<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
                              --------------------

    FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
    FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
               FOR THE TRANSITION PERIOD FROM ______ TO __________

                        Commission file number 000-21770

                          SIGNAL TECHNOLOGY CORPORATION
             (Exact Name Of Registrant As Specified In Its Charter)

            DELAWARE                                            04-2758268
  (State Or Other Jurisdiction                               (I.R.S. Employer
Of Incorporation Or Organization)                           Identification No.)


   222 ROSEWOOD DRIVE, DANVERS, MA                              01923-450
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code: (978) 774-2281

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

                                      None

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

                     Common Stock, par value $0.01 per share
                     ---------------------------------------
                                (Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes: [X] No: [ ]

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

On March 26, 2001, the aggregate fair value of the Registrant's Common Stock
held by non-affiliates was $59,897,948. On March 26, 2001, there were 9,958,840
shares of the Registrant's Common Stock issued and outstanding.

<PAGE>   2
                       DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the definitive Proxy
Statement in connection with the Registrant's Annual Meeting of Shareholders to
be held on May 15, 2001. Certain exhibits are incorporated by reference from the
Registrant's Registration Statement on Form S-1, as amended (File No. 33-61124)
and Form 8-K dated November 24, 1993.




                                       2
<PAGE>   3



                  Signal Technology Corporation and Subsidiary

                       INDEX TO ANNUAL REPORT ON FORM 10-K


                                     PART I
                                                                           Page
                                                                           ----

Item 1.   Business                                                            4

Item 2.   Properties                                                         10

Item 3.   Legal Proceedings                                                  11

Item 4.   Submission of Matters to a Vote of Security Holders                12

                                     PART II

Item 5.   Market for the Registrant's Common Equity and
          Related Stockholder Matters                                        12

Item 6.   Selected Consolidated Financial Data                               13

Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                                13

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk         21

Item 8.   Financial Statements and Supplementary Data                        21

Item 9.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure                                41

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant                 41

Item 11.  Executive Compensation                                             41

Item 12.  Security Ownership of Certain Beneficial Owners
          and Management                                                     41

Item 13.  Certain Relationships and Related Transactions                     41

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and
          Reports on Form 8-K                                                41

          Signatures                                                         44





                                       3
<PAGE>   4


                                     PART I


ITEM I.     BUSINESS

GENERAL

We design, manufacture and market power management products and sophisticated
electronic radio frequency, or RF, components and subsystems. Our products are
used in broadband wireless equipment, digital cellular/PCS wireless
infrastructure equipment and defense electronics. Our commercial customers
integrate our products into wireless systems, which are then sold to wireless
service providers throughout the world and enable the transmission and reception
of data signals in wireless systems worldwide. Applications for our commercial
products include point-to-point transport, point-to-multipoint access, cellular
backhaul and digital cellular/PCS base stations. Selected commercial customers
include DMC Stratex Networks, Giganet, Helioss, P-Com, Siemens, Spectrian and
Witcom. Selected defense customers include Boeing, British Aerospace, Lockheed
Martin, Northrop Grumman, Raytheon and TRW.

Our defense electronics technology, manufacturing skill and focus on quality
have allowed us to expand into the commercial wireless market. Our defense
electronics experience includes over 20 years of proven expertise in the design,
development, manufacture and marketing of sophisticated RF and microwave
electronic components. These components and subsystems are used for applications
such as radar, communications and smart weapons and contain vital technology to
receive, transmit and process wireless data signals. This technology is directly
applicable to commercial wireless communication products.

The market for broadband wireless equipment is characterized by the increasing
demand for high speed Internet access and other data services due to the
proliferation of mobile voice and wireless Internet appliances. The increase in
the usage of wireless devices is driving the expansion and development in the
wireless infrastructure equipment industry.

Existing telecommunications solutions such as copper wire, cable and fiber have
certain limitations, including the high cost of infrastructure deployment and
slow data transmission rates. These limitations have helped to propel the
increasing demand for broadband wireless access service. New fixed-access
wireless technology offers quality of service comparable to land-line
alternatives, but at data transmission speeds significantly faster than copper
wire networks or coaxial cable. In addition, wireless solutions can be deployed
in a much shorter time and at a significantly lower cost than fiber optic
solutions.

Our products cover the entire frequency spectrum from RF, at 900Mhz and 1.8Ghz
for cellular and PCS applications, through microwave frequencies, 2.4Ghz
through 18Ghz, and to millimeter wave frequencies, 20Ghz through 40Ghz. This
capability allows us to address global opportunities in both fixed wireless
broadband access applications as well as mobile wireless applications.

We intend to become the supplier of choice for OEMs in the wireless
communications infrastructure market and to major defense contractors. We plan
to accomplish this goal through the following strategy:

-    leverage our success in the broadband wireless point-to-point market to
     expand into the rapidly growing point-to-multipoint market;

-    continue to extend our military electronics technology and expertise into
     commercial markets;

-    build upon our success in wireless mobile infrastructure Power
     Combiner/Switch products to capture a greater percentage of the electronic
     content of base stations;

-    increase our penetration of top tier wireless OEMs and major defense
     contractors;

-    expand our manufacturing excellence and "lean enterprise" operations;

-    pursue strategic alliances and acquisitions to develop next generation
     products and technology; and

-    continue significant investment in research and development.


                                       4
<PAGE>   5


STRUCTURE AND ORGANIZATION

Signal Technology was incorporated in 1982 and became a public company in 1993.
We have six operating divisions engaged in the development, manufacturing and
marketing of electronic components and subsystems. The operating divisions;
referred to as Arizona, California, Systems, Advanced Frequency Products, Keltec
and Olektron report their operations within four segments: Signal Wireless Group
(established in January 2000 and includes Advanced Frequency Products and
products from Arizona, California and Olektron that are produced for the
world-wide wireless telecommunication markets), Microwave Components and
Subsystems (products from Arizona, California and Systems that primarily serve
the defense and space markets), Power Management Products (Keltec) and Radio
Frequency (RF) Components and Subsystems (Olektron products that primarily serve
the defense market). The products from the operating divisions aggregated into
the Signal Wireless Group and Microwave Components and Subsystems segments have
similar types of production processes and types of customers.

PRODUCTS AND CUSTOMERS

We currently offer a wide range of products to serve the commercial wireless and
defense electronics markets. We categorize these products as follows:

Commercial Wireless Products

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
       PRODUCTS                     DESCRIPTION                                 APPLICATION
-----------------------------------------------------------------------------------------------------------
<S>                   <C>                                           <C>

Signal Components     Basic building blocks for RF modules.         Perform elementary amplification single
                                                                    RF functions such as isolation,
                                                                    amplification, detection and conversion
-----------------------------------------------------------------------------------------------------------
IF & RF Modules       Building blocks for radio subsystems.         Provide basic RF functions in broadband
                      They include low noise amplifiers, power      wireless systems and are often used to
                      amplifiers, frequency converters and          rapidly develop product prototypes.
                      frequency multipliers.
-----------------------------------------------------------------------------------------------------------
Oscillators &         Heart of all radio architectures as           Provide highly stable, tunable, low
Synthesizers          they generate the prime RF                    noise RF reference signals enabling
                      frequency.                                    the receive and transmit functions.
-----------------------------------------------------------------------------------------------------------
Integrated            Combine the IF and RF receive                 Transmit and receive data in a
Transceivers          and transmit modules of a                     variety of broadband wireless
                      radio system into one package.                applications.
-----------------------------------------------------------------------------------------------------------
Outdoor Units,        Provide complete radio                        Used in nearly all types of
or ODUs               functionality in a single,                    broadband wireless systems as
                      environmentally sealed                        a complete RF subsystem in
                      package. They include a                       point to point and multipoint
                      transceiver module and                        applications.
                      associated electronics and
                      control section. ODUs transmit
                      and receive RF signals
                      containing digital data to and
                      from one or more other outdoor
                      units.
-----------------------------------------------------------------------------------------------------------
Power Combiner/       Combine the output power from separate        Deployed in mobile wireless basestations
Switches              highly linear transmitters to obtain the      in cellular and PCS telecommunication
                      necessary transmit power.                     networks.
-----------------------------------------------------------------------------------------------------------
</TABLE>



                                       5
<PAGE>   6
Defense and Other Products

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
       PRODUCTS                                    DESCRIPTION                                 APPLICATION
-------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                                           <C>

RF, microwave and millimeter wave      Frequency and power determinate               Perform the elementary functions
components including oscillators,      components that are the basic                 such as isolation, amplification,
amplifiers, switches, filters,         building blocks for RF and                    switching, filtering, signal
mixers, doublers, discriminators,      microwave modules and assemblies.             detection and frequency and power
detectors, isolators, circulators,                                                   steering and conversion in military
power dividers and combiners                                                         multi-function assemblies.
-------------------------------------------------------------------------------------------------------------------------

Frequency Synthesizers and             Assemblies and their integrated RF,           Perform the critical frequency
Converters                             microwave and millimeter wave                 steering, determination and
                                       components, with associated                   conversion functions used in
                                       electronic control circuits that              military Multi-Function Assemblies,
                                       perform frequency and power                   or MFAs, and subsystems.
                                       determinate functions, conversion,
                                       steering and control.
-------------------------------------------------------------------------------------------------------------------------

MFAs and Microwave Integrated          Combine the function of RF,                   When integrated with other
Assemblies, or MIAs                    microwave and millimeter wave                 MFAs/MIAs, form the subsystems for
                                       components and in most cases                  military electronic applications.
                                       frequency synthesizers or                     Applications include Electronic
                                       oscillator assemblies and                     Warfare, or EW, Radar, ELINT,
                                       converters with associated control            COMINT, IFF, missile and
                                       electronics to perform a high level           communications systems.
                                       of frequency determinate conversion
                                       and control, power steering and
                                       management functions.
-------------------------------------------------------------------------------------------------------------------------

Power Supplies and DC/DC, AC/DC,       Perform the electronic voltage and            Provides power to electronic
DC/AC Power Converters                 direct/alternating current and                devices, assemblies, subassemblies,
                                       power steering, conversion,                   subsystems and systems. All
                                       amplification, filtering and                  military airborne, ground-based,
                                       control function required to power            space-based, and sea-based, defense
                                       all electronics.                              electronics require these
                                                                                     assemblies to operate.
-------------------------------------------------------------------------------------------------------------------------

TWTA, Traveling Wave Tube              Integrated power supply electronics and       Many military airborne, ground-based,
Amplifiers                             microwave power amplifiers. They perform      space-based and sea-based, defense
                                       the electronic voltage and                    electronics require these types of
                                       direct/alternating current and power          assemblies.
                                       steering, conversion, amplification,
                                       filtering and control function driving
                                       power amplifiers. These assemblies
                                       provide the output power for
                                       transmitters.
-------------------------------------------------------------------------------------------------------------------------

Transmitters                           Integrated power supply electronics,           Military airborne, ground-based,
                                       TWTAs, power amplifiers, MFAs and RF and       space-based and sea-based, defense
                                       microwave components. They perform             electronics require use of these
                                       function of transmitting the frequency         assemblies.
                                       and power for systems.
-------------------------------------------------------------------------------------------------------------------------

IF/HF/UHF Matrix Switches              Integrated signal switching components         When integrated with other MFAs/MIAs,
and Filters                            and assemblies, coupled with associated        form the subsystems of electronic
                                       control and management electronics. They       subsystems and systems. Applications
                                       perform RF, IF, HF, UHF and microwave          include Secure Communications, COMINT,
                                       multi-path signal frequency steering and       EW, Radar, and ELINT systems.
                                       filtering.
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

CUSTOMERS

We sell our commercial wireless communications products primarily to OEMs, that
in turn integrate our products into wireless infrastructure equipment solutions
sold to network service providers. In addition, we also sell certain niche
products directly to network service providers. Some of our customers for
commercial wireless subsystems include the following:


        -  Alcatel                                    -  Siemens
        -  DMC Stratex Networks                       -  Spectrian
        -  Giganet                                    -  Tadiran
        -  Helioss                                    -  Witcom
        -  P-Com

We also offer our defense electronics equipment to major U.S. defense prime
contractors for integration into larger systems. Some of our customers for
defense electronics equipment include the following:

         -  Boeing                                     -  Northrop Grumman
         -  British Aerospace                          -  Raytheon
         -  Harris                                     -  TRW
         -  Lockheed Martin


                                        6
<PAGE>   7

Our principal defense customers are prime contractors and military agencies of
the U.S. government and certain foreign countries. With the exception of
Raytheon, which accounted for 17%, 18%, and 23% of our net sales in 2000, 1999,
and 1998, respectively, we believe that the loss of any single customer would
not have a material adverse effect on our sales.

The following table displays net sales by business segment for years ending
December 31:

<TABLE>
<CAPTION>
(amounts in thousands)                         2000          1999          1998
                                              -------      -------       -------
<S>                                           <C>          <C>           <C>
Signal Wireless Group                         $19,489      $ 3,541       $ 1,242
Microwave Components and Subsystems            40,827       41,845        50,616
Power Management Products                      27,930       25,403        24,262
RF Components and Subsystems                   10,241       11,660        15,963
                                              -------      -------       -------
Total                                         $98,487      $82,449       $92,083
                                              -------      -------       -------

</TABLE>

For selected financial data by business segment see ("Segment Information") Note
15 to the consolidated financial statements.

The following table displays information concerning net sales of our products to
categories of customers and geographic markets. The sales information includes
direct sales to the customer or market and indirect sales to prime contractors
selling to the customer or market.

<TABLE>
<CAPTION>
                                                    Years Ended December 31,
                                    ---------------------------------------------------------
                                        2000                  1999                 1998
                                    --------------       ---------------       --------------
(dollars in thousands)                 $        %          $         %           $         %
                                    -------    ---       -------     ---       -------    ---
<S>                                 <C>         <C>      <C>          <C>      <C>        <C>
U.S. Government
   Military                         $53,386     54%      $54,830      66%      $64,599     70%
   Non-Military                         843      1         3,063       4         1,262      1

U.S. Commercial                      17,681     18         7,422       9         7,639      9
International
   Military                          18,217     19        14,924      18        16,689     18
   Commercial                         8,360      8         2,210       3         1,894      2
                                    -------    ---       -------     ---       -------    ---
Total                               $98,487    100%      $82,449     100%      $92,083    100%
                                    =======    ===       =======     ===       =======    ===
</TABLE>

GOVERNMENT CONTRACTS

A substantial portion of our business is conducted under United States
government contracts and subcontracts. These contracts are either competitively
bid or sole source contracts. Competitively bid contracts are awarded after a
formal bid and proposal competition among suppliers. Sole source contracts are
awarded when a single contractor is deemed to have an expertise or technology
that is superior to that of competing contractors.

Virtually all of our United States government contracts and subcontracts are
fixed price contracts, pursuant to which we agree to develop a product or to
manufacture a product for a fixed price and assume the risk of cost overrun.
Substantially all of our net sales are derived from fixed price manufacturing
contracts. We believe that the risk of a cost overrun is lower on fixed price
manufacturing contracts than it is on fixed price development contracts.

SALES AND MARKETING

We market our products worldwide through our own domestic sales force and a
network of knowledgeable independent sales representatives and distributors. Our
sales force is comprised of divisional marketing vice presidents, regional sales
managers, sales personnel and support staff.


                                       7
<PAGE>   8

Our sales managers are responsible for coordinating the independent sales
representatives and have extensive knowledge of government and commercial
programs within their respective regions. They also advise our engineering,
manufacturing and management personnel of anticipated trends and the
requirements of our customers.

The key to our sales and marketing strategy is to develop long-term
relationships with our customers and to have our products designed into our
customers' systems. This is achieved by regular communications and meetings
between our personnel at all levels and our counterparts in the customer's
organization. We actively seek to form strategic alliances with our customers
through volume purchase agreements.

PRODUCT ENGINEERING AND MANUFACTURING

We believe that a principal reason for our success is the quality of our product
design, engineering, manufacturing and testing capabilities. These capabilities
enable us to design and engineer products that meet or exceed our customers'
demanding specifications for performance and reliability and to manufacture the
products at competitive prices.

Since our founding in 1982, we have been manufacturing products for the defense
industry. As a supplier to the defense industry, we are subject to its rigorous
specifications. We adhere closely to the principles of total quality management
and we are ISO-9001 certified.

We practice what we consider to be proprietary methods for the high volume
design, production and testing of wireless subsystems and outdoor units. Our
concurrent processes and automated component assembly and test enable us to
achieve high volume, high quality production while providing competitive
solutions for our customers. We maintain engineering product design and related
support systems at each of our operating facilities. In addition, as part of our
lean enterprise initiative, we have formed an alliance with an assembly and test
operation in Asia that has adopted the concepts we value in manufacturing. This
operation is capable of executing the entire manufacturing process through
assembly and test for the complex subsystem assemblies required for our wireless
products. As a result, we are able to rapidly respond to fluctuations in the
demand forecast from our customers and have demonstrated high rate manufacturing
with outstanding yields and product quality.

SOURCES OF RAW MATERIALS

We attempt to utilize standard parts and components that are available from
multiple vendors. However, certain components used in our products are available
from only single sources, and other components are available from only a limited
number of sources. Despite the risks associated with purchasing components from
single sources or from a limited number of sources, we have made the strategic
decision to select single source or limited source suppliers in order to obtain
higher quality goods and lower pricing, and to receive more timely delivery and
maintain quality control.

RESEARCH AND DEVELOPMENT

Continuing investments in research and development are critical to our ongoing
product evolution and market position. We place strong emphasis on R&D that
improves our existing products and technologies. We also place strong emphasis
on R&D for new wireless product offerings that focus on the high growth segments
of the commercial wireless market and military product offerings that we believe
show the greatest production potential for the next few years. We work closely
with our customers to determine the key product attributes and performance
specifications that are demanded by the marketplace. We perform R&D activities
in all of our operations with each location focused to capitalize on its
engineering talents and technology portfolios. A key R&D strategy is to form
alliances with companies which possess key technologies to sustain and refresh
our product portfolio. A portion of our R&D budget will be devoted to the
development of "breakthrough technology" in order to further position us as a
technology leader in the


                                       8
<PAGE>   9

commercial wireless market and selected defense opportunities. We also retain
certain rights from customer-sponsored development work. The amounts of
company-funded and customer-sponsored development work performed in each of the
last three years are as follows:

<TABLE>
<CAPTION>
                                    Years Ended December 31,
                                 -----------------------------
(dollars in thousands)            2000        1999       1998
                                 ------      ------     ------
<S>                              <C>         <C>        <C>
Company-funded                   $4,266      $1,786     $  274
Customer-sponsored                3,731       1,607      1,794
                                 ------      ------     ------
Total                            $7,997      $3,393     $2,068
                                 ======      ======     ======
</TABLE>


BACKLOG

At December 31, 2000, we had a backlog of unshipped orders of $98.8 million,
comprised of $30.4 million of commercial wireless backlog and $68.4 million of
defense and other backlog. At December 31, 1999, we had a backlog of unshipped
orders of $83.4 million, comprised of $11.0 million of commercial wireless
backlog and $72.4 million of defense and other backlog. We expect to ship all of
the December 31, 2000 backlog within 2001, except for approximately $17.0
million, which will be shipped in later periods.

COMPETITION

We compete in the global commercial wireless industry. In the commercial market
our primary competitors include Anaren, Celeritek, Dover Industries, Endwave,
M/A-Com, MTI, REMEC and SPC Electronics.

Reduced spending by the U.S. government and many of its allies has intensified
competition in defense electronics. In the defense market, our primary
competitors include Filtronics, Herley, M/A-Com, REMEC, and Stellex.

We believe competition in both the commercial and defense segments is based
primarily on price, product performance, reliability and customer support, and
we compete effectively in all of these areas. Our continued success will depend
in part on our ability to develop and introduce innovative, low cost, quality
products that meet or exceed customers' specifications.

It is our opinion that our technological legacy and financial strength will make
us a strong competitor in both the commercial wireless and defense electronics
markets. Some of our competitors have greater financial and operating resources
than we do. In addition, certain of our customers have technological
capabilities in our product areas and could choose to manufacture certain
products themselves rather than to purchase from suppliers such as ourselves.

EMPLOYEES

As of December 31, 2000, we had 702 full-time employees at our various
divisions. No employees are represented by unions. We believe our relationship
with our employees is good.

INTELLECTUAL PROPERTY

We hold patents issued in the United States and certain European countries.
While we consider our patents to be of some value, we believe that our
technological position depends primarily on the technical competence and the
creative ability of our engineering staff in the areas of product design and
manufacturing processes, as well as our closely held proprietary information. We
require our key personnel to execute confidentiality agreements. We also rely on
a combination of copyrights and trademarks to protect certain of our
intellectual property.


                                       9
<PAGE>   10

GOVERNMENT REGULATION

All of our operations are subject to compliance with regulatory requirements of
federal, state and municipal authorities, including regulations concerning
employment obligations and affirmative action, workplace safety and protection
of the environment. While compliance with applicable regulations has not
adversely affected our operations in the past, there can be no assurance that we
will continue to be in compliance in the future or that these regulations will
not change.

In particular, we must comply with detailed government procurement and
contracting regulations and with U.S. government security regulations, certain
of which carry substantial penalty provisions for non-performance or
misrepresentation in the course of negotiations. Our failure to comply with our
government procurement, contracting or security obligations could result in
penalties or our suspension from government contracting, which would have a
material adverse effect on our results of operations.

We are required to maintain a U.S. government facility security clearance at
each of our locations. This clearance could be suspended or revoked if we are
found not to be in compliance with applicable security regulations. Any such
revocation or suspension would delay our delivery of our products to customers.
Although we have adopted policies directed at ensuring our compliance with
applicable regulations and there have been no suspensions or revocations of any
of our facilities, there can be no assurance that the approved status of our
facilities will continue without interruption. U.S. government regulations
require a license for the export of advanced weapons systems. Changes in the
U.S. government policies towards the export of these systems may impact our
international business.

ITEM 2. PROPERTIES

Our principal executive offices are located in Danvers, Massachusetts. Our
principal operating facilities, containing light manufacturing and associated
engineering and support services, are located in five states:

     ARIZONA

     -    We own a modern 84,260 square foot building in Chandler.

     CALIFORNIA

     -    We lease a modern 54,280 square foot building in Sunnyvale.

     -    The lease does not include utilities, maintenance and repairs,
          insurance and real estate taxes.

     -    The lease expires in 2003.

     -    The current annual rent is $723,012 with an average annual escalation
          of approximately 4.0% through the term of the lease.

     FLORIDA

     -    We own a modern 68,000 square foot building in Fort Walton Beach.

     MASSACHUSETTS

     -    We own a modern 25,000 square foot building in Webster and a modern
          40,350 square foot building in Beverly.

     TEXAS

     -    We lease a modern 4,197 square foot office in Plano.

     -    The lease does not include insurance or electricity exceeding $1.75
          per square foot.

     -    The lease expires in 2005.

     -    The current annual rent is $81,842 with an escalation of 2.6% for the
          last two years of the lease.


                                       10
<PAGE>   11

We believe that our properties are in good operating condition and repair and
consider our facilities to be suitable and adequate for our current and
reasonably foreseeable future activities. We believe that there is capacity at
our facilities to absorb acquired businesses of a certain size and product lines
and/or internal growth. The properties owned by us are all subject to either
mortgages or industrial revenue bond financing.

ITEM 3. LEGAL PROCEEDINGS

We are involved from time to time in litigation incidental to our business.
Ongoing legal proceedings include the following:

Weymouth Environmental Contamination:

In April 1996, we sold our manufacturing facility in Weymouth, Massachusetts but
retained the environmental liability and responsibility associated with
groundwater contaminants present at and associated with the site. This site has
been classified as a Tier 1A disposal site by the Massachusetts Department of
Environmental Protection, or DEP, as a result of past releases of petroleum
based solvents. Environmental assessment reports prepared by independent
consultants indicate that contaminants present in the Town of Weymouth well
field across the street from the facility are similar to those reportedly
released at the site and still present in the groundwater at the site; however,
these reports also indicate that the contaminants do not exceed safe drinking
water levels in the finished water after normal treatment. Other contaminants
which did not originate at the facility have also been detected in the well
field.

In accordance with the applicable provisions of the Massachusetts Contingency
Plan, we have completed our investigation of the site and have submitted an
evaluation of remedial alternatives to the DEP. The recommended remedial
alternative involves continued operation of the currently operating groundwater
remediation system with the addition of a supplemental well and well head
treatment at Weymouth Winter Street well No. 2 through an agreement with the
Town of Weymouth. We have been informed that no recovery of costs incurred in
the treatment of the groundwater at the facility is possible under existing
insurance arrangements. We have not reached an agreement with the Town of
Weymouth relative to well head treatment and, it is not possible at this stage
of the proceedings to predict whether the DEP will approve the recommended
alternative, and if not, the specific remedial actions, if any, that it will
require.

We have recorded liabilities of $1.6 million calculated on the discounted cash
flow method using an 8% discount rate for anticipated costs including legal and
consulting fees, site studies and design and implementation of remediation
plans, post-remediation monitoring and related activities to be performed during
the next 20 years.

Sunnyvale (Eaton) Indemnification Claim:

Eaton Corporation filed a suit against us in U.S. District Court, Northern
District of California, alleging that we have a contractual duty to indemnify
Eaton Corporation for costs incurred as a result of environmental contamination
and subsequent remediation. The claim is based upon allegations that we assumed
certain liabilities when we acquired one of the divisions of Eaton Corporation.
The indemnification claim was dismissed at the trial level, but the Ninth
Circuit of the U.S. Court of Appeals reversed this decision and found that we do
owe Eaton a duty of indemnification. In December 2000, the decision by a jury
was in favor of an indemnification claim by Eaton and Eaton was awarded a
judgment of $4.2 million, related to environmental liabilities assumed by Signal
when it purchased Eaton's Microwave Products division in 1989. On March 7, 2001,
the U.S. District Court ruled on various motions pending before it, including
denying our motion for a new trial and denying certain of Eaton's motions. The
U.S. District Court amended the judgment to increase it to an aggregate of $6.04
million and clarified that we are responsible for fifty percent of the
reasonable costs and expenses of remediation. We have recorded liabilities of
$9.0 million for anticipated costs including the $6.04 million judgment, legal
and consulting fees, site studies, implementation of remediation plans,
post-remediation monitoring and related activities to be performed during the
next 20 years. We intend to appeal the amended judgment.



                                       11
<PAGE>   12

SEC Investigation:

The Boston District Office of the Securities and Exchange Commission advised us
on September 27, 2000 that the Commission has entered a formal order of private
investigation. We understand that the investigation relates to our restatement
in 1998 of our financial statements for 1996, 1997 and the first quarter of
1998. We intend to continue to cooperate with the Commission on this
investigation.


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

None

                                     PART II

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

Our common stock is traded on the Nasdaq National Market under the symbol
"STCO". The following table sets forth, for the periods indicated, the high and
low closing prices per share of our common stock as reported in the Nasdaq
National Market.

<TABLE>
<CAPTION>
                                                           High         Low
                                                          ------       ------
<S>                                                       <C>          <C>
Year Ending December 31, 2000:

   First Quarter .......................................  $27.50       $ 7.00
   Second Quarter ......................................   26.63        14.75
   Third Quarter .......................................   24.75        14.00
   Fourth Quarter ......................................   16.50         7.88

Year Ending December 31, 1999:

    First Quarter ......................................  $ 4.75       $ 2.56
    Second Quarter .....................................    5.88         3.69
    Third Quarter ......................................    5.75         5.00
    Fourth Quarter .....................................    9.63         4.00
</TABLE>


On March 26, 2001 the last reported sales price of our common stock on the
Nasdaq National Market was $7.25 per share. As of March 26, 2001 there were
approximately 89 stockholders of record of the common stock.

We have never paid cash dividends on our common stock. We anticipate retaining
all available funds for use in operations and expansion of our business and do
not anticipate paying any cash dividends in the foreseeable future.


                                       12
<PAGE>   13



ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
(in thousands, except per share
amounts and employees at year-end)               2000           1999         1998          1997           1996
                                               --------       -------      -------       --------       --------
<S>                                             <C>           <C>          <C>           <C>            <C>
OPERATIONS
Net sales                                       $98,487       $82,449      $92,083       $102,239       $113,064
Research and development expenses                 4,266         1,786          274            777            522
Operating income (loss)                           5,460         5,565       (6,600)            76          4,252
Income (loss) before taxes [1]                   (3,822)        3,947       (7,497)          (994)         2,907
Net income (loss)                                (2,523)        4,476       (7,173)          (657)         1,698
Net income (loss) per share:
    Basic                                         (0.30)         0.59        (0.97)         (0.09)          0.24
    Diluted                                     $ (0.30)      $  0.56      $ (0.97)      $  (0.09)      $   0.22
                                               --------       -------      -------       --------       --------
Shares used in calculating net
income (loss) per share:
    Basic                                         8,537        7,587         7,365          7,268          7,076
    Diluted                                       8,537        7,986         7,365          7,268          7,676

[1] Includes $9.0 million charge for liabilities associated with Eaton
    Corporation indemnification claim in 2000.


FINANCIAL POSITION
Current assets                                 $ 76,665       $32,434      $30,707       $ 42,670       $ 47,096
Current liabilities                              30,215        18,818       11,006         13,631         16,065
Total assets                                    102,393        57,601       48,983         62,840         65,644
Long-term debt, less current maturities           5,500         5,573        9,928         13,408         13,408
Total debt                                        6,467         9,178       10,408         13,888         14,729
Stockholders' equity                             65,544        31,686       26,487         34,274         34,362
Shares outstanding at year-end                    9,923         7,676        7,349          7,417          7,172
Book value per share                           $   6.61       $  4.13      $  3.60       $   4.62       $   4.79
                                               --------       -------      -------       --------       --------
SELECTED DATA
Orders                                         $113,343       $95,171      $68,187       $101,875       $103,829
Year-end backlog                               $ 98,808       $83,439      $64,803       $ 88,699       $ 89,063
Employees at year-end                               702           657          754            817            993
Net sales per employee                         $    140       $   125      $   122       $    125       $    114

</TABLE>

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

CAUTIONARY NOTE

The Annual Report on Form 10-K may contain "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, including, but
not limited to, (i) trends in the federal defense budget and military reliance
upon sophisticated electronic equipment, (ii) the impact upon us due to loss of
customers or sales, (iii) the impact and effects of competition and our
continued ability to compete in its markets, (iv) the suitability and adequacy
of our properties for its intended uses, (v) our anticipated policy with respect
to dividends, (vi) the incidence, materiality, and frequency of fluctuations in
our operating results, (vii) our optimism about improvements in its operating
deficiencies, (viii) the impact on us and effects of the expansion of our
business in the wireless infrastructure market place, (ix) our ability to
successfully integrate acquisitions into its operations and (x) certain other
statements identified or qualified by words such as "likely", "will",
"suggests", "may", "would", "could", "should", "expects", "anticipates",
"estimates", "plans", "projects",



                                       13
<PAGE>   14

"believes", "is optimistic about", or similar expressions (and variants of such
words or expressions). Investors are cautioned that forward-looking statements
are inherently uncertain. These forward-looking statements represent our best
judgment as on the date of this Annual Report on Form 10-K, and we caution
readers not to place undue reliance on such statements. Actual performance and
results of operations may differ materially from those projected or suggested in
the forward-looking statements due to certain risks and uncertainties including,
without limitation, risks associated with fluctuations in our operating results,
volume and timing of orders received, changes in the mix of products sold,
competitive pricing pressure, our ability to meet or renegotiate customer
demands, our ability to anticipate changes in the market, our ability to finance
operations on terms that are acceptable, our ability to attract and retain
qualified personnel including our management, changes in the global economy,
changes in regulatory processes, the dependence on certain key customers
(including the U.S. government), our ability to realize sufficient margins on
sales of our products, the availability and timing of funding for our current
products and the development of future products.

OVERVIEW

Our principal business is the design, development and manufacture of power
management products and electronic radio frequency components and subsystems
that are used in broadband wireless equipment, digital cellular/PCS wireless
infrastructure equipment and defense electronics. We were incorporated in 1982
and have traditionally been a supplier to the defense industry. Our
sophisticated RF, microwave and millimeter wave electronic components are used
in applications such as radar, communications, smart weapons and contain vital
technology to receive, transmit and process wireless data signals. Our
experience in designing, manufacturing and marketing wireless equipment for the
demanding defense industry has positioned us well to effectively penetrate the
commercial broadband wireless market.

This past year our management has focused on developing and implementing our
strategic initiative to grow our business in the commercial wireless market.

We have been active in the pursuit and acquisition of complementary businesses
over the years. Most recently, in December of 1999, we acquired Advanced
Frequency Products, or AFP, which provided us with an entry into the rapidly
growing broadband wireless millimeter wave communications market. AFP has been
integrated into our Olektron operation and is part of the Signal Wireless Group
and their products focus on the commercial wireless industry.

We have experienced and expect to continue to experience significant
fluctuations in our results of operations. Factors that affect our results of
operations include the volume and timing of orders received, changes in the mix
of products sold, competitive pricing pressures and our ability to meet customer
requirements. As a result of the forgoing or other factors, there can be no
assurance that we will not experience material fluctuations in the future
operating results on a quarterly or annual basis, which would materially and
adversely affect our business, financial condition and results of operations.





                                       14
<PAGE>   15



RESULTS OF OPERATIONS

The following table displays the percentage of net sales of certain items in our
consolidated financial statements for the periods indicated:

<TABLE>
<CAPTION>
                                                                 Years Ended December 31,
                                                         ---------------------------------------
                                                         2000           1999              1998
                                                         -----          -----            -----
<S>                                                      <C>            <C>              <C>

Net sales                                                100.0 %        100.0 %          100.0 %
Cost of sales                                             67.6 %         68.2 %           84.9 %
                                                         -----          -----            -----
    Gross profit                                          32.4 %         31.8 %           15.1 %
Operating expenses:
    Selling, general and administrative expenses          22.5 %         22.9 %           22.0 %
    Research and development expenses                      4.3 %          2.2 %            0.3 %
                                                         -----          -----            -----
Operating income (loss)                                    5.6 %          6.7 %           (7.2)%
Other expenses                                             9.3 %          1.5 %            0.0 %
Interest expenses, net                                     0.2 %          0.4 %            1.0 %
                                                         -----          -----            -----
Income (loss) before income taxes                         (3.9)%          4.8 %           (8.2)%
Benefit for income taxes                                  (1.3)%         (0.6)%           (0.4)%
                                                         -----          -----            -----
Net income (loss)                                         (2.6)%          5.4 %           (7.8)%
                                                         =====          =====            =====
</TABLE>

Fiscal Year Ended December 31, 2000 vs. Fiscal Year Ended December 31, 1999.

Net Sales. Net sales increased 19.5% from $82.4 million during fiscal year 1999
to $98.5 million during fiscal year 2000. The primary reason for the increase
was the addition of $15.9 million in commercial wireless product sales from
Signal Wireless Group. The net sales to the defense electronics and other
markets were approximately the same in fiscal year 2000 and fiscal year 1999.

Gross Profit. Gross profit increased 21.6% from $26.2 million in fiscal year
1999 to $31.9 million during fiscal year 2000. The increase in gross profit
associated with the increased sales from Signal Wireless Group was $2.4 million;
consisting of $3.1 million from increased sales reduced by a $.7 million loss on
a terminated contract. Gross profit increased $3.3 million in defense
electronics and other due to changes in product and contract mix, streamlining
of operations and higher gross margin contracts in our Microwave Components and
Subsystems and Power Management Products business segments.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 17.5% from $18.9 million in fiscal year
1999 to $22.2 million during fiscal year 2000. The increase is primarily due to
the increase in selling, general and administrative expenses associated with the
acquisition of Advanced Frequency Products of $2.0 million which includes the
amortization of intangible assets. Additionally, there was a $.6 million expense
associated with remediation plans for groundwater contaminants at a previously
owned manufacturing facility in Weymouth, Massachusetts and a non-cash stock
option expense of $.2 million primarily related to stock options granted to
non-employees.

Research and development expenses. Research and development expense increased
138.9% from $1.8 million during fiscal year 1999 to $4.3 million during fiscal
year 2000. During 2000 we have increased research and development expenditures
as part of our continued focus on the commercial wireless industry and to
produce technology upgrades to existing products.

Other expenses. Other expenses were $9.1 million in fiscal year 2000. Included
in other expenses during 2000 was a $9.0 million charge for liabilities
associated with Eaton Corporation's indemnification claim. In February 2000 we
assumed the management and operation of the LogiMetrics' high-power amplifier
business as a security interest for a loan. We were responsible for all expenses
incurred and entitled to retain all revenue generated in connection with the
operation of the business and assumed all current liabilities of the business.
Included in other expenses was $.1 million in expense associated with managing
the LogiMetrics' power amplifier business before our acquisition of the business
in November 2000. Other


                                       15
<PAGE>   16

expenses were $1.3 million during fiscal year 1999 and were related to a
settlement of a class action suit against us.

Interest expense, net. Interest expense, net decreased 51.9% from $.4 million
during fiscal year 1999 to $.2 million during fiscal year 2000. The primary
reason for the decrease is we repaid borrowings under our revolving credit
facility during the third quarter reducing the amount borrowed to zero. During
the third quarter of 2000 we issued 2 million shares of common stock with net
proceeds of $35.1 million. After repaying our revolving credit facility the
remaining funds were invested in cash equivalents and generated interest income
of $.5 million during the fourth quarter of 2000.

Income taxes. The benefit for income taxes during fiscal year 1999 was $.5
million compared to an income tax benefit of $1.3 million during fiscal year
2000. The effective income tax rate was (34.0)% benefit for 2000 compared to a
(13.4)% benefit for 1999. The loss before income taxes during fiscal 2000
included a $9.0 million charge for liabilities associated with Eaton's
indemnification claim. We believe a valuation allowance against our deferred tax
assets is not required based on our continuing earnings performance excluding
the $9.0 million charge in fiscal 2000. The 1999 benefit for income taxes
primarily relates to the full reversal of the valuation allowance on the
deferred tax assets, which we believed was more likely than not to be realized
based on our earnings performance.

Fiscal Year Ended December 31, 1999 vs. Fiscal Year Ended December 31, 1998

Net Sales. Net sales decreased 10.5% from $92.1 million during fiscal year 1998
to $82.4 million during fiscal year 1999. Backlog increased to $83.4 million at
the end of 1999 from $64.8 million at the end of 1998 on orders of $95.2 million
in 1999 compared to $68.2 million in 1998. A reduction in orders during the last
six months of 1998 at the Microwave and RF Components and Subsystems business
was the primary reason for the overall decreased net sales in 1999. The decrease
in orders and delayed orders produced lower backlog at the beginning of 1999 and
subsequently lower net sales.

Gross Profit. Gross profit increased 89.0% from $13.9 million during fiscal year
1998 to $26.2 million during fiscal year 1999 and as a percentage of net sales,
gross profit increased from 15.1% in 1998 to 31.8% in 1999. Gross profit was
adversely affected during 1998 by contract adjustments and inventory write-downs
at our Keltec operation and also our Microwave Components and Subsystems
business. In addition, in 1999 we began to recognize the benefits of the
implementation of new financial and manufacturing controls.

Selling, general and administrative expenses. Selling, general and
administrative expenses decreased 6.5% from $20.2 million during fiscal year
1998 to $18.9 million during fiscal 1999. The $1.3 million decrease is primarily
due to a reduction in commissions and selling expenses.

Research and development expenses. Research and development expenses increased
551.8% from $.3 million during fiscal year 1998 to $1.8 million during fiscal
year 1999. During 1999, our management team made the decision to increase
research and development expenditures as part of our new focus on the commercial
wireless industry.

Other expenses. Other expenses were $1.3 million during fiscal year 1999 and
were related to an agreement-in-principle to settle a pending class action suit
against us.

Interest expense. Interest expense decreased 59.0% from $.9 million during
fiscal year 1998 compared to $.4 million during fiscal year 1999. The decrease
is primarily due to paying down of our revolving credit facility. Total debt
decreased to $9.2 million at fiscal year ending 1999, from $10.4 million at the
end of fiscal year 1998.

Income taxes. The benefit for income taxes in fiscal year 1998 was
$.3 million compared to an income tax benefit of $.5 million during fiscal year
1999. The 1999 benefit for income taxes primarily relates to the full reversal
of the valuation allowance on the deferred tax assets, which we believe was more
likely than not to be realized, based on our earnings performance.


                                       16
<PAGE>   17


BUSINESS SEGMENTS

We have six operating divisions engaged in the development, manufacturing and
marketing of electronic components and subsystems. The operating divisions;
referred to as Arizona, California, Systems, Advanced Frequency Products, Keltec
and Olektron report their operations within four segments: Signal Wireless Group
(established in January 2000 and includes Advanced Frequency Products and
products from Arizona, California and Olektron that are produced for the
world-wide wireless telecommunication markets), Microwave Components and
Subsystems (products from Arizona, California and Systems that primarily serve
the defense and space markets), Power Management Products (Keltec) and Radio
Frequency (RF) Components and Subsystems (Olektron products that primarily serve
the defense market). The products from the operating divisions aggregated into
the Signal Wireless Group and Microwave Components and Subsystems segments have
similar types of production processes and types of customers. Signal Wireless
Group was added as a new business segment in fiscal year 2000. The fiscal year
1999 and 1998 business segment reporting has been adjusted to include Signal
Wireless Group business originally reported in Microwave Components and
Subsystems and RF Components and Subsystems in our previous segment reporting.
In reporting business segment operating income corporate headquarters expenses
have been allocated to the business segments based on a percentage of net sales.

Our reportable segments are as follows:

SIGNAL WIRELESS GROUP

Designs and manufactures commercial wireless products for the telecommunications
industry.

MICROWAVE COMPONENTS AND SUBSYSTEMS

Designs and manufactures microwave oscillators, frequency synthesizers and
converters, space qualified microwave assemblies, microwave amplifiers and
microwave switch matrices.

POWER MANAGEMENT PRODUCTS

Designs and manufactures military high and low voltage power supplies, DC to DC
converters and military high power amplifiers and transmitters for use in radar
systems.

RADIO FREQUENCY COMPONENTS AND SUBSYSTEMS

Designs and manufactures RF and intermediate frequency signal processing
components, integrated multi-function devices and switching systems.

The following tables display net sales and operating income by business segment
for the three years ending December 31 which correspond to the segment
information presented in Note 15 to the consolidated financial statements.

<TABLE>
<CAPTION>
(amounts in thousands)                               2000        1999         1998
                                                   --------     -------     --------
<S>                                                <C>          <C>         <C>
NET SALES
Signal Wireless Group                              $ 19,489     $ 3,541     $  1,242
Microwave Components and Subsystems                  40,827      41,845       50,616
Power Management Products                            27,930      25,403       24,262
RF Components and Subsystems                         10,241      11,660       15,963
                                                   --------     -------     --------
Total                                              $ 98,487     $82,449     $ 92,083
                                                   ========     =======     ========

OPERATING INCOME (LOSS)[1]
Signal Wireless Group                              $(4,724)     $ (394)     $   (57)
Microwave Components and Subsystems                   5,768       2,731          122
Power Management Products                             4,666       2,937      (8,234)
RF Components and Subsystems                          (250)         291        1,569
                                                   --------     -------     --------
Total                                              $  5,460     $ 5,565     $(6,600)
                                                   ========     =======     =======
</TABLE>



                                       17
<PAGE>   18

[1] Corporate headquarters expenses have been allocated to the business segments
based on a percentage of net sales.


Business Segments Fiscal Year Ended December 31, 2000 vs. Fiscal Year Ended
December 31, 1999

SIGNAL WIRELESS GROUP

Net Sales. Net sales of Signal Wireless Group increased 450.4% from $3.5 million
during fiscal year 1999 to $19.5 million during fiscal year 2000. The increase
was primarily due to $12.4 million in sales from Advanced Frequency Products
(acquired in December 1999) along with increased sales from other operations due
to an increased demand for wireless products.

Operating Loss. Operating loss of Signal Wireless Group increased by 1,099% from
a $.4 million loss during fiscal year 1999 to a $4.7 million loss during fiscal
year 2000. The increase is primarily the result of a $3.0 million increase in
spending on research and development, and a $2.0 million increase in selling,
general and administrative costs associated with the Advanced Frequency Products
acquisition including the amortization of intangible assets and a $.7 million
loss incurred on a terminated contract partially offset by operating profits
from increased sales during fiscal 2000.

MICROWAVE COMPONENTS AND SUBSYSTEMS

Net Sales. Net sales of Microwave Components and Subsystems decreased 2.4% from
$41.8 million during fiscal year 1999 to $40.8 million during fiscal year 2000.
The primary reason for the decrease was lower A/V switch and HF/UHF distribution
equipment sales at our Systems operation.

Operating Income. Operating income of Microwave Components and Subsystems
increased by 111.2% from $2.7 million during fiscal year 1999 to $5.8 million
during fiscal year 2000. The increase is primarily due to a $2.1 million
increase in gross margin attributable to streamlining of operations and a
favorable change in product mix and a $.6 million decrease in research and
development expense.

POWER MANAGEMENT PRODUCTS

Net Sales. Net sales of Power Management Products increased 9.9% from $25.4
million during fiscal year 1999 to $27.9 million in fiscal year 2000. The
primary reason was an increase in shipments of production hardware and delivery
of several preproduction units which experienced delays during the development
stage of the program during 1999.

Operating Income. Operating income of Power Management Products increased by
58.9% from $2.9 million during fiscal year 1999 to $4.7 million during fiscal
year 2000. The increase is primarily due to a $1.3 million increase in gross
margin associated with favorable changes in product mix and lower manufacturing
costs, and $.8 million from increased sales.

RF COMPONENTS AND SUBSYSTEMS

Net Sales. Net sales of RF Components and Subsystems decreased 12.2% from $11.7
million during fiscal year 1999 to $10.2 million during fiscal year 2000. The
decrease was due to a reduction of sales across most product areas for which
orders have been declining.

Operating loss. Operating income of RF Components and Subsystems decreased by
185.9% from $.3 million during fiscal year 1999 to an operating loss of $.3
million during fiscal year 2000. The decrease is primarily due to a $.8 million
decrease in gross margin due to unfavorable changes in product mix and continued
production problems on the Sparrow missile program and a $.4 million decrease in
gross margin from decreased sales partially offset by a $.7 million reduction in
operating expenses.



                                       18
<PAGE>   19

Business Segments Fiscal Year Ended December 31, 1999 vs. Fiscal Year Ended
December 31, 1998

SIGNAL WIRELESS GROUP

Net sales. Net sales of Signal Wireless Group increased 185.1% from $1.2 million
during fiscal 1998 to $3.5 million during fiscal year 1999. The increase in
sales was primarily due to increased orders as demand for our wireless
components increased.

Operating Loss. The operating loss of Signal Wireless Group increased 591.2%
from $.1 million during fiscal year 1998 to $.4 million during fiscal year 1999.
The increase in the operating loss is primarily due to increased spending on
research and development.

MICROWAVE COMPONENTS AND SUBSYSTEMS

Net Sales. Net sales of Microwave Components and Subsystems decreased by 17.3%
from $50.6 million during fiscal year 1998 to $41.8 million during fiscal year
1999. The primary reason for the decrease was a reduction in second half 1998
orders.

Operating Income. Operating income of Microwave Components and Subsystems
increased from $.1 million during fiscal year 1998 to $2.7 million during fiscal
year 1999. Gross profit was adversely affected in 1998 by contract adjustments
and inventory write-downs of approximately $1.9 million.

POWER MANAGEMENT PRODUCTS

Net Sales. Net sales of Power Management Products increased by 4.7% from $24.3
million during fiscal year 1998 to $25.4 million during fiscal year 1999. The
primary reason for the increase was a focused effort by the new management team
to increase efficiencies in manufacturing and ship delinquent orders during the
first six months of 1999.

Operating Income. Operating income of Power Management Products increased from
an operating loss of $8.2 million during fiscal year 1998 to an operating profit
of $2.9 million during fiscal year 1999. Gross profit was adversely affected in
1998 by contract adjustments and inventory write-downs of approximately $6.3
million. Contributing to the increase in operating income during 1999 was
increased sales volume, greater efficiencies in manufacturing as well as changes
in contract mix.

RF COMPONENTS AND SUBSYSTEMS

Net sales. Net sales of RF Components and Subsystems decreased by 27.0% from
$16.0 million during fiscal year 1998 to $11.7 million during fiscal year 1999.
The primary reason for the decreased sales was a reduction in orders during the
second half of 1998 and first quarter 1999.

Operating Income. Operating income of RF Components and Subsystems decreased by
81.5% from $1.6 million during fiscal year 1998 to $.3 million during fiscal
year 1999. The decrease in 1999 operating income is mainly attributable to the
above mentioned decrease in sales volume, technical problems on the Sparrow
Missile program as well as changes in contract mix.


LIQUIDITY AND CAPITAL RESOURCES

Fiscal Year Ended December 31, 2000 vs. Fiscal Year Ended December 31, 1999

At December 31, 2000 we had working capital of $46.5 million, including cash and
cash equivalents of $31.0 million, as compared to working capital of $13.6
million and cash and cash equivalents of $3.6 million, respectively at December
31, 1999. Net cash used by operations was $2.8 million during fiscal year 2000
compared to $12.0 million net cash provided by operations during fiscal year
1999. The primary reasons for the decrease in cash from operations during fiscal
year 2000 as compared to fiscal year 1999 was a $7.1 million increase in
inventory and a $5.9 million increase in accounts receivable from increased



                                       19
<PAGE>   20

sales and working capital requirements associated with the growth of our
commercial wireless business during 2000. On March 22, 2001, a $6.2 million
cash deposit was made with the Clerk, United States District Court by order of
the United States District Court for the Northern District of California in
association with our Eaton Indemnification claim.

Net cash used by investing activities was $2.3 million during fiscal 2000
compared to $9.9 million net cash used by investing activities during fiscal
year 1999. During 2000 $2.1 million in cash was received from Logimetrics in
exchange for assuming substantially all the assets and liabilities of
LogiMetrics' power amplifier business. In fiscal 1999 $8.0 million in cash was
used for an acquisition and related costs. During fiscal 2000 $4.2 million in
cash was used for additions to property, plant and equipment compared to $1.9
million during fiscal year 1999. The primary reason for the increase was
machinery and equipment required to support our growing commercial wireless
business.

Net cash provided by financing activities was $32.5 million during fiscal 2000
compared to $.9 million used by financing activities during fiscal 1999. During
fiscal year 2000 net proceeds from the issuance of 2 million shares of common
stock were $35.1 million offset by the repayment of borrowings under our
revolving credit facility of $3.0 million reducing the amount borrowed to zero.
During fiscal 1999 we repaid borrowings under our revolving credit facility of
$1.0 million.

Fiscal Year Ended December 31, 1999 vs. Fiscal Year Ended December 31, 1998

At December 31, 1999 we had working capital of $13.6 million and cash of $3.6
million, as compared to working capital and cash of $19.7 and $2.4 million
respectively at December 31, 1998. Net cash provided by operations was $12.0
million during fiscal year 1999 compared to $6.9 million net cash provided by
operations during fiscal year 1998.

Net cash used by investing activities was $9.9 million during fiscal 1999
compared to $1.5 million net cash used by investing activities during fiscal
1998. During fiscal 1999 $8.0 million in cash was used for an acquisition and
related costs. During fiscal 1999 $1.9 million in cash was used for additions to
property, plant and equipment compared to $1.6 million during fiscal year 1998.

Net cash used by financing activities was $.9 million during fiscal 1999
compared to $4.1 million used for financing activities during fiscal 1998.
During fiscal 1999 we repaid borrowings under our revolving credit facility of
$1.0 million compared to repaid borrowings under our credit facility of $3.0
million during 1998.

Our borrowing arrangement at December 31, 2000 requires us to maintain certain
minimum balances and ratios, including the requirement to maintain a minimum
tangible net worth. We were in compliance with the net worth covenant at
December 31, 2000. Our borrowing arrangement also requires that we maintain an
interest coverage ratio. December 31, 2000 we were not in compliance with the
interest coverage covenant on the predecessor Revolver and we obtained a waiver
with respect to such non-compliance. The predecessor revolving credit facility
(the "Revolver") expired in February 2001. We have amended the Revolver as of
February 27, 2001 including a change to the covenants and the amount available
for borrowing is $20 million.

We continue to investigate acquisition opportunities in complementary
businesses, product lines and markets. We believe that we have adequate cash,
working capital and available financing to meet our operating and capital
requirements in the foreseeable future and to pursue acquisition opportunities.



                                       20
<PAGE>   21

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not engage in trading market risk sensitive instruments or purchasing
hedging instruments or "other than trading" instruments that are likely to
expose us to market risk, whether interest rate, foreign currency exchange,
commodity price or equity price risk. We have not purchased options or entered
into swaps, forward or futures contracts. Our primary market risk exposure is
that of interest rate risk on borrowings under our revolving credit facility,
which are subject to interest rates based on the bank's base rate. We also have
a collateralized real estate loan based on the bank's base rate and a change in
the applicable interest rate on these loans would affect the rate at which we
could borrow funds. The aggregate hypothetical loss in earnings for one year of
those borrowings held by us at December 31, 2000 and 1999, which are subject to
interest rate risk resulting from a hypothetical 10 percent increase in interest
rates is approximately $30 thousand and $50 thousand after tax, respectively.
The hypothetical loss was determined by calculating the aggregate impact of a 10
percent increase in each of our variable financial instruments held by us at
December 31, 2000 and 1999. Fixed rate financial instruments were not evaluated.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                 SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
                                                                -----------------------------------
(amounts in thousands, except per share data)                     2000         1999          1998
                                                                --------      -------      --------
<S>                                                             <C>           <C>          <C>

Net sales                                                       $ 98,487      $82,449      $ 92,083
Cost of sales                                                     66,582       56,215        78,203
                                                                --------      -------      --------
Gross profit                                                      31,905       26,234        13,880
Selling, general and administrative expenses                      22,179       18,883        20,206
Research and development expenses                                  4,266        1,786           274
                                                                --------      -------      --------
Operating income (loss)                                            5,460        5,565        (6,600)
Other expense                                                      9,105        1,250             -
Interest expense, net                                                177          368           897
                                                                --------      -------      --------
Income (loss) before income taxes                                 (3,822)       3,947        (7,497)
                                                                --------      -------      --------
Benefit for income taxes                                          (1,299)        (529)         (324)
                                                                --------      -------      --------
Net income (loss)                                               $ (2,523)     $ 4,476      $ (7,173)
                                                                ========      =======      ========
Net income (loss) per share
    Basic                                                       $  (0.30)     $  0.59      $  (0.97)
    Diluted                                                     $  (0.30)     $  0.56      $  (0.97)
                                                                ========      =======      ========
Shares used in calculating net income (loss) per share
    Basic                                                          8,537        7,587         7,365
    Diluted                                                        8,537        7,986         7,365
                                                                ========      =======      ========
</TABLE>





The accompanying notes are an integral part of the consolidated financial
statements.




                                       21
<PAGE>   22

                 SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                                ----------------------
(dollar amounts in thousands)                                                     2000          1999
                                                                                --------       -------
<S>                                                                             <C>            <C>
ASSETS
Current assets:
Cash and cash equivalents                                                       $ 31,024       $ 3,571
Accounts receivable, net of allowance for doubtful
     accounts of $542 in 2000 and $199 in 1999                                    19,417        13,299
Inventories, net of progress payments                                             17,375        10,446
Deferred income taxes                                                              8,516         4,134
Refundable income taxes                                                                -           638
Prepaid expenses and other current assets                                            333           346
                                                                                --------       -------
Total current assets                                                              76,665        32,434
                                                                                --------       -------
Property, plant and equipment, net                                                17,214        14,954
Intangibles assets, net                                                            7,562         9,365
Other assets                                                                         952           848
                                                                                --------       -------
Total assets                                                                    $102,393       $57,601
                                                                                ========       =======

LIABILITIES
Current liabilities:
Accounts payable                                                                $  7,402       $ 3,292
Accrued expenses                                                                  20,113        10,318
Customer advances                                                                  1,733         1,603
Current maturities of long-term debt                                                 967         3,605
                                                                                --------       -------
Total current liabilities                                                         30,215        18,818
                                                                                --------       -------
Deferred income taxes                                                              1,134         1,524
Long-term debt, net of current maturities                                          5,500         5,573
Commitments and contingencies (Note 10)

STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued
Common stock, $0.01 par value; 30,000,000 authorized;
  10,077,685 shares in 2000 and 7,828,189 shares in 1999
  issued and 9,922,748 shares in 2000 and 7,676,089 shares
  in 1999 outstanding                                                                100            78

Additional paid-in-capital                                                        50,097        13,667
Retained earnings                                                                 16,318        18,841
                                                                                --------       -------
                                                                                  66,515        32,586
                                                                                --------       -------
Less treasury stock; 154,937 shares in 2000 and 152,100 shares
  in 1999 at cost                                                                   (971)         (900)
                                                                                --------       -------
Total stockholders' equity                                                        65,544        31,686
                                                                                --------       -------
Total liabilities and stockholders' equity                                      $102,393       $57,601
                                                                                ========       =======


</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.




                                       22
<PAGE>   23


                 SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                               Years Ended December 31, 2000, 1999 and 1998

                                        Common Stock      Additional               Treasury Stock
                                     Shares     Amount     Paid-in      Retained   Shares     Amount   Stockholders'
(dollar amounts in thousands)        Issued                Capital      Earnings              at Cost     Equity
------------------------------------------------------------------------------------------------------------------
<S>                                 <C>          <C>       <C>         <C>         <C>        <C>         <C>

December 31, 1997                   7,423,040    $ 74      $12,693     $21,538     (6,000)    $ (31)      $ 34,274
Exercise of stock options              36,599       1           74                                              75
Issuance of common stock               41,684                  180                                             180
Stock repurchase program                                                         (146,100)     (869)          (869)
Net loss                                                               (7,173)                              (7,173)
------------------------------------------------------------------------------------------------------------------
December 31, 1998                   7,501,323      75       12,947      14,365   (152,100)     (900)        26,487
Exercise of stock options             233,305       2          376                                             378
Issuance of common stock               93,561       1          216                                             217
Stock compensation expense                                     128                                             128
Net income                                                               4,476                               4,476
------------------------------------------------------------------------------------------------------------------
December 31, 1999                   7,828,189      78       13,667      18,841   (152,100)     (900)        31,686
Exercise of stock options             175,207       1          748                 (2,837)      (71)           678
Issuance of common stock            2,074,289      21       35,450                                          35,471
Stock compensation expense                                     232                                             232
Net loss                                                                (2,523)                             (2,523)
------------------------------------------------------------------------------------------------------------------
December 31, 2000                  10,077,685    $100      $50,097     $16,318   (154,937)   $ (971)      $ 65,544
==================================================================================================================

</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements



                                       23
<PAGE>   24

                 SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                      Years Ended December 31,
                                                                                 --------------------------------
(dollar amounts in thousands)                                                      2000        1999       1998
                                                                                 --------    --------    --------
<S>                                                                              <C>         <C>         <C>
Cash flows from operating activities:
Net income (loss)                                                                $ (2,523)   $  4,476    $ (7,173)

Adjustments to reconcile net income (loss) to net cash provided by operations:
  Depreciation                                                                      2,866       2,754       3,028
  Amortization                                                                      1,337         444         419
  Compensation charge on stock options                                                232         128          --
  (Gain) or loss on disposal of property, plant and equipment                          31          17          (4)
  Deferred taxes                                                                   (4,772)     (2,610)        800
Changes in operating assets and liabilities, net of effects of purchase of
LogiMetrics:
  Accounts receivable                                                              (5,929)        316       3,007
  Inventory                                                                        (7,092)      1,566       8,847
  Refundable income taxes                                                             638       1,681         305
  Prepaid expenses and other current assets                                            13        (137)        278
  Accounts payable                                                                  2,973        (770)     (2,287)
  Accrued expenses                                                                  9,347       2,560         836
  Customer advances                                                                   120       1,560      (1,174)
                                                                                 --------    --------    --------
Net cash provided (used) by operating activities                                   (2,759)     11,985       6,882
                                                                                 --------    --------    --------
Cash flows from investing activities:
Acquisitions and associated costs                                                   2,054      (7,977)         --
Additions to property, plant and equipment                                         (4,242)     (1,928)     (1,608)
Proceeds from disposal of property, plant and equipment and other                      36          10          59
Issuance of employee note receivable                                                 (140)         --          --
                                                                                 --------    --------    --------
Net cash used by investing activities                                              (2,292)     (9,895)     (1,549)
                                                                                 --------    --------    --------
Cash flows from financing activities:
Proceeds from exercise of stock options                                               678         378          75
Proceeds from issuance of common stock, net of issuance costs                      35,471         217         180
Purchase of treasury stock                                                             --          --        (869)
Borrowings under bank revolving credit facilities                                  14,500       7,600      26,950
Repayment of borrowings under bank revolving credit facilities                    (17,500)     (8,600)    (29,950)
Payments of long-term debt                                                           (645)       (480)       (480)
                                                                                 --------    --------    --------
Net cash provided (used) by financing activities                                   32,504        (885)     (4,094)
                                                                                 --------    --------    --------
Net increase (decrease) in cash                                                    27,453       1,205       1,239
Cash, beginning of year                                                             3,571       2,366       1,127
                                                                                 --------    --------    --------
Cash, end of year                                                                $ 31,024    $  3,571    $  2,366
                                                                                 ========    ========    ========
</TABLE>



The accompanying notes are an integral part of the consolidated financial
statements.



                                       24
<PAGE>   25


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)

1.   NATURE OF OPERATIONS

Our principal business is the design, development and manufacture of power
management products and electronic radio frequency components and subsystems
that are used in broadband wireless equipment, digital cellular/PCS wireless
infrastructure equipment and defense electronics. We were incorporated in 1982
and have traditionally been a supplier to the defense industry. Our
sophisticated RF, microwave and millimeter wave electronic components are used
in applications such as radar, communications, smart weapons and contain vital
technology to receive, transmit and process wireless data signals. Our
experience in designing, manufacturing and marketing wireless equipment for the
demanding defense industry has positioned us well to effectively penetrate the
commercial broadband wireless market.

2.   SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of Signal Technology
Corporation and its wholly-owned subsidiaries. Intercompany accounts and
transactions have been eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

REVENUE RECOGNITION

We record revenue on a percentage of completion basis generally using units of
delivery as the basis to measure the contract work which has been completed.
Estimated losses on contracts are recognized in full in the period they become
known. A provision is made currently for estimated returns and warranty costs.

RESEARCH AND DEVELOPMENT

Research and development expenditures are charged to operations as incurred.



                                       25
<PAGE>   26

INCOME TAXES

Deferred tax assets and liabilities consist of differences between the tax basis
of assets and liabilities and their basis for financial reporting purposes and
are measured based on the enacted tax rates and laws that will be in effect when
the differences are expected to reverse. Deferred tax assets are stated at their
estimated realizable value. The provision for income taxes consists of estimated
federal and state income taxes currently payable adjusted for changes between
periods in the measurement of deferred tax assets and liabilities.

EARNINGS PER SHARE

We present basic and diluted earnings per share ("EPS"). Basic EPS is computed
by dividing income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS is computed
giving effect to all dilutive potential common shares that were outstanding
during the period. Dilutive potential common shares consist of the incremental
common shares issuable upon the exercise of stock options for all periods using
the treasury stock method.

STOCK BASED COMPENSATION

We account for stock based employee compensation arrangements in accordance with
the provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", and comply with the disclosure provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation."

COMPREHENSIVE INCOME (LOSS)

There were no differences between net income (loss) and comprehensive income
(loss) for the years ended December 31, 2000, 1999 and 1998.

CASH AND CASH EQUIVALENTS

We consider all highly liquid investments which have an original maturity of
three months or less to be cash equivalents.

INVENTORIES

Inventories, other than inventoried costs relating to contracts and programs,
are stated at the lower of cost (principally first-in, first-out) or market.
Inventoried costs relating to contracts are stated at the actual production
cost, including overhead incurred to date reduced by amounts identified with
revenue recognized on units delivered or progress completed. Inventoried costs
relating to long-term contracts and programs are reduced by charging any amounts
in excess of estimated realizable value to cost of sales.

In accordance with industry practice, inventories may include amounts relating
to contracts and programs having production cycles longer than one year and a
portion thereof will not be realized within one year.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost, and depreciation is provided
using the straight-line method over the estimated useful life of the asset, as
follows:

          Buildings                                        33 years
          Building improvements                            15 years
          Machinery and equipment                         3-7 years
          Furniture and fixtures                          5-7 years

Leasehold improvements are amortized over the lesser of their useful lives or
the life of the lease. Maintenance and repairs are charged to expense as
incurred; improvements are capitalized. Upon retirement or sale, the cost of the
assets disposed of and the related accumulated depreciation are removed from the
accounts; any resulting gain or loss is credited or charged to income.




                                       26
<PAGE>   27

INTANGIBLE ASSETS

Intangible assets consist principally of goodwill which is being amortized on a
straight-line basis over periods of three to twenty years. At each reporting
date, management assesses whether there has been a permanent impairment in the
value of its long-term assets and the amount of such impairment by comparing
anticipated undiscounted future operating income from acquired business units
with the carrying value of the related goodwill. The factors considered by
management in performing this assessment include current operating results,
trends and prospects, as well as the effects of demand, competition and other
economic factors. At December 31, 2000 and 1999 accumulated amortization was
$3,539 and $2,202 respectively.

ENVIRONMENTAL COSTS

We expense environmental expenditures related to existing conditions from past
or current operations. We determine our liability on a site by site basis and
record a liability at the time when it is probable and can be reasonably
estimated. Our liability is reduced to reflect the anticipated participation of
other responsible parties when it is both probable that such parties are legally
responsible and financially capable of paying their respective share of the
relevant cost. The estimated liability is calculated using a discounted cash
flow method. Refer to Note 10.

CONCENTRATIONS OF RISK

The market for our defense electronics products is largely dependent on the
availability of new contracts from U.S. Government authorities to prime
contractors to which we provide components. Any decline in expenditures by U.S.
government authorities may have an adverse effect on our financial performance.
We generally extend credit to customers and, therefore, collection of
receivables is affected by the defense industry economy. We closely monitor
extensions of credit, maintaining reserves for potential credit losses, and such
losses have been within management's expectations.

Also, our international sales are denominated in U.S. currency. Consequently,
changes in exchange rates that strengthen the U.S. dollar could increase the
price in local currencies of our products in foreign markets and make our
products relatively more expensive than competitors' products that are
denominated in local currencies, leading to a potential reduction in sales or
profitability in those foreign markets. We have not taken any protective
measures against exchange rate fluctuations, such as purchasing hedging
instruments with respect to such fluctuations.

The amounts reported for cash equivalents, receivables and other financial
instruments are considered to be approximate fair values based upon comparable
market information available at the respective balance sheet dates. Financial
instruments that potentially subject us to concentrations of credit risks
consist principally of cash and note and trade receivables. Substantially all of
our cash is invested in short-term U.S. Treasury bills.

We must comply with detailed government procurement and contracting regulations
and with United States government security regulations, certain of which carry
substantial penalty provisions for nonperformance or misrepresentation in the
course of negotiations. Our failure to comply with government procurement,
contracting or security obligations could result in penalties or suspension from
government contracting, which would have a material adverse effect on our
results of operations.

Our inventories include high-technology parts and components that may be
specialized in nature or subject to rapid technology obsolescence. While we have
programs to minimize the required inventories on hand




                                       27
<PAGE>   28


and consider technology obsolescence in estimating reserves to reduce recorded
amounts to market values, such estimates could change in the future.

3.   ACQUISITIONS AND DISPOSALS

In December 1999, the Company paid $7,977 for substantially all of the assets
of Advanced Frequency Products LLC a manufacturer of high-frequency millimeter
wave and microwave transceivers for the broadband wireless infrastructure
marketplace. The transaction was accounted for as a purchase and results of
operations since the acquisition date are included in the consolidated
statements of income.

The assets and liabilities recorded in connection with the acquisition of
Advanced Frequency Products LLC are based upon estimates of fair value. The
assets and liabilities recorded were $2,117 and $1,444, respectively. The
identifiable intangible assets of $2,300 consist of Advanced Frequency Products
workforce, tradename and completed technology and is being amortized on a
straight-line basis over the estimated useful life of 3-7 years. Goodwill of
$5,040 is being amortized on a straight-line basis over the estimated useful
life of 10 years.

In November 2000, we received $2,090 in exchange for assuming substantially all
the assets and liabilities of LogiMetrics' power amplifier business previously
located in Bohemia, New York. The transaction was accounted for as a purchase
and results of operations since the acquisition date are included in the
consolidated statements of income. From February 2000 through the acquisition
date we managed the business which was a security interest for a loan under an
agreement with LogiMetrics and results from operations were reported as other
expense. This loan was repaid in July 2000.

The assets and liabilities recorded in connection with the acquisition of
LogiMetrics' power amplifier business are based upon estimates of fair value.
The asset and liabilities recorded were $26 and $1,614, respectively. Excess of
acquired net assets over cost of $502 is being amortized on a straight-line
basis over three years.

Assuming the acquisitions described above had been made on January 1, 1999, the
Company's unaudited pro forma condensed results of operations would have been as
follows:

<TABLE>
<CAPTION>
                                                Years Ended December 31,
                                                -----------------------
                                                 2000            1999
                                                -------         -------
<S>                                             <C>             <C>
Net sales                                       $99,553         $93,023
Net income (loss)                               $(2,517)        $ 3,434
Net income (loss) per share:
    Basic                                       $(0.30)         $  0.45
    Diluted                                     $(0.30)         $  0.43
</TABLE>

The pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of what would have occurred had the acquisitions
been made on January 1, 1999, or of results which may occur in the future.

4.   OTHER ASSETS

At December 31, 2000 and 1999 other assets includes a mortgage receivable in the
amount of $808 and $820, respectively. In April 1996, we issued the mortgage
related to the sale of our former operating facility in Weymouth, Massachusetts
and retained an environmental liability present at the site. The mortgage
receivable matures on September 1, 2023, and principal and interest payments of
approximately $6 are due monthly (see Note 10 Commitments and Contingencies). We
earn interest on the mortgage receivable at a rate of 8.0% per annum and
interest income for the years ended December 31, 2000, 1999 and 1998 amounted to
$65, $66 and $63, respectively. Also included in other assets at December 31,
2000, is an employee note receivable in the amount of $140. The note receivable
accrues interest at the rate of our average rate of interest earned on our cash
equivalents. In exchange for continued employment until January 2003, and under
certain conditions, the note and accrued interest will be forgiven.






                                       28
<PAGE>   29

5.   STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                                                                  ---------------------------
                                                                   2000       1999       1998
                                                                  ------      ----       ----
    <S>                                                            <C>         <C>        <C>
     Cash paid during period for:
     Interest                                                     $1,023      $471       $842
     Taxes                                                         2,673       303         --

     Supplemental disclosure of non-cash financing activity:
     Capital lease equipment                                       $ 915      $148         --
</TABLE>


6.   INVENTORIES

<TABLE>
<CAPTION>
                                                            December 31,
                                                     --------------------------
                                                       2000              1999
                                                     --------          --------
    <S>                                                   <C>               <C>
     Raw materials                                    $ 6,079           $ 2,914
     Work in progress                                  14,485             9,739
     Finished goods                                       266               587
                                                      -------           -------
                                                       20,830            13,240
     Less: unliquidated progress payments              (3,455)           (2,794)
                                                      -------           -------
                                                      $17,375           $10,446
                                                      =======           =======

</TABLE>

7.   PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                            December 31,
                                                     --------------------------
                                                       2000              1999
                                                     --------          --------
    <S>                                                   <C>               <C>
     Land                                            $    992          $    992
     Building and improvements                         10,528            10,132
     Machinery and equipment                           30,954            27,162
     Furniture and fixtures                             4,173             3,487
                                                     --------          --------
                                                       46,647            41,773
     Less: accumulated depreciation                   (29,433)          (26,819)
                                                     --------          --------
     Net property, plant and equipment               $ 17,214          $ 14,954
                                                     ========          ========

</TABLE>



                                       29
<PAGE>   30

8.   ACCRUED EXPENSES

<TABLE>
<CAPTION>
                                                            December 31,
                                                     --------------------------
                                                       2000              1999
                                                     --------          --------
      <S>                                            <C>               <C>
      Payroll & employee benefits                     $ 3,001           $ 2,439
      Vacation                                          1,634             1,497
      Warranty                                          1,186             1,084
      Commissions                                         835               942
      Litigation                                        9,000             1,250
      Environmental                                     1,571             1,125
      Income tax payable                                1,347               546
      Other                                             1,539             1,435
                                                     --------          --------
                                                      $20,113           $10,318
                                                      =======           =======
</TABLE>

9.  LONG-TERM DEBT AND NOTES PAYABLE

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                            -------------------------
                                                                              2000              1999
                                                                           --------         --------
    <S>                                                                    <C>             <C>
      Massachusetts Industrial Revenue Bond,
           maturing in 2009, interest at 62% of the prime rate plus 1/2%
           effective interest rate of 5.1% and 4.5% in 2000 and 1999
           respectively, payable in annual
           principal payments of $80                                         $  648          $   728
      Capital lease obligations (Note 10)                                       819              250
      Bank revolving credit facility                                              -            3,000
      Bank real estate term loan facility                                     5,000            5,200
                                                                             ------          -------
                                                                              6,467            9,178
      Less: current maturities                                                 (967)          (3,605)
                                                                             ------          -------
                                                                             $5,500          $ 5,573
                                                                             ======          =======
</TABLE>


The Massachusetts Industrial Revenue Bond is collateralized by real estate with
a net book value of $1,355 at December 31, 2000.

We have an unsecured bank revolving credit facility, (the "Revolver"). The
predecessor Revolver expired in February 2001. We have amended the Revolver; as
of February 27, 2001 including a change to covenants and the amount available
for borrowing is $20,000. Amounts may be borrowed, paid and reborrowed by us
through the expiration date. In the event that the facility is not extended or
renegotiated, any amounts borrowed would become due at the expiration date.
Amounts available under the Revolver are reduced by actual borrowings and
outstanding letters of credit. We have the option of borrowing under one or more
differing interest rate formulas and at December 31, 2000 and 1999, the weighted
average interest rate was 9.63% and 8.06% respectively. We also pay a quarterly
commitment fee at an annual rate of 1/4% on the amount of the unused facility.
After reduction for outstanding letters of credit under the Revolver, we had
approximately $18,753 available as of December 31, 2000.

The Real Estate Loan is collateralized by real estate with a net book value of
$4,958 at December 31, 2000. Maturing in January 2003, the Real Estate Loan is
payable in quarterly principal payments of $100, plus interest at the bank's
base rate (8.98% at December 31, 2000), with the last installment equal to the
remaining unpaid loan balance.

The Real Estate Loan and the Revolver contains certain covenants relating to net
worth and interest coverage, as defined. Default on any covenant may affect the
commitment by the bank to continue to lend, and, if not corrected, could
accelerate the maturity of any borrowings outstanding. At December 31, 2000 we
were


                                       30
<PAGE>   31
not in compliance with the interest coverage covenant on the predecessor
Revolver and we obtained a waiver with respect to such non-compliance.


10.  COMMITMENTS AND CONTINGENCIES

Lease Obligations:
We lease real estate and equipment under operating leases expiring at various
dates through 2006. The leases include provisions for rent escalation which are
inflationary in nature, renewals and purchase options and we are generally
responsible for taxes, maintenance and repairs. Aggregate rental expense
included in operations amounted to $989 in 2000, $900 in 1999 and $907 in 1998.
Additionally, we leased equipment under capital leases.


Equipment under capital leases included in property, plant and equipment are as
follows:

<TABLE>
<CAPTION>
                                                            December 31,
                                                     --------------------------
                                                       2000              1999
                                                     --------          --------
<S>                                                   <C>               <C>

Machinery and equipment                               $1,049             $ 425
Less: accumulated amortization                           (77)             (117)
                                                      ------             -----
Net capital lease assets                              $  972             $ 308
                                                      ======             =====
</TABLE>

The following is a schedule by year of future minimum lease payments at December
31, 2000:

<TABLE>
<CAPTION>
                                                      Capital         Operating
        Fiscal Year                                    Leases           Leases
        -----------                                   -------         ---------
        <S>                                              <C>           <C>
        2001                                             $536          $  959
        2002                                              304             989
        2003                                               36             847
        2004                                               33             120
        2005                                                -             102
        Thereafter                                          -              33
                                                         ----          ------
                                                         $909          $3,050
                                                         ====          ======
Less amounts representing interest                         90
                                                         ----
Present value of minimum lease payments
(includes current portion of $487)                       $819
                                                         ====
</TABLE>


Weymouth Environmental Contamination:
In April 1996, we sold our manufacturing facility in Weymouth, Massachusetts but
retained the environmental liability and responsibility associated with
groundwater contaminants present at and associated with the site. This site has
been classified as a Tier 1A disposal site by the Massachusetts Department of
Environmental Protection, or DEP, as a result of past releases of petroleum
based solvents. Environmental assessment reports prepared by independent
consultants indicate that contaminants present in the Town of Weymouth well
field across the street from the facility are similar to those reportedly
released at the site and still present in the groundwater at the site; however,
these reports also indicate that the contaminants do not exceed safe drinking
water levels in the finished water after normal treatment. Other contaminants
which did not originate at the facility have also been detected in the well
field.



                                       31
<PAGE>   32

In accordance with the applicable provisions of the Massachusetts Contingency
Plan, we have completed our investigation of the site and have submitted an
evaluation of remedial alternatives to the DEP. The recommended remedial
alternative involves continued operation of the currently operating groundwater
remediation system with the addition of a supplemental well and well head
treatment at Weymouth Winter Street well No. 2 through an agreement with the
Town of Weymouth. We have been informed that no recovery of costs incurred in
the treatment of the groundwater at the facility is possible under existing
insurance arrangements. We have not reached an agreement with the Town of
Weymouth relative to well head treatment and, it is not possible at this stage
of the proceedings to predict whether the DEP will approve the recommended
alternative, and if not, the specific remedial actions, if any, that it will
require.

We have recorded liabilities of $1,571 calculated on the discounted cash flow
method using an 8% discount rate for anticipated costs including legal and
consulting fees, site studies and design and implementation of remediation
plans, post-remediation monitoring and related activities to be performed during
the next 20 years. The increase in the liability of $.4 million during fiscal
2000 is for legal and consulting fees and payments to the Town of Weymouth for
well head treatment at Weymouth Winter Street well No. 2. Environmental cleanup
expenses are included as general and administrative expense in our statement of
operations. Cash payments for Weymouth environmental contamination are expected
to be $577 in 2000, $90 per year for 2002-2004 and $1,355 for 2005 and
thereafter.

Sunnyvale (Eaton) Indemnification Claim:
Eaton Corporation filed a suit against us in U.S. District Court, Northern
District of California, alleging that we have a contractual duty to indemnify
Eaton Corporation for costs incurred as a result of environmental contamination
and subsequent remediation. The claim is based upon allegations that we assumed
certain liabilities when we acquired one of the divisions of Eaton Corporation.
The claim was dismissed at the trial level, but the Ninth Circuit of the U.S.
Court of Appeals reversed this decision and found that we do owe Eaton a duty of
indemnification. In December 2000, the decision by a jury was in favor of an
indemnification claim by Eaton and Eaton was awarded a judgment of $4,200,
related to environmental liabilities assumed by Signal when it purchased Eaton's
Microwave Products division in 1989. On March 7, 2001, the U.S. District Court
ruled on various motions pending before it, including denying our motion for a
new trial and denying certain of Eaton's motions. The U.S. District Court
amended the judgment to increase it to an aggregate of $6,040 and clarified that
we are responsible for 50 percent of the reasonable costs and expenses of
remediation. We have recorded liabilities of $9,000 for anticipated costs
including the $6,040 judgment, legal and consulting fees, site studies,
implementation of remediation plans, post-remediation monitoring and related
activities to be performed during the next 20 years. We intend to appeal the
amended judgment.

SEC Investigation:
The Boston District Office of the Securities and Exchange Commission advised us
on September 27, 2000 that the Commission has entered a formal order of private
investigation. We understand that the investigation relates to our restatement
in 1998 of our financial statements for 1996, 1997 and the first quarter of
1998. We intend to continue to cooperate with the Commission on this
investigation.

T-3 Contract:
We are currently committed to a long term contract at our Keltec division (the
T-3 contract) for amplifiers for Raytheon. The current contract value is $764.
If Raytheon exercises all of its options within this contract, the total value
could be in excess of $19,000. Based on an assessment by management in 1998, if
all options are exercised at current estimated costs and prices, our loss could
total up to $4,000. In 1999 we negotiated new prices and specifications for the
same amplifiers under a new contract and we believe prices are at Keltec's
manufacturing cost. We believe that other future orders and options for T-3
amplifiers will be under new contractual arrangements.


                                       32
<PAGE>   33

11.  INCOME TAXES

<TABLE>
<CAPTION>
                                                   Years Ended December 31,
                                             ---------------------------------
                                               2000         1999        1998
                                             -------      -------      -------
<S>                                          <C>          <C>          <C>

Current (benefit) provision
     Federal                                 $ 2,925      $   569      $(1,121)
     State                                       500           25           --
     Foreign Sales Corporation                    48           11           --
                                             -------      -------      -------
Deferred (benefit) provision
     Federal                                  (4,236)         845         (936)
     State                                      (536)         234         (480)
                                             -------      -------      -------
Less: Valuation allowance
     Federal                                      --       (1,544)       1,544
     State                                        --         (669)         669
                                             -------      -------      -------
(Benefit) provision for income taxes         $(1,299)     $  (529)     $  (324)
                                             =======      =======      =======
</TABLE>

The benefit for income taxes primarily relates to various deferred tax assets,
which we believe are more likely than not to be realized based on our earnings
performance.

Our effective tax rate differs from the statutory federal income tax rate as
follows:

<TABLE>
<CAPTION>
                                                          Years Ended December 31,
                                                  -------------------------------------
                                                    2000           1999           1998
                                                  -------         ------         ------
<S>                                               <C>             <C>            <C>

Statutory federal income tax rate                 (34.0)%         34.0 %         (34.0)%
State income taxes, net of federal benefit         (5.4)           6.5            (4.2)
Benefit from Foreign Sales Corporation             (2.4)          (0.5)             --
Non-deductible expenses and other                   7.8            2.7             4.4
Change in valuation allowance                        --          (56.1)           29.5
                                                  -----          -----            ----
Effective tax rate                                (34.0)%        (13.4)%          (4.3)%
                                                  =====          =====            ====

</TABLE>


The non-deductible expenses consist principally of goodwill resulting from
certain of our acquisitions and other amounts not deductible for tax purposes.

The tax effect of temporary differences that give rise to the net deferred tax
asset and liability are as follows:

<TABLE>
<CAPTION>
                                                     Years Ended December 31,
                                                     -----------------------
                                                      2000             1999
                                                     ------          -------
<S>                                                  <C>             <C>

Deferred tax asset:
     Net operating losses and credits                $   --          $   25
     Vacation accrual                                   590             514
     Inventories                                      1,864           1,458
     Warranty                                           457             414
     Deferred compensation                             --                83
     Environmental and litigation reserve             4,070             433
     Contract reserves and other                      1,535           1,207
                                                     ------          ------
Deferred tax asset                                    8,516           4,134
Deferred tax liability:
     Depreciation                                     1,134           1,524
                                                     ------          ------
Deferred tax liability                                1,134           1,524
                                                     ------          ------
Net deferred tax asset                               $7,382          $2,610
                                                     ======          ======

</TABLE>




                                       33
<PAGE>   34

12.   STOCKHOLDERS' EQUITY

We have stock option plans (the "Plans") under which options for a maximum of
3,167 shares of our common stock may be granted generally at prices not less
than 100 percent of the fair market value of our common stock at the date of
option grant. During 2000, 1999 and 1998 we recorded compensation expense of
$77, $89 and none, respectively for options issued below fair market value.
Options vest in increments and over periods determined by the Compensation
Committee of our Board of Directors and expire not more than ten years from date
of grant. At December 31, 2000, 2,354 shares of common stock were reserved for
future issuance under the plans and 257 were available for future grant.
Additionally, non-qualified options to purchase a total of 120 shares of our
common stock are outstanding to certain directors and other non-employees. These
options were generally granted at the fair market value of our common stock at
the date of option grant, vest generally over a five-year period and expire
between 2000 and 2004. During 2000, 1999 and 1998 we recorded compensation
expense of $155, $39 and none, respectively for options granted to
non-employees.

Information concerning the plans and non-qualified stock options is as follows:

<TABLE>
<CAPTION>
                                                        Available       Option      Option Price     Weighted Avg.
                                                        for Grant       Shares       per Share      Exercise Price
                                                        ---------       ------     -------------    --------------
<S>                                                     <C>             <C>        <C>                 <C>
December 31, 1997                                             565         808      $1.57 - $ 8.25       $ 4.63
                                                            -----       -----      --------------       ------
Options granted                                              (656)        656       2.50 -   6.25         2.82
Options canceled                                              217        (249)      2.36 -   8.25         6.65
Options exercised                                               -         (37)      1.58 -   5.75         2.00
                                                            -----       -----      --------------       ------
December 31, 1998                                             126       1,178       1.58 -   8.25         3.27
                                                            -----       -----      --------------       ------
Options granted                                              (544)        544       4.00 -   5.44         4.39
Options canceled                                               89         (98)      1.58 -   7.63         5.76
Options exercised                                               -        (233)      1.58 -   4.19         1.63
Increase in available options, 1992 Plan                      500           -          - -      -            -
                                                            -----       -----      --------------       ------
December 31, 1999                                             171       1,391       1.80 -   8.25         3.80
                                                            -----       -----      --------------       ------
Options granted                                              (595)        595       9.44 -  25.38        19.28
Options canceled                                               81         (81)      2.94 -  19.88        10.03
Options exercised                                               -        (175)      1.80 -   8.25         4.24
Increase in available options, 1992 Plan                      600           -          - -      -            -
                                                            -----       -----      --------------       ------
December 31, 2000                                             257       1,730      $2.00 - $25.38       $ 8.86
                                                            =====       =====      ==============       ======
</TABLE>

A total of 603 options were exercisable at December 31, 2000 at a weighted
average price of $3.35. A total of 539 options were exercisable at December 31,
1999 at a weighted average price of $3.58. A total of 544 options were
exercisable at December 31, 1998 at a weighted average price of $2.91.



                                       34

<PAGE>   35



The following table summarizes information with respect to stock options
outstanding as of December 31, 2000:
<TABLE>
<CAPTION>
                                                                                                               Weighted-
                                                                                                                Average
                                              Weighted-Average                                               Exercise Price
      Range of               Options              Remaining           Weighted-Average       Options         of Exercisable
  Exercise Prices          Outstanding        Contractual Life         Exercise Price      Exercisable          Options
  ---------------          -----------        ----------------        ----------------     -----------       --------------
<S>                           <C>                <C>                     <C>                 <C>               <C>
  $ 2.00 - $ 3.94               572                7.8                     $ 2.51              402               $2.51
  $ 4.00 - $ 5.75               494                7.6                     $ 4.39              139               $4.34
  $ 6.06 - $ 7.00                75                1.6                     $ 6.45               56               $6.45
  $ 7.25 - $10.25                15                4.4                     $ 8.51                6               $7.86
  $12.68 - $17.77                60                9.7                     $15.08                -                   -
  $17.78 - $20.30               480                9.4                     $19.70                -                   -
  $20.31 - $25.38                34                5.7                     $22.11                -                   -
  ---------------             -----                ---                     ------              ---               -----
Total                         1,730                7.9                                         603               $3.35
                              =====                ===                                         ===               ======
</TABLE>

The following information concerning our stock option and employee stock
purchase plans is provided in accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation." We account for such plans in accordance with APB No.
25 and related Interpretations.

The fair value of each option grant has been estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions are as follows:

<TABLE>
<CAPTION>
                                 2000                1999                1998
                               ---------          ----------           ---------

<S>                              <C>                 <C>                 <C>
Risk-free Interest Rates         5.0%                4.5%                5.3%
Expected Life                  6.6 years           6.8 years           4.5 years
Volatility                       0.72                0.66                0.65
Dividend Yield                     -                   -                   -
</TABLE>

The weighted average fair value of those options granted in 2000, 1999 and 1998
was $13.57, $2.95 and $1.60 respectively.

The following pro forma income information has been prepared following the
provisions of SFAS No. 123:
<TABLE>
<CAPTION>
                                          Years Ended December 31,
                                 -----------------------------------------
                                    2000            1999            1998
                                 ---------        -------        ---------
<S>                              <C>              <C>            <C>
Net income (loss):
     As reported                 $ (2,523)        $ 4,476        $ (7,173)
     Pro forma                     (4,429)          3,812          (7,821)

Basic EPS:
     As reported                 $  (0.30)        $  0.59         $ (0.97)
     Pro forma                      (0.52)           0.50           (1.06)

Diluted EPS:
     As reported                 $  (0.30)        $  0.56         $ (0.97)
     Pro forma                      (0.52)           0.48           (1.06)
</TABLE>





                                       35

<PAGE>   36

13.  EARNINGS PER SHARE

A reconciliation of the numerator and denominator of both basic and diluted EPS
is provided as follows:
<TABLE>
<CAPTION>
                                                     2000               1999               1998
                                                  ---------            -------          ---------
<S>                                               <C>                  <C>               <C>
Numerator - Basic and Diluted EPS
         Net income (loss)                        $ (2,523)            $ 4,476           $ (7,173)

Denominator - Basic EPS
         Common shares outstanding                   8,537               7,587              7,365
                                                  --------             -------           --------
Basic earnings (loss) per share                   $  (0.30)            $  0.59           $  (0.97)
                                                  ========             =======           ========
Denominator - Diluted EPS
         Denominator - Basic EPS                     8,537               7,587              7,365

         Effect of Dilutive Securities
           Common Stock Options                          -                 399                  -

Denominator - Diluted EPS                            8,537               7,986              7,365
                                                  --------             -------           --------
Diluted earnings (loss) per share                 $  (0.30)            $  0.56           $  (0.97)
                                                  ========             =======           ========
</TABLE>

As of December 31, 2000 and 1998 the number of dilutive shares was 849 and 238,
respectively and such shares have not been included in above calculations as the
effect would be anti-dilutive.

14.  EMPLOYEE BENEFIT PLANS

We maintain a 401(k) plan covering substantially all of our employees. Eligible
employees may contribute up to 15% of their annual compensation, as defined, to
this plan. We may also make a discretionary contribution. Our contributions to
this plan totaled $697 in 2000, $377 in 1999 and $378 in 1998.

We have an Employee Stock Purchase Plan ("the Purchase Plan") under which 300
shares of common stock have been reserved for issuance. Eligible employees may
designate not more than 10% of their cash compensation to be deducted each pay
period for the purchase of common stock under the Purchase Plan, and
participants may purchase not more than $25 of common stock in any one calendar
year. On the last business day of each six month offering period shares of
common stock are purchased with the employees' payroll deductions over the
immediately preceding six months at a price per share of 85% of the lesser of
the market price of the common stock on the purchase date or the market price on
the first day of the period. The Purchase Plan will terminate on June 30, 2002
unless its term is extended. Common stock issued under the Purchase Plan was 74
in 2000, 94 in 1999 and 42 in 1998.

15.  SEGMENT INFORMATION

We have six operating divisions engaged in the development, manufacturing and
marketing of electronic components and subsystems. The divisions; referred to as
Arizona, California, Systems, Advanced Frequency products, Keltec and Olektron
report their operations within four segments: Signal Wireless Group (established
in January 2000 and includes Advanced Frequency Products and products from
Arizona, California and Olektron that are produced for the world-wide wireless
telecommunication markets). Microwave Components and Subsystems (products from
Arizona, California and Systems that primarily serve the defense and space
markets), Power Management Products (Keltec) and Radio Frequency (RF) Components
and Subsystems (Olektron products that primarily serve the defense market). The
products from the operating divisions aggregated into the Signal Wireless Group
and Microwave Components and Subsystems segments have similar types of
production processes and types of customers. Signal Wireless Group was added as
a new business segment in fiscal year 2000. The fiscal year 1999 and 1998
business


                                       36

<PAGE>   37


segment reporting has been adjusted to include Signal Wireless Group
business originally reported in Microwave Components and Subsystems and RF
Components and Subsystems in our previous segment reporting. In reporting
business segment operating income corporate headquarters expenses have been
allocated to the business segments based on a percentage of net sales.

Our reportable segments are as follows:

SIGNAL WIRELESS GROUP

Designs and manufactures commercial wireless products for the telecommunications
industry.

MICROWAVE COMPONENTS AND SUBSYSTEMS

Designs and manufactures microwave oscillators, frequency synthesizers and
converters, space qualified microwave assemblies, microwave amplifiers and
microwave switch matrices.

POWER MANAGEMENT PRODUCTS

Designs and manufactures military high and low voltage power supplies, DC to DC
converters and military high power amplifiers and transmitters for use in radar
systems.

RADIO FREQUENCY COMPONENTS AND SUBSYSTEMS

Designs and manufactures RF and intermediate frequency signal processing
components, integrated multi-function devices, and switching systems.





                                       37

<PAGE>   38


The accounting policies of the segments are the same as those described in the
"Summary of Significant Accounting Policies". Segment data includes a charge for
allocating corporate headquarters costs. The table below presents selected
financial data by business segment for the years ending December 31:

<TABLE>
<CAPTION>
Selected Financial Data by Business Segment
(amounts in thousands)                                          2000              1999             1998
                                                             ---------          --------         --------
<S>                                                          <C>                <C>              <C>

NET SALES
Signal Wireless Group                                        $  19,489          $  3,541         $  1,242
Microwave Components and Subsystems                             40,827            41,845           50,616
Power Management Products                                       27,930            25,403           24,262
RF Components and Subsystems                                    10,241            11,660           15,963
                                                             ---------          --------         --------
                                                             $  98,487          $ 82,449         $ 92,083
OPERATING INCOME
Signal Wireless Group                                        $  (4,724)         $   (394)        $    (57)
Microwave Components and Subsystems                              5,768             2,731              122
Power Management Products                                        4,666             2,937           (8,234)
RF Components and Subsystems                                      (250)              291            1,569
                                                             ---------          --------         --------
                                                             $   5,460          $  5,565         $ (6,600)

TOTAL ASSETS
Signal Wireless Group                                        $  22,388          $ 10,428         $    511
Microwave Components and Subsystems                             18,070            17,988           21,969
Power Management Products                                       13,789            12,099           12,173
RF Components and Subsystems                                     7,494             7,659            7,110
Other                                                           40,652             9,427            7,220
                                                             ---------          --------         --------
                                                             $ 102,393          $ 57,601         $ 48,983

LONG-LIVED ASSETS - NET
Signal Wireless Group                                        $  10,434          $  8,230         $    252
Microwave Components and Subsystems                              6,899             7,484            8,692
Power Management Products                                        3,650             4,478            4,762
RF Components and Subsystems                                     3,582             3,860            3,606
Other                                                              211               267              128
                                                             ---------          --------         --------
                                                             $  24,776          $ 24,319         $ 17,440

LONG LIVED ASSET ADDITIONS
Signal Wireless Group                                        $   2,679          $  7,354         $     15
Microwave Components and Subsystems                              1,344               841              664
Power Management Products                                           12               599              329
RF Components and Subsystems                                       623               385              467
Other                                                               33               196              133
                                                             ---------          --------         --------
                                                             $   4,691          $  9,375         $  1,608

DEPRECIATION AND AMORTIZATION EXPENSE
Signal Wireless Group                                        $   1,446          $    178         $     55
Microwave Components and Subsystems                              1,379             1,604            1,867
Power Management Products                                          822               928            1,050
RF Components and Subsystems                                       466               432              440
Other                                                               90                56               35
                                                             ---------          --------         --------
                                                             $   4,203          $  3,198         $ $3,447
</TABLE>

                                       38

<PAGE>   39


<TABLE>
<CAPTION>
Net Sales by Customer Category
(amounts in thousands)                                          2000              1999             1998
                                                             ---------          --------         --------
<S>                                                          <C>               <C>               <C>
U.S. GOVERNMENT MILITARY
Signal Wireless Group                                       $       -        $       -           $      -
Microwave Components and Subsystems                            27,812           23,907             33,819
Power Management Products                                      17,548           21,537             17,709
RF Components and Subsystems                                    8,026            9,386             13,071
                                                            ---------          --------          --------
                                                            $  53,386        $  54,830           $ 64,599

U.S. GOVERNMENT NON-MILITARY
Signal Wireless Group                                       $       -         $      -           $      -
Microwave Components and Subsystems                               367            2,635                949
Power Management Products                                         320                -                  -
RF Components and Subsystems                                      156              428                313
                                                            ---------         --------           --------
                                                            $     843         $  3,063           $  1,262

U.S. COMMERCIAL
Signal Wireless Group                                       $  13,211         $  1,515           $  1,123
Microwave Components and Subsystems                             3,280            4,724              5,362
Power Management Products                                         593               59                179
RF Components and Subsystems                                      597            1,124                975
                                                            ---------         --------           --------
                                                            $  17,681         $  7,422           $  7,639

INTERNATIONAL MILITARY
Signal Wireless Group                                       $       -         $      -           $      -
Microwave Components and Subsystems                             7,661           10,139              9,389
Power Management Products                                       9,324            3,802              5,926
RF Components and Subsystems                                    1,232              983              1,374
                                                            ---------         --------           --------
                                                            $  18,217         $ 14,924           $ 16,689

INTERNATIONAL COMMERCIAL
Signal Wireless Group                                       $   6,278         $  1,906           $    119
Microwave Components and Subsystems                             1,705              124              1,097
Power Management Products                                         145                5                448
RF Components and Subsystems                                      232              175                230
                                                            ---------         --------           --------
                                                            $   8,360         $  2,210           $  1,894
                                                            ---------         --------           --------
Total                                                       $  98,487         $ 82,449           $ 92,083
                                                            =========         ========           ========
</TABLE>

SIGNIFICANT CUSTOMER

Revenue of approximately $16,617 (17%), $14,770 (18%) and $21,474 (23%) was
attributable to Raytheon Company for the years ended December 31, 2000, 1999 and
1998 respectively. At December 31, 2000 and 1999, accounts receivable from
Raytheon Company accounted for approximately $2,214 (11%) and $1,638 (12%),
respectively, of the total amount of accounts receivable due to the Company.



                                       39

<PAGE>   40


16.  UNAUDITED QUARTERLY FINANCIAL INFORMATION

The following quarterly financial information should be read in conjunction with
Notes 1 and 2. The first three quarters in each year consist of thirteen week
periods with the fourth quarter ending on December 31.
<TABLE>
<CAPTION>
                                                        First               Second           Third              Fourth
2000:                                                  Quarter             Quarter          Quarter            Quarter
-----                                                 --------            --------         ---------           ---------
<S>                                                   <C>                 <C>              <C>                 <C>
Net sales                                             $ 20,289            $ 23,062         $  27,165           $  27,971
Gross profit                                             6,905               7,844             7,886               9,270
Operating income                                           765               1,691             1,009               1,995
Net income (loss)                                          241                 718               555              (4,037)
Net income (loss) per share:
     Basic                                            $   0.03            $   0.09         $    0.06           $   (0.41)
     Diluted                                          $   0.03            $   0.08         $    0.06           $   (0.41)
Shares used in calculating
     Net income (loss) per share:
     Basic                                               7,748               7,830             8,615               9,923
     Diluted                                             8,794               8,863             9,578               9,923

1999:
-----
Net sales                                             $ 20,436            $ 20,934          $ 20,819           $  20,260
Gross profit                                             5,889               6,142             6,809               7,394
Operating income                                           801                 946             1,480               2,337
Net income                                                 639                 825             1,428               1,584
Net income per share:
     Basic                                            $   0.09            $   0.11         $    0.19            $   0.21
     Diluted                                          $   0.08            $   0.10         $    0.18            $   0.20
Shares used in calculating
      Net income per share:
      Basic                                              7,503               7,585             7,652               7,673
      Diluted                                            7,824               8,032             8,106               8,065

</TABLE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Signal Technology Corporation:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 (a) present fairly, in all material respects, the
financial position of Signal Technology Corporation and its subsidiaries at
December 31, 2000 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule listed in
the index appearing under Item 14(a) presents fairly in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.


/s/
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 13, 2001, except as to Note 9 which is as of February 27, 2001 and
Note 10 which is as of March 7, 2001.




                                       40



<PAGE>   41


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

None


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


All information required by Items 10, 11, 12 and 13 is incorporated herein by
reference to the Company's definitive proxy statement for its annual meeting of
stockholders to be held on May 15, 2001, which will be filed with the Securities
and Exchange Commission pursuant to Regulation 14A.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
(a)(1) Index to Financial Statements and Financial Statement Schedules                     PAGE
----------------------------------------------------------------------                     ----
  <S>                                                                                       <C>
         Financial Statements for the Years Ended December 31, 2000, 1999 and 1998:
         Consolidated Statements of Operations                                               21
         Consolidated Balance Sheets                                                         22
         Consolidated Statements of Stockholders' Equity                                     23
         Consolidated Statements of Cash Flows                                               24
Notes to Consolidated Financial Statements                                                   25
Report of Independent Accountants                                                            40
Schedule II Valuation and Qualifying Accounts                                                45
</TABLE>

All other schedules are omitted because they are not applicable, nor required
under the instructions, or all the information required is set forth in the
consolidated financial statements or notes thereto.


(2) The following described exhibits are filed herewith or incorporated herein
    by reference indicated:

   EXHIBIT
    NUMBER     DESCRIPTION
   -------     -----------
     3.1       Certificate of Incorporation of Registrant, as amended to date.*

     3.2       By-Laws of Registrant, as amended to date.***

    10.1       Amended and Restated Credit Agreement among The First National
               Bank of Boston, the Registrant and its subsidiaries, dated as of
               April 14, 1992.*

    10.0.1     Second Amendment and Restatement of Credit Agreement
               with First National Bank of Boston, dated as of
               September 30, 1993.***

    10.4       Employee Incentive Stock Option Plan - 1982 of the Registrant.*

    10.5       1992 Equity Incentive Plan of the Registrant.*



                                       41

<PAGE>   42


    10.6       Signal Technology Corporation 401(k) Plan.*

    10.8       Lease dated as of October 18, 1990 by and between Benecia
               Associates and ST Microwave Corp.*

    10.20      Purchase and Sale Agreement by and between Tecnetics,
               Incorporated and Keltec Corporation, dated September 7,
               1995.*****

    10.22      Amendment agreement No.1 to the Second Amendment and
               Restated Credit Agreement, dated as of September 30,
               1993, with the First National Bank of Boston, dated as
               of July 20, 1995.*****

    10.23      Amendment agreement No. 2 to the Second Amendment and
               Restated Credit Agreement dated as of September 30,
               1993, with the First National Bank of Boston, dated as
               of September 30, 1995.*****

    10.24      Amendment agreement No. 3 to the Second Amendment and Restated
               Credit Agreement, dated as of September 30, 1993, with the First
               National Bank of Boston, dated as of March 29, 1996.*******

    10.25      Amendment agreement No. 4 to the Second Amendment and Restated
               Credit Agreement, dated as of September 30, 1993, with the First
               National Bank of Boston, dated as of March 10, 1997.*******

    10.29      First Amendment to lease, dated as of September 9, 1996, by and
               between Benecia Associates and Signal Technology
               Corporation.*******

    10.30      Employee Stock Purchase Plan.******

    10.31      Amendment No. 5 to the second and restated credit agreement,
               dated as of September 30, 1993, with the First National Bank of
               Boston, dated as of December 15, 1997.********

    10.33      Sublease Agreement as of October 1, 1998 by and between Copyright
               Clearance Center, Inc. and Signal Technology
               Corporation.*********

    10.34      Amendment Agreement No. 6 to Second Amended and Restated Credit
               Agreement, dated as of September 30, 1993, with BankBoston, N.A.,
               formerly known as the First National Bank of Boston, dated as of
               October 20, 1998.*********

    10.35      Amendment Agreement No. 7 to Second Amended and Restated Credit
               Agreement, dated as of September 30, 1993, with Fleet National
               Bank, formerly known as BankBoston, N.A., formerly known as the
               First National Bank of Boston, dated as of March 9, 2000.

    10.36      Amendment Agreement No. 8 to Second Amended and Restated Credit
               Agreement, dated as of September 30, 1993, with Fleet National
               Bank, formerly known as BankBoston, N.A., formerly known as the
               First National Bank of Boston, dated as of May 11, 2000.

    10.37      Amendment Agreement No. 9 to Second Amended and Restated Credit
               Agreement, dated as of September 30, 1993, with Fleet National
               Bank, formerly known as BankBoston, N.A., formerly known as the
               First National Bank of Boston, dated as of September 30, 2000.

                                       42

<PAGE>   43




    10.38      Amendment Agreement No. 10 to Second Amended and Restated Credit
               Agreement, dated as of September 30, 1993, with Fleet National
               Bank, formerly known as BankBoston, N.A., formerly known as the
               First National Bank of Boston, dated as of December 22, 2000.

    10.39      Third Amended and Restated Credit Agreement, with Fleet National
               Bank, formerly known as BankBoston, N.A., formerly known as the
               First National Bank of Boston dated as of February 27, 2001.

    21.1       Schedule of Registrant's subsidiaries.

    23.1       Consent of Independent Accountants.

    *          Incorporated by reference to the corresponding exhibit filed as
               part of the Registrant's registration statement on Form S-1, as
               amended (File No. 33-61124).

    ***        Incorporated by reference to the corresponding exhibit filed as
               part of the Registrant's 1993 Annual Report on Form 10-K.

    ****       Incorporated by reference to the corresponding exhibit filed as
               part of the Registrant's 1994 Annual Report on Form 10-K.

    *****      Incorporated by reference to the corresponding exhibit filed as
               part of the Registrant's 1995 Annual report on Form 10-K.

    ******     Incorporated by reference to the definitive Proxy Statement to be
               filed with the SEC in connection with Company's Annual Meeting of
               Shareholders to be held on May 6, 1997.

    *******    Incorporated by reference to the corresponding exhibit filed as
               part of the Registrant's 1996 Annual report on Form 10-K.

    ********   Incorporated by reference to the corresponding exhibit files as a
               part of the Registrant's 1997 Annual report on Form 10-K.

    *********  Incorporated by reference to the corresponding exhibit files as a
               part of the Registrant's 1998 Annual report on Form 10-K.

(b) Reports on Form 8-K

    None

                                       43

<PAGE>   44


                                   SIGNATURES

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

                                 SIGNAL TECHNOLOGY CORPORATION

                                 By: /s/  Robert Nelsen
                                    --------------------------------------------
                                    Chief Financial Officer and Principal
                                    Accounting Officer

Date:  March 28, 2001

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.


 /s/  George E. Lombard                                          March 28, 2001
 --------------------------------------------------------
 Chairman, Chief Executive Officer and Principal
 Executive Officer


 /s/  Robert Nelsen                                              March 28, 2001
 --------------------------------------------------------
 Chief Financial Officer


 /s/  Bernard P. O'Sullivan                                      March 28, 2001
 --------------------------------------------------------
 Bernard P. O'Sullivan
 Director


                                                                 March 28, 2001
 --------------------------------------------------------
 Harvey C. Krentzman
 Director


 /s/  Joseph S. Schneider                                        March 28, 2001
 --------------------------------------------------------
 Joseph S. Schneider
 Director

 /s/  Larry L. Hansen                                            March 28, 2001
 --------------------------------------------------------
 Larry L. Hansen
 Director

 /s/  Thomas McInerney                                           March 28, 2001
 --------------------------------------------------------
 Director

 /s/  Thomas Skelly                                              March 28, 2001
 --------------------------------------------------------
 Director





                                       44

<PAGE>   45


                  SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>
                                                                Years Ended December 31, 2000, 1999 and 1998
                                                ------------------------------------------------------------------------------
                                                 Balance at         Charged to            Charged to            Balance at
                                                  Beginning          Costs and               Other                  End
Description                                       Of Period          Expenses              Accounts              Of Period
------------------------------------------------------------------------------------------------------------------------------
<C>                                                <C>               <C>                 <C>                     <C>
1998 Inventory reserve.............               $1,729,000        $5,823,000          $(1,624,000)(2)         $5,928,000
Allowance for doubtful accounts....                  159,000           196,000              (23,000)(1)            332,000
------------------------------------------------------------------------------------------------------------------------------
1999 Inventory reserve.............               $5,928,000        $1,643,000          $(2,764,000)(2)         $4,807,000
Allowance for doubtful accounts....                  332,000            73,000             (206,000)(1)            199,000
------------------------------------------------------------------------------------------------------------------------------
2000 Inventory reserve.............               $4,807,000        $1,172,000          $(2,015,000)(2)         $3,964,000
Allowance for doubtful accounts......                199,000           401,000              (58,000)(1)            542,000
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Notes
(1) Write-off of bad debts
(2) Charged to inventory accounts from previously established reserved amounts.




                                       45

<PAGE>   46

                                 EXHIBIT INDEX


   EXHIBIT
    NUMBER     DESCRIPTION
   -------     -----------
     3.1       Certificate of Incorporation of Registrant, as amended to date.*

     3.2       By-Laws of Registrant, as amended to date.***

    10.1       Amended and Restated Credit Agreement among The First National
               Bank of Boston, the Registrant and its subsidiaries, dated as of
               April 14, 1992.*

    10.0.1     Second Amendment and Restatement of Credit Agreement
               with First National Bank of Boston, dated as of
               September 30, 1993.***

    10.4       Employee Incentive Stock Option Plan - 1982 of the Registrant.*

    10.5       1992 Equity Incentive Plan of the Registrant.*

    10.6       Signal Technology Corporation 401(k) Plan.*

    10.8       Lease dated as of October 18, 1990 by and between Benecia
               Associates and ST Microwave Corp.*

    10.20      Purchase and Sale Agreement by and between Tecnetics,
               Incorporated and Keltec Corporation, dated September 7,
               1995.*****

    10.22      Amendment agreement No.1 to the Second Amendment and
               Restated Credit Agreement, dated as of September 30,
               1993, with the First National Bank of Boston, dated as
               of July 20, 1995.*****

    10.23      Amendment agreement No. 2 to the Second Amendment and
               Restated Credit Agreement dated as of September 30,
               1993, with the First National Bank of Boston, dated as
               of September 30, 1995.*****

    10.24      Amendment agreement No. 3 to the Second Amendment and Restated
               Credit Agreement, dated as of September 30, 1993, with the First
               National Bank of Boston, dated as of March 29, 1996.*******

    10.25      Amendment agreement No. 4 to the Second Amendment and Restated
               Credit Agreement, dated as of September 30, 1993, with the First
               National Bank of Boston, dated as of March 10, 1997.*******

    10.29      First Amendment to lease, dated as of September 9, 1996, by and
               between Benecia Associates and Signal Technology
               Corporation.*******

    10.30      Employee Stock Purchase Plan.******

    10.31      Amendment No. 5 to the second and restated credit agreement,
               dated as of September 30, 1993, with the First National Bank of
               Boston, dated as of December 15, 1997.********


                                       46

<PAGE>   47


    10.33      Sublease Agreement as of October 1, 1998 by and between Copyright
               Clearance Center, Inc. and Signal Technology
               Corporation.*********

    10.34      Amendment Agreement No. 6 to Second Amended and Restated Credit
               Agreement, dated as of September 30, 1993, with BankBoston, N.A.,
               formerly known as the First National Bank of Boston, dated as of
               October 20, 1998.*********

    10.35      Amendment Agreement No. 7 to Second Amended and Restated Credit
               Agreement, dated as of September 30, 1993, with Fleet National
               Bank, formerly known as BankBoston, N.A., formerly known as the
               First National Bank of Boston, dated as of March 9, 2000.

    10.36      Amendment Agreement No. 8 to Second Amended and Restated Credit
               Agreement, dated as of September 30, 1993, with Fleet National
               Bank, formerly known as BankBoston, N.A., formerly known as the
               First National Bank of Boston, dated as of May 11, 2000.

    10.37      Amendment Agreement No. 9 to Second Amended and Restated Credit
               Agreement, dated as of September 30, 1993, with Fleet National
               Bank, formerly known as BankBoston, N.A., formerly known as the
               First National Bank of Boston, dated as of September 30, 2000.

    10.38      Amendment Agreement No. 10 to Second Amended and Restated Credit
               Agreement, dated as of September 30, 1993, with Fleet National
               Bank, formerly known as BankBoston, N.A., formerly known as the
               First National Bank of Boston, dated as of December 22, 2000.

    10.39      Third Amended and Restated Credit Agreement, with Fleet National
               Bank, formerly known as BankBoston, N.A., formerly known as the
               First National Bank of Boston dated as of February 27, 2001.

    21.1       Schedule of Registrant's subsidiaries.

    23.1       Consent of Independent Accountants.

    *          Incorporated by reference to the corresponding exhibit filed as
               part of the Registrant's registration statement on Form S-1, as
               amended (File No. 33-61124).

    ***        Incorporated by reference to the corresponding exhibit filed as
               part of the Registrant's 1993 Annual Report on Form 10-K.

    ****       Incorporated by reference to the corresponding exhibit filed as
               part of the Registrant's 1994 Annual Report on Form 10-K.

                                     47

<PAGE>   48


    *****      Incorporated by reference to the corresponding exhibit filed as
               part of the Registrant's 1995 Annual report on Form 10-K.

    ******     Incorporated by reference to the definitive Proxy Statement to be
               filed with the SEC in connection with Company's Annual Meeting of
               Shareholders to be held on May 6, 1997.

    *******    Incorporated by reference to the corresponding exhibit filed as
               part of the Registrant's 1996 Annual report on Form 10-K.

    ********   Incorporated by reference to the corresponding exhibit files as a
               part of the Registrant's 1997 Annual report on Form 10-K.

    *********  Incorporated by reference to the corresponding exhibit files as a
               part of the Registrant's 1998 Annual report on Form 10-K.

(b) Reports on Form 8-K

    None

                                       48