------------------     --------------

  /s/ Robert Boschert            Director                       March 17, 1997
  ---------------------
   Robert Boschert

  /s/ Edward W. Moose            Director                       March 17,  1997
  ---------------------  
    Edward W. Moose

  /s/ Edward Y. Tang             Director                       March 17, 1997
  ---------------------
       Edward Y. Tang

  /s/ Shou-Chen Yih              Director                       March 17, 1997
  ---------------------   
    Shou-Chen Yih


                                      S-2

<PAGE>

                            HYTEK MICROSYSTEMS, INC.

                           Annual Report on Form 10-KSB
                    for the fiscal year ended December 28, 1996

                                 EXHIBIT INDEX
                                 -------------

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

Exhibit                                                     
Number                              Exhibit Description     
-------        ----------------------------------------------------------

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

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

3.3 (10)       Amended and Restated Bylaws, as amended      
               through July 27, 1992.

4.1            Reference Exhibits 3.1, 3.2 and 3.3.             

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

10.1a (9) (*)  Incentive Stock Option Plan, as amended             
               July 27, 1992. 

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

10.2 (11) (*)  Form of Amendment to Option Agreements of      
               Charles S. Byrne, Jay L. Kimball and Jonathan B.
               Presnell.
                                        
10.3a (11)(*)  1991 Stock Option Plan, as amended              
               February 10, 1995.

                                     X-1     (Footnotes at end of index)


<PAGE>

Exhibit                                                     
Number                              Exhibit Description     
-------        ----------------------------------------------------------

10.3b (9) (*)  Form of Agreement used under the 1991               
                        Stock Option Plan.

10.3c     (*)  1991 Stock Option Plan as amended February 7,
               1997 (subject to Shareholder approval)               

10.4  (7) (*)  1991 Director's Stock Option Plan and form of       
               Agreement thereunder.

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

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

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

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

10.8  (12)     Line of Credit Agreement dated December 13, 
               1996 between HytekMicrosystems, Inc. and 
               Sierra Bank of Nevada.                       
     
13.1           President's Letter to Shareholders dated     
               April 8, 1997, which together with 
               this Form 10-KSB comprises the Registrant's
               1996 Annual Report to Shareholders.          

21.1           The Registrant has no subsidiaries.          

23.1            Consent of Independent Auditors             
                (see page F- 17).

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

27.1            Financial Data Schedule.                    

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

                              X-2  (Footnotes at end of index)

<PAGE>

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

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

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

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

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

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

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

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

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

(12)      Incorporated by reference to Exhibit filed with the Annual
          Report on Form 10-KSB for the year ended December 30, 1995.

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


                                       X-3