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

                                  FORM 10-K

[X] Annual  Report  Pursuant  to Section 13 or 15(d) of the  Securities
    Exchange Act of 1934 For the fiscal year ended September 30, 1999

                                      Or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934.

                     Commission File Number 000-28276
         ------------------------------------------------------
                                  SAWTEK INC.
         (Exact name of registrant as specified in its charter)
         ------------------------------------------------------
                Florida                                    59-1864440
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
     incorporation or organization)                           32703
  1818 S. Highway 441, Apopka, Florida                     (Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code:  (407) 886-8860

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

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

                      Common Stock, $.0005 Par Value

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

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

The aggregate market value of the common stock held by non-affiliates of the
registrant as of October 28, 1999 was: common stock, $.0005 par value:
$1,137,206,651.

There were 42,250,489 shares of the registrant's common stock outstanding as of
October 28, 1999.

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

                  DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement of the registrant for the
registrant's Annual Meeting of the Shareholders for the fiscal year ended
September 30, 1999, which definitive proxy statement will be filed with the
Securities and Exchange Commission not later than 120 days after the
registrant's fiscal year end of September 30, 1999, are incorporated by
reference into Part III.


<PAGE>


                               TABLE OF CONTENTS

                                     PART I

                                                                        Page
                                                                        ----

Item 1.  Business (including Risk Factors and Uncertainties)            1-24
Item 2.  Properties                                                       24
Item 3.  Legal Proceedings                                                25
Item 4.  Submission of Matters to a Vote of Security Holders              25

                                    PART II

Item 5.  Market for Registrant's Common Equity and Related
          Shareholder Matters                                             26
Item 6.  Selected Financial Data                                       26-27
Item 7.  Management's Discussion and Analysis of Financial
          Condition and Results of Operations                          28-35
Item 7a. Quantitative and Qualitative Disclosures about Market Risk       35
Item 8.  Financial Statements and Supplementary Data                      36
Item 9.  Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure                             36


                                    PART III

Item 10. Directors and Executive Officers of the Registrant            37-40
Item 11. Executive Compensation                                           40
Item 12. Security Ownership of Certain Beneficial Owners and
          Management                                                      40
Item 13. Certain Relationships and Related Transactions                   40


                                    PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on
          Form 8-K                                                        41
         Exhibit Index                                                 41-45
         Signatures                                                       46


<PAGE>


PART I.

         This annual report on Form 10-K contains forward-looking statements
made pursuant to the Safe Harbor provisions of the Private Securities Litigation
Act of 1995. Investors are cautioned that forward-looking statements such as
statements of our plans, objectives, expectations and intentions involve risks
and uncertainties. The cautionary statements made in this Form 10-K should be
read as being applicable to all related forward-looking statements wherever they
appear. Statements containing terms such as "believes," "does not believe," "no
reason to believe," "expects," "plans," "projected," "intends," "estimates" or
"anticipates" are considered to contain uncertainty and are forward-looking
statements. Our actual results could differ materially from those discussed.
Factors that could cause or contribute to such differences include those
discussed below, as well as those discussed under the caption "Risk Factors and
Uncertainties."

ITEM 1.  BUSINESS

         We design, develop, manufacture and market a broad range of electronic
signal processing components based on surface acoustic wave ("SAW") technology.
Our primary products are custom-designed, high performance bandpass filters,
resonators, delay lines, oscillators and SAW-based subsystems. These products
are used in a variety of microwave and radio frequency ("RF") systems, such as
Code Division Multiple Access ("CDMA") and Global System for Mobile
communications ("GSM")-based digital wireless systems, digital microwave radios,
wireless local area networks ("WLAN"), cable television equipment, various
defense and satellite systems and chemical sensors. Our products offer key
advantages such as lower distortion, reduced size and weight, high reliability
and precise frequency control compared to products based on alternative
technologies and address rapidly growing needs in telecommunications, data
communications, video transmission, military and space systems and other
markets. Our proprietary computer aided design ("CAD") and analysis software
tools support rapid and precise SAW device design and simulation, enabling us
and our customers to achieve timely new product development. Our commercial
customer base accounts for approximately 94% of net sales for our most recent
fiscal year and includes major telecommunications equipment producers such as
Ericsson, Hyundai, LGIC, Lucent Technologies, Motorola, Nokia, Qualcomm and
Samsung.

Industry Background
-------------------
         Electronic systems which transmit or receive voice, data or video must
contain various signal processing components such as bandpass filters,
resonators, delay lines and oscillators. These components can be used to modify
and condition the desired signals and reject unwanted signals that cause
distortion and interference. The frequencies at which these systems transmit and
receive information is at the RF or microwave or frequency range. However,
before the information can be used, the signal must generally be converted to a
lower intermediate frequency ("IF") and finally to the lowest system frequency,
commonly referred to as baseband. While the RF and microwave frequencies at






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which voice, data and video systems operate are generally dictated by regulatory
bodies such as the FCC, system designers have considerable flexibility in
selecting one or more IF frequencies which suit the requirements of a specific
application and design approach. Consequently, IF components, particularly
filters, are developed specifically for each customer and application, even
though they frequently must be produced in large quantities. The performance
demands placed on these components by increasingly complex systems have changed
dramatically over the past few years, particularly in wireless applications.

         The wireless communications industry is experiencing significant
worldwide growth. Cost reductions and technological improvements in such
wireless communications products as cellular, personal communications services
("PCS"), wireless local loop ("WLL"), global satellite telephones and wireless
data systems are contributing to this growth. Wireless communications systems
can offer the functional advantages of wired systems without the costly and time
consuming development of an extensive wired infrastructure, which is of
particular importance in developing parts of the world. Rapidly emerging digital
telecommunications standards and technology will likely provide the performance
improvements necessary to address overcrowding of existing cellular systems and
will provide increased functionality. Unless carriers adopt the emerging digital
standards, they will be forced to build new cellular base station sites and
continue to suffer from dropped calls due to the overcrowding problem. These
standards include CDMA, which is predominately utilized in the United States and
South Korea as well as in Japan, China and other countries, and GSM, adopted
throughout Europe and in many other countries worldwide. These new approaches
are being utilized to provide cellular and PCS mobile services as well as fixed
WLL networks. As demands for wireless communications subscriber services grow,
service providers are offering digital handheld products and expanding the
associated infrastructure. These factors, coupled with regulatory changes in the
United States and abroad, as well as advances in wireless communications
technology, are leading to substantial worldwide growth in existing systems and
the emergence of new markets and applications.

         As the wireless telecommunications industry has expanded, previously
allocated frequency bands have become increasingly congested, and the need to
precisely control transmission frequencies and to filter unwanted signals
without distortion has become critically important. In response to this crowding
of existing frequency bands, regulatory agencies have allocated new blocks of
spectrum at higher frequencies and more stringently regulated allowable signal
bandwidths. Systems operating at these higher microwave and RF frequencies
require higher frequency IF components to simplify the overall system
architecture, thereby reducing cost, complexity and power consumption. To make
more efficient use of the crowded frequency bands, the spacing between adjacent
signal channels must be reduced, placing the desired signal very close to
unwanted interfering signals. Highly selective RF and IF filters are required to
pass the desired signal without distortion, while rejecting interfering signals
from adjacent channels or frequency bands and other sources.






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         Telecommunications systems, including cellular and PCS, are rapidly
evolving from traditional analog to more efficient digital protocols to improve
system performance and capacity. These digital approaches call for a wider range
of bandwidths, higher frequencies and more precise bandwidth control.
Furthermore, for highly bandwidth-efficient digital transmission systems to
operate properly, all frequency components of the signal must pass through the
system with essentially the same time delay or severe distortion may result.

         The development of RF integrated circuits, coupled with surface mount
packaging ("SMP") technology, has facilitated a significant reduction in the
size of portable wireless products. These developments have, in turn, driven the
demand for rugged, miniature, surface mount RF and IF signal processing
components, particularly for use in handheld applications such as cellular
telephones.

         Traditional signal processing technologies include lumped element
("LC"), ceramic and bulk acoustic wave ("BAW") crystal filters, resonators and
oscillators. While these basic approaches have been improved to address changing
demands, the improvements have been largely incremental and evolutionary, rather
than revolutionary. It is generally difficult to build traditional LC filters
with the high selectivity and precision required by many new systems. In
addition, most LC filters tend to drift in frequency and degrade in performance
with changes in operating temperature. Conventional BAW crystal filters are
difficult to build in the higher RF and IF frequency ranges and increasing
bandwidths required for many emerging communications applications because the
crystal elements of these filters must be made increasingly thinner, resulting
in a device that is both delicate and difficult to manufacture. Many
conventional types of filters, including both BAW crystal and LC, which are
suitable for filtering analog signals, may produce significant distortion when
used to filter digital signals. Another inherent limitation of these traditional
filter technologies is the inability to adequately reduce their physical size to
suit many emerging applications.

         The SAW solution to signal processing relies on the propagation and
interaction of acoustic waves on the surface of a piezoelectric crystal. SAW
technology offers a number of advantages over competing technologies, including
precise frequency control and selectivity, reduced size and weight, high
reliability, environmental stability and the ability to pass RF signals without
significant distortion. Perhaps the most significant benefit inherent in SAW
technology is the relative ease in producing large quantities of high precision
components that are comparatively small in size and are passive (no current
required). SAW devices are routinely manufactured at the higher RF and IF
frequency ranges and broader bandwidths required for emerging systems. The range
of signal bandwidths that can be accommodated with SAW technology ranges from 10
MHz to 3 GHz, permitting SAW components to address almost all viable
applications.








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         As the use of wireless communications systems increases and new
applications develop, there will be a need for large quantities of both IF and
RF signal processing components which can meet demanding performance, size and
reliability requirements. SAW technology is an enabling solution, possessing all
of these attributes, with applications in nearly all wireless communications
systems.

Strategy
--------
         Our goal is to be the leading supplier of SAW devices used in wireless
communications and other applications. To accomplish this goal, we have a very
focused strategy. The key elements are:

         Expand product offering for wireless communications. We have completed
         several key designs and have introduced SAW-based RF filters for CDMA
         handsets and SAW-based IF filters for GSM phones. In the future we plan
         to offer SAW-based RF filters for GSM and TDMA applications as well as
         SAW duplexer filters. We believe this broad product offering will
         augment our core business consisting of CDMA IF filters for handsets
         and IF base station filters for GSM and CDMA. This broad-based product
         offering will enable our customers to use Sawtek as their total SAW
         solution for wireless communications.

         Expand manufacturing capacity. We have started an aggressive capital
         expenditure plan for fiscal 2000 estimated at $32 million to ramp-up
         our manufacturing capacity. This plan includes increasing the capacity
         at our Orlando fab, adding over 10 new automated production lines to
         our Costa Rican operation and increasing the Costa Rican facility from
         approximately 32,000 square feet to approximately 59,000 square feet.
         We anticipate completing the bulk of this program in fiscal 2000. Upon
         completion, our production capacity will be more than four times
         greater in units compared to 1999.

         Enhance our relationships with major telecommunications equipment
         manufacturers. We plan to focus our attention on the major
         telecommunication manufacturers and to further strengthen our
         relationships with them by developing a product-based sales force,
         working with them in the design phase and by ramping capacity in
         advance of their requirements.

         Continue work in emerging markets for SAW. We plan to continue to
         develop products to meet the needs of a changing marketplace, including
         filters for head-end equipment for cable modems, wireless LAN, wireless
         data, SAW-based chemical sensors and applications for bringing voice,
         data and video into the home.






                                       4


<PAGE>



Markets and Applications
------------------------
         SAW devices may be utilized in most applications that transmit or
receive microwave or RF signals. We design, manufacture and market bandpass
filters, resonators, delay lines, oscillators and SAW-based subsystems to both
domestic and international original equipment manufacturers ("OEMs") that
integrate these products into receivers, transmitters and other equipment for
commercial, industrial, military and space applications. We provide products to
the following markets: communications, military and space systems and other
markets.

         Communications
         --------------
         Applications for the communications market accounted for approximately
82% of our net sales in 1999 compared to 81% in the previous year. Our
communications product offerings consist primarily of IF bandpass filters for
CDMA and GSM base station equipment and CDMA subscriber handsets. Additional
applications include base station repeaters, global satellite systems, digital
radios and data and video applications. We offer many custom SAW components to
serve these market applications.

         As systems evolve from analog to digital, it is important to understand
what role the SAW filter serves. CDMA and GSM are digital technologies because
the final signal processing which occurs to maximize the frequency spectrum
(allowing multiple subscribers to talk at the same time within the FCC allocated
frequency band), is performed digitally. The actual transmission from a phone to
a base station through the air, however, must still be done via analog RF waves.
A SAW filter is a passive analog component that filters out the unwanted RF
signals and passes the desired signals for later digital signal processing.

         Cellular. In cellular applications, calls are placed through subscriber
handsets by establishing a connection with a base station via RF channels in the
800-1000 MHz frequency range. We supply IF bandpass filters for CDMA and
GSM-based cellular base stations and for CDMA handset applications. We have also
recently introduced SAW RF filters for cellular CDMA handsets and SAW IF filters
for both cellular and PCS GSM handsets.

         PCS. PCS systems are enhanced cellular networks that operate in a
frequency band of 1,800 to 2,000 MHz and provide a broad range of
telecommunications services. We supply IF bandpass filters for CDMA and
GSM-based PCS base station equipment, and bandpass filters for CDMA subscriber
handsets.

         Wireless Local Loop ("WLL"). WLL systems eliminate the need for a wire
(loop) connecting users to the public switched telephone network by transmitting
voice messages over radio waves for the "last mile" connection between the
location of the customers' telephone and a base station connected to the network
equipment. We supply bandpass filters to both base station and subscriber
applications for WLL.






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<PAGE>



         Data Communications. The data communications market encompasses a
number of applications involving the transmission and reception of data through
wired, wireless or satellite networks. As the usage of these networks increases,
OEMs are pursuing broader bandwidths, faster data rates and improved data
integrity. OEMs typically specify custom SAW filters based on these requirements
and as a result, we frequently design unique products for each OEM. As
international standards have been adopted to meet these requirements, we have
developed standard products to meet these needs. Applications include digital
radios, wireless local area networks, handheld data terminals, global
positioning systems and filters for head-end equipment to clean up signals,
which will speed up Internet access for cable modems.

         Video Transmission. OEM products utilizing relatively low frequency SAW
filter designs for cable television ("CATV") head-end equipment are purchased
worldwide by cable operating companies. We manufacture a variety of SAW filters
to serve the various standards required by the worldwide video transmission
market. Emerging technologies within the video transmission market include
digital high definition television ("HDTV") and interactive television. We have
designed custom products for both of these applications.

         Military and Space
         ------------------
         We have been a provider to the military and space systems markets since
our inception in 1979. Our components and subsystems can be found in major
applications that include electronic warfare, defense communications, missile
guidance, military and commercial space systems, radar and surveillance.

         Other Markets
         -------------
         We design and produce SAW components for other markets, including
commercial avionics, test equipment and identification and security systems.
Commercial avionics applications include collision avoidance transponders and
radar for line-of-flight weather information. Our products are utilized in
various test equipment applications for circuit design and system performance
analysis, such as signal generators, spectrum analyzers and cellular telephone
system test equipment. In the identification and security system industry, our
products enable OEMs to provide passive SAW RF identification labels (or tags)
for a variety of applications, such as toll road vehicle identification and
personnel monitoring. We also market three families of standard SAW filters and
offer these products for sale through distribution networks in North America and
Europe.

         We have been developing SAW-based chemical sensors for several years,
and we are a leading supplier of SAW resonators and delay lines used in sensor
development programs. In February 1998, we acquired Microsensor Systems, Inc. of
Bowling Green, Kentucky, a supplier in the developing SAW-based chemical sensor
instrument market.






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         We have a concentrated customer base with five customers that each
accounted for over 5% of net sales in 1999. They are, in alphabetical order,
Lucent, Motorola, Nokia, Qualcomm and Samsung. Our top 10 customers accounted
for approximately 70% of net sales in 1999 and 76% of net sales in 1998. The
loss of any of these customers could have a material adverse effect on our
business, operating results and financial condition. There is no assurance that
we will obtain future business from these customers.

Products
--------
         We have produced unique SAW products at frequencies ranging from 10 MHz
to nearly 3 GHz. Products are organized into six product categories: bandpass
filters, resonators, delay lines, oscillators, SAW-based subsystems and
SAW-based chemical sensor products. While some product standardization exists,
many of our products are custom developed for an individual application or
customer, for which a non-recurring engineering ("NRE") fee is generally
charged.

         Bandpass Filters
         ----------------
         Although the performance parameters for SAW bandpass filters are the
same for various applications, the actual specifications for each of these
parameters is very different depending upon its usage as an RF front end filter,
an image reject filter or an IF filter. For example, while rejection is more
important in a base station filter, loss is more important in a handset RF
filter, and group delay variation and passband flatness are critical in wireless
data filters. Sawtek sales and engineering personnel work closely with our
customers to define not only the specifications needed, but also the importance
of each specification. We then select a general SAW structure that best matches
the customer's application and design a specific filter to meet their unique
requirements. Typical filter structures and their corresponding applications are
described below.

         Bi-directional Transversal Filters. This traditional SAW filter
structure is characterized by very steep shape factors and high insertion loss.
These types of filters operate over a wide range of frequencies and fractional
bandwidths. (The fractional bandwidth is the bandwidth divided by the center
frequency). They are commonly used in applications such as military
communications, cable television or CDMA base stations that require very steep
rejection, but that can accept more loss and a larger package size.

         Low-loss Transversal Filters. Sawtek has improved upon the
bi-directional filter structure by developing techniques to lower the insertion
loss while maintaining good selectivity. Sawtek offers low loss structures for
both moderate and wide fractional bandwidth filters. Applications for these low
loss, surface mount devices include CDMA handset, digital radio, wireless local
look, 3G base station, WLAN and GPS.






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         Reflective Low-loss Filters. To suit the narrower fractional bandwidth
of GSM-based systems, Sawtek utilizes a reflective low loss structure. Sawtek
has utilized this structure to drive GSM base station filters from larger leaded
packages to smaller surface mount packages thereby offering continuous price
reductions to our customers. Recent development of the reflective low-loss
technology has made a significant impact in the CDMA handset market as well.
This approach has enabled us to produce these difficult devices at a fraction of
the size of the older low-loss transversal filters, while offering the same or
better performance.

         Resonator Filters. As we enter the market for RF filters and GSM IF
filters, we have expanded our resonator based filter technology to include
combined mode, in-line coupled, waveguide coupled and ladder structures. This
filter technology acts more like traditional LC filters with its very low
insertion loss and moderate rejection. These filters are ideally suited for
pre-selector and image reject functions in mobile handset or home wireless
applications. Base stations do not use SAW filters in the RF due to the high
power handling requirements.

         Resonators
         ----------
         We offer two types of resonators: SAW and surface transverse wave
("STW"). Products operating from 100 MHz to 2.5 GHz are available and are
generally used as stable, high-Q frequency control elements that determine the
operating frequencies of oscillators. We offer these products for use in high
performance commercial, military and space applications, where the demand for
more stringent electrical requirements is not served by high volume SAW
resonator manufacturers. In addition to offering these products as individual
components, we use our resonators in the manufacture of high performance
oscillator products.

         Delay Lines
         -----------
         We currently offer SAW delay line products, consisting of
non-dispersive, dispersive and multi-tap delay line configurations. Our delay
line products are primarily used in military communications and electronic
warfare applications, such as pulse expansion and compression radar. However,
they also find uses in commercial applications, such as commercial avionics
collision avoidance transponders, RF identification tag systems and wireless
handheld data terminal products. All SAW delay lines make use of the fact that a
surface acoustic wave travels 100,000 times more slowly than an electromagnetic
wave. This permits SAW delay lines to be much smaller for a given signal delay
than those of most competing technologies.

         Oscillators
         -----------
         We offer fixed frequency and voltage controlled oscillators based on
both SAW and STW resonator technologies. Oscillators are used to generate a pure
RF tone or signal. This signal often determines, directly or through frequency
multiplication, the final operating frequency of the system in which it is used.
Oscillators, in conjunction with additional circuitry, are also used in
converting or mixing RF signals from one frequency to another. Our oscillators
are used in high performance commercial and military applications such as
instrumentation, avionics and electronic warfare.


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         SAW-based Subsystems
         --------------------
         SAW-based subsystems are among our most complex and highly integrated
products. In general, these subsystems consist of key SAW components, surrounded
by additional circuitry, that provide a higher level of system functionality
than that provided by the SAW devices alone. These products are highly
specialized and are custom developed for specific applications. Our subsystem
products are largely used in military and space applications and include
channelized filter banks, switched filter and delay line modules and pulse
expansion and compression subsystems.

         SAW Chemical Sensor Products
         ----------------------------
         We offer a line of SAW-based chemical sensor instruments for the
chemical agent detection market through our wholly owned subsidiary, Microsensor
Systems, Inc. The customer base for chemical agent detectors includes the U.S.
military, various Federal agencies and state and local municipalities. We also
offer an ethylene oxide detector that is commonly used in the hospital
sterilization market and a fuel dilution meter for the oil analysis market. In
fiscal 1999, we introduced a new product, VaporLab, which is a handheld battery
operated device that can be programmed to detect a variety of chemical compounds
for use in commercial applications. In addition, we continue to be a leading
supplier of SAW resonators and delay lines used in sensor development programs
throughout the world.

New Product Development
-----------------------
         Our research and development and engineering teams are developing new
SAW-based products to serve the needs of our current and potential customers.
Much of the effort is involved in reducing the size and increasing the
performance of our devices. Examples of recent development efforts that are
generating new revenue include filters for wireless LAN and WLL applications,
significantly smaller surface mount IF filters for GSM and CDMA applications and
the introduction of SAW-based RF filters.

         We have identified SAW chemical sensors and subsystems as a promising
technology for new product development. A majority of our sensor development
work is being conducted through our subsidiary, Microsensor Systems, Inc. To
date, our scientists have made fundamental improvements in three major technical
areas necessary for product development, namely, temperature compensation,
polymer development and metrology.

         The market for SAW-based chemical sensors is in the early stages of
development. For fiscal year 1999, sales of chemical sensor-based products
accounted for less then 3% of our consolidated revenue. There is no assurance
that we will be successful in developing new sensor products for commercial or
military applications.

Technology
----------
         SAW Technology. A simple SAW filter has two transducers that consist of
inter-digital arrays of thin metal electrodes photolithographically defined on a
highly polished piezoelectric wafer. A piezoelectric material is one in which
there exists a reciprocal, linear relationship between the electric field in the

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material and the mechanical strain in the material. When a signal of the proper
frequency is applied across the interdigital transducers ("IDTs"), the
alternating electrode voltages cause the surface of the device to expand and
contract due to the varying electric fields induced in the piezoelectric
material. This causes the generation of a mechanical (or acoustic) wave
propagating at the surface of the device. Reciprocally, the acoustic wave
generates an electrostatic wave with potentials at the surface of the device
that can be detected by an IDT. The electrode spacing and the material's surface
acoustic wave velocity determine the operating frequency of the device. This
relationship places physical limitations on the frequency of operation of
practical SAW devices due to limitations in photolithographic resolution. The
configuration of the IDTs and properties of the substrate material determine the
signal processing function and response characteristics of the device.

         The appeal of SAW devices as preferred signal processing components is
based on the inherent advantages of the technology. SAW devices can provide
complex signal processing functions in a single, compact device. One example is
the outstanding bandpass filter characteristics that can be achieved using SAW
technology. Comparable performance utilizing LC filter technology would require
numerous components and could occupy more space on a PC board. Because surface
acoustic waves propagate 100,000 times slower than electromagnetic waves, the
realization of relatively long electrical delays on devices of limited
dimensions is possible. Additional performance advantages of SAW technology,
which vary based on the application, include small size, linear phase, high
selectivity, excellent rejection and temperature stability. The ruggedness and
reliability of SAW devices are characteristic of the physical device structure.
Because photolithographic processes determine device-operating frequencies, SAW
devices do not require complicated tuning procedures, nor do they become detuned
in the field. The semiconductor microfabrication techniques used in
manufacturing SAW components allow for the volume production of economical and
reproducible devices. The outstanding reproducibility of these devices makes
them ideal for military electronic warfare applications such as channelized
filter banks for spectral analysis. Small size and ruggedness make SAW devices
useful for cellular communications and related applications. Finally, the
relative radiation hardness of SAW devices makes them ideal for space-based
applications.

         Computer Aided Design and Analysis Software. Our versatile and
user-friendly proprietary software fully supports the design and simulation of a
broad range of SAW device structures, allowing our design engineers to realize
the optimum SAW device type for a particular application with respect to
performance, size and cost.

Manufacturing
-------------
         The manufacturing techniques used to produce our products are very
similar to those used by the integrated circuit industry. In general, SAW
devices are more straight forward to manufacture than most integrated circuits
but involve certain highly complex and precise processes that are unique. While
we control a substantial portion of the manufacturing process, some activities
are outsourced. The primary raw materials used to manufacture our products are

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purchased from outside sources and include piezoelectric wafers and metal or
ceramic packages used to house and protect the SAW die. Manufacturing scheduling
and control is achieved through the use of a computer-based manufacturing
resource planning ("MRP II") system. We segregate the manufacturing process into
two functional areas: wafer fabrication and assembly.

         Wafer Fabrication. The wafer fabrication process involves the
deposition of a very thin, uniform coating of aluminum onto piezoelectric
wafers. These metallized wafers are coated with a light sensitive material known
as photoresist. The wafer is exposed to light through a master glass plate, or
photomask, which contains multiple images of the SAW devices to be produced. The
image from the photomask is replicated on the wafer through a photolithographic
develop and etch process. Each device on the wafer is referred to as a SAW die
and each wafer may contain from several to 3,000 die, depending upon the design
and performance of the final product. All of our fabrication processes are
conducted at our main facility in Orlando, Florida.

         Assembly. In assembly, the wafer is cut into the individual SAW die
with high precision, diamond wheel dicing saws and placed in metal or ceramic
packages. The SAW die and associated components, if any, are attached to the
base of the package using specialized adhesives. Electrical connections are made
between the SAW die and the pins, pads or leads of the package using either
manual or automatic wirebonding equipment. The packages are hermetically sealed
using specialized welding equipment in a dry nitrogen atmosphere to ensure the
long-term reliability of the device. After sealing, the units are tested for
hermeticity and labeled with a laser marking system. Finally, the units are
tested with automated network analyzers to ensure that the devices conform to
the desired electrical specifications.

         In 1996, we established a subsidiary in Costa Rica for the production
of SAW components. In 1999, our Costa Rican subsidiary accounted for
approximately 46.9% of net sales, compared to 37.5% of net sales in 1998, and
36% of consolidated net fixed assets at September 30, 1999, compared to 29.8% at
September 30, 1998.

         We have recently initiated a significant capital expansion program for
both the Orlando and Costa Rica operations, totaling approximately $32 million
for fiscal 2000. The expansion program will increase the output and capacity of
the Orlando wafer fab and will add new automated production lines for the Costa
Rica operation. This expansion will enable us to expand capacity in pursuit of
the high-volume SAW RF filter market as well as other opportunities.

Raw materials and sources of supply
-----------------------------------
         We generally maintain alternative sources for our principal raw
materials to reduce the risk of supply interruptions or price increases. We
purchase this material on a purchase order basis against annual supply
agreements, and we do not normally carry significant inventories of raw
material.



                                       11


<PAGE>



         We use several raw materials in manufacturing SAW components, including
wafers made from quartz, lithium niobate or lithium tantalate and ceramic or
metal packages used in final assembly. Relatively few companies produce these
piezoelectric wafers and metal and ceramic packages, and we have at times
experienced shortages of ceramic packages. Our most significant suppliers of
ceramic surface mount packages are three companies based in Japan. This reliance
on a limited number of suppliers involves several risks; including reduced
control over the price, foreign currency exposure, timely delivery, reliability
and quality of the material.

Sales and Marketing
-------------------
         We use a team-based sales approach to develop relationships at multiple
levels within the customer's organization, including management, engineering and
purchasing. We have 15 domestic and 12 international independent sales
representatives to identify opportunities that are then managed by our internal
sales force. Our sales and marketing personnel and management handle direct
sales. We also utilize distributors to generate additional sales for our
standard product families and we have a sales and service office in Seoul, Korea
to assist with our Asian sales effort. Once an opportunity is identified,
members of our engineering design team and sales team coordinate close technical
collaboration with the customer during the design and qualification phase of
their program. Our executive officers are actively involved in all aspects of
the sales and marketing process working closely with the senior management of
our customers.

Foreign and Domestic Operations and Export Sales
------------------------------------------------
         See Item 7 and Notes 11 and 12 to Consolidated Financial Statements for
a detailed discussion of foreign and domestic operations and export sales.

Competition
-----------
         The markets for our products are characterized by price competition,
rapid technological change, product obsolescence and heightened global
competition. Historically, the NRE investment required to produce a SAW design
and technical incompatibility issues between various SAW suppliers has led many
SAW customers to single source their requirements. We compete against large
international firms which have substantially greater financial, technical,
sales, marketing, distribution and other resources than us in each of our
product markets. In addition, we face competition from companies that currently
produce SAW devices for their internal requirements, as well as from a number of
our customers who have the potential to develop an internal capability to
produce SAW devices. The following North American companies compete with us to a
greater or lesser degree: Andersen Laboratories (a unit of Sawgrass
Microelectronics), Phonon, RF Monolithics, Vectron and CTS Wireless Components.
Competition from European companies principally includes EPCOS AG (formerly
Siemens Matsushita Components) and Thomson Microsonics. We anticipate that we
will experience increasing competition from Pacific Rim companies as they expand
into handheld and other high volume subscriber applications outside of their


                                       12


<PAGE>


geographic region. Major Asian suppliers of SAW-based products include Fujitsu,
Murada, NDK and several other Japanese and Korean manufacturers. We expect
competition to increase from both established and emerging competitors as well
as from internal capabilities developed by certain customers. Competition could
also come from new technologies including digital filtering, direct conversion
or other approaches that could potentially reduce or eliminate the need for
certain SAW filters in wireless phones. Existing or new competition could have a
material adverse effect on our business, results of operations and financial
condition through price reductions, loss of market share and delays in the
timing of customers' orders.

         Our ability to compete effectively in our target markets depends on a
variety of factors both within and outside of our control, including timing and
success of new product introductions by us and our competitors, availability of
manufacturing capacity, the rate at which customers incorporate our components
into their products, our ability to respond to price competition, availability
of technical personnel, sufficient supplies of raw materials, the quality,
reliability and price of products and general economic conditions. There can be
no assurance that we will be able to compete successfully in the future.

Research and Development
------------------------
         We direct our research and development efforts at developing new and
innovative SAW device structures and SAW-based technologies to address demand in
selected markets. The goal of our research and development group is to develop
the technological tools and techniques necessary to meet emerging market
requirements.

         We engage 28 scientists, technicians and consultants in our research
and development efforts. In addition to our staff and consultants, we are
involved in cooperative research with outside organizations, including
individuals, research groups, universities, institutes and national
laboratories. This approach allows our research and development group to benefit
from the ideas and talents of a group of scientists larger than our internal
staff, and helps to maintain a highly creative, stimulating and intellectual
environment for our scientists.

         Research and development expenses were $5.6 million in 1999, $4.3
million in 1998 and $3.8 million in 1997. We anticipate that research and
development expenses will continue to increase in total dollars as personnel and
programs are added. A portion of our development activities is conducted in
connection with the design and development of custom devices, which is paid for
by customers and classified as NRE items. The revenue generated from these items
is included in net sales and the cost is reflected in cost of sales rather than
in research and development expenses.









                                       13


<PAGE>



Proprietary Rights
------------------
         We rely on a combination of patents, copyrights and trade secrets to
establish and protect our proprietary rights. We hold 22 patents (which expire
from 2005 to 2018), relating to SAW devices, oscillators, packaging technologies
and SAW-based chemical sensors; and, we have 18 patents pending. We also own a
substantial body of proprietary techniques and trade secrets. We recognize the
benefits associated with developing a portfolio of corporate intellectual
property, particularly during the new product development process; and, we are
aggressively pursuing patents on several technologies. Over the past two years,
19 patent applications were filed and 12 patents have been issued. There can be
no assurance that patents will issue from any of the pending applications, that
any claims allowed from existing or pending patents will be sufficiently broad
to protect our technology or that the patents will withstand challenges to their
validity.

         We also seek to protect our trade secrets and proprietary technology,
in part, through confidentiality agreements with employees, consultants and
other parties. There can be no assurance that these agreements will not be
breached, that we will have adequate remedies for any breach or that our trade
secrets will not otherwise become known to or independently developed by others.
In addition, the laws of some foreign countries do not offer protection of our
proprietary rights to the same extent as the laws of the United States.

Backlog
-------
         Our backlog as of September 30, 1999 was approximately $29.2 million
compared to the backlog at September 30, 1998 of $15.8 million. We include in
backlog only customer orders and certain purchase agreements with firmly
scheduled deliveries within the subsequent 12 months. We expect to ship
substantially our entire backlog by the end of fiscal 2000. The backlog is not
necessarily indicative of future product sales, and a delay or cancellation of a
small number of purchase orders may materially adversely affect us. Backlog
cancellations are negotiated with each customer in writing and generally form a
part of the contract with the customer.

         Most of the orders from our largest customers allow the customer to
cancel the order with a certain amount of required notice; and, from time to
time, we have experienced cancellations of orders in backlog. This notice is
negotiated with each customer and is generally related to the manufacturing
cycle time of the product that the customer ordered, typically 60 to 90 days. If
there is any work in process at the time of cancellation, the customer may be
required to pay customary termination charges. If customers over-order to secure
delivery dates and eventually cancel orders, the customer may be subject to
price renegotiations as a result of the lower quantity of units taken.







                                       14


<PAGE>



Employees
---------
         As of September 30, 1999, we have 603 employees (compared to 549 last
year), including 423 in manufacturing and operations; 107 in research,
development and engineering; 22 in quality assurance; 23 in sales and marketing
and 28 in administration. There are 212 employees located in San Jose, Costa
Rica, 8 employees located in Bowling Green, Kentucky, 3 in Seoul, South Korea
and 380 employees in Orlando, Florida. We believe our future performance will
depend in large part on our ability to attract and retain highly skilled
employees. None of our employees are represented by a labor union, and we have
not experienced any work stoppages. We consider employee relations to be good.




































                                       15



<PAGE>



                         RISK FACTORS AND UNCERTAINTIES

         An investment in our Common Stock is extremely risky. You should
carefully consider the following risk factors and other information in this Form
10-K before investing in our Common Stock. Our business and the results of
operations could be seriously harmed by any of the following risks. The trading
price of our Common Stock could decline due to any of these risks, and you may
lose part or all of your investment.

         There are forward-looking statements in this report. Any statement
relating to plans, intentions, expectations or other forward-looking expression
is a forward-looking statement. We may make other forward-looking statements
either orally or in writing in the future. A reader of this Form 10-K should
understand that it is not possible to predict or identify all such risk factors.
Consequently, the reader should not consider this list to be a complete
statement of all potential risks or uncertainties. We do not assume the
obligation to update any forward-looking statement. The following "Risk Factors"
are intended to be cautionary statements identifying important factors that
could cause actual results to differ materially from those in the
forward-looking statements.

Risks related to our business
-----------------------------
Our operating results may fluctuate which could cause the trading price of our
common stock to be volatile.

         Our operating results have fluctuated in the past and are expected to
fluctuate in the future due to a variety of factors. Some of these factors
include:

-  Continuing demand for wireless communication services and CDMA and GSM
    technology.
-  Sales to customers in foreign countries.
-  Fluctuations in the value of foreign currency.
-  Sales to a limited number of customers.
-  Limited number of suppliers of key raw materials.
-  Risks associated with our Costa Rican operation.
-  Declining average selling prices of our products and lower gross margin.
-  Timely release and acceptance of new products, including RF filters.
-  Potential decline in manufacturing yields.
-  Timely completion of capacity expansion plan.
-  Termination of purchase orders by our customers with short notice.
-  Rapidly changing technology and evolving industry standards.
-  Competition from larger companies.
-  Risks that we may not be able to protect our intellectual and proprietary
    rights.
-  Loss of key personnel.
-  Environmental and other government regulations.
-  Natural disasters, such as hurricanes, floods and earthquakes.
-  Potential Year 2000 problems.


                                       16


<PAGE>



Any decline in the growth of wireless communication and continued acceptance of
CDMA would have an adverse impact on our operating results.

         Approximately 74% of our net sales for 1999 and 1998 were derived from
sales of SAW devices for applications in wireless communications systems. Any
economic, technological or other force that causes a reduction in demand for
wireless services would have a material adverse effect on our business,
financial condition and results of operations.

         Sales of products for CDMA-based systems, including base stations and
subscriber handset phones, accounted for approximately 56% of net sales in
fiscal 1999 and 1998. CDMA technology is relatively new to the marketplace and
there can be no assurance that governments and consumers in new regions of the
world will adopt it. Our results will be adversely impacted if CDMA technology
does not continue to gain acceptance in new regions of the world.

Risks associated with international sales could adversely affect our operating
results.

         We have grown our revenue over the past several years partly from
shipments to South Korean customers. In fiscal 1999, our revenue to South Korean
customers was approximately $16.8 million, equal to 17% of total revenue, and in
fiscal 1998 it was approximately $14 million, or 14% of revenue. However,
revenue from South Korean customers does fluctuate greatly as experienced in the
last quarter of fiscal year 1998 when revenue from South Korean customers
declined to $1.1 million or approximately 5% of total revenue compared to $4.8
million or approximately 18% of total revenue in the immediately preceding
quarter. The South Korean economy and the economies of many other countries in
Asia and around the world have experienced economic turmoil and recession during
the past 18 months and may continue to face economic problems which would
adversely impact our sales in this region.

         Some of our other major customers are relying on growth in
international markets, including Asia and Latin America, for sales of their
products. The demand for our products will be reduced if the economies in these
regions continue to decline.

         Overall, our revenue from international sales account for approximately
41%, 37% and 43% of net sales for fiscal 1999, 1998 and 1997, respectively. The
sale of products in foreign countries involves the following risks:

-  Currency exchange rate fluctuations and restrictions.
-  Import-export regulations.
-  Customs matters.
-  Ability to secure credit and funding.
-  Longer payment cycles.
-  Foreign collection problems.
-  Political and transportation risks.
-  Economic turmoil.

                                       17


<PAGE>



In addition, foreign sales involve uncertainties arising from local business
practices and cultural considerations, and risks associated with international
trade transactions.

Our operating results could be adversely affected by fluctuations in the value
of foreign currencies.

         Over the past two years, the valuations of many foreign currencies have
fluctuated significantly relative to the U.S. dollar. The Korean won and
Japanese yen, in particular, have fluctuated in value due in part to the
economic problems experienced by these countries.

         Our international sales are generally denominated in U.S. dollars.
However, we may be required in the future, due to competition, to denominate
sales in the foreign currencies of certain countries or in the new Euro for some
of our European customers. As a result, fluctuations in currency exchange rates
may have a significant effect on our sales, even in the absence of an increase
or decrease of unit sales to foreign customers. A strong U.S. dollar could have
a material adverse effect on our ability to compete internationally. We also
purchase a great deal of our key raw materials and equipment from foreign
countries, primarily Japan. A weak U.S. dollar could make our purchases more
expensive. We have not, to date, engaged in substantial hedging transactions for
our foreign exchange risks. If any of our future international sales are
denominated in foreign currencies, we may find it necessary to engage in rate
hedging activities with respect to certain exchange rate risks. There can be no
assurance that we will engage in such exchange rate hedging or that any such
activities will successfully protect against such risks.

Because we depend on a few large customers, our operating results would be
adversely affected by the loss of one or two customers.

         A few large customers have accounted for a significant portion of our
net sales. In fiscal 1999 and fiscal 1998, sales to our top 10 customers
accounted for approximately 70% and 76% of net sales, respectively. Motorola,
our largest customer, accounted for 23% of net sales in 1999 and 17% of net
sales in 1998. We expect that sales of our products to a limited number of
customers will continue to account for a high percentage of our net sales in the
foreseeable future. In addition, a substantial portion of our products are
designed to address the needs of individual customers. Our future success
depends largely upon the decisions of our current customers to continue to
purchase our products, as well as the decisions of prospective customers to
develop and market systems that incorporate our products.

Because we rely on a limited number of suppliers, our operating results would be
adversely affected if a few suppliers are unable to meet our needs.

         We have a limited number of suppliers for certain critical raw
materials, components, services and equipment. Recently, we have experienced
difficulty in obtaining ceramic surface mount packages used in the production of
bandpass filters. There are only a few ceramic package and wafer producers
worldwide who have the expertise and capacity necessary to satisfy our require-



                                       18


<PAGE>


ments. Most of these suppliers are based in Japan. A failure by us to anticipate
demand for materials or of our suppliers to provide sufficient amounts of
material could result in raw material shortages. If we are unable to satisfy our
requirements for raw materials or to obtain and maintain appropriate equipment,
our business, financial condition and results of operations would be materially
adversely affected. There can be no assurance that we will be able to secure
adequate supplies of materials, components, services or equipment.

A disruption in our Costa Rican operation could have an adverse impact on our
operating results.

         During 1999, net sales from our Costa Rican operation accounted for
approximately 46.9% of consolidated net sales, 39.5% of operating income and 36%
of total net fixed assets. Operating a production facility in Costa Rica carries
unknown risks of disruption including:

-  Government intervention
-  Wars
-  Currency fluctuation
-  Labor disputes
-  Earthquakes
-  Volcanic eruptions
-  Hurricanes
-  Floods
-  Other events

         Any such disruptions could have a material adverse effect on our
business, results of operations and financial condition.

Declining selling prices for some of our key products could have an adverse
impact on our operating results.

         Selling prices for base station filters for GSM applications have
declined due to competitive pricing pressures and to the use of the newer
surface mount package devices that are smaller and less expensive than previous
generation filters. We believe that the conversion to lower priced, surface
mount package filters will occur in the CDMA base station market. Sales of our
products for CDMA base station applications were approximately 25% of total net
sales in fiscal 1999 and 28% in 1998. We believe that our revenue from base
station filters may be lower in fiscal 2000 compared to fiscal 1999. We believe
that our sales of SAW filters for subscriber handsets in the CDMA market will
increase in fiscal 2000 compared to fiscal 1999. However, we are uncertain
whether or not the additional revenue from handset filters will offset the
projected lower revenue from base station filters in fiscal 2000. Handset
filters typically produce lower gross margins than the gross margins produced by
base station filters. Prices for handset filters will continue to decline as
they become smaller and as competitive pricing pressure increases.



                                       19


<PAGE>



If we fail to develop new products, our operating results in the future will be
adversely affected.

         Future growth of our business is dependent on our ability to develop
new or improved SAW devices on a timely basis. Our product development resources
are limited, requiring us to allocate such resources among a limited number of
product development projects. Failure by us to allocate our product development
resources to products that meet market needs could have a material adverse
effect on our future growth. The success of new products may also depend on
timely completion of new product designs, quality of new products and market
acceptance of these products.

         Recently, we announced our intent to offer an expanded line of SAW
filters for the wireless market, including SAW RF filters. To date, we have
completed some designs for these RF filters and we have begun to receive orders
from some customers for these products. We have also begun to order and receive
the materials and equipment necessary to enter this market. However, to date we
have produced RF filters in limited volumes and have just begun to ship these
filters to customers. There is no assurance that we will be successful in our
efforts to introduce filters for the wireless telecommunications market.

If we experience a decline in our manufacturing yields, our operating results
will be adversely affected.

         The manufacture of SAW devices involves complex processes that may
experience reduced yields from time to time, the causes of which are often
difficult to determine. Reduced yields have not been a significant factor in
limiting production capacity in the past. However, a reduction in yields at any
stage of the manufacturing process would have a material adverse effect on our
ability to meet our quoted delivery times and cost of production, which would
have an adverse impact on our operations and profitability.

If we are unable to achieve a timely ramp-up of our production capacity, we will
not be able to grow our revenue as planned.

         We have initiated a capital expenditure program estimated at over $32
million for fiscal 2000 to increase our manufacturing output to enable us to
grow our revenue. This plan includes new fab capacity in Orlando and new
assembly capacity in Costa Rica, as well as expanding our building in Costa
Rica. Any delay in ramping-up our capacity will have a material adverse impact
on our ability to introduce new products and on our ability to grow revenue.









                                       20


<PAGE>



If one or more customers cancel or terminate purchase orders or delay deliveries
with short notice, our operating results could be adversely affected.

         Purchase orders may be large and intended to satisfy customers'
long-term needs and are subject to cancellation or modification with very short
notice. Accordingly, our backlog is not necessarily indicative of future product
sales, and a delay or cancellation of a small number of purchase orders may
adversely impact our operations. In addition, our expense levels are based in
part on our expectations of future product sales and therefore are relatively
fixed in the short term. Operating results would be materially adversely
affected if net sales were below expectations.

New competitive products or technologies may be developed which could reduce
demand for our products.

         Our business would be adversely affected if technology supported by our
products becomes obsolete or fails to gain widespread commercial acceptance.
Accordingly, we believe that continued significant expenditures for research and
development will be required. In the past, we have depended on customer funded
non-recurring engineering charges for a portion of our product development
expenditures. There can be no assurance that such customer funding will continue
in the future, which may require us either to reduce the scope of our product
development or to allocate increased internal resources for such purposes. Our
future financial condition and operating results could be materially adversely
affected if we are unable to design, develop and introduce new products on a
timely basis. Competing technologies, including digital filtering technology,
direct conversion or other such technologies, could develop which could replace
or reduce the use of SAW filters for certain applications. Any development of a
cost effective, new technology that replaces SAW filtering technology or reduces
the need for SAW filtering technology could have a material adverse effect on
our business, financial condition and results of operations.

We expect competition to increase which could result in lower selling prices and
lower revenue which would have an adverse affect on our operating results.

         Competition in the markets for our products is intense. We compete
against large international companies that have substantially greater financial,
technical, sales, marketing, distribution and other resources. In addition, we
may face competition from companies that currently manufacture SAW devices for
their own internal requirements, as well as from a number of our customers that
have the potential to develop an internal supply capability for SAW devices. We
expect competition to increase from both established and emerging competitors,
as well as from internal capabilities developed by certain customers. We also
believe that a significant source of competition may come from alternative
technological approaches. Our ability to compete effectively in our target
markets depends on a variety of factors both within and outside of our control,
including timing and success of new product introductions, availability of
manufacturing capacity, the rate at which customers incorporate our components
into their products, our ability to respond to price decreases, availability of
technical personnel, sufficient supplies of raw materials, the quality,
reliability and price of products and general economic conditions. There can be
no assurance that we will be able to compete successfully in the future.


                                       21


<PAGE>



If we are not able to protect our intellectual property or if we infringe on the
intellectual property of others, our business and our operating results could be
adversely affected.

         We rely on a combination of patents, copyrights and trade secrets to
establish and protect our proprietary rights. There can be no assurance that
patents will issue from any of our pending applications or that any claims
allowed from existing or pending patents will be sufficiently broad to protect
our technology. In addition, there can be no assurance that any patents issued
to us will not be challenged, invalidated or circumvented, or that the rights
granted will provide proprietary protection. Litigation may be necessary to
enforce our patents, trade secrets and other intellectual property rights, to
determine the validity and scope of the proprietary rights of others or to
defend against claims of infringement. Such litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on our business, results of operations and financial condition regardless
of the final outcome of the litigation. We are not currently engaged in any
patent infringement suits nor have we been threatened with any such suits in
recent years. Despite our efforts to maintain and safeguard our proprietary
rights, there can be no assurances that we will be successful in doing so or
that our competitors will not independently develop or patent technologies that
are substantially equivalent or superior to our technologies. If any of the
holders of these patents assert claims that we are infringing such patents, we
would incur substantial litigation expenses. In addition, if we were found to
infringe, we would be required to pay substantial damages, pay royalties in the
future or be enjoined from infringing on such patents in the future.

A failure to attract and retain qualified individuals for critical positions
could have an adverse impact on our business, financial condition and results of
operations.

         Our success, in part, depends on the performance of a number of key
management and technical personnel, the loss of one or more of whom could have a
material adverse effect on our business. Our success will also depend, in part,
on our ability to attract and retain qualified professional, technical,
production, managerial and marketing personnel. Competition for such personnel
in our industry is very intense. While we have not yet experienced significant
problems in recruiting or retaining qualified personnel, we cannot be certain
that such problems will not arise in the future.

We could be subject to fines, suspension of production or cessation of
operations if we fail to comply with the many laws and government regulations
applicable to our business.

         We are subject to a variety of federal, state and local laws, rules and
regulations relating to the discharge and disposal of toxic, volatile and other
hazardous chemicals used in our manufacturing processes and to export controls.
The failure to comply with present or future regulations could result in the
imposition of fines, suspension of production or a cessation of operations. Such
regulations could require us to acquire significant equipment or to incur
substantial expense in order to comply with such regulations. Any past or
future failure to control the use of or the discharge of toxic hazardous
substances or to comply with export regulations could subject us to future
liabilities and could have a material adverse effect on our business, results of
operations and financial condition.


                                       22


<PAGE>



         In addition, the increasing demand for wireless communications has
exerted pressure on regulatory bodies worldwide to adopt new standards for such
products and services. The delays inherent in this governmental approval process
have in the past, and may in the future, cause the cancellation, postponement or
rescheduling of the installation of communications systems by our customers. Any
such delays may have a material adverse effect on the sale of products to these
customers.

Our manufacturing facilities are located in areas prone to natural disasters.

         We could suffer disruptions due to natural disasters which could have
an adverse affect on our operations. Hurricanes, tropical storms, flooding,
tornadoes, and other natural disasters are common events for the southeastern
part of the United States and in Costa Rica. Our main facility is located in
Orlando, Florida which is an area prone to hurricanes, tornadoes, flooding and
other natural disasters. Our Costa Rica facility is also prone to these
disasters as well as mudslides, earthquakes and volcanic eruptions. Any
disruptions from these or other events would have a material impact on our
operations and financial results.

Year 2000 problems could have an adverse affect on our operations.

         We are subject to potential Year 2000 problems affecting our internal
systems, the systems of our suppliers and our customers. If any of these are not
corrected for Year 2000 problems, our operations could be materially impacted.
We have begun a complete examination of these systems and a detailed report on
our progress to date is included in Item 7 in this Form 10-K.

There are many factors that could cause the trading price of our stock to
decline.

Our stock price has been volatile.

         There has been significant volatility in the market price of our common
stock, as well as in the market price of securities of technology-based
companies and the U.S. stock market overall. Some of the factors that could
affect our stock price include:

-  Variations in our operating results or the operating results of our
    customers or competitors.
-  Announcements of new products by us or by our competitors.
-  Gain or loss of significant contracts.
-  Announcements of technological innovations.
-  Acquisitions by us or our competitors.
-  Changes in analysts' estimates of our financial performance.
-  Government regulatory action.
-  Developments or disputes regarding proprietary rights.
-  General trends in the industry.
-  Economic or stock market conditions.



                                       23


<PAGE>



         Additionally, in the past, securities class action litigation often has
been brought against companies following periods of volatility in the market
price of their securities. We may in the future be the target of similar
litigation. Securities litigation could result in substantial costs and damages
and divert management's attention and resources.

Developments in the wireless communications market could harm the market price
of our stock.

         Adverse developments or announcements relating to the wireless
communications market involving one or more of our large customers, competitors
or other companies involved in the sale of products for wireless communication
could have an adverse effect on the market price of our stock even though the
actual impact of such developments could be immaterial to our results of
operations and financial condition.

Certain anti-takeover provisions could make it more difficult for others to
acquire us.

         Certain anti-takeover provisions of the Florida Business Corporation
Act could have the effect of making it more difficult for a third party to
acquire us or of discouraging a third party from attempting to acquire us. These
anti-takeover measures could result in a lower value to be received by our
shareholders if our acquisition was not approved by our Board of Directors. Such
provisions could limit or depress the price that certain investors might be
willing to pay in the future for shares of our stock. We are also authorized to
issue preferred stock, with rights senior to our common stock, without the
necessity of shareholder approval. We have no present plans to issue shares of
preferred stock. However, issuance of preferred stock could have the effect of
making it more difficult for a third party to acquire a majority of our
outstanding voting stock.

ITEM 2.  PROPERTIES

         Our principal administrative, engineering and manufacturing facilities
are located in one owned building of approximately 93,000 square feet and one
leased building of approximately 1,365 square feet, both located in Orlando,
Florida. We also own a production facility located in San Jose, Costa Rica of
approximately 32,000 square feet. We are in the process of adding approximately
27,000 square feet to this facility over the next 10 months. We also have a
7,600 square foot leased facility in Bowling Green, Kentucky used for our
chemical sensor development operation, and we also lease a small sales office in
Seoul, South Korea. We believe our facilities, along with the planned expansion,
are adequate to meet our current needs and that suitable additional or
alternative space will be available, as needed, on commercially reasonable
terms. Our Orlando facility is encumbered by an Industrial Development Revenue
Bond maturing in 2010.

         Federal, state and local laws and regulations pertaining to the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, have not had and are not expected to have a
material effect on capital expenditures, earnings or our competitive position.


                                       24


<PAGE>



ITEM 3.  LEGAL PROCEEDINGS

         There were no material legal proceedings either by or against us during
fiscal 1999 or ongoing as of the date of this Form 10-K.

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

         No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1999.

         The Securities and Exchange Commission recently amended Rule 14a-4,
which governs our use of discretionary voting authority with respect to
shareholder proposals. SEC Rule 14a-14(c)(1) provides that, if the proponent of
a shareholder proposal fails to notify the company at least 45 days prior to the
month and day of mailing the prior year's proxy statement, the company's
management acting as proxies would be permitted to use their discretionary
authority at the company's next annual meeting of shareholders if the proposal
were raised at the meeting without any discussion of the matter in the proxy
statement. For purposes of our 2000 Annual Meeting of Shareholders, this
deadline is October 29, 1999.




























                                       25



<PAGE>



PART II.

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

         Our shares are quoted on the NASDAQ National Market under the symbol
"SAWS." The following table sets forth the high and low sales price per share of
our common stock as reported by the NASDAQ National Market for the periods
indicated (all prices are adjusted for the two-for-one stock split in August
1999):
<TABLE>
<CAPTION>
                                                       High           Low
                                                       ----           ---
<S>                                                   <C>            <C>
Fiscal Year Ended September 30, 1998
1st Quarter                                           $23.38         $10.50
2nd Quarter                                            15.50          10.47
3rd Quarter                                            16.25           6.19
4th Quarter                                             9.63           5.13
Fiscal Year Ended September 30, 1999
1st Quarter                                           $11.94          $5.91
2nd Quarter                                            17.59           8.75
3rd Quarter                                            23.63          15.25
4th Quarter                                            40.75          22.31
</TABLE>

         The last reported sale price of our common stock on the NASDAQ National
Market on September 30, 1999 was $35.00 per share.

         As of October 29, 1999, there were 42,250,489 shares of common stock
outstanding (net of 417,705 shares held in treasury stock) held by approximately
120 shareholders of record. Many shareholders hold their shares in "street
name." We believe we have more than 4,000 beneficial owners of our common stock.

         Historically, we have not paid dividends on our common stock. Because
we believe we may require additional capital in the future, we intend to retain
our earnings and do not anticipate paying cash dividends on our common stock in
the foreseeable future.

ITEM 6.  SELECTED FINANCIAL DATA

         The following is a summary of selected financial data as of and for
each of the five years ended September 30, 1999. The historical consolidated
financial data has been derived from the historical financial statements, which
financial statements have been audited by Ernst & Young LLP, independent
auditors, as indicated in their report. These data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our Consolidated Financial Statements appearing elsewhere in
this document.




                                       26


<PAGE>



Consolidated Statements of Income Data:
<TABLE>
<CAPTION>
                                                             Year Ended September 30,
                                           -------------------------------------------------------------
                                           1999          1998          1997         1996(1)         1995
                                           ----          ----          ----         -------         ----
                                                       (in thousands, except per share data)

<S>                                     <C>            <C>            <C>           <C>           <C>
Net sales                               $100,276       $97,700        $85,041       $59,173       $32,473
Cost of sales                             42,224        44,811         38,569        28,338        14,148
                                        --------       -------        -------       -------       -------
Gross profit                              58,052        52,889         46,472        30,835        18,325
Operating expenses:
 Selling expenses                          5,637         6,008          5,384         4,024         3,139
 Gen. and Adm. expenses(1)                 4,319         4,693          5,842        18,852         4,244
 R&D expenses                              5,627         4,285          3,756         1,954         1,669
                                        --------       -------        -------       -------       -------
   Total operating expenses               15,583        14,986         14,982        24,830         9,052
                                        --------       -------        -------       -------       -------
Operating income                          42,469        37,903         31,490         6,005         9,273
Other income (expense), net                4,737         3,542          1,785           343          (144)
                                        --------       -------        -------       -------       -------
Income before income taxes                47,206        41,445         33,275         6,348         9,129
Income taxes                              16,522        15,240         12,556         6,568         3,405
                                        --------       -------        -------       -------       -------
Net income (loss)                       $ 30,684       $26,205        $20,719       $  (220)      $ 5,724
                                        ========       =======        =======       =======       =======

Net income (loss) per share:
   Basic(2)                             $   0.73       $  0.62        $  0.50       $ (0.01)      $  0.21
                                        ========       =======        =======       =======       =======
   Diluted(2)                           $   0.72       $  0.60        $  0.49       $ (0.01)      $  0.16
                                        ========       =======        =======       =======       =======
Shares used in per share calculations:
   Basic                                  41,946        42,360         41,092        34,734        27,816
                                        ========       =======        =======       =======       =======
   Diluted                                42,815        43,356         42,668        40,486        36,542
                                        ========       =======        =======       =======       =======
<FN>
(1) General and  administrative  expenses for 1996 include  $12,925,000  of ESOP
    compensation expense.

(2)  Computed on the basis described in Notes to Consolidated Financial State-
     ments.
</FN>
</TABLE>


<TABLE>
<CAPTION>
                                                                   September 30,
                                       --------------------------------------------------------------------
                                       1999              1998           1997           1996            1995
                                       ----              ----           ----           ----            ----
                                                                   (in thousands)
<S>                                    <C>             <C>            <C>             <C>            <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and
 short-term investments                $115,274        $ 84,131       $ 58,073        $27,743        $  2,821
Working capital                         135,200          99,038         68,658         36,307           7,490
Total assets                            191,579         148,710        120,506         75,524          23,802
Long-term debt, less
 current maturities                       1,790           2,169          2,868          3,907           6,916
Total shareholders' equity             $158,399        $123,877       $ 98,218        $62,086        $(20,265)

</TABLE>



                                       27


<PAGE>



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

         We maintain our records on a fiscal year ending on September 30 of each
year and all references to a year refer to the fiscal year ending on that date.

Overview
--------
         We were incorporated in January 1979 to design, develop, manufacture
and market a broad range of electronic components based on SAW technology for
use in telecommunications, data communications, video transmission, military and
space systems and other applications. Our focus has been on the high-end
performance spectrum of the market, and our primary products are SAW bandpass
filters, resonators, delay lines, oscillators, SAW-based subsystems and chemical
sensors. Our products were initially concentrated in the military and space
systems market, with over half of net sales in 1992 attributable to this market
segment. Since then, we made a strategic decision to target commercial markets,
which accounted for approximately 94% of net sales in 1999 and 92% of net sales
in 1998. We have witnessed significant growth in our international markets over
the last five years. International sales accounted for 41% of net sales in 1999.

         We derive revenue from high-volume commercial production components,
military/industrial production components and engineering services and products.
Non-recurring engineering revenue is included in engineering services and
products and relates to the design and development of custom devices and
delivery of one or more prototype units. In all cases, revenue is recognized
when the parts or services have been completed and units, including prototypes,
have been shipped.

         Net sales increased 14.9% from 1997 to 1998, and 2.6% from 1998 to
1999. The growth in net sales is attributable to growth in the wireless
communications market to which we supply SAW bandpass filters for cellular and
PCS telephone base stations and handheld subscriber telephones. We have a broad
product line of SAW filters, components, and subsystems with average selling
prices ranging from under $1 for RF filters to over $10,000 for complex
sub-systems.

         For 1999, net sales to our top 10 customers accounted for approximately
70% of net sales, compared to 76% in 1998, with the top five customers
accounting for approximately 55% of net sales in 1999, compared to 61% in 1998.
We expect that sales of products to a limited number of customers will continue
to account for a high percentage of our net sales in the foreseeable future.








                                       28


<PAGE>



Results of Operations
---------------------
         The following table sets forth, for the periods indicated, the
percentage relationship of certain items from our statements of income to net
sales:
<TABLE>
<CAPTION>
                                                       Percentage of Net Sales
                                                       Year Ended September 30,
                                              ----------------------------------------
                                              1999              1998              1997
                                              ----              ----              ----
<S>                                           <C>              <C>               <C>
Net sales                                     100.0%           100.0%            100.0%
Cost of sales                                  42.1             45.9              45.4
                                              -----            -----             -----
Gross margin                                   57.9             54.1              54.6
Operating expenses:
 Selling expenses                               5.6              6.1               6.3
 Gen. & Adm. expenses                           4.3              4.8               6.8
 R&D expenses                                   5.6              4.4               4.4
                                              -----            -----             -----
   Total operating expenses                    15.5             15.3              17.5
                                              -----            -----             -----
Operating income                               42.4             38.8              37.1
Other income-net                                4.7              3.6               2.1
                                              -----            -----             -----
Income before income taxes                     47.1             42.4              39.2
Income taxes                                   16.5             15.6              14.8
                                              -----            -----             -----
Net income                                     30.6%            26.8%             24.4%
                                              =====            =====             =====
</TABLE>

Comparison of Years Ended September 30, 1998 and 1999
-----------------------------------------------------
         Net Sales. Net sales increased 2.6% from $97.7 million in 1998 to
$100.3 million in 1999. The increase was due to an increase in shipments of
bandpass filters for CDMA handsets, which increased from 28% of net sales in
1998 to 31% of net sales in 1999. Sales of filters for base station applications
decreased 3% from 1998 due to lower average selling prices. Sales for military
and space applications also declined from 9% of sales in 1998 to 6% of sales in
1999. International sales increased from 37% of net sales in 1998 to 41% of net
sales in 1999 due to the recovery of the South Korean market, which accounted
for 17% of net sales in 1999 compared to 14% of net sales in 1998. Sales to all
other international markets also increased slightly in 1999 compared to 1998.

         Gross Margin. The gross margin increased from 54.1% of net sales in
1998 to 57.9% of net sales in 1999. The increase is attributed to higher yields,
reduced prices for certain raw materials, a lower labor base for much of 1999
compared to 1998 and a shift of more production to our low-cost, high-volume
Costa Rican operation. Our Costa Rican operation accounted for 37.5% of net
sales in 1998 compared to 46.9% of net sales in 1999. We believe that we will
produce a significantly higher volume of parts in FY2000 compared to 1999;
however, these newer parts will likely have substantially lower average selling
prices compared to products sold in 1999. As a result, we believe that while
revenue may increase in 2000, our gross margin will decline as a percent of net
sales because the newer parts are subject to more competitive pricing and the
cost to manufacture will be higher as a percent of revenue compared to products
sold in 1999.


                                       29


<PAGE>



         Selling Expenses. Selling expenses decreased in absolute dollars and as
a percentage of net sales from 1998 to 1999. The decrease is due to reduced
corporate sales expense and reduced commissions paid to independent sales
representatives due in part to our opening of a Korean sales office which
reduced the cost of selling into the Korean market.

         General and Administrative Expenses. General and administrative
expenses decreased in absolute dollars and as a percentage of net sales from
1998 to 1999. The decrease is due to reduced corporate administrative staff in
1999 compared to 1998. In addition, the general and administrative costs for
1998 included various costs associated with the acquisition of Microsensor
Systems, Inc. and costs to transfer certain of its operations to Orlando.

         Research and Development Expenses. Research and development expenses
increased 31.3% from $4.3 million in 1998 to $5.6 million in 1999. The increase
is due to more R&D programs undertaken, including costs associated with
developing VaporLab, which is a handheld SAW-based chemical detector, costs
associated with developing SAW-based RF filters and other programs.

         Other Income. Other income increased $1.2 million from 1998 to 1999 due
to increased interest income on our cash and investment portfolio, which
increased from $84 million in 1998 to $115 million in 1999.

         Income Tax Expense. The provision for income tax as a percentage of
income before tax was 36.8% in 1998 compared to 35% in 1999. The slightly lower
effective rate for 1999 compared to 1998 relates to increased tax exempt
interest earned, the benefit from our foreign sales corporation, increased R&D
tax credit due to increased R&D expenditures and a lower effective rate for
state income taxes. We believe that our effective tax rate will be between 34%
and 35% for 2000.

Comparison of Years Ended September 30, 1997 and 1998
-----------------------------------------------------
         Net Sales. Net sales increased 14.9% from $85.0 million in 1997 to
$97.7 million in 1998. The increase was due to an increase in shipments of CDMA
subscriber handset filters which grew from 16% of net sales in 1997 to 28% of
net sales in 1998. Sales of GSM base station filters declined from $16.1 million
in 1997 to $14.8 million in 1998 due to the conversion to smaller, lower cost,
surface mount package filters in 1998 compared to larger, higher average price,
dual-in-line package filters sold in 1997. Sales of CDMA base station filters
were essentially unchanged from the previous year. International sales decreased
from 43% of total sales in 1997 to 37% of total sales in 1998 due to the
economic recession in Asia and reduced revenue from GSM base station filters to
European customers. Sales to South Korean customers decreased from 16% of total
revenue in 1997 to 14% of total revenue in 1998. Sales to South Korean customers
dropped in the fourth quarter of 1998 to approximately 5% of total sales due to
the economic turmoil experienced in that country and the decline in consumer and
industrial spending. Sales for military and space systems decreased from $9.8
million in 1997 to $8.8 million in 1998.



                                       30


<PAGE>



         Gross Margin. Gross margin decreased slightly from 54.6% in 1997 to
54.1% in 1998 due to lower gross profit margin on filters for subscriber
handsets, which increased as a percentage of overall revenue, lower gross profit
margin on surface mount GSM base station filters and competitive pricing
pressure. Offsetting these factors were improvements in manufacturing
automation, improved yields and higher productivity per worker in 1998 compared
to 1997.

         Selling Expenses. Selling expenses increased 11.6% from $5.4 million in
1997 to $6.0 million in 1998 due to commissions paid to independent sales
representatives and increased costs for the internal sales personnel and related
expenses. Selling expenses decreased as a percentage of overall sales from 6.3%
in 1997 to 6.1% in 1998.

         General and Administrative Expenses. General and administrative
expenses decreased 19.7% from $5.8 million in 1997 to $4.7 million in 1998 due
to reduced corporate administrative staff in 1998 compared to 1997, lower bonus
payments and no grants of compensatory stock options in 1998 compared to 1997.

         Research and Development Expenses. General and administrative expenses
increased 14.1% from $3.8 million in 1997 to $4.3 million in 1998 due to
additional personnel and expanded research and development efforts, particularly
for the development of SAW-based chemical sensors. A significant portion of our
development activities are conducted in connection with the design and
development of devices for specific customer applications, which are paid for by
these customers and are classified as NRE items. The revenue generated from
these items is included in net sales and the cost is reflected in cost of sales
rather than in research and development expenses.

         Other Income. Other income increased in 1998 due to interest earned on
the higher cash and investment balances in 1998 compared to 1997 and lower
interest expense.

         Income Tax Expense. The provision for income taxes as a percentage of
income before tax was 36.8% in 1998 compared to 37.7% in 1997. The slightly
lower effective tax rate for 1998 relates to increased interest earned on
tax-exempt securities, benefit from our foreign sales corporation and a lower
effective rate for state income taxes.

Liquidity and Capital Resources
-------------------------------
         To date, we have financed our business through cash generated from
operations, bank borrowings, lease financing, the private sale of securities,
our May 1, 1996 initial public offering and the July 1, 1997 follow-on public
offering. We require capital principally for equipment, financing of accounts
receivable and inventory, investment in product development activities and new
technologies, expansion of our operation in Costa Rica and Orlando and potential
acquisitions of new technologies or compatible companies. For the year ended
September 30, 1999, we generated net cash from operating activities of $42.4
million, consisting primarily of net income of $30.7 million, $7.2 million of
depreciation and amortization and an increase of $6.4 million in deferred taxes,
offset by a $7.1 million increase in accounts receivable.


                                       31


<PAGE>



         We have a revolving credit agreement totaling $30.0 million from
SunTrust Bank, Central Florida, N.A. available through March 31, 2000. There
were no balances outstanding on this credit line at September 30, 1999.

         We made capital expenditures of approximately $11.4 million during the
year ended September 30, 1999. We intend to spend approximately $32 million over
the next 12 months on capital equipment and facilities to increase capacity.

         In the fourth quarter of fiscal 1998, the Board of Directors authorized
us to repurchase up to 2,000,000 shares of common stock. To date, 1,129,810
shares have been repurchased under this program, of which 358,810 shares costing
approximately $2.9 million were purchased in the year ended September 30, 1999.
We expect to continue to repurchase shares of common stock from time to time in
the future. The repurchased shares will be used to satisfy stock option
exercises and issuance of shares under other stock-related benefit programs.

         We believe that our present cash position, together with our credit
facility and funds expected to be generated from operations, will be sufficient
to meet our projected working capital and other cash requirements throughout the
next 12 months. Thereafter, we may require additional equity or debt financing
to address our working capital needs or to provide funding for capital
expenditures. There can be no assurance that events in the future will not
require us to seek additional capital sooner or, if so required, that it will be
available on acceptable terms, if at all.

Foreign Operations, Export Sales and Foreign Currency
-----------------------------------------------------
         We established a subsidiary in Costa Rica in 1996, began operations in
the second quarter and commenced shipments in the third quarter of 1996. As of
September 30, 1999, we had a net investment in fixed assets of approximately
$16.7 million in this operation and recorded net sales of approximately $47.1
million with an operating profit of approximately $16.8 million for 1999. The
functional currency for the Costa Rican subsidiary is the U.S. dollar as sales,
most material cost and equipment are U.S. dollar denominated. The effects of
currency fluctuations of the local Costa Rican currency are not considered
significant and are not hedged.

         In 1996, we established a "foreign sales corporation" pursuant to the
applicable provisions of the Internal Revenue Code to take advantage of income
tax reductions on export sales. For 1999, the cost to operate this subsidiary
was less than $10,000, and it has less than $10,000 in identifiable assets.

         In 1999, we opened a sales and service office in Seoul, South Korea to
assist in our Asian sales efforts. The cost to operate this subsidiary in 1999
was less than $200,000.





                                       32


<PAGE>



         International sales are denominated in U.S. dollars and represented
41%, 37% and 43% of net sales for the years ended September 30, 1999, 1998 and
1997, respectively. Sales to the European market accounted for 18%, 18% and 22%
for these same periods, respectively, and sales to the Asian and Pacific Rim
markets, principally to South Korea were 18%, 16% and 17%, respectively for
these same periods. See Notes 11 and 12 to the Consolidated Financial
Statements.

         Over the past year, the valuations of many foreign currencies have
fluctuated relative to the U.S. dollar. The Korean won and Japanese yen, in
particular, have fluctuated in value due in part to the economic events
experienced by these countries over the past year. A stronger U.S. dollar makes
it more difficult for companies in these countries to purchase U.S. products and
makes it more difficult for us to compete against SAW producers based in these
countries. A weaker U.S. dollar may make it more expensive for us to buy certain
raw materials and equipment from Japanese suppliers.

         The new common European currency, the Euro, made its debut in January
1999. Approximately 20% of our sales are to European customers. To date, none of
our customers or suppliers has requested us to transact business in the Euro. At
this time, the impact of this new currency is not determinable.

Recently Issued Accounting Standards
------------------------------------
         Please see Note 1 to the Consolidated Financial Statements for a
discussion of new pronouncements.

Impact of Inflation
-------------------
         We believe that inflation has not had a material impact on operating
costs and earnings.

Year 2000 Compliance
--------------------
         The Year 2000 issue relates to the method used by computer systems and
software for recognizing the two-digit year code as the year 1900, instead of
2000. Computer hardware and software describes traditional information
technology systems such as enterprise resource planning systems, accounting
systems, fax servers, print servers, desktop computers and applications,
telephone/PBX systems, as well as other systems such as manufacturing equipment,
facilities equipment and security systems and imbedded hardware. Some of our
computer hardware and software may recognize a year represented by "00" as 1900,
instead of 2000. This could result in unexpected behavior in the affected
hardware or software. These systems will need to be able to accept four-digit
entries to distinguish years beginning with 2000 from prior years. As a result,
systems that do not accept four-digit year entries will need to be upgraded or
replaced to comply with such Year 2000 requirements.




                                       33


<PAGE>



Our State of Readiness - Year 2000
----------------------------------
         Our Year 2000 inventory, assessment, remediation and testing began in
January 1998. We believe that we have substantially completed the tasks for a
successful Year 2000 transition.

         To certify Year 2000 compliance, we employed two methods. Vendor
certification was the primary method utilized. In order for a system to be
considered compliant from vendor certification, we required a written statement
from the vendor, as well as a description of the testing methods used. If this
information was not available or was not otherwise considered adequate, we
performed internal tests. These tests include the use of a certified hardware
test program, the examination of the software source code by our Software
Engineering Department or Information Systems Department and advancing the date
past January 1, 2000.

         We also surveyed key suppliers. As of October 29, 1999, 100% of those
surveyed have responded. Of those surveyed, all except one are already
compliant. The sole remaining key supplier expects to be compliant by December
31, 1999. No suppliers responded that they would fail to be Year 2000 compliant.

         We have determined, through surveys of our key customers, that all of
them either have achieved full Year 2000 compliance or will be compliant by
December 31, 1999.

Costs to Address the Year 2000 Issues
-------------------------------------
         The bulk of our costs to address Year 2000 issues are internal staff
time estimated at less than $200,000 and the cost to upgrade our main MRP
software which is certified as Year 2000 compliant. The cost of this upgrade,
which was purchased in fiscal 1998, was $48,000. The cost to complete the Year
2000 compliance was funded out of fiscal 1998 and 1999 operating cash flow.

The Risks of the Year 2000 Issues
---------------------------------
         Our products generally are not date sensitive and, therefore, are not
subject to Year 2000 defects or problems. We believe that our primary
manufacturing, engineering, financial and administrative systems are Year 2000
compliant. We believe that the greatest potential risk from Year 2000 issues
relates to the possibility that a major supplier or customer whose systems are
not Year 2000 compliant may be unable to meet delivery requirements for an
important raw material or piece of equipment or may not be able to accept
shipment of our products until they correct their Year 2000 problem.







                                       34


<PAGE>



         We believe that the Year 2000 issue will not pose significant
operational problems. However, if all Year 2000 issues are not properly
identified, or assessment, remediation and testing are not effected in a timely
fashion, there can be no assurance that the Year 2000 issue will not materially
adversely impact our results of operations or adversely affect relationships
with customers, vendors or other relevant parties. Additionally, there can be no
assurance that the Year 2000 issues of other entities will not have a material
adverse impact on our systems or results of operations.

Our Contingency Plans - Year 2000
---------------------------------
         We have begun, but not yet completed, a comprehensive analysis of the
operational problems and costs (including loss of revenues) that could
reasonably occur from any failure by us or third parties to complete efforts
necessary to achieve Year 2000 compliance on a timely basis. A contingency plan
has been developed for dealing with the most likely, worst-case scenario. This
worst-case scenario includes difficulties in customer billing, order processing,
disruptions in our receipt of raw material, loss of power and equipment
malfunction. If this worst-case scenario occurred it would harm our business.
Depending on the systems affected, these plans could include increased work
hours for our personnel or the use of contract personnel to correct (on an
accelerated schedule) any Year 2000 problems which may arise and use of manual
workarounds for information systems. We are continuing to modify this plan and
expect to have a completed plan by November 30, 1999. However, because of our
large power requirements, it is not practical to establish emergency power
systems should our electrical suppliers encounter disruption in service.

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are exposed to minimal market and interest rate risk. We manage the
sensitivity of our results of operations to these risks by maintaining a
conservative investment portfolio, which is comprised solely of highly rated,
short-term investments. We do not hold or issue derivative securities,
derivative commodity instruments or other financial instruments for trading
purposes. We are exposed to currency exchange fluctuations since we sell our
products internationally and we purchase raw materials and equipment from
foreign suppliers. We are also exposed to currency fluctuations associated with
our Costa Rican operation. We manage the sensitivity of our international sales,
purchases of raw materials and equipment and our Costa Rican operation by
denominating most transactions in U.S. dollars. We do engage in limited foreign
currency hedging transactions, principally to lock in the cost of purchase
commitments that are not denominated in U.S. dollars. At September 30, 1999, we
are committed to purchase 4,835,200 Dutch guilders (approximately $2.4 million)
under forward foreign currency contracts for the purchase of equipment.

         We are exposed to minimal interest rate risk on debt instruments as our
outstanding debt is less than $3 million, and we do not plan to use additional
debt-based financing to fund capital expenditures over the next 12 months.


                                       35


<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See Index to Consolidated Financial Statements, which appears on page
F-1 herein.

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

         None.














































                                       36



<PAGE>




Index to Consolidated Financial Statements
------------------------------------------
Report of Ernst & Young LLP, Independent Auditors...........................F-2
Consolidated Balance Sheets.................................................F-3
Consolidated Statements of Income ..........................................F-4
Consolidated Statements of Shareholders' Equity.............................F-5
Consolidated Statements of Cash Flows.......................................F-6
Notes to Consolidated Financial Statements..................................F-7

Financial Statement Schedules
-----------------------------
         All  required  information  is  included  in the Notes to  Consolidated
Financial Statements.





































                                      F-1




<PAGE>



Report of Ernst & Young LLP, Independent Auditors



Board of Directors and Shareholders
Sawtek Inc. and subsidiaries


         We have audited the accompanying consolidated balance sheets of Sawtek
Inc. and subsidiaries as of September 30, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended September 30, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sawtek Inc.
and subsidiaries at September 30, 1999 and 1998, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1999, in conformity with generally accepted accounting
principles.


                                                  ERNST & YOUNG LLP



Orlando, Florida
October 22, 1999












                                      F-2



<PAGE>
<TABLE>


                                         Sawtek Inc. and Subsidiaries
                                          Consolidated Balance Sheets
                                   (dollars in thousands, except share data)
                                                    ASSETS
<CAPTION>
                                                                                             September 30,
                                                                                         --------------------
                                                                                         1999            1998
                                                                                         ----            ----
<S>                                                                                    <C>             <C>
Current Assets:
 Cash, cash equivalents and short-term investments                                     $115,274        $ 84,131
 Accounts receivable, net                                                                18,641          11,569
 Inventories                                                                              8,052           8,453
 Deferred income taxes                                                                    1,063           1,179
 Other current assets                                                                     2,107           1,184
                                                                                       --------        --------
   Total current assets                                                                 145,137         106,516
Property, plant and equipment, net                                                       46,442          42,194
                                                                                       --------        --------
   Total assets                                                                        $191,579        $148,710
                                                                                       ========        ========

                                       LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
 Accounts payable                                                                      $  4,055        $  1,830
 Accrued wages and benefits                                                               3,638           3,198
 Other accrued liabilities                                                                1,674           1,912
 Current maturities of long-term debt                                                       379             469
 Income taxes payable                                                                       191              69
                                                                                       --------        --------
     Total current liabilities                                                            9,937           7,478
Long-term debt, less current maturities                                                   1,790           2,169
Deferred income taxes                                                                    21,453          15,186
Shareholders' Equity:
 Common stock; $.0005 par value; 120,000,000 authorized shares; 42,668,194
   issued and outstanding shares                                                             11              11
 Capital surplus                                                                         74,765          72,816
 Unearned ESOP compensation                                                                (781)           (975)
 Retained earnings                                                                       87,330          56,646
 Less common stock held in treasury, at cost; 437,705 shares in 1999 and 771,000
   shares in 1998                                                                        (2,926)         (4,621)
                                                                                       --------        --------
     Total shareholders' equity                                                         158,399         123,877
                                                                                       --------        --------
     Total liabilities and shareholders' equity                                        $191,579        $148,710
                                                                                       ========        ========


                                  See notes to consolidated financial statements.

</TABLE>
















                                      F-3


<PAGE>
<TABLE>

                                         Sawtek Inc. and Subsidiaries
                                       Consolidated Statements of Income
                                     (in thousands, except per share data)
<CAPTION>

                                                            Year Ended September 30,
                                                    -------------------------------------
                                                    1999             1998            1997
                                                    ----             ----            ----
<S>                                               <C>              <C>              <C>
Net sales                                         $100,276         $97,700          $85,041
Cost of sales                                       42,224          44,811           38,569
                                                  --------         -------          -------
Gross profit                                        58,052          52,889           46,472
Operating expenses:
 Selling expenses                                    5,637           6,008            5,384
 General and administrative expenses                 4,319           4,693            5,842
 Research and development expenses                   5,627           4,285            3,756
                                                  --------         -------          -------
     Total operating expenses                       15,583          14,986           14,982
                                                  --------         -------          -------
Operating income                                    42,469          37,903           31,490
Other income, net                                    4,737           3,542            1,785
                                                  --------         -------          -------
Income before income taxes                          47,206          41,445           33,275
Income taxes                                        16,522          15,240           12,556
                                                  --------         -------          -------
Net income                                        $ 30,684         $26,205          $20,719
                                                  ========         =======          =======
Net income per share:
  Basic                                           $   0.73         $  0.62          $  0.50
                                                  ========         =======          =======
  Diluted                                         $   0.72         $  0.60          $  0.49
                                                  ========         =======          =======
Shares used in per share calculation:
  Basic                                             41,946          42,360           41,092
                                                  ========         =======          =======
  Diluted                                           42,815          43,356           42,668
                                                  ========         =======          =======


                                  See notes to consolidated financial statements.

</TABLE>




























                                      F-4


<PAGE>
<TABLE>

                                         Sawtek Inc. and Subsidiaries
                                Consolidated Statements of Shareholders' Equity
                                                (in thousands)
<CAPTION>

                                                                       Unearned
                                  Common Stock         Capital           ESOP          Retained      Treasury
                              Shares       Amount      Surplus       Compensation      Earnings       Stock         Total
                              ------       ------      -------       ------------      --------       -----         -----
<S>                           <C>           <C>        <C>             <C>              <C>          <C>           <C>
Balance at Oct. 1, 1996       40,048        $11        $53,057         $(1,367)         $10,393                    $62,094
 Net income                                                                              20,719                     20,719
 Sale and issuance of
   common stock                1,816                    10,627                                                      10,627
 Compensatory stock
   option tax benefit                                    4,700                                                       4,700
 Stock option
   compensation                                            553                                                         553
 ESOP allocation                                                           196                                         196
 Net loss of MSI for the
   three months ended
   Sept. 30, 1997                                                                          (671)                      (671)
                              ------        ---        -------         -------          -------                   --------
Balance at Sept. 30, 1997     41,864         11         68,937          (1,171)          30,441                     98,218
 Net income                                                                              26,205                     26,205
 Issuance of common stock        804                     1,171                                                       1,171
 Compensatory stock
    option tax benefit                                   2,708                                                       2,708
 Purchase of treasury
    stock                                                                                            $(4,621)       (4,621)
 ESOP allocation                                                           196                                         196
                              ------        ---        -------         -------          -------      -------      --------
Balance at Sept. 30, 1998     42,668         11         72,816            (975)          56,646       (4,621)      123,877
 Net income                                                                              30,684                     30,684
 Issuance of common stock                               (1,054)                                        4,627         3,573
 Compensatory stock
    option tax benefit                                   3,003                                                       3,003
 Purchase of treasury
    stock                                                                                             (2,932)       (2,932)
 ESOP allocation                                                           194                                         194
                              ------        ---        -------         -------          -------      -------      --------
Balance at Sept. 30, 1999     42,668        $11        $74,765         $  (781)         $87,330      $(2,926)     $158,399
                              ======        ===        =======         =======          =======      =======      ========



                                 See notes to consolidated financial statements.


</TABLE>














                                      F-5


<PAGE>

<TABLE>
                                         Sawtek Inc. and Subsidiaries
                                     Consolidated Statements of Cash Flows
                                                (in thousands)
<CAPTION>

                                                                                   Year Ended September 30,
                                                                             ------------------------------------
                                                                             1999             1998           1997
                                                                             ----             ----           ----
<S>                                                                        <C>              <C>            <C>
Operating activities:
Net income                                                                 $ 30,684         $26,205        $20,719
Adjustments to reconcile net income to net cash provided by operating
activities:
 Depreciation and amortization                                                7,244           6,036          3,995
 Deferred income taxes                                                        6,383           6,670          7,646
 ESOP allocation                                                                194             196            196
 Stock option compensation                                                                                     553
 Loss on disposal of fixed assets                                                               616             87
 Changes in operating assets and liabilities:
 (Increase) decrease in assets:
  Accounts receivable                                                        (7,072)            758         (3,656)
  Inventories                                                                   401          (1,333)          (464)
  Other current assets                                                         (649)           (404)          (155)
  Increase (decrease) in liabilities:
  Accounts payable                                                            2,225          (1,057)           764
  Accrued liabilities                                                           202            (953)         1,701
  Income taxes payable                                                        2,787           2,709          3,923
                                                                           --------         -------        -------
Net cash provided by operating activities                                    42,399          39,443         35,309

Investing activities:
Purchase of property, plant and equipment                                   (11,428)         (7,915)       (14,624)
Short-term investments                                                      (22,635)        (26,235)       (15,764)
                                                                           --------         -------        -------
Net cash used in investing activities                                       (34,063)        (34,150)       (30,388)

Financing activities:
Proceeds from long-term debt                                                                    146            309
Principal payments on long-term debt                                           (469)         (2,166)        (1,279)
Issuance of common stock                                                      3,573           1,171         10,627
Purchase of common stock for treasury                                        (2,932)         (4,621)
                                                                           --------         -------        -------
Net cash provided by (used in) financing activities                             172          (5,470)         9,657
                                                                           --------         -------        -------

Increase (decrease) in cash and cash equivalents                              8,508            (177)        14,578
Cash and cash equivalents at beginning of period                             42,132          42,309         27,731
                                                                           --------         -------        -------
Cash and cash equivalents at end of period                                   50,640          42,132         42,309
Short-term investments                                                       64,634          41,999         15,764
                                                                           --------         -------        -------
Cash, cash equivalents and short-term investments                          $115,274         $84,131        $58,073
                                                                           ========         =======        =======




                                   See notes to consolidated financial statements.



</TABLE>








                                      F-6


<PAGE>


                                         Sawtek Inc. and Subsidiaries
                                  Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies
---------------------------------------------------
         Description of Business. Sawtek Inc. and subsidiaries (the "Company")
designs, develops, manufactures and markets a broad range of electronic signal
processing components based on surface acoustic wave ("SAW") technology. The
Company's primary products are custom-designed, high performance bandpass
filters, resonators, delay lines, oscillators, SAW-based subsystems and chemical
sensors. These products are used in a variety of microwave and RF systems, such
as Code Division Multiple Access and Global System for Mobile
communications-based digital wireless systems, digital microwave radios, WLAN,
cable television equipment and various defense and satellite systems. In fiscal
1998, the Company acquired Microsensor Systems, Inc. ("MSI"), a manufacturer of
SAW-based chemical sensors, in a transaction accounted for as a
pooling-of-interests. The Company's consolidated financial statements for all
periods prior to this acquisition have been restated to include MSI's financial
position, results of operations and cash flows.

         Basis of Presentation. The consolidated financial statements include
the Company and its wholly owned subsidiaries. All material intercompany
accounts and transactions have been eliminated. The Company's fiscal year ends
on September 30 of each year, but its fiscal quarters generally end on the
Sunday nearest the close of a quarter. For convenience, the accompanying
financial statements reflect the end of the fiscal quarter as the last day of
that calendar quarter.

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

         Financial Instruments. The Company considers all liquid interest-
earning investments with a maturity of three months or less at the date of
purchase to be cash equivalents. Short-term investments generally mature between
three months and 18 months from the purchase date. All cash equivalents and
short-term investments are classified as held to maturity and are recorded at
cost, which approximates market.

         Accounts Receivable. Potential credit losses are recognized as they are
identified and are reported as an increase to selling expenses. See Note 11 for
a discussion of concentration of risk.

         Inventories. Inventories are stated at the lower of cost (first-in,
first-out method) or market. Cost includes materials, direct labor and
manufacturing overhead. Market is defined principally as net realizable value.

         Property, Plant and Equipment. Property, plant and equipment are valued
at cost (less accumulated depreciation) computed using the straight-line method.



                                      F-7


<PAGE>



         The estimated useful lives used in computing depreciation expense are
as follows:
<TABLE>

<S>                                                           <C>
                  Building and Improvements                   10 - 30 years
                  Production and Test Equipment                4 -  8 years
                  Computer Equipment                           4 -  8 years
                  Furniture and Fixtures                       5 - 10 years
</TABLE>

         Expenditures for maintenance, repairs and renewals of minor items are
expensed as incurred. Major renewals and improvements are capitalized. Upon
disposition, the cost and related accumulated depreciation are removed from the
accounts and the resulting gain or loss is reflected in operations for the
period.

         Earnings Per Share. The Company follows Statement of Financial
Accounting Standard (SFAS) No. 128, Earnings per Share to calculate basic and
diluted earnings per share. All earnings per share amounts have been adjusted
for the two-for-one stock split in August 1999.

         Revenue Recognition. Revenues from production contracts are recorded
when the product is completed and shipped. Revenues from non-recurring
engineering ("NRE") are recognized when the parts or services have been
completed and units, including prototypes, have been shipped. Revenues from NRE
are less than 10% of total net sales for the periods reported.

         Income Taxes. The provision for income taxes includes Federal and State
taxes currently payable and deferred taxes arising from temporary differences
between income for financial and tax reporting purposes. These temporary
differences result principally from the use of accelerated methods of
depreciation for tax purposes, earnings of the Costa Rican subsidiary not
currently subject to tax, the provisions for losses on inventories and accounts
receivable, and the accounting for stock compensation. Research and development
tax credits are applied as a reduction to the provision for income taxes in the
year in which they are utilized.

         ESOP Compensation Expense. The Company accounts for ESOP shares
acquired prior to January 1, 1993 in accordance with SOP 76-3, which requires
compensation expense be measured using the cost basis of the shares when the
shares are committed to be released to employees.

         Stock-Based Compensation. The Company accounts for compensation cost
related to employee stock options and other forms of employee stock-based
compensation plans other than the ESOP in accordance with the requirements of
Accounting Principles Board Opinion 25 ("APB 25") and related interpretations.
APB 25 requires compensation cost for stock-based compensation plans to be
recognized based on the difference, if any, between the fair market value of the
stock on the date of grant and the option exercise price. The Company provides
additional pro forma disclosures as required under SFAS No. 123, "Accounting for
Stock-Based Compensation."


                                      F-8


<PAGE>



         Impairment of Long Lived Assets. In the event that facts and
circumstances indicate that the cost of assets may be impaired, an evaluation of
recoverability would be performed. If an evaluation were required, the estimated
future undiscounted cash flows associated with the asset would be compared to
the asset's carrying amount to determine if a write-down to market value or
discounted cash flow value is required.

         Comprehensive Income. Effective October 1, 1998, the Company adopted
the provisions of SFAS No. 130, Reporting Comprehensive Income. The objective of
SFAS No. 130 is to report all changes in equity that result from transactions
and economic events other than transactions with owners. There is no difference
between net income and comprehensive income for any of the periods presented.

         Impact of Recently Issued Accounting Standard. In June 1998, the FASB
issued Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities. The Company expects to adopt the new Statement effective October 1,
2000. The Statement will require the Company to recognize all derivatives on the
balance sheet at fair value. The Company does not anticipate that the adoption
of this Statement will have a significant effect on its results of operations or
financial position.

         Reclassifications. Certain amounts in prior years have been
reclassified to conform to current year presentation.

Note 2 - Acquisition of MSI
---------------------------
         On February 25, 1998, the Company acquired all of the outstanding
shares of MSI, a manufacturer of chemical sensors, in exchange for 339,622
shares of the Company's Common Stock plus assumption of approximately $900,000
of debt. The business combination was recorded as a pooling-of-interests. Prior
to the combination, MSI's fiscal year ended on June 30 of each year. In
recording the business combination, MSI's financial statements for the year
ended June 30, 1997 were combined with Sawtek's for the year ended September 30,
1997. MSI's unaudited net sales and net loss for the three-month period ended
September 30, 1997 were approximately $423,000 and ($671,000), respectively. In
accordance with APB 16, MSI's results of operations and cash flows for the
three-month period ended September 30, 1997 have been added to the retained
earnings and cash flows of the Company and excluded from reported fiscal 1998
results of operations and cash flows. MSI's revenue and net loss for the period
from October 1, 1997 through the date of acquisition were approximately $792,000
and ($438,000), respectively.










                                      F-9


<PAGE>



Note 3 - Cash, Cash Equivalents and Short-Term Investments
----------------------------------------------------------
         Cash, cash equivalents and short-term investments consist of the
following:
<TABLE>
<CAPTION>

                                                                            September 30,
                                                                      -----------------------
                                                                      1999               1998
                                                                      ----               ----
                                                                           (in thousands)
<S>                                                                 <C>                 <C>
Cash and equivalents:
Cash and overnight investments                                      $  9,943            $ 2,390
Commercial paper, banker's acceptances and money market
   preferreds under 90 days                                           40,697             39,742
                                                                    --------            -------
Cash and equivalents                                                  50,640             42,132
Short-term investments:
Banker's acceptances and money market preferreds over 90 days         18,618              8,761
Municipal securities                                                   3,011              7,775
Certificates of deposit                                               12,005             11,401
Government agency securities                                          31,000             14,062
                                                                    --------            -------
Short-term investments                                                64,634             41,999
                                                                    --------            -------
Cash, cash equivalents and short-term investments                   $115,274            $84,131
                                                                    ========            =======
</TABLE>

Note 4 - Allowance for Doubtful Accounts and Sales Returns
----------------------------------------------------------
         The allowance for doubtful accounts and sales returns is as follows:

<TABLE>
<CAPTION>
                                                                          September 30,
                                                              -----------------------------------
                                                              1999            1998           1997
                                                              ----            ----           ----
                                                                         (in thousands)

<S>                                                          <C>             <C>             <C>
Balance, beginning of period                                 $1,399          $  684          $654
Provision for doubtful accounts and sales returns               174           1,396           821
Sales returns and uncollectible accounts written off           (438)           (681)         (791)
                                                             ------          ------          ----
Balance, end of period                                       $1,135          $1,399          $684
                                                             ======          ======          ====

</TABLE>














                                      F-10


<PAGE>
Note 5 - Inventories
--------------------
         Net inventories consist of the following:
<TABLE>
<CAPTION>
                          September 30,
                     ----------------------
                     1999              1998
                     ----              ----
                         (in thousands)

<S>                 <C>               <C>
Raw material        $2,984            $3,809
Work in process      1,993             1,969
Finished goods       3,075             2,675
                    ------            ------
     Total          $8,052            $8,453
                    ======            ======
</TABLE>
         The allowance for obsolete and slow moving inventory is as follows:
<TABLE>
<CAPTION>
                                                          September 30,
                                                -------------------------------
                                                1999          1998         1997
                                                ----          ----         ----
                                                         (in thousands)
<S>                                            <C>           <C>          <C>
Balance, beginning of period                   $2,118        $1,935       $1,705
Charged to cost of sales                          130           345          270
Disposal of inventory                            (139)         (162)         (40)
                                               ------        -------      ------
Balance, end of period                         $2,109        $2,118       $1,935
                                               ======        ======       ======
</TABLE>
Note 6 - Property, Plant and Equipment
--------------------------------------
         Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
                                                 September 30,
                                          -------------------------
                                          1999                 1998
                                          ----                 ----
                                                (in thousands)
<S>                                    <C>                   <C>
Land and improvements                  $   830               $   830
Buildings                               16,500                16,500
Production and test equipment           39,797                37,235
Computer equipment                       3,455                 3,239
Furniture and fixtures                   2,865                 2,666
Construction in progress                 9,589                 1,138
                                       -------               -------
                                        73,036                61,608
Less accumulated depreciation           26,594                19,414
                                       -------               -------
     Total                             $46,442               $42,194
                                       =======               =======
</TABLE>
         Approximately $36,000, $98,000 and $159,000 of interest costs were
capitalized as part of property, plant and equipment in 1999, 1998 and 1997,
respectively.




                                      F-11


<PAGE>



Note 7 - Line of Credit
-----------------------
         The Company has a line of credit with a bank for working capital,
equipment purchases, plant expansion and other general business purposes of
$30,000,000 with interest at LIBOR plus 125 basis points. The line of credit is
unsecured and renewable annually. Covenants in connection with the line of
credit and with long-term debt agreements impose restrictions with respect to,
among other things, the maintenance of certain financial ratios, additional
indebtedness and disposition of assets. The Company was in compliance with the
covenants as of September 30, 1999 and 1998. There were no borrowings against
the line of credit at September 30, 1999 and 1998.

Note 8 - Long-Term Debt and Lease Obligations
---------------------------------------------
         Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                   September 30,
                                              ---------------------
                                              1999             1998
                                              ----             ----
                                                  (in thousands)
<S>                                          <C>              <C>
Industrial Revenue Bond (a)                  $  259           $  375
Industrial Revenue Bond (b)                   1,910            2,263
                                             ------           ------
                                              2,169            2,638
Less Current Maturities                         379              469
                                             ------           ------
                                             $1,790           $2,169
                                             ======           ======
</TABLE>

(a)      In 1982, the Company obtained $1,800,000 in financing through the
         Orange County Industrial Development Authority. The obligation is
         secured by land and land improvements, the building and related
         equipment with a carrying value of approximately $696,000 at September
         30, 1999. The obligation is payable in varying quarterly installments
         through 2001 plus interest at 68% of the prime rate.

(b)      In 1995, the Company obtained $3,500,000 in financing through the
         Orange County Industrial Development Authority. The obligation is
         secured by a building expansion and related equipment with a carrying
         value of approximately $6,637,000 at September 30, 1999. The obligation
         is payable in quarterly installments of $88,334 through March 2000,
         thereafter in quarterly installments of $43,334 through March 2010,
         both plus interest at LIBOR plus 150 basis points.

         The Company has two non-cancelable lease agreements for facilities and,
in the past, leased certain equipment. Rental expense was approximately
$394,000, $843,000 and $461,000 in 1999, 1998 and 1997, respectively.







                                      F-12


<PAGE>



         Required future payments for long-term debt and operating leases are as
follows:
<TABLE>
<CAPTION>

                          Debt      Leases
                          ----      ------
                           (in thousands)
<S>                      <C>         <C>
       2000              $  379      $ 52
       2001                 288        52
       2002                 202        17
       2003                 173
       2004                 173
    Thereafter              954
                         ------       ----
                         $2,169       $121
                         ======       ====

</TABLE>

         The Company made interest payments of approximately $152,000, $228,000
and $313,000 on long-term debt in 1999, 1998 and 1997, respectively. The fair
value of the Company's long-term debt approximates the carrying amount.

Note 9 - Income Taxes
---------------------
         The income tax provision consists of the following:

<TABLE>
<CAPTION>
                                         Year Ended September 30,
                                  ---------------------------------------
                                  1999             1998              1997
                                  ----             ----              ----
                                               (in thousands)
<S>                             <C>               <C>               <C>
Current:
  Federal                       $ 9,414           $7,908            $4,537
  State                             725              662               373
                                -------           ------            ------
                                 10,139            8,570             4,910
Deferred:
  Federal                         6,068            6,024             6,554
  State                             315              646             1,092
                                -------           ------            ------
                                  6,383            6,670             7,646
                                -------           ------            ------
Total Income Tax Provision      $16,522          $15,240           $12,556
                                =======          =======           =======
</TABLE>

         Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The tax effects
of significant temporary differences giving rise to year-end deferred tax
balances were as follows:









                                      F-13


<PAGE>

<TABLE>
<CAPTION>

                                                                September 30,
                                                           ----------------------
                                                           1999              1998
                                                           ----              ----
                                                               (in thousands)
<S>                                                      <C>               <C>
Current:
  Accruals not currently deductible                      $    389          $    481
  Inventory costs capitalized for tax purposes                 71               120
  Inventory loss provision                                    603               578
                                                         --------          --------
     Deferred Tax Asset                                  $  1,063          $  1,179
                                                         ========          ========

Non-Current:
  Stock option compensation not currently deductible     $    159          $    245
  Earnings of subsidiary not currently taxed              (18,706)          (12,630)
  Excess tax over book depreciation                        (2,906)           (2,801)
                                                         --------          --------
     Deferred Tax Liability                              $(21,453)         $(15,186)
                                                         ========          ========
</TABLE>

         A reconciliation of statutory Federal income taxes to reported income
taxes is as follows:
<TABLE>
<CAPTION>

                                                               Year Ended September 30,
                                                            ---------------------------
                                                            1999          1998       1997
                                                            ----          ----       ----
                                                                    (in thousands)
<S>                                                        <C>          <C>         <C>
Income taxes computed at the Federal
 statutory rate of 35%                                     $16,522      $14,506     $11,652
State income taxes, net of Federal benefit                     676          850         952
Other-tax credits, tax-exempt interest                        (676)        (116)        (48)
                                                           -------      -------     -------
     Total Income Tax Provision                            $16,522      $15,240     $12,556
                                                           =======      =======     =======
</TABLE>

         In 1999 and 1998, the Company's tax liability was reduced and its
capital surplus was increased by approximately $3,003,000 and $2,708,000,
respectively, as a result of transactions involving stock options.

         The Company made income tax payments of approximately $7,765,000,
$6,276,000 and $1,007,000 in 1999, 1998 and 1997, respectively.

         The Company provides for deferred taxes on the non-repatriated earnings
of its subsidiary in Costa Rica. The subsidiary benefits from a complete
exemption from Costa Rican income taxes through 2003 and a 50% exemption
thereafter through 2007.










                                      F-14


<PAGE>



Note 10 - Earnings Per Share (in thousands, except per share data)
------------------------------------------------------------------
         The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>

                                                         Year Ended September 30,
                                                    ------------------------------------
                                                    1999            1998            1997
                                                    ----            ----            ----
<S>                                               <C>             <C>             <C>
Net income                                        $30,684         $26,205         $20,719
                                                  =======         =======         =======
Weighted-average common stock outstanding
 for basic earnings per share                      41,946          42,360          41,092
Dilutive effect of employee stock options             869             996           1,576
                                                  -------         -------         -------
Weighted-average common stock outstanding
 for diluted earnings per share                    42,815          43,356          42,668
                                                  =======          ======          ======
Basic earnings per share                          $  0.73          $ 0.62          $ 0.50
Diluted earnings per share                        $  0.72          $ 0.60          $ 0.49
</TABLE>

         The weighted-average common stock outstanding includes all ESOP shares
outstanding.

Note 11 - Concentration of Risk
-------------------------------

(a)      Significant customers and sales to foreign markets. Sales to the United
         States government (both as a prime contractor and on a subcontract
         basis) to foreign markets and to significant customers as a percent of
         the Company's total revenues were as follows:

<TABLE>
<CAPTION>
                                                                   Year Ended September 30,
                                                             ------------------------------------
                                                             1999            1998            1997
                                                             ----            ----            ----
<S>                                                           <C>             <C>             <C>
U.S. Government (Inclusive of Significant Customers)           *               *              11%
Foreign Markets (Inclusive of Significant Customers
 and European Market)                                         41%             37%             43%
European Market (Inclusive of Significant Customers)          18%             18%             22%
Asian and Pacific Rim Market (principally to S. Korea)        18%             16%             17%
Significant Customer A                                        23%             17%             14%
Significant Customer B                                         *               *              12%
Significant Customer C                                         *               *              11%
Significant Customer D                                        13%             15%             11%
Significant Customer E                                         *              15%              *
<FN>

*Less than 10%
</FN>
</TABLE>








                                      F-15


<PAGE>

(b)      Concentrations or risk

         (1)      Suppliers

                  The Company currently procures certain key raw materials for
                  its products from a limited number of vendors, most of whom
                  are based in Japan. The Company purchases this material on a
                  purchase order basis and does not carry significant
                  inventories of these components. The Company's reliance on a
                  limited number of vendors involves several risks, including
                  reduced control over the price, foreign currency exposure,
                  timely delivery, reliability and quality of the components.
                  Any inability of the Company to obtain timely deliveries of
                  material of acceptable quality in required quantities or any
                  increases in the prices of components for which the Company
                  does not have alternative sources could materially adversely
                  affect the Company's business, financial condition and results
                  of operations.

         (2)      Credit Risk

                  The Company generally sells its products to customers engaged
                  in the design and/or manufacture of high technology products
                  either recently introduced or not yet introduced to the
                  marketplace. The Company's customers are concentrated into a
                  small group of which several account for more than 10% of
                  sales as noted above and a significant percentage are foreign
                  customers. Substantially all of the Company's trade accounts
                  receivable are due from such sources.

                  The Company performs continuing credit evaluations of its
                  customers and generally does not require collateral; however,
                  in certain circumstances, the Company may require letters of
                  credit from its customers or the Company may secure credit
                  insurance.

         (3)      Foreign Currency Exchange Risk

                  At times the Company engages in foreign exchange forward
                  contracts to lock in the cost of certain foreign currency
                  exposures for the purchase of equipment or raw materials
                  denominated in foreign currencies. At September 30, 1999, the
                  Company is committed to purchase 4,835,200 Dutch guilders
                  (approximately $2.4 million) under forward foreign currency
                  contracts that mature in October 1999 for the purchase of
                  equipment. While these forward contracts are subject to
                  fluctuations in value from movement in the foreign currency
                  exchange rates, such fluctuations are offset by the change in
                  value of the underlying exposures being hedged. The Company is
                  not a party to leveraged derivatives and does not hold or
                  issue financial instruments for trading purposes. Foreign
                  currency contracts are entered into with major financial
                  institutions with investment grade credit ratings, thereby
                  decreasing the risk of credit loss. Gains and losses on
                  instruments that hedge firm commitments are deferred and are
                  included in the basis of the underlying hedged item. At
                  September 30, 1999, any deferred hedging gains or losses are
                  immaterial.

                                      F-16


<PAGE>



Note 12 - Segment Information
-----------------------------
         The Company has adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
reporting by public business enterprises of information about operating
segments, products and services, geographic areas and major customers. The
method for determining what information to report is based on the way that
management organizes the segments within the Company for making operating
decisions and assessing financial performance.

         The Company's chief operating decision-maker is considered to be the
Chief Executive Officer (CEO). The Company's CEO evaluates both consolidated and
disaggregated financial information in deciding how to allocate resources and
assess performance. The CEO uses certain disaggregated financial information for
the Company's primary markets: communications, military and space, and other
markets. The communications market includes the sale of bandpass filters for
wireless phones, base stations, video and data communication applications.

         The Company has aggregated its three markets into a single reportable
segment as allowed under SFAS No. 131 because these product lines have similar
long-term economic characteristics, such as average gross margin, and the
product lines are similar in regards to (a) nature of products and production
processes, (b) type of customers, and (c) method used to distribute products.

         Accordingly, the Company describes its reportable segment as the
manufacture and sale of SAW-based products as described in Note 1. All of the
Company's revenue results from sales in these markets. The Company does not
allocate operating expense or assets by market.

         Revenues by markets (as defined by the Company), as a percentage of
total revenues for years ended December 31, 1999, 1998 and 1997, were as
follows: Communications, 82%, 81%, and 78%, respectively; military and space,
6%, 9%, and 12%, respectively; and other markets, 12%, 10%, and 10%,
respectively.

         Sales are reported in the geographic area where they originate.
Transfers from the U.S. to Costa Rica are made on a basis intended to reflect
the market price of the products.
<TABLE>
<CAPTION>

                           Net Sales                     Operating Income            Assets
                --------------------------       -------------------------       ---------------
                1999       1998       1997       1999       1998      1997       1999       1998
                ----       ----       ----       ----       ----      ----       ----       ----
                                                         (in thousands)
<S>            <C>        <C>        <C>        <C>       <C>        <C>       <C>        <C>
United States  $ 66,373   $70,960    $63,795    $25,416   $23,181    $18,096   $142,114   $117,973
Costa Rica       47,053    36,612     28,438     16,783    14,722     13,424     49,137     30,737
Transfers/
 Eliminations   (13,150)   (9,872)    (7,192)       270         -        (30)       328          -
               --------   -------    -------    -------   -------    -------   --------   --------
Consolidated
Results        $100,276   $97,700    $85,041    $42,469   $37,903    $31,490   $191,579   $148,710
               ========   =======    =======    =======   =======    =======   ========   ========

</TABLE>




                                      F-17


<PAGE>



         Transfers from the U.S. to Costa Rica are accounted for at amounts that
are above cost and are consistent with rules and regulations of taxing
authorities. Such transfers are eliminated in the consolidated financial
statements.

         To date, substantially all sales have been denominated in U.S. dollars.
The functional currency for the Costa Rican operation is the U.S. dollar as
sales, most material cost and equipment are U.S. dollar denominated. The impact
of fluctuations of the local Costa Rican currency is not considered significant
and is not hedged.

Note 13 - Employee Benefit Plans
--------------------------------
         In 1997, the Company merged the Sawtek Inc. Code Section 401(k) Profit
Sharing Plan into the Employee Stock Ownership Plan for Employees of Sawtek Inc.
and renamed the combined plan the Sawtek Inc. Employee Stock Ownership and
401(k) Plan. The merged plan has two principal elements: i) a profit sharing and
401(k) element and ii) an employee stock ownership ("ESOP") element.

         Profit Sharing and 401(k) Element. In 1981, the Company established a
profit sharing plan covering substantially all U.S. employees who work 500 hours
or more per year. A 401(k) feature was added to the plan in 1991 and a Company
matching feature was added effective October 1, 1997. There have been no profit
sharing contributions by the Company to the plan since 1990. The 401(k)
contribution expense was approximately $299,000 and $368,000 in 1999 and 1998,
respectively.

         Employee Stock Ownership Element. In 1991, the Company established an
Employee Stock Ownership Plan covering substantially all U.S. employees. The
ESOP purchased 6,753,280 shares of common stock from substantially all of the
common shareholders and 11,024,480 shares of common stock from the Company in
1991. The transaction was financed from the proceeds of a $4,000,000 loan from
the Company. The Company accounts for these ESOP shares in accordance with
Statement of Position 76-3. As of September 30, 1999, 3,180,484 of these shares
remain unallocated. These shares will be allocated through fiscal year 2003.

         The Company made contributions of approximately $265,000, $279,000 and
$293,000 to the ESOP in 1999, 1998 and 1997, respectively. Allocations to
participants' accounts were 915,838 shares, 964,126 shares and 1,012,414 shares
in 1999, 1998 and 1997, respectively.

         Employee Stock Purchase Plan. In February 1996, the Board of Directors
approved an Employee Stock Purchase Plan and allotted 1,000,000 shares of Common
Stock to the plan. The plan enables eligible employees who have completed a
service requirement to purchase shares of Common Stock at a 15% discount from
the fair market value of the stock, up to a maximum of 10% of their
compensation.





                                      F-18


<PAGE>



         Costa Rica Profit Sharing Plan. Effective October 1, 1997, the Company
adopted a Profit Sharing Plan for its Costa Rica subsidiary covering
substantially all employees of this subsidiary. The Company contributed
approximately $101,000 and $70,000 to this plan in 1999 and 1998, respectively.

Note 14 - Stock Options
-----------------------
         The Company has granted incentive stock options and non-qualified stock
options under the 1983 Stock Option Plan, the Second Stock Option Plan and the
Stock Option Plan for Acquired Companies. The Second Stock Option Plan was
approved by the shareholders in 1996 with up to 4,000,000 shares of Common Stock
available for options and the Stock Option Plan for Acquired Companies was
approved by shareholders in 1998 with up to 2,000,000 shares of Common Stock
available for options. Incentive options generally become exercisable in four
equal annual installments commencing one year after the date of grant and expire
within ten years. A majority of the non-qualified options granted are
exercisable from the date of grant over a ten-year period, while the remainder
become exercisable in three or four equal annual installments.

         Information concerning options under these plans is as follows:

<TABLE>
<CAPTION>

                                              Shares Under                                   Weighted-Average
                                                 Option         Price Range of Options        Exercise Price
                                              ------------      ----------------------       ----------------
<S>                                           <C>                    <C>                          <C>
Balance at October 1, 1996                     3,090,920             $ 0.06-$12.38                $ 1.07
Granted                                          499,000             $ 5.53-$16.63                $12.74
Terminated                                       (23,160)            $ 0.37-$12.38                $ 5.63
Exercised                                     (1,136,500)            $ 0.06-$ 5.53                $ 0.49
                                              ----------
Balance at September 30, 1997                  2,430,260             $ 0.06-$16.63                $ 3.69
Granted                                          516,000             $ 6.64-$17.50                $10.97
Terminated                                      (143,500)            $ 0.06-$14.38                $ 5.67
Exercised                                       (747,468)            $ 0.06-$13.44                $ 0.95
                                              ----------
Balance at September 30, 1998                  2,055,292             $ 0.06-$17.50                $ 6.37
Granted                                          937,000             $10.94-$35.13                $22.00
Terminated                                       (76,400)            $ 6.64-$17.50                $11.01
Exercised                                       (622,151)            $ 0.06-$17.50                $ 4.98
                                              ----------
Balance at September 30, 1999                  2,293,741             $ 0.06-$35.13                $12.98
                                              ==========
Exercisable at September 30, 1999                788,791
                                              ==========
</TABLE>


         The weighted-average contractual life of stock options outstanding as
of September 30, 1999 was 5.25 years.






                                      F-19


<PAGE>



         The following table summarizes information about fixed stock options
outstanding at September 30, 1999:
<TABLE>
<CAPTION>

                                      Weighted-Avg.
Range of Exercise       Number          Remaining        Weighted-Avg.    Number Exercisable   Weighted-Avg.
     Prices          Outstanding     Contractual Life    Exercise Price    at Sept. 30, 1999   Exercise Price
-----------------    -----------     ----------------    --------------   ------------------   --------------
<S>                   <C>                 <C>               <C>                 <C>                <C>                <C>
   $0.06-$ 1.00         539,128           5.43              $ 0.33              539,128            $ 0.33
   $1.01-$12.50       1,014,388           4.58              $ 5.57              160,844            $ 7.27
  $12.51-$35.13         740,225           6.03              $26.07               88,819            $14.24
                      ---------                                                 -------
                      2,293,741                                                 788,791
                      =========                                                 =======
</TABLE>


         The Company applies APB Opinion No. 25 in accounting for its plans and,
accordingly, no compensation cost was recognized to the extent that the exercise
price of the stock options equaled the fair value. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net income and income per share would
be the pro forma amounts indicated below:
<TABLE>
<CAPTION>

                                                   Year Ended September 30,
                                             ------------------------------------
                                             1999            1998            1997
                                             ----            ----            ----
                                            (in thousands, except per share data)

<S>                                        <C>             <C>             <C>
Net income as reported                     $30,684         $26,205         $20,719
Pro forma net income                       $27,615         $24,376         $19,657
Pro forma basic earnings per share         $  0.66         $  0.58         $  0.48
Pro forma diluted earnings per share       $  0.66         $  0.57         $  0.46
</TABLE>

         The  weighted-average  fair  value of options  granted  during the year
ended  September  30,  1999,  1998  and  1997  was  $18.79,   $6.96  and  $9.81,
respectively,  using the Black-Scholes  option-pricing  model with the following
weighted-average  assumptions:  1999 --- expected  volatility of 77%,  risk-free
interest  rate of 5.75%,  no expected  dividends  and an  expected  life of 4.94
years; 1998 --- expected volatility of 78%, risk-free interest rate of 5.71%, no
expected  dividends  and an  expected  life of 4.79  years;  1997  ---  expected
volatility of 74%,  risk-free  interest rate of 6.45%, no expected dividends and
an expected life of 4.5 years.

         The pro forma net income reflects only options granted since 1995.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the option vesting
periods of up to four years and compensation cost for options granted prior to
October 1, 1995 is not considered.

Note 15 - Capital Structure
---------------------------
         Common Stock. The Company is authorized to issue up to 120,000,000
shares of common stock. Holders of common stock i) are entitled to receive such
dividends as may from time to time be declared by the Board of Directors of the
Company out of funds legally available to pay dividends, ii) are entitled to one
vote per share on all matters that are subject to shareholder voting and do not


                                      F-20


<PAGE>


have any cumulative voting rights, iii) have no preemptive, conversion,
redemption or sinking fund rights and iv) in the event of a liquidation,
dissolution or winding up of the Company, are entitled to share equally and
ratably in the assets of the Company, if any, remaining after payment of all
debts and liabilities of the Company and the liquidation preference of any
outstanding class or series of preferred stock.

         Share Repurchase. On August 31, 1998, the Board of Directors approved a
common stock repurchase program for up to 2,000,000 shares of common stock in
open market transactions. The repurchased shares will be used to satisfy stock
option exercises and issuance of shares under other stock related benefit
programs. To date, 1,129,810 shares have been repurchased under this program.

         Stock Split Effected in the Form of a Stock Dividend. On July 27, 1999,
the Board of Directors approved a two-for-one stock split of the outstanding
common shares to be effected in the form of a stock dividend on August 24, 1999
to stockholders of record as of August 9, 1999. Common share and per share data
for all periods presented in the accompanying financial statements have been
adjusted to give effect to the stock split.

         Preferred Stock. The Board of Directors is authorized to issue up to
1,000,000 shares of preferred stock, par value $0.01 per share, in one or more
series and to fix the number of shares constituting any such series, and the
voting powers, designations, preferences, and relative participating, optional
or other special rights and qualifications, limitations or restrictions thereof,
including the dividend rights, dividend rate, terms of redemption, redemption
prices, conversion and voting rights, and liquidation preferences, without any
further vote or action by the holders of common stock. To date, no shares of the
preferred stock have been issued.






















                                      F-21


<PAGE>



Note 16 - Quarterly Financial Information (unaudited)
-----------------------------------------------------
         Selected quarterly financial data is summarized below:

<TABLE>
<CAPTION>
                                                                     Quarter Ended
                             --------------------------------------------------------------------------------------------
                                              Fiscal 1999                                     Fiscal 1998
                             ---------------------------------------------   --------------------------------------------
                                                         (in thousands, except per share data)

                             Sept. 30,    June 30,    Mar. 31,    Dec. 31,   Sept. 30,   June 30,    Mar. 31,    Dec. 31,
                                1999        1999        1999        1998       1998        1998        1998        1997
                                ----        ----        ----        ----       ----        ----        ----        ----
<S>                           <C>         <C>         <C>         <C>        <C>         <C>         <C>         <C>
Net sales                     $28,515     $26,045     $23,497     $22,219    $21,522     $26,301     $25,183     $24,694
Cost of sales                  11,701      10,737       9,828       9,958      9,665      12,585      11,190      11,371
                              -------     -------     -------     -------    -------     -------     -------     -------
Gross profit                   16,814      15,308      13,669      12,261     11,857      13,716      13,993      13,323
Operating expenses:
  Selling expenses              1,395       1,517       1,340       1,385      1,295       1,436       1,508       1,769
  Gen. & Adm. expenses          1,089       1,114       1,037       1,079        527       1,226       1,509       1,431
  R&D expenses                  1,480       1,334       1,616       1,197      1,544         923         950         868
                              -------     -------     -------     -------    -------     -------     -------     -------
    Total operating expenses    3,964       3,965       3,993       3,661      3,366       3,585       3,967       4,068
                              -------     -------     -------     -------    -------     -------     -------     -------
Operating income               12,850      11,343       9,676       8,600      8,491      10,131      10,026       9,255
Other income, net               1,328       1,174       1,116       1,119      1,009         921         794         818
                              -------     -------     -------     -------    -------     -------     -------     -------
Income before
 income taxes                  14,178      12,517      10,792       9,719      9,500      11,052      10,820      10,073
Income taxes                    4,963       4,380       3,777       3,402      3,420       4,089       4,004       3,727
                              -------     -------     -------     -------    -------     -------     -------     -------
Net income                    $ 9,215     $ 8,137     $ 7,015     $ 6,317    $ 6,080     $ 6,963     $ 6,816     $ 6,346
                              =======     =======     =======     =======    =======     =======     =======     =======
Net income per share:
  Basic(1)                    $  0.22     $  0.19     $  0.17     $  0.15    $  0.14     $  0.16     $  0.16     $  0.15
                              =======     =======     =======     =======    =======     =======     =======     =======
  Diluted(1)                  $  0.21     $  0.19     $  0.17     $  0.15    $  0.14     $  0.16     $  0.16     $  0.15
                              =======     =======     =======     =======    =======     =======     =======     =======
Shares used in per share
 calculations:
  Basic                        42,193      42,004      41,824      41,764     42,502      42,542      42,354      42,046
  Diluted                      43,236      43,066      42,494      42,462     43,132      43,524      43,302      43,466

<FN>

(1)  Earnings per share for each quarter are calculated as a discrete period;
     the sum of the four quarters may not equal the calculated full year amount.
     All earnings per share data are restated to reflect the two-for-one stock
     split in August 1999.

</FN>
</TABLE>














                                      F-22


<PAGE>


PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-----------------------------------------------------------
Management - Executive Officers and Directors

         The executive officers and directors of the Company and their ages as
of October 1, 1999 are as follows:

<TABLE>
<CAPTION>

         Name                    Age                Position
         ----                    ---                --------
<S>                              <C>    <C>
Steven P. Miller                 51     Chairman of the Board of Directors
Gary A. Monetti                  40     Chief Executive Officer and Director
Kimon Anemogiannis               37     President and Chief Operating Officer
Raymond A. Link                  45     Senior Vice President-Finance, Treasurer
                                         and Chief Financial officer
Brian P. Balut                   34     Vice President-Sales and Marketing
John K. Bitzer                   49     Vice President-Operations Support
Azhar Waseem                     46     Vice President-Operations
Robert C. Strandberg(1) (2)      42     Director
Neal J. Tolar (1)                58     Director
Bruce S. White (2)               66     Director
Willis C. Young (1) (2)          58     Director
<FN>

(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
</FN>
</TABLE>

         Steven P. Miller co-founded the Company, has served as a Director since
1979, Chief Executive Officer from 1986 to September 30, 1999, Chairman since
February 1996 and President from 1979 to April 1997. He stepped down from
day-to-day operations on September 30, 1999. Prior to joining the Company, he
was Manager of the SAW Device Engineering and Development Laboratory at Texas
Instruments Incorporated ("TI"), an electronics manufacturer. He joined TI in
1969. Mr. Miller has a B.S. degree in Electrical Engineering from the South
Dakota School of Mines and Technology.

         Gary A. Monetti joined the Company in 1982 and was appointed Chief
Executive Officer effective October 1, 1999. He served as President from April
1997 to September 30, 1999 and Chief Operating Officer from July 1995 to
September 30, 1999 and served as Vice President-Operations from July 1995 to
April 1997. He has served in various positions, since 1982, at the Company,
including Filter Design Engineer, Manager of Filter Technology, Vice
President-Sales and Marketing and Vice President-Engineering. Mr. Monetti has a
B.S. degree in Electrical Engineering from the University of Illinois and an
M.B.A. degree from Rollins College. Mr. Monetti was appointed to the Board of
Directors in April 1998.




                                       37


<PAGE>



         Kimon Anemogiannis joined Sawtek in July 1995 as Director of
Engineering and was promoted to Vice President-Engineering in April 1998, Vice
President-Operations in 1999 and President and Chief Operating Officer,
effective October 1, 1999. Prior to joining Sawtek, Dr. Anemogiannis was in
various engineering positions for the surface acoustic wave (SAW) group at
Siemens Matsushita based in Munich, Germany from August 1986 to July 1995. Dr.
Anemogiannis has an M.S. degree and a Ph.D. degree in Electrical Engineering
from the Technical University of Munich.

         Raymond A. Link joined the Company in September 1995 as Vice
President-Finance and Chief Financial Officer and was promoted to Senior Vice
President and Chief Financial Officer, effective October 1, 1999. From 1987 to
September 1995, Mr. Link was Vice President-Finance and Chief Financial Officer
of Hubbard Construction Company, a heavy/highway construction company. From 1980
to 1987, he was with Harris Corporation, a manufacturer of electronic
communication equipment, in various financial capacities. Mr. Link has a B.S.
degree from the State University of New York at Buffalo and an M.B.A. degree
from the Wharton School at the University of Pennsylvania. He is a Certified
Public Accountant.

         Brian P. Balut joined Sawtek in October 1994 as a Sales Manager, was
promoted to Director of Sales and Marketing in November 1996 and promoted to
Vice President Sales and Marketing in September 1998. From 1987 to 1994, Mr.
Balut was in various sales, marketing and engineering positions with REMEC, a
manufacturer of electronic components. Mr. Balut has a B.S. degree in Electrical
Engineering from the Massachusetts Institute of Technology and an M.B.A. degree
from Rollins College.

         John K. Bitzer joined Sawtek in August 1991 as Director of Operations
Support and was promoted to Vice President-Operations Support in April 1998.
From December 1988 to July 1991, Mr. Bitzer was the Director of Operations for
the ESCO unit of Emerson Electric. From 1974 to December 1988, Mr. Bitzer was in
various operations and management positions with the General Electric Company.
Mr. Bitzer has a B.S. degree in Mechanical Engineering from West Virginia
University.

         Azhar Waseem joined Sawtek in March 1995 as Director of Wafer
Fabrication and was promoted to Vice President-Manufacturing in April 1998 and
to Vice President-Operations, effective October 1, 1999. From 1989-1994, Mr.
Waseem was in various operation and engineering positions of Siliconix, Inc., a
microelectronics manufacturer, based in Santa Clara, California and from
1986-1989 he was in various engineering positions with the General Electric
Company. Mr. Waseem has a B.S. and M.S. degree in Electrical Engineering and an
M.B.A. all from the University of Minnesota.








                                       38


<PAGE>



         Robert C. Strandberg has been a Director of the Company since October
1995. Mr. Strandberg is President and CEO of PSC Inc., a manufacturer of bar
code readers, since June 1997 and served as Executive Vice President from
November 1996 to June 1997. Mr. Strandberg is also a Director of Merix
Corporation. From May 1996 to October 1996, he was self-employed as a business
consultant. From September 1991 to April 1996, Mr. Strandberg was the Chairman
of the Board of Directors, President and Chief Executive Officer of Datamax
International Corporation, a manufacturer of bar code printers. From 1988 to
1991, he was Vice President-Finance of Datamax. From 1986 to 1988, he worked for
GTECH, a lottery management company, in the areas of finance and strategic
planning. Mr. Strandberg has a B.S. degree in Operations Research and Industrial
Engineering from Cornell University and an M.B.A. degree from Harvard Graduate
School of Business Administration.

         Neal J. Tolar co-founded the Company and served as Senior Vice
President and Chief Technical Officer from June 1995 to September 30, 1999 and a
Director since 1979. He stepped down from the day-to-day operations on September
30, 1999. He served as Vice President-Operations and Engineering from 1979 to
June 1995. Prior to joining the Company, he was a member of the technical staff
in the RF Technology Group of the Corporate Research Laboratory at TI. He joined
TI in 1967. Dr. Tolar has a B.S. degree in Ceramic Engineering from Mississippi
State University and a Ph.D. in Ceramic Engineering from the University of Utah.

         Bruce S. White has been a Director of the Company since April 1996. Mr.
White was a Corporate Vice President of AVNET Inc., a distributor of electronic
components from January 1996 to January 1998 and the President of the Penstock
Division of AVNET Inc. from July 1994 to January 1998. From 1974 to July 1994,
Mr. White was the President and Chief Executive Officer of Penstock Inc., a
company he founded to distribute RF and microwave components. Mr. White is now
retired from both AVNET and Penstock. AVNET is a distributor of certain products
manufactured by Sawtek. In fiscal 1999, sales from Sawtek to AVNET were
approximately $3.8 million. Mr. White has a B.A. degree in Mathematics from
Colgate University and a B.S. and M.S. degree in Electrical Engineering from
Michigan State University.

         Willis C. Young has been a Director of the Company since February 1996.
He has been a Senior Partner of the Atlanta office of BDO Seidman, LLP, an
international accounting and consulting firm, since January 1996. From April
1995 to December 1995, Mr. Young was the Chief Financial Officer for Hayes
Microcomputer Products, Inc., a manufacturer of modems and communication
equipment, where he was engaged to assist in the implementation of Hayes'
restructuring in bankruptcy. From 1965 to March 1995, Mr. Young held various
positions with BDO Seidman, LLP, and from 1988 to March 1995 he was a Vice
Chairman and a member of the Executive Committee. Mr. Young has a B.S. degree in
Accounting from Ferris State University. He is a Certified Public Accountant.

         Members of the Company's Board of Directors are each elected for
one-year terms at the annual shareholders meeting. Officers are elected at the
first Board of Directors meeting following the shareholders meeting at which
directors are elected and serve at the discretion of the Board of Directors.

                                       39


<PAGE>



         There are no family relationships between any of the Company's
executive officers or directors.

ITEM 11. EXECUTIVE COMPENSATION
-------------------------------
         The information required by this item is incorporated herein by
reference to the Company's proxy statement to be filed not later than 120 days
after the end of the fiscal year.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------
         The information required by this item is incorporated herein by
reference to the Company's proxy statement to be filed not later than 120 days
after the end of the fiscal year.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------
         The information required by this item is incorporated herein by
reference to the Company's proxy statement to be filed not later than 120 days
after the end of the fiscal year.


























                                       40



<PAGE>



PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8K
------------------------------------------------------------------------
         (A) The following documents are filed as part of this report:

              1. Financial statements - see index to Consolidated Financial
                 Statements on page F-1 hereof.

              2. Financial statement schedules: All schedules have been omitted
                 because they are inapplicable or not material, or the
                 information called for thereby is included in the Consolidated
                 Financial Statements and notes thereto.

              3. Exhibits required by Item 601 of Regulation S-K:

                 (a)   See Exhibit Index in (c) below.

                 (b)   Reports on Form 8K: Form 8K filed on July 28,1999
                       Item 5 - Other events:
                       -  Sawtek announces next-generation management
                          team and a two-for-one stock split, effective
                          for shareholders of record on August 9, 1999

                 (c)   Exhibits:

                       3.1      Amended and Restated Articles of Incorporation
                                of Sawtek Inc. (incorporated by reference to
                                Registration Statement on Form S-8, File No.
                                333-10579).

                       3.2      1996 Bylaws of Sawtek Inc. (incorporated by
                                reference to Form 10-K for the year ended
                                September 30, 1999).

                       4.1*     Specimen stock certificate.

                       10.1     Sawtek Inc. 1983 Incentive Stock Option Plan
                                (incorporated by reference to Registration
                                Statement on Form S-8, File No. 333-10579).

                       10.2     Sawtek Inc. Second Stock Option Plan
                                (incorporated by reference to Registration
                                Statement on Form S-8, File No. 333-11523).



                                       41


<PAGE>



                       10.3     Sawtek Inc. Employee Stock Purchase Plan
                                (incorporated by reference to Registration
                                Statement on Form S-8, File No. 333-11701 and
                                amendment incorporated by reference to Form 10-Q
                                for the period ended June 30, 1999, filed on
                                July 19, 1999.

                       10.4*    Incentive Stock Option Agreement, dated December
                                12, 1994, between the Company and Ronald M.
                                Hays.

                       10.5*    Incentive Stock Option Agreement, dated December
                                19, 1994, between the Company and Neal J. Tolar.

                       10.6*    Incentive Stock Option Agreement, dated December
                                19, 1994, between the Company and Steven P.
                                Miller.

                       10.7     Employee Stock Ownership Plan and Trust
                                Agreement for Employees of Sawtek Inc. (the
                                "ESOP") (incorporated by reference to
                                Registration Statement on Form S-8, File No.
                                333-08281).

                       10.8*    Sawtek Inc. 1994 Stockholders Agreement.

                       10.9*    Restructuring Agreement, dated January 11, 1991,
                                by and between the Company, certain shareholders
                                of the Company and the ESOP.

                       10.10*   Agreement with respect to Stock Options, dated
                                June 29, 1994, between the Company and the ESOP.

                       10.11*   Second ESOP Loan Agreement, dated June 29, 1994.

                       10.12*   Second Amendment to ESOP Loan Agreement, dated
                                June 29, 1994.

                       10.13*   Commercial Lease, dated March 1, 1994, between
                                the Company as Tenant and Piezo Technology, Inc.
                                as Landlord.

                       10.17*   Company Loan Agreement dated January 11, 1991,
                                between the Company and Sun Bank, National
                                Association ("Sun Bank").

                       10.18*   Company Note, dated January 11, 1991.




                                       42


<PAGE>



                       10.19*   Security Agreement dated January 11, 1991,
                                between the Company and Sun Bank.

                       10.20*   Company Pledge Agreement dated January 11, 1991.

                       10.21*   Mortgage and Security Agreement, dated January
                                9, 1991, by and between the Company, the Orange
                                County Industrial Development Authority
                                ("OCIDA"), and Sun Bank.

                       10.22*   Fourth Amendment to Installment Sales and
                                Security Agreement, dated January 8, 1991, by
                                and between the Company, OCIDA, and Sun Bank.

                       10.23*   ESOP Pledge Agreement, dated January 11, 1991,
                                by and between the Company, ESOP, and Southeast
                                Bank, National Association ("Southeast").

                       10.24*   ESOP Loan Agreement, dated January 11, 1991, by
                                and between the Company and Southeast.

                       10.25*   ESOP Note dated January 11, 1991.

                       10.26*   Amended and Restated Loan and Security
                                Agreement, dated November 15, 1995, between the
                                Company and SunTrust Bank, Central Florida,
                                National Association ("SunTrust").

                       10.27*   Increase Promissory Note dated November 10,
                                1995.

                       10.28*   Renewal, Increase and Consolidation Promissory
                                Note, dated November 10, 1995.

                       10.29*   Promissory Demand Note, dated November 10, 1995.

                       10.30*   Fifth Amendment to Installment Sale and Security
                                Agreement, dated as of March 1, 1995, between
                                the Company, Sun Bank and OCIDA.

                       10.31*   Fourth Supplemental Trust Indenture, dated as of
                                March 1, 1995, between the Company, Sun Bank and
                                OCIDA.

                       10.32*   Construction Loan Agreement, dated as of March
                                1, 1995, between the Company and Sun Bank.




                                       43


<PAGE>



                       10.33*   Eighth Amendment to Loan and Security Agreement,
                                Fourth Amendment to Company Loan Agreement and
                                First Amendment to Second Company Loan
                                Agreement, dated as of March 11, 1995, between
                                the Company and Sun Bank.

                       10.34*   Bond Purchase Agreement dated as of December 1,
                                1981, between OCIDA and the Company.

                       10.35*   Installment Sale and Security Agreement, dated
                                as of December 1, 1981, between OCIDA and the
                                Company and accepted by the Guarantors.

                       10.36*   Guaranty Agreement dated as of December 1, 1981,
                                among the Guarantors and OCIDA.

                       10.37*   Trust Indenture dated as of December 1, 1981,
                                between OCIDA and the Trustee and accepted by
                                the Company and the Guarantors.

                       10.38*   Sawtek Inc. Code ss.401(k) Profit Sharing Plan
                                and Trust Agreement, dated February 15, 1995.

                       10.39    Letter from SunTrust Bank, Central Florida, N.A.
                                for renewal and increase in credit to
                                $30,000,000 of unsecured line of credit for
                                Sawtek Inc. dated September 22, 1999.

                       10.40    First Amendment to Amended and Restated Loan and
                                Security Agreement dated December 9, 1996
                                between the Company and SunTrust Bank, Central
                                Florida, N.A. (incorporated by reference to Form
                                10-Q filed January 21, 1997).

                       10.41    First Amendment to Fourth Supplemental Trust
                                Indenture dated November 19, 1996 by and among
                                the Company, SunTrust Bank, Central Florida,
                                N.A., and the Orange County Industrial
                                Development Authority (incorporated by reference
                                to Form 10-Q filed April 21, 1997).

                       10.42    Amendment to Employee Stock Ownership and Trust
                                Agreement for Employees of Sawtek Inc. (2)




                                       44


<PAGE>



                       10.43    Modification of ESOP Loan Agreement dated as of
                                September 26, 1997 between the Company and
                                Marine Midland Bank. (1)

                       10.44    Modification of ESOP Pledge Agreement dated as
                                of September 26, 1997 between the Company and
                                Marine Midland Bank. (1)

                       10.45    Renewal ESOP Note dated as of September 26,
                                1997. (1)

                       10.46    Implementation Agreement dated September 26,
                                1997 between the Company and Marine Midland Bank
                                that forms a part of the Sawtek Inc. Employee
                                Stock Ownership and 401(k) Plan and Trust. (1)

                       10.47    Sawtek Inc. Employee Stock Ownership and 401(k)
                                Plan dated as of July 16, 1997. (1)

                       10.48    Sawtek Inc. Employee Stock Ownership and 401(k)
                                Trust Agreement dated July 16, 1997 between the
                                Company and HSBC (formerly Marine Midland Bank)
                                updated for all amendments through May 1, 1999
                                (incorporated by reference to Form 10-Q for the
                                period ended June 30, 1999, filed on July 19,
                                1999).

                       10.49    Sawtek Inc. Stock Option Plan for Acquired
                                Companies (incorporated by reference to proxy
                                filed for 1998 shareholders meeting filed on
                                Form 14A filed on December 3, 1997).

                       21.1     List of subsidiaries of the Registrant.

                       23.1     Consent of Ernst & Young LLP.

                       24.1     Power of attorney. Reference is made to page 46.

                       27.0     Financial Data Schedule.

*    Incorporated by reference to Registration Statement on Form S-1, File No.
     333-1860.
#    Incorporated by reference to Registration Statement on Form S-3, File No.
     333-26747.
(1)  Incorporated by reference to Form 10-K for 1997 filed on November 12, 1997.
(2)  Incorporated by reference to Form 10-K for 1998 filed on November 10, 1998.





                                       45



<PAGE>



                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 2nd day of
November, 1999.

                                   SAWTEK INC.

                                   By:/s/ Gary A. Monetti
                                   Gary A. Monetti
                                   Chief Executive Officer

                                   By:/s/ Raymond A. Link
                                   Raymond A. Link
                                   Senior Vice President-Finance and
                                    Chief Financial Officer and Chief
                                    Accounting Officer


                                POWER OF ATTORNEY

         KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears on the following page constitutes and appoints Gary A. Monetti and or
Raymond A. Link to sign any amendments to this report on Form 10-K, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that the said attorney-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 2nd day of November, 1999.




/s/Neal J. Tolar                            /s/Steven P. Miller
Neal J. Tolar                               Steven P. Miller
Director                                    Chairman of the Board of Directors

/s/Robert C. Strandberg                     /s/Willis C. Young
Robert C. Strandberg                        Willis C. Young
Director                                    Director

/s/Bruce S. White                           /s/Gary A. Monetti
Bruce S. White                              Gary A. Monetti
Director                                    Chief Executive Officer and Director


                                       46


<PAGE>



                                                                    Exhibit 21.1



<TABLE>

                              List of Subsidiaries
<CAPTION>

           Name                    State or other Jurisdiction of Incorporation
           ----                    --------------------------------------------
<S>                                                  <C>
Sawtek, S.A.                                         Costa Rica
Sawtek International, Inc.                           Barbados
Microsensor Systems, Inc.                            Kentucky
Sawtek Far East, Inc.                                Florida
Sawtek Korean Sales Office                           South Korea

</TABLE>

         All of the above listed entities are 100% directly or indirectly owned
by Sawtek Inc. and their results of operations are included in the consolidated
financial statements.








<PAGE>


                                                                    Exhibit 23.1

                                        Consent of Independent Auditors


         We consent to the incorporation by reference in the following
Registration Statements of our report dated October 22, 1999, with respect to
the consolidated financial statements of Sawtek Inc. included in its Annual
Report (Form 10-K) for the year ended September 30, 1999.
<TABLE>
<CAPTION>

Registration Statement
       Number                                             Description
----------------------     ---------------------------------------------------------------------------------
<S>                        <C>
     333-11701             Form S-8 re: Sawtek Inc. Employee Stock Purchase Plan
     333-11523             Form S-8 Re: Sawtek Inc. Second Stock Option Plan
     333-47773             Form S-8 re: Sawtek Inc. Second Stock Option Plan (amendment)
     333-10579             Form S-8 re: Sawtek Inc. Amended and Restated 1983 Incentive Stock Option Plan
     333-08281             Form S-8 re: Sawtek Inc.  Employee  Stock  Ownership  and 401(k) Plan,  formerly
                           known as the Employee Stock Ownership Plan for Employees of Sawtek Inc.
     333-47771             Form S-8 re: Sawtek Inc. Stock Option Plan for Acquired Companies



</TABLE>


                                                         /s/Ernst & Young, LLP
                                                         Ernst & Young LLP



Orlando, Florida
November 3, 1999




<PAGE>


                                                                   Exhibit 10.39

SunTrust Bank, Central Florida, N.A.                        Douglas A. Woodman
Post Office Box 3833                                        First Vice President
Orlando, FL  32802
Tel (407) 237-4303
--------------------------------------------------------------------------------

SUNTRUST

September 22, 1999


Mr. Raymond A. Link
Senior Vice President / CFO
Sawtek, Inc.
Post Office Box 609501
Orlando, Florida 32860-9501

Dear Ray:

         It is my pleasure to advise you that SunTrust Bank, Central Florida,
N.A. has approved a $10,000,000 increase to our existing unsecured line of
credit to Sawtek Inc. Therefore, we now have a committed, unsecured line of
credit in the amount of $30,000,000 approved with an expiration date of 3/31/00.
An unused fee of 10 basis points shall only apply to the $11.5 million currently
evidenced by the note dated December 9, 1996.

         As with our last increase, we will leave the existing loan
documentation in place in order to avoid the expenses associated with modifying
our paperwork. Therefore, should you need to draw more than $11,500,000 on the
line, we will need some lead time in order to prepare a note and loan agreement
amendment. Until such time, the original terms and conditions outlined in that
certain First Amendment to the Amended and Restated Loan and Security Agreement,
dated December 9, 1996 by and between SunTrust Bank, Central Florida, N.A. and
Sawtek, Inc., shall remain in full force and effect in all respects except for
the expiration date as per the above referenced approval.

         Please execute the enclosed copy of this letter in order to document
the increased loan amount and extended maturity date. Upon receipt of your
9/30/99 financial statements, we will promptly process another extension of the
maturity date. We certainly appreciate all of the business that you do with
SunTrust and look forward to serving Sawtek's needs well into the future. Please
let me know of any opportunity to be of assistance.

Sincerely,                                  Acknowledged and Accepted:

/s/Douglas A. Woodman                       /s/Raymond A. Link     Date: 9/27/99
First Vice President                        Senior Vice President / CFO