DESCRIPTION OF BUSINESS

     SMTEK International, Inc. (the "Company," "we," "us" or "our") is an
electronics manufacturing services ("EMS") provider to original equipment
manufacturers ("OEMs") primarily in the industrial and instrumentation,
medical, telecommunications, security, financial services automation and
aerospace and defense industries.  We provide integrated solutions to OEMs
across the entire product life cycle, from design to manufacturing to end-of-
life services, for the worldwide low-to-medium volume, high complexity
segment of the EMS industry.

     We have seven wholly owned subsidiaries:  SMTEK, Inc. (dba SMTEK
Moorpark), located in Moorpark, California; Technetics, Inc. (dba SMTEK San
Diego), located in Poway, California; Jolt Technology, Inc. (aka SMTEK Fort
Lauderdale), located in Fort Lauderdale, Florida; SMTEK Europe Limited,
located in Craigavon, Northern Ireland; SMTEK New England, located in
Marlborough, Massachusetts; SMTEK Santa Clara, located in Santa Clara,
California; and SMTEK International Thailand Limited, located in Ayutthya,
Thailand.





LETTER TO STOCKHOLDERS

Dear Shareholder:

     It has been a challenging year for SMTEK International, Inc.  We
completed an acquisition and have continued to weather a significant downturn
in the EMS (electronic manufacturing services) industry.  Concurrent with our
increase in capacity, a slowdown in our customers' current demand has
challenged both the top line and bottom line.  I believe the SMTEK team is
poised to overcome the adversity and turn SMTEK into a leader of our segment
in the EMS industry.  I am honored to lead such a talented team in addressing
and tackling the challenges that are ahead of us.

     The timing of SMTEK's revenue decline occurred just as we were
strategically committed to increasing our capacity, indicative with the
following moves:  1) our San Diego facility more than doubled production
capability by moving into a new 45,000 square foot facility and purchasing
new equipment; 2) SMTEK purchased certain assets of Century Manufacturing,
Inc. out of bankruptcy court and immediately opened three new facilities; and
3) our Thousand Oaks facility moved into a new 115,000 square foot facility
in Moorpark, California, almost tripling its manufacturing footprint.

     Currently, SMTEK has seven facilities on three continents with over
360,000 square feet to service our customers.  Although our expansion moves
have contributed to a portion of our losses for the fiscal year, we are
excited about the possibilities of such an attractive strategic footprint
only found in much larger EMS companies.  Additionally, our ability to meet
any type of ramp up in revenue will come at a nominal price as it relates to
infrastructure and capital expenditures.

     Our revenue for the year ended June 2002 was $74.2 million compared to
$91.1 million in the prior year.  Gross profit for the year was $5.5 million
compared to $11.1 million in the prior year.  SMTEK incurred a net loss of
$6.0 million compared to net income of $1.8 million in the prior year.
Backlog at the end of fiscal year 2002 was $45.4 million compared to backlog
of $59.0 million in fiscal year 2001.  SMTEK's balance sheet held up
relatively well in a financially challenging year.  Prudent management of the
working capital resulted in the generation of approximately $6 million of
cash driven mainly by approximately 25 percent reduction in inventory (even
after the Century acquisition of over $1 million in inventory) and a dramatic
improvement in the cash conversion cycle (accounts receivable days
outstanding plus inventory days less accounts payable days).  SMTEK's current
ratio remains positive at 1.3 to 1.

     My immediate goal is to fill up our facilities with business and utilize
the assets we have heavily invested in.  Although I am encouraged by the
short-term results in this objective, we have a long way to go to achieve
consistent, profitable and strategically congruent business in each of our
facilities.  Regardless, we will not shy away from making a tough decision to
consolidate a facility or close one if we do not believe we can achieve a
satisfactory rate of return in a reasonable timeframe.  In the past few
months, we have seen an uptick in bookings, which we believe is due to our
development of a target customer profile and aggressively pursuing that type
of customer.  SMTEK's customer profile tends to be relatively diversified
with services rendered in the medical, industrial and instrumentation,
telecommunications, security, financial services automation and
aerospace/defense industries.  SMTEK will continue to focus on low-to-medium
volume with a slant towards more complex board production.  A major change,
however, is that we will exploit our relationships with current customers and
take advantage of our multi-facility offering to achieve greater penetration
in our preferred customer base.

     SMTEK will focus a tremendous amount of attention towards the mantra of
"the power of one."  The word "power" has many definitions but I prefer to
use the following; the ability to perform effectively.  The word "one" can be
defined as being a single entity of the same kind of quality.  These
definitions provide the backdrop of what I truly believe will make SMTEK
successful.  Although we have many facilities and different capabilities in
each of them, we will operate as one equivalent entity in the eyes of our
customers.  Recently we have been committed to ensure that all of our
operating units effectively communicate and transfer data to each other to
take advantage of what each of them have to offer to the other.  To that end,
we have also established national agreements with certain suppliers to
improve pricing and delivery services based on larger volume orders.  Our
sales effort has also become more of a joint effort at selling SMTEK as one
offering as opposed to seven separate entities.  Additionally, we believe we
have a lot more to offer a customer when we can include the expertise and
talent of all of our employees instead of just one of our facility's
capabilities.  And I think our customers like it.  Essentially, we are
determined to cross pollinate any concept or process into all of our
facilities to take advantage of what is good in SMTEK.

     In closing, I would like to thank you, the shareholders, for your
support as the entire SMTEK team and I begin our journey into an exciting new
year filled with challenges and opportunities.

Yours very truly,


/s/ Edward J. Smith

Edward J. Smith
President and CEO
SMTEK International, Inc.


                     SELECTED CONSOLIDATED FINANCIAL DATA

     The selected consolidated financial data for the years ended June 30,
1998 through 2002 set forth below are derived from our consolidated financial
statements and notes thereto.  The consolidated balance sheets as of June 30,
2002 and 2001 and the related consolidated statements of operations,
stockholders' equity and comprehensive income (loss) and cash flows for each
of the years in the three-year period ended June 30, 2002, appear elsewhere
in this Report.  The Selected Consolidated Financial Data are qualified in
their entirety by reference to, and should be read in conjunction with, the
consolidated financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Report.

                    SMTEK INTERNATIONAL, INC. AND SUBSIDIARIES
                           FIVE-YEAR FINANCIAL SUMMARY
                     (In thousands except per share amounts)
<Table>
<Caption>
                                             Year ended June 30,
                                 -------------------------------------------
OPERATING DATA                    2002     2001     2000     1999     1998
                                 -------  -------  -------  -------  -------
<S>                              <C>      <C>      <C>       <C>     <C>
Revenues                         $74,222  $91,148  $70,252  $51,175  $44,690
Cost of goods sold                68,762   80,060   62,260   44,605   37,392
                                 -------  -------  -------  -------  -------
Gross profit                       5,460   11,088    7,992    6,570    7,298
                                 -------  -------  -------  -------  -------
Operating expenses:
  Administrative and selling      10,657    7,141    5,783    5,375    4,564
  Goodwill amortization               37      670    1,304    1,284    1,268
  Acquisition expenses                59      -        -        -        609
                                 -------  -------  -------  -------  -------
Total operating expenses          10,753    7,811    7,087    6,659    6,441
                                 -------  -------  -------  -------  -------
Operating income (loss)           (5,293)   3,277      905      (89)     857
                                 -------  -------  -------  -------  -------
Non-operating income (expense):
  Interest income                     12       26      166       96       47
  Interest expense                (1,212)  (1,463)  (1,057)  (1,700)  (1,113)
  Other income (expense), net        284      (84)    (148)      61      (76)
                                 -------  -------  -------  -------  -------
Total non-operating expense         (916)  (1,521)  (1,039)  (1,543)  (1,142)
                                 -------  -------  -------  -------  -------
Income (loss) from continuing
 operations before income taxes   (6,209)   1,756     (134)  (1,632)    (285)

Income tax provision (benefit)      (225)     (42)     100    1,202      -
                                 -------  -------  -------  -------  -------
Income (loss) from
 continuing operations            (5,984)   1,798     (234)  (2,834)    (285)

Income from discontinued
  operations, net of tax             -        -        254      339      778

Loss on sale of discontinued
  operations, net of tax             -        -       (661)     -        -
                                 -------  -------  -------  -------  -------
Net income (loss)                $(5,984) $ 1,798  $  (641) $(2,495) $   493
                                 =======  =======  =======  =======  =======
</Table>

                    SMTEK INTERNATIONAL, INC. AND SUBSIDIARIES
                           FIVE-YEAR FINANCIAL SUMMARY
                     (In thousands except per share amounts)
                                   (Continued)
<Table>
<Caption>
                                             Year ended June 30,
                                 -------------------------------------------
OPERATING DATA                    2002     2001     2000     1999     1998
 (Continued)                     -------  -------  -------  -------  -------
<S>                              <C>      <C>      <C>      <C>      <C>
Basic earnings (loss)
 per share:
   Income (loss) from
     continuing operations       $ (2.62) $  0.79  $ (0.10) $ (1.60) $ (0.20)
   Income from discontinued
     operations                      -         -      0.11     0.19     0.54
   Loss on sale of
     discontinued operations         -         -     (0.29)      -        -
                                 -------  -------  -------  -------  -------
     Basic earnings (loss)
       per share                 $ (2.62) $  0.79  $ (0.28) $ (1.41) $  0.34
                                 =======  =======  =======  =======  =======

Diluted earnings (loss)
 per share:
   Income (loss) from
     continuing operations       $ (2.62) $  0.76  $ (0.10) $ (1.60) $ (0.20)
   Income from discontinued
     operations                       -        -      0.11     0.19     0.54
   Loss on sale of
     discontinued operations          -        -     (0.29)     -        -
                                 -------  -------  -------  -------  -------
     Diluted earnings (loss)
       per share                 $ (2.62) $  0.76  $ (0.28) $ (1.41) $  0.34
                                 =======  =======  =======  =======  =======
</Table>

<Table>
<Caption>
                                             Year ended June 30,
                                 -------------------------------------------
BALANCE SHEET DATA                2002     2001     2000     1999     1998
                                 -------  -------  -------  -------  -------
<S>                              <C>      <C>      <C>      <C>      <C>
Current assets                   $25,253  $27,672  $30,429  $27,854  $21,505

Current liabilities              $19,338  $14,294  $24,056  $23,042  $17,060

Working capital                  $ 5,915  $13,378  $ 6,373  $ 4,812  $ 4,445

Current ratio                        1.3      1.9      1.3      1.2      1.3

Total assets                     $34,834  $35,932  $38,528  $39,499  $31,802

Long-term debt                   $10,071  $10,418  $ 4,997  $ 7,153  $ 7,186

Stockholders' equity             $ 5,425  $11,220  $ 9,475  $ 9,304  $ 7,556

Equity per share                 $  2.38  $  4.92  $  4.17  $  4.10  $  4.43

Shares outstanding (000s)          2,284    2,282    2,272    2,267    1,704
</Table>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


BASIS OF PRESENTATION

     We utilize a 52-53 week fiscal year ending on the Friday closest to June
30 which, for fiscal years 2002, 2001 and 2000, fell on June 28, June 29, and
June 30, respectively.  In the accompanying consolidated financial
statements, the fiscal year-end for all years is shown as June 30 for clarity
of presentation.  Fiscal years 2002, 2001 and 2000 each consisted of 52
weeks.

     As more fully described in the accompanying consolidated financial
statements and notes thereto, on October 24, 2001, we completed a transaction
to purchase certain assets, but not assume any liabilities, of Century
Electronics Manufacturing, Inc. ("Century"), an EMS company that filed for
bankruptcy.  As part of this transaction, we also purchased substantially all
of the common stock of Century's subsidiary in Thailand.  The aggregate
purchase price of this transaction was approximately $3.2 million.

     The following discussion and analysis should be read in conjunction with
the consolidated financial statements and related notes included elsewhere in
this Report.


CRITICAL ACCOUNTING POLICIES

     In response to SEC Release No. 33-8040, "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies," we have identified our most
critical accounting policies that require significant management judgment or
involve complex estimates upon which our financial status depends.  The
information that follows describes specific disclosures about our accounting
policies regarding risks, estimates, subjective decisions, or assessments
that materially different results of operations and financial condition could
have been reported had different assumptions been used or different
conditions existed.

     REVENUE AND COST RECOGNITION--We recognize revenues and cost of sales
upon shipment of products except at our Moorpark subsidiary which has
historically used the percentage of completion method to recognize revenues
and cost of sales on certain of its long-term contracts with suppliers of
electronic components and products.  Percentage of completion is determined
on the basis of costs incurred to total estimated costs.  Contract costs
include direct material and direct labor costs and those indirect costs
related to the assembly process, such as indirect labor, supplies, tools,
repairs and depreciation costs.  Selling and administrative costs are charged
to expense as incurred.  In the period in which it is determined that a loss
will result from the performance of a contract, the entire amount of the
estimated loss is charged to cost of goods sold.  Other changes in contract
price and estimates of costs and profits at completion are recognized
prospectively.  A change in our estimate of costs to complete could result in
lower earnings than currently recorded.  A portion of the asset "costs and
estimated earnings in excess of billings on uncompleted contracts" contains
revenues recognized in excess of amounts billed.

     During fiscal 2002, our Moorpark facility entered into sales contracts
consistent with our other locations, and as such, recognizes revenue on these
new arrangements upon shipment of products rather than on a percentage of
completion method.  As a result, during fiscal 2002, the Moorpark facility
was recognizing revenue upon shipment of products as well as under the
percentage of completion method.  At June 30, 2002 there were no existing
sales contracts with customers under the percentage of completion method of
accounting.

     ACCOUNTS RECEIVABLE--We perform ongoing credit evaluations of our
customers and adjust credit limits based upon each customer's payment history
and current credit worthiness, as determined by credit information available
at that time.  We continuously monitor collections and payments from our
customers and we maintain allowances for doubtful accounts for estimated
losses resulting from the inability of our customers to make required
payments.  If the condition of our customers were to deteriorate, resulting
in an impairment of their ability to make payments, additional allowances may
be required.

     INVENTORIES--Inventories are stated at the lower of cost or net
realizable value, with cost determined principally by use of the first-in,
first-out method.  We write down inventory for slow-moving and obsolete
inventory based on assessments of future demands, market conditions and
customers who may be experiencing financial difficulties.  If these factors
are less favorable than those projected, additional inventory write downs may
be required.

     LONG-LIVED ASSETS--Property, equipment and improvements are stated at
cost.  Depreciation and amortization are computed on the straight-line
method.  The principal estimated useful lives are:  buildings - 20 years;
improvements - 5 to 10 years; and plant, office and other equipment - 3 to 7
years.  Property, equipment and improvements acquired by our Northern Ireland
operating unit are recorded net of capital grants received from the
Industrial Development Board ("IDB") for Northern Ireland.  Goodwill
represents the excess of acquisition cost over the fair value of net assets
of a purchased business, and is being amortized over 5 to 15 years through
June 30, 2002.  Amortization of goodwill will cease on July 1, 2002 when we
adopt Statement of Financial Accounting Standards ("SFAS") No. 142 (see
section entitled "Recent Accounting Pronouncements").  The recoverability of
long-lived assets is evaluated whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable, and if
future undiscounted cash flows expected to result from the use of such assets
are believed insufficient to recover the carrying value of the asset, the
carrying value is written down to fair value in the period the impairment is
identified.  Factors we consider important which could trigger an impairment
review include, but are not limited to, the following:

     - the asset's ability to continue to generate income;

     - loss of legal ownership or title to the asset;

     - significant changes in our strategic business objectives and
       utilization of the asset;

     - the impact of significant negative industry or economic trends; or

     - significant decrease in the market value of the asset



RESULTS OF OPERATIONS

     The following table sets forth our comparative revenues and other
operating data as percentages of revenues:

                                                    Year Ended June 30,
                                                ----------------------------
                                                 2002       2001       2000
                                                ------     ------     ------
Revenues                                        100.0%     100.0%     100.0%
Cost of goods sold                               92.6       87.8       88.6
                                                -----      -----      -----
Gross profit                                      7.4       12.2       11.4

Administrative and selling expenses              14.5        7.8        8.2
Goodwill amortization                              -         0.8        1.9
                                                -----      -----      -----
Operating income (loss)                          (7.1)       3.6        1.3

Net interest expense                             (1.6)      (1.6)      (1.3)
Other income (expense), net                       0.3       (0.1)      (0.2)
                                                -----      -----      -----
Income (loss) from continuing operations
  before income taxes                            (8.4)       1.9       (0.2)
Income tax provision (benefit)                   (0.3)      (0.1)       0.1
                                                -----      -----      -----
Income (loss) from continuing operations         (8.1)       2.0       (0.3)
Loss from discontinued operations                  -          -        (0.6)
                                                -----      -----      -----
Net income (loss)                                (8.1)%      2.0%      (0.9)%
                                                =====      =====      =====


FISCAL 2002 VS. 2001

     Consolidated revenues for fiscal 2002 were $74.2 million compared to
$91.1 million for fiscal 2001, a decrease of 19%.  The decrease in revenue
was primarily due to reduced demand for our services, reflecting the current
downward economic and EMS market trends in the United States.  During fiscal
2002, our Moorpark facility entered into sales contracts consistent with our
other locations, and as such, recognizes revenue on these new arrangements
upon shipment of products rather than on the percentage of completion method.
Starting in the third quarter of fiscal 2001, existing customers began to
defer shipments, and some cancelled orders.

     Consolidated gross profit for fiscal 2002 was $5.5 million (7.4% of
sales) compared to $11.1 million (12.2% of sales) for fiscal 2001.  Gross
profit for fiscal 2002 was positively impacted by the benefit received from
inventory used that was purchased at a discount from the bankruptcy of
Century.  Excluding the positive impact from these reduced inventory costs,
we estimate that the consolidated gross profit for fiscal 2002 would have
been approximately $4.3 million (5.7% of sales).  We do not anticipate any
additional benefit to gross margin in the future from this inventory.  The
decrease in gross profit and gross profit margin, excluding the purchase
benefit, was due to several factors.  Revenues have been declining at a
faster rate than the decline in cost of sales, as fixed costs have been
spread over a smaller volume of production and we have recorded a $550,000
inventory write down for excess/slow moving materials during fiscal 2002.

     Administrative and selling expenses for fiscal 2002 were $10.7 million
compared to $7.1 million for fiscal 2001.  The increase was due to selling
and administrative expenses incurred in our new facilities, the expansion of
our managerial and administrative staff during fiscal 2001 caused by our
growth during fiscal 2001, the recognition of a $342,000 bad debt provision,
the recognition of $575,000 of severance expenses, the recognition of a
$785,000 loss related to the lease at our former Thousand Oaks facility and
relocation expenses relating to the transition to our new San Diego and
Moorpark facilities.

     Goodwill amortization for fiscal 2002 was $37,000 compared to $670,000
for fiscal 2001.  The reduction occurred because we had fully amortized, as
of December 31, 2000, the goodwill of $6.3 million, which arose from our
acquisition of SMTEK, Inc. in January 1996.

     Total non-operating expense for fiscal 2002 was $916,000 compared to
$1.5 million for fiscal 2001.  The primary reason for this decrease was due
to a net gain on sale of assets of $196,000 during fiscal 2002 and the
decrease in interest expense as a result of lower average interest rates and
lower levels of debt outstanding during fiscal 2002 as compared to fiscal
2001.

     We had an income tax benefit of $225,000 for fiscal 2002 compared to an
income tax benefit of $42,000 for fiscal 2001.  Fiscal 2002 reflects a
$164,000 income tax benefit resulting from passage of the 2002 Stimulus
Package providing for the recovery of our alternative minimum taxes paid in
fiscal years 2000 and 2001 and a refund of $78,000 from the state of
California for fiscal 2001.  Without these items, we would have reported an
income tax expense of $17,000 for fiscal 2002.  Fiscal 2001 reflects a
$218,000 income tax benefit resulting from a reduction of a recorded
liability for a federal tax assessment related to prior years as discussed in
Note 6 to the accompanying consolidated financial statements.  Without this
item, we would have reported an income tax provision of $176,000 in fiscal
2001.  Our tax rate is lower than the statutory income tax rates due to the
utilization of federal and state net operating loss carryforwards.  During
fiscal year 2001, we had utilized a majority of our California state net
operating loss carryforwards, however, this ceased during fiscal year 2002 as
we have incurred operating losses.  Based on the level of historical losses,
management believes that it does not have the basis to conclude that it is
more likely than not that the deferred tax assets will be realized, and
therefore, has recorded a 100% valuation allowance to offset the net deferred
assets.

     The net loss for fiscal 2002 was $6.0 million, or $2.62 loss per diluted
share compared to net income of $1.8 million for fiscal 2001, or $0.76 per
diluted share.  This decrease was primarily due to lower revenues and higher
administrative and selling expenses, slightly offset by lower cost of sales,
goodwill amortization and non-operating expense.


FISCAL 2001 VS. 2000

     Consolidated revenues for fiscal 2001 were $91.1 million compared to
$70.3 million for fiscal 2000, an increase of approximately 30%.  The
increase in revenues was primarily due to an increase in business with our
key customers.

     Consolidated gross profit for fiscal 2001 was $11.1 million (12.2% of
sales) compared to $8.0 million (11.4% of sales) for fiscal 2000.  The gross
profit and gross margin improvement was attributable primarily to the revenue
growth in fiscal 2001 compared to fiscal 2000, which caused fixed costs
absorption to be spread over a larger volume of production.  In addition,
certain production changes were made, and the decline in materials pricing,
have reduced costs.  These changes had a positive impact on our gross profit
and gross margin.

     Administrative and selling expenses increased 23% to $7.1 million for
fiscal 2001 compared to $5.8 million for fiscal 2000.  The increase was due
primarily to expansion of our managerial and administrative staff and an
increase in the allowance for doubtful accounts.  However as a percentage of
sales, administrative and selling expenses decreased to 7.8% in fiscal 2001
from 8.2% in fiscal 2000, due mainly to our growth in revenues.

     Goodwill amortization decreased to $670,000 for fiscal 2001 from $1.3
million for fiscal 2000.  The reduction occurred because we had fully
amortized, as of December 31, 2000, the goodwill of $6.3 million, which arose
from our acquisition of our Thousand Oaks subsidiary in January 1996.

     Total non-operating expense was $1.5 million for fiscal 2001 compared to
$1.0 million for fiscal 2000.  The primary reason for this increase was due
to an increase in total interest expense.  Total interest expense was $1.5
million for fiscal 2001 compared to $1.1 million for fiscal 2000.  There are
two reasons for the increased interest expense.  First, we had higher line of
credit borrowings due mainly to our growth, and an increased need for working
capital, principally in higher inventory levels.  Second, the average
interest rates on our new equipment notes and leases entered into during the
beginning of fiscal year 2001, ranged from 7.9% to 9.4%, were higher on
average than fiscal 2000, with interest rates ranging from 6.5% to 8.4%.

     We had an income tax benefit of $42,000 in fiscal 2001 compared to
income tax expense of $100,000 for fiscal 2000.  As discussed above, the
fiscal 2001 income tax benefit of $218,000 resulting from the reduction of
the recorded liability for a federal tax assessment related to prior years.
Without this, we would have reported an income tax provision of $176,000
compared to an income tax provision of $100,000 in fiscal 2000.  The income
tax expense for fiscal 2000 consists of Florida state income tax, as well as
U.S. federal and California alternative minimum income taxes.  The income tax
provision amounts, after taking into account the nondeductibility of the
goodwill amortization, are less than the statutory income tax rates due to
the utilization of federal net operating loss carryforwards.

     Income from continuing operations was $1.8 million for fiscal 2001, or
$0.76 per diluted share, compared to a loss from continuing operations in
fiscal 2000 of $234,000, or $0.10 per diluted share.  The improvement was due
to increased gross profit which, was partially offset by increases in
administrative and selling expenses and interest expense.


RECENT ACCOUNTING PRONOUNCEMENTS

     In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations."  SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001, as well as for all purchase method business combinations
completed after June 30, 2001.  In addition, SFAS No. 141 specifies the
criteria for intangible assets acquired in a purchase method business
combination to be recognized and reported apart from goodwill.  We have
adopted SFAS No. 141.

     In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets."  SFAS No. 142 will require that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead
tested for impairment, at least annually, in accordance with the provisions
of SFAS No. 142.  SFAS No. 142 will also require that intangible assets with
definite useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for impairment in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" and SFAS No. 144 (see
below) upon adoption.  We will adopt SFAS No. 142 as of July 1, 2002.  We are
assessing the impact of SFAS No. 142.

     In October 2001 the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."  SFAS No. 144 replaces SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of."  The primary objectives of SFAS No. 144 were to
develop one accounting model, based on the framework established in SFAS No.
121, for long-lived assets to be disposed of by sale and to address other
significant implementation issues.  While SFAS No. 144 supersedes SFAS No.
121, it retains many of the fundamental provisions of SFAS No. 121.  SFAS No.
144 is effective for financial statements issued for fiscal years beginning
after December 15, 2001.  We will adopt SFAS No. 144 as of July 1, 2002.  We
are assessing the impact of SFAS No. 144.

     In July 2002 the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities."  SFAS No. 146 nullifies
Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)."  SFAS No. 146 requires that a
liability be recognized for those costs only when the liability is incurred,
that is, when it meets the definition of a liability in the FASB's conceptual
framework.  SFAS No. 146 also establishes fair value as the objective for
initial measurement of liabilities related to exit or disposal activities.
SFAS No. 146 is effective for exit or disposal activities that are initiated
after December 31, 2002, with earlier adoption encouraged.  We do not expect
the adoption of SFAS No. 146 will have a material impact on our financial
position or results of operations.


LIQUIDITY AND CAPITAL RESOURCES

     Our primary sources of liquidity are our cash and cash equivalents,
which amounted to $816,000 at the end of fiscal 2002, and amounts available
under our bank lines of credit, which provided approximately $4.1 million of
availability in excess of current borrowings at June 30, 2002.  During fiscal
2002, cash and cash equivalents increased by $592,000.  This increase
resulted from cash provided by operations of $2.8 million and net proceeds
from financing of $1.5 million, offset by $3.9 million for capital
expenditures, inclusive of the purchased Century assets.

     Net cash provided by operating activities of $2.8 million for fiscal
2002 was attributable to a decrease of $8.0 million in costs and estimated
earnings in excess of billings on uncompleted contracts and an increase in
accounts payable of $1.9 million, offset by an increase in inventories of
$3.9 million and a net loss of $6.0 million.

     Net cash used in investing activities was $3.7 million for fiscal 2002
compared to net cash used in investing activities of $487,000 for fiscal
2001.  We utilized cash of $3.9 million and $506,000 for capital expenditures
for fiscal 2002 and 2001, respectively.  Amounts financed by notes payable
and capital leases were approximately $2.5 million and $2.6 million for
fiscal 2002 and 2001, respectively, inclusive of $1.3 million for the
purchase of Century assets in fiscal 2002.  In addition, in fiscal 2002, we
utilized cash of $129,000 to purchase the common stock of Century's
subsidiary in Thailand.  Our subsidiaries require continuing investment in
plant and equipment to remain competitive as technology evolves and to
increase production capacity to accommodate business growth and expansion.

     Net cash provided by financing activities was $1.5 million for fiscal
2002 compared to cash used in financing activities of $3.0 million for fiscal
2001.  As discussed further in Note 5 to the notes to the consolidated
financial statements, we have bank lines of credit to finance the working
capital requirements of our domestic and foreign operations.  At June 30,
2002, we had approximately $4.1 million available to borrow under our
revolving bank lines of credit.

     At June 30, 2002, we have a credit facility for our domestic operating
units, which consisted of an $11 million working capital line secured by
accounts receivable, inventory and equipment.  Borrowings under the credit
agreement bear interest at either the bank's prime rate (4.75% at June 30,
2002) plus 0.50% or a Eurodollar-base rate (1.86% at June 30, 2002) plus
3.25%.  At June 30, 2002, borrowings outstanding under this credit facility
amounted to $4.0 million and the effective weighted average interest rate was
5.16%.  The line of credit agreement contains certain financial covenants,
with which we were in compliance at June 30, 2002 (see also discussion
below).  Our available borrowing capacity as of June 30, 2002 was
approximately $4.1 million.  This credit facility matures September 25, 2003.

     At December 31, 2001, we violated certain covenants in our domestic line
of credit agreement with our bank.  In February 2002, the bank waived these
covenant violations.  At March 31, 2002, we violated certain covenants in our
domestic line of credit agreement.  In May 2002, the bank either removed or
amended the related restricted covenants in an amendment to the credit
agreement.  At June 30, 2002, we were in compliance with the amended
covenants to the credit agreement.  In anticipation of future projected
covenant violations, during September 2002, we amended the May 2002 covenants
with the bank.  Under the terms of this new amendment, our interest rates
have been amended to the bank's prime rate plus 0.75%, or a Eurodollar-base
rate plus 3.50%.  In addition, had the provisions of the September amendment
been in effect at June 30, 2002, our availability would have been $3.5
million at June 30, 2002.  In the event of default under our line of credit
agreement, any and all outstanding borrowings would be immediately due and
payable.

     In addition, during fiscal 2002 we have borrowed $1.6 million on our
equipment line of credit to finance our capital expenditures.  At June 30,
2002, the balance outstanding was $1.1 million.  This advance has a maturity
date of October 24, 2006.  Interest is at either the bank's prime rate plus
0.50% or at a Eurodollar-base rate plus 3.25%.  The effective weighted
average interest rate was 5.12% at June 30, 2002.  Additional advances under
our equipment line of credit will not be available to us until a review by
the bank at a future date.

     We anticipate that additional expenditures of as much as $1.0 million
may be incurred during fiscal 2003, primarily to improve production
efficiency at all our subsidiaries.  A substantial portion of these capital
expenditures are expected to be financed by our line of credit or other
notes/leases payable.

     We also have a credit facility agreement with Ulster Bank Markets for
our Northern Ireland operating company.  This agreement consists of an
accounts receivable revolver, with maximum borrowings equal to the lesser of
75% of eligible receivables or 2,500,000 British pounds sterling
(approximately $3,825,000 at June 30, 2002), and bears interest at the bank's
base rate (4.00% at June 30, 2002) plus 2.00%.  At June 30, 2002, borrowings
outstanding under this credit facility amounted to approximately $3.2 million
and there was nominal available borrowing capacity.  The credit facility
agreement with Ulster Bank Markets expires November 30, 2002.

     At June 30, 2002, the aggregate amounts of minimum maturities of long-
term debt, capital lease obligations and operating lease obligations are as
follows (in thousands):

                       Long-Term Debt            Operating
                     and Capital Leases            Leases
                     ------------------          ---------
     Fiscal 2003           $2,527                 $ 2,569
     Fiscal 2004            1,684                   2,609
     Fiscal 2005            1,399                   2,443
     Fiscal 2006              639                   2,022
     Fiscal 2007              204                   2,034
     Thereafter             2,140                   8,476
                           ------                 -------
                           $8,593                 $20,153
                           ======                 =======

     In July 2002, we entered into a $900 per month vehicle lease which
terminates in June 2006.  Also in July 2002, our Thailand operation renewed
their facility lease for a two year term, which terminates in August 2004.
Monthly payments are approximately $8,000 a month.

     At June 30, 2002, the ratio of current assets to current liabilities was
1.3 to 1.0 compared to 1.9 to 1.0 at June 30, 2001.  The decrease in the
working capital ratio was due to decreases in our cost and estimated earnings
in excess of billings balance offset by increases in our inventory, accounts
payable and working capital line of credit balances.  At June 30, 2002, we
had $5.9 million of working capital.  At June 30, 2002, we had long-term
borrowings of $10.1 million compared to $10.4 million at June 30, 2001.

     SMTEK San Diego moved into a new leased facility in Poway, California,
near the city of San Diego, on July 16, 2001.  The new facility is
approximately 45,000 square feet.  The former facility was located in El
Cajon, another city near San Diego.  The former facility was approximately
20,000 square feet.  On October 8, 2001, the landlord for the El Cajon
facility released SMTEK San Diego from its lease for that facility.

     As a result of the acquisition of Century assets, we entered into an
eight year lease of a 69,400 square foot facility in Marlborough,
Massachusetts and we also entered into a seven month lease, subject to an
option for a long-term extension, of a 44,700 square foot facility in Santa
Clara, California.  The current month base rents are approximately $33,000
and $32,000 for Marlborough and Santa Clara, respectively.

     SMTEK Moorpark has moved to a remodeled facility in Moorpark,
California, from its former location in Thousand Oaks.  The Thousand Oaks
building is being marketed for a subtenant.  This lease does not expire until
May 31, 2004.  We currently expect to sublease the Thousand Oaks building.
If we are unable to find a subtenant, we will be responsible for cost and
expenses associated with holding a vacant building in addition to amounts
under the lease agreements.  During fiscal 2002, we recognized approximately
$785,000 in administrative and selling expenses related to the write off of
leasehold improvements and holding expenses related to the maintenance of the
now vacant building.  Monthly rent for the Thousand Oaks building is
approximately $35,000.

     As more fully described in Note 6 to the notes to our consolidated
financial statements, we have a federal tax assessment liability of
approximately $1.1 million and a related accrued interest liability of
approximately $1.1 million, which reflect the results of a settlement with
the IRS Appeals Division in December 2001.  We are currently seeking an
installment payment plan with the IRS.

     On October 24, 2001, we completed a transaction to purchase certain
assets, but did not assume liabilities, of Century, an EMS company that filed
for bankruptcy.  As part of this transaction, we also purchased substantially
all of the common stock of Century's subsidiary in Thailand.  The aggregate
purchase price was approximately $3.2 million in cash and was funded by our
bank lines of credit.  Approximately $1.5 million was funded by our domestic
working capital line of credit and approximately $1.6 million was funded by
our equipment line of credit.

     Specifically, we purchased from Century certain equipment and machinery
for approximately $1.4 million and inventory for approximately $900,000.  We
have and will continue to use some of the purchased assets at our other
locations.  We negotiated new facility leases in Marlborough, Massachusetts
and Santa Clara, California and began operations in Marlborough and Santa
Clara in connection with the purchase of these assets.  Also, as part of the
Century agreement we purchased the common stock of the Century subsidiary in
Thailand for approximately $900,000.

     There can be no assurance that the equipment, machinery and inventory
purchased will be productive or useful to us.  If we have to sell such
equipment, machinery or inventory, we can give no assurance that there will
be sufficient value received by us.  There also can be no assurance that the
common stock of the Thailand operation will have significant value if the
foreign operation is not profitable in the future.

     We may not be able to successfully integrate the new facilities and
operations into our overall business.  We may not secure sufficient business
in the facilities being opened in New England, Santa Clara and Thailand.
Also, our debt-to-equity ratio may be adversely affected if the new
facilities continue to not be profitable or cash flow positive.  If any
adverse event related to these additional risk factors arising out of the
Century transaction, or the concurrent development of our facilities, occurs,
either alone, in conjunction with each other or in conjunction with one or
more of the risk factors identified in our other filings with the SEC, there
could be an adverse result in our operations or financial condition.

     We may continue to experience an adverse effect on our operating results
and in our financial condition if current economic conditions continue for an
extended period of time, despite our cost reduction measures and efficiency
improvements made at our operating subsidiaries.  For further discussion, see
section entitled "Risk Factors That May Affect Your Decision to Invest In Us"
in our 2002 Form 10-K.

     Management believes that our cash resources, cash from operations and
available borrowing capacity on our working capital lines of credit are
sufficient to fund operations for at least the next 12 months.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our financial instruments include cash and cash equivalents, accounts
receivable, and short-term and long-term debt.  At June 30, 2002, the
carrying amount of long-term debt (including the current portion thereof but
excluding the bank lines of credit) was $8.6 million and the fair value was
$8.1 million.  The carrying values of our other financial instruments
approximated their fair values.  The fair value of our financial instruments
is estimated based on quoted market prices for the same or similar issues.
See Note 5 to the accompanying consolidated financial statements for
maturities of long-term debt for the next five years.  A change in interest
rates of one percent would result in an annual impact on interest expense of
approximately $100,000.

     It is our policy not to enter into derivative financial instruments for
speculative purposes.  We may, from time to time, enter into foreign currency
forward exchange contracts in an effort to protect us from adverse currency
rate fluctuations on foreign currency commitments entered into in the
ordinary course of business.  These commitments are generally for terms of
less than one year.  The foreign currency forward exchange contracts are
executed with banks believed to be creditworthy and are denominated in
currencies of major industrial countries.  In accordance with SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," all
derivative financial instruments are measured at fair value and are
recognized as either assets or liabilities in the balance sheet.  The
accounting treatment of changes in fair value is dependent upon whether or
not a derivative financial instrument is designated as a hedge and, if so,
the type of hedge.  Changes in fair value are recognized in current results
of operations for fair value hedges and in other comprehensive income for
cash flow hedges.  Derivative financial instruments not qualifying for hedge
accounting treatment under SFAS No. 133 are recognized as assets or
liabilities with gains or losses recognized in current results of operations.
At June 30, 2002 we had forward foreign currency contracts to sell $1.3
million for approximately 870,000 British pounds sterling between July 12,
2002 through December 24, 2002.  The U.S. dollar to British pounds sterling
exchange rate at June 30, 2002 was 1.53.  These forward foreign currency
contracts are designated as cash flow hedge instruments.  In accordance with
SFAS No. 133, we recognized a gain of $72,000 in other comprehensive income
at June 30, 2002, related to these contracts.

     Our operations consists of investments in foreign operating units.  Our
foreign subsidiaries represent approximately 15% of our revenues and 26% of
our total assets.  As a result, our financial results have been and may
continue to be affected by changes in foreign currency exchange rates.



                           INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders
SMTEK International, Inc.:

We have audited the accompanying consolidated balance sheets of SMTEK
International, Inc. and subsidiaries ("the Company") as of June 30, 2002 and
2001, and the related consolidated statements of operations, cash flows and
stockholders' equity and comprehensive income (loss) for each of the years in
the three-year period ended June 30, 2002.  These consolidated financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

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




/s/ KPMG LLP


Los Angeles, California
August 16, 2002,
except for the third
paragraph of note 5
to the consolidated
financial statements,
which is as of
September 25, 2002



                    SMTEK INTERNATIONAL, INC. AND SUBSIDIARIES
                              Consolidated Balance Sheets
                          (In thousands except share amounts)

<Table>
<Caption>
                                                                       June 30,
                                                               ----------------------
                                                                  2002         2001
                                                               ---------    ---------
<S>                                                            <C>          <C>
             Assets
Current assets:
   Cash and cash equivalents                                   $    816     $    224
   Accounts receivable, less allowance
     for doubtful accounts of $380 and $407
     in 2002 and 2001, respectively                              12,351       11,905
   Costs and estimated earnings in excess
     of billings on uncompleted contracts                           -          7,965
   Inventories, net                                              11,223        6,833
   Prepaid expenses                                                 863          745
                                                               --------     --------
          Total current assets                                   25,253       27,672
                                                               --------     --------
Property, equipment and improvements, net of
   accumulated depreciation and amortization                      8,809        7,319
Other assets                                                        772          941
                                                               --------     --------
                                                               $ 34,834     $ 35,932
                                                               ========     ========
    Liabilities and Stockholders' Equity
Current liabilities:
   Current portion of bank lines of credit payable             $  3,223     $  1,468
   Current portion of long-term debt                              2,527        2,109
   Accounts payable                                               8,652        6,161
   Income taxes payable                                             859        1,128
   Other accrued liabilities                                      4,077        3,428
                                                               --------     --------
          Total current liabilities                              19,338       14,294
                                                               --------     --------
Long-term liabilities:
   Long-term bank lines of credit payable                         4,005        4,638
   Long-term debt                                                 6,066        5,780
                                                               --------     --------
          Total long-term liabilities                            10,071       10,418
                                                               --------     --------
Commitments and contingencies

Stockholders' equity:
   Preferred stock, $1 par value;  1,000,000 shares
    authorized; no shares issued or outstanding                     -            -
   Common Stock, $.01 par value; 3,750,000 shares
    authorized; 2,284,343 and 2,282,339 shares issued
    and outstanding in 2002 and 2001, respectively                   23           23
   Additional paid-in capital                                    37,028       37,018
   Accumulated deficit                                          (31,616)     (25,632)
   Accumulated other comprehensive loss                             (10)        (189)
                                                               --------     --------
          Total stockholders' equity                              5,425       11,220
                                                               --------     --------
                                                               $ 34,834     $ 35,932
                                                               ========     ========
</Table>
            See accompanying notes to consolidated financial statements.

                       SMTEK INTERNATIONAL, INC. AND SUBSIDIARIES
                         Consolidated Statements of Operations
                        (In thousands except per share amounts)
<Table>
<Caption>
                                                     Year ended June 30,
                                                ------------------------------
                                                  2002       2001       2000
                                                --------   --------   --------
<S>                                             <C>        <C>        <C>
Revenues                                        $74,222    $91,148    $70,252
Cost of goods sold                               68,762     80,060     62,260
                                                -------    -------    -------
Gross profit                                      5,460     11,088      7,992
                                                -------    -------    -------
Operating expenses:
   Administrative and selling                    10,716      7,141      5,783
   Goodwill amortization                             37        670      1,304
                                                -------    -------    -------
Total operating expenses                         10,753      7,811      7,087
                                                -------    -------    -------
Operating income (loss)                          (5,293)     3,277        905
                                                -------    -------    -------
Non-operating income (expense):
   Interest income                                   12         26        166
   Interest expense                              (1,212)    (1,463)    (1,057)
   Other income (expense), net                      284        (84)      (148)
                                                -------    -------     -------
Total non-operating expense                        (916)    (1,521)    (1,039)
                                                -------    -------     -------
Income (loss) from continuing
  operations before income taxes                 (6,209)     1,756       (134)
Income tax provision (benefit)                     (225)       (42)       100
                                                -------    -------    -------
Income (loss) from continuing operations         (5,984)     1,798       (234)
Income from discontinued operations,
  net of tax                                        -          -          254
Loss on sale of discontinued operations,
  net of tax                                        -          -         (661)
                                                -------    -------    -------
Net income (loss)                               $(5,984)   $ 1,798    $  (641)
                                                =======    =======    =======

Basic earnings (loss) per share:
  Income (loss) from continuing operations      $ (2.62)   $  0.79    $ (0.10)
  Income from discontinued operations               -          -         0.11
  Loss on sale of discontinued operations           -          -        (0.29)
                                                -------    -------    -------
    Net income (loss)                           $ (2.62)   $  0.79    $ (0.28)
                                                =======    =======    =======

Diluted earnings (loss) per share:
  Income (loss) from continuing operations      $ (2.62)   $  0.76    $ (0.10)
  Income from discontinued operations               -          -         0.11
  Loss on sale of discontinued operations           -          -        (0.29)
                                                -------    -------    -------
    Net income (loss)                           $ (2.62)   $  0.76    $ (0.28)
                                                =======    =======    =======

Shares used in computing basic and
  diluted earnings (loss) per share:
    Basic                                         2,284      2,277      2,270
                                                =======    =======    =======
    Diluted                                       2,284      2,379      2,270
                                                =======    =======    =======
</Table>
            See accompanying notes to consolidated financial statements.

                         SMTEK INTERNATIONAL, INC. AND SUBSIDIARIES
                         Consolidated Statements of Cash Flows
                                    (In thousands)
<Table>
<Caption>
                                                            Year ended June 30,
                                                       ------------------------------
                                                         2002       2001       2000
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
Cash flows from operating activities:
  Net income (loss)                                    $(5,984)   $ 1,798    $  (641)
  Adjustments to reconcile net income (loss) to
   net cash provided by operating activities:
     Depreciation and amortization                       2,543      2,987      3,340
     Loss on sale of discontinued operations               -          -          661
     Gain on sale of assets                               (196)       -          -
     (Increase) decrease in accounts receivable            165      1,166     (5,104)
     (Increase) decrease in costs and estimated
       earnings in excess of billings on
       uncompleted contracts                             7,965      2,291     (4,019)
     Increase in inventories                            (3,862)      (918)    (1,056)
     Increase (decrease) in accounts payable             1,947     (2,875)      (927)
     Increase (decrease) in other accrued liabilities      246       (535)         6
     Other, net                                            (21)      (703)        55
                                                       -------    -------    -------
Net cash provided by (used in) operating activities      2,803      3,211     (7,685)
                                                       -------    -------    -------

Cash flows from investing activities:
  Capital expenditures                                  (3,880)      (506)    (2,241)
  Net proceeds from sale of discontinued operations        -          -        2,689
  Purchase of Century Thailand, net of cash received      (129)       -          -
  Proceeds from sale of assets                             325         19        155
                                                       -------    -------    -------
Net cash provided by (used in) investing activities     (3,684)      (487)       603
                                                       -------    -------    -------

Cash flows from financing activities:
  Proceeds from (repayments of) bank lines of credit       892     (1,309)     3,806
  Proceeds of long-term debt                             2,465        -          -
  Repayments from long-term debt                        (1,907)    (1,741)    (1,498)
  Proceeds from the exercise of stock options                7         22        -
  Proceeds from foreign government grants                  -          -          247
                                                       -------    -------    -------
Net cash provided by (used in) financing activities      1,457     (3,028)     2,555
                                                       -------    -------    -------

Effect of exchange rate changes on cash                     16         (4)        62
                                                       -------    -------    -------

Increase (decrease) in cash and cash equivalents           592       (308)    (4,465)
Cash and cash equivalents at beginning of year             224        532      4,997
                                                       -------    -------    -------
Cash and cash equivalents at end of year               $   816    $   224    $   532
                                                       =======    =======    =======

Supplemental cash flow information:
  Interest paid                                        $   889    $ 1,179    $ 1,076
  Income taxes paid                                    $    45    $   194    $   823
Non-cash investing activities:
  Capital expenditures financed by lease
    obligations and notes payable                      $   -      $ 2,591    $ 1,110
  Other                                                $     1    $    25    $    89
</Table>
            See accompanying notes to consolidated financial statements.



<Table>
<Caption>
                      SMTEK INTERNATIONAL, INC. AND SUBSIDIARIES
      Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)
                       Years ended June 30, 2002, 2001 and 2000
                         (In thousands except share amounts)


                                  Common Stock                             Accumulated
                                ---------------  Additional                   other          Total
                                           Par    paid-in    Accumulated  comprehensive  stockholders'
                                Shares    value   capital      deficit    income (loss)     equity
                               ---------  -----  ----------  -----------  -------------  -------------
<S>                           <C>         <C>    <C>         <C>          <C>            <C>
Balance at June 30, 1999       2,267,455   $23    $36,948     $(26,789)       $(878)        $ 9,304

Comprehensive income:
 Net loss                            -       -        -           (641)         -              (641)
 Foreign currency
  translation adjustments            -       -        -            -             32              32
 Reclassification of foreign
  currency translation
  adjustments included in
  loss on sale of discontinued
  operations                         -       -        -            -            756             756
                               ---------   ---    -------     --------        -----         -------
    Total comprehensive income       -       -        -           (641)         788             147
Other                              4,557     -         24          -            -                24
                               ---------   ---    -------     --------        -----         -------
Balance at June 30, 2000       2,272,012    23     36,972      (27,430)         (90)          9,475

Comprehensive income:
 Net income                          -       -        -          1,798          -             1,798
 Foreign currency
  translation adjustments            -       -         -            -           (99)            (99)
                               ---------   ---    -------     --------        -----         -------
    Total comprehensive income       -       -        -          1,798          (99)          1,699
Other                             10,327     -         46          -            -                46
                               ---------   ---    -------     --------        -----         -------
Balance at June 30, 2001       2,282,339    23     37,018      (25,632)        (189)         11,220

Comprehensive loss:
 Net loss                            -       -        -         (5,984)         -            (5,984)
 Foreign currency
  translation adjustments            -       -        -            -            107             107
 Unrealized gain on
  forward contracts                  -       -        -            -             72              72
                               ---------   ---    -------     --------        -----         -------
    Total comprehensive loss         -       -        -         (5,984)         179          (5,805)
Other                              2,004     -         10          -             -               10
                               ---------   ---    -------     --------        -----         -------
Balance at June 30, 2002       2,284,343   $23    $37,028     $(31,616)       $ (10)        $ 5,425
                               =========   ===    =======     ========        =====         =======

</Table>












             See accompanying notes to consolidated financial statements.



                  SMTEK INTERNATIONAL, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

     SMTEK International, Inc. (the "Company," "we," "us" or "our") is an
electronics manufacturing services ("EMS") provider to original equipment
manufacturers ("OEMs") primarily in the industrial and instrumentation,
medical, telecommunications, security, financial services automation and
aerospace and defense industries.  We provide integrated solutions to OEMs
across the entire product life cycle, from design to manufacturing to end-of-
life services, for the worldwide low-to-medium volume, high complexity
segment of the EMS industry.

     We have seven wholly owned subsidiaries:  SMTEK, Inc. (dba SMTEK
Moorpark), located in Moorpark, California; Technetics, Inc. (dba SMTEK San
Diego), located in Poway, California; Jolt Technology, Inc. (aka SMTEK Fort
Lauderdale), located in Fort Lauderdale, Florida; SMTEK Europe Limited,
located in Craigavon, Northern Ireland; SMTEK New England, located in
Marlborough, Massachusetts; SMTEK Santa Clara, located in Santa Clara,
California; and SMTEK International Thailand Limited, located in Ayutthya,
Thailand.

     As more fully described in Note 2, on October 24, 2001, we completed a
transaction to purchase certain assets, but not assume any liabilities, of
Century Electronics Manufacturing, Inc. ("Century"), an EMS company that
filed for bankruptcy.  As part of this transaction, we also purchased
substantially all of the common stock of Century's subsidiary in Thailand.
The aggregate purchase price of this transaction was approximately $3.2
million.

     On November 12, 1999, we sold our printed circuit board ("PCB")
operation, Irlandus Circuits Ltd. ("Irlandus").  The results of operations of
Irlandus, which represented a separate segment of our business, are shown as
a discontinued operation for all periods presented in the accompanying
consolidated financial statements.  See Note 3 for additional details of this
transaction.

     Certain reclassifications have been made to the fiscal year 2001 and
2000 financial statements to conform with the fiscal year 2002 financial
statement presentation.  Such reclassifications had no effect on our results
of operations or stockholders' equity.

Accounting Period

     We utilize a 52-53 week fiscal year ending on the Friday closest to June
30 which, for fiscal years 2002, 2001 and 2000, fell on June 28, June 29 and
June 30, respectively.  In these consolidated financial statements, the
fiscal year-end for all years is shown as June 30 for clarity of
presentation, except where the context dictates a more specific reference to
the actual year-end date.  Fiscal 2002, 2001 and 2000 consisted of 52 weeks.


Cash Equivalents

     For financial reporting purposes, cash equivalents consist primarily of
money market instruments and bank certificates of deposit that have original
maturities of three months or less.

Fair Value of Financial Instruments

     As of June 30, 2002, the carrying amount of our cash and cash
equivalents, accounts receivable, accounts payable, accrued liabilities and
bank lines of credit approximate their fair value because of the short
maturity of those instruments.  At June 30, 2002 and 2001, the carrying
amount of long-term debt (including the current portion thereof but excluding
the bank lines of credit) was $8.6 million and $7.9 million, respectively,
and the fair value was $8.1 million and $7.4 million, respectively.  The fair
value of our long-term debt is estimated based on the quoted market prices
for the same or similar issues or on the current rates offered to us for debt
of the same remaining maturities.  All financial instruments are held for
purposes other than trading.

Concentrations of Credit Risk

     Financial instruments that potentially subject us to concentrations of
credit risk consist principally of money market instruments and trade
receivables.  Cash is invested in money market instruments and certificates
of deposit with high credit quality financial institutions and, by policy, we
limit the amount of credit exposure to any one issuer.

     Concentrations of credit risk with respect to trade receivables exist
because our EMS operations rely heavily on a relatively small number of
customers.  We perform ongoing credit evaluations of our customers and
generally do not require collateral.  We maintain reserves for potential
credit losses and such losses, to date, have been within management's
expectations.

     At June 30, 2002, we had one customer representing approximately 12% of
our accounts receivables balance.

Inventories

     Inventories are stated at the lower of cost or net realizable value,
with cost determined principally by use of the first-in, first-out method.
Inventories consist of the following (in thousands):

                                                      June 30,
                                                -------------------
                                                  2002        2001
                                                -------      ------
Raw materials                                   $ 7,553      $3,929
Work in process                                   3,174       2,700
Finished goods                                      496         204
                                                -------      ------
     Total inventories                          $11,223      $6,833
                                                =======      ======


Long-Lived Assets

     Property, equipment and improvements are stated at cost.  Depreciation
and amortization are computed on the straight-line method.  The principal
estimated useful lives are:  buildings - 20 years; improvements - 5 to 10
years; and plant, office and other equipment - 3 to 7 years.  Property,
equipment and improvements acquired by our Northern Ireland operating unit
are recorded net of capital grants received from the Industrial Development
Board ("IDB") for Northern Ireland.  Fixed assets consist of the following
(in thousands):

                                                          June 30,
                                                   --------------------
                                                     2002        2001
                                                   --------    --------
Buildings and improvements                         $  3,980    $  2,827
Plant equipment                                      16,243      13,691
Office and other equipment                            2,941       2,614
Less accumulated depreciation and amortization      (14,355)    (11,813)
                                                   --------    --------
     Total property, equipment and improvements    $  8,809    $  7,319
                                                   ========    ========

     Goodwill represents the excess of acquisition cost over the fair value
of net assets of a purchased business, and is being amortized over 5 to 15
years through June 30, 2002.  Goodwill of $420,000 and $457,000 is included
in "Other assets" at June 30, 2002 and 2001, respectively.

     The recoverability of long-lived assets is evaluated whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable, and if future undiscounted cash flows expected to result
from the use of such assets are believed insufficient to recover the carrying
value of the asset, the carrying value is written down to fair value in the
period the impairment is identified.

Revenue and Cost Recognition

     All of our subsidiaries, except for our Moorpark subsidiary, recognize
revenues and cost of sales upon shipment of products.  We ship products FOB
shipping point and accordingly, title and risk of ownership pass to the
customer upon shipment.

     The Moorpark facility has historically generated a significant portion
of its revenue through long-term contracts with suppliers of electronic
components and products.  Consequently, this operating unit has historically
used the percentage of completion method to recognize revenues and cost of
sales.  Percentage of completion is determined on the basis of costs incurred
to total estimated costs.  Contract costs include direct material and direct
labor costs and those indirect costs related to the assembly process, such as
indirect labor, supplies, tools, repairs and depreciation costs.  Selling and
administrative costs are charged to expense as incurred.  In the period in
which it is determined that a loss will result from the performance of a
contract, the entire amount of the estimated loss is charged to cost of goods
sold.  Other changes in contract price and estimates of costs and profits at
completion are recognized prospectively.  The asset "costs and estimated
earnings in excess of billings on uncompleted contracts" represents revenues
recognized in excess of amounts billed.

     During fiscal 2002, our Moorpark facility entered into sales contracts
consistent with our other locations, and as such, recognizes revenue on these
new arrangements upon shipment of products rather than on a percentage of
completion method.  As a result, during fiscal 2002, the Moorpark facility
was recognizing revenue upon shipment of product as well as under the
percentage of completion method.  At June 30, 2002 there were no existing
sales contracts with customers under the percentage of completion method of
accounting.

     In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements."  The objective of SAB No. 101 is to provide further guidance on
revenue recognition issues in the absence of authoritative literature
addressing a specific arrangement or a specific industry.  We adopted SAB No.
101 in the fourth quarter of fiscal year 2001.

Income Taxes

     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the expected future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards.  In estimating future
tax consequences, all expected future events other than enactments of changes
in tax law or statutorily imposed rates are considered.  The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.  A valuation allowance
is recorded to reduce deferred tax assets to their estimated realizable
amount.

Earnings (Loss) Per Share

     Basic earnings (loss) per share is computed by dividing net income
(loss) available to common stockholders by the weighted average number of
common shares outstanding during the period.  Diluted earnings (loss) per
share reflects the potential dilution that could occur if securities or other
contracts to issue Common Stock were exercised or converted into Common Stock
or resulted in the issuance of Common Stock that then shared in our earnings
(losses).

Foreign Currency Translation

     The financial statements of our foreign operating units have been
translated into U.S. dollars from their functional currencies, British pounds
sterling or the Thai Baht, in the accompanying consolidated financial
statements.  Balance sheet amounts have been translated at the exchange rate
on the balance sheet date and income statement amounts have been translated
at average exchange rates in effect during the period.  The net translation
adjustment is recorded as a separate component of stockholders' equity.

     It is our policy not to enter into derivative financial instruments for
speculative purposes.  We may, from time to time, enter into foreign currency
forward exchange contracts in an effort to protect us from adverse currency
rate fluctuations on foreign currency commitments entered into in the
ordinary course of business.  These commitments are generally for terms of
less than one year.  The foreign currency forward exchange contracts are
executed with banks believed to be creditworthy and are denominated in
currencies of major industrial countries.  In accordance with Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," all derivative financial instruments are
measured at fair value and are recognized as either assets or liabilities in
the balance sheet.  The accounting treatment of changes in fair value is
dependent upon whether or not a derivative financial instrument is designated
as a hedge and, if so, the type of hedge.  Changes in fair value are
recognized in current results of operations for fair value hedges and in
other comprehensive income for cash flow hedges.  Derivative financial
instruments not qualifying for hedge accounting treatment under SFAS No. 133
are recognized as assets or liabilities with gains or losses recognized in
current results of operations.  At June 30, 2002 we had forward foreign
currency contracts to sell $1.3 million for approximately 870,000 British
pounds sterling between July 12, 2002 through December 24, 2002.  The U.S.
dollar to British pounds sterling exchange rate at June 30, 2002 was 1.53.
These forward foreign currency contracts are designated as cash flow hedge
instruments.  In accordance with SFAS No. 133, we recognized a gain of
$72,000 in other comprehensive income at June 30, 2002, related to these
contracts.

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.

Stock Based Compensation

     SFAS No. 123, "Accounting for Stock-Based Compensation" allows entities
to continue to apply the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and provide pro
forma net income and pro forma earnings per share disclosures for stock-based
awards as if the fair-value-based method defined in SFAS No. 123 had been
applied.  In accordance with APB Opinion No. 25 and related interpretations,
compensation expense would generally be recorded for fixed option grants only
if, on the date of grant, the current market price of the underlying stock
exceeded the exercise price.  We have elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123.

Recent Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations."  SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001, as well as for all purchase method business combinations
completed after June 30, 2001.  In addition, SFAS No. 141 specifies the
criteria for intangible assets acquired in a purchase method business
combination to be recognized and reported apart from goodwill.  We have
adopted SFAS No. 141.

     In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets."  SFAS No. 142 will require that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead
tested for impairment, at least annually, in accordance with the provisions
of SFAS No. 142.  SFAS No. 142 will also require that intangible assets with
definite useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for impairment in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" and SFAS No. 144 (see
below) upon adoption.  We will adopt SFAS No. 142 as of July 1, 2002.  We are
assessing the impact of SFAS No. 142.

     In October 2001 the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."  SFAS No. 144 replaces SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of."  The primary objectives of SFAS No. 144 were to
develop one accounting model, based on the framework established in SFAS No.
121, for long-lived assets to be disposed of by sale and to address other
significant implementation issues.  While SFAS No. 144 supersedes SFAS No.
121, it retains many of the fundamental provisions of SFAS No. 121.  SFAS No.
144 is effective for financial statements issued for fiscal years beginning
after December 15, 2001.  We will adopt SFAS No. 144 as of July 1, 2002.  We
are assessing the impact of SFAS No. 144.

     In July 2002 the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities."  SFAS No. 146 nullifies
Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)."  SFAS No. 146 requires that a
liability be recognized for those costs only when the liability is incurred,
that is, when it meets the definition of a liability in the FASB's conceptual
framework.  SFAS No. 146 also establishes fair value as the objective for
initial measurement of liabilities related to exit or disposal activities.
SFAS No. 146 is effective for exit or disposal activities that are initiated
after December 31, 2002, with earlier adoption encouraged.  We do not expect
the adoption of SFAS No. 146 will have a material impact on our financial
position or results of operations.


NOTE 2 - ACQUISITION OF THE ASSETS OF CENTURY ELECTRONICS
         MANUFACTURING, INC.

     On October 24, 2001, we completed a transaction to purchase certain
assets, but not assume any liabilities, of Century, an EMS company that filed
for bankruptcy.  As part of this transaction, we also purchased substantially
all of the common stock of Century's subsidiary in Thailand.  The aggregate
purchase price of this transaction was approximately $3.2 million in cash and
was funded by our existing long-term bank lines of credit.

     Specifically, we purchased from Century certain equipment and machinery
for approximately $1.4 million and inventory for approximately $900,000.  We
have and will continue to utilize some of the purchased assets at our other
locations.  We negotiated new facility leases in Marlborough, Massachusetts
and Santa Clara, California and began operations in Marlborough and Santa
Clara in connection with the purchase of these assets.

     As part of the Century agreement we purchased the common stock of the
Century subsidiary in Thailand ("Century Thailand") for approximately
$900,000.  The acquisition of the Thailand subsidiary provides us with a low
cost manufacturing facility in Southeast Asia.  The acquisition of Century
Thailand was accounted for using the purchase method of accounting and,
accordingly, the statements of condensed consolidated operations include the
results of the Thailand subsidiary from the date of acquisition.  The assets
acquired and liabilities assumed were recorded at fair value as determined by
us based on information currently available.  A summary of the assets
acquired and the liabilities assumed in the acquisition is as follows (in
thousands):

     Estimated fair values:
       Assets acquired                   $1,392
       Liabilities assumed                  476

     Purchase price                      $  916
     Less cash received                     787
                                         ------
     Net cash paid                       $  129
                                         ======

     Unaudited pro forma results of operations for the fiscal years ended
June 30, 2002, 2001 and 2000, as if the acquisition of the Thailand
subsidiary had occurred at the beginning of the period reported, follow
(dollars in thousands).  The unaudited pro forma results are not necessarily
indicative of the results which would have occurred if the business
combination had occurred on the date indicated:

                                  Years Ended June 30,
                             -------------------------------
                               2002       2001        2000
                             -------     -------     -------
                                       (Unaudited)

Revenue                      $75,542     $98,848     $73,521
                             =======     =======     =======

Net income (loss)            $(5,921)    $ 1,097     $(1,175)
                             =======     =======     =======

Earnings (loss) per share:
  Basic                      $ (2.59)    $  0.48     $ (0.52)
                             =======     =======     =======
  Diluted                    $ (2.59)    $  0.46     $ (0.52)
                             =======     =======     =======


NOTE 3 - DISCONTINUED OPERATIONS

     On November 12, 1999, we sold Irlandus, our PCB fabrication operation in
Northern Ireland.  The purchase price was negotiated on an arms length basis
between us and the purchaser, a management buy-out team.  The gross sales
proceeds in the aggregate amount of 2.8 million British pounds sterling
(approximately $4.5 million) consisted of a cash dividend of 500,000 British
pounds sterling paid by Irlandus just prior to closing and cash of 2.3
million British pounds sterling paid by the purchaser at closing.  After
giving consideration to disposal costs and the cash of approximately $1.5
million which stayed with the divested operation, the net cash proceeds of
this transaction amounted to approximately $2.7 million.

     Irlandus was the sole operating unit comprising our PCB segment.
Accordingly, operating results for Irlandus have been presented in the
accompanying consolidated statements of operations as a discontinued
operation, and are summarized as follows (in thousands):

                                                    Year Ended June 30, 2000
                                                    ------------------------
Net sales                                                    $3,383
Operating income                                             $  131
Income from discontinued operations, net of tax              $  254

     Net assets of Irlandus consisted of the following (in thousands):

                                               November 12, 1999 (sale date)
                                               -----------------------------
  Current assets                                         $ 4,099
  Property, equipment and improvements                     3,447
  Current liabilities                                     (2,081)
  Long-term debt                                          (1,314)
                                                         -------
    Net assets                                           $ 4,151
                                                         =======

     The loss on sale of Irlandus, shown in the accompanying consolidated
statements of operations, stockholders' equity and comprehensive income
(loss) and cash flows as "Loss on sale of discontinued operations", is
comprised as follows (in thousands):

   Gross sales proceeds                                  $ 4,523
   Less disposal costs                                      (277)
                                                         -------
   Net sales proceeds                                      4,246

   Less net assets of Irlandus                            (4,151)
                                                         -------
   Gain on sale before elimination of foreign
    currency translation account balance                      95

   Elimination of Irlandus' foreign
    currency translation account balance                    (756)
                                                         -------
   Loss on sale of discontinued operations               $  (661)
                                                         =======

     Prior to the sale, Irlandus had an accumulated foreign currency
translation loss of $756,000, which was carried as a reduction of
consolidated stockholders' equity.  In accordance with SFAS No. 52, "Foreign
Currency Translation," this amount has been included in the determination of
the loss on sale of discontinued operations and in accordance with SFAS No.
130, "Reporting Comprehensive Income," an equal and offsetting amount is
reported as other comprehensive income in the accompanying consolidated
statements of operations and consolidated statements of stockholders' equity
and comprehensive income (loss).



NOTE 4 - COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON
         UNCOMPLETED CONTRACTS

     Costs and estimated earnings in excess of billings on uncompleted
contracts consists of revenue recognized under electronics assembly
contracts, which amounts were not billable at the balance sheet date.  All of
the contracts were completed as of June 30, 2002.  The components of costs
and estimated earnings in excess of billings on uncompleted contracts are as
follows (in thousands):

                                                    June 30,
                                             -----------------------
                                               2002          2001
                                             ---------     ---------
Costs incurred to date on
   uncompleted contracts                     $ 81,615      $ 82,929
Estimated earnings based on
   Percentage of completion                     6,769        10,643
                                             --------      --------
                                               88,384        93,572
Less:  billings to date                       (88,384)      (85,607)
                                             --------      --------
     Total costs and estimated
       earnings in excess of billings
       on uncompleted contracts              $    -        $  7,965
                                             ========      ========


NOTE 5 - FINANCING ARRANGEMENTS

Bank Credit Agreements

      At June 30, 2002, we have a credit facility for our domestic operating
units, which consist of an $11 million working capital line secured by
accounts receivable, inventory and equipment.  Borrowings under the credit
agreement bear interest at either the bank's prime rate (4.75% at June 30,
2002) plus 0.50% or a Eurodollar-base rate (1.86% at June 30, 2002) plus
3.25%.  At June 30, 2002, borrowings outstanding under this credit facility
amounted to $4.0 million and the effective weighted average interest rate was
5.16%.  The line of credit agreement contains certain financial covenants,
with which we were in compliance at June 30, 2002.  Our available borrowing
capacity as of June 30, 2002 was approximately $4.1 million.  This credit
facility matures September 25, 2003.

     In addition, during fiscal 2002 we have borrowed $1.6 million on our
equipment line of credit to finance our capital expenditures.  At June 30,
2002, the balance outstanding was $1.1 million.  This advance has a maturity
date of October 24, 2006.  Interest is at either the bank's prime rate plus
0.50% or at a Eurodollar-base rate plus 3.25%.  The effective weighted
average interest rate was 5.12% at June 30, 2002.  Additional advances under
our equipment line of credit will not be available to us until a review by
the bank at a future date.


     At December 31, 2001, we violated certain covenants in our domestic line
of credit agreement with our bank.  In February 2002, the bank waived these
covenant violations.  At March 31, 2002, we violated certain covenants in our
domestic line of credit agreement.  In May 2002, the bank either removed or
amended the related restricted covenants in an amendment to the credit
agreement.  At June 30, 2002, we were in compliance with the amended
covenants to the credit agreement.  In anticipation of future projected
covenant violations, during September 2002, we amended the May 2002 covenants
with the bank.  Under the terms of this new amendment, our interest rates
have been amended to the bank's prime rate plus 0.75%, or a Eurodollar-base
rate plus 3.50%.  In addition, had the provisions of the September amendment
been in effect at June 30, 2002, our availability would have been $3.5
million at June 30, 2002.  In the event of default under our line of credit
agreement, any and all outstanding borrowings would be immediately due and
payable.

     We also have a credit facility agreement with Ulster Bank Markets for
our Northern Ireland operating company.  This agreement consists of an
accounts receivable revolver, with maximum borrowings equal to the lesser of
75% of eligible receivables or 2,500,000 British pounds sterling
(approximately $3,825,000 at June 30, 2002), and bears interest at the bank's
base rate (4.00% at June 30, 2002) plus 2.00%.  At June 30, 2002, borrowings
outstanding under this credit facility amounted to approximately $3.2 million
and there was nominal available borrowing capacity.  The credit facility
agreement with Ulster Bank Markets expires November 30, 2002.


Long-Term Debt

     Long-term debt, other than the bank line of credit, consists of the
following (in thousands):
<Table>
<Caption>
                                                                June 30,
                                                          -------------------
                                                           2002        2001
                                                          -------     -------
<S>                                                       <C>         <C>
Mortgage note secured by real property at the
 Northern Ireland operations, with interest at
 variable rates (5.50% and 6.88% at June 30, 2002
 and 2001, respectively), payable in semiannual
 installments through 2009                                $   697     $   637

Notes payable secured by equipment, interest
 at 3.90% to 9.60%, payable in monthly
 installments through June 2011                             2,268       1,926

Equipment line of credit, secured by equipment,
 due October 2006, interest at 5.12% at June 30, 2002       1,105         -

Capitalized lease obligations                               1,584       2,283

8-1/2% Convertible Subordinated Debentures, due 2008,
 interest payable semi-annually and convertible at
 holders' option at a price of $212.50 per share at
 any time prior to maturity                                 1,580       1,580

Obligations to former officers, employees and directors
  under consulting and deferred fee agreements              1,016         989

Other                                                         343         474
                                                          -------     -------
                                                            8,593       7,889
Less current maturities                                     2,527       2,109
                                                          -------     -------
     Total long-term debt                                 $ 6,066     $ 5,780
                                                          =======     =======
</Table>
     The aggregate amounts of minimum maturities of other long-term debt for
the indicated fiscal years (other than capitalized lease obligations) are as
follows (in thousands):

             Fiscal 2003         $1,872
             Fiscal 2004          1,115
             Fiscal 2005          1,131
             Fiscal 2006            547
             Fiscal 2007            204
             Thereafter           2,140
                                 ------
                                 $7,009
                                 ======

     In March 1996, we entered into a settlement agreement with certain of
our former officers, key employees and directors (the "Participants") to
restructure our outstanding obligations under several consulting programs and
deferred fee arrangements, which had provided for payments to the
Participants after their retirement from us or from our Board of Directors.
Under terms of the settlement, the Participants agreed to relinquish all
future payments due them under these consulting programs and deferred fee
arrangements in return for an aggregate of 29,793 Common Stock purchase
warrants, Series G.  We are obligated to pay the Participants $50.00 for each
warrant which remained unexercised on the June 1, 1998 warrant expiration
date, payable in semiannual installments over two to ten years.  We have
recorded a liability for the present value of these future payments, which
amounted to $1.0 million and $989,000 at June 30, 2002 and 2001,
respectively.

Lease Commitments

     Future minimum lease payments at June 30, 2002 were as follows (in
thousands):

                                                 Capital     Operating
                                                 leases       leases
                                                 -------     ---------
Fiscal 2003                                      $  733       $ 2,569
Fiscal 2004                                         619         2,609
Fiscal 2005                                         284         2,443
Fiscal 2006                                          94         2,022
Fiscal 2007                                         -           2,034
Thereafter                                          -           8,476
                                                 ------       -------
Total                                             1,730       $20,153
                                                              =======
Less:  interest expense                            (146)
                                                 ------
Present value of minimum lease payments          $1,584
                                                 ======

     In July 2002, we entered into a $900 per month vehicle lease which
terminates in June 2006.  Also in July 2002, our Thailand operation renewed
their facility lease for a two year term, which terminates in August 2004.
Monthly payments are approximately $8,000 a month.

     The capitalized cost of the related assets (primarily plant equipment),
which are pledged as security under the capital leases, was $3.4 million, and
$3.9 million at June 30, 2002 and 2001, respectively.  Accumulated
amortization on assets under capital leases amounted to $1.6 million and $1.3
million at June 30, 2002 and 2001, respectively.

     Rental expense for operating leases amounted to $2.3 million, $717,000,
and $756,000 for fiscal 2002, 2001 and 2000, respectively.


NOTE 6 - INCOME TAXES

     In connection with the filing of our federal income tax return for
fiscal year 1995, and acting on advice of our tax advisor, we filed for a
refund to carry back losses described in Section 172(f) of the Internal
Revenue Code of 1986, as amended (the "IRC").  Section 172(f) of the IRC
provides for a ten year net operating loss ("NOL") carryback for specific
losses attributable to (1) a product liability or (2) a liability arising
under a federal or state law or out of any tort if the act giving rise to
such liability occurs at least three years before the beginning of the
taxable year.  As a result of these refund filings, in September and October
1995 we received federal income tax refunds totaling $1.9 million, net of
costs associated with applying for such refunds, and recognized an income tax
benefit of $1.1 million in the quarter ended December 31, 1995.  The balance
of the net refunds received, $761,000, was recorded as income taxes payable,
pending resolution by the Internal Revenue Service ("IRS") of the
appropriateness and the amount of the 172(f) carryback.

     Beginning in May 1997, we came under IRS audit with respect to such
refund claims.  In September 1998, we received tax deficiency notices from
the IRS in which the IRS advised us that it was disallowing substantially all
of the tax refunds received by us in 1995 which had been recorded as an
income tax benefit.  In January 1999, the Company and its tax advisor filed a
protest letter with the IRS to appeal the disallowance.  Subsequent to filing
the protest letter, the U.S. Tax Court upheld the disallowance of refund
claims made by another taxpayer involving Section 172(f) issues similar to
those on which we had based certain of its refund claims.  Accordingly, in
the fourth quarter of fiscal 1999 we recorded income tax expense, net of fee
amounts refunded to us from our tax advisor, of $1.1 million plus accrued
interest expense of $725,000.  Additional interest expense at a rate of 11.0%
has been accrued since June 30, 1999.

     In connection with the IRS audit, and the subsequent internal review by
us, we determined that the net refund of $761,000 which had been received in
1995, and which was recorded as income taxes payable upon receipt, needed to
be returned to the IRS.  Accordingly, on July 30, 1999, we repaid this amount
to the IRS plus accrued interest of $272,000.

     In December 2001, we reached a settlement with the Appeals Division of
the IRS concerning the Section 172(f) issues.  At June 30, 2002, we have a
federal tax liability associated with this assessment of approximately $1.1
million and accrued interest thereon is approximately $1.1 million.  We are
currently seeking an installment payment plan with the IRS.

     Income tax provision (benefit), all current, consists of the following
(in thousands):

                                           Year ended June 30,
                                        --------------------------
                                        2002      2001       2000
                                        -----     -----     ------
                 Federal                $(169)    $(153)     $ 38
                 State                    (56)      111        62
                                        -----     -----      ----
                                        $(225)    $ (42)     $100
                                        =====     =====      ====


     Temporary differences between financial statement carrying amounts and
the tax bases of assets and liabilities that give rise to significant
portions of the deferred tax assets and liabilities relate to the following
(in thousands):

                                                     June 30,
                                               ---------------------
                                                  2002        2001
                                               ---------   ---------
Deferred tax assets:
  Accrued employee benefits                    $    506    $    593
  Reserves and allowances                           769         797
  Domestic NOL carryforwards                     14,366      12,876
  Foreign NOL carryforwards                       1,652       1,092
  Alternative minimum tax credits                   -           164
  Depreciation                                      162         -
  Other                                             308         106
                                               --------    --------
Total deferred tax assets                        17,763      15,628

Deferred tax liabilities:
  Depreciation                                      -           (98)
                                               --------    --------
  Net deferred tax assets before allowance       17,763      15,530
  Less valuation allowance                      (17,763)    (15,530)
                                               --------    --------
Net deferred tax assets after allowance        $    -      $    -
                                               ========    ========

     In assessing the realizability of net deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
net deferred tax assets will be realized.  The ultimate realization of net
deferred tax assets is dependent upon the generation of future domestic and
foreign taxable income of approximately $39.8 million and $4.9 million,
respectively, prior to the expiration of the NOL carryforward.  Based on the
level of historical losses, management believes that it does not have the
basis to conclude that it is more likely than not that the deferred tax
assets will be realized, and therefore, has recorded a 100% valuation
allowance to offset the net deferred tax assets.  The valuation allowance was
$17.8 million and $15.5 million as of June 30, 2002 and 2001, respectively.
The net change in the total valuation allowance for the years ended June 30,
2002 and 2001 was an increase of $2.2 million and $1.3 million, respectively.


     The provision for income taxes for continuing operations differs from an
amount computed using the statutory federal income tax rate as follows (in
thousands):

                                                      Year ended June 30,
                                                ----------------------------
                                                 2002       2001       2000
                                                -------    -------    ------
Federal tax provision/(benefit) computed at
  statutory rate                                $(2,111)   $   597    $  (46)
State income tax, net of federal benefit            (67)        33        59
Amortization of goodwill                             13        228       443
Expiration of unutilized NOL carryforwards          -          -         472
Net change in valuation allowance                 1,963      1,341      (835)
Adjustment to the deferred tax assets               (34)      (191)      -
Reinstatement of NOLs utilized for subsequently
  disallowed Section 172(f) claims                  -       (1,836)      -
IRS refunds                                         -         (218)      -
Other                                                11          4         7
                                                -------     ------    ------
Income tax provision (benefit) from
  continuing operations                         $  (225)   $   (42)   $  100
                                                =======    =======    ======

     The provision for income tax related to discontinued operations in
fiscal 2000 was $72,000.  The provision for income tax related to
discontinued operations includes a reduction in the valuation allowance of
$3.6 million for fiscal 2000.

     As of June 30, 2002, we had U.S. federal NOL carryforwards of
approximately $39.8 million, expiring in 2005 through 2022, and state NOL
carryforwards of $18.5 million, expiring in 2002 through 2012. At June 30,
2002, the NOL carryforward for federal alternative minimum tax purposes was
approximately $32.5 million.

     Our ability to use our NOL carryforwards to offset future taxable income
may be subject to annual limitations due to certain substantial stock
ownership changes, which have occurred in the current and prior years.  We
maintain an ongoing analysis to determine if the future utilization of the
NOLs will be limited due to these ownership changes.

     Pretax income (loss) from our U.S. continuing operations for fiscal
2002, 2001 and 2000 was ($5.4 million), $2.0 million and $493,000,
respectively.  Pretax loss from our U.K. foreign continuing operations for
fiscal 2002, 2001 and 2000 was ($830,000), ($208,000) and ($627,000),
respectively.  Pretax income from our Thailand operation for fiscal 2002 was
$14,000.

     Income of our Northern Ireland subsidiary is sheltered by operating loss
carryforwards for United Kingdom income tax purposes (the "U.K. NOL").  The
current income tax benefit from the U.K. NOL was $0 for all three fiscal
years, and has been treated as a reduction in the provision for income taxes.
At June 30, 2002 the U.K. NOL amounted to approximately $3.9 million.
Substantially all of these NOLs from prior years of our Northern Ireland
subsidiary can be carried forward for an indefinite period of time to reduce
future taxable income.

     Our Thailand operations was granted an investment promotion from the
Thailand government, which includes exemption from corporate income taxes for
a seven year period from the date operating income is first derived.  This
exemption will expire in 2004.  Prior to the purchase of our Thailand
operation, Thailand had NOLs of approximately $900,000.  As a result of the
acquisition, we acquired deferred tax assets of $270,000 and a related
valuation allowance of $270,000.  These NOLs from prior years can be carried
forward for at least five years after the expiration of the aforementioned
investment promotion.


NOTE 7 - STOCKHOLDERS' EQUITY

Stock Option Plans

     We have in effect several stock-based plans under which non-qualified
and incentive stock options and restricted stock awards have been granted to
employees and directors.  Subject to the discretion of the Board of Directors
(the "Board"), employee stock options generally become exercisable over a
period of two to three years as determined by the Board, and generally have a
10-year exercise term when granted.

     The exercise price of all incentive stock options must be equal to or
greater than the market value of the shares on the date of grant.  The
exercise price of non-statutory stock options must be at least 85% of the
market value of the Common Stock on the date of grant.

     Under our Amended and Restated 1998 Non-Employee Directors Stock Plan,
each eligible director receives Company securities (Common Stock or stock
options) valued at $1,000 for attendance at each Board meeting and $500 for
attendance at each Board committee meeting.  Additionally, annually each non-
employee director will receive Company securities with a fair market value of
$12,000 and each non-employee director will be granted 5,000 stock options
upon initial election or re-election to the board of directors.  In fiscal
2002 and 2001, options to purchase a total of 15,516 and 43,341 shares,
respectively, were granted to our non-employee directors at exercise prices
ranging from $2.40 to $7.75 in 2002 and $3.75 to $8.20 in 2001.  Annually,
each non-employee director makes an election to receive director compensation
in the form of Common Stock or stock options.  The fair value of Common Stock
issued in connection with these director compensation plans is equal to the
market value of Common Stock on the grant date.  The fair value of stock
options granted in connection with these director plans is determined using
the Black-Scholes option pricing model (as discussed in more detail below)
using data and assumptions as of the grant date.  The exercise price of all
stock options is equal to the market value at the date of grant.  In fiscal
2002, 2001 and 2000, we recorded expense of $0, $20,000 and $18,000,
respectively, and issued 254, 4,327 and 4,557 shares, respectively, related
to the issuance of Common Stock for director compensation.


     Activity under the employee and non-employee director stock option plans
for fiscal years 2002, 2001 and 2000 was as follows:
<Table>
<Caption>
                                                      Weighted average exercise
                                         Shares            price per share
                                        ---------     -------------------------
<S>                                     <C>                    <C>
Shares under option, June 30, 1999       133,191                $ 9.89

  Granted                                209,205                  3.79
  Expired or canceled                    (38,040)                 9.00
                                        --------
Shares under option, June 30, 2000       304,356                $ 5.81

  Granted                                292,741                  4.96
  Expired or canceled                    (17,340)                 6.48
  Exercised                               (6,000)                 3.71
                                        --------
Shares under option, June 30, 2001       573,757                $ 5.37

  Granted                                103,516                  4.97
  Expired or canceled                    (68,330)                 5.68
  Exercised                               (1,750)                 4.25
                                        --------
Shares under option, June 30, 2002       607,193                $ 5.28
                                        ========                ======
</Table>
     The following table summarizes information about shares under option at
June 30, 2002:

                           Outstanding                  Exercisable
                ---------------------------------  ---------------------
                             Expiration  Weighted               Weighted
   Range of                    date      average                average
   exercise       Options     (fiscal    exercise    Options    exercise
    prices      outstanding  year end)    price    exercisable   price
--------------  -----------  ----------  --------  -----------  --------
$ 2.40 -  7.75     93,516       2012      $ 5.06     15,516      $ 5.60
$ 3.75 -  9.75    243,741       2011      $ 4.92     93,441      $ 4.90
$ 3.38 -  3.88    179,105       2010      $ 3.74     96,980      $ 3.74
$ 6.50 - 10.00     90,831       2009      $ 9.50     90,831      $ 9.50
                  -------                           -------
     Total        607,193                 $ 5.28    296,768      $ 5.97
                  =======                           =======

     At June 30, 2002, under the employee and non-employee director stock
option plans there were 148,542 and 108,857 shares, respectively, available
for future grants.

Stock Based Compensation

     We apply the provisions of APB Opinion No. 25 and related
interpretations in accounting for our stock option plans.  Accordingly, no
compensation expense has been recognized for our employee stock option plans
and awards of options to non-employee directors.  Had compensation expense
for stock-based awards been determined consistent with SFAS No. 123, our
results of operations would have been reduced to the pro forma amounts
indicated below (in thousands except per share amounts):


                                            Year ended June 30,
                                     --------------------------------
                                       2002         2001       2000
                                        --------      --------     --------
Net income (loss):
  As reported                        $(5,984)     $1,798       $ (641)
  Pro forma                          $(6,371)     $1,515       $ (836)
Basic earnings (loss) per share:
  As reported                        $ (2.62)     $ 0.79       $(0.28)
  Pro forma                          $ (2.79)     $ 0.67       $(0.37)
Diluted earnings (loss) per share:
  As reported                        $ (2.62)     $ 0.76       $(0.28)
  Pro forma                          $ (2.79)     $ 0.64       $(0.37)

     For purposes of this pro forma disclosure, the "fair value" of each
option and warrant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions used for grants in 2002,
2001 and 2000:  dividend yield of 0.0% for all years; expected volatility of
90%, 75% and 75% for 2002, 2001 and 2000, respectively; risk-free interest
rates ranging from 3.5% to 5.3% for 2002, 4.8% to 6.3% for 2001, and 5.9% to
6.7% for 2000; and expected lives of five years for all years.

     The weighted average fair value of options granted during the years
ended June 30, 2002, 2001 and 2000 was $3.50, $4.35 and $2.53, respectively.


NOTE 8 - EARNINGS (LOSS) PER SHARE

     Common stock equivalents used in the determination of diluted earnings
per share include the effect, when such effect is dilutive, of our
outstanding employee stock options, the 7% Convertible Subordinated
Debentures (which were convertible into 8,075 shares of Common Stock at
$40.00 per share of Common Stock), and the 8-1/2% Convertible Subordinated
Debentures (which are convertible into 7,435 shares of Common Stock at
$212.50 per share of Common Stock).  The following is a summary of the
calculation of basic and diluted earnings per share (dollars in thousands,
except per share data):
<Table>
<Caption>
                                                  Year ended, June 30,
                                        ----------------------------------------
                                           2002           2001           2000
                                        ---------      ----------     ----------
<S>                                     <C>            <C>            <C>
Net income (loss)                       $  (5,984)     $   1,798      $    (641)
                                        =========      =========      =========

Weighted average shares:
  Basic weighted average number
    of common shares outstanding        2,284,018      2,277,111      2,269,805
  Diluted effect of outstanding
    options to purchase                       -          101,408            -
                                        ---------      ---------      ---------
    Diluted weighted average number
      of common shares outstanding      2,284,018      2,378,519      2,269,805
                                        =========      =========      =========
Earnings (loss) per share:
  Basic                                 $   (2.62)     $    0.79      $   (0.28)
                                        =========      =========      =========
  Diluted                               $   (2.62)     $    0.76      $   (0.28)
                                        =========      =========      =========
</Table>
     Because we had a net loss for the year ended June 30, 2002, there were
no common stock equivalents which had a dilutive effect on earnings per
share.  However, if we had reported net income rather than a loss for the
year ended June 30, 2002, the additional diluted shares outstanding would
have been 172.  Further, options to purchase approximately 603,500 shares of
Common Stock at prices ranging from $3.38 to $10.00 which were outstanding at
June 30, 2002, would not have been included in the computation of diluted
earnings per share for the year ended June 30, 2002, because the exercise
price of these options were greater than the average market price of the
Common Stock.

     Options to purchase approximately 108,000 shares of Common Stock at
prices ranging from $7.47 to $21.25 were outstanding at June 30, 2001, but
were not included in the computation of diluted earnings per share for fiscal
2001 because the exercise price of these options was greater than the average
market price of the Common Stock.

     Because we had a net loss for the year ended June 30, 2000, there were
no common stock equivalents which had a dilutive effect on earnings per
share.  However, if we had reported net income rather than a loss for the
year ended June 30, 2000, the additional diluted shares outstanding would
have been 2,866.  Further, options and warrants to purchase approximately
336,600 shares of Common Stock at prices ranging from $3.75 to $70.00 which
were outstanding at June 30, 2000, would not have been included in the
computation of diluted earnings per share for the year ended June 30, 2000,
because the exercise price of these options were greater than the average
market price of the Common Stock.

     Convertible subordinated debentures aggregating $1,580,000, due in 2008
and convertible at a price of $212.60 per share at any time prior to maturity
were outstanding during fiscal 2002, 2001 and 2000 but were excluded in the
computation of diluted earnings per share because the effect would be
antidilutive.  Convertible subordinated debentures aggregating $323,000, due
on May 15, 2001 and convertible at a price of $40.00 per share at any time
prior to maturity, were no longer outstanding during fiscal 2002 and 2001 but
were outstanding during fiscal year 2000 and were excluded in the computation
of diluted earnings per share because the effect would be antidilutive.



NOTE 9 - OTHER FINANCIAL INFORMATION

Valuation and Qualifying Accounts and Reserves

     Following is our schedule of valuation and qualifying accounts and
reserves for fiscal years 2002, 2001 and 2000 (in thousands):

Allowance for Doubtful Accounts:
--------------------------------
                                                   June 30,
                                             --------------------
                                             2002    2001    2000
                                             ----    ----    ----
Balance at beginning of period               $407    $151    $156
Charged to costs and expenses                  70     302     104
Deductions                                    (97)    (46)    (82)
Sale of subsidiary                             -       -      (27)
                                             ----    ----    ----
Balance at end of period                     $380    $407    $151
                                             ====    ====    ====


NOTE 10- COMMITMENTS AND CONTINGENCIES

Government Grants

     Pursuant to government grant agreements with the IDB for Northern
Ireland, our Northern Ireland operating unit has been reimbursed for a
portion of qualifying capital expenditures and for certain employment and
interest costs.  Approximately $401,000 of the government grants received by
this operating unit are subject to repayment in the event that it ceases
business, permanently discontinues production, or fails to pay to the IDB any
amounts due under its mortgage note payable (Note 5).  Management does not
expect that we will be required to repay any grants under these provisions.

Environmental Matters

     Since the early 1990s, we continue to be involved in certain remediation
and investigative studies regarding soil and groundwater contamination at the
site of a former printed circuit board manufacturing plant in Anaheim,
California.  One of our former subsidiaries, Aeroscientific Corp., leased the
Anaheim facility.  Under the terms of a cost sharing agreement entered into
several years ago, the remaining remediation costs are currently being shared
on a 50-50 basis with the landlord.  There is no environmental insurance
coverage for this remediation.  At June 30, 2002, we had a reserve of
$416,000 for future remediation costs.  Management, based in part on
consultations with outside environmental engineers and scientists, believes
that this reserve is adequate to cover its share of future remediation costs
at this site.  However, the future actual remediation costs could differ
significantly from the estimates.  Further, our portion could potentially
exceed the amount of our reserve.  Our liability for remediation in excess of
our reserve could have a material adverse impact on our business, financial
condition and results of operations.



NOTE 11 - BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

      We now operate in a single business segment--the EMS industry.  Our
revenues and long-lived assets, net of accumulated depreciation, by
geographic area are as follows (in thousands):

                                              Year ended June 30,
                                      ---------------------------------
                                       2002         2001         2000
                                      -------      -------      -------
Revenues:
  United States                       $63,146      $73,772      $50,107
  Northern Ireland                      9,664       17,376       20,145
  Thailand                              1,412          -            -
                                      -------      -------      -------
     Total                            $74,222      $91,148      $70,252
                                      =======      =======      =======

Long-lived assets:
  United States                       $ 7,487      $ 5,997
  Northern Ireland                      1,549        1,779
  Thailand                                193          -
                                      -------      -------
     Total                            $ 9,229      $ 7,776
                                      =======      =======

     We had sales to three customers which accounted for 16.5%, 14.1% and
9.1% of revenues in fiscal 2002, sales to three customers, which accounted
for 14.6%, 14.2% and 11.3% of revenues in fiscal 2001, and sales to three
customers, which accounted for 15.5%, 13.5% and 10.2% of revenues in fiscal
2000.


NOTE 12 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     The following table sets forth certain unaudited financial data for each
of the last eight quarters.  This information, in management's opinion,
reflects all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the information for the quarters
presented.  The operating results for any quarter are not necessarily
indicative of results for any future period.

     Following is a summary of the quarterly results of operations (in
thousands except per share amounts):

                                           Quarters ended
                      -----------------------------------------------------
                       Sep 30     Dec 31      Mar 31     Jun 30      Total
                      --------   --------    --------   --------    -------
Fiscal 2002
-----------
  Revenues             $19,634   $19,594     $16,067    $18,927     $74,222
  Net income (loss)    $    27   $  (762)    $(2,925)   $(2,324)(A) $(5,984)
  Basic and diluted
   earnings (loss)
   per share           $  0.01   $ (0.33)    $ (1.28)   $ (1.02)    $ (2.62)


                                           Quarters ended
                      -----------------------------------------------------
                       Sep 30     Dec 31      Mar 31     Jun 30      Total
                      --------   --------    --------   --------    -------
Fiscal 2001
-----------
  Revenues             $20,924   $24,148     $25,008    $21,068     $91,148
  Net income           $   315   $   419     $   926    $   138     $ 1,798
  Basic earnings
   per share           $  0.14   $  0.18     $  0.41    $  0.06     $  0.79
  Diluted earnings
   per share           $  0.14   $  0.18     $  0.38    $  0.06     $  0.76

(A)  Included in the net loss for the three months ended June 30, 2002 were
severance expenses of $575,000, expenses of $275,000 related to the lease at
our former Thousand Oaks facility and an inventory write down of $150,000.


                  SMTEK INTERNATIONAL, INC. AND SUBSIDIARIES
                       Market and Dividend Information

     Our Common Stock is traded on Nasdaq Small Cap Market (ticker symbol
"SMTI") and the Pacific Stock Exchange (ticker symbol "SMK").  The high and
low closing sales prices for the Common Stock, as reported by the Nasdaq
Small Cap Market, for the last two fiscal years are set forth in the
following table.

                              Fiscal 2002          Fiscal 2001
                            ---------------       --------------
                             High      Low        High      Low
                            ------    -----       -----    -----
1st Quarter                 $ 9.79    $3.80       $4.88    $3.50

2nd Quarter                   7.00     3.25        7.00     4.00

3rd Quarter                   4.60     2.52        7.47     4.38

4th Quarter                   3.10     2.00       10.11     5.01

     On September 20, 2002, the closing market price of our Common Stock in
the Nasdaq Small Cap Market was $0.95 per share.  There were approximately
1,200 stockholders of record at September 13, 2002.  This number does not
give effect to the total number of stockholders who hold their shares in
"street name" or brokerage accounts.

     Dividend payments are not anticipated in the foreseeable future.

                           Form 10-K Annual Report

     A copy of the Annual Report on Form 10-K (without exhibits) may be
obtained free of charge upon written request to SMTEK International, Inc.,
200 Science Drive, Moorpark, California  93021 attention: Secretary.

                SMTEK INTERNATIONAL, INC. AND SUBSIDIARIES
                DIRECTORS, EXECUTIVE OFFICERS, OPERATING UNITS
                       AND OTHER CORPORATE INFORMATION





DIRECTORS                            EXECUTIVE OFFICERS
=========                            ==================
Clay M. Biddinger                    Edward J. Smith
Chief Executive Officer              President and Chief Executive Officer
Bay 4 Capital, LLC
Tampa, Florida                       Kirk A. Waldron
                                     Senior Vice President and
James P. Burgess                     Chief Financial Officer
Chairman of the Board of
SMTEK International, Inc.            Mitchell J. Freedman
                                     Vice President, Legal and Administration

Oscar B. Marx, III                   OPERATING UNITS
Vice President                       ===============
TMW Enterprises, Inc.                SMTEK Moorpark
Troy, Michigan                       Moorpark, California

                                     SMTEK San Diego
INDEPENDENT AUDITORS                 Poway, California
====================
KPMG LLP                             Jolt Technology, Inc.
Los Angeles, California              Fort Lauderdale, Florida

TRANSFER AGENT & REGISTRAR           SMTEK New England
==========================           Marlborough, Massachusetts
American Stock Transfer &
  Trust Company                      SMTEK Santa Clara
59 Maiden Lane                       Santa Clara, California
New York, New York  10038
                                     SMTEK Europe, Ltd.
                                     Craigavon, Northern Ireland
                                     United Kingdom

                                     SMTEK International Thailand, Ltd.
                                     Ayutthya, Thailand
46