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

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

                                   FORM 10-KSB

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

                 For the fiscal year ended DECEMBER 29, 2001, or

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


             For the transition period from _________ to __________


                         Commission file number 0-11880

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

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

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

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

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

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

                           Common Stock, no par value
                                (Title of Class)

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

                              Yes ___X___ No ______

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

Revenues of the Issuer for the most recent fiscal year ended December 29, 2001
were: $9,480,000.

The aggregate market value of the common stock held by non-affiliates of the
registrant (based on the average of the bid and asked prices reported on the
National Association of Securities Dealers Automated Quotation (NASDAQ) system
on March 15, 2002) was approximately $2,719,000. For purposes of such
calculation, shares of Common Stock held by each executive officer and director
and by each person who owns more than 5% of the outstanding Common Stock have
been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

As of March 22, 2002, the issuer had outstanding 3,253,508 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 31, 2002 (the "Proxy Statement") are incorporated
by reference into Part III of this Annual Report on Form 10-KSB.


Transitional Small Business Disclosure Format (check one):  Yes___    No __X__



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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. The
Company also uses other technologies such as Low Temperature Co-fired Ceramic
substrates (LTCC) to produce hybrid circuits. In addition to custom hybrid
microcircuits, the Company also manufactures delay lines, thermo-electric cooler
controllers and laser diode driver standard products.

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

Net revenues in 2001 increased 19% from 2000 levels as the result of increases
in new orders and increased sales of the Company's custom products. The Company
had a net loss of approximately $2,020,000 in 2001 as compared to net income of
approximately $560,000 during 2000. See "Management's Discussion and Analysis or
Plan of Operation" in Part II, Item 6 hereof.

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

PRODUCTS AND MARKETS

         Products manufactured by the Company are sold primarily to original
equipment manufacturers (OEMs) serving the medical, oil exploration, military,
satellite systems, industrial electronics and opto-electronic markets.
Approximately 86% of the Company's net revenues in 2001 were derived from
products designed and manufactured to meet a particular customer's
specifications. The remaining 14% of net revenues in 2001 were derived from
standard products designed by the Company's engineering staff for use by
multiple customers.

         During 2001, approximately 46% of the Company's revenues were derived
from commercial and industrial private sector programs as compared to
approximately 59% in 2000. Sales to




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the military, aerospace and government sector accounted for 54% of total
revenues in 2001 and accounted for 41% of 2000 total revenues.

MILITARY

      The Company maintains its military certification under MIL-PRF-38534, and
is also certified to the international quality standard ISO 9001. The Company
continues to pursue business in the military market and is actively seeking to
expand its customer base in this area.* Offshore producers with significantly
lower costs have in the past been precluded from participating in many U.S.
military applications; however, it is not certain that this preclusion will
remain in effect in the future. Military products are subject to much more
stringent manufacturing criteria than commercial products and have in the past
commanded significantly higher prices. However, there is a growing trend in
military procurement to buy to the "best commercial standards" or "commercial
off the shelf" (COTS) products, which may have a negative impact on margins in
future military business. The Company intends to continue its efforts to remain
competitive in this market. *

         While domestic defense and military-related spending programs had been
declining over the past several years, the positive posture towards defense
spending of the current administration has reversed this trend. The Company
anticipates continuing strong military business in the aftermath of September
11, 2001, as the United States government continues the war on terrorism.*

CUSTOM COMMERCIAL HYBRIDS

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

     During 2001, the Company has continued to expand its participation in the
medical device and medical instrumentation markets and is currently producing
custom hybrid devices for medical instrument applications and diagnostic
applications. The Company intends to increase its efforts to further expand in
this market.*

STANDARD PRODUCTS

           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. In subsequent
years through 2001, additional TECC devices have been designed and introduced.
These products have received favorable response from the marketplace and have
been shipped to a wide variety of customers.



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During 2001, sales of TECC products decreased significantly from the prior year
as a result of the dramatic downturn in the fiber optic and telecommunications
market.

     During 1995, the Company introduced its High Speed Laser Diode Driver
(HSLDD). The Company has subsequently introduced several additional design
versions of the Laser Diode Driver. Sales of these products also declined in
2001 due to the downturn in the fiber optic and telecommunications markets.

     The Company expects the market for these opto-electronic support products
to recover as fiber-optic and telecommunications markets improve.*

     The Company's digital delay line standard products experienced decreasing
revenue in 2001 as compared to prior years as new and more cost effective
technologies have become available.


HYBRID CIRCUIT TECHNOLOGY

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

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

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

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

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



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

         Prior to 1998, all of the microcircuits produced by Hytek were
manufactured using thick film hybrid circuit packaging techniques, including
thick film screen print, firing and laser trimming, chip and wire assembly, and
automatic testing. During 1998, the Company began to produce a small number of
circuits utilizing Low Temperature Co-fired Ceramic (LTCC) substrates. This
technology increases the uniformity of the substrate layers, yielding a higher
number of conductive layers on a substrate. As a result, LTCC technology can
produce higher density, more complex circuits than standard thick-film substrate
technology. The Company will continue to seek and develop additional process
technologies in the future that could enable the Company to offer more
sophisticated circuits than those currently provided by Hytek. *

PRODUCT APPLICATIONS

         Custom products accounted for approximately 86% of the Company's sales
in 2001. These products serve a variety of applications in the medical, oil
exploration, military, satellite systems, industrial electronics and
opto-electronic markets. In the production of custom products, the Company
generally accepts full responsibility for product design, having received
blueprints and/or input and output specifications from the potential customer.
In many cases, prototypes are developed and delivered to the customer, and are
evaluated by the customer, before a firm order for production quantities is
placed. In the case of a new custom product, a typical production cycle time
from initial customer contact to shipment of the product in commercial
quantities would be 20 to 30 weeks. The Company places a strong emphasis on
developing a working relationship between its own engineering staff and the
engineering staff of a potential customer during the product development phase.

         Standard products accounted for approximately 14% of the Company's
sales in 2001. These products consist of delay lines, thermo-electric cooler
controllers and laser diode driver products produced for applications in the
military, industrial electronic systems and communications markets.

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

            Medical -- Instrument motor controls and diagnostic devices.

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

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

            Satellite Systems -- power monitoring and control circuits.

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


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


MARKETING

         The Company markets its products in the United States through its own
sales staff and through independent sales representatives. At December 29, 2001,
the Company's direct sales staff consisted of five employees operating from the
Company's principal office in Carson City. In addition, at such date the Company
had 11 independent sales representatives located throughout the United States
and one independent representative located in Israel. The Company also has
independent distributors in France, Germany, Japan and Sweden.

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

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

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

CUSTOMERS

         During 2001, the Company's five largest customers accounted for 50% of
the Company's net revenues. In 2001, Eaton Corp., Reptron Corp. and Chesapeake
Sciences Corp. accounted for 14%, 11% and 10% of net sales, respectively.
(Reptron Corp. is a contract manufacturer for Stryker Instruments.) The Company
is dependent on these major customer for continued business. Loss of any of
these major customers would be seriously detrimental to the Company's results of
operations.



                                       6
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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.
Occasionally in the past, the Company has experienced isolated technical
manufacturing problems that have resulted in a material negative impact on
quarterly results. The Company has experienced manufacturing problems during the
2001 fiscal year, including reduced labor efficiency and lower yield factors.
While the Company is taking steps to improve its manufacturing processes and
equipment, any future manufacturing problems on major customer programs could
have a material adverse effect on operating results.

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

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

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

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

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

         During 2001 the Company has installed new automated pick-and place
equipment and a computer controlled dispensing system to improve our
manufacturing processes and yields.

         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


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purchases are generally available from several sources. Some of the Company's
major suppliers include Aegis, Inc., E. I. DuPont, Electro Science Laboratories,
Hi-Rel Products, Inc., Semi-Films Inc., Semi Dice, Inc. and Micross Components,
Inc. Although the Company has at times experienced long lead times with respect
to deliveries from its vendors, the Company believes that adequate alternative
sources of supply are currently available for a majority of the Company's
materials requirements. Nevertheless, any major disruption in the delivery of
raw materials from these suppliers would have a material adverse impact on the
Company's future operations.

         Government regulations impose a number of environmental controls on the
chemicals used in electronics manufacturing. The Company employs various
safeguards to avoid the discharge of harmful materials into the environment and
believes that its activities conform to present state and federal environmental
regulations. However, there can be no assurance that the Company will not in the
future be exposed to increased costs relating to required clean-up or compliance
with ever-tightening regulations. The Company complies with 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. These 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

         During 2001 and 2000, the Company spent $1,021,000 and $902,000,
respectively, on its total engineering efforts. Of these amounts, approximately
$230,000 and $151,000 were spent on new product or process research and
development in 2001 and 2000, respectively. All amounts spent on research and
development were internally funded.

         During 2001, the Company introduced four new versions of its optical
support products. One new Thermo-Electric Cooler Controllers, two Laser Diode
Drivers and a Heater Controller were brought to market during the year.

COMPETITION

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

         The Company believes that the hybrid circuit industry includes large
OEMs, such as IBM, TRW, Inc. and others, that manufacture exclusively for their
own use (so called "captive" manufacturers), and other OEMs, such as Teledyne
Industries, Inc., that manufacture for both their own use and for sale to
others. Some of these large "captive" and OEM hybrid


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manufacturers have curtailed or reduced their internal hybrid operations and
begun to procure their hybrid requirements from outside sources. The Company
believes that this has led to increased opportunities for the entire hybrid
circuit industry.

         In addition, there exists a large number of independent hybrid circuit
manufacturers, such as the Company, that manufacture exclusively for sale to
others. In past years certain of these manufacturers have left the custom hybrid
arena to specialize in defined markets such as medical or memory hybrids. These
changes have created additional opportunities for the Company. Further,
approximately 50 of the known independent manufacturers are certified to
MIL-PRF-38534, as is the Company. The Company's current share of the overall
hybrid circuit market remains small.

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

         The primary factors of competition in the markets served by the Company
are product reliability, timely delivery, price, performance and stability of
the manufacturer. The Company believes that it generally competes favorably with
respect to all of these factors; however, the Company's stability has been a
concern to certain of the Company's customers in past years and may be an issue
in 2002 due to the "going concern" opinion issued by the Company's independent
auditors with respect to its 2001 audited financial statements.

TRADEMARKS, PATENTS AND LICENSES

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

EMPLOYEES

         As of December 29, 2001, the Company employed a total of 119 full-time
employees and 1 part-time employee, of whom 94 were in manufacturing, 5 were in
marketing and sales, 17 were in engineering and development and 4 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 2001, the Company derived approximately 54% of its total
revenues from military or government-funded contracts and subcontracts. Such
contracts and subcontracts generally contain provisions allowing termination for
the convenience of the government. In the event of such termination, the Company
would generally be entitled to receive a termination settlement consisting of
(i) the contract price for completed items accepted by the government or prime
contractor and (ii) the Company's costs incurred in the performance of work
completed prior to


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termination, together with a reasonable profit on such work. During 2001, the
Company experienced no such termination for government convenience.


ITEM 2.  DESCRIPTION OF PROPERTY.

         The Company currently leases a total of approximately 27,000 square
feet of manufacturing, engineering and support facilities in two adjacent
buildings in Carson City, Nevada. The main building, consisting of 23,800 square
feet, has a lease term through June 2005, with an option to extend for an
additional five years. The main facility is currently operating at approximately
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. *

     The second adjacent facility consists of approximately 3,000 square feet of
office space utilized by several of the Company's departments. This lease
expires March 31, 2003 and has no option to extend. This property is standard
commercial office space and the Company does not anticipate any difficulty in
retaining this or other suitable space after the lease expires.*


ITEM 3.  LEGAL PROCEEDINGS.

         There were no material legal proceedings pending as of the date of
filing of this Form 10-KSB.


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 29, 2001.


EXECUTIVE OFFICERS OF THE COMPANY

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

          Sally B. Chapman, age 46, re-joined the Company in May 1998, as
Controller. In July 1998, Ms. Chapman was promoted to the position of Chief
Financial Officer and Corporate Secretary. Ms. Chapman has 20 years experience
as an accountant and chief financial officer in various industries and was
previously employed as Accounting Manager for Hytek from June 1995 to June 1996.
From 1997 until April 1998, Ms. Chapman was Chief Financial Officer for Four
Corner Paper, a paper manufacturing and distribution company. From 1990 through
1994, Ms. Chapman was Controller for Sun Bird Security Systems, a security
systems and service provider.





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

CRITICAL ACCOUNTING POLICIES

         Hytek's discussion and analysis of its financial condition and results
of operations are based on Hytek's financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires Hytek to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenue and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, Hytek evaluates its estimates, including
those related to bad debts, inventories,



                                       11
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investments, financing operations, warranty obligations, contingencies and
litigation. Hytek bases its estimates on historical experience and various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ materially from these estimates under different
assumptions or conditions.

         The Company believes the following critical accounting policies affects
its more significant judgments and estimates used in the preparation of its
financial statements.

     The Company recognizes revenue (sales) upon the delivery of the product and
transfer of title to the customer, net of estimated provisions for warranty and
estimated returns.

         The Company evaluates the collectibility of accounts receivable on a
customer-by-customer basis. The Company records a reserve for bad debts against
amounts due to reduce the net recognized receivable to an amount the Company
believes will be reasonably collected. The reserve is a discretionary amount
determined from the analysis of the aging of the accounts receivables,
historical experience and knowledge of specific customers. If the estimates are
not correct, the Company might have to write off accounts receivable in excess
of the bad debt reserve, which would be charged against earnings.

     Inventories are stated at the lower of cost (determined using the first-in,
first-out method), or market. The Company plans production based on orders
received and forecasted demand. For the opto-electronic market, the Company must
order components and build inventories well in advance of product shipments. The
valuation of inventories at the lower of cost or market requires the use of
estimates regarding the amounts of current inventories that will be sold. These
estimates are dependent on the Company's assessment of current and expected
orders from its customers, including consideration that orders are subject to
cancellation with limited advance notice prior to shipment. Because the
Company's markets are volatile, and are subject to technological risks and price
changes as well as inventory reduction programs by the Company's customers and
distributors, there is a risk that the Company will forecast incorrectly and
produce excess inventories of particular products. This inventory risk is
compounded for the opto-electronic products, because many of the Company's
customers place orders with short lead times. As a result, actual demand will
differ from forecasts, and such a difference may have a material adverse effect
on actual results of operations due to required write-offs of excess or obsolete
inventory.


RESULTS OF OPERATIONS

         Net sales in 2001 were $9,480,000, a 19% increase from 2000 net sales
of $7,939,000. The increase in net sales is the result of higher customer demand
and increasing unit volume for custom products. Sales of custom products
increased by 36%, reflecting increased sales to the Company's major customers,
while unit sales of the Company's standard products decreased by 29% from the
prior year. The decrease in standard product sales results primarily from lower
sales of opto-electronic support products brought on by the decline in the
fiber-optic and telecommunication markets.



                                       12
<PAGE>


         Cost of sales was $8,650,000, or 91% of net revenues, in 2001, as
compared to $5,353,000, or 67% of net revenues, in 2000. During fiscal 2001, the
Company experienced increased costs for both direct labor and materials in
addition to an inventory write-down of $800,000 primarily for the
opto-electronic standard product inventory. The cost increases experienced in
2001 were the result of a significant increase in the number of custom products
manufactured during the year. The Company produced an increased variety of
devices, some at lower than optimum quantities, that increased set up times,
caused production delays and resulted in lower yield and higher scrap factors.

         Engineering and development expenses were $1,021,000 in 2001, or 11% of
net revenues, as compared to $902,000, or 11% of net revenues, in 2000. Of the
amount spent in 2001, approximately $230,000 or 23% of total expenditures, was
for actual research and development efforts, as compared to $151,000, or 17%, in
fiscal 2000. The increase in actual research and development expenditure
reflects additional work in developing processes related to the use of optical
fiber.

         Selling, general and administrative expenses were $1,700,000, or 18% of
net revenues, in 2001, as compared to $1,374,000, or 17% of net revenues, in
2000. This increase in dollar amount is primarily attributable to increased
expenditures for compensation, sales commission, audit services and bad debt
expenses.

         Net interest income was $72,000 for 2001, as compared to $250,000 in
2000, as a result of decreased cash and cash equivalents in interest-bearing
accounts and instruments during the year.

         In the fourth quarter of 2001, the Company provided for a full
valuation allowance against its net deferred tax assets at December 29, 2001 due
to the Company's net loss of $2,020,000 in 2001 and an accumulated deficit of
$435,000 at December 29, 2001. The $200,800 provision is comprised of $200,000
related to increasing the valuation allowance and $800 minimum California state
income tax At December 29, 2001, the Company had net operating loss
carryforwards for federal income tax purposes of approximately $2,205,000. These
loss carryforwards will begin to expire in 2008. The Company had future tax
credit carryforwards for federal income tax purposes at December 29, 2001 of
approximately $133,000. These tax credit carryforwards will not expire. The
provision in fiscal 2000 is comprised of $800 minimum California state income
tax.


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.

      We have continued to broaden our customer base during 2001 and have
expanded the number and complexity of custom products produced. As a result,
during 2001, we have experienced increased labor and material costs during the
year. We must regain control of these cost factors and improve production
efficiency and through-put in order to return to positive cash flow and improved
operating results. We are implementing new shop floor control procedures,


                                       13
<PAGE>



scheduling systems and statistical process controls to more precisely control
production operations on a real time basis. Results for 2002 will hinge on our
ability to reduce costs while increasing output.*

         The Company's current 2002 internal revenue estimate shows growth for
the year and is based on a combination of firm backlog and a forecast of various
orders anticipated to "book" during the first half of the year.* In the event
that forecast orders do not become actual sales, or are "booked" later in the
year than anticipated, the 2002 revenue range could be lower than anticipated
and would have an adverse effect on 2002 operating results.

         During 2001, the Company realized 54% of its net revenues from
government-funded or military/aerospace-funded sources. A significant portion of
this business is dependent on the Company maintaining its MIL-PRF- 38534
certification and qualification. While the Company fully expects to maintain
this certification and qualification (*), the loss of same would have a material
adverse impact on the Company's ability to capture this type of business. In
addition, with the resurgence of demand in these areas after September 11, 2001,
additional competitors may enter the market, which could adversely affect the
Company's sales volume.

         The Company is currently dependent on the custom product market for a
substantial majority of its revenue. Custom products accounted for 86% of total
revenues in 2001. This market is generally more volatile and complex than the
standard product market, requiring longer product lead time and greater
investment in product design and manufacturing in advance of shipment and
payment. In addition, the high concentration in the custom market requires
significant investment in inventories, which could be a financial risk in the
event of a major customer cancellation such as the Chesapeake cancellation in
1999. Further, the custom product market is considerably more competitive than
the market for the Company's standard products. The Company must run its
operations in a cost-effective manner in order to remain competitive in the
custom product market. Any failure of the Company to remain competitive in the
custom product market would have a material adverse effect on the Company's
results of operations and financial condition.

         The Company's standard products accounted for 14% of net revenues in
2001. This was a significant decrease in amount and as a percentage of net
revenues from the prior year. Our opto-electronic support products, primarily
Thermo-Electric Cooler Controllers (TECCs), showed a significant drop in
revenues for the year. Continued declines in demand for opto-electronic products
could have a significant adverse effect on the Company's future revenues.

       The Company's ability to meet varying demand and to develop new products
that contribute to future sales growth is dependent upon the attraction and
retention of qualified technical employees, for whom there is strong demand. Any
failure of the Company to attract and retain qualified personnel could have a
material adverse effect on the Company's results of operations and financial
condition. Any severe lack of technical personnel could limit the Company's
potential future growth.

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


                                       14
<PAGE>


         The Company's cash position has deteriorated during 2001 due to poor
operating performance, an excessive growth in inventories and the acquisition of
capital equipment. As a result the Company has used its credit facilities with
Bank of the West and is, at December 29, 2001, in violation of loan covenants
with the bank in respect to "quick ratio" and minimum tangible net worth. This
violation of covenants and other issues such as negative operating cash flow,
has led to the "going concern" opinion issued by our public accountants. A
"going concern" opinion may have a negative impact on the Company's future
competitive position in the overall marketplace. The bank has agreed to continue
the lending relationship, however, the bank reserves the right to "call" the
loan at its discretion. Any such decision by the bank would have a serious
negative impact on the Company's future operations.

LIQUIDITY AND CAPITAL RESOURCES

         The Company incurred a net loss of $2,020,000 during the year ended
December 29, 2001 and had an accumulated deficit of $435,000 at December 29,
2001. The Company had cash and cash equivalents of $902,000 at December 29,
2001, but used cash of $2,609,000 to fund operations during 2001. In addition,
the Company had $850,000 in outstanding borrowing at December 29, 2001, under a
loan agreement. As the Company is in violation of financial loan covenants, the
note payable is due on demand. These conditions raise substantial doubt about
the Company's ability to continue as a going concern.

         During 2001, total assets decreased by $999,000 and the net effect of
changes in current assets and current liabilities resulted in a net working
capital decrease of $2.4 million.

         The Company had $902,000 in cash and cash equivalents at December 29,
2001, as compared to $3,589,000 at the 2000 fiscal year end. This decrease is
the net result of $2,609,000 used by operating activities (primarily net loss
and increased inventory, partially offset by depreciation, decreases in deferred
tax assets and customer deposits, and increased accounts payable), and $962,000
used for the purchase of capital equipment, partially offset by $884,000
generated by financing activities, which included $850,000 in short-term
borrowing.

         Accounts receivable decreased slightly during 2001 to $1,480,000 at
December 29, 2001, as compared to $1,502,000 at 2000 fiscal year end. At
December 29, 2001, accounts in excess of 60 days totaled 24% of total
receivables, as compared to 15% at December 30, 2000. The percentage increase in
receivables over 60 days results from cash flow problems at several customers
due to the sharp decline in the economy. A significant portion of this amount
over 60 days has been subsequently collected. The Company has increased its bad
debt reserves during 2001 as a result of the overall slower economic conditions.

         Total inventories increased sharply to $4,472,000 at December 29, 2001
as compared to $2,980,000 at December 30, 2000. Raw materials increased
significantly in response to high forecast demand for the Company's
opto-electronic support products. The Company did not foresee the severity and
speed of the overall decline in the opto-electronics market during the second
half of the year and, as a consequence, accumulated excess inventory for this
market. The Company wrote down $800,000 of primarily opto-electronic inventory.
Work-in-process also increased significantly as a result of increasing backlog
and forecast demand combined with



                                       15
<PAGE>


lower than anticipated production through-put. See Notes 3 and 12 of Notes to
Financial Statements for a comparison of inventory components.

         Prepaid expenses and deposits decreased by approximately $174,000, to
$101,000 during 2001. At the prior fiscal year end, the Company had made
significant deposits on new production equipment that was subsequently delivered
in 2001.

         Property, plant and equipment, net of accumulated depreciation and
amortization, increased by $593,000 during 2001 as a result of additions of
automated processing machinery and equipment during the year of $962,000, offset
by fiscal 2001 depreciation and amortization of $369,000.

         On May 21, 2001, the Company renewed its line of credit with Bank of
the West in the amount of $1,000,000. This line of credit is for a term of 12
months, expiring on May 20, 2002, and bears interest at the bank's index rate
(4.75% at December 29, 2001). During the latter half of 2001, the Company
utilized this line of credit and, at December 29, 2001 owed $850,000 on the
line. The loan agreement imposes certain financial covenants that the Company
was in violation of at December 29, 2001. As a result, the loan is payable on
demand. The bank has not made a demand as of this writing, but reserves the
right to do so. Subsequent to December 29, 2001, the Company has begun to pay
down the principal. Through March 20, 2002, $150,000 has been repaid on the line
of credit. This line of credit is collateralized by substantially all of the
Company's assets. The Company intends to attempt to renew this line of credit,
perhaps at a lesser amount, when it comes up for renewal in May 2002.* If the
Company is unable to renew this line of credit in May 2002 and cannot otherwise
raise cash to finance its operations, the Company could be forced to curtail its
level of business.

         Accounts payable increased to $514,000 at December 29, 2001 as compared
to $258,000 at December 30, 2000. This increase results primarily from a higher
overall level of business activity.

         Accrued employee compensation and benefits decreased by $11,000 to
$217,000 from the prior fiscal year end. This decrease is the combined result of
higher year-end employment levels off-set by the absence of profit sharing
accruals. At December 29, 2001, there was no accrual for the employee profit
sharing plan, as compared to a $57,000 accrual at December 30, 2000.

         Customer deposits were $1,308,000 at December 29, 2001 as compared to
$1,509,000 at December 30, 2000. This decrease is the net result of shipments of
geophysical exploration circuits to Chesapeake Sciences Corp. and Sercel, Inc.
under the terms of the "Final Settlement Agreement", combined with the receipt
of an additional deposit from Chesapeake Sciences Corp. for production of
telemetry components for Chesapeake's TAIPT program.

         Accrued warranty, commissions and other accrued liabilities were
$294,000 at December 29, 2001, as compared to $201,000 at December 30, 2000. A
majority of this increase is attributable to increased sales commissions payable
and reflects normal ongoing accruals.

         At December 29, 2001, the Company had no long-term debt.


                                       16
<PAGE>



         The Company has certain non-cancelable operating leases (primarily
facilities) that carry through 2005 in the aggregate of $764,000. As of December
29, 2001, The Company has the following contractual obligations:

<TABLE>
<CAPTION>
                                         Payments Due by Period
     Contractual                               Less than 1
     Obligations             Total               Year              1 - 3 Years
     -----------             -----       ----------------------    -----------
<S>                        <C>                 <C>                 <C>
     Note Payable          $   850,000          $  850,000              --

     Operating Leases      $   764,000          $  252,000          $  512,000
                           -----------          ----------          ----------

     Total                 $ 1,614,000         $ 1,102,000          $  512,000
</TABLE>

         The Company's fundamental accounting policies are formulated to achieve
compliance with Generally Accepted Accounting Principles (GAAP), Securities and
Exchange Commission rules and other applicable federal regulations. The emphasis
of Hytek's financial management oversight function for the ensuing year will be
to improve liquidity through inventory reduction and improved gross margins.

         Management believes that the Company's backlog and projected new
business in the ensuing year can provide sufficient cash to meet normal
operating needs without additional financing activity through 2002.* The
Company may pursue additional debt or equity financing should the need arise;
however, there is no certainty that such financing could be obtained or that the
terms on which it might be obtained would be favorable.

FUTURE OUTLOOK

         While we experienced acceptable revenue growth during 2001, this growth
also significantly raised the complexity of our internal operations. Frankly, we
did not deal well with the increase in complexity. In retrospect, we tried to
"be all things to all people", and bit off more than we could efficiently chew.
In both custom and standard product markets, we tried to deal with a large
number of customers and part configurations, which, in reality, contributed only
a small portion of the total revenues. We clogged up production operations and
lost efficiency and yields. In the process, our ten largest customers, who
provided 72% of total revenues, did not receive the level of service they
deserved.

         In the fourth quarter of 2001, we initiated new internal procedures
that we believe will help to restore our efficiency.* Additional procedures and
operational changes are currently being planned and initiated. During 2002, our
emphasis will be on improved production through-put, higher yield and better
service to our major customers who provide the greater potential for future
growth. Improving our gross margin is mandatory if we are to return to
profitability. In addition to the emphasis on production issues, we will be
scrutinizing our expenditures in all other areas to assure that we are getting a
real return for dollars spent.

         Currently, more than mid-way through the first quarter, customer
activity remains strong.


                                       17
<PAGE>


Custom product bookings in military, geophysical exploration and medical
markets are continuing.

         While we are seeing renewed interest in our opto-electronic standard
products, we expect that revenue levels in this market will remain depressed and
below 2001 levels.* It may take a two- to three - year period for this market to
regain some semblance of real growth and stability.*

     Although first quarter 2002 operating results may be negative, management
believes there is a real potential for growth in revenues , improved operating
results and increased shareholder value in fiscal 2002.*

ITEM 7.  FINANCIAL STATEMENTS

         The financial statements of the Company (including the notes thereto)
at December 29, 2001 and December 30, 2000 and for the years then ended, and the
report of independent auditors thereon, are included herein on pages F- 3
through F- 20 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 "Election of Directors - Nominees for Director" in the Company's
Proxy Statement and is hereby incorporated herein by reference.

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

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

ITEM 10.  EXECUTIVE COMPENSATION.

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



                                       18
<PAGE>


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS.

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

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Not applicable.

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

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

         (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 29,
                 2001.










                                       19
<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 29, 2001
    and December 30, 2000 .....................................  F-3

Statement of Operations for the Years ended
     December 29, 2001 and December 30, 2000 ..................  F-4

Statement of Shareholders' Equity for the
    Years ended December 29, 2001 and December 30, 2000 .......  F-5

Statement of Cash Flows for the Years Ended
    December 29, 2001 and December 30, 2000 ...................  F-6

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

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

Consent of Ernst & Young LLP, Independent Auditors ............  F-21





                                       F-1


<PAGE>




                            HYTEK MICROSYSTEMS, INC.

                        SELECTED QUARTERLY FINANCIAL DATA
                                   (UNAUDITED)

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                        --------------------------------------------------------------------------------------------
                                                                               QUARTER ENDED
                                        --------------------------------------------------------------------------------------------
                                                          FISCAL 2001                                    FISCAL 2000
                                        ----------------------------------------------  --------------------------------------------
                                        Dec.29,01   Sep. 29,01   Jun. 30,01  Mar.31,01  Dec.30,00  Sep. 30,00  Jul. 01,00  Apr. 1,00
                                        ---------   ----------   ----------  ---------  ---------  ----------  ----------  ---------

<S>                                     <C>          <C>          <C>        <C>         <C>         <C>         <C>        <C>
Net revenues                            $  3,039     $ 2,357      $ 2,771    $  1,313    $ 2,111     $ 1,728     $ 2,172    $ 1,928

Gross profit                            $   (320)    $   644      $   637    $  (131)    $   567     $   617     $   759    $   643

Net income (loss)                       $ (1,177)    $  (191)     $    11    $  (663)    $    21     $   118     $   252    $   169

Net income (loss) per share - basic     $  (0.36)      (0.06)     $  0.00    $ (0.20)    $  0.01     $  0.04     $  0.08    $  0.05

Net income (loss) per share - diluted   $  (0.36)    $ (0.06)     $  0.00    $ (0.20)    $  0.00     $  0.04     $  0.08    $  0.05

Market price range per share  High      $   2.74     $  3.99      $  3.65    $  8.34     $ 14.44     $ 18.50     $ 10.94    $ 13.38
                              Low       $   1.35     $  1.46      $  1.60    $  2.59     $  3.50     $  7.13     $  2.06    $  1.53
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


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

   As of March 8, 2002, there were approximately 135 holders of record of the
                            Company's Common Stock.

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





                                      F-2

<PAGE>



                            Hytek Microsystems, Inc.

                                 Balance Sheets

                     December 29, 2001 and December 30, 2000

<TABLE>
<CAPTION>
                                                                        2001             2000
                                                                     -----------       -----------
<S>                                                                  <C>               <C>
ASSETS
Current assets:
   Cash and cash equivalents                                         $   901,531       $ 3,589,303
   Trade accounts receivable, net of allowance for doubtful
     accounts of $159,000 and $77,000 in 2001 and 2000,
     respectively                                                      1,479,849         1,502,191
   Inventories                                                         4,471,889         2,980,109
   Prepaid expenses and deposits                                         101,491           274,959
                                                                     -----------       -----------
Total current assets                                                   6,954,760         8,346,562

Deferred income taxes                                                       --             200,000

Plant and equipment, at cost, less accumulated depreciation and
   amortization                                                        1,179,524           586,536

                                                                     -----------       -----------
Total assets                                                         $ 8,134,284       $ 9,133,098
                                                                     ===========       ===========

LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
   Note payable                                                      $   850,000       $      --
   Accounts payable                                                      514,007           257,502
   Accrued employee compensation and benefits                            216,552           227,467
   Accrued warranty, commissions, and other                              293,757           200,761
   Customer deposits                                                   1,308,058         1,509,125
                                                                     -----------       -----------
Total current liabilities                                              3,182,374         2,194,855

Commitments and contingencies

Shareholders' equity:
   Common stock, no par value:
     Authorized shares - 7,500,000
     Issued and outstanding shares - 3,253,508 in 2001 and
       3,238,508 in 2000                                               5,386,897         5,353,009
   Retained earnings (Accumulated deficit)                              (434,987)        1,585,234
                                                                     -----------       -----------

Total shareholders' equity                                             4,951,910         6,938,243

                                                                     -----------       -----------
Total liabilities and shareholders' equity                           $ 8,134,284       $ 9,133,098
                                                                     ===========       ===========
</TABLE>




See accompanying notes.



                                       F-3


<PAGE>




                            Statements of Operations

               Years ended December 29, 2001 and December 30, 2000


<TABLE>
<CAPTION>
                                                         2001              2000
                                                     ------------       ------------

<S>                                                  <C>                <C>
Net sales                                            $  9,479,903       $  7,939,330

Cost of sales                                           8,650,343          5,353,000
Engineering and development                             1,020,941            901,751
Selling, general and administrative expenses            1,700,073          1,373,580
                                                     ------------       ------------
                                                       11,371,357          7,628,331
                                                     ------------       ------------

Operating income (loss)                                (1,891,454)           310,999

Other income
   Interest income, net                                    72,033            249,716
                                                     ------------       ------------

Income (loss) before provision for income taxes        (1,819,421)           560,715

Income tax provision                                      200,800                800
                                                     ------------       ------------

Net income (loss)                                    $ (2,020,221)      $    559,915
                                                     ============       ============

Basic earnings (loss) per share                      $       (.62)      $        .18
                                                     ============       ============

Diluted earnings (loss) per share                    $       (.62)      $        .17
                                                     ============       ============

Shares used in calculating basic earnings
   (loss) per share                                     3,249,029          3,178,730
                                                     ============       ============

Shares used in calculating diluted earnings
   (loss) per share                                     3,249,029          3,320,600
                                                     ============       ============
</TABLE>









See accompanying notes.


                                       F-4


<PAGE>



                       Statements of Shareholders' Equity

               Years ended December 29, 2001 and December 30, 2000

<TABLE>
<CAPTION>

                                                                         Retained
                                             Common Stock                Earnings
                                     ----------------------------      (Accumulated
                                       Shares           Amount           Deficit)            Total
                                     -----------      -----------      ------------       -----------

<S>                                   <C>             <C>               <C>               <C>
Balance at January 1, 2000             3,064,758      $ 5,016,468       $ 1,025,319       $ 6,041,787

   Net and comprehensive income
                                            --               --             559,915           559,915

   Issuance of stock                     173,750          336,541              --             336,541
                                     -----------      -----------       -----------       -----------

Balance at December 30, 2000           3,238,508        5,353,009         1,585,234         6,938,243

   NET AND COMPREHENSIVE LOSS               --               --          (2,020,221)       (2,020,221)

   ISSUANCE OF STOCK                      15,000           33,888              --              33,888
                                     -----------      -----------       -----------       -----------

BALANCE AT DECEMBER 29, 2001
                                       3,253,508      $ 5,386,897       $  (434,987)      $ 4,951,910
                                     ===========      ===========       ===========       ===========
</TABLE>










See accompanying notes.


                                       F-5


<PAGE>


                            Hytek Microsystems, Inc.

                            Statements of Cash Flows

                Increase (Decrease) in Cash and Cash Equivalents

               Years ended December 29, 2001 and December 30, 2000


<TABLE>
<CAPTION>
                                                                           2001              2000
                                                                        -----------       -----------
<S>                                                                     <C>               <C>
OPERATING ACTIVITIES
Net income (loss)                                                       $(2,020,221)      $   559,915
Adjustments to reconcile net income (loss) to net cash provided by
    (used in) operating activities:
     Depreciation and amortization                                          369,401           314,679
     Deferred income taxes                                                  200,000              --
     Changes in operating assets and liabilities:
       Trade accounts receivable, net                                        22,342          (774,273)
       Inventories                                                       (1,491,780)         (373,720)
       Prepaid expenses and deposits                                        173,468          (200,688)
       Accounts payable                                                     256,505            (7,701)
       Accrued employee compensation and benefits                           (10,915)           93,022
       Accrued warranty, commissions, and other                              92,996           (84,152)
       Customer deposits                                                   (201,067)        1,476,817
                                                                        -----------       -----------
Net cash provided by (used in) operating activities                      (2,609,271)        1,003,899

INVESTING ACTIVITIES
Purchases of equipment                                                     (962,389)         (227,064)
                                                                        -----------       -----------
Net cash used in investing activities                                      (962,389)         (227,064)

FINANCING ACTIVITIES
Principal proceeds from line of credit                                      850,000              --
Principal payments on capital lease obligations                                --             (38,708)
Proceeds from issuance of common stock                                       33,888           336,541
                                                                        -----------       -----------
Net cash provided by financing activities                                   883,888           297,833
                                                                        -----------       -----------

Net increase (decrease) in cash and cash equivalents                     (2,687,772)        1,074,668
Cash and cash equivalents at beginning of year                            3,589,303         2,514,635
                                                                        -----------       -----------
Cash and cash equivalents at end of year                                $   901,531       $ 3,589,303
                                                                        ===========       ===========
</TABLE>






See accompanying notes.


                                       F-6


<PAGE>



                          Notes to Financial Statements

               Years ended December 29, 2001 and December 30, 2000


1.   ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

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

FISCAL YEAR

The Company operates under a 52/53 week fiscal year, with the year end being the
Saturday nearest December 31st. The year ended December 29, 2001 ("fiscal 2001")
was a 52-week year, and the year ended December 30, 2000 ("fiscal 2000") was
also a 52-week year.

USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS

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

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 fiscal 2001, the Company had sales to Eaton Corp., Reptron Corp. (Stryker)
and Chesapeake Sciences, that accounted for 14%, 11% and 10%, respectively, of
net sales. In fiscal 2000, the Company had sales to Stryker, Chesapeake Sciences
and Eaton that accounted for 12%, 11% and 11%, respectively, of net sales.




                                       F-7


<PAGE>



                    Notes to Financial Statements (continued)


1.   ACCOUNTING POLICIES (CONTINUED)

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and money market funds with original
maturities of less than ninety days. The fair value of the Company's financial
instruments approximated their carrying value at December 29, 2001 and December
30, 2000. The Company maintains the majority of its cash and cash equivalents in
one financial institution.

During fiscal 2001 and 2000, the Company paid income taxes of $0 and $22,000,
respectively, and interest of $11,000 and $3,000, respectively.

INVENTORIES

Inventories are stated at the lower of cost (determined using the first-in,
first-out method), or market. The Company plans production based on orders
received and forecasted demand. For the opto-electronic market, the Company must
order components and build inventories well in advance of product shipments. The
valuation of inventories at the lower of cost or market requires the use of
estimates regarding the amounts of current inventories that will be sold. These
estimates are dependent on the Company's assessment of current and expected
orders from its customers, including consideration that orders are subject to
cancellation with limited advance notice prior to shipment. Because the
Company's markets are volatile, and are subject to technological risks and price
changes as well as inventory reduction programs by the Company's customers and
distributors, there is a risk that the Company will forecast incorrectly and
produce excess inventories of particular products. This inventory risk is
compounded for the opto-electronic products, because many of the Company's
customers place orders with short lead times. As a result, actual demand will
differ from forecasts, and such a difference may have a material adverse effect
on actual results of operations. In the fourth quarter of 2001, the Company
wrote down $800,000 of inventories, primarily related to opto-electronic
inventory. This additional excess inventory charge was due to a significant
decrease in forecasted demand for the Company's products and was calculated in
accordance with the Company's policy, which is based on inventory levels in
excess of demand for each specific product. Management believes that they have
adequately provided for any losses that may result.





                                       F-8


<PAGE>



                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)


1.   ACCOUNTING POLICIES (CONTINUED)

PLANT AND EQUIPMENT

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

REVENUE RECOGNITION

Sales are recorded by the Company upon delivery of the product and title
transfer, net of estimated provisions for warranty and estimated returns.

STOCK-BASED COMPENSATION

In accordance with the provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has
elected to follow Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and related interpretations in accounting
for its employee stock option plans. Under APB 25, if the exercise price of the
Company's employee stock options equals or exceeds the fair value of the
underlying stock on the date of grant as determined by the Company's Board of
Directors, no compensation expense is recognized (see Notes 7 and 8).

INCOME TAXES

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

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to operations as incurred, and are
included in engineering and development expenses on the accompanying statement
of operations. During fiscal 2001 and 2000, such costs amounted to approximately
$230,000 and $151,000, respectively.



                                       F-9


<PAGE>



                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)


1.   ACCOUNTING POLICIES (CONTINUED)

PRODUCT WARRANTY COSTS

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

ADVERTISING COSTS

The Company expenses the costs of all advertising campaigns and promotions as
they are incurred. Total advertising expense for fiscal 2001 and 2000 amounted
to approximately $96,000 and $154,000, respectively, and is included in selling,
general and administrative expenses on the accompanying statement of operations.

2.   BASIS OF PRESENTATION

The Company incurred a net loss of approximately $2,020,000 during the year
ended December 29, 2001 and had an accumulated deficit of approximately $435,000
at December 29, 2001. The Company had cash and cash equivalents of approximately
$902,000 at December 29, 2001, but used cash of approximately $2,609,000 to fund
operations during 2001. In addition, the Company had $850,000 in outstanding
borrowings at December 29, 2001, under a loan agreement. As the Company is in
violation of financial loan covenants, the note payable is due on demand. The
report of independent auditors on the Company's December 29, 2001 financial
statements includes an explanatory paragraph indicating there is substantial
doubt about the Company's ability to continue as a going concern. Management is
developing a plan to address these issues and allow the Company to continue as a
going concern through the end of fiscal year 2002. This plan includes increasing
revenues and the gross margin percentage from 2001 and monitoring expenditures.
In addition, the Company is planning to pay off the note in 2002. The
accompanying financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.







                                      F-10


<PAGE>




                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)
3. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
                          FISCAL 2001          FISCAL 2000
                          -----------          -----------

<S>                        <C>                   <C>
Finished goods            $   186,122          $   308,698
Work-in-process             1,431,428              779,946
Raw materials               2,854,349            1,891,465
                          -----------          -----------
                          $ 4,471,899          $ 2,980,109
                          ===========          ===========
</TABLE>

4.   PLANT AND EQUIPMENT

Plant and equipment consists of the following:

<TABLE>
<CAPTION>
                                                     FISCAL 2001        FISCAL 2000
                                                     -----------        -----------

<S>                                                  <C>                <C>
Leasehold improvements                               $    565,494       $    546,651
Machinery and equipment                                 4,506,808          3,592,493
Furniture and fixtures                                     60,519             31,288
                                                     ------------       ------------
                                                        5,132,821          4,170,432
Less accumulated depreciation and amortization         (3,953,297)        (3,583,896)
                                                     ------------       ------------
                                                     $  1,179,524       $    586,536
                                                     ============       ============
</TABLE>

5.   INCOME TAXES

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

<TABLE>
<CAPTION>
                                            FISCAL 2001          FISCAL 2000
                                            -----------          -----------
<S>                                         <C>                  <C>
Deferred tax assets:
     Net operating loss carryforwards       $    749,648         $    402,109
     Credit carryforwards                        133,465              133,465
     Other                                       627,652              351,237
                                            ------------         ------------
Total deferred tax assets                      1,510,765              886,811
Valuation allowance                           (1,510,765)            (686,811)
                                            ------------         ------------
Net deferred tax assets                     $       --           $    200,000
                                            ============         ============
</TABLE>

For the year ended December 29, 2001, the valuation allowance was increased by
$823,954 due to the uncertainties surrounding their realization, including the
Company's net loss of $2,020,221 in 2001 and an accumulated deficit of $434,987
at December 29, 2001.




                                      F-11


<PAGE>



                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)


5.   INCOME TAXES (CONTINUED)

The provision for income taxes differs from the provision amount computed by
applying the statutory federal tax rate (34%) to income (loss) before taxes due
to the following:

<TABLE>
<CAPTION>
                                              FISCAL 2001         FISCAL 2000
                                              -----------         -----------

<S>                                           <C>                  <C>
Computed expected tax (benefit)               $ (618,603)          $  190,371
Nondeductible expenses                            (3,400)               2,040
Benefit of operating loss carryforward            (1,951)            (323,407)
State taxes, net                                     800                  800
Increase in valuation allowance                  823,954              130,996
                                              ----------           ----------
Provision for income taxes                    $  200,800           $      800
                                              ==========           ==========
</TABLE>

As of December 29, 2001, the Company had net operating loss and tax credit
carryforwards for federal income tax purposes of approximately $2,204,847 and
$133,465, respectively. These net operating loss carryforwards will begin to
expire in 2008.

6.       EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                                               FISCAL 2001            FISCAL 2000
                                                               -----------            -----------
<S>                                                            <C>                    <C>
Numerator:
   Net income (loss)                                           $ (2,020,221)          $    559,915

Denominator:
   Denominator for basic earnings (loss) per share -
     weighted average shares outstanding                          3,249,029              3,178,730
   Effect of dilutive securities:
     Employee stock options                                            --                  141,870
                                                               ------------           ------------
   Denominator for diluted earnings (loss) per share
     - adjusted weighted average shares and assumed
     conversions                                                  3,249,029              3,320,600
                                                               ============           ============

Basic earnings (loss) per share                                $       (.62)          $        .18
                                                               ============           ============

Diluted earnings (loss) per share                              $       (.62)          $        .17
                                                               ============           ============
</TABLE>




                                      F-12

<PAGE>



                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)


6.   EARNINGS PER SHARE (CONTINUED)

For fiscal 2001, all outstanding options were excluded from the computation of
diluted earnings (loss) per share because the Company had a net loss during
fiscal 2001.

7.   STOCK OPTION PLANS

1991 AND 2001 STOCK OPTION PLANS

The 1991 Stock Option Plan (the "1991 Plan") expired in 2001. In February 2001,
the Board adopted the 2001 Stock Plan (the "2001 Plan") and reserved 131,000
shares of common stock for issuance under the 2001 Plan. The 2001 Plan expires
in February 2011 and 88,000 shares were available for future grant as of
December 29, 2001. Options granted under the 1991 and 2001 Plans have terms of
five years.

A summary of the Company's 1991 and 2001 Plans' stock option activity and
related information for fiscal 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                 Fiscal 2001                       Fiscal 2000
                                       -------------------------------     ------------------------------
                                                      Weighted-Average                   Weighted-Average
                                       Options         Exercise Price      Options        Exercise Price
                                       --------       ----------------     --------      ----------------
<S>                                    <C>               <C>              <C>              <C>
Outstanding-beginning of year           116,250           $   2.92          245,000         $   2.46
Granted                                 153,000               3.41           30,000             2.38
Exercised                                    --                 --         (153,750)            2.10
Cancelled                                (7,500)              2.44           (5,000)            2.38
                                       --------           --------         --------         --------
Outstanding-end of year                 261,750           $   3.22          116,250         $   2.92
                                       ========           ========         ========         ========

Exercisable at end of year               55,000           $   3.28           12,500         $   5.00

</TABLE>








                                      F-13


<PAGE>




                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)


7.   STOCK OPTION PLANS (CONTINUED)

Exercise prices for options outstanding under the 1991 and 2001 Plans as of
December 29, 2001 ranged from $1.56 to $5.00. A summary of the outstanding and
exercisable options at December 29, 2001, 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>
$ 1.56 - $ 2.19         48,750         $  1.77               2.3               16,250         $  1.63
$ 2.30 - $ 2.44         35,000            2.36               2.7               15,000            2.36
$ 2.88 - $ 3.53        143,000            3.49               4.2                    -              -
$ 4.88 - $ 5.00         35,000            4.98               1.3               23,750            4.99
                       -------                                                 ------
                       261,750         $  3.22               3.3               55,000         $  3.28
                       =======                                                 ======
</TABLE>

1991 AND 2001 DIRECTORS' STOCK OPTION PLANS

Under the 1991 Directors' Stock Option Plan (the "1991 Directors' Plan"),
200,000 shares of the Company's common stock had been reserved for issuance as
of December 30, 2000, of which options to purchase 140,000 shares were granted
at per share exercise prices that range from $0.19 to $4.63 (20,000 shares had
been granted during 2000). The 1991 Directors' Plan expired in February 2001.
The Board approved the 2001 Director's Plan (the "2001 Director's Plan") in
February 2001, under which 30,000 shares had been reserved for issuance as of
December 29, 2001, of which options to purchase 30,000 shares at per share
exercise prices that range from $2.19 to $3.38 had been granted. There are no
abatable shares under the 1991 and 2001 Directors' Plans (collectively, the
"Directors' Plans"). The Directors' Plans provide for the automatic grant of an
option to purchase 15,000 shares upon first becoming an outside director (a
"First Option"). In addition, non-employee directors who serve on the Board of
Directors of the Company for five years or more receive an automatic grant of
5,000 shares (a "Subsequent Option") on the last business day of each fiscal
year at an exercise price equaling the fair value of the Company's stock on such
date. First Options granted under the Directors' Plans vest on the first
anniversary of the grant date and become exercisable on the first, second and
third anniversaries of the grant date. Subsequent Options vest and become fully
exercisable on the first anniversary of the grant date. The 2001 Directors' Plan
expires February 2011.


                                      F-14


<PAGE>



                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)


7.   STOCK OPTION PLANS (CONTINUED)

A summary of the Company's Directors' Plans stock option activity and related
information for fiscal 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                Fiscal 2001                      Fiscal 2000
                                       ------------------------------     ------------------------------
                                                     Weighted-Average                   Weighted-Average
                                       Options        Exercise Price      Options        Exercise Price
                                       -------       ----------------     -------       ----------------
<S>                                   <C>               <C>              <C>               <C>
Outstanding-beginning of year           75,000           $   3.05          75,000           $   1.84
Granted                                 30,000               2.74          20,000               4.63
Exercised                              (15,000)              2.26         (20,000)               .71
                                       -------           --------         -------           --------

Outstanding-end of year                 90,000           $   2.94          75,000           $   3.05
                                       =======           ========         =======           ========

Exercisable at end of year              55,417           $   3.33          55,000           $   2.48
</TABLE>

Exercise prices per share for options outstanding as of December 29, 2001 ranged
from $1.81 to $4.63. A summary of the outstanding and exercisable directors'
options at December 29, 2001, 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>
   $ 1.81 - 1.91          30,000       $  1.86                  9.0             15,000         $    1.81
   $ 2.28 - 2.69          25,000          2.51                  6.6             25,000              2.53
   $ 3.56 - 4.63          35,000          4.17                  9.4             15,417              4.63
                         -------                                               -------
                          90,000       $  2.94                  8.0             55,417         $    3.33
                         =======                                               =======
</TABLE>

8.   STOCK-BASED COMPENSATION

The Company has four stock-based compensation plans: The 1991 and 2001 Stock
Option Plans, and the 1991 and 2001 Directors' Stock Option Plans, all of which
are described in Note 7 above.



                                      F-15



<PAGE>



                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)


8.   STOCK-BASED COMPENSATION (CONTINUED)

Pro forma information regarding net income (loss) and earnings (loss) per share
is required by SFAS 123, which also requires that the information be determined
as if the Company has accounted for its employee stock options granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 2001 and 2000, respectively: risk-free interest rates of 4.0%
and 4.9%, dividend yields of 0% and 0%; volatility factors of the expected
market price of the Company's common stock of 1.041 and .935 and a
weighted-average expected life of the options of 4.5 and 4.3 years.

The weighted average fair value of options granted under the 1991 and 2001
Plans' was $2.57 and $1.54 for fiscal 2001 and 2000, respectively. The weighted
average fair value of options granted under the Directors' Plans was $2.11 and
$3.53 for fiscal 2001 and 2000, respectively.

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















                                      F-16


<PAGE>



                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)


8.   STOCK-BASED COMPENSATION (CONTINUED)

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

<TABLE>
<CAPTION>
                                                  FISCAL 20001          FISCAL 2000
                                                  ------------          -----------

<S>                                              <C>                   <C>
Net income (loss) as reported                    $   (2,020,221)       $      559,915
                                                 ==============        ==============

Pro forma net income (loss)                      $   (2,261,924)       $      428,366
                                                 ==============        ==============

Earnings (loss) per share as reported:
     Basic                                       $         (.62)       $          .18
                                                 ==============        ==============
     Diluted                                     $         (.62)       $          .17
                                                 ==============        ==============

   Pro forma earnings (loss) per share:
     Basic                                       $         (.70)       $          .13
                                                 ==============        ==============
     Diluted                                     $         (.70)       $          .13
                                                 ==============        ==============
</TABLE>

9.   PROFIT SHARING PLAN

In February 1995, the Company's Board adopted the 1995 Profit Sharing Plan (the
"Profit Sharing Plan"), which is available to all eligible full-time employees
of the Company, except executive officers of the Company, as defined. Under the
Profit Sharing Plan, the Company will distribute to employees between 10% and
15% of the Company's pre-tax income, as defined. The distribution percentage is
at the discretion of the Company's Board. The Plan, which terminates by its own
terms in December 2005, may be terminated or amended at any time by the Board.
During fiscal 2001 and 2000, the Board authorized $0 and $57,000, respectively,
in profit sharing distributions to employees, which amount is included in
accrued employee compensation and benefits in the accompanying balance sheet.







                                      F-17



<PAGE>



                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)


10. NOTE PAYABLE

In May 2001, the Company renewed an existing revolving business loan agreement
(the "Loan Agreement") with a bank under which it may borrow up to $1,000,000 at
the bank's index rate (aggregating 4.75% at December 29, 2001). Interest is
payable monthly up to the maturity date in May 2002, at which time all unpaid
principal and interest become due. The Loan Agreement is collateralized by all
of the Company's assets. The Loan Agreement imposes certain limitations on the
payment of dividends and incurrence of additional indebtedness. As the Company
is in violation of financial loan covenants, the note payable is due on demand.
At December 29, 2001, the Company had $850,000 in outstanding borrowings under
this Loan Agreement.

11.  COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases its administrative and production facility and also leases
certain operating equipment under noncancelable operating lease arrangements
with terms in excess of one year.

The aggregate future minimum lease payments under noncancelable operating leases
are as follows at December 29, 2001:

<TABLE>
<CAPTION>
                                                 Operating Leases
                                                 ----------------
<S>                                              <C>
         2002                                      $   252,000
         2003                                          215,000
         2004                                          200,000
         2005                                           97,000
                                                   -----------
         Total minimum payments                    $   764,000
                                                   ===========
</TABLE>

The Company's total rental expense charged to operations amounted to
approximately $323,000 and $293,000 in fiscal 2001 and 2000, respectively.

LEGAL PROCEEDINGS

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



                                      F-18



<PAGE>



                            Hytek Microsystems, Inc.

                    Notes to Financial Statements (continued)


12.      CHESAPEAKE AND SERCEL INVENTORY

On February 25, 1999, the Company was notified by its largest customer,
Chesapeake Sciences Corp., to place all open orders on an indefinite "hold"
status, citing continuing depressed crude oil prices and an over-abundance of
the world oil supply. Chesapeake subsequently canceled all remaining undelivered
items on these purchase orders. On August 17, 1999, the Company entered into an
agreement (the "Final Settlement Agreement") with Chesapeake whereby Chesapeake
paid to the Company $2.3 million, plus interest at 9.5% per year, in full and
final settlement of all claims by the Company related to the cancellation of
these purchase orders. This amount was paid in installments and the final
payment of $1.4 million was received by the Company in September 2000. Upon
receipt by the Company of the final payment, title to the related inventory
vested in Chesapeake; however, the Company continues to hold the related
inventory. As the inventory is in the Company's custody, the Company assumes all
risk of loss, destruction or damage to the inventory. An amendment (the
"Amendment") to the Final Settlement Agreement assigned Chesapeake's role to
Sercel, Chesapeake's customer, as of September 1, 2001. Thus, title to the
related inventory vested in Sercel. In addition, the Company is obligated to
build products ordered by Sercel from the related inventory being held by the
Company at specified prices per the Amendment. The Company has customer deposits
in the amount of $849,610 and $1,509,125 on the accompanying balance sheet for
principal payments received in excess of quantities of inventory shipped to
Chesapeake or Sercel as of December 29, 2001 and December 30, 2000,
respectively. At December 29, 2001, the Company has recorded a receivable in the
amount of $248,042 and $183,535 in relation to the conversion costs for
production of finished goods shipped to Chesapeake or Sercel before December 29,
2001 and December 30, 2000, respectively. At December 29, 2001 and December 30,
2000, respectively, approximately $734,000 and $1.0 million of the Company's
total inventory balance is related to the Sercel program.

On September 14, 2001, the Company executed a statement of work with Chesapeake
for the production of TAIPT Telemetry components. The Company has recorded
customer deposits in the amount of $473,365 on the accompanying balance sheet
for principal payments received in excess of quantities of inventory shipped to
Chesapeake as of December 29, 2001, which offsets the value of inventory on hand
related to the statement of work as of December 29, 2001.






                                      F-19






<PAGE>




                         Report of Independent Auditors



The Board of Directors and Shareholders
Hytek Microsystems, Inc.

We have audited the accompanying balance sheets of Hytek Microsystems, Inc. as
of December 29, 2001 and December 30, 2000, and the related statements of
operations, shareholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hytek Microsystems, Inc. at
December 29, 2001 and December 30, 2000, and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States.

The accompanying financial statements have been prepared assuming Hytek
Microsystems, Inc. will continue as a going concern. As discussed in Note 2, the
Company had a significant operating loss in 2001 and had an accumulated deficit
at December 29, 2001. In addition, the Company did not comply with certain
covenants of a loan agreement with a bank at December 29, 2001. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans with respect to these matters are also discussed in
Note 2. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.


San Jose, California                                       /s/ Ernst & Young LLP
January 25, 2002



                                      F-20


<PAGE>


                                                                    EXHIBIT 23.1



                         CONSENT OF INDEPENDENT AUDITORS


We consent to the incorporation by reference in the Registration Statements on
Form S-8 (File Nos. 2-90789, 33-7452, 33-28848, 33-61717, 33-42836 and
333-27899) pertaining to the Incentive Stock Option Plan, the Key Employee Stock
Purchase Plan, the 1991 Stock Option Plan and the 1991 Directors' Stock Option
Plan, of our report dated January 25, 2002, with respect to the financial
statements of Hytek Microsystems, Inc. included in the Annual Report (Form 10-K)
for the year ended December 29, 2001.

                                                            /s/Ernst & Young LLP


San Jose, California
March 23, 2002
























                                      F-21


<PAGE>



                                   SIGNATURES

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

                                              HYTEK MICROSYSTEMS, INC.


                                              By:  /s/ Charles S. Byrne
                                                  -----------------------------
                                                     Charles S. Byrne
                                                     Chairman of the Board,
                                                     Chief Executive Officer
                                                      and President

                                              Date:   March 27, 2002


                                POWER OF ATTORNEY

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

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

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


      /s/ Charles S. Byrne         Chairman of the Board,         March 27, 2002
      ---------------------        Chief Executive Officer
      Charles S. Byrne             and President, Director


     /s/ Sally B. Chapman          Chief Financial Officer        March 27, 2002
     ----------------------        (Principal financial and
     Sally B. Chapman              accounting officer)



     /s/ Ted E. Batchman           Director                       March 27, 2002
     ----------------------
     Ted E. Batchman

     /s/ Robert Boschert           Director                       March 27, 2002
     ----------------------
     Robert Boschert

     /s/ Edward W. Moose           Director                       March 27, 2002
     ----------------------
     Edward W. Moose

     /s/ Edward Y. Tang            Director                       March 27, 2002
     ----------------------
     Edward Y. Tang





                                      S-1


<PAGE>


                            HYTEK MICROSYSTEMS, INC.

                          Annual Report on Form 10-KSB
                   for the fiscal year ended December 29, 2001

                                  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 (3)            Composite Articles of Incorporation, as amended
                   through June 28, 1988.

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

4.1                Reference Exhibits 3.1, 3.2, 3.3 and 3.4.

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

10.1a (6) (*)      1991 Stock Option Plan, as amended
                   February 7, 1997.

10.1b (7) (*)      Form of Agreement used under the 1991 Stock
                   Option Plan.

10.2 (8) (*)       1991 Directors' Stock Option Plan as amended
                   September 11, 1997, and form of Agreement thereunder.

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







                                    X-1     (Footnotes at end of index)



<PAGE>



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

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

10.5 (11)         Line of Credit Agreement dated May 16,
                  2000 between HytekMicrosystems, Inc. and
                  Bank of the West.

10.6              Lease dated October 22, 1999 for the facility at 400 Hot
                  Springs Road, Carson City, Nevada.

10.7a (12)        Final Settlement Agreement with Chesapeake Sciences Corp.
                  dated August 17, 1999.

10.7 b            Amendment to Final Settlement Agreement by and among the
                  Registrant, Chesapeake Sciences Corp. and Sercel, Inc. dated
                  July 11, 2001.

10.8 (*)          2001 Stock Plan and form of Agreement thereunder.

10.9 (*)          2001 Director Stock Option Plan and forms of Agreement
                  thereunder.

13.1              President's Letter to Shareholders dated April 2, 2002, which
                  together with this Form 10-KSB comprises the Registrant's
                  2001 Annual Report to Shareholders.

21.1              The Registrant has no subsidiaries.

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

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

Footnotes:

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

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



                                       X-2



<PAGE>



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

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

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

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

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

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

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

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

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

(12)              Incorporated by reference to Exhibit filed with the Quarterly
                  Report on Form 10-QSB for the period ended October 2, 1999.

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












                                       X-3