##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549


FORM 10-K

|           |  |                                                                                                                                 
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------
|(Mark One)
|(X)        |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934for the fiscal year ended March 29, 2003, or
|           |  |                                                                                                                                 
|(   )      |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934for the transition period from
to      
|           |  |                                                                                                                                 
|           |  | Commission File No. 0-12719                                                                                                     

GIGA-TRONICS INCORPORATED

(Exact name of registrant as specified in its charter)


|                                                                                |  |                                                
|------------------------------------------------------------------------------- |  | -----------------------------------------------
|California
(State or other jurisdiction of
incorporation or organization)       |  | 94-2656341
(I.R.S. Employer Identification No.)
|                                                                                |  |                                                
|4650 Norris Canyon Road, San Ramon, CA
(Address of principal executive offices) |  | 94583
(Zip Code)                               

Registrants telephone number: (925) 328-4650

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

|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange on which registered
|                    |  |                                          
|None                |  | None                                     

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

Common Stock, No par value(Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

|Yes [X] |  | No [   ]
|------- |  | --------

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b of the Act).
Yes [   ] No [X]

The aggregate market value of voting stock held by non-affiliates of the
Registrant calculated on the closing average bid and asked prices as of May 21,
2003 was $5,180,254. For purposes of this determination only, directors and
officers of the Registrant have been assumed to be affiliates. There were a
total of 4,693,080 shares of the Registrants Common Stock outstanding as of
May 21, 2003.





---



##### Table of Contents



DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents have been incorporated by reference into
the parts indicated:

|                                 |  |                                                                                                                                                                     
|-------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|PART OF FORM 10-K                |  | DOCUMENT                                                                                                                                                            
|PART III
Items 10, 11, 12 and 13 |  | Registrants PROXY STATEMENT for
its 2003 annual meeting of shareholders to
be filed no later than 120 days after the close
of the fiscal year ended March 29, 2003.

2



---

TABLE OF CONTENTS



|                                           |                                                                                                         |  |  |  |  |  |  | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                    
|                                           | ITEM 1. BUSINESS                                                                                       
|                                           | ITEM 2. PROPERTIES                                                                                     
|                                           | ITEM 3. LEGAL PROCEEDINGS                                                                              
|                                           | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            
|PART II                                   
|                                           | ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED SHAREHOLDER MATTERS                           
|                                           | ITEM 6. SELECTED FINANCIAL DATA                                                                        
|                                           | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION          
|MANAGEMENTS DISCUSSION AND ANALYSIS      
|                                           | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                    
|                                           | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                    
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                           | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.         
|PART III                                  
|                                           | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                            
|                                           | ITEM 11. EXECUTIVE COMPENSATION                                                                        
|                                           | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
|                                           | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                
|                                           | ITEM 14. CONTROLS AND PROCEDURES                                                                       
|PART IV                                   
|                                           | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                              
|SIGNATURES                                
|CERTIFICATIONS UNDER                      
|INDEX TO EXHIBITS                         
|Exhibit 21                                
|Exhibit 23.1                              
|Exhibit 99.1                              
|Exhibit 99.2                              



---



##### Table of Contents






PART I

The forward-looking statements included in this report including, without
limitation, statements containing the words believes, anticipates,
estimates, expects, intends and words of similar import, which reflect
managements best judgment based on factors currently known, involve risks and
uncertainties. Actual results could differ materially from those anticipated
in these forward-looking statements as a result of a number of factors,
including but not limited to those discussed under Certain Factors Which May
Adversely Affect Future Operations Or An Investment In Giga-tronics in Item 1
below and in Item 7, Managements Discussion and Analysis.




ITEM 1. BUSINESS

General

Giga-tronics Incorporated (Giga-tronics) includes operations of
Giga-tronics Instrument Division, ASCOR, Inc. (ASCOR), DYMATiX, which is a
joint venture of Viking Semiconductor Equipment, Inc. (Viking) and
Ultracision, Inc. (Ultracision), and Microsource, Inc. (Microsource).

Giga-tronics designs, manufactures and markets through its Giga-tronics
Instrument Division, a broad line of test and measurement equipment used in the
development, test and maintenance of wireless communications products and
systems, flight navigational equipment, electronic defense systems and
automatic testing systems. These products are used primarily in the design,
production, repair and maintenance of commercial telecommunications, radar, and
electronic warfare.

Giga-tronics was incorporated on March 5, 1980, and its principal
executive offices are located at 4650 Norris Canyon Road, San Ramon,
California, and its telephone number at that location is (925) 328-4650.

Effective July 23, 1996, Giga-tronics acquired ASCOR. ASCOR, located in
Fremont, California, designs, manufactures, and markets a line of switching and
connecting devices that link together many specific purpose instruments that
comprise a portion of automatic test systems. ASCOR offers a family of
switching and interface test adapters as standard VXI configured products, as
well as complete system integration services to the Automatic Test Equipment
market.

Effective June 27, 1997, Giga-tronics completed a merger with Viking by
issuing approximately 420,000 shares of the Companys common stock in exchange
for all of the common stock of Viking. Viking, which is now located in
Fremont, California, manufactures and markets a line of optical inspection
equipment used to manufacture and test semiconductor devices. Products include
die attachments, automatic die sorters, tape and reel equipment, and wafer
inspection equipment.

Effective December 2, 1997, Giga-tronics completed a merger with
Ultracision by issuing approximately 517,000 shares of the Companys common
stock in exchange for all of the common stock of Ultracision. Ultracision was
a manufacturer of automation equipment for the test and inspection of silicon
wafers. Ultracision also produced a line of probers for the testing and
inspection of silicon devices.

Effective May 18, 1998, Giga-tronics acquired Microsource. All the
outstanding shares of Microsource were exchanged for $1,500,000 plus contingent
payments based on earnings from Microsource from 1998 to 2000, which amounts
were nominal. Microsource located in Santa Rosa, California develops and
manufactures a broad line of YIG (Yttrium, Iron, Garnet) tuned oscillators,
filters and microwave synthesizers, which are used by its customers in
manufacturing a wide variety of microwave instruments or devices.

Giga-tronics intends to broaden its product lines and expand its market,
both by internal development of new products and through the acquisition of
other business entities. From time to time, the Company considers a variety of
acquisition opportunities.

3



---



##### Table of Contents



Industry Segments

The Company manufactures products used in test, measurement and handling.
The Company operates primarily in four operating segments, Giga-tronics
Instrument Division, ASCOR Inc., Microsource Inc. and DYMATiX (formerly the
Semiconductor Equipment Group).

Products and Markets

Giga-tronics Instrument Division

The Giga-tronics Instrument Division segment produces signal sources,
generators and sweepers, and power measurement instruments for use in the
microwave and RF frequency range (10 kHz to 75 GHz). Within each product line
are a number of different models and options allowing customers to select
frequency range and specialized capabilities, features and functions. The
end-user markets for these products can be divided into three broad segments:
commercial telecommunications, radar and electronic warfare. This segments
instruments are used in the design, production, repair and maintenance and
calibration of other manufacturers products, from discrete components to
complex systems.

ASCOR Inc.

The ASCOR Inc. segment produces switch modules, and interface adapters
that operate with a bandwidth from direct current (DC) to 18 GHz. This
segments switch modules may be incorporated within its customers automated
test equipment. The end-user markets for these products are primarily related
to electronic warfare, though the VXI architecture may become more accepted by
the telecommunications market.

DYMATiX (formerly the Semiconductor Equipment Group)

The DYMATiX segment manufactures and markets a line of optical inspection
equipment used in the testing of semiconductor devices. Products include die
attachments, automatic die sorters, tape and reel equipment, and wafer
inspection equipment. Until recently, DYMATiX manufactured automation
equipment for the test inspection and robotic handling of silicon wafers in
addition to a line of probers for the testing and inspection of silicon
devices.

Microsource Inc.

The Microsource segment develops and manufactures a broad line of YIG
(Yttrium, Iron, Garnet) tuned oscillators, filters and microwave synthesizers,
which are used by its customers in manufacturing a wide variety of microwave
instruments or devices.

Sources and Availability of Raw Materials and Components

Substantially all of the components required by Giga-tronics to make its
assemblies are available from more than one source. The Company occasionally
uses sole source arrangements to obtain leading-edge technology, favorable
pricing or supply terms, but not in any material volume. In the Companys
opinion, the loss of any sole source arrangement it has would not be material
to its operations.

Although extended delays in receipt of components from its suppliers could
result in longer product delivery schedules for the Company, the Company
believes that its protection against this possibility stems from its practice
of dealing with well-established suppliers and maintaining good relationships
with such suppliers.

4



---



##### Table of Contents



Patents and Licenses

The Companys competitive position is largely dependent upon its ability
to provide performance specifications for its instruments and systems that (a)
easily, effectively and reliably meet customers needs and (b) selectively
surpass competitors specifications in competing products. Patents may
occasionally provide some short-term protection of proprietary designs.
However, because of the rapid progress of technological development in the
Companys industry, such protection is most often, although not always,
short-lived. Therefore, although we occasionally pursue patent coverage, we
place major emphasis on the development of new products with superior
performance specifications and the upgrading of existing products toward this
same end. This is reflected in a substantial allocation of budget to project
development costs.

The Companys products are based on its own designs, which in turn derive
from its own engineering abilities. If the Companys new product engineering
efforts fall behind, its competitive position weakens. Conversely, effective
product development greatly enhances its competitive status.

The Company presently holds 22 patents. None of these is critical to the
Companys ongoing business, and the Company does not actively maintain them.

The Company is not dependent on trademarks, licenses or franchises. We do
utilize certain software licenses in some functional aspects to some of our
products. Such licenses are readily available, non-exclusive and are obtained
at either no cost or for a relatively small fee.

Seasonal Nature of Business

The business of the Company is not seasonal.

Working Capital Practices

The Company generally strives to maintain at least 60 days worth of
inventory and generally sells to customers on 30 day payment terms. Typically,
the Company receives payment terms of 30 days. The Company believes that these
practices are consistent with typical industry practices.

Importance of Limited Number of Customers

Commercial business accounted for
61% of net sales in fiscal 2003, 83% in
fiscal 2002, and 89% in fiscal 2001. The Company is a leading supplier
of microwave and radio frequency (RF) test instruments to various U.S.
Government defense agencies, as well as to their prime contractors. Management
anticipates sales to U.S. Government agencies will remain significant in fiscal
2004. Defense-related agencies accounted for 39% of net sales in fiscal 2003,
17% in fiscal 2002, and 11% in fiscal 2001. Prior to the current year, where
the defense business has improved, sales to the defense industry in general and
direct sales to the United States and foreign government agencies in particular
had declined. Any decline of defense orders could have a negative effect on
the business, operating results, financial condition and cash flows of
Giga-tronics.

During fiscal 2003, a Japanese distributor of the Company, Midoriya,
accounted for less than 10% of the Companys revenues and a negligible amount
outstanding in accounts receivable. During 2002 and 2001, Midoriya accounted
for 16% and 10% of the Companys consolidated sales, respectively. At fiscal
2002 year end, Midoriya had a negligible amount outstanding in accounts
receivable while they composed about 11% of receivables at the fiscal year end
of 2001.

5



---



##### Table of Contents



During fiscal 2003, the U.S. Government defense agencies and their prime
contractors made up 25% of the Giga-tronics Instrument Divisions 2003 revenue.
During fiscal 2002 the Instrument Division had two major customer
concentrations. Midoriya, the Divisions Japanese distributor, accounted for
30% of the Instrument Divisions fiscal 2002 revenue. The U.S. Government
defense agencies and their prime contractors made up 10% of the Giga-tronics
Instrument Divisions 2002 revenue.

In fiscal 2003, ASCOR derived 41% of its revenues from U.S. Government
defense agencies and their prime contractors and another 34% from an automated
test equipment manufacturer. During fiscal 2002 ASCOR had three major customer
concentrations. The U.S. Government defense agencies and their prime
contractors made up 18%, an automated test equipment manufacturer comprised 30%
and an international communications equipment company comprised 11% of ASCORs
fiscal 2002 revenue, respectively.

In fiscal 2003, DYMATiX derived 21% of its revenues from a major
semiconductor device manufacturer and another 11% from a manufacturer of mobile
electronics and transportation components. During fiscal 2002, the same
manufacturer of mobile electronics and transportation components accounted for
56% of DYMATiXs revenue.

During fiscal 2003 and 2002, Microsource had two major customer
concentrations. An electronic instrument manufacturer accounted for 14% and
35% of Microsources fiscal 2003 and fiscal 2002 revenue, respectively. U.S.
Government defense agencies and their prime contractors made up 62% and 35% of
Microsources 2003 and 2002 revenue, respectively.

Other than U.S. government agencies and their defense contractors, no
customer accounted for 10% or more of consolidated revenues of the Company in
fiscal 2003 and no customer who accounted for 10% or more of revenues of any
one segment accounted for 10% or more of any other segment. Other than U.S.
Government agencies and their defense contractors, the Company has no customer
the loss of which would, in managements opinion, have a material adverse
effect on the Company and its subsidiaries as a whole.

The Companys products are largely capital investments for its customers,
and the Companys belief is that its customers have economic cycles in which
capital investment budgets for the kinds of products that the Company produces
expand and contract. The Company, therefore, expects that a major customer in
one year will often not be a major customer in the following year.
Accordingly, the Companys revenues and earnings will decline if the Company is
unable to find new customers or increase its business with other existing
customers to replace declining revenues from the previous years major
customers. A substantial decline in revenues from U.S. Government defense
agencies and their prime contractors would also have a material adverse effect
on the Companys revenues and results of operations unless replaced by revenues
from the commercial sector.

Backlog of Orders

On March 29, 2003, the Companys backlog of unfilled orders was
$17,192,000 compared to $21,387,000 at March 30, 2002. As of March 29, 2003,
there were approximately $9,077,000 in unfilled orders that were scheduled for
shipment beyond a year, as compared to approximately $13,912,000 at March 30,
2002. Orders for the Companys products include program orders from both the
U.S. Government and defense contractors, with extended delivery dates.
Accordingly, the backlog of orders may vary substantially from quarter to
quarter and the backlog entering any single quarter may not be indicative of
sales for any period.

Backlog includes only those customer orders for which a delivery schedule
has been agreed upon between the Company and the customer and, in the case of
U.S. Government orders, for which funding has been appropriated.

6



---



##### Table of Contents



Competition

Giga-tronics serves the broad market for electronic instrumentation with
applications ranging from the design, test, calibration and maintenance of
other electronic devices to providing sophisticated components for complex
electronic systems to sub-systems capable of sorting and identifying high
frequency communication signals. These applications cut across the commercial,
industrial and military segments of the broad market. The Company has a
variety of competitors. Several of its competitors are much larger than the
Company and have greater resources and substantially broader product lines.
Others are of comparable size with more limited product lines.

Competition from numerous existing companies is intense and potential new
entrants are expected to increase. The Companys instrument, switch,
oscillator and synthesizer products compete with Agilent, Anritsu, Racal, IFR
and Rohde & Schwarz while the semiconductor equipment products compete with
various other competitors. Many of these companies have substantially greater
research and development, manufacturing, marketing, financial, technological,
personnel and managerial resources than Giga-tronics. There can be no
assurance that any products developed by these competitors will not gain
greater market acceptance than any developed by Giga-tronics.

To compete effectively in this circumstance, the Company (a) places strong
emphasis on maintaining a high degree of technical competence as it relates to
the development of new products and the upgrading of existing products and (b)
is highly selective in establishing technological objectives. The Company does
not attempt to compete across the board, but selectively based upon its
particular strengths and the competitors perceived limitations.

Specification requirements of customers in this market vary widely. The
Company is able to compete by offering products that meet a customers
particular specification requirements; by being able to offer certain product
specifications at lower cost resulting from the Companys past production of
products with those specifications; and by being able to offer certain product
specifications at a higher quality level. All of these advantages are
attributable to the Companys continuing investment in research and development
and in a highly trained engineering staff.

The customers decision is most often based on the best match of its
particular requirements and the suppliers operating specifications. In most
cases, attracting and retaining customers does not require the Company to offer
the best product with respect to each of the customers requirements but rather
to those few specifications that are most important to the customer.

Occasionally price is a competitive consideration. In that circumstance,
the Company believes it has more flexibility in making pricing decisions than
its larger and more structured competitors.

Sales and Marketing

Giga-tronics Instrument Division, ASCOR Inc., DYMATiX and Microsource Inc.
market their products through various distributors and representatives to
commercial and government customers, although not necessarily through the same
distributors and representatives.

Product Development

Products of the type manufactured by Giga-tronics historically have had
relatively long product life cycles. However, the electronics industry is
subject to rapid technological changes at the component level. The future
success of the Company is dependent on its ability to steadily incorporate
advancements in component technologies into its new products.

7



---



##### Table of Contents



Product development expense was approximately $5,644,000 in fiscal 2003,
$7,001,000 in fiscal 2002, and $5,087,000 in fiscal 2001. Activities included
the development of new products and the improvement of existing products. It
is managements intention to maintain or increase expenditures for product
development at levels required to sustain its competitive position. All of the
Companys product development activities are internally funded and expensed as
incurred.

Giga-tronics expects to continue to make significant investments in
research and development. There can be no assurance that future technologies,
processes or product developments will not render Giga-tronics current product
offerings obsolete or that Giga-tronics will be able to develop and introduce
new products or enhancements to existing products, which satisfy customer
needs, in a timely manner or achieve market acceptance. The failure to do so
could adversely affect Giga-tronics business.

Manufacturing

The assembly and testing of Giga-tronics Instrument Division microwave, RF
and power measurement products are done at its San Ramon facility. The
assembly and testing of ASCORs switching and connecting devices and the
assembly and testing of DYMATiX semiconductor equipment products are done at
its Fremont facility. The assembly and testing of Microsources line of YIG
(Yttrium, Iron, Garnet) tuned oscillators, filters and microwave synthesizers
are done at its Santa Rosa facility.

Environment

To the best of its knowledge, the Company is in compliance with all
federal, state and local laws and regulations involving the protection of the
environment.

Employees

As of March 29, 2003, Giga-tronics employed 174 individuals on a full time
basis. Management believes that the future success of the Company depends on
its ability to attract and retain skilled personnel. None of the Companys
employees are represented by a labor union, and the Company considers its
employee relations to be good.

Information about Foreign Operations

The Company sells to its international customers through a network of
foreign technical sales representative organizations. Sales to foreign
customers were approximately $5,111,000 in fiscal 2003, $17,105,000 in fiscal
2002, and $22,072,000 in fiscal 2001.

The Company closed its United Kingdom (UK) research & development facility
as of March 30, 2002. The Company has no other foreign-based operations or
material amounts of identifiable assets in foreign countries. Its gross
margins on foreign and domestic sales are similar.

Certain Factors Which May Adversely Affect Future Operations Or An Investment
In Giga-tronics

Business climate is volatile

Giga-tronics has a significant number of defense-related orders. If the
defense market should soften, shipments in the current year could decrease more
than current projected shipments with a concurrent decline in earnings. The
Companys commercial product backlog has a number of risks and uncertainties
such as the cancellation or deferral of orders, dispute over performance and
our ability to collect amounts due under these orders. If this occurs, then
shipments in the current year could decrease more than current projected
shipments resulting in a decline in earnings.

8



---



##### Table of Contents



Giga-tronics sales are substantially dependent on the wireless industry

Giga-tronics sells directly or indirectly to customers and equipment
manufacturers in the wireless industry. Currently, this industry is undergoing
dramatic and rapid change. As such, the business that Giga-tronics records
could decrease or existing recorded backlog could be stretched or deferred
resulting in less than projected shipments. These reduced shipments may have a
material adverse effect on operations.

Giga-tronics markets involve rapidly changing technology and standards

The market for electronics equipment is characterized by rapidly changing
technology and evolving industry standards. Giga-tronics believes that its
future success will depend in part upon its ability to develop and
commercialize its existing products, develop new products and applications, and
in part to develop, manufacture and successfully introduce new products and
product lines with improved capabilities and to continue to enhance existing
products. There can be no assurance that Giga-tronics will successfully
complete the development of current or future products or that such products
will achieve market acceptance.

Giga-tronics acquisitions may not be effectively integrated and their
integration may be costly

As part of its business strategy, Giga-tronics intends to broaden its
product lines and expand its markets, in part through the acquisition of other
business entities. Giga-tronics is subject to various risks in connection with
any future acquisitions. Such risks include, among other things, the
difficulty of assimilating the operations and personnel of the acquired
companies, the potential disruption of the Companys business, the inability of
management to maximize the financial and strategic position of the Company by
the successful incorporation of acquired technology and rights into its product
offerings, the maintenance of uniform standards, controls, procedures and
policies, and the potential loss of key employees of acquired companies. No
assurance can be given that any acquisition by Giga-tronics will or will not
occur, that if an acquisition does occur, that it will not materially harm the
Company or that any such acquisition will be successful in enhancing the
Companys business. The Company currently contemplates that future
acquisitions may involve the issuance of additional shares of common stock.
Any such issuance may result in dilution to all Giga-tronics shareholders, and
sales of such shares in significant volume by the shareholders of acquired
companies may depress the price of its common stock.

Giga-tronics common stock price is volatile

The market price of the Companys common stock could be subject to
significant fluctuations in response to variations in quarterly operating
results, shortfalls in revenues or earning from levels expected by securities
analysts and other factors such as announcements of technological innovations
or new products by Giga-tronics or by competitors, government regulations or
developments in patent or other proprietary rights. In addition, the NASDAQ
National Market and other stock markets have experienced significant price
fluctuations in recent periods. These fluctuations often have seemingly been
unrelated to the operating performance of the specific companies whose stocks
are traded. Broad market fluctuations, as well as general foreign and domestic
economic conditions, may adversely affect the market price of the common stock.

Giga-tronics stock at any time has historically traded on thin volume on
NASDAQ. Sales of a significant volume of stock could result in a depression of
Giga-tronics share prices.




ITEM 2. PROPERTIES

As of March 29, 2003, Giga-tronics principal executive office and the
Instrument Division marketing, sales and engineering offices and manufacturing
facilities for its microwave and RF signal generator and power measurement
products are located in approximately 47,300 square feet in San Ramon,
California, which the Company occupies under a lease agreement expiring
December 31, 2006.

ASCORs marketing, sales and engineering offices and manufacturing
facilities for its switching and connecting devices and the DYMATiX marketing,
sales and engineering offices and manufacturing facilities for its

9



---



##### Table of Contents



automation equipment for the inspection of silicon wafers, prober line and
optical inspection equipment for the manufacture and test of semiconductor
devices are both located in approximately 18,756 square feet in Fremont,
California, under a lease that expires on June 30, 2006.

Microsources marketing, sales and engineering offices and manufacturing
facilities for its YIG tuned oscillators, filters and microwave synthesizers
are located in an approximately 33,439 square foot facility in Santa Rosa,
California, which the Company occupies under a lease expiring May 25, 2013.

The Company believes that its facilities are adequate for its business
activities.




ITEM 3. LEGAL PROCEEDINGS

As of March 29, 2003, the Company has no material pending legal
proceedings. From time to time, Giga-tronics is involved in various disputes
and litigation matters that arise in the ordinary course of business.




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 the fiscal year ended March 29, 2003.

Executive Officers of the Company are listed in Part III, Item 10 of this
Form 10-K.




PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Common Stock Market Prices

Giga-tronics common stock is traded over the counter on NASDAQ National
Market System using the symbol GIGA. The number of record holders of the
Companys common stock as of March 29, 2003 was approximately 1,400. The table
below shows the high and low closing bid quotations for the common stock during
the indicated fiscal periods. These quotations reflect inter-dealer prices
without retail mark-ups, mark-downs, or commission and may not reflect actual
transactions.

|               |  |      |             |      |  |     |       |      |  |      |       |     |  |  |             |   |  |   |       |  |  |   |       | 
|-------------- |  | ---- | ----------- | ---- |  | --- | ----- | ---- |  | ---- | ----- | --- |  |  | ----------- | - |  | - | ----- |  |  | - | ----- | 
|               |  | 2003 |             | High |  | Low |       | 2002 |  | High |       | Low
|               |  |      |             |      |  |     |       |      |  |      |       |    
|First quarter  |  |      | (3/31-6/29  | )    |  | $   | 3.700 |      |  | $    | 2.330 |     |  |  | (4/1-6/30   | ) |  | $ | 5.810 |  |  | $ | 3.200 | 
|Second quarter |  |      | (6/30-9/28  | )    |  |     | 2.220 |      |  |      | 1.000 |     |  |  | (7/1-9/29   | ) |  |   | 3.760 |  |  |   | 2.170 | 
|Third quarter  |  |      | (9/29-12/28 | )    |  |     | 1.660 |      |  |      | 0.910 |     |  |  | (9/30-12/29 | ) |  |   | 4.160 |  |  |   | 2.320 | 
|Fourth quarter |  |      | (12/29-3/29 | )    |  |     | 1.510 |      |  |      | 1.210 |     |  |  | (12/30-3/30 | ) |  |   | 4.630 |  |  |   | 3.450 | 

Giga-tronics has not paid cash dividends in the past and has no plans to
do so in the future, based upon its belief that the best use of its available
capital is in the enhancement of its product position.




ITEM 6. SELECTED FINANCIAL DATA

Effective March 26, 2000, the Company changed its method of accounting for
revenue recognition to conform with the guidance provided by SAB 101 (see Note
1 to the consolidated financial statements). The impact of adopting SAB 101
was to increase earnings (loss) before the cumulative effect of the accounting
change in the year ended March 31, 2001 by $520,000, net of income taxes.

10



---



##### Table of Contents



SELECTED FINANCIAL DATA

|                                                                               |  |            |         |           |  |           |        |           |  |           |        |   |  |   |        |  |  |   |        |  
|------------------------------------------------------------------------------ |  | ---------- | ------- | --------- |  | --------- | ------ | --------- |  | --------- | ------ | - |  | - | ------ |  |  | - | ------ | -
|Summary of Operations:                                                         |  | Year Ended
|                                                                               |  |           
|                                                                               |  | March 29,  |         | March 30, |  | March 31, |        | March 25, |  | March 27,
|(In thousands except per share data)                                           |  | 2003       |         | 2002      |  | 2001      |        | 2000      |  | 1999     
|Net sales                                                                      |  | $          | 22,281  |           |  | $         | 39,036 |           |  | $         | 54,159 |   |  | $ | 47,577 |  |  | $ | 37,636 |  
|Gross profit                                                                   |  |            | 5,903   |           |  |           | 11,535 |           |  |           | 19,056 |   |  |   | 15,810 |  |  |   | 11,534 |  
|Operating expenses                                                             |  |            | 12,464  |           |  |           | 16,085 |           |  |           | 16,032 |   |  |   | 14,315 |  |  |   | 15,293 |  
|Interest income, net                                                           |  |            | 60      |           |  |           | 63     |           |  |           | 205    |   |  |   | 59     |  |  |   | 121    |  
|Earnings (loss) before cumulative effect
of accounting change and income taxes |  |            | (6,664  | )         |  |           | (4,462 | )         |  |           | 3,461  |   |  |   | 1,633  |  |  |   | (3,006 | )
|Earnings (loss) before cumulative effect
of accounting change                  |  |            | (10,762 | )         |  |           | (2,102 | )         |  |           | 2,421  |   |  |   | 1,139  |  |  |   | (1,858 | )
|Cumulative effect of accounting change                                         |  |            |        |           |  |           |       |           |  |           | (520   | ) |  |   |       |  |  |   |       |  
|Net earnings (loss)                                                            |  | $          | (10,762 | )         |  | $         | (2,102 | )         |  | $         | 1,901  |   |  | $ | 1,139  |  |  | $ | (1,858 | )
|Basic earnings (loss) per share:                                               |  |            |         |           |  |           |        |           |  |           |        |   |  |   |        |  |  |   |        |  
|Before cumulative effect of accounting change                                  |  | $          | (2.31   | )         |  | $         | (0.46  | )         |  | $         | 0.54   |   |  | $ | 0.26   |  |  | $ | (0.43  | )
|Cumulative effect of accounting change                                         |  |            |        |           |  |           |       |           |  |           | (0.12  | ) |  |   |       |  |  |   |       |  
|Net earnings (loss) per share  basic                                          |  |            | (2.31   | )         |  |           | (0.46  | )         |  |           | 0.42   |   |  |   | 0.26   |  |  |   | (0.43  | )
|Diluted earning (loss) per share:                                              |  |            |         |           |  |           |        |           |  |           |        |   |  |   |        |  |  |   |        |  
|Before cumulative effect of accounting change                                  |  |            | (2.31   | )         |  |           | (.46   | )         |  |           | .51    |   |  |   | .24    |  |  |   | (.43   | )
|Cumulative effect of accounting change                                         |  |            |        |           |  |           |       |           |  |           | (.11   | ) |  |   |       |  |  |   |       |  
|Net earnings (loss) per share  diluted                                        |  | $          | (2.31   | )         |  | $         | (0.46  | )         |  | $         | 0.40   |   |  | $ | 0.24   |  |  | $ | (0.43  | )
|Shares of common stock  basic                                                 |  |            | 4,663   |           |  |           | 4,604  |           |  |           | 4,474  |   |  |   | 4,379  |  |  |   | 4,338  |  
|Shares of common stock  diluted                                               |  |            | 4,663   |           |  |           | 4,604  |           |  |           | 4,803  |   |  |   | 4,693  |  |  |   | 4,338  |  

|                            |  |           |        |           |  |           |        |           |  |           |        |  |  |   |        |  |  |   |        | 
|--------------------------- |  | --------- | ------ | --------- |  | --------- | ------ | --------- |  | --------- | ------ |  |  | - | ------ |  |  | - | ------ | 
|Financial Position:        
|                           
|                            |  | March 29, |        | March 30, |  | March 31, |        | March 25, |  | March 27,
|(In thousands except ratio) |  | 2003      |        | 2002      |  | 2001      |        | 2000      |  | 1999     
|Current ratio               |  |           | 3.49   |           |  |           | 5.49   |           |  |           | 4.06   |  |  |   | 3.17   |  |  |   | 3.32   | 
|Working capital             |  | $         | 13,622 |           |  | $         | 23,135 |           |  | $         | 22,924 |  |  | $ | 21,066 |  |  | $ | 18,021 | 
|Total assets                |  | $         | 21,789 |           |  | $         | 32,880 |           |  | $         | 37,318 |  |  | $ | 37,526 |  |  | $ | 33,259 | 
|Shareholders equity        |  | $         | 15,960 |           |  | $         | 26,661 |           |  | $         | 28,475 |  |  | $ | 26,149 |  |  | $ | 24,710 | 

|                                                                               |  |           |       |           |  |           |       |           |  |           |      |   |  |  |      |   |  |  |      |  
|------------------------------------------------------------------------------ |  | --------- | ----- | --------- |  | --------- | ----- | --------- |  | --------- | ---- | - |  |  | ---- | - |  |  | ---- | -
|Percentage Data:                                                              
|                                                                              
|                                                                               |  | March 29, |       | March 30, |  | March 31, |       | March 25, |  | March 27,
|                                                                               |  | 2003      |       | 2002      |  | 2001      |       | 2000      |  | 1999     
|Percent of net sales                                                           |  |           |       |           |  |           |       |           |  |           |      |   |  |  |      |   |  |  |      |  
|Gross profit                                                                   |  |           | 26.5  | %         |  |           | 29.6  | %         |  |           | 35.2 | % |  |  | 33.2 | % |  |  | 30.6 | %
|Operating expenses                                                             |  |           | 55.9  |           |  |           | 41.2  |           |  |           | 29.6 |   |  |  | 30.1 |   |  |  | 40.6 |  
|Interest income, net                                                           |  |           | 0.3   |           |  |           | 0.2   |           |  |           | 0.4  |   |  |  | 0.1  |   |  |  | 0.3  |  
|Earnings (loss) before cumulative effect
of accounting change and income taxes |  |           | (29.9 | )         |  |           | (11.4 | )         |  |           | 6.4  |   |  |  | 3.4  |   |  |  | (8.0 | )
|Cumulative effect of accounting change                                         |  |           |      |           |  |           |      |           |  |           | 1.0  |   |  |  |     |   |  |  |     |  
|Net earnings (loss)                                                            |  |           | (48.3 | )         |  |           | (5.4  | )         |  |           | 3.5  |   |  |  | 2.4  |   |  |  | (4.9 | )

11



---



##### Table of Contents



SELECTED FINANCIAL DATA

|                                                                    |  |       |       |        |  |       |       |        |  |      |       |   |  |   |       |   |  |   |        |  
|------------------------------------------------------------------- |  | ----- | ----- | ------ |  | ----- | ----- | ------ |  | ---- | ----- | - |  | - | ----- | - |  | - | ------ | -
|Quarterly Financial Information (Unaudited)                        
|(In thousands except per share data)                                |  |       |       |        |  |       |       |        |  |      |       |   |  |   |       |   |  |   |        |  
|                                                                    |  | 2003 
|                                                                    |  |      
|                                                                    |  | First |       | Second |  | Third |       | Fourth |  | Year
|                                                                    |  |       |       |        |  |       |       |        |  |     
|Net sales                                                           |  | $     | 6,008 |        |  | $     | 5,539 |        |  | $    | 5,506 |   |  | $ | 5,228 |   |  | $ | 22,281 |  
|Gross profit                                                        |  |       | 1,959 |        |  |       | 1,888 |        |  |      | 1,577 |   |  |   | 479   |   |  |   | 5,903  |  
|Operating expenses                                                  |  |       | 3,644 |        |  |       | 3,159 |        |  |      | 2,719 |   |  |   | 2,942 |   |  |   | 12,464 |  
|Interest income, net                                                |  |       | 12    |        |  |       | 18    |        |  |      | 16    |   |  |   | 14    |   |  |   | 60     |  
|Loss before cumulative effect of accounting change and
income taxes |  |       | 1,699 |        |  |       | 1,298 |        |  |      | 1,180 |   |  |   | 2,487 |   |  |   | 6,664  |  
|Loss before cumulative effect of accounting change                  |  |       | 1,599 |        |  |       | 1,298 |        |  |      | 5,478 |   |  |   | 2,387 |   |  |   | 10,762 |  
|Net loss                                                            |  |       | 1,599 |        |  |       | 1,298 |        |  |      | 5,478 |   |  |   | 2,387 |   |  |   | 10,762 |  
|Net loss per share  basic                                          |  | $     | (0.34 | )      |  | $     | (0.28 | )      |  | $    | (1.17 | ) |  | $ | (0.51 | ) |  | $ | (2.31  | )
|Net loss per share  diluted                                        |  | $     | (0.34 | )      |  | $     | (0.28 | )      |  | $    | (1.17 | ) |  | $ | (0.51 | ) |  | $ | (2.31  | )
|Shares of common stock - basic                                      |  |       | 4,656 |        |  |       | 4,666 |        |  |      | 4,677 |   |  |   | 4,682 |   |  |   | 4,663  |  
|Shares of common stock - diluted                                    |  |       | 4,656 |        |  |       | 4,666 |        |  |      | 4,677 |   |  |   | 4,682 |   |  |   | 4,663  |  

|                                                                    |  |       |        |        |  |       |       |        |  |      |       |   |  |   |        |   |  |   |        |  
|------------------------------------------------------------------- |  | ----- | ------ | ------ |  | ----- | ----- | ------ |  | ---- | ----- | - |  | - | ------ | - |  | - | ------ | -
|Quarterly Financial Information (Unaudited)                        
|(In thousands except per share data)                                |  |       |        |        |  |       |       |        |  |      |       |   |  |   |        |   |  |   |        |  
|                                                                    |  | 2002 
|                                                                    |  |      
|                                                                    |  | First |        | Second |  | Third |       | Fourth |  | Year
|                                                                    |  |       |        |        |  |       |       |        |  |     
|Net sales                                                           |  | $     | 11,797 |        |  | $     | 9,892 |        |  | $    | 9,720 |   |  | $ | 7,627  |   |  | $ | 39,036 |  
|Gross profit                                                        |  |       | 3,326  |        |  |       | 3,612 |        |  |      | 3,405 |   |  |   | 1,192  |   |  |   | 11,535 |  
|Operating expenses                                                  |  |       | 4,332  |        |  |       | 4,060 |        |  |      | 3,824 |   |  |   | 3,869  |   |  |   | 16,085 |  
|Interest income, net                                                |  |       | 19     |        |  |       | 15    |        |  |      | 13    |   |  |   | 16     |   |  |   | 63     |  
|Loss before cumulative effect of accounting change and
income taxes |  |       | (934   | )      |  |       | (435  | )      |  |      | (402  | ) |  |   | (2,682 | ) |  |   | (4,462 | )
|Loss before cumulative effect of accounting change                  |  |       | (566   | )      |  |       | (275  | )      |  |      | (191  | ) |  |   | (1,070 | ) |  |   | (2,102 | )
|Net loss                                                            |  |       | (566   | )      |  |       | (275  | )      |  |      | (191  | ) |  |   | (1,070 | ) |  |   | (2,102 | )
|Net loss per share  basic                                          |  | $     | (0.12  | )      |  | $     | (0.06 | )      |  | $    | (0.04 | ) |  | $ | (0.23  | ) |  | $ | (0.46  | )
|Net loss per share  diluted                                        |  | $     | (0.12  | )      |  | $     | (0.06 | )      |  | $    | (0.04 | ) |  | $ | (0.23  | ) |  | $ | (0.46  | )
|Shares of common stock - basic                                      |  |       | 4,565  |        |  |       | 4,591 |        |  |      | 4,626 |   |  |   | 4,635  |   |  |   | 4,604  |  
|Shares of common stock - diluted                                    |  |       | 4,565  |        |  |       | 4,591 |        |  |      | 4,626 |   |  |   | 4,635  |   |  |   | 4,604  |  

12



---



##### Table of Contents






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




MANAGEMENTS DISCUSSION AND ANALYSIS

Results of Operations for Fiscal 2003 as compared to 2002

New orders received in fiscal 2003 were $18,086,000, a decrease of 12%
from the $20,461,000 received in fiscal 2002. New orders declined primarily due
to the weakness in the commercial wireless market and major customer order
cancellations during fiscal 2003 partially offset by increases in new military
orders. New orders at Giga-tronics Instrument Division declined 17% to
$8,590,000 for the year. Orders at ASCOR increased 48% to $4,866,000 primarily
due to increased military orders. DYMATiX experienced a decline of 41% on new
orders to $1,738,000 for the fiscal year 2003. Orders at Microsource decreased
25% to $2,892,000, which includes an order reversal of approximately $750,000
due to a contract re-negotiation with a long-term customer. Backlog on March
29, 2003 was $17,192,000 (about $8,115,000 is expected to be shipped within one
year) compared to $21,387,000 (about $7,475,000 was expected to be shipped
within one year) on March 30, 2002. The decrease in backlog is primarily due to
weak order levels at the Giga-tronics Instrument Division and Microsource
offset by stronger order levels at ASCOR. Of the $7,475,000 in orders
considered shippable within one year at March 30, 2002, Giga-tronics
subsequently rescheduled (and reclassified as not shippable within one year)
shipments for orders of $782,000 net and recorded cancellations of orders for
$605,000 throughout the year that ended March 29, 2003.

Net sales for fiscal 2003 were $22,281,000, a 43% decrease from the
$39,036,000 in 2002. The reduction in sales was primarily due to fewer orders
booked because of the general slowdown in the commercial wireless market. In
fiscal 2003, Microsource revenues decreased 23% or $2,349,000, on weak orders
and customer stretch-outs. The Instrument Division sales decreased 57% or

$12,254,000 primarily due to weak orders. ASCOR sales increased 2% or $62,000
primarily due to increased orders and higher backlog. Sales at DYMATiX
decreased 60% or $2,214,000 on weak orders primarily due to the reduction in
capital equipment spending affecting the semiconductor manufacturing market.

Cost of sales decreased 40% in fiscal 2003 to $16,378,000 from the
$27,501,000 in 2002. The decrease is primarily attributable to the 43% decline
in sales offset with the write-off of inventory related to discontinued
products.

Operating expenses decreased 23% or $3,621,000 in fiscal 2003 over 2002
due to decreases of $1,929,000 in Selling, general and administrative, $335,000
in total amortization and $1,357,000 in product development expenses. Product
development costs decreased 19% or $1,357,000 in fiscal 2003 primarily due to
decreased product development expenses at the Instrument Division and
Microsource offset by higher product development costs at DYMATiX related to
the newest line of automation equipment. Selling, general and administrative
expenses decreased 22% or $1,929,000 for the fiscal year 2003 compared to the
prior year. The decrease is a result of lower commission expense of $581,000 on
lower sales for the year coupled with $602,000 less in administrative expenses
and $746,000 less in marketing expenses. These expense reductions were
primarily personnel reductions and less rent expense on renegotiated lease
terms. For fiscal year 2003 amortization of intangibles decreased 94% or
$335,000 as compared to last fiscal year. The decrease in the amortization of
intangibles is primarily a result of reduced amortization of patents and
licenses as well as the goodwill write-off at Microsource that occurred last
year related to an impairment of this asset. Interest income in 2003 decreased
from 2002 due to lower interest rates.

Giga-tronics recorded a net loss of $10,762,000 or $2.31 per fully diluted
share for the fiscal year 2003 versus a net loss of $2,102,000 or $0.46 per
fully diluted share in 2002. The loss for 2003 includes a one-time charge of
approximately $4,098,000 related to an increase in the allowance against the
deferred tax benefit, in addition to approximately $1,450,000 in restructuring
and inventory write-offs related to discontinued products.

13



---



##### Table of Contents



Results of Operations for Fiscal 2002 as compared to 2001

New orders received in fiscal 2002 were $20,461,000, a decrease of 65%
from the $57,830,000 received in 2001. New orders declined primarily due to the
weakness in the overall wireless market and major customer order cancellations
during fiscal 2002 partially offset by increases in new military orders. New
orders at Giga-tronics Instrument Division declined 65% to $10,357,000 for
fiscal year 2002 after a net order cancellation of $2,900,000. In fiscal 2002,
a significant customer of the Instrument Division reduced ordering from the
Company, primarily due to lower demand. The company expects the lower levels
of business from this customer to continue. Orders at ASCOR declined 28% to
$3,296,000. DYMATiX experienced a decline of 55% on new orders to $2,969,000
for the fiscal year 2002. Orders at Microsource decreased 77% to $3,839,000,
which includes $5,120,000 order reversal for a customer that commenced
liquidation proceedings. At year-end 2002, the Companys backlog of unfilled
orders was $21,387,000, compared to $39,964,000 at the end of 2001. The
decrease in backlog is primarily due to weak order levels at the Giga-tronics
Instrument Division and Microsource. As of year-end 2002, there were
approximately $13,912,000 unfilled orders that were scheduled for shipment
beyond a year and as of year end 2001 there were $7,245,000 unfilled orders
scheduled for shipment beyond a year. The increase in unfilled orders
scheduled for shipment beyond a year is attributable primarily to Microsources
customers delaying shipments of their orders.

Net sales for 2002 were $39,036,000, a 28% decrease from the $54,159,000
in 2001. The reduction in sales was primarily due to fewer orders booked
because of the slowdown in the commercial wireless market and stretch outs on
existing orders in backlog. In fiscal 2002, Microsource revenues decreased 24%
or $3,172,000, on weak orders and customer stretch outs. Giga-tronics
Instrument Division sales decreased 14% or $3,442,000 and ASCOR sales decreased
50% or $3,735,000 primarily due to weak orders at both of these segments. Sales
at DYMATiX decreased 57% or $4,774,000 on weak orders primarily due to
customers delaying orders until their new product is released.

Cost of sales decreased 22% in fiscal 2002 to $27,501,000 from the
$35,103,000 in 2001. The decrease is primarily attributable to the 28% decline
in sales offset with higher costs for labor and material on the products
shipped coupled with the write down of inventory and pre-production costs
associated with the liquidation of a Microsource customer. Subsequent to year
end, a telecommunications equipment customer of the Microsource Division
commenced liquidation proceedings. As a result, the orders under the long term
production contract with this customer were cancelled and Giga-tronics recorded
a write-off of $1,100,000 of inventory and pre-production costs.

Operating expenses increased less than 1% or $50,000 in fiscal 2002 over
2001 due to decreases of $1,984,000 in Selling, general and administrative and
$50,000 in total amortization offset by an increase of $1,914,000 in product
development expenses. Product development costs increased 38% or $1,914,000 in
fiscal 2002 primarily due to increased product development at DYMATiX and
increased YIG product development costs at Microsource. Selling, general and
administrative expenses decreased 19% or $1,984,000 for the fiscal year 2002
compared to the prior year. The decrease was a result of lower commission
expense of $959,000 on lower sales for the year coupled with $752,000 less in
administrative expenses and $322,000 less in marketing expenses primarily due
to expense reduction measures taken during the year. These expense reductions
were primarily personnel related. For fiscal year 2002 amortization of
intangibles decreased 22% or $50,000 as compared to last fiscal year. The
decrease in the amortization of intangibles is primarily a result of reduced
amortization of patents and licenses. The Company wrote off $173,000 of
remaining goodwill related to the Microsource acquisition as such goodwill was
determined to be impaired. Interest income in 2002 decreased from 2001 due to
lower interest rates.

Giga-tronics recorded a net loss of $2,102,000, or $0.46 per diluted
share, in 2002 versus net earnings before cumulative effect of accounting
change of $2,421,000, or $0.51 per diluted share, in 2001. The Company recorded
$520,000 for the cumulative effect of accounting change in fiscal 2001 as a
result of the implementation of SAB 101. As a result, Giga-tronics recorded
net earnings of $1,901,000, or $0.40 per diluted share, in 2001.

14



---



##### Table of Contents



Critical Accounting Policies

Management of Giga-tronics has identified the following as the Companys
critical accounting policies:

Revenue

Revenues are recognized when there is evidence of an arrangement, delivery
has occurred, the price is fixed or determinable, and collectability is
reasonably assured. This generally occurs when products are shipped and the
risk of loss has passed. Upon shipment, the Company also provides for the
estimated cost that may be incurred for product warranties. Revenue related to
products shipped subject to customers evaluation is recognized upon final
acceptance.

Inventory

Inventories are stated at the lower of cost or market. Cost is determined
on a first-in, first-out basis. The Company periodically reviews inventory on
hand to identify and write down excess and obsolete inventory based on
estimated product demand.

Accounts Receivable

Accounts receivable are stated at the net realizable value. The Company
has estimated an allowance for uncollectible accounts based on analysis of
outstanding receivables, consideration of the age of those receivables, and the
Companys historical collection experience.

Deferred Tax Assets

The Company has recorded a valuation allowance to reflect the estimated
amount of deferred tax assets, which may not be realized. The ultimate
realization of deferred tax assets is dependent upon generation of future
taxable income during the periods in which those temporary differences become
deductible. Management considers projected future taxable income and tax
planning strategies in making this assessment. Based on the historical taxable
income and projections for future taxable income over the periods in which the
deferred tax assets become deductible, management believes it more likely than
not that the Company will not realize benefits of these deductible differences
as of March 29, 2003. Management has, therefore, established a valuation
allowance against its net deferred tax assets as of March 29, 2003.

Product Development Costs

The Company incurs pre-production costs on certain long-term supply
arrangements. The costs, which represent non-recurring engineering and tooling
costs, are capitalized as other assets and amortized over their useful life
when reimbursable by the customer. Otherwise, they are expensed as incurred.

Financial Condition and Liquidity

As of March 29, 2003, Giga-tronics had $5,005,000 in cash and cash
equivalents, compared to $7,180,000 as of March 30, 2002. Cash used by
operations amounted to $1,996,000 in 2003 and cash provided by operations
amounted to $3,795,000 in 2002 and $1,951,000 in 2001. Cash used by operations
in 2003 is primarily attributed to the operating loss in the year offset by
non-cash depreciation and amortization expenses, an increase in the deferred
tax asset valuation allowance, and by the net change in operating assets and
liabilities. Cash provided by operations in 2002 is attributed to accounts
receivable collections, reduced inventory purchases and non-cash depreciation
and amortization expenses offset by the operating loss in the year, and the net
change in operating assets and liabilities. Cash provided by operations in 2001
is attributed to the operating income in the year and non-cash depreciation and
amortization expenses, offset by a net change in operating assets and
liabilities.

Giga-tronics had working capital at year-end of $13,622,000 compared to
$23,135,000 in 2002 and $22,924,000 in 2001. The Companys current ratio at
March 29, 2003 was 3.5 compared to 5.5 in 2002 and 4.1 in 2001. The decrease
in working capital is primarily a result of the increased allowance against the
deferred income tax benefit and its operating loss in the current year.

15



---



##### Table of Contents



Additions to property and equipment were $160,000 in 2003, compared to
$811,000 in 2002 and $1,800,000 in 2001. Fiscal 2003 spending reflects
continuing investments to support new product development, increased
productivity, and improved product quality. Other cash inflows in 2003, 2002
and 2001 consist of $61,000, $239,000 and $367,000, respectively, from the sale
of common stock in connection with the exercise of stock options and purchases
under the employee stock purchase plan.

The Company leases various facilities under various operating leases that
expire through May 2013. Total future minimum lease payments under these
leases amount to approximately $6,958,000 as follows:

|               |  |   |       | 
|-------------- |  | - | ----- | 
|              
|Fiscal years   |  |   |       | 
|(In thousands) |  |   |       | 
|              
|2004           |  | $ | 1,286 | 
|2005           |  |   | 1,312 | 
|2006           |  |   | 1,325 | 
|2007           |  |   | 932   | 
|2008           |  |   | 341   | 
|Thereafter     |  |   | 1,762 | 
|               |  |   |       | 
|               |  | $ | 6,958 | 
|               |  |   |       | 

The Company is committed to purchase certain inventory under
non-cancelable purchase orders. As of March 29, 2003, total non-cancelable
purchase orders were approximately $1,142,000 through fiscal 2004 and $187,000
beyond fiscal 2004 that are scheduled to be delivered to the Company at various
dates through July 2004.

Management believes that the Company has adequate resources to meet its
anticipated operating and capital expenditure needs for the foreseeable future.
Giga-tronics intends to increase research and development expenditures for the
purpose of broadening its product base. From time to time, Giga-tronics
considers a variety of acquisition opportunities to also broaden its product
lines and expand its markets. Such acquisition activity could also increase the
Companys operating expenses and require the additional use of capital
resources.

Outlook

The commercial wireless telecommunications market continues to be weak.
All of our business segments have been impacted by the economic downturn

currently affecting the test and measurement and semiconductor industries.
Giga-tronics is uncertain of the duration and severity of this downturn in the
markets we serve and the ultimate impact this will have on the Company. New
orders in the military sector are showing strength, however new orders in many
of our commercial markets have been severely impacted. In response to the
current market conditions, Giga-tronics has implemented cost reductions, which
include personnel reductions, pay cuts across all of the divisions for existing
employees and reductions in monthly lease payments for our facilities.
Giga-tronics will continue monitoring its cost structure in order to take the
appropriate actions to reduce expenses and achieve profitability. Giga-tronics
remains fully committed to the investment in new product development to expand
our product lines and update our existing lines with additional features. While
the Microsource management hopes that prospects for new orders will improve
results for the new fiscal year, its short-term growth will be less than
previously anticipated as there are timing delays associated with currently
booked orders.

Recent Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 143, Accounting Obligations associated with the Retirement of
Long-Lived Assets. SFAS No. 143 addresses financial accounting and reporting
for the retirement obligation of an asset. SFAS No. 143 states that companies
should recognize the asset retirement cost, at its fair value, as part of the
asset cost and classify the accrued amount as a liability in the balance sheet.
The asset retirement liability is then accreted to the ultimate payout as
interest expense. The initial measurement of the liability would be
subsequently updated for revised estimates of the discounted cash outflows.
SFAS No. 143 was effective for fiscal years beginning after June 15, 2002. The
Company does not expect the adoption of SFAS No. 143 will have a material
effect on the Companys financial position or results of operations.

16



---



##### Table of Contents



In August 2001, the FASB issued Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. Statement No. 144 addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. Statement No. 144 retains the fundamental provisions in Statement No.
121 for recognizing and measuring impairment losses on long-lived assets held
for use and long-lived assets to be disposed of by sale, while also resolving
significant implementation issues associated with Statement No. 121. Statement
No. 144 also retains the basic provisions of APB Opinion No. 30 on how to
present discontinued operations in the statement of operations, but broadens
that presentation to include a component of an entity (rather than a segment of
a business). The Company adopted the provisions of Statement No. 144 effective
March 31, 2002. The impact of adopting Statement No. 144 did not have a
material effect on the Companys financial position or results of operations.

SFAS No. 145, Rescission of SFAS Statements No. 4, 44, and 64, Amendment
of SFAS Statement No. 13, and Technical Corrections (SFAS 145), updates,
clarifies and simplifies existing accounting pronouncements. SFAS 145 rescinds
SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt. SFAS 145
amends SFAS No. 13, Accounting for Leases, to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the
required accounting for certain lease modifications that have economic effects
that are similar to sale-leaseback transactions. The provisions of SFAS 145
related to SFAS No.4 and SFAS No. 13 are effective for fiscal years beginning
and transactions occurring after May 15, 2002, respectively. The Company does
not expect the adoption of SFAS No. 145 will have a material effect on its
financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, (SFAS 146), requires companies
to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
SFAS 146 replaces Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The provisions of SFAS 146 are to be applied prospectively to
exit or disposal activities initiated after December 31, 2002. The adoption of
SFAS No. 146 did not have a material effect on the Companys financial position
or results of operations.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires a guarantor
to (i) include disclosure of certain obligations and (ii) if applicable, at the
inception of the guarantee, recognize a liability for the fair value of other
certain obligations undertaken in issuing a guarantee. The disclosure
provisions of the Interpretation are effective for financial statements of
interim or annual reports that end after December 15, 2002. The adoption of
FIN 45 required additional warranty activity disclosures for the Company. The
recognition and measurement provisions of FIN 45 are effective for guarantees
issued or modified after December 29, 2002. The adoption of FIN 45 did not
have a material effect on the Companys financial position or results of
operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure-An Amendment of FASB
Statement No. 123. SFAS No. 148 amends FASB Statement No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for an
entity that chooses to change to the fair-value-based method of accounting for
stock-based employee compensation. It also amends the disclosure provisions of
that statement to require prominent disclosure about the effects that
accounting for stock-based employee compensation using the fair-value based
method would have on reported net income and earnings per share and to require
prominent disclosure about the entitys accounting policy decisions with
respect to stock-based employee compensation. Certain of the disclosure
requirements are required for all companies, regardless of whether the fair
value method or intrinsic value method is used to account for stock-based
employee compensation arrangements. The Company accounts for its stock option
plan in accordance with the recognition and measurement principles of
Accounting Principles Opinion No. 25, Accounting for Stock Issued to Employees.
The amendments to SFAS No. 123 are effective for financial statements for
fiscal years ended after December 15, 2002 and for interim periods beginning
after December 15, 2002. The adoption of the disclosure requirements of SFAS
No. 148 did not have a material effect on the Companys financial position or
results of operations.

17



---



##### Table of Contents






ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Financial instruments that expose the company to market risk are cash and
cash equivalents. The investments are held in recognized financial instruments
and have limited market risk due to the short-term maturities of the
instruments.

18



---



##### Table of Contents






ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED BALANCE SHEETS

|                                                        |                                                                                                                                |                |        |                |  |   |        |        | 
|------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | -------------- | ------ | -------------- |  | - | ------ | ------ | 
|(In thousands except share data)                        |                                                                                                                                | March 29, 2003 |        | March 30, 2002
|                                                        |                                                                                                                                |                |        |               
|Assets                                                  |                                                                                                                                |                |        |                |  |   |        |       
|Current assets                                          |                                                                                                                                |                |        |                |  |   |        |       
|                                                        | Cash and cash equivalents                                                                                                      |                | $      | 5,005          |  |   | $      | 7,180  | 
|                                                        | Trade accounts receivable, net of allowance
of $353 and $358, respectively                                                     |                |        | 3,245          |  |   |        | 3,881  | 
|                                                        | Inventories                                                                                                                    |                |        | 10,244         |  |   |        | 11,369 | 
|                                                        | Income tax refund receivable                                                                                                   |                |        | 100            |  |   |        | 701    | 
|                                                        | Prepaid expenses                                                                                                               |                |        | 488            |  |   |        | 320    | 
|                                                        | Deferred income taxes                                                                                                          |                |        |               |  |   |        | 4,841  | 
|                                                        |                                                                                                                                |                |        |                |  |   |        |       
|Total current assets                                    |                                                                                                                                |                | 19,082 |                |  |   | 28,292 |       
|Property and equipment                                  |                                                                                                                                |                |        |                |  |   |        |       
|                                                        | Leasehold improvements                                                                                                         |                |        | 674            |  |   |        | 408    | 
|                                                        | Machinery and equipment                                                                                                        |                |        | 16,353         |  |   |        | 16,590 | 
|                                                        | Office furniture and fixtures                                                                                                  |                |        | 1,162          |  |   |        | 1,162  | 
|                                                        |                                                                                                                                |                |        |                |  |   |        |       
|Property and equipment                                  |                                                                                                                                |                | 18,189 |                |  |   | 18,160 |       
|Less accumulated depreciation and amortization          |                                                                                                                                |                | 15,915 |                |  |   | 14,098 |       
|                                                        |                                                                                                                                |                |        |                |  |   |        |       
|Property and equipment, net                             |                                                                                                                                |                | 2,274  |                |  |   | 4,062  |       
|Patents and licenses                                    |                                                                                                                                |                |       |                |  |   | 20     |       
|Other assets                                            |                                                                                                                                |                | 433    |                |  |   | 506    |       
|                                                        |                                                                                                                                |                |        |                |  |   |        |       
|Total assets                                            |                                                                                                                                | $              | 21,789 |                |  | $ | 32,880 |       
|                                                        |                                                                                                                                |                |        |                |  |   |        |       
|Liabilities and shareholders equity                    |                                                                                                                                |                |        |                |  |   |        |       
|Current liabilities                                     |                                                                                                                                |                |        |                |  |   |        |       
|                                                        | Accounts payable                                                                                                               |                | $      | 1,723          |  |   | $      | 1,426  | 
|                                                        | Accrued commissions                                                                                                            |                |        | 249            |  |   |        | 224    | 
|                                                        | Accrued payroll and benefits                                                                                                   |                |        | 1,038          |  |   |        | 1,249  | 
|                                                        | Accrued warranty                                                                                                               |                |        | 859            |  |   |        | 779    | 
|                                                        | Customer advances                                                                                                              |                |        | 796            |  |   |        | 780    | 
|                                                        | Obligations under capital lease                                                                                                |                |        | 76             |  |   |        | 89     | 
|                                                        | Other current liabilities                                                                                                      |                |        | 719            |  |   |        | 610    | 
|                                                        |                                                                                                                                |                |        |                |  |   |        |       
|Total current liabilities                               |                                                                                                                                |                | 5,460  |                |  |   | 5,157  |       
|Obligations under capital lease, net of current portion |                                                                                                                                |                | 10     |                |  |   | 94     |       
|Deferred income taxes                                   |                                                                                                                                |                |       |                |  |   | 546    |       
|Deferred rent                                           |                                                                                                                                |                | 359    |                |  |   | 422    |       
|                                                        |                                                                                                                                |                |        |                |  |   |        |       
|Total liabilities                                       |                                                                                                                                |                | 5,829  |                |  |   | 6,219  |       
|                                                        |                                                                                                                                |                |        |                |  |   |        |       
|Commitments                                             |                                                                                                                                |                |       |                |  |   |       |       
|Shareholders equity                                    |                                                                                                                                |                |        |                |  |   |        |       
|Preferred stock of no par value                         |                                                                                                                                |                |        |                |  |   |        |       
|                                                        | Authorized
1,000,000 shares; no shares outstanding
at March 29, 2003 and March 30, 2002                                        |                |        |               |  |   |        |       | 
|Common stock of no par value;                           |                                                                                                                                |                |        |                |  |   |        |       
|                                                        | Authorized 40,000,000 shares; 4,693,080 shares at
March 29, 2003 and 4,648,944 shares at
March 30, 2002 issued and outstanding |                |        | 12,695         |  |   |        | 12,634 | 
|Retained earnings                                       |                                                                                                                                |                | 3,265  |                |  |   | 14,027 |       
|                                                        |                                                                                                                                |                |        |                |  |   |        |       
|Total shareholders equity                              |                                                                                                                                |                | 15,960 |                |  |   | 26,661 |       
|                                                        |                                                                                                                                |                |        |                |  |   |        |       
|Total liabilities and shareholders equity              |                                                                                                                                | $              | 21,789 |                |  | $ | 32,880 |       
|                                                        |                                                                                                                                |                |        |                |  |   |        |       

See Accompanying Notes to Consolidated Financial Statements

19



---



##### Table of Contents



CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------ |  | -------------- | ------- | -------------- |  | -------------- | ------ | - |  | - | ------ | -
|Years ended                                                                                            |  |                |         |                |  |                |        |   |  |   |        |  
|(In thousands except share data)                                                                       |  | March 29, 2003 |         | March 30, 2002 |  | March 31, 2001
|                                                                                                       |  |                |         |                |  |               
|Net sales                                                                                              |  | $              | 22,281  |                |  | $              | 39,036 |   |  | $ | 54,159 |  
|Cost of sales                                                                                          |  |                | 16,378  |                |  |                | 27,501 |   |  |   | 35,103 |  
|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Gross profit                                                                                           |  |                | 5,903   |                |  |                | 11,535 |   |  |   | 19,056 |  
|Product development                                                                                    |  |                | 5,644   |                |  |                | 7,001  |   |  |   | 5,087  |  
|Selling, general and administrative                                                                    |  |                | 6,800   |                |  |                | 8,729  |   |  |   | 10,713 |  
|Amortization of intangibles                                                                            |  |                | 20      |                |  |                | 182    |   |  |   | 232    |  
|Goodwill impairment                                                                                    |  |                |        |                |  |                | 173    |   |  |   |       |  
|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Operating expenses                                                                                     |  |                | 12,464  |                |  |                | 16,085 |   |  |   | 16,032 |  
|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Operating income (loss)                                                                                |  |                | (6,561  | )              |  |                | (4,550 | ) |  |   | 3,024  |  
|Other income (expense)                                                                                 |  |                | (163    | )              |  |                | 25     |   |  |   | 232    |  
|Interest income, net                                                                                   |  |                | 60      |                |  |                | 63     |   |  |   | 205    |  
|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Earnings (loss) before provision (benefit) for income
taxes and cumulative effect of accounting change |  |                | (6,664  | )              |  |                | (4,462 | ) |  |   | 3,461  |  
|Provision (benefit) for income taxes                                                                   |  |                | 4,098   |                |  |                | (2,360 | ) |  |   | 1,040  |  
|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Earnings (loss) before cumulative effect of accounting
change                                          |  |                | (10,762 | )              |  |                | (2,102 | ) |  |   | 2,421  |  
|Cumulative effect of accounting change                                                                 |  |                |        |                |  |                |       |   |  |   | (520   | )
|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Net earnings (loss)                                                                                    |  | $              | (10,762 | )              |  | $              | (2,102 | ) |  | $ | 1,901  |  
|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Basic earnings (loss) per share:                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Before cumulative effect of accounting change                                                          |  | $              | (2.31   | )              |  | $              | (0.46  | ) |  | $ | 0.54   |  
|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Cumulative effect of accounting change                                                                 |  |                |        |                |  |                |       |   |  |   | (0.12  | )
|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Basic earnings (loss) per share                                                                        |  | $              | (2.31   | )              |  | $              | (0.46  | ) |  | $ | 0.42   |  
|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Diluted earnings (loss) per share:                                                                     |  |                |         |                |  |                |        |   |  |   |        |  
|Before cumulative effect of accounting change                                                          |  | $              | (2.31   | )              |  | $              | (0.46  | ) |  | $ | 0.51   |  
|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Cumulative effect of accounting change                                                                 |  |                |        |                |  |                |       |   |  |   | (0.11  | )
|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Diluted earnings (loss) per share                                                                      |  | $              | (2.31   | )              |  | $              | (0.46  | ) |  | $ | 0.40   |  
|                                                                                                       |  |                |         |                |  |                |        |   |  |   |        |  
|Weighted average basic common shares outstanding                                                       |  |                | 4,663   |                |  |                | 4,604  |   |  |   | 4,474  |  
|Weighted average diluted common shares outstanding                                                     |  |                | 4,663   |                |  |                | 4,604  |   |  |   | 4,803  |  

See Accompanying Notes to Consolidated Financial Statements

20



---



##### Table of Contents



CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY AND COMPREHENSIVE INCOME (LOSS)

|                                                      |              |        |           |              |  |               |        |               |  |          |   |         |   |   |   |   |  |   |        |         |   |   |        |         |   | 
|----------------------------------------------------- | ------------ | ------ | --------- | ------------ |  | ------------- | ------ | ------------- |  | -------- | - | ------- | - | - | - | - |  | - | ------ | ------- | - | - | ------ | ------- | - | 
|                                                      |              |        |           |              |  |               |        |               |  |          |   |         |   |   |   |   |  |   |        |        
|                                                      |              |        |           | Common Stock |  |               |        |               |  | Other    |   |         |   |   |   |   |  |  
|                                                      |              |        |           |              |  | Comprehensive |        | Comprehensive |  | Retained |   |         |   |  
|(In thousands except share data)                      |              | Shares |           | Amount       |  | Income (Loss) |        | Income (Loss) |  | Earnings |   | Total  
|                                                      |              |        |           |              |  |               |        |               |  |          |   |         |   |  
|Balance at March 25, 2000                             |              |        | 4,431,008 |              |  | $             | 11,921 |               |  | $        |  |         |   | $ |  |   |  | $ | 14,228 |         |   | $ | 26,149 |        
|Comprehensive Income  net                            |              |        |           |              |  |               |        |               |  |          |   |         |   |   |   |   |  |   |        |         |   |   |        |        
|                                                      | Net earnings |        |           |             |  |               |        |              |  |          |   | 1,901   |   |   |   |  |  |   |        | 1,901   |   |   |        | 1,901   |  
|                                                      |              |        |           |              |  |               |        |               |  |          |   |         |   |   |   |   |  |   |        |         |   |   |        |        
|Stock issuance under stock
option plans               |              |        | 111,686   |              |  |               | 367    |               |  |          |  |         |   |   |  |   |  |   |       |         |   |   | 367    |        
|Tax benefit associated
with exercise
of stock options |              |        |          |              |  |               | 58     |               |  |          |  |         |   |   |  |   |  |   |       |         |   |   | 58     |        
|                                                      |              |        |           |              |  |               |        |               |  |          |   |         |   |   |   |   |  |   |        |         |   |   |        |        
|Balance at March 31, 2001                             |              |        | 4,542,694 |              |  | $             | 12,346 |               |  | $        |  |         |   | $ |  |   |  | $ | 16,129 |         |   | $ | 28,475 |        
|Comprehensive Income  net                            |              |        |           |              |  |               |        |               |  |          |   |         |   |   |   |   |  |   |        |         |   |   |        |        
|                                                      | Net earnings |        |           |             |  |               |        |              |  |          |   | (2,102  | ) |   |   |  |  |   |        | (2,102  | ) |   |        | (2,102  | )
|                                                      |              |        |           |              |  |               |        |               |  |          |   |         |   |   |   |   |  |   |        |         |   |   |        |        
|Stock issuance under stock
option plans               |              |        | 106,250   |              |  |               | 239    |               |  |          |  |         |   |   |  |   |  |   |       |         |   |   | 239    |        
|Tax benefit associated
with exercise
of stock options |              |        |          |              |  |               | 49     |               |  |          |  |         |   |   |  |   |  |   |       |         |   |   | 49     |        
|                                                      |              |        |           |              |  |               |        |               |  |          |   |         |   |   |   |   |  |   |        |         |   |   |        |        
|Balance at March 30, 2002                             |              |        | 4,648,944 |              |  | $             | 12,634 |               |  | $        |  |         |   | $ |  |   |  | $ | 14,027 |         |   | $ | 26,661 |        
|Comprehensive Income  net                            |              |        |           |              |  |               |        |               |  |          |   |         |   |   |   |   |  |   |        |         |   |   |        |        
|                                                      | Net earnings |        |           |             |  |               |        |              |  |          |   | (10,762 | ) |   |   |  |  |   |        | (10,762 | ) |   |        | (10,762 | )
|                                                      |              |        |           |              |  |               |        |               |  |          |   |         |   |   |   |   |  |   |        |         |   |   |        |        
|Stock
issuance under stock
option plans               |              |        | 44,136    |              |  |               | 61     |               |  |          |  |         |   |   |  |   |  |   |       |         |   |   | 61     |        
|                                                      |              |        |           |              |  |               |        |               |  |          |   |         |   |   |   |   |  |   |        |         |   |   |        |        
|Balance
at March 29, 2003                             |              |        | 4,693,080 |              |  | $             | 12,695 |               |  | $        |  |         |   | $ |  |   |  | $ | 3,265  |         |   | $ | 15,960 |        
|                                                      |              |        |           |              |  |               |        |               |  |          |   |         |   |   |   |   |  |   |        |         |   |   |        |        

See Accompanying Notes to Consolidated Financial Statements

21



---



##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                           |                                           |                |         |                |   |                |        |        |   |   |        |        |  
|------------------------------------------------------------------------------------------ | ----------------------------------------- | -------------- | ------- | -------------- | - | -------------- | ------ | ------ | - | - | ------ | ------ | -
|Years ended                                                                                |                                           |                |         |                |   |                |        |        |   |   |        |       
|(In thousands)                                                                             |                                           | March 29, 2003 |         | March 30, 2002 |   | March 31, 2001
|                                                                                           |                                           |                |         |                |   |               
|Cash flows provided from operations:                                                       |                                           |                |         |                |   |                |        |        |   |   |        |       
|Net earnings (loss)                                                                        |                                           | $              | (10,762 | )              |   | $              | (2,102 | )      |   | $ | 1,901  |       
|Adjustments to reconcile net earnings (loss) to
net cash (used in) provided by operations: |                                           |                |         |                |   |                |        |        |   |   |        |       
|Provision for bad debt                                                                     |                                           |                | (5      | )              |   |                | 96     |        |   |   | 8      |       
|Depreciation and amortization                                                              |                                           |                | 1,954   |                |   |                | 2,216  |        |   |   | 2,120  |       
|Impairment of Goodwill                                                                     |                                           |                |        |                |   |                | 173    |        |   |   |       |       
|Tax benefit from employee stock options                                                    |                                           |                |        |                |   |                | 49     |        |   |   | 58     |       
|(Gain) Loss on sales of fixed assets                                                       |                                           |                | 7       |                |   |                | (1     | )      |   |   | (20    | )     
|Deferred income taxes                                                                      |                                           |                | 4,295   |                |   |                | (1,531 | )      |   |   | (205   | )     
|Changes in operating assets and liabilities:                                               |                                           |                |         |                |   |                |        |        |   |   |        |       
|                                                                                           | Trade accounts receivable                 |                |         | 641            |   |                |        | 3,799  |   |   |        | 1,419  |  
|                                                                                           | Inventories                               |                |         | 1,125          |   |                |        | 3,939  |   |   |        | (1,072 | )
|                                                                                           | Prepaid expenses                          |                |         | (168           | ) |                |        | 229    |   |   |        | 20     |  
|                                                                                           | Accounts payable                          |                |         | 297            |   |                |        | (1,921 | ) |   |        | (718   | )
|                                                                                           | Accrued commissions                       |                |         | 25             |   |                |        | (211   | ) |   |        | (190   | )
|                                                                                           | Accrued payroll and benefits              |                |         | (211           | ) |                |        | (438   | ) |   |        | 49     |  
|                                                                                           | Accrued warranty                          |                |         | 80             |   |                |        | 47     |   |   |        | 179    |  
|                                                                                           | Accrued other expenses                    |                |         | 109            |   |                |        | 62     |   |   |        | (613   | )
|                                                                                           | Customer advances                         |                |         | 16             |   |                |        | 90     |   |   |        | (846   | )
|                                                                                           | Income taxes receivable/payable           |                |         | 601            |   |                |        | (701   | ) |   |        | (139   | )
|                                                                                           |                                           |                |         |                |   |                |        |        |   |   |        |       
|Net cash (used in) provided by operations                                                  |                                           |                | (1,996  | )              |   |                | 3,795  |        |   |   | 1,951  |       
|Cash flows from investing activities:                                                      |                                           |                |         |                |   |                |        |        |   |   |        |       
|Proceeds from sale of property and equipment                                               |                                           |                | 7       |                |   |                | 13     |        |   |   | 26     |       
|Purchases of property and equipment                                                        |                                           |                | (160    | )              |   |                | (708   | )      |   |   | (1,645 | )     
|Other assets                                                                               |                                           |                | 73      |                |   |                | 603    |        |   |   | (489   | )     
|                                                                                           |                                           |                |         |                |   |                |        |        |   |   |        |       
|Net cash used in investing activities                                                      |                                           |                | (80     | )              |   |                | (92    | )      |   |   | (2,108 | )     
|Cash flows from financing activities:                                                      |                                           |                |         |                |   |                |        |        |   |   |        |       
|Issuance of common stock                                                                   |                                           |                | 61      |                |   |                | 239    |        |   |   | 367    |       
|Payment on notes payable and other long term liabilities                                   |                                           |                | (63     | )              |   |                | (29    | )      |   |   | (78    | )     
|Payments on capital leases                                                                 |                                           |                | (97     | )              |   |                | (202   | )      |   |   | (118   | )     
|                                                                                           |                                           |                |         |                |   |                |        |        |   |   |        |       
|Net cash (used in) provided by financing activities                                        |                                           |                | (99     | )              |   |                | 8      |        |   |   | 171    |       
|(Decrease) increase in cash and cash equivalents                                           |                                           |                | (2,175  | )              |   |                | 3,711  |        |   |   | 14     |       
|                                                                                           |                                           |                |         |                |   |                |        |        |   |   |        |       
|Beginning cash and cash equivalents                                                        |                                           |                | 7,180   |                |   |                | 3,469  |        |   |   | 3,455  |       
|Ending cash and cash equivalents                                                           |                                           |                | 5,005   |                |   |                | 7,180  |        |   |   | 3,469  |       
|                                                                                           |                                           |                |         |                |   |                |        |        |   |   |        |       
|Supplementary disclosure of cash flow information:                                         |                                           |                |         |                |   |                |        |        |   |   |        |       
|                                                                                           | Cash paid for income taxes                |                | $       | 6              |   |                | $      | 56     |   |   | $      | 988    |  
|                                                                                           |                                           |                |         |                |   |                |        |        |   |   |        |       
|                                                                                           | Cash paid for interest                    |                |         | 1              |   |                |        | 21     |   |   |        | 4      |  
|                                                                                           |                                           |                |         |                |   |                |        |        |   |   |        |       
|Non-cash investing and financing activities:                                               |                                           |                |         |                |   |                |        |        |   |   |        |       
|                                                                                           | Purchases under capital lease obligations |                |         |               |   |                |        | 103    |   |   |        | 155    |  
|                                                                                           |                                           |                |         |                |   |                |        |        |   |   |        |       

See Accompanying Notes to Consolidated Financial Statements

22



---



##### Table of Contents






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| |  |  | 1 Summary of Significant Accounting Policies
| |  |  | --------------------------------------------

The Company      The accompanying consolidated financial statements include the
accounts of Giga-tronics and its wholly owned subsidiaries. Giga-tronics and
its subsidiary companies design, manufacture and market a broad line of test
and measurement equipment used in the development, test, and maintenance of
wireless communications products and systems, flight navigational equipment,
electronic defense systems, and automatic testing systems. The Company also
manufactures and markets a line of test, measurement, and handling equipment
used in the manufacturing of semiconductor devices. The Companys products are
sold worldwide to customers in the test and measurement and semiconductor
industries. During March 2002 the Company closed its United Kingdom (UK)
research & development facility. The Company currently has no other
foreign-based operations or material amounts of identifiable assets in foreign
countries. Its gross margins on foreign and domestic sales are similar, and
all non-U.S. sales are made in U.S. dollars.

Principles of Consolidation      The consolidated financial statements include
the accounts of Giga-tronics and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.

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

Fiscal Year      The Companys financial reporting year consists of either a 52
week or 53 week period ending on the last Saturday of the month of March.
Fiscal year 2003 and 2002 contained 52 weeks, while fiscal year 2001 contained
53 weeks.

Reclassifications      Certain reclassifications, none of which affected net
income (loss), have been made to prior year balances in order to conform to the
current year presentation.

Revenue Recognition      The Company records revenue in accordance with SAB 101,
Revenue Recognition in Financial Statements. As such, revenue is recorded when
there is evidence of an arrangement, delivery has occurred, the price is fixed
and determinable, and collectability reasonably assured. This occurs when
products are shipped, unless the arrangement involves acceptance terms. If the
arrangement involves acceptance terms, the Company defers revenue until product
acceptance is received. The Company has not entered into any long-term
contracts that would require revenue recognition in accordance with Statement
of Position 81-1. Further, sales made to distributors do not include price
protection or product return rights, except for product defects covered under
warranty arrangements. The Company has no other post-shipment obligations.

The Companys warranty policy generally provides three years for Fast
Switching Microwave Synthesizers and Universal Power Meters and one year for
all other products. The Companys policy is to accrue the estimated cost of
warranty coverage at the time the sale is recorded. The estimated cost of
warranty coverage is based on the Companys actual historical experience with
its current products or similar products. For new products, the required
reserve is based on historical experience of similar products until such time
as sufficient historical data has been collected on the new product. The
Company adopted the provisions of FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others, in December 2002. For the required
disclosures regarding a reconciliation of changes in the Companys product
warranty liabilities, see Note 10 to the consolidated financial statements.

23



---



##### Table of Contents



During the fourth quarter of fiscal 2001, the Company adopted Staff
Accounting Bulletin (SAB) 101, Revenue Recognition in Financial Statements,
effective March 26, 2000. Prior to the adoption of SAB 101, the Company
recognized revenue on sales with final customer acceptance upon delivery and
provided for the estimated costs of installation obligations at the time the
revenue was recognized. The Company recorded a cumulative effect adjustment
related to this change in accounting of $520,000, net of income taxes at the
beginning of fiscal year 2001. The adoption of SAB 101 resulted in the
deferral of $2,165,000 in revenue as of the beginning of the 2001 fiscal year,
and subsequent recognition of the deferred sales during the year.

Cash Equivalents      The Company considers all highly liquid debt instruments
with remaining maturity dates of 90 days or less from date of purchase to be
cash equivalents.

Inventories      Inventories are stated at the lower of cost or market. Cost is
determined on a first-in, first-out basis.

Property and Equipment      Property and equipment are stated at cost.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the respective assets, which range from three to ten years for
machinery and equipment and office fixtures. Leasehold improvements and assets
acquired under capital leases are amortized using the straight-line method over
the shorter of the estimated useful lives of the respective assets or the lease
term. Recoverability of property and equipment is measured by comparison of
its carrying amount to future cash flows the property and equipment are
expected to generate. The Company assesses the recoverability of enterprise
level goodwill by determining whether the unamortized goodwill balance can be
recovered through undiscounted future cash flows of the acquired operation.

Deferred Rent      Rent expense is recognized in an amount equal to the minimum
guaranteed base rent plus future rental increases amortized on the
straight-line basis over the terms of the leases, including free rent periods.

Income Taxes      Income taxes are accounted for using the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Future tax benefits are subject to a valuation allowance when
management is unable to conclude that its deferred tax assets will more likely
than not be realized from the results of operations.

Patents and Licenses      Patents and licenses are being amortized using the
straight-line method over periods of five to seven years. As of March 29, 2003
and March 30, 2002 accumulated amortization on patents and licenses was
$2,196,000 and $2,176,000, respectively.

Goodwill      The Company amortized goodwill using the straight-line method over
a period of five years. In March 2002, the Company determined that the
remaining goodwill balance was impaired and recorded an impairment charge on
the remaining balance of $173,000.

Pre-production costs      The Company incurs pre-production costs on certain
long-term supply arrangements. The costs, which represent non-recurring
engineering and tooling costs, are capitalized as other assets and amortized
over their useful life when reimbursable by the customer. Otherwise, they are
expensed as incurred. Subsequent to fiscal 2002 year end, a telecommunications
equipment customer of the Microsource division commenced liquidation
proceedings. As a result, the orders under the long-term production contract
with this customer were cancelled and Giga-tronics recorded a write-off of
$1,100,000 of inventory and pre-production costs in the fourth quarter of
fiscal 2002. Included in other assets as of March 29, 2003 and March 30, 2002
were capitalized pre-production costs of $341,000, and $431,000, respectively.

Product Development Costs      Product development costs are charged to
operations in the year incurred.

Software Development Costs      Development costs included in the research and
development of new products and enhancements to existing products are expensed
as incurred until technological feasibility in the form of a working

24



---



##### Table of Contents



model has been established. To date, completion of software development has
been concurrent with the establishment of technological feasibility, and
accordingly, no costs have been capitalized.

Stock-based Compensation      The Company uses the intrinsic value method to
account for employee stock-based compensation. In accordance with SFAS No.
123, Accounting for Stock-Based Compensation, the Company is required to
disclose the effects on net earnings and earnings per share as if it had
elected to use the fair value method to account for employee stock-based
compensation plans. Had the Company recorded a charge for the fair value of
options granted consistent with SFAS No. 123, net earnings (loss) and net
earnings (loss) per share would have been changed to the pro-forma (unaudited)
amounts shown below:

|                                        |             |                |   |                |   |                |   |        |   |  |   |       | 
|--------------------------------------- | ----------- | -------------- | - | -------------- | - | -------------- | - | ------ | - |  | - | ----- | 
|Years ended                             |             |                |   |                |   |                |   |        |   |  |   |      
|(In thousands except per share data)    |             | March 29, 2003 |   | March 30, 2002 |   | March 31, 2001
|                                        |             |                |   |                |   |               
|Net earnings (loss)                     |             |                |   |                |   |                |   |        |   |  |   |      
|                                        | As reported |                | $ | (10,762        | ) |                | $ | (2,102 | ) |  | $ | 1,901 | 
|                                        | Pro-forma   |                |   | (10,965        | ) |                |   | (2,373 | ) |  |   | 1,537 | 
|Net earnings (loss) per share  basic   |             |                |   |                |   |                |   |        |   |  |   |      
|                                        | As reported |                |   | (2.31          | ) |                |   | (0.46  | ) |  |   | 0.42  | 
|                                        | Pro-forma   |                |   | (2.35          | ) |                |   | (0.52  | ) |  |   | 0.34  | 
|Net earnings (loss) per share  diluted |             |                |   |                |   |                |   |        |   |  |   |      
|                                        | As reported |                |   | (2.31          | ) |                |   | (0.46  | ) |  |   | 0.40  | 
|                                        | Pro-forma   |                |   | (2.35          | ) |                |   | (0.52  | ) |  |   | 0.32  | 

For purposes of computing pro-forma (unaudited) consolidated net earnings
(loss), the fair value of each option grant and Employee Stock Purchase Plan
purchase right is estimated on the date of grant using the Black Scholes option
pricing model. The assumptions used to value the option grants and purchase
rights are stated below:

|                                 |  |                |              |                |  |                |         |  |              |  |         | 
|-------------------------------- |  | -------------- | ------------ | -------------- |  | -------------- | ------- |  | ------------ |  | ------- | 
|Years ended                      |  | March 29, 2003 |              | March 30, 2002 |  | March 31, 2001
|                                 |  |                |              |                |  |               
|Expected life of options         |  |                | 4 years      |                |  |                | 4 years |  |              |  | 4 years | 
|Expected life of purchase rights |  |                | 6 mos        |                |  |                | 6 mos   |  |              |  | 6 mos   | 
|Annualized volatility            |  |                | 60%          |                |  |                | 60%     |  |              |  | 60%     | 
|Risk-free interest rate          |  |                | 2.90 to 4.49 |                |  | 4.39 to 4.93   |         |  | 4.64 to 6.30
|Dividend yield                   |  |                | Zero         |                |  |                | Zero    |  |              |  | Zero    | 

Earnings (Loss) Per Share     Basic earnings (loss) per share is computed
using the weighted average number of common shares outstanding during the
period. Diluted earnings per share incorporate the incremental shares issuable
upon the assumed exercise of stock options using the treasury method.
Antidilutive options are not included in the computation of diluted earnings
per share.

Financial Instruments and Concentration of Credit Risk     Financial
instruments, which potentially subject the Company to credit risk consist
principally of cash, cash equivalents and trade accounts receivable. The
Companys cash equivalents consist principally of overnight deposits and money
market funds. Cash and cash equivalents are held in recognized depository
institutions. Concentration of credit risk in trade accounts receivable
results primarily from sales to major customers. The Company individually
evaluates the creditworthiness of its customers and generally does not require
collateral or other security.

Fair Market Value of Financial Instruments     The carrying amount for the
Companys cash equivalents, trade accounts receivable and accounts payable
approximates fair market value because of the short maturity of these financial
instruments.

Recent Accounting Pronouncements     In August 2001, the Financial Accounting
Standards Board (FASB) issued Statement No. 143, Accounting Obligations
associated with the Retirement of Long-Lived Assets. SFAS No. 143 addresses
financial accounting and reporting for the retirement obligation of an asset.
SFAS No. 143 states that companies should recognize the asset retirement cost,
at its fair value, as part of the asset cost and classify the accrued amount as
a liability in the balance sheet. The asset retirement liability is then
accreted to the ultimate payout as interest expense. The initial measurement
of the liability would be subsequently updated for revised

25



---



##### Table of Contents



estimates of the discounted cash outflows. SFAS No. 143 was effective for
fiscal years beginning after June 15, 2002. The Company does not expect the
adoption of SFAS No. 143 will have a material effect on the Companys financial
position or results of operations.

In August 2001, the FASB issued Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. Statement No. 144 addresses

financial accounting and reporting for the impairment or disposal of long-lived
assets. Statement No. 144 retains the fundamental provisions in Statement No.
121 for recognizing and measuring impairment losses on long-lived assets held
for use and long-lived assets to be disposed of by sale, while also resolving
significant implementation issues associated with Statement No. 121. Statement
No. 144 also retains the basic provisions of APB Opinion No. 30 on how to
present discontinued operations in the statement of operations, but broadens
that presentation to include a component of an entity (rather than a segment of
a business). The Company adopted the provisions of Statement No. 144 effective
March 31, 2002. The impact of adopting Statement No. 144 did not have a
material effect on the Companys financial position or results of operations.

SFAS No. 145, Rescission of SFAS Statements No. 4, 44, and 64, Amendment
of SFAS Statement No. 13, and Technical Corrections (SFAS 145), updates,
clarifies and simplifies existing accounting pronouncements. SFAS 145 rescinds
SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt. SFAS 145
amends SFAS No. 13, Accounting for Leases, to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the
required accounting for certain lease modifications that have economic effects
that are similar to sale-leaseback transactions. The provisions of SFAS 145
related to SFAS No.4 and SFAS No. 13 are effective for fiscal years beginning
and transactions occurring after May 15, 2002, respectively. The Company does
not expect the adoption of SFAS No. 145 will have a material effect on its
financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, (SFAS 146), requires companies
to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
SFAS 146 replaces Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The provisions of SFAS 146 are to be applied prospectively to
exit or disposal activities initiated after December 31, 2002. The adoption of
SFAS No. 146 did not have a material effect on the Companys financial position
or results of operations.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires a guarantor
to (i) include disclosure of certain obligations and (ii) if applicable, at the
inception of the guarantee, recognize a liability for the fair value of other
certain obligations undertaken in issuing a guarantee. The disclosure
provisions of the Interpretation are effective for financial statements of
interim or annual reports that end after December 15, 2002. The adoption of
FIN 45 required additional warranty activity disclosures for the Company. The
recognition and measurement provisions of FIN 45 are effective for guarantees
issued or modified after December 29, 2002. The adoption of FIN 45 did not
have a material effect on the Companys financial position or results of
operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure-An Amendment of FASB
Statement No. 123. SFAS No. 148 amends FASB Statement No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for an
entity that chooses to change to the fair-value-based method of accounting for
stock-based employee compensation. It also amends the disclosure provisions of
that statement to require prominent disclosure about the effects that
accounting for stock-based employee compensation using the fair-value based
method would have on reported net income and earnings per share and to require
prominent disclosure about the entitys accounting policy decisions with
respect to stock-based employee compensation. Certain of the disclosure
requirements are required for all companies, regardless of whether the fair
value method or intrinsic value method is used to account for stock-based
employee compensation arrangements. The Company accounts for its stock option
plan in accordance with the recognition and measurement principles of
Accounting Principles Opinion No. 25, Accounting for Stock Issued to Employees.
The amendments to SFAS No. 123 are effective for financial statements for
fiscal years ended after December 15,

26



---



##### Table of Contents



2002 and for interim periods beginning after December 15, 2002. The adoption
of the disclosure requirements of SFAS No. 148 did not have a material effect
on the Companys financial position or results of operations.



| |  | 2     Cash and Cash Equivalents
| |  | -------------------------------

Cash and cash equivalents consisted of the following at March 29, 2003 and March 30, 2002:

|                   |                           |           |                           |       |  |   |       |       | 
|------------------ | ------------------------- | --------- | ------------------------- | ----- |  | - | ----- | ----- | 
|                   |                           |           | Cash and Cash Equivalents
|                   |                           |           |                          
|March 29, 2003     |                           | Amortized |                           | Fair 
|(In thousands)     |                           | Cost      |                           | Value
|Cash               |                           | $         | 943                       |       |  | $ | 943   |      
|Money market funds |                           |           | 4,062                     |       |  |   | 4,062 |      
|                   |                           |           |                           |       |  |   |       |      
|                   | Cash and cash equivalents |           | $                         | 5,005 |  |   | $     | 5,005 | 
|                   |                           |           |                           |       |  |   |       |      

|                   |                           |           |                           |       |  |   |       |       | 
|------------------ | ------------------------- | --------- | ------------------------- | ----- |  | - | ----- | ----- | 
|                   |                           |           | Cash and Cash Equivalents
|                   |                           |           |                          
|March 30, 2002     |                           | Amortized |                           | Fair 
|(In thousands)     |                           | Cost      |                           | Value
|Cash               |                           | $         | 1,245                     |       |  | $ | 1,245 |      
|Money market funds |                           |           | 5,935                     |       |  |   | 5,935 |      
|                   |                           |           |                           |       |  |   |       |      
|                   | Cash and cash equivalents |           | $                         | 7,180 |  |   | $     | 7,180 | 
|                   |                           |           |                           |       |  |   |       |      



| |  | 3     Inventories
| |  | -----------------

|                        |  |                |        |                |  |   |        | 
|----------------------- |  | -------------- | ------ | -------------- |  | - | ------ | 
|Years ended             |  |                |        |                |  |   |        | 
|(In thousands)          |  | March 29, 2003 |        | March 30, 2002
|                        |  |                |        |               
|Raw materials           |  | $              | 4,669  |                |  | $ | 6,157  | 
|Work-in-progress        |  |                | 3,427  |                |  |   | 3,852  | 
|Finished goods          |  |                | 1,096  |                |  |   | 683    | 
|Demonstration inventory |  |                | 1,052  |                |  |   | 677    | 
|                        |  |                |        |                |  |   |        | 
|                        |  | $              | 10,244 |                |  | $ | 11,369 | 
|                        |  |                |        |                |  |   |        | 



| |  | 4     Selling Expenses
| |  | ----------------------

Selling expenses consist primarily of commissions paid to various
marketing agencies. Commission expense totaled $1,039,000, $1,620,000, and
$2,579,000 in fiscal 2003, 2002, and 2001, respectively. Advertising costs
which are expensed as incurred totaled $144,000 $362,000, and $579,000 for
fiscal 2003, 2002, and 2001, respectively.



| |  | 5     Significant Customers and Industry Segment Information
| |  | ------------------------------------------------------------

The Company has five reportable segments: Giga-tronics Instrument
Division, ASCOR, Microsource, DYMATiX, and Corporate. Giga-tronics Instrument
division produces a broad line of test and measurement equipment used in the
development, test and maintenance of wireless communications products and
systems, flight navigational equipment, electronic defense systems and
automatic testing systems. ASCOR designs, manufactures, and markets a line of
switching devices that link together many specific purpose instruments that
comprise automatic test systems. Microsource develops and manufactures a broad
line of YIG (Yttrium, Iron, Garnet) tuned oscillators, filters and microwave
synthesizers, which are used in a wide variety of microwave instruments or
devices. DYMATiX, which includes Viking Semiconductor Equipment, Inc. and
Ultracision, Inc., manufactures and markets optical inspection equipment used
to test semiconductor devices. Corporate handles the financing needs of each
segment and lends funds to each segment as required.

27



---



##### Table of Contents



The accounting policies for the segments are the same as those described
in the Summary of Significant Accounting Policies. The Company evaluates the
performance of its segments and allocates resources to them based on earnings
before income taxes. Segment net sales includes sales to external customers.
Segment pre-tax loss includes an allocation for corporate expenses,
amortization of goodwill, and interest expense on borrowings from Corporate.
Corporate expenses are allocated to the reportable segments based principally
on full time equivalent headcount. Interest expense is charged at
approximately prime which is currently 5% for cash required by each segment.
Goodwill associated with acquisitions are recorded as assets of the individual
segments. Assets include accounts receivable, inventories, equipment, cash,
deferred income taxes, prepaid expenses and other long-term assets. The
Company accounts for inter-segment sales and transfers at terms that allow a
reasonable profit to the seller. During the periods reported there were no
significant inter-segment sales or transfers.

The Companys reportable operating segments are strategic business units
that offer different products and services. They are managed separately because
each business utilizes different technology and requires different marketing
strategies. All of the businesses except for Giga-tronics Instrument Division
were acquired. The Companys chief operating decision maker is considered to
be the Companys Chief Executive Officer (CEO). The CEO reviews financial
information presented on a consolidated basis accompanied by disaggregated
information about revenues and pre-tax income by operating segment. The tables
below present information for the fiscal years ended in 2003, 2002 and 2001:

March 29, 2003 (In thousands):

|                              |  |                     |        |       |  |             |       |         |  |           |       |       |  |   |        |   |  |   |        |   |  |   |        |  
|----------------------------- |  | ------------------- | ------ | ----- |  | ----------- | ----- | ------- |  | --------- | ----- | ----- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                              |  | Instrument Division |        | ASCOR |  | Microsource |       | DYMATiX |  | Corporate |       | Total
|                              |  |                     |        |       |  |             |       |         |  |           |       |      
|Revenue                       |  | $                   | 9,305  |       |  | $           | 3,830 |         |  | $         | 7,687 |       |  | $ | 1,459  |   |  | $ |       |   |  | $ | 22,281 |  
|Interest income               |  |                     | 17     |       |  |             | 28    |         |  |           | 2     |       |  |   |       |   |  |   | 61     |   |  |   | 108    |  
|Interest expense              |  |                     | (36    | )     |  |             |      |         |  |           | (460  | )     |  |   | (258   | ) |  |   | 706    |   |  |   | (48    | )
|Depreciation and amortization |  |                     | 556    |       |  |             | 108   |         |  |           | 1,250 |       |  |   | 40     |   |  |   |       |   |  |   | 1,954  |  
|Pre-tax income (loss)         |  |                     | (3,477 | )     |  |             | (473  | )       |  |           | (999  | )     |  |   | (2,594 | ) |  |   | 879    |   |  |   | (6,664 | )
|Assets                        |  |                     | 9,492  |       |  |             | 4,559 |         |  |           | 7,480 |       |  |   | 3,596  |   |  |   | (3,338 | ) |  |   | 21,789 |  

March 30, 2002 (In thousands):

|                                          |  |                     |        |       |  |             |       |         |  |           |        |       |  |   |        |   |  |   |       |  |  |   |        |  
|----------------------------------------- |  | ------------------- | ------ | ----- |  | ----------- | ----- | ------- |  | --------- | ------ | ----- |  | - | ------ | - |  | - | ----- |  |  | - | ------ | -
|                                          |  | Instrument Division |        | ASCOR |  | Microsource |       | DYMATiX |  | Corporate |        | Total
|                                          |  |                     |        |       |  |             |       |         |  |           |        |      
|Revenue                                   |  | $                   | 21,559 |       |  | $           | 3,768 |         |  | $         | 10,036 |       |  | $ | 3,673  |   |  | $ |      |  |  | $ | 39,036 |  
|Interest income                           |  |                     | 28     |       |  |             | 74    |         |  |           | 0      |       |  |   | 4      |   |  |   | 69    |  |  |   | 175    |  
|Interest expense                          |  |                     | (130   | )     |  |             | 0     |         |  |           | (561   | )     |  |   | (234   | ) |  |   | 813   |  |  |   | (112   | )
|Depreciation and amortization             |  |                     | 593    |       |  |             | 138   |         |  |           | 1,408  |       |  |   | 77     |   |  |   |      |  |  |   | 2,216  |  
|Income before taxes and accounting change |  |                     | (548   | )     |  |             | (655  | )       |  |           | (3,011 | )     |  |   | (1,182 | ) |  |   | 934   |  |  |   | (4,462 | )
|Assets                                    |  |                     | 12,122 |       |  |             | 3,479 |         |  |           | 9,661  |       |  |   | 4,037  |   |  |   | 3,581 |  |  |   | 32,880 |  

March 31, 2001 (In thousands):

|                                          |  |                     |        |       |  |             |       |         |  |           |        |       |  |   |       |   |  |   |       |  |  |   |        |  
|----------------------------------------- |  | ------------------- | ------ | ----- |  | ----------- | ----- | ------- |  | --------- | ------ | ----- |  | - | ----- | - |  | - | ----- |  |  | - | ------ | -
|                                          |  | Instrument Division |        | ASCOR |  | Microsource |       | DYMATiX |  | Corporate |        | Total
|                                          |  |                     |        |       |  |             |       |         |  |           |        |      
|Revenue                                   |  | $                   | 25,001 |       |  | $           | 7,503 |         |  | $         | 13,208 |       |  | $ | 8,447 |   |  | $ |      |  |  | $ | 54,159 |  
|Interest income                           |  |                     | 25     |       |  |             | 93    |         |  |           | 6      |       |  |   | 3     |   |  |   | 109   |  |  |   | 236    |  
|Interest expense                          |  |                     | (196   | )     |  |             | (4    | )       |  |           | (744   | )     |  |   | (354  | ) |  |   | 1,267 |  |  |   | (31    | )
|Depreciation and amortization             |  |                     | 604    |       |  |             | 148   |         |  |           | 1,270  |       |  |   | 98    |   |  |   |      |  |  |   | 2,120  |  
|Income before taxes and accounting change |  |                     | 1,193  |       |  |             | 1,436 |         |  |           | (985   | )     |  |   | 434   |   |  |   | 1,383 |  |  |   | 3,461  |  
|Assets                                    |  |                     | 15,518 |       |  |             | 4,172 |         |  |           | 11,937 |       |  |   | 5,236 |   |  |   | 455   |  |  |   | 37,318 |  

The Companys Giga-tronics Instrument Division, ASCOR, and Microsource
segments sell to agencies of the U.S. Government and U.S. defense-related
customers. In fiscal 2003, 2002, and 2001 U.S. Government and U.S.
defense-related customers accounted for 39%, 17%, and 11%, of sales,
respectively. During fiscal 2003, a Japanese distributor of the Company,
Midoriya, accounted for less than 10% of the Companys revenues and a
negligible amount outstanding in accounts receivable. During 2002 and 2001,
Midoriya accounted for 16% and 10% of the Companys consolidated sales,
respectively. At fiscal 2002 year end, Midoriya had a negligible amount
outstanding in accounts receivable while they composed about 11% of receivables
at the fiscal year end of 2001.

28



---



##### Table of Contents



Export sales accounted for 23%, 44%, and 41% of the Companys sales in
fiscal 2003, 2002, and 2001, respectively. Export sales by geographical area
are shown below:

|               |  |                |       |                |  |                |        |  |  |   |        | 
|-------------- |  | -------------- | ----- | -------------- |  | -------------- | ------ |  |  | - | ------ | 
|Years ended    |  |                |       |                |  |                |        |  |  |   |        | 
|(In thousands) |  | March 29, 2003 |       | March 30, 2002 |  | March 31, 2001
|               |  |                |       |                |  |               
|Americas       |  | $              | 306   |                |  | $              | 1,112  |  |  | $ | 4,256  | 
|Europe         |  |                | 2,075 |                |  |                | 4,860  |  |  |   | 6,831  | 
|Asia           |  |                | 1,766 |                |  |                | 9,412  |  |  |   | 9,512  | 
|Rest of world  |  |                | 964   |                |  |                | 1,721  |  |  |   | 1,473  | 
|               |  |                |       |                |  |                |        |  |  |   |        | 
|               |  | $              | 5,111 |                |  | $              | 17,105 |  |  | $ | 22,072 | 
|               |  |                |       |                |  |                |        |  |  |   |        | 



| |  | 6     Earnings (loss) per Share
| |  | -------------------------------

Net earnings (loss) and shares used in per share computations for the
years ended March 29, 2003, March 30, 2002 and March 31, 2001 are as follows:

|                                                                |  |                |         |                |  |                |        |   |  |   |       | 
|--------------------------------------------------------------- |  | -------------- | ------- | -------------- |  | -------------- | ------ | - |  | - | ----- | 
|Years ended                                                     |  |                |         |                |  |                |        |   |  |   |       | 
|(In thousands except per share data)                            |  | March 29, 2003 |         | March 30, 2002 |  | March 31, 2001
|                                                                |  |                |         |                |  |               
|Net earnings (loss)                                             |  | $              | (10,762 | )              |  | $              | (2,102 | ) |  | $ | 1,901 | 
|Weighted average:                                               |  |                |         |                |  |                |        |   |  |   |       | 
|Common shares outstanding                                       |  |                | 4,663   |                |  |                | 4,604  |   |  |   | 4,474 | 
|Potential common shares                                         |  |                |        |                |  |                |       |   |  |   | 329   | 
|Common shares assuming dilution                                 |  |                | 4,663   |                |  |                | 4,604  |   |  |   | 4,803 | 
|Net earnings (loss) per share of common stock                   |  | $              | (2.31   | )              |  | $              | (0.46  | ) |  | $ | 0.42  | 
|Net earnings (loss) per share of common stock
assuming dilution |  | $              | (2.31   | )              |  | $              | (0.46  | ) |  | $ | 0.40  | 
|Stock options not included in computation                       |  |                | 528     |                |  |                | 550    |   |  |   | 57    | 

The number of stock options not included in the computation of diluted
earnings per share (EPS) for the period ended March 29, 2003 and March 30, 2002
is a result of the Companys loss from continuing operations and therefore the
options are antidilutive. The number of stock options not included in the
computation of diluted EPS for the period ending March 31, 2001 reflects stock
options where the exercise prices were greater than the average market price of
the common shares and are therefore antidilutive.

29



---



##### Table of Contents





| |  | 7     Income Taxes
| |  | ------------------

Following are the components of the provision (benefit) for income taxes:

|                                                                                                                    |         |                |       |                |  |                |        |        |   |   |       |       |  
|------------------------------------------------------------------------------------------------------------------- | ------- | -------------- | ----- | -------------- |  | -------------- | ------ | ------ | - | - | ----- | ----- | -
|Years ended                                                                                                         |         |                |       |                |  |                |        |        |   |   |       |      
|(In thousands)                                                                                                      |         | March 29, 2003 |       | March 30, 2002 |  | March 31, 2001
|                                                                                                                    |         |                |       |                |  |               
|Current:                                                                                                            |         |                |       |                |  |                |        |        |   |   |       |      
|                                                                                                                    | Federal |                | $     |               |  |                | $      | (760   | ) |   | $     | 1,063 |  
|                                                                                                                    | State   |                |       | 4              |  |                |        | 4      |   |   |       | 66    |  
|                                                                                                                    |         |                |       |                |  |                |        |        |   |   |       |      
|                                                                                                                    |         |                | 4     |                |  |                | (756   | )      |   |   | 1,129 |      
|Deferred:                                                                                                           |         |                |       |                |  |                |        |        |   |   |       |      
|                                                                                                                    | Federal |                |       | 2,885          |  |                |        | (1,143 | ) |   |       | 58    |  
|                                                                                                                    | State   |                |       | 1,200          |  |                |        | (510   | ) |   |       | (263  | )
|                                                                                                                    |         |                |       |                |  |                |        |        |   |   |       |      
|                                                                                                                    |         |                | 4,085 |                |  |                | (1,653 | )      |   |   | (205  | )    
|Charge in lieu of taxes attributable to
employer stock option plans                                                 |         |                | 9     |                |  |                | 49     |        |   |   | 58    |      
|Goodwill, for initial recognition of
acquired tax benefits that previously
were included in the valuation allowance |         |                |      |                |  |                |       |        |   |   | 58    |      
|                                                                                                                    |         |                |       |                |  |                |        |        |   |   |       |       |  
|Provision (benefit) for income taxes                                                                                |         | $              | 4,098 |                |  | $              | (2,360 | )      |   | $ | 1,040 |      
|                                                                                                                    |         |                |       |                |  |                |        |        |   |   |       |      

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities are as follows:

|                                                    |  |                |         |                |  |   |        |  
|--------------------------------------------------- |  | -------------- | ------- | -------------- |  | - | ------ | -
|Years ended                                         |  |                |         |                |  |   |        |  
|(In thousands)                                      |  | March 29, 2003 |         | March 30, 2002
|                                                    |  |                |         |               
|Current tax assets, net                             |  | $              | 0       |                |  | $ | 4,841  |  
|Noncurrent tax asset (liabilities)                  |  |                | 0       |                |  |   | (546   | )
|                                                    |  |                |         |                |  |   |        |  
|Net deferred taxes                                  |  | $              | 0       |                |  | $ | 4,295  |  
|                                                    |  |                |         |                |  |   |        |  
|Future state tax effect                             |  |                | (417    | )              |  |   | (274   | )
|Allowance for doubtful accounts                     |  |                | 151     |                |  |   | 154    |  
|Fixed asset depreciation                            |  |                | (203    | )              |  |   | (586   | )
|Inventory reserves and additional costs capitalized |  |                | 3,272   |                |  |   | 3,309  |  
|Accrued vacation                                    |  |                | 152     |                |  |   | 191    |  
|Accrued warranty                                    |  |                | 368     |                |  |   | 334    |  
|Other accrued liabilities                           |  |                | 256     |                |  |   | 217    |  
|Net operating loss carryforward                     |  |                | 7,469   |                |  |   | 5,964  |  
|Income tax credits                                  |  |                | 1,894   |                |  |   | 1,317  |  
|Valuation allowances                                |  |                | (12,942 | )              |  |   | (6,331 | )
|                                                    |  |                |         |                |  |   |        |  
|                                                    |  | $              | 0       |                |  | $ | 4,295  |  
|                                                    |  |                |         |                |  |   |        |  

30



---



##### Table of Contents



|                                                                   |  |                |        |                |  |                |       |    |  |   |        |   |  |  |       |    |  |   |       |   |  |  |      |  
|------------------------------------------------------------------ |  | -------------- | ------ | -------------- |  | -------------- | ----- | -- |  | - | ------ | - |  |  | ----- | -- |  | - | ----- | - |  |  | ---- | -
|Years ended                                                        |  |                |        |                |  |                |       |    |  |   |        |   |  |  |       |    |  |   |       |   |  |  |      |  
|(In thousands except percentages)                                  |  | March 29, 2003 |        | March 30, 2002 |  | March 31, 2001
|                                                                   |  |                |        |                |  |               
|Statutory federal income tax (benefit)                             |  | $              | (2,266 | )              |  |                | (34.0 | )% |  | $ | (1,517 | ) |  |  | (34.0 | )% |  | $ | 1,176 |   |  |  | 34.0 | %
|Beginning of year change in deferred
Tax asset valuation allowance |  |                | 7,176  |                |  |                | 107.8 |    |  |   | 117    |   |  |  | 2.6   |    |  |   |      |   |  |  |     |  
|State income tax, net of federal benefit                           |  |                | (253   | )              |  |                | (3.8  | )  |  |   | (143   | ) |  |  | (3.2  | )  |  |   | 200   |   |  |  | 5.8  |  
|Nontax deductible expenses                                         |  |                | 9      |                |  |                | 0.1   |    |  |   | 9      |   |  |  | 0.2   |    |  |   | 6     |   |  |  | 0.2  |  
|Tax credits                                                        |  |                | (577   | )              |  |                | (8.7  | )  |  |   | (894   | ) |  |  | (20.0 | )  |  |   | (297  | ) |  |  | (8.6 | )
|Goodwill and patent amortization                                   |  |                |       |                |  |                |      |    |  |   | 142    |   |  |  | 3.2   |    |  |   | 60    |   |  |  | 1.7  |  
|Interest income exempt from federal tax                            |  |                |       |                |  |                |      |    |  |   | (82    | ) |  |  | (1.8  | )  |  |   | (58   | ) |  |  | (1.7 | )
|Other                                                              |  |                | 9      |                |  |                | .1    |    |  |   | 8      |   |  |  | .3    |    |  |   | (47   | ) |  |  | (1.4 | )
|Effective income tax expense (benefit)                             |  | $              | 4,098  |                |  |                | 61.5  | %  |  | $ | (2,360 | ) |  |  | (52.7 | )% |  | $ | 1,040 |   |  |  | 30.0 | %

The change in valuation allowance from March 30, 2002 to March 29, 2003 an
increase of was $6,611,000. The change in valuation allowance from March 31,
2001 to March 30, 2002 was a decrease of $161,000. The change in valuation
allowance from March 25, 2000 to March 31, 2001 was a decrease of $395,000.

The Company has recorded a valuation allowance to reflect the estimated
amount of deferred tax assets, which may not be realized. The ultimate
realization of deferred tax assets is dependent upon generation of future
taxable income during the periods in which those temporary differences become
deductible. Management considers projected future taxable income and tax
planning strategies in making this assessment. The Company is presently unable
to conclude that its deferred tax assets will more likely than not be realized
from the results of operations. Accordingly, the Company has provided a
valuation allowance on its net deferred tax assets for the year ended March 29,
2003.

During the year ended March 27, 1999, the Company acquired approximately
$7,600,000 of deferred tax assets in the acquisition of Microsource, which was
fully offset by a valuation allowance. Subsequent recognition of tax benefits
relating to the valuation allowance for deferred tax assets of Microsource are
allocated to goodwill and the remainder to income tax benefit. As of March
31, 2002, goodwill had been reduced by $452,000 for the tax benefits realized
from the Microsource deferred tax assets.

During the year ended March 30, 2002 and March 31, 2001, disqualifying
employee stock option dispositions resulted in an income tax deduction to the
Company of approximately $122,000 and $145,000 respectively, and a tax benefit
of approximately $49,000 and $58,000 respectively. The tax benefit has been
reflected as an increase to the Companys paid-in capital in the accompanying
financial statements.



| |  | 8     Stock Options and Employee Benefit Plans
| |  | ----------------------------------------------

Stock Option Plan     The Company established a 1990 Stock Option Plan which
provided for the granting of options for up to 700,000 shares of common stock.
The 1990 Plan expired during the 2001 fiscal year. The Company subsequently
established the 2000 Stock Option Plan, which provides for the granting of
options for up to 700,000 shares of common stock at 100% of fair market value
at the date of grant, with each grant requiring approval by the Board of
Directors of the Company. Options granted vest in one or more installments as
set forth in the relevant option agreements and must be exercised while the
grantee is employed by the Company or within a certain period after termination
of employment. Options granted to employees shall not have terms in excess of
10 years from the grant date. Holders of options may be granted stock
appreciation rights (SARs), which entitle them to surrender outstanding
options for a cash distribution under certain changes in ownership of the
Company, as defined in the stock option plan. As of March 29, 2003, no SARs
have been granted under the option plan. As of March 29, 2003, the total number
of shares of common stock available for issuance is 385,350 under the 2000
stock option plan. All outstanding options have a term of five years.

31



---



##### Table of Contents



Following is a summary of stock option activity:

|                                 |           |  |                    |       |             |  |               |  |                  |  |         |          |   |   |       |       | 
|-------------------------------- | --------- |  | ------------------ | ----- | ----------- |  | ------------- |  | ---------------- |  | ------- | -------- | - | - | ----- | ----- | 
|                                 |           |  | Per Share Weighted |       |             |  |               |  |                  |  |         |          |   |   |      
|                                 |           |  | Average Fair Value |       | Options     |  | Total Options |  | Weighted Average
|                                 |           |  | Of Options Granted |       | Exercisable |  | Outstanding   |  | Fair Value      
|                                 |           |  |                    |       |             |  |               |  |                 
|Outstanding as of March 25, 2000 |           |  |                    |       |             |  | 131,424       |  |                  |  | 553,985 |          |   |   | 2.514 |      
|                                 |           |  |                    |       |             |  |               |  |                  |  |         |          |   |   |       |      
|                                 | Exercised |  |                    |       |             |  |               |  |                  |  |         | (84,212  | ) |   |       | 2.247 | 
|                                 | Forfeited |  |                    |       |             |  |               |  |                  |  |         | (89,737  | ) |   |       | 4.786 | 
|                                 | Granted   |  | $                  | 6.407 |             |  |               |  |                  |  |         | 214,700  |   |   |       | 6.407 | 
|                                 |           |  |                    |       |             |  |               |  |                  |  |         |          |   |   |       |      
|Outstanding as of March 31, 2001 |           |  |                    |       |             |  | 143,988       |  |                  |  | 594,736 |          |   | $ | 3.610 |      
|                                 |           |  |                    |       |             |  |               |  |                  |  |         |          |   |   |       |      
|                                 | Exercised |  |                    |       |             |  |               |  |                  |  |         | (67,275  | ) |   |       | 2.163 | 
|                                 | Forfeited |  |                    |       |             |  |               |  |                  |  |         | (145,437 | ) |   |       | 3.783 | 
|                                 | Granted   |  | $                  | 4.290 |             |  |               |  |                  |  |         | 168,150  |   |   |       | 4.290 | 
|                                 |           |  |                    |       |             |  |               |  |                  |  |         |          |   |   |       |      
|Outstanding as of March 30, 2002 |           |  |                    |       |             |  | 194,437       |  |                  |  | 550,174 |          |   | $ | 3.838 |      
|                                 |           |  |                    |       |             |  |               |  |                  |  |         |          |   |   |       |      
|                                 | Exercised |  |                    |       |             |  |               |  |                  |  |         | (12,188  | ) |   |       | 2.094 | 
|                                 | Forfeited |  |                    |       |             |  |               |  |                  |  |         | (113,750 | ) |   |       | 4.097 | 
|                                 | Granted   |  | $                  | 2.605 |             |  |               |  |                  |  |         | 104,000  |   |   |       | 2.605 | 
|                                 |           |  |                    |       |             |  |               |  |                  |  |         |          |   |   |       |      
|Outstanding as of March 29, 2003 |           |  |                    |       |             |  | 269,874       |  |                  |  | 528,236 |          |   | $ | 3.580 |      
|                                 |           |  |                    |       |             |  |               |  |                  |  |         |          |   |   |       |      

Options Outstanding and Exercisable as of March 29, 2003, by Price Range

|                    |  |             |         |                  |  |                |      |             |  |                |       |  |  |  |         |  |  |   |       | 
|------------------- |  | ----------- | ------- | ---------------- |  | -------------- | ---- | ----------- |  | -------------- | ----- |  |  |  | ------- |  |  | - | ----- | 
|                    |  | Total       |         | Weighted Average |  | Weighted       |      | Number      |  | Weighted      
|Range of            |  | Options     |         | Remaining        |  | Average        |      | of Options  |  | Average       
|Exercise Prices     |  | Outstanding |         | Contractual Life |  | Exercise Price |      | Exercisable |  | Exercise Price
|From $1.22 to $2.09 |  |             | 173,036 |                  |  |                | 1.31 |             |  | $              | 1.968 |  |  |  | 148,036 |  |  | $ | 2.094 | 
|From $2.12 to $5.75 |  |             | 303,700 |                  |  |                | 2.99 |             |  |                | 3.895 |  |  |  | 96,088  |  |  |   | 3.865 | 
|From $6.13 to $8.88 |  |             | 51,500  |                  |  |                | 2.38 |             |  |                | 7.140 |  |  |  | 25,750  |  |  |   | 7.140 | 
|                    |  |             |         |                  |  |                |      |             |  |                |       |  |  |  |         |  |  |   |       | 
|From $1.22 to $8.88 |  |             | 528,236 |                  |  |                | 2.38 |             |  | $              | 3.580 |  |  |  | 269,874 |  |  | $ | 3.206 | 
|                    |  |             |         |                  |  |                |      |             |  |                |       |  |  |  |         |  |  |   |       | 

Employee Stock Purchase Plan     Under the Companys Employee Stock Purchase
Plan (the Purchase Plan), employees meeting specific employment qualifications
are eligible to participate and can purchase shares semi-annually through
payroll deductions at the lower of 85% of the fair market value of the stock at
the commencement or end of the offering period. The Purchase Plan permits
eligible employees to purchase common stock through payroll deductions for up
to 10% of qualified compensation. As of March 29, 2003, 67,337 shares remain
available for issuance under the Purchase Plan. The weighted average fair
value of the purchase rights granted in fiscal 2003 was $1.100.

401(k) Plan     The Company has established 401(k) plans which cover
substantially all employees. Participants may make voluntary contributions to
the plans up to 20% of their defined compensation. The Company is required to
match a percentage of the participants contributions in accordance with the
plan. Participants vest ratably in Company contributions over a four-year
period. Company contributions to the plans for fiscal 2003, 2002, and 2001
were approximately $159,000, $185,000, and $208,000, respectively.



| |  | 9     Commitments
| |  | -----------------

The Company leases a 47,300 square foot facility located in San Ramon,
California, under a twelve-year lease (as amended) that commenced in April
1994. The Company leases a 18,756 square foot facility located in Fremont,
California, under a seven-year lease that commenced in July 1999. The Company
leases a 33,439 square foot facility located in Santa Rosa, California, under a
twenty-year lease that commenced in July 1993 and amended in April 2003. These
facilities accommodate all of the Companys present operations. The Company
also has acquired equipment under capital and leases other equipment under
operating leases. The future minimum lease payments for operating equipment
and facility leases are shown below:

32



---



##### Table of Contents



|               |  |   |       | 
|-------------- |  | - | ----- | 
|Fiscal years   |  |   |       | 
|(In thousands) |  |   |       | 
|               |  |   |       | 
|2004           |  | $ | 1,286 | 
|2005           |  |   | 1,312 | 
|2006           |  |   | 1,325 | 
|2007           |  |   | 932   | 
|2008           |  |   | 341   | 
|Thereafter     |  |   | 1,762 | 
|               |  |   |       | 
|               |  | $ | 6,958 | 
|               |  |   |       | 

The aggregate rental expense was $2,063,000, $1,951,000, and $1,816,000 in
fiscal 2003, 2002, and 2001, respectively.

As of March 29, 2003, Property and Equipment includes equipment under
capital lease of $241,000 and related accumulated amortization of $95,000. As
of March 30, 2002, Property and Equipment includes equipment under capital
lease of $491,000 and related accumulated amortization of $223,000. The future
minimum lease payments for capital leases are shown below:

|                                               |  |   |    | 
|---------------------------------------------- |  | - | -- | 
|Fiscal years                                   |  |   |    | 
|(In thousands)                                 |  |   |    | 
|                                               |  |   |    | 
|2004                                           |  | $ | 81 | 
|2005                                           |  |   | 10 | 
|                                               |  |   |    | 
|Total                                          |  |   | 91 | 
|Less interest costs                            |  |   | 5  | 
|                                               |  |   |    | 
|Present value of minimum lease payments        |  |   | 86 | 
|Less current portion                           |  |   | 76 | 
|                                               |  |   |    | 
|Long term portion of capital lease obligations |  | $ | 10 | 
|                                               |  |   |    | 

The Company is committed to purchase certain inventory under
non-cancelable purchase orders. As of March 29, 2003, total non-cancelable
purchase orders were approximately $1,142,000 through fiscal 2004 and $187,000
beyond fiscal 2004 and were scheduled to be delivered to the Company at various
dates through March 2004.



| |  | 10     Warranty Obligations
| |  | ---------------------------

The Company records a liability for estimated warranty obligations at the
date products are sold. Adjustments are made as new information becomes
available. The provisions of FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others, which the Company adopted in December
2002, require disclosures about the guarantees that an entity has issued,
including a reconciliation of changes in the entitys product warranty
liabilities. The following provides a reconciliation of changes in the
Companys warranty reserve. The Company provides no other guarantees.

|                             |                                  |                |     |                |   |                |     |      |   |   |     |      |  
|---------------------------- | -------------------------------- | -------------- | --- | -------------- | - | -------------- | --- | ---- | - | - | --- | ---- | -
|Years ended                  |                                  |                |     |                |   |                |     |      |   |   |     |     
|(In thousands)               |                                  | March 29, 2003 |     | March 30, 2002 |   | March 31, 2001
|                             |                                  |                |     |                |   |               
|Balance at beginning of year |                                  | $              | 779 |                |   | $              | 731 |      |   | $ | 553 |     
|                             | Provision for current year sales |                |     | 750            |   |                |     | 875  |   |   |     | 794  |  
|                             | Warranty costs incurred          |                |     | (670           | ) |                |     | (827 | ) |   |     | (616 | )
|                             |                                  |                |     |                |   |                |     |      |   |   |     |     
|Balance at end of year       |                                  | $              | 859 |                |   | $              | 779 |      |   | $ | 731 |     
|                             |                                  |                |     |                |   |                |     |      |   |   |     |     

33



---



##### Table of Contents



I N D E P E N D E N T A U D I T O R S R E P O R T

The Board of Directors and Shareholders
Giga-tronics Incorporated:

We have audited the accompanying consolidated balance sheets of
Giga-tronics Incorporated and subsidiaries as of March 29, 2003 and March 30,
2002, and the related consolidated statements of operations, shareholders
equity and cash flows for each of the years in the three year period ended
March 29, 2003. These consolidated financial statements are the responsibility
of the Companys management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Giga-tronics Incorporated and subsidiaries as of March 29, 2003 and March 30,
2002, and the results of their operations and their cash flows for each of the
years in the three year period ended March 29, 2003, in conformity with
accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, effective
March 26, 2000, the Company changed its method of accounting for certain
equipment sales.

/s/
KPMG LLP

Mountain View, California
May 2, 2003

34



---



##### Table of Contents






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

Not applicable.




PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding directors of the Company is set forth under the
heading Election of Directors of the Companys Proxy Statement for its 2003
Annual Meeting of Shareholders, incorporated herein by reference. This Proxy
Statement is to be filed no later than 120 days after the close of the fiscal
year ended March 29, 2003.

GIGA-TRONICS INCORPORATED
EXECUTIVE OFFICERS

|                     |  |     |    |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-------------------- |  | --- | -- | -------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name                 |  | Age |    | Position
|                     |  |     |    |         
|George H. Bruns, Jr. |  |     | 84 |          |  | Chief Executive Officer since January, 1995,
Chairman of the Board and a Director of the
Company. He provided seed financing for the
Company in 1980 and has been a Director
since inception. Mr. Bruns is General
Partner of The Bruns Company, a private
venture investment and management consulting
firm. Mr. Bruns is Director of Testronics,
Inc. of McKinney, Texas.                                                                                                                                                                                                                         
|                     |  |     |    |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Mark H. Cosmez II    |  |     | 51 |          |  | Vice President, Finance/Chief Financial
Officer, Giga-tronics since October 1997.
Before joining Giga-tronics, Mr. Cosmez was
the Chief Financial Officer for Pacific Bell
Public Communications. Prior to 1997, he
was the Vice President of Finance and Chief
Financial Officer for International
Microcomputer Software Inc., a NASDAQ-traded
software company.                                                                                                                                                                                                                                  
|                     |  |     |    |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Jeffrey T. Lum       |  |     | 57 |          |  | President, ASCOR, Inc. since November 1987.
Mr. Lum founded ASCOR in 1987 and has been
President since inception. Before founding
ASCOR, Mr. Lum was Vice President and
founder of Autek Systems Corporation.                                                                                                                                                                                                                                                                                                                                                                                       
|                     |  |     |    |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Daniel S. Markowitz  |  |     | 52 |          |  | President, DYMATiX, a joint venture between
Ultracision, Inc. and Viking Semiconductor
Equipment, Inc. since January 2000. Also,
President of Ultracision, Inc. and Viking
Semiconductor Equipment, Inc. since April
1999. Assistant to the Chairman of
Giga-tronics, Inc. from September 1998 to
March 1999. Vice President, Automation
Products, Ultracision, Inc. from February
1996 to August 1998. Mr. Markowitz was the
General Manager of Mar Engineering from
September 1993 to January 1996. Mar
Engineering is a manufacturer of precision
machined components for the aerospace
industry.
|                     |  |     |    |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|William E. Wilson    |  |     | 63 |          |  | President of Microsource, Inc. since April
2001. Mr. Wilson has been a director of the
Company since December 1998. Before joining
the Company as the President of Microsource,
Inc., Mr. Wilson was the Chairman and CEO of
Microwave Technology Incorporated of
Fremont, CA, a producer of Microwave Devices
and Amplifiers with broad application to
defense electronics, telecommunications and
the test and measurement industries.                                                                                                                                                            

35



---



##### Table of Contents






ITEM 11. EXECUTIVE COMPENSATION

Information regarding the Companys compensation of its executive officers
is set forth under the heading Executive Compensation of the Companys Proxy
Statement for its 2003 Annual Meeting of Shareholders, incorporated herein by
reference. This Proxy Statement is to be filed no later than 120 days after
the close of the fiscal year ended March 29, 2003.




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS

Information regarding security ownership of certain beneficial owners and
management is set forth under the heading Stock Ownership of Certain
Beneficial Owners and Management of its Proxy Statement for the 2003 Annual
Meeting of Shareholders, incorporated herein by reference. Information about
securities authorized for issuance under equity compensation plans is set forth
under the heading Equity Compensation Plan Information of its Proxy Statement
for the 2003 Annual Meeting of Shareholders, incorporated herein by reference.
This Proxy Statement is to be filed no later than 120 days after the close of
the fiscal year ended March 29, 2003.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information set forth in the Proxy Statement under the section captioned
Transactions with Management and Others is incorporated herein by reference.




ITEM 14. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Companys disclosure controls and
procedures are effective in ensuring that all material information required to
be included in this annual report have been made known to them in a timely
fashion. There were no significant changes in the Companys internal controls
or in other factors that could significantly affect these controls subsequent
to the date of their evaluation.

36



---



##### Table of Contents






PART IV




ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

|                           
|---------------------------
|(a)(1) Financial Statements

The following financial statements and schedules are filed or incorporated
by reference as a part of this report.

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

|                                                                                                                                                          |  |            |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | ------- | 
|                                                                                                                                                          |  | Form 10K  
|Financial Statements                                                                                                                                      |  | (Page No.)
|                                                                                                                                                          |  |           
|Consolidated Balance Sheets -
     As of March 29, 2003 and
     March 30, 2002                                                                           |  |            | 19      | 
|                                                                                                                                                          |  |            |         | 
|Consolidated Statements of Operations -
     Years Ended March 29, 2003,
     March 30, 2002 and March 31, 2001                                           |  |            | 20      | 
|                                                                                                                                                          |  |            |         | 
|Consolidated Statements of Shareholders Equity and
Comprehensive Income (Loss) -
     Years Ended March 29, 2003,
     March 30, 2002 and March 31, 2001 |  |            | 21      | 
|                                                                                                                                                          |  |            |         | 
|Consolidated Statements of Cash Flows -
     Years Ended March 29, 2003,
     March 30, 2002 and March 31, 2001                                           |  |            | 22      | 
|                                                                                                                                                          |  |            |         | 
|Notes to Consolidated Financial Statements                                                                                                                |  |            | 23 - 33 | 
|                                                                                                                                                          |  |            |         | 
|Independent Auditors Report                                                                                                                              |  |            | 34      | 

|                                                                                |  |            |    | 
|------------------------------------------------------------------------------- |  | ---------- | -- | 
|                                                                                |  | Form 10-K 
|(a)(2) Schedules                                                                |  | (Page No.)
|                                                                                |  |           
|Report on Financial Statement Schedule and
     Consent of Independent Auditors |  |            | 43 | 
|                                                                                |  |            |    | 
|Schedule II - Valuation and Qualifying Accounts                                 |  |            | 44 | 

All other schedules are not submitted because they are not applicable or
not required or because the required information is included in the financial
statements or notes thereto.

Except for those portions thereof incorporated by reference in this Form
10-K, the 2003 Annual Report and the Proxy Statement are not to be deemed filed
as part of this report.

(a)(3) Exhibits

Reference is made to the Exhibit Index which is found on page 41 of this Annual Report on Form 10-K.

(b)      Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended March 29, 2003.

37



---



##### Table of Contents






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.

| |                          
| | -------------------------
| | GIGA-TRONICS INCORPORATED

| |    |                                                                                               
| | -- | ----------------------------------------------------------------------------------------------
| | By | /s/ GEORGE H. BRUNS JR.
George H. Bruns, Jr.
Chairman of the Board and
Chief Executive Officer

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

|                                             |  |                                                                                               |  |                 
|-------------------------------------------- |  | --------------------------------------------------------------------------------------------- |  | ----------------
|/s/ GEORGE H. BRUNS JR

George H. Bruns, Jr. |  | Chairman of the Board 
and Chief Executive Officer
(Principal Executive Officer)              |  | 5/27/2003
(Date)
|                                             |  |                                                                                               |  |                 
|/s/ MARK H.COSMEZ II

Mark H. Cosmez II      |  | Vice President, Finance, Chief
Financial Officer and Secretary
(Principal Accounting Officer) |  | 5/27/2003
(Date)
|                                             |  |                                                                                               |  |                 
|/s/ JAMES A. COLE                            |  | Director                                                                                      |  | 5/20/2003       
|                                             |  |                                                                                               |  |                 
|James A. Cole                                |  |                                                                                               |  | (Date)          
|                                             |  |                                                                                               |  |                 
|/s/ KENNETH A HARVEY                         |  | Director                                                                                      |  | 5/22/2003       
|                                             |  |                                                                                               |  |                 
|Kenneth A. Harvey                            |  |                                                                                               |  | (Date)          
|                                             |  |                                                                                               |  |                 
|/s/ ROBERT C. WILSON                         |  | Director                                                                                      |  | 5/23/2003       
|                                             |  |                                                                                               |  |                 
|Robert C. Wilson                             |  |                                                                                               |  | (Date)          
|                                             |  |                                                                                               |  |                 
|/s/ WILLIAM E. WILSON                        |  | Director                                                                                      |  | 5/22/2003       
|                                             |  |                                                                                               |  |                 
|William E. Wilson                            |  |                                                                                               |  | (Date)          

38



---



##### Table of Contents






CERTIFICATIONS UNDER

SECTION 302 OF


THE SARBANES OXLEY ACT OF 2002


I, George H. Bruns, Jr., certify that:

1.     I have reviewed this annual report on Form 10-K of Giga-tronics
Incorporated;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 27, 2003

| |                                                                     
| | --------------------------------------------------------------------
| | /s/ GEORGE H. BRUNS JR.
George H. Bruns, Jr.
Chief Executive Officer

39



---



##### Table of Contents



CERTIFICATIONS UNDER
SECTION 302 OF
THE SARBANES OXLEY ACT OF 2002

I, Mark H. Cosmez II, certify that:

1.     I have reviewed this annual report on Form 10-K of Giga-tronics
Incorporated;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 27, 2003



| |                                                                
| | ---------------------------------------------------------------
| | /s/ MARK H. COSMEZ II
Mark H. Cosmez II
Chief Financial Officer

40



---



##### Table of Contents






GIGA-TRONICS INCORPORATED
INDEX TO EXHIBITS

|      |  |                                                                                                                                                                                                                                                                  
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1   |  | Articles of Incorporation of the Registrant, as amended, previously filed
as Exhibit 3.1 to Form 10-K for the fiscal year ended March 27, 1999 and
incorporated herein by reference.                                                                             
|      |  |                                                                                                                                                                                                                                                                  
|3.2   |  | By-laws of Registrant, as amended, previously filed as Exhibit 3.2 to
Form 10-K for the fiscal year ended March 28, 1998, and incorporated
herein by reference.                                                                                                  
|      |  |                                                                                                                                                                                                                                                                  
|4.1   |  | Rights Agreement dated as of November 6, 1998 between Giga-tronics
Incorporated and ChaseMellon Shareholder Services LLC, as previously filed
on November 9, 1998 as Exhibit 4.1 to Form 8-K and incorporated herein by
reference.                               
|      |  |                                                                                                                                                                                                                                                                  
|10.1  |  | 1990 Restated Stock Option Plan and form of Incentive Stock Option
Agreement, previously filed on November 3, 1997 as Exhibit 99.1 to Form
S-8 (33-39403) and incorporated herein by reference.**                                                                
|      |  |                                                                                                                                                                                                                                                                  
|10.2  |  | Standard form Indemnification Agreement for Directors and Officers,
previously filed on June 21, 1999, as Exhibit 10.2 to Form 10-K for the
fiscal year ended March 27, 1999 and incorporated herein by reference.**                                             
|      |  |                                                                                                                                                                                                                                                                  
|10.3  |  | Lease between Giga-tronics Incorporated and Calfront Associates for 4650
Norris Canyon Road, San Ramon, CA, dated December 6, 1993, previously
filed as Exhibit 10.12 to Form 10-K for the fiscal year ended March 26,
1994 and incorporated herein by reference.
|      |  |                                                                                                                                                                                                                                                                  
|10.4  |  | Employee Stock Purchase Plan, previously filed on August 29, 1997, as
Exhibit 99.1 to Form S-8 (33-34719), and incorporated herein by reference.**                                                                                                               
|      |  |                                                                                                                                                                                                                                                                  
|10.8  |  | 2000 Stock Option Plan and form of Incentive Stock Option Agreement,
previously filed on September 8, 2000 as Exhibit 99.1 to Form S-8
(33-45476) and incorporated herein by reference.**                                                                        
|      |  |                                                                                                                                                                                                                                                                  
|21*   |  | Significant Subsidiaries.                                                                                                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                  
|23.1* |  | Report on Financial Statement Schedule and Consent of Independent
Auditors. (See page 43 of this Annual Report on Form 10-K.)                                                                                                                                    
|      |  |                                                                                                                                                                                                                                                                  
|99.1* |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 
Chief Executive Officer.                                                                                                                                                               
|      |  |                                                                                                                                                                                                                                                                  
|99.2* |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 
Chief Financial Officer.                                                                                                                                                               

* Attached as exhibits to this Form 10-K.

** Management contract or compensatory plan or arrangement.

41