**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 1934**




For
      the
      fiscal year ended August 29, 2008




**OR**




 ̈  **TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE** **ACT
      OF 1934**




For
      the
      transition period from__________________________to
      _______________________




Commission
      file No. 0-11003




**WEGENER
      CORPORATION**


(Exact
      name of registrant as specified in its charter)




**Delaware**
            **81-0371341**(State
                or other jurisdiction
            (I.R.S.
                Employerof
                incorporation or organization)
            Identification
                No.)





**11350
                Technology Circle, Johns Creek, Georgia**
            **30097-1502**(Address
                of principal executive offices)
            (Zip
                Code)




**Registrant’s
      telephone number, including area code:**   (770)
      623-0096




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




Title
                of each class
            Name
                of each exchange on which registered**Common
                Stock, $.01 par value**
            **NASDAQ
                Stock Market**




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




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. **Yes
      o** **No
      x**




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. **Yes
      o** **No
      x**




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
      o**






Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§ 229.405 of this chapter) 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 a large accelerated filer, an
      accelerated filer, a non-accelerated filer or a smaller reporting company.
      See
      definition of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.





Large
                Accelerated Filer ̈
            Accelerated
                Filer ̈
            Non-Accelerated
                Filer. ̈
            Smaller
                reporting companyx




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act). **Yes
      o** **No
      x**




As
      of
      February 29, 2008 (the last business day of the registrant’s most recently
      completed second fiscal quarter), the aggregate market value of the Common
      Stock
      held by non-affiliates was $9,978,337 based on the last sale price of the Common
      Stock as quoted on the NASDAQ Stock Market on such date. (The officers and
      directors of the registrant, and owners of over 10% of the registrant’s common
      stock, are considered affiliates for purposes of this calculation.)




As
      of
      November 21, 2008, 12,647,051 shares of registrant’s Common Stock were
      outstanding.




**DOCUMENTS
      INCORPORATED BY REFERENCE**


Portions
      of the definitive Proxy Statement pertaining to the 2009 Annual Meeting of
      Stockholders, only to the extent expressly so stated herein, are incorporated
      herein by reference into Part III.










**WEGENER
      CORPORATION**


**FORM
      10-K**


**YEAR
      ENDED AUGUST** **29** **,
      2008**


**INDEX**




Page**PART
                I**Item
                1.
            Business
            2Item
                1A.
            Risk
                      Factors
            11Item
                1B.
            Unresolved
                Staff Comments
            15Item
                2.
            Properties
            15Item
                3.
            Legal
                Proceedings
            15Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            16**PART
                II**Item
                5.
            Market
                for Registrant's Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            16Item
                6.
            Selected
                Financial Data
            18Item
                7.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            19Item
                7A.
            Quantitative
                and Qualitative Disclosures About Market Risk
            29Item
                8.
            Financial
                Statements and Supplementary Data
            30Item
                9.
            Changes
                in and Disagreements With Accountants on Accounting and Financial
                Disclosure
            51Item
                9A.
            Controls
                and Procedures
            51Item
                9A(T).
            Controls
                and Procedures
            51Item
                9B.
            Other
                Information
            52**PART
                III**Item
                10.
            Directors,
                Executive Officers and Corporate Governance
            52Item
                11.
            Executive
                Compensation
            52Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            52Item
                13.
            Certain
                Relationships and Related Transactions, and Director Independence
            52Item
                14.
            Principal
                Accounting Fees and Services
            52**PART
                IV**Item
                15.
            Exhibits
                and Financial Statement Schedules
            53


1


**PART
      I**




**ITEM
      1. BUSINESS**




Wegener ® Corporation, the Registrant, together with its subsidiary, is referred to herein
      as “we,”
      “our,” “us,” the
“Company” or “Wegener.”





Wegener
      Corporation was formed in 1977 and is a Delaware corporation. We conduct our
      continuing business through Wegener Communications, Inc. (WCI), a wholly-owned
      subsidiary. WCI was formed in April 1978 and is a Georgia corporation. WCI
      is an
      international provider of digital solutions for video, audio and Internet
      Protocol (IP) data networks. Applications include IP data delivery, broadcast
      television, cable television, radio networks, business television, distance
      education, business music and financial information distribution.
      COMPEL ® ,
      our
      network control system, provides network flexibility to regionalize programming,
      commercials and file transfers.




Segment
      Information and Financial Information by Geographical Area




Segment
      information and financial information by geographical area contained in Note
      14
      to the consolidated financial statements contained in this report are
      incorporated herein by reference in response to this item.




**MARKETS
      AND INDUSTRY OVERVIEW**




The
      primary markets we serve are business and private networks, cable and telecom
      headends, broadcast television and program originators and broadcast
      radio.




Business/Private
      Networks




Business
      networks consist of corporations and enterprises distributing video, audio
      and/or data among their sites. Private networks consist of networks that target
      video, audio and/or data to a select group of subscribers or viewers. Our
      equipment is currently used for a large percentage of the horse racing video
      distribution in the United States and Sweden and we are continuing to expand
      that market. We also have a strong presence in faith-based networks. In fiscal
      2008, we continued to expand our presence in digital signage networks, providing
      networks to distribute and display information and advertisements dynamically
      to
      retail customers and employees. Other business and private network customers
      include Muzak LLC, Roberts Communications, Inc., The Church of Jesus Christ
      of
      Latter-Day Saints and Swedish companies ATG and TERACOM. In addition, we work
      through third-party integrators, such as Ascent Media and Satellite Store Link,
      to reach this market.





Business
      and private networks almost universally have bandwidth as one of their single
      largest operating expenses. Customers are typically willing to invest in
      large-scale replacement of their networks when they can find a satisfactory
      return on investment (ROI), such as in the case of MPEG-4/H.264 video
      compression and DVB-S2 modulation. Many private and business networks are also
      interested in store-forward technology to reduce their satellite bandwidth
      usage.




Cable
      and Telecom




Cable
      headends consist of cable distribution companies, such as cable multiple system
      operators (MSOs) and other headends. We have a multiyear agreement with Mega
      Hertz for exclusive distribution of several of our products into cable headends
      in the United States.





Telecom
      is comprised of telephony companies now offering television services to
      consumers. They are launching video service offerings to compete with cable
      and
      satellite DTH (direct-to-home) companies, due to a decline in telephone
      subscribers and the ability to reduce subscriber churn.





Due
      to
      the February 2009 Federal Communications Commission (FCC) mandate to turn off
      analog broadcasts, cable and telecom headends require methods to receive the
      local digital broadcasts for integration into their headends. This integration
      will allow consumers to continue receiving local broadcast channels on their
      analog televisions, as well as to access high definition (HD) channels from
      local broadcasters.


2




Broadcast
      Television and Program Originators




Broadcast
      television consists of (1) broadcast networks (companies that distribute
      broadcast television channels nationally to their affiliates typically via
      satellite); and (2) broadcast stations (local stations which are typically
      affiliates of national broadcasters that distribute typically free-to-air
      television to local viewers). Program originators consist of programmers that
      provide television programming to cable, DTH satellite and telecom companies
      for
      distribution to consumers. Broadcast television and programmer customers include
      Big Ten Network (BTN), FOX Cable, Fox Broadcast, HDNet, and ION
      Media.





Broadcast
      networks have launched high definition channels of all their primary broadcast
      channels and broadcast stations have launched high definition channels in most
      large markets throughout the United States. Broadcast networks continue to
      see
      their viewership eroded by program originators and some have launched secondary
      channels to generate additional revenue. Additionally, they have a mandate
      from
      the FCC to cease transmission of their analog broadcasts by February 2009.





Program
      providers continue to distribute their programming over satellite to cable,
      DTH
      satellite, and telecom companies. In addition, many offer programming through
      other means such as the internet and mobile phones. Program providers continue
      to launch new services to compete for advertising dollars and are offering
      increasing numbers of HD services, as well as distributing video-on-demand
      content. They are concerned about the effect that personal video recorders
      could
      potentially have on their advertising revenue as well as the security of their
      high value content being stored in consumers’ homes in a digital and potentially
      easy to copy format.





With
      the
      drop in costs and the 2009 analog cut-off looming, more HD televisions are
      being
      purchased by consumers. This is dramatically increasing the amount of HD
      programs being offered on cable, satellite and telecom networks.





Cable,
      DTH satellite and telecom companies are all competing to provide consumers
      with
      television, telephone, high speed internet services and, in some cases, cell
      phone service. To gain and maintain subscribers, they continue to roll out
      high
      definition, video-on-demand services and personal video recording
      devices





Satellite
      teleports are expanding their distribution systems to include terrestrial
      delivery as well as satellite.




Broadcast
      Radio




Broadcast
      radio consists of companies that broadcast, typically free-to-air, radio signals
      to local listeners. Radio network customers include BBC World Service, EMF
      Broadcasting, Dial Global, Christian Radio Consortium, Salem Radio Network
      and
      American Family Radio.





Broadcast
      radio operators are interested in regionalizing their broadcasts to give a
      local
      feel to the programming. They also want to shift their programming for
      time-zones so that “drive times” are able to be addressed with particular
      morning and afternoon shows and advertisements, which can demand higher
      advertising dollars. In addition, they continue to come under pressure from
      advertisers to ensure verification and accuracy of advertisements.




**PRODUCTS**




Our
      products include: iPump ® Media
      Servers, Unity ® Satellite Receivers, Compel ® Network
      Control and Content Management Systems, Nielsen Media Research Products, SMD
      Set
      Top Boxes, Digital Television (DTV) Digital Stream Processors, analog audio
      products, third-party uplink products and customized products. See Note 14
      to
      the consolidated financial statements for information on the concentration
      of
      products representing 10% or more of revenues in the past three fiscal
      years.




iPump ® Media
      Servers




The
      iPump ® product
      line combines the features of our integrated receiver decoders (IRD) with
      advanced media server functionality and IP router capabilities. The
      iPump ® receives
      and stores television, radio and other digital files from broadcast, cable
      and
      business network operations utilizing store and forward technology compared
      to
      traditional real-time linear broadcasts. Store and forward technology allows
      network operators to store content at receive locations with an
      iPump ® and then
      play back the content locally either based on schedules or on-demand user
      selection. Network operators with repetitive content in their programming
      line-up can reduce their satellite space segment costs by sending programming,
      advertising and playback schedules via stored files into the iPump ® for
      later playback according to the schedules. The network operator can then utilize
      limited satellite time to refresh the programming, advertising and play-out
      schedules without the necessity to maintain a constant signal on the satellite.


3


A
      relatively new addition to the iPump ® and
      Compel ® system
      is IP network delivery of files and commands to the iPump ® .
      With
      this ability, network operators can launch iPump ® networks
      over the internet or private IP networks. Additionally, they can control their
      network from one integrated Compel ® control
      system while feeding select sites via IP that they cannot reach with their
      satellite either due to location or inability to place a satellite
      dish.





There
      are
      three models of the iPump ® that
      utilize store-forward technology. The iPump ® 6400
      Professional Media Server is designed for broadcast television and private
      network customers. The iPump ® 6420
      Audio Media Server is designed specifically to meet the needs of broadcast
      radio. The iPump ® 562
      Enterprise Media Server is designed specifically for private network and
      enterprise applications, such as digital signage. The iPump 562 Media Server
      is
      the most recent addition to the iPump product line and supports new technologies
      such as MPEG-4 video decoding for high definition and standard definition video,
      as well as Digital Video Broadcast (DVB)-S2 satellite demodulation.





The
      SMD
      515 Streaming Media Decoder is a peripheral decoder for the iPump ® 6400 and
      is designed for environments such as retail point-of-sale kiosks, point of
      purchase (POP) digital signs and advertisements, and corporate communications.
      It receives a video stream via Internet Protocol from the iPump ® 6400 and
      outputs high quality video to large video monitors for digital signage or
      classroom training applications. It supports HD video in MPEG-4 and MPEG-2
      compression formats and advanced digital audio, in addition to standard
      definition video and audio to ensure quality media displays for such high
      visibility purposes.





We
      are
      targeting all of our core markets for the iPump ® product
      line. Within these markets, applications for the iPump ® products
      include: digital signage, corporate communications, training/education,
      time-zone shifting, regional advertising insertion, and news
      distribution.




Unity
      Receivers




The
      Unity ® 551
      and
      Unity ® 552 are
      the newest additions to the Unity ® products. They are targeted to meet the needs of private and business television
      networks. Unity ® 551
      utilizes MPEG-2 for video distribution and is functionally equivalent to the
      Unity ® 500 with
      the addition of a second audio output. Unity ® 552 adds
      MPEG-4 video with high definition support and DVB-S2 demodulation to the
      features of the Unity ® 551.
      With these new features, network operators can reduce their bandwidth
      utilization by approximately half. This allows them to launch additional
      services, reduce their expenses or convert to high definition video.





The
      Unity ® 4600
      receiver is a digital satellite receiver used primarily by program originators
      to distribute programming to cable and telecom headends. It offers analog and
      digital outputs to support analog and digital headends. DVB-S2 satellite
      demodulation support has recently been added to the product. Cable headends
      utilize the Unity ® 4600 to
      support digital high definition television distribution.





The
      Unity ® 4650
      receiver is a digital receiver used primarily by broadcast television networks.
      The Unity ® 4650
      receiver is a video and audio decoder that features MPEG 4:2:0 and 4:2:2 video
      for enhanced video quality in broadcast television network
      distribution.





The
      Unity ® 202
      audio
      receiver is designed for business music providers. It allows users to select
      audio formats and offers audio storage for advertising insertion and disaster
      recovery. It is our second generation of store-forward business music
      receiver.




Compel ® Network Control and Content Management System




Compel ® Network
      Control System has been a key differentiator to our products since 1989.
      Compel ® is used
      in over 150 networks controlling over 100,000 receivers, and it features
      grouping and addressing controls that provide flexibility in network management.
      Receivers can be controlled as individual sites and as groups. Commands are
      synchronized with video and audio programming, which allows users to regionalize
      programming and blackout programming from nonsubscribers, as well as target
      commercials to subscribers.





Compel ® option
      modules include Conditional Access, MediaPlan ® Content
      Management (CM) and MediaPlan Ò i/o
      Ingest. Conditional Access utilizes a secure microprocessor in every
      Unity ® receiver
      to deliver fast, secure conditional access to a network without the high cost
      of
      consumer smart card systems. Unity ® satellite receivers and iPump ® media
      servers are controlled by the Compel ® Network
      Control System, so the markets for Compel ® are the
      same as for iPump ® and
      Unity ® receivers.


4


MediaPlan Ò CM and
      MediaPlan Ò i/o
      products are control and management system modules to our Compel Ò Control
      System. The MediaPlan ® products
      are crucial for customers when controlling iPump ® Media
      Server networks and are a competitive advantage in sales of iPump ® Media
      Servers.





MediaPlan ® CM is a
      powerful content management system used for managing media and other files
      and
      actively tracking their delivery throughout the iPump ® network.
      In a store-forward network, media is simultaneously stored in multiple
      iPumps ® in the
      field, rather than all in one repository at a central location; therefore,
      management of the dispersed media assets becomes a crucial part of the network
      operation. Operators need easy ways to view the content on individual
      iPumps ® and
      automated mechanisms for updating/deleting media as it changes.
      MediaPlan ® CM is
      designed to address those and many other specific needs of managing media files
      in a store-forward network. Operators can create libraries of assets, generate
      descriptive metadata information, view content at each iPump ® ,
      send
      requested content directly to targeted users and track file usage.





MediaPlan ® i/o is
      the media creation product for the iPump ® network.
      In traditional linear networks, network operators are required to compress
      the
      video, distribute it to remote locations and decompress it for broadcast, all
      within one or two seconds. This requires the use of real-time encoders to
      compress the video and audio as it is sent to the receivers at the remote
      locations. In store-forward networks, the paradigm changes and the process
      of
      video and audio compression, media distribution and decompression of the media
      for broadcast can be done at different times. Network operators can prepare
      the
      media files containing the compressed video and audio ahead of airtime.
      Additionally, they can distribute the media files any time before airing, so
      they can optimize the use of their bandwidth. When it is time for the program
      to
      be broadcast, it merely needs to be played from the local hard drive on the
      iPump ® ,
      not
      transported through the network. As the media creation tool,
      MediaPlan ® i/o
      handles the first part of the process, the creation of media files containing
      compressed video and audio which will be sent to iPumps ® .




Nielsen
      Media Research Products




We
      offer
      two products to encode Nielsen Media Research identification tags into media
      for
      Nielsen program ratings: the NAVE IIc ® and
      SpoTTrac ® Encoders.





The
      NAVE
      IIc ® watermarks program audio with tagging information that identifies the television
      program and the television station that originated the program. The watermarks
      are used by Nielsen devices to automate the process of cataloging viewers’
television viewing habits which ultimately translate into Nielsen ratings.
      The
      NAVE IIc ® makes
      advances over prior units in that it inserts the watermarks for audio in the
      digital domain and can simultaneously insert watermarking on an entire transport
      stream with up to four programs. Alternatively, stations have to down-convert
      to
      analog audio to insert Nielsen data.





The
      SpoTTrac ® Encoder
      is a turnkey workstation that encodes both the audio and video of television
      commercials, Public Service Announcements and other spots with Nielsen Media
      Research content identification information as they are being produced and
      distributed, so the content has the Nielsen codes all the way from the program
      origination point. The tracked data is collected and integrated into Nielsen
      Tracking Service’s reporting and performance management tools.





SMD
      Set Top Box





The
      SMD
      515 Set Top Box (SMD) is sold both to telecom operators and private network
      customers. Telecom operators use the SMD as the device in consumers’ homes to
      receive IPTV (internet protocol television) services. It is currently integrated
      with Conklin-Intracom’s middleware and conditional access solution for use by
      multiple telcom operators in North America to provide premium IPTV services
      including high definition programming, video on demand and integrated personal
      video recording.





Private
      networks use the SMD as a companion to iPump Media Servers for high definition
      video and to distribute additional video channels. The iPump streams video
      over
      Ethernet to the remote SMDs. The SMD supports high definition and standard
      definition video. Additionally it supports MPEG-2 and MPEG-4.h.264 advanced
      video compression.


5


DTV
      Digital Stream Processors





The
      DTV
      Digital Stream Processor product line is designed for cable and telecom
      headends. It allows them to integrate local off-air HD broadcast television
      channels and digital programs and easily insert them onto their networks. Our
      products provide for multiple signals to be inserted with one unit. Models
      include DTV 720, DTV 742 and DTV 744.




Analog
      Audio




Our
      legacy analog products are sold primarily to the cable television market. These
      products consist of Series 1600 and 1700 mainframes, sub-carrier modulators,
      demodulators and decoders, which are used for cable audio distribution. Our
      Series 2046 network communications and control system cards allow cable
      operators to insert local commercials which increase their advertising
      revenues.




Uplink
      Equipment




We
      offer
      our customers complete system solutions for video and audio distribution. The
      complete system solution requires us to resell components, such as encoders,
      modulators and IP encapsulators from other manufacturers, such as Harmonic,
      Inc.
      and Thomson.




Customized
      Products




We
      offer
      our customers the option to create custom products for their needs when they
      cannot find off-the-shelf products to satisfy their requirements. They pay
      non-recurring engineering expenses through product pricing and/or up-front
      milestone payments. Typically the products are based on our standard products
      and require modifications to fit particular customer needs. This is an area
      of
      competitive advantage for us.




**MARKET
      OPPORTUNITY**





Growth
      opportunities are most significant in the technologies in which we have been
      making significant R&D investments, including store-forward technology,
      MPEG-4 technology and DVB-S2. See “Research and Development” below.





We
      have
      completed shipments of iPump ® networks, including Compel ® and
      MediaPlan ® ,
      in
      multiple markets for a variety of applications, including private networks
      for
      virtual channel applications, broadcast television, broadcast radio, broadcast
      news and private networks for training and digital signage. The broad appeal
      of
      the iPump ® is due
      to the diversity of applications for store-forward technology. Some examples
      of
      iPump applications are described below.





A
      private
      network customer for digital signage and distance training is using the
      iPump ® for both
      signage and training applications simultaneously. The customer is using the
      iPump’s optional feature to generate two networks from a single unit. A third
      output is streamed from the iPump over Ethernet to SMD Set-Tops. Within a retail
      environment, the main output and the SMD are being used for advertising at
      the
      point of sale and in the electronics department by outputting high quality
      video
      advertisements to large video monitors. Within eight months of deployment,
      the
      customer generated a positive return on equipment expenses through advertising
      revenue. With this asset, the customer is also generating a back-room training
      center for its employees at each site, basically for free since the
      advertisements are funding the network. The customer can create customized
      training schedules at each location depending on the employees’ availability, or
      the employees can watch the materials on demand.





The
      virtual channel application of the iPump ® allows a
      current private network customer to reduce its budget for satellite bandwidth
      by
      greater than 90% of what it had been spending prior to upgrading to
      iPump ® .
      Satellite bandwidth utilization was one of the customer’s largest operating
      expenses, so this reduction represents a sizable savings, allowing the customer
      to launch an additional channel. This network used to run continuously,
      utilizing satellite bandwidth the entire time; now the customer uses bandwidth
      only twice a month to update the iPumps ® with new
      content and playout schedules. This example demonstrates the significant savings
      that potential customers may achieve with the iPump ® .





iPump ® broadcast audio customers are using store-forward technology to update its
      operations and enable localization of broadcasts. It allows them to send
      repetitive material to their affiliates a single time and provides an easy
      interface for affiliates to access the audio files. With the iPump ® ,
      radio
      broadcasters can create a localized listening experience for each affiliate
      location to drive increased advertising dollars and listener loyalty. One
      customer regularly generates over 150,000 playlists per week through their
      iPump ® network
      to localize all of its radio channels throughout the country.


6


A
      broadcast television customer utilizes iPump ® store-forward
      technology to offer extended services to its customers. This television channel
      is often featured in museums and schools. The customer can send additional
      educational materials and digital videos along with the broadcast video. All
      the
      video files and additional materials are stored locally on the iPump ® so that
      the museums or schools can have easy access to the materials. The distribution
      is possible without an increase in satellite bandwidth utilization (which would
      be costly), since with store-forward, the operator can manage bandwidth use
      more
      effectively and send repetitive video only once to the iPump ® ,
      rather
      than sending it each time the video is scheduled for broadcast.





A
      broadcast news customer is using the iPump ® to
      streamline the operations of its affiliates. Previously, the news broadcaster
      used different mechanisms to distribute video and script information to
      affiliates. Video was distributed on a linear feed and the affiliate had to
      track the schedule and manually record any video that was of interest to the
      affiliate. If affiliates missed the linear broadcast, then the broadcaster
      had
      to do a “re-feed” and use additional costly satellite bandwidth to redistribute
      the video to the affiliates. With the iPump ® ,
      the
      broadcaster sends all the video as files that are stored for the affiliate
      on
      the hard drive of the iPump ® .
      Then
      the affiliate can access all the information through a web browser interface
      at
      its convenience. This eliminates manual recording by the affiliate and removes
      the need for re-feeds. Additionally, the broadcaster sends scripts and other
      descriptive information to the iPump ® in one
      package with the video so the affiliate can access all the related information
      at a single location. The iPump ® provides
      additional valuable features to the customer’s affiliates, while lowering
      operational costs.





Another
      area of growth for us relates to the development of MPEG-4/h.264 video decoding
      and DVB-S2 satellite demodulation products (see “Research and Development” below
      for additional information). The Unity ® 552
      product offers MPEG-4/h.264 and DVB-S2 technology. The MPEG-4/h.264 standard
      is
      the next evolutionary step in video compression and DVB-S2 is the newest
      technology in satellite modulation. The two technologies combined reduce the
      bandwidth requirements of satellite media distribution approximately in half.
      This reduction in bandwidth requirements is significant, as bandwidth
      utilization is one of the largest operating costs for our customers. This new
      technology can drive growth in two ways. First, existing satellite operators
      can
      replace their existing equipment with new MPEG-4/h.264 and DVB-S2 capable
      equipment since they can justify the capital expense with the operational
      benefits of the transition. Additionally, the lower operating expenses enable
      new business models to develop that could not be supported by the older
      technology’s cost structure.





**SALES
      AND MARKETING**




Domestically,
      we sell our products principally through our own direct sales force, which
      is
      organized geographically and by market segment. We have sales representatives
      in
      Georgia, New York and Eastern Canada, as well as a key account executive in
      North Carolina. We use a major domestic value added reseller for additional
      sales coverage in the cable market. We have relationships with a few key
      integrators as an additional sales channel. Internationally, we sell primarily
      through independent distributors and integrators, mostly in North America,
      South
      America and Europe. The majority of our sales have payment terms of net 30
      days.
      Due to the technical nature of our business, both sales application engineering
      and system integration engineering support sales.





Our
      marketing organization develops strategies for product lines and provides
      direction to product development on product feature requirements. Marketing
      is
      also responsible for setting price levels and general support of the sales
      force, particularly with major proposal responses, presentations and
      demonstrations. We strive to establish Wegener’s brand further within the
      industry, including participation on technical committees, publication of
      articles in industry journals, speaking opportunities at industry events and
      exhibitions at trade shows.





**Manufacturing
      and Suppliers; Sources and Availability of Raw Materials**





During
      fiscal years 2008 and 2007, we used offshore manufacturers for a significant
      amount of our finished goods or component inventories. Three offshore
      manufacturers accounted for approximately 52%, 21% and 3% of inventory purchases
      in fiscal 2008, respectively, and two offshore manufacturers accounted for
      approximately 41% and 23% in fiscal 2007, respectively. They have facilities
      located in Taiwan and the Peoples Republic of China. Raw materials consist
      of
      passive electronic components, electronic circuit boards and fabricated sheet
      metal. Approximately 20% of our raw materials are purchased directly from
      manufacturers and the other 80% are purchased from distributors. Passive and
      active components include parts such as resistors, integrated circuits and
      diodes. We use approximately ten distributors and two contract manufacturers
      to
      supply our electronic components. We often use a single contract manufacturer
      or
      subcontractor to supply a total subassembly or turnkey solution for higher
      volume products. Direct suppliers provide sheet metal, electronic circuit boards
      and other materials built to specifications. We maintain relationships with
      approximately 20 direct suppliers. Most of our materials are available from
      a
      number of different suppliers; however, certain components used in existing
      and
      future products are currently available from a single or a limited number of
      sources. Although we believe that all single-source components currently are
      available in adequate quantities, there can be no assurance that shortages
      or
      unanticipated delivery interruptions will not develop in the future. Any
      disruption or termination of supply of certain single-source components or
      agreements with contract manufacturers could have an adverse effect on our
      business and results of operations. Our manufacturing operations consist
      primarily of final assembly and testing of our products, utilizing technically
      trained personnel, electronic test equipment and proprietary test
      programs .


7


**Intellectual
      Property**





We
      hold
      three U.S patents currently, including a patent covering advanced receiver
      grouping techniques in Compel ® which
      expired on November 14, 2008. In addition to the advanced grouping techniques,
      we believe Compel ® ,
      along
      with our MediaPlan Ò CM and
      MediaPlan Ò i/o
      modules, offers other significant features and functionalities for complex
      network control applications that provide us with an advantage over competitive
      control systems. Compel ® ,
      which
      has been operational since 1989, will continue to be upgraded and enhanced.
      Although no assurances may be given (see Item 1A. “Risk Factors” section below),
      the expiration of the Compel ® patent
      is
      not expected to have a material adverse effect on our business and results
      of
      operations. We hold nine active trademarks, such as Compel ® ,
      iPump ® ,
      Wegener ® and
      Unity ® .
      During
      the fourth quarter of fiscal 2008, we completed the sale of selected patents
      and
      patent applications to EPAX Consulting Limited Liability Company for net
      proceeds of approximately $1,075,000 and recorded a gain of $894,000. The group
      of patents and patent applications sold relate to product distinction, system
      architecture and IP networking. We retain a worldwide, non-exclusive,
      royalty-free license under the patents for use in both existing and future
      products. Currently we have one patent application pending, five patents
      published and one trademark application pending.





Although
      we attempt to protect our intellectual property rights through patents,
      trademarks, copyrights, licensing arrangements and other measures, we cannot
      assure you that any patent, trademark, copyright or other intellectual property
      rights owned by us will not be invalidated, circumvented or challenged, that
      such intellectual property rights will provide competitive advantages to us,
      or
      that any of our pending or future patent and trademark applications will be
      issued. We also cannot assure you that others will not develop technologies
      that
      are similar or superior to our technology, duplicate our technology or design
      around the patents that we own . In order
      to develop and market successfully certain of our planned products for digital
      applications, we may be required to enter into technology development or
      licensing agreements with third parties. Although many companies are often
      willing to enter into such technology development or licensing agreements,
      we
      cannot assure you that such agreements will be negotiated on terms acceptable
      to
      us, or at all. The failure to enter into technology  development
      or licensing agreements, when necessary, could limit our ability to develop
      and
      market new products and could cause our business to suffer. Third parties have
      in the past claimed, and may in the future claim, that we  have  infringed
      their current or future intellectual property rights. There can be no assurance
      that we will prevail in any intellectual property infringement litigation given
      the complex technical issues and inherent uncertainties in litigation. Even
      if
      we prevail in litigation, such litigation could result in substantial costs
      and
      diversion of resources and could negatively affect our business, operating
      results, financial position and cash flows.





Although
      we believe that the patents and trademarks we own are of value, we believe
      that
      success in our industry will be dependent upon new product introductions,
      frequent product enhancements, and customer support and service. However, we
      intend to protect our rights when, in our view, these rights are infringed
      upon.
      Additionally, we license certain analog audio processing technology to several
      manufacturing companies which generated royalty revenues of approximately
      $66,000, $86,000, and $82,000 in fiscal 2008, 2007 and 2006, respectively.
      These
      royalty license agreements renew annually unless cancelled by the licensee
      on
      the expiration date.




During
      the second quarter of fiscal 2003, we entered into a license agreement with
      StarGuide Digital Networks, Inc., a Nevada corporation. This agreement granted
      a
      number of limited licenses of StarGuide patents related to delivering IP data
      by
      satellite and store/forward audio. These licenses extend to and conclude upon
      the last to expire of any licensed patent. We have agreed to pay StarGuide
      a
      running royalty on certain of our products. We believe that these royalties
      will
      not have a material adverse effect on our financial condition or results of
      operations. In addition, as of August 29, 2008, we have entered into seven
      other
      license agreements for utilization of various technologies. These agreements
      currently require royalty payments, or may require future royalties for products
      under development, none of which are expected to have a material adverse effect
      on our financial condition or results of operations.


8


**Seasonal
      Variations in Business**




There
      do
      not appear to be any seasonal variations in our business.




**Working
      Capital Practices**




Information
      contained under the caption "Management's Discussion and Analysis of Financial
      Condition and Results of Operations" (MD&A) section of this report is
      incorporated herein by reference in response to this item.




**Dependence
      upon a Limited Number of Customers**




We
      sell
      to a variety of domestic and international customers on an open-unsecured
      account basis. These customers principally operate in the cable television,
      broadcast, business music, private network and data communications industries.
      Sales to Big Ten Network, Conklin-Intracom and Mega Hertz accounted for
      approximately 14.4%, 13.3% and 12.1% of revenues in fiscal 2008, respectively.
      Sales to Jones Radio Networks,  SSL
      (Satellite Store Link) and Mega Hertz accounted for approximately 15.4%, 14.2%
      and 10.3% of revenues in fiscal 2007, respectively. Sales to Muzak, Nielsen
      Media Research and BBC World Service accounted for approximately 21.8%, 10.7%
      and 10.5% of revenues in fiscal 2006, respectively. At August 29, 2008, three
      customers accounted for more than 33.6% of our accounts receivable. At August
      31, 2007, one customer accounted for more than 10% of our accounts receivable.
      Sales to a relatively small number of major customers have typically comprised
      a
      majority of our revenues. This trend is expected to continue in fiscal 2009
      and
      beyond. The loss of one or more of these customers would likely have, at least
      in the near term, a material adverse effect on our results of
      operations.




**Backlog
      of Orders**




Our
      backlog is comprised of undelivered, firm customer orders, which are scheduled
      to ship within 18 months. Our eighteen month backlog was approximately
      $8,491,000 at August 29, 2008, $10,170,000 at August 31, 2007, and $10,700,000
      at September 1, 2006. Approximately $7,206,000 of the August 29, 2008, backlog
      is expected to ship during fiscal 2009. At August 29, 2008, four customers
      accounted for 85.1% of the eighteen month backlog and 83.4% of the backlog
      expected to ship during fiscal 2009. Reference is hereby made to the information
      contained in MD&A, which is incorporated herein by reference in response to
      this item. The total multi-year backlog at August 29, 2008 was $13,300,000
      compared to $17,080,000 at August 31, 2007.





**Competitive
      Conditions**




We
      compete both with companies that have substantially greater resources and with
      small specialized companies. Competitive forces generally change on a
      year-by-year basis for the markets we serve due to the length of time required
      to develop new products. Through relationships with component and integrated
      solution providers, we believe we are positioned to provide complete end-to-end
      digital video and audio systems to our customers.





Broadcast
      Television and Program Originators




Competition
      for our products in the broadcast television and program originators market
      is
      from large and well-established companies such as Tandberg, Motorola and Cisco. We
      believe our
      Unity ® products
      have a competitive advantage with our advanced Compel ® control,
      so we focus on opportunities where that advantage is of value to the customer.




Cable
      and Telecom




Competition
      for our DTV products is mostly from smaller companies that do not have as
      favorable a reputation in the cable television market. Significant orders for
      this product line will depend on the overall growth of broadcast and telecom
      HDTV offerings and possible legislative decisions by the FCC in the
      future.





Competition
      for the SMD Set Top box is from companies producing cable set-top boxes as
      well
      as from companies specifically addressing the IPTV market.


9


Broadcast
      Radio





Competition
      is currently limited to a few smaller companies for our iPump ® Media
      Server in the broadcast radio market. We believe Compel® Network Control is a
      competitive advantage in broadcast radio, as well as our full-featured
      iPump ® 6420
      Media Server.




Business
      and Private Networks




Competition
      in the business and private networks market generally comes from smaller
      companies with unique products tailored to the needs of the customer.
      Competition in this field is increasing, although still limited, and we expect
      to be among the industry key players. We believe our products are well
      positioned for this market and have competitive advantages, such as our powerful
      network control and targeting capabilities. Digital signage is a new and growing
      market which is currently very fragmented.





**Research
      and Development**




Our
      research and development activities are designed to strengthen and enhance
      our
      existing products and systems and to develop new products and systems. Our
      development strategy is to identify features, products and systems which are,
      or
      are expected to be, needed by a number of customers. A major portion of the
      fiscal 2008 research and development expenses were spent on product development
      of our iPump ® 6420,
      iPump ® 562,
      Compel ® ,  and
      Unity ® 552
      products. WCI’s research and development expenses totaled $3,213,000 in fiscal
      2008, $3,033,000 in fiscal 2007, and $3,052,000 in fiscal 2006. Additional
      information contained in the “Products” and “Intellectual Property” sections
      above and in MD&A is incorporated herein by reference in response to this
      item.





Technological
      advances occur frequently in our industry and our product offerings must be
      upgraded with the advances to remain current with industry trends and attract
      potential customers. During fiscal 2008, we invested heavily in new technologies
      since the industry is in a transitional period between technologies and new
      technologies are beginning to deploy in volume. We have been investing in new
      technologies now while they are still very innovative and of high value to
      customers. During fiscal 2008, we invested in MPEG-4/H.264 video decompression
      and DVB-S2 demodulation technology, store-forward technology and network
      management. We anticipate that we will continue to invest in all of these
      technologies in the coming years as they are all at the beginning of their
      life
      cycles.





MPEG-4/H.264
      video compression is a new technology that is now being fielded with our
      products. It is beginning to drive a new cycle of purchases throughout the
      industry. MPEG-4/H.264 compression reduces bandwidth utilization significantly,
      which is a material cost reduction for our customers since bandwidth utilization
      is one of their largest operating expenses. Alternately, customers can upgrade
      their video to high definition and significantly increase its quality while
      maintaining similar bandwidth utilization to their current MPEG-2 standard
      definition networks. The Unity ® 552
      receiver, iPump ® 562
      server and the SMD 515 decoder incorporate MPEG-4 technology.





Network
      control and management have long been a differentiator for our Unity ® receivers and iPump ® media
      servers. Through fiscal 2008, we continued to invest in network control for
      our
      products, which allows customers to create dynamic environments with their
      receivers and to gain additional advertising revenue by regionalizing broadcasts
      and advertisements. When network control is included in a store-forward network,
      it becomes a very complex operation to manage the media content and data files
      on media servers throughout the network. It is imperative to customers that
      it
      is managed properly, as the content often has limited viewing rights, so it
      must
      be deleted when rights have expired or replaced by newer versions over time.
      Network control and management products, such as Compel ® and
      MediaPlan ® ,
      manage
      such operations.





**Employees**





As
      of
      August 29, 2008, we had 91 **** full-time
      employees employed by WCI and no employees employed by Wegener Corporation.
      No
      employees are parties to a collective bargaining agreement and we believe that
      employee relations are good.





**Available
      Information**




Our Web site
      is http://www.wegener.com .
      Information contained on our Web site should not be considered incorporated
      by
      reference in this Form 10-K.


10


**EXECUTIVE
      OFFICERS OF THE REGISTRANT**




The
      executive officers of the Company, for purposes of section 401(b) of Regulation
      S-K, are as follows:


**Name
                  and Business Experience**
              **Age**
              **Office
                  Held****Robert
                  A. Placek**
                President
                  and Chief Executive Officer
                of
                  the Company since August 1987 and Director of the Company since
                  July 1987.
                  Chairman of the Board since 1995. Chairman and Chief Executive
                  Officer and
                  Director of WCI since 1979. President of WCI from October 1979
                  to June
                  1998 and from March 2002 to January 2005.
              70
              Chairman
                  of the Board,
                President
                  and Chief Executive Officer of the Company**Ned
                  L. Mountain**
                President
                  and Chief Operating Officer of WCI since January 2005 and Director
                  of the
                  Company since May 2003. Executive Vice President of WCI from March
                  2002 to
                  January 2005. Senior Vice President of Business Development of
                  WCI from
                  1996 to 2002. Vice President European Operations of WCI from 1994
                  to 1995.
                  Numerous sales and marketing positions from 1981 to 1994. Corporate
                  Senior
                  Engineer of UA-Columbia Cablevision from 1979 to 1981.
              60
              President
                  and Chief Operating Officer of WCI**C.
                  Troy Woodbury, Jr.**
                Treasurer
                  and Chief Financial Officer of the Company since June 1988 and
                  Director
                  since 1989. Treasurer and Chief Financial Officer of WCI since
                  1992.
                  Senior Vice President of Finance of WCI since March 2002. Executive
                  Vice
                  President of WCI from July 1995 to March 2002. Chief Operating
                  Officer of
                  WCI from September 1992 to June 1998. Group Controller for
                  Scientific-Atlanta, Inc. from March 1975 to June 1988.
              61
              Treasurer
                  and
                Chief
                  Financial Officer
                of
                  the Company and WCI




**ITEM
      1A. RISK FACTORS**




Our
      business, financial condition and operating results can be affected by a number
      of factors, including those listed below, any one of which could cause our
      actual results to vary materially from recent results or from our anticipated
      future results. Any of these risks could also materially and adversely affect
      our business, financial condition or the price of our common stock.




**We
      may not have sufficient capital to continue as a going concern.**




Through November
      21, 2008 bookings and revenues to date were insufficient to provide adequate
      levels of cash flow from operations or adequate levels of collateral to support
      required borrowings during the second quarter of fiscal 2009. As a result, we
      need to raise additional capital or obtain additional credit facilities during
      the second quarter of fiscal 2009 to continue as a going concern and to execute
      our business plan. Although
      we are in discussions with potential financing sources, if
      we are
      unsuccessful in securing additional capital during this period, through
      additional equity and/or debt financing, we may not be able to continue as
      a
      going concern. During
      the fourth quarter of fiscal 2008, and subsequent to August 29, 2008, we made
      reductions in headcount to bring the current number of employees to 84, and
      reduced engineering consulting and other overhead expenses. Should adequate
      capital or financing not be available, and if increased revenues not
      materialize, we are committed to further reducing operating costs to bring
      them
      in line with reduced revenue levels. No assurances can be given that operating
      costs can be sufficiently reduced to allow us to continue as a going
      concern. The
      audit report
      relating to the consolidated financial statements for the year ended August
      29,
      2008, contains an explanatory paragraph regarding the Company’s ability to
      continue as a going concern.


11


**The
      recent volatility and disruption of the capital and credit markets, and adverse
      changes in the global economy, will likely have a negative impact on our ability
      to access the capital and credit markets.**





Recently,
      the capital and credit markets have become increasingly tight as a result of
      adverse economic conditions that have caused the failure and near failure of
      a
      number of large financial services companies. If the capital and credit markets
      continue to experience crisis and the availability of funds remains low, it
      is
      likely that our ability to access the capital and credit markets will be
      limited, available on less favorable terms or not available at all during this
      period when we need to raise additional capital or obtain additional credit
      facilities in order to continue as a going concern. In addition, if current
      global economic conditions persist for an extended period of time or worsen
      substantially, our business may suffer in a manner which could cause us to
      fail
      to satisfy the financial and other restrictive covenants to which we are subject
      under our existing credit facilities.





**We
      are in the process of examining various strategic alternatives to enhance
      shareholder value, which is ongoing, but such process may not result in the
      achievement of the desired goal of enhancing shareholder
      value.**





During
      the second quarter of fiscal 2007, the Board of Directors formed a committee
      of
      independent directors to explore strategic and financial alternatives to enhance
      shareholder value, including the retention of a financial advisor to assist
      us
      in this evaluation process. These strategic alternatives may include: (i)
      technology licensing agreements, (ii) product development and marketing
      arrangements, joint ventures or strategic partnerships, (iii) strategic
      acquisitions, mergers or other business combinations, or (iv) the merger or
      sale
      of all or part of the Company. We are also evaluating various financing
      alternatives to unlock the market value of our headquarters and associated
      real
      estate. To date, the committee has explored and considered a number of potential
      courses of action. This process is ongoing and there can be no assurance that
      these efforts will result in any specific action or transaction. Further, any
      such transaction or business arrangement may not ultimately lead to increased
      shareholder value. There are uncertainties and risks related to the exploration
      of strategic alternatives, including:





·
            The
                distraction of management and potential disruption of operations,
                which
                could have an adverse effect on our operating
                results;




·
            The
                inability to successfully achieve the benefits of any strategic action
                undertaken by us;




·
            The
                time dedicated to the process can be lengthy and there are inherent
                costs
                associated with such a process;




·
            Potential
                loss of other business opportunities as management focuses on the
                exploration of strategic alternatives;
                and




·
            Perceived
                uncertainties as to our future direction which can result in difficulties
                in recruiting and retaining personnel**.**







In
      addition, the market price of our stock can be volatile as we explore strategic
      alternatives, which may continue or become more severe if and when a transaction
      or business arrangement is announced or we announce that we are no longer
      exploring strategic alternatives.





**Our
      future operating results are difficult to predict and may fluctuate
      materially.**





Our
      future operating results are difficult to predict and may be materially affected
      by a number of factors, including: the timing of purchasing decisions by our
      customers, the timing of new product announcements or introductions by us or
      our
      competitors, competitive pricing pressures, adequate availability of components
      and offshore manufacturing capacity. Additional factors affecting our operating
      results include our ability to hire, retain and motivate adequate numbers of
      engineers and other qualified employees, changes in product mix, and the effect
      of adverse changes in economic conditions in the United States and international
      markets. In addition, our markets have historically been cyclical and subject
      to
      significant economic downturns. Our business is subject to rapid technological
      changes and there can be no assurance, depending on the mix of future business,
      that products stocked in inventory will not be rendered obsolete before we
      ship
      them. As a result of these and other factors, there can be no assurance that
      we
      will not experience material fluctuations in future operating results on a
      quarterly or annual basis.


12


**Our
      fluctuations in bookings and revenues affect our ability to borrow due to
      collateral advance formulas on our credit facilities. In addition, our credit
      facility imposes debt covenants and maximum borrowing
      limits.**





At
      August
      29, 2008, we had line of credit borrowings outstanding of $1,833,000 and our
      borrowing availability under our current line of credit advance formulas was
      $3,117,000. At
      November 21, 2008, the outstanding balance on the line of credit increased
      to
      $3,268,000 and our borrowing availability decreased to $559,000. Our
      credit facility currently provides for advances in excess of the availability
      formulas of up to $1,000,000 during the term of the facility. We could require
      additional overadvances due to fluctuations in accounts receivable, inventory
      levels and outstanding letter of credit balances. There is no assurance the
      bank
      would grant additional overadvances. At August 29, 2008, we were in compliance
      with our debt covenants. Depending on our results of operations during fiscal
      2009, we may not be in compliance with debt covenants at the end of fiscal
      2009.
      A breach of these covenants or our inability to maintain the debt covenants
      could result in a default on our indebtedness. If a default occurs, the bank
      could increase the interest rate or declare any outstanding indebtedness,
      together with accrued interest and other fees, to be immediately due and
      payable, and could proceed against our assets that secure that indebtedness.





**We
      have in the past experienced delays in product development and introduction,
      and
      there can be no assurance that we will not experience further delays in
      connection with our current product development or future development
      activities.**





Delays
      in
      development, testing, manufacture and/or release of new products or features,
      including digital receivers, Compel ® network
      control software, MediaPlan ® content
      management software, streaming media, and other products could adversely affect
      our sales and results of operations. In addition, there can be no assurance
      that
      we will successfully identify new product opportunities, develop and bring
      new
      products to market in a timely manner and achieve market acceptance of our
      products, or that products and technologies developed by others will not render
      our products or technologies obsolete or noncompetitive.





**Our
      lengthy and variable qualification and sales cycles make it difficult to predict
      the timing of a sale or whether a sale will be made.**





As
      is
      typical in our industry, our customers may expend significant efforts in
      evaluating and qualifying our products. This evaluation and qualification
      process frequently results in a lengthy sales cycle, typically ranging from
      three to six months and sometimes longer. While our customers are evaluating
      our
      products and before they place an order with us, we may incur substantial sales,
      marketing, and research and development expenses, expend significant management
      efforts, increase manufacturing capacity and order long-lead-time supplies
      prior
      to receiving an order. Even after this evaluation process, it is possible that
      a
      potential customer will not purchase our products.





**Our
      customer base is concentrated and the loss of one or more of our key customers
      would harm our business.**




Sales
      to
      a relatively small number of major customers have typically comprised a majority
      of our revenues, and that trend is expected to continue throughout fiscal 2009
      and beyond. In fiscal 2008, three customers accounted for approximately 14.4%,
      13.3% and 12.1% of revenues, respectively. Four customers accounted for 85.1%
      of
      the backlog at August 29, 2008 and 83.4% of the backlog scheduled to ship during
      fiscal 2009. In addition, recent disruptions in global economic and market
      conditions could result in decreases in demand for our products as the current
      tightening in credit in financial markets may adversely affect the ability
      of
      our major customers to obtain financing for significant purchases. The loss
      of
      any significant customer or any reduction in orders by any significant customer
      would adversely affect our business and operating results and potentially our
      liquidity.




**We
      rely on third-party subcontractors, certain suppliers and offshore
      manufacturers.**




We
      use
      offshore manufacturers for a significant amount of finished goods or component
      inventories. Three offshore manufacturers accounted for approximately 52.0%,
      21.0% and 2.6% of inventory purchases in fiscal 2008, respectively, and two
      offshore manufacturers accounted for approximately 41.7% and 22.6% in fiscal
      2007, respectively. Certain raw materials, video sub-components and licensed
      video processing technologies used in existing and future products are currently
      available from a single source or limited sources. Any disruption or termination
      of supply of certain single-source components or technologies, or interruption
      of supply from offshore manufacturers, would likely have a material adverse
      effect on our business and results of operations, at least in the near
      term.


13


**Our
      intellectual property rights may be insufficient to protect our competitive
      position. In addition, our pending or future intellectual property applications
      may not be issued.**





We
      hold
      three U.S patents currently, including a patent covering advanced receiver
      grouping techniques in Compel ® which
      will expire on November 14, 2008 (See also “Intellectual Property”section
      above). We hold nine active trademarks, such as Compel ® ,
      iPump ® ,
      Wegener ® and
      Unity ® .
      Currently we have one patent application pending, five patents published and
      one
      trademark application pending. Although we attempt to protect our intellectual
      property rights through patents, trademarks, copyrights, licensing arrangements
      and other measures, we cannot assure you that any patent, trademark, copyright
      or other intellectual property rights owned by us will not be invalidated,
      circumvented or challenged, that such intellectual property rights will provide
      competitive advantages to us, or that any of our pending or future patent and
      trademark applications will be issued. We also cannot assure you that others
      will not develop technologies that are similar or superior to our technology,
      duplicate our technology or design around the patents that we own .





**We
      may not be able to license necessary third-party technology or it may be
      expensive to do so. In addition, claims that we infringe third-party
      intellectual property rights could result in significant expenses and
      restrictions on our ability to sell our products in particular
      markets.**





In
      order
      to develop and market successfully certain of our planned products for digital
      applications, we may be required to enter into technology development or
      licensing agreements with third parties. Although many companies are often
      willing to enter into such technology development or licensing agreements,
      we
      cannot assure you that such agreements will be negotiated on terms acceptable
      to
      us, or at all. The failure to enter into technology  development
      or licensing agreements, when necessary, could limit our ability to develop
      and
      market new products and could cause our business to suffer. Third parties have
      in the past claimed, and may in the future claim, that we  have  infringed
      their current or future intellectual property rights. There can be no assurance
      that we will prevail in any intellectual property infringement litigation given
      the complex technical issues and inherent uncertainties in litigation. Even
      if
      we prevail in litigation, such litigation could result in substantial costs
      and
      diversion of resources and could negatively affect our business, operating
      results, financial position and cash flows.





**Competition
      in our industry is intense and can result in reduced sales and market
      share** .





We
      compete with companies which have substantially larger operations and greater
      financial, engineering, marketing, production and other resources than we have.
      These competitors may develop and market their products faster, devote greater
      marketing and sales resources, or offer more aggressive pricing, than we can.
      As
      a result, this could cause us to lose orders or customers or force reductions
      in
      pricing, all of which would have a material adverse effect on our financial
      position and results of operations.




**Our
      business is subject to rapid changes in technology and new product
      introductions.**




The
      market for our products is characterized by rapidly changing technology,
      evolving industry standards and frequent product introductions. Product
      introductions are generally characterized by increased functionality and better
      quality, sometimes at reduced prices. The introduction of products embodying
      new
      technology may render existing products obsolete and unmarketable. Our ability
      to successfully develop and introduce on a timely basis new and enhanced
      products that embody new technology, and achieve levels of functionality and
      price acceptable to the market, will be a significant factor in our ability
      to
      grow and to remain competitive. If we are unable, for technological or other
      reasons, to develop competitive products in a timely manner in response to
      changes in the industry, our business and operating results will be materially
      and adversely affected.





**The
      Nasdaq Stock Market may delist our securities, which could limit investors’
ability to trade in our securities.**





On
      August
      21, 2008, we received a notice from The Nasdaq Stock Market (“Nasdaq”)
      indicating that for the last 30 consecutive business days, the bid price of
      our
      common stock had closed below the minimum $1.00 per share requirement for
      continued inclusion under Marketplace Rule 4310(c)(4) (the “Rule”). The notice
      also stated that we had been provided with 180 calendar days, or until February
      17, 2009, to regain compliance in accordance with Marketplace Rule
      4310(c)(8)(D). On October 16, 2008, Nasdaq announced it had temporarily
      suspended enforcement of the minimum bid price and minimum market value of
      publicly held shares through January 16, 2009. As a result of this suspension,
      we now have until May 26, 2009 to regain compliance with the minimum bid rule.
      If, at anytime before May 26, 2009, the bid price of our common stock closes
      at
      $1.00 per share or more for a minimum of 10 consecutive business days, the
      Nasdaq staff will provide written notification that we comply with the
      Rule.


14


If
      we
      cannot regain compliance by May 26, 2009, the Nasdaq staff will determine
      whether we meet The Nasdaq Capital Market initial listing criteria set forth
      in
      Marketplace Rule 4310(c), except for the bid price requirement. If we meet
      the
      initial listing criteria, the Nasdaq staff will notify us that we have been
      granted an additional 180 calendar day compliance period. If we are not eligible
      for an additional compliance period, the Nasdaq staff will provide written
      notification that our securities will be delisted. At that time, we may appeal
      the Nasdaq staff’s determination to delist our securities to a Listing
      Qualifications Panel.





If
      our
      common stock is delisted by Nasdaq, the trading market for our common stock
      would likely be adversely affected, as price quotations may not be as readily
      obtainable, which would likely have a material adverse effect on the market
      price of our common stock.





**Our
      stock price is subject to volatility.**





Our
      common stock has experienced substantial price volatility and such volatility
      may occur in the future, particularly as a result of quarter to quarter
      variations in the actual or anticipated financial results of the Company or
      other companies in the satellite communications industry or in the markets
      we
      serve. These and other factors may adversely affect the market price of our
      common stock.




**ITEM
      1B. UNRESOLVED STAFF COMMENTS**




Not
      applicable




**ITEM
      2. PROPERTIES**




Our
      executive, sales, engineering and administrative offices are located at 11350
      Technology Circle, Johns Creek, Georgia 30097-1502. This 40,000 square foot
      facility, which is located on a 4.7 acre site, was purchased by WCI in February
      1987. During August 1989, WCI purchased an additional 4.4 acres of adjacent
      property. WCI also leases a 21,000 square foot manufacturing facility in
      Alpharetta, Georgia under a one year lease expiring in January 2009 with annual
      rent of approximately $143,000. We expect to be able to renew the lease on
      similar terms. WCI's 40,000 square foot facility and 4.4 acres of adjacent
      land
      are pledged as collateral under our line of credit facility.





During
      the third quarter of fiscal 2007, our Board of Directors authorized and approved
      listing for sale the 4.4 acres of undeveloped land located adjacent to the
      Company’s headquarters facility in Johns Creek, Georgia. The Company evaluated
      the criteria of Statement of Financial Standards No. 144 (as amended),
“Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS No. 144)
      and concluded that these assets qualified as assets held for sale.  In
      accordance with SFAS No. 144, the land was reclassified to land held for sale
      at
      its historic carrying value of $354,000 (lower of carrying amount or fair value
      less costs to sell) in the consolidated balance sheet as of August 29, 2008.
      The
      land was acquired in August 1989 and no impairment charges were recorded related
      to the reclassification. On November 26, 2008, we executed a contract to sell
      the land for approximately $840,000 less applicable commissions and closing
      costs. The contract is subject to various contingencies including a rezoning
      of
      the property which could take up to one year to complete. No assurances may
      be
      given that the sale will be consummated.




**ITEM
      3. LEGAL PROCEEDINGS**




On
      June 1, 2006, a complaint was filed by Rembrandt Technologies, LP
      (Rembrandt) against Charter Communications, Inc. (Charter), Cox Communications
      Inc. (Cox), CSC Holdings, Inc. (CSC) and Cablevisions Systems Corp.
      (Cablevision) in the United States District Court for the Eastern District
      of
      Texas alleging patent infringement. The complaint alleges that products and
      services sold by Charter infringe certain Rembrandt patents related to cable
      modem, voice-over internet, and video technology and applications. The case
      may
      be expensive to defend and there may be substantial monetary exposure if
      Rembrandt is successful in its claim against Charter and then elects to pursue
      other cable operators that use the allegedly infringing products. Wegener has
      not been named a party in the suit. However, subsequent to December 1, 2006,
      Charter has requested us to defend and indemnify Charter to the extent that
      the
      Rembrandt allegations are premised upon Charter’s use of products that we have
      sold to Charter. To date, we have not agreed to Charter’s request.





On
      June 1, 2006, a complaint substantially similar to the above described suit
      was filed by Rembrandt against Time Warner Cable (TWC) in the United States
      District Court for the Eastern District of Texas. Wegener has not been named
      a
      party in the suit, but TWC has requested us (as well as other equipment vendors)
      to contribute 2% of the defense costs related to this matter as a result of
      the
      products that we and others have sold to TWC. To date, we have not agreed to
      contribute to the payment of legal costs related to this case.


15


These
      actions have been consolidated into a multi-district action pending in the
      United States District Court for the District of Delaware. There are currently
      two trials scheduled with respect to the multi-district action, the first to
      start on January 11, 2010, and the second to start on February 8, 2010. At
      this
      point, the outcome is uncertain and we are presently unable to assess the
      impact, if any, of this litigation on Wegener.





In
      addition, Cisco Systems, Inc. (Scientific Atlanta) has made indemnity demands
      against us, related to the fact that a number of Cisco’s customers that are
      defendants in the Rembrandt lawsuit have made indemnity demands against Cisco.
      Cisco’s demands are based upon allegations that Wegener sold devices to these
      companies that are implicated by the patent infringement claims in the Rembrandt
      lawsuit. To date, we have not agreed to Cisco’s demands.




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




There
      were no matters submitted to a vote of security holders in the fourth quarter
      of
      the fiscal year covered by this report.




**PART
      II**




**ITEM
              5.**
            **MARKET
                FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
                ISSUER
                PURCHASES OF EQUITY
                SECURITIES**




Our
      Common Stock is traded on The NASDAQ Stock Market (NASDAQ symbol: WGNR). As
      of
      November 3, 2008, there were approximately 343 **** holders
      of record of Common Stock. This number does not reflect beneficial ownership
      of
      shares held in nominee or “street” name.




The
      quarterly ranges of high and low sale prices for fiscal 2008 and 2007 were
      as
      follows:


**Fiscal
                  2008**
              
              Fiscal
                  2007**High**
              
              **Low**
              
              High
              
              LowFirst
                  Quarter
              
              **$**
              **1.22**
              
              **$**
              **.
                  83**
              
              $
              1.85
              
              $
              1.17Second
                  Quarter
              
              
              **1.01**
              
              
              **.76**
              
              
              1.57
              
              
              1.15Third
                  Quarter
              
              
              **1.49**
              
              
              **.74**
              
              
              1.74
              
              
              1.25Fourth
                  Quarter
              
              
              **1.22**
              
              
              **.58**
              
              
              1.60
              
              
              .76




**Dividends**




We
      have
      not paid any cash dividends on our Common Stock. For the foreseeable future,
      our
      Board of Directors does not intend to pay cash dividends, but rather plans
      to
      retain any earnings to support our operations. Furthermore, we are prohibited
      from paying dividends under our bank loan agreement, as more fully described
      in
      MD&A and in Note 10 to the consolidated financial statements contained in
      this report.




**Recent
      Sales of Unregistered Securities**




There
      were no unregistered sales of securities during the fiscal year ended
      August 29, 2008.


16




**Stock
      Performance Graph**




The
      following graph compares the cumulative total stockholder return of our common
      stock with the cumulative total return of the NASDAQ Composite Index and the
      NASDAQ Telecommunications Index for the five fiscal years ended August 29,
      2008. The graph assumes that $100 was invested on August 29, 2003 in our
      common stock and each index and that all dividends were reinvested. We have
      not
      declared any cash dividends on our common stock. Stockholder returns over the
      indicated period should not be considered indicative of future stockholder
      returns.









**8/29/03**
            
            **9/3/04**
            
            **9/2/05**
            
            **9/1/06**
            
            **8/31/07**
            
            **8/29/08****Wegener
                Corporation**
            
            
            **100.00**
            
            
            **53.50**
            
            
            **51.85**
            
            
            **51.85**
            
            
            **42.80**
            
            
            **23.87****NASDAQ
                Composite**
            
            
            **100.00**
            
            
            **103.10**
            
            
            **120.73**
            
            
            **125.87**
            
            
            **149.70**
            
            
            **135.02****NASDAQ
                Telecommunications**
            
            
            **100.00**
            
            
            **116.91**
            
            
            **124.85**
            
            
            **136.53**
            
            
            **184.46**
            
            
            **159.89**





(1)         
      The stock performance graph shall not be deemed soliciting material or to be
      filed with the Securities and Exchange Commission or subject to
      Regulation 14A or 14C under the Securities Exchange Act of 1934 (the
“Exchange Act”) or to the liabilities of Section 18 of the Exchange Act,
      nor shall it be incorporated by reference into any past or future filing under
      the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except to
      the extent we specifically request that it be treated as soliciting material
      or
      specifically incorporate it by reference into a filing under the Securities
      Act
      or the Exchange Act.


17




**Equity
      Compensation Plan Information**




The
      following table summarizes information as of August 29, 2008, regarding our
      common stock reserved for issuance under our equity compensation plans.







Plan
                Category
            
            Number of Securities
              to be Issued Upon
              Exercise of
              Outstanding Options
              (a)
            
            Weighted-
              Average
              Exercise Price
              of Outstanding
              Options
              (b)
            
            Number of Securities
              Remaining Available for
              Future Issuance Under the
              Plans (Excluding
              Securities Reflected in
              Column (a))
              (c)Equity
                Compensation Plans Approved by Security Holders
            
            
            928,531
            
            $
            1.55
            
            
            -Equity
                Compensation Plans Not Approved by Security Holders
            
            
            -
            
            
            -
            
            
            -Total
            
            
            928,531
            
            $
            1.55
            
            
            -




**ITEM
      6. SELECTED FINANCIAL DATA**




**SELECTED
      FINANCIAL DATA**


**(in
      thousands, except per share amounts** **)**


Year
                  ended**August 29,**
                **2008**
              
              August 31,
                2007
              
              September 1,
                2006
              
              September 2,
                2005
              
              September 3,
                2004Revenues,
                  net
              
              **$**
              **21,494**
              
              $
              21,546
              
              $
              20,388
              
              $
              21,902
              
              $
              18,104Operating
                  income (loss) (a)
              
              
              **540**
              
              
              (613
              )
              
              (2,811
              )
              
              (1,470
              )
              
              (3,086
              )Net
                  earnings (loss) (a) (b)
              
              
              **383**
              
              
              (753
              )
              
              (2,883
              )
              
              (5,671
              )
              
              (2,108
              )Net
                  earnings (loss) per shareBasic
              
              **$**
              **.03**
              
              $
              (.06
              )
              $
              (.23
              )
              $
              (.45
              )
              $
              (.17
              )Diluted
              
              **$**
              **.03**
              
              $
              (.06
              )
              $
              (.23
              )
              $
              (.45
              )
              $
              (.17
              )Cash
                  dividends paid per share (c)
              
              
              **-**
              
              
              -
              
              
              -
              
              
              -
              
              
              -Total
                  assets
              
              **$**
              **13,213**
              
              $
              12,812
              
              $
              11,128
              
              $
              12,802
              
              $
              17,496Long-term
                  obligations inclusive of current maturities
              
              
              **-**
              
              
              -
              
              
              -
              
              
              -
              
              
              -




(a)
      The
      year ended August 29, 2008 includes a fourth quarter gain on sale of patents
      of
      $894,000.




(b)
      The
      year ended September 2, 2005 includes a fourth quarter noncash tax charge of
      $4,710,000 to provide a full valuation allowance for net deferred tax assets.




(c)
      We
      have never paid cash dividends on our common stock and do not intend to pay
      cash
      dividends in the foreseeable future. Additionally, our line of credit precludes
      the payment of dividends.


18




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





Certain
      statements contained in this filing are “forward-looking statements” within the
      meaning of the Private Securities Litigation Reform Act of 1995, and the Company
      intends that such forward-looking statements are subject to the safe harbors
      created thereby.  Forward-looking statements may be identified by words
      such as "believes," "expects," "projects," "plans," "anticipates," and similar
      expressions, and include, for example, statements relating to expectations
      regarding  future sales, income and cash flows. Forward-looking statements
      are based upon the Company’s current expectations and assumptions, which are
      subject to a number of risks and uncertainties including, but not limited
      to:  customer acceptance and effectiveness of recently introduced products;
      development of additional business for the Company’s digital video and audio
      transmission product lines; effectiveness of the sales organization; the
      successful development and introduction of new products in the future; delays
      in
      the conversion by private and broadcast networks to next generation digital
      broadcast equipment; acceptance by various networks of standards for digital
      broadcasting; the Company’s liquidity position and capital resources; general
      market conditions which may not improve during fiscal year 2009  and
      beyond; and success of the Company’s research and development efforts aimed at
      developing new products. Additional potential risks and uncertainties include,
      but are not limited to, economic conditions, customer plans and commitments,
      product demand, government regulation, rapid technological developments and
      changes, performance issues with key suppliers and subcontractors, delays in
      product development and testing, availability of raw materials, new and existing
      well-capitalized competitors, and other uncertainties detailed from time to
      time
      in the Company’s periodic Securities Exchange Act filings, including Item 1.A,
“Risk Factors,” contained in the Company’s Annual Report on Form 10-K. Such
      forward-looking statements are subject to risks, uncertainties and other factors
      and are subject to change at any time, which could cause actual results to
      differ materially from future results expressed or implied by such
      forward-looking statements.




These
      risks are exacerbated by the recent developments in national and international
      financial markets, and we are unable to predict what effect these uncertain
      market conditions will have on our Company. During 2008, the capital and credit
      markets have experienced extended volatility and disruption. In the last 90
      days, the volatility and disruption have reached unprecedented levels. There
      can
      be no assurance that these unprecedented recent developments will not materially
      and adversely affect our business, financial condition and results of
      operations.




Forward-looking
      statements speak only as of the date the statement was made.  The Company
      does not undertake any obligation to update any forward-looking
      statements.




**OVERVIEW**





We
      design
      and manufacture satellite communications equipment through Wegener
      Communications, Inc. (WCI), a wholly-owned subsidiary. WCI is an international
      provider of digital solutions for video, audio and IP data networks.
      Applications include IP data delivery, broadcast television, cable television,
      radio networks, business television, distance education, business music and
      financial information distribution. COMPEL Ò ,
      our
      network control system, provides network flexibility to regionalize programming,
      commercials and file transfers.




We
      operate on a 52-53 week fiscal year. The fiscal year ends on the Friday nearest
      to August 31. Fiscal years 2008, 2007 and 2006 contained 52 weeks. All
      references herein to 2008, 2007 and 2006, refer to the fiscal years ending
      August 29, 2008, August 31, 2007, and September 1, 2006,
      respectively.





Our
      fiscal 2008 revenues decreased $52,000, or 0.2%, to $21,494,000 from $21,546,000
      in fiscal 2007. Our net earnings for fiscal 2008 were $383,000 or $0.03 per
      share compared to a net loss of $(753,000) or $(0.06) per share for fiscal
      2007.
      Fiscal 2008 net earnings included a one-time gain on sale of patents of
      $894,000. Through November
      21, 2008 bookings and revenues to date were insufficient to provide adequate
      levels of cash flow from operations or adequate levels of collateral to support
      required borrowings during the second quarter of fiscal 2009. As a result,
      we
      need to raise additional capital or obtain additional credit facilities during
      the second quarter of fiscal 2009 to continue as a going concern and to execute
      our business plan.




During
      the fourth quarter of fiscal 2008, we booked approximately $4.9 million of
      new
      orders. Dial Global, Triton Radio’s sales and programming division, ordered $2.1
      million of equipment consisting of iPump ® 6420
      audio media servers and network products which are scheduled to ship over the
      first three quarters of fiscal 2009. Following its acquisition of Jones Media
      America in June of this year, Dial Global is purchasing the equipment to upgrade
      and expand the file-based broadcasting platform that Jones Media currently
      uses
      to manage its 2,000-radio station network. This is the initial phase of a
      multi-year project to ultimately expand Dial Global’s file-based distribution of
      programming, advertising and related services to their 6,000 radio affiliates.
      Mega Hertz placed an order for Unity ® 4600
      professional satellite receivers totaling over $800,000. The order began
      shipping during the first quarter of fiscal 2009 and included a new standard
      feature, DVB-S2 demodulation support, while still maintaining backward
      compatibility with DVB-S demodulation. DVB-S2 modulation offers broadcasters
      a
      wide range of choices to manage inclement weather, satellite service provider
      limitations, reduce operational costs or increase service (when compared with
      DVB-S). Bandwidth costs of a typical transmission can be reduced by 20% to
      30%
      by switching from DVB-S to DVB-S2. In addition, Educational Media Foundation
      ordered 600 DVB-S2 tuner cards to upgrade their Unity ® 4600
      satellite receivers. This order shipped in the fourth quarter of fiscal
      2008.


19


During
      the third quarter of fiscal 2008, bookings, consisting primarily of add-on
      orders from existing customers, were $1,927,000. In addition, during the third
      quarter WCI entered into an agreement to sell selected patents and patent
      applications to EPAX Consulting Limited Liability Company for net proceeds
      of
      approximately $1,075,000, which closed in the fourth quarter (See Note 7 to
      the
      Consolidated Financial Statements). The group of patents and patent applications
      sold relate to product distinction, system architecture and IP networking.
      WCI
      retained a worldwide, non-exclusive, royalty-free license under the patents
      for
      use in both existing and future products. Proceeds from this transaction were used
      to
      reduce our line of credit borrowings .





During
      the second quarter of fiscal 2008, we recorded $5.8 million in new orders.
      These
      orders included approximately $1.4 million from one of our larger private
      network customers for our new Unity ® 552
      Enterprise Media Receiver (Unity ® 552).
      The Unity ® 552 has
      bandwidth-efficient MPEG-4/h.264 video coding for both standard definition
      and
      high definition video, digital and analog outputs, as well as advanced DVB-S2
      demodulation. With these new features, network operators can reduce their
      bandwidth utilization by approximately half, resulting in considerably lower
      operational costs. The order shipped in the second quarter of fiscal 2008,
      and
      is expected to be the first of a series of orders from the customer for a
      complete network upgrade to the Unity ® 552. We
      received orders totaling over $2.1 million for our SMD 515 IPTV(internet
      protocol television) set top box from Conklin-Intracom for use by multiple
      telco
      operators in North America to provide premium IPTV services including high
      definition programming, video on demand and integrated personal video recording.
      This order began shipping in the second quarter and was completed in the fourth
      quarter. An order for $1.2 million was received for our new iPump ® 562
      enterprise media server from Satellite Store Link (SSL) to support the expansion
      of SSL’s digital signage projects in Latin America and shipped in the third
      quarter of fiscal 2008. The iPump ® 562
      media
      server supports bandwidth-saving features, such as MPEG-4/h.264 video
      compression and file-based workflows. These features can be used in combination
      to create customized, high quality HD (high definition) and SD (standard
      definition) video channels for digital signage applications.





During
      the first quarter of fiscal 2008, bookings, consisting primarily of add-on
      orders from existing customers, were approximately $3.6 million.




**Current
        Financial Position and Liquidity**
  Through November
        21, 2008 bookings and revenues to date were insufficient to provide adequate
        levels of cash flow from operations or adequate levels of collateral to support
        required borrowings during the second quarter of fiscal 2009. As a result,
        we
        need to raise additional capital or obtain additional credit facilities during
        the second quarter of fiscal 2009 to continue as a going concern and to execute
        our business plan. Although
        we are in discussions with potential financing sources, i f
        we are
        unsuccessful in securing additional capital during
        this period, through additional equity and/or debt financings, we may not
        be
        able to continue as a going concern (See Note 1 to the Consolidated
        Financial Statements ).
  At
        August
        29, 2008, we had line of credit borrowings outstanding of $1,883,000. Our
        $5,000,000 bank loan facility is subject to availability advance formulas
        based
        on eligible accounts receivable, import letter of credit commitment balances
        and
        inventories. The loan facility matures on September 30, 2009, or upon demand.
        At
        August 29, 2008, **** approximately
        $3,117,000 remained available to borrow under the advance formulas. At November
        21, 2008, the outstanding balance on the line of credit increased to $3,268,000
        and our borrowing availability decreased to $559,000.
 
 During
        fiscal 2008, our line of credit net borrowings decreased $133,000 to the
        outstanding balance of $1,883,000 at August 29, 2008 from $2,016,000 at August
        31, 2007. Operating activities provided $771,000 of cash and investing
        activities used $537,000 of cash, which consisted of capitalized software
        additions of $1,214,000, equipment additions of $335,000 and $63,000 for
        license
        agreements and legal fees related to the filing of applications for various
        patents and trademarks. Proceeds from the sale of patents and patent
        applications provided $1,075,000 of cash which was used to reduce our line
        of
        credit borrowings. Loan facility fees used $100,000 of cash.
 
 (See
        the
        Liquidity and Capital Resources section for further
        discussion.)


**Current
      Developments**





We
      released the next generation Compel ® II
      network control system at the 2008 National Association of Broadcasters (NAB)
      Convention in April 2008. Compel ® II
      retains the features of the Compel ® network
      control system while adding new features designed to enhance the user interface
      and simplify operations for dynamic media distribution. The control system
      has
      been streamlined by unifying many different screens and utilities within a
      single, user friendly, web-based graphical user interface. Using a web browser
      access, operators can control live and file-based media distribution networks
      from any web-enabled remote location. Built upon a scalable open architecture,
      Compel ® II also
      makes it easier for network administrators to limit access of employees or
      affiliates to only those features and functions their jobs require. New set-up
      features allow administrators to create classes of users that designate each
      user’s level of access.





In
      addition, at the NAB Convention we released the new iPump ® 562
      media server which supports bandwidth-saving features, such as MPEG-4/h.264
      video compression, file-based workflows and DVB-S2 satellite demodulation.
      The
      iPump ® 562
      provides a cost-effective approach to supporting any multi-site video projects
      with high levels of customization per television screen. With Compel ® ,
      unique
      programming content can reach individual retail stores, departments, schools,
      or
      hospitals, and can be rapidly updated by central network operators. Employees
      at
      display locations do not have to manage or interact with the media servers
      because all functions and upgrades are scheduled and managed remotely from
      the
      Compel ® network
      control system at the central operations center. The iPump ® 562 is
      optimized for high quality video and on-screen graphics, and provides a superior
      viewing experience compared to PC solutions and targets applications where
      cost
      is a major factor.





Our
      Encompass LE2 began shipping to Muzak for use in its new digital music delivery
      service that incorporates satellite media distribution, media players, and
      content management technology. With Encompass LE2, Muzak’s business customers
      can view and update their music program selections, scheduling, and preferences
      instantly using a web-based user interface. They can also create multiple zones
      of music throughout their business; customize schedules and playlists according
      to business types, regions, promotions, or other criteria; as well as upload
      and
      schedule in-store messages anytime. The music and messaging play from the same
      media player, which also stores back-up music to ensure 100-percent uptime
      during inclement weather.


20


Our
      Unity ® 4600
      satellite media receiver now supports next-generation DVB-S2 satellite
      demodulation as a standard feature. With its advanced coding and Forward Error
      Correction (FEC) options, DVB-S2 modulation provides broadcasters with
      additional flexibility to manage inclement weather and satellite service
      provider limitations, and can significantly reduce bandwidth consumption and
      operating costs without compromising signal integrity.





Subsequent
      to August 29, 2008, we announced the introduction of two new
      MediaPlan ® i/o
      (input/output) content creation stations: MediaPlan ® i/o
      Contributor and MediaPlan ® i/o
      Professional. Both offer advanced tools for creating and preparing media
      content, including digitizing, encoding, editing, and controlling the quality
      of
      media assets prior to uploading them into the MediaPlan ® content
      management system, which is part of our end-to-end solution for file-based
      content distribution.





During
      the second quarter of fiscal 2007, the Board of Directors formed a committee
      of
      independent directors to explore strategic and financial alternatives to enhance
      shareholder value. We retained Near Earth LLC as our exclusive financial advisor
      in this evaluation process. These strategic alternatives may include: (i)
      technology licensing agreements, (ii) product development and marketing
      arrangements, joint ventures or strategic partnerships, (iii) strategic
      acquisitions, mergers or other business combinations, or (iv) the merger or
      sale
      of all or part of the Company. We are also evaluating various financing
      alternatives to unlock the market value of our headquarters and associated
      real
      estate to support our capital needs. On November 26, 2008, we executed a
      contract to sell the 4.4 acres of undeveloped land adjacent to our headquarters
      facility for approximately $840,000 less applicable commissions and closing
      costs. The contract is subject to various contingencies including a rezoning
      of
      the property. No assurances may be given that the sale will be consummated.
      To
      date, the committee has explored and considered a number of potential courses
      of
      action.  There
      can
      be no assurance that these efforts will result in any specific transaction.
      We
      do not expect to disclose further developments regarding the process until
      the
      completion of the strategic alternatives review and a decision by the Board
      of
      Directors regarding a transaction or course of action.


21




**RESULTS
      OF OPERATIONS**




The
      following table sets forth, for the periods indicated, the components of the
      results of operations as a percentage of revenue:




Year ended**August 29,2008**
              
              August 31,2007
              
              September 1,2006Revenues, net
              
              
              **100.0**
              **%**
              
              100.0
              %
              
              100.0
              %Cost
                  of products sold
              
              
              **60.9**
              
              
              64.8
              
              
              67.8Gross
                  margin
              
              
              **39.1**
              
              
              35.2
              
              
              32.2Selling,
                  general, and administrative
              
              
              **25.8**
              
              
              24.0
              
              
              31.0Research
                  & development
              
              
              **14.9**
              
              
              14.1
              
              
              15.0Gain
                  on sale of patents
              
              
              **(4.2**
              **)**
              
              -
              
              
              -Operating
                  income (loss)
              
              
              **2.5**
              
              
              (2.8
              )
              
              (13.8
              )Interest
                  expense
              
              
              **(0.7**
              **)**
              
              (0.7
              )
              
              (0.5
              )Interest
                  income
              
              
              **0.0**
              
              
              0.0
              
              
              0.1Net
                  earnings (loss)
              
              
              **1.8**
              **%**
              
              (3.5
              )%
              
              (14.1
              )%




Net
      earnings for the year ended August 29, 2008, were $383,000 or $0.03 per share,
      compared to a net loss of $(753,000) or $(0.06) per share for the year ended
      August 31, 2007, and a net loss of $(2,883,000) or $(0.23) per share for the
      year ended September 1, 2006. Fiscal 2008 net earnings included a gain on sale
      of patents of $894,000.




Revenues
      for fiscal 2008 decreased $52,000, or 0.2%, to $21,494,000 from $21,546,000
      in
      fiscal 2007. Direct Broadcast Satellite (DBS) revenues (including service
      revenues) in fiscal 2008 increased $49,000, or 0.2%, to $21,465,000 from
      $21,416,000 in fiscal 2007. Analog and Custom Products Group revenues were
      $29,000 in fiscal 2008 compared to $129,000 in fiscal 2007. Our
      revenue levels are not subject to significant annual fluctuations in unit
      pricing. Product volumes are driven by product mix of orders. In addition,
      revenues and order backlog are subject to the timing of significant
      orders from customers, and as a result revenue levels may fluctuate on a
      quarterly and yearly basis. Fiscal 2008 included revenues from shipments of
      (i)
      our SMD 515 IPTV (internet protocol television) set top box to Conklin-Intracom
      for use by multiple telco operators in North America, (ii) our new
      iPump ® 562
      enterprise media server to Satellite Store Link (SSL) for expansion of SSL’s
      digital signage projects in Latin America, and (iii) our new Unity ® 552
      Enterprise Media Receiver (Unity ® 552) to
      one of our larger private network customers. Additionally in fiscal 2008, we
      completed shipments of our Unity ® 4600 to
      the Big Ten Network (BTN) for a new cable network being distributed by Fox
      Cable
      Networks.  Shipments
      in fiscal 2008 continued to MegaHertz for distribution of our products to the
      U.S. cable market and to business music provider Muzak LLC, of our new Encompass
      LE2, our next generation business music audio receiver.





Revenues
      for fiscal 2007 increased $1,158,000, or 5.7%, to $21,546,000 from $20,388,000
      in fiscal 2006. Direct Broadcast Satellite (DBS) revenues (including service
      revenues) in fiscal 2007 increased $1,158,000, or 5.7%, to $21,416,000 from
      $20,258,000 in fiscal 2006. Analog and Custom Products Group revenues were
      $129,000 for both fiscal years 2007 and 2006. Fiscal 2007 included revenues
      from
      a new $3.2 million contract from SSL to
      launch a digital signage network in Mexico. Initial shipments of
      Unity ® 4600
      satellite receivers began in the fourth quarter of fiscal 2007 for use by the
      BTN in the new cable network being distributed by Fox Cable Networks.
      Additionally, fiscal 2007 included continued revenues from fiscal 2006 orders
      from BBC World Service and Jones Radio Networks of iPump ® Media
      Servers, digital encoders and Unity ® receivers for their broadcast radio networks.





WCI's
      backlog of orders scheduled to ship within 18 months was $8,491,000 at August
      29, 2008, $10,170,000 at August 31, 2007, and $10,700,000 at September 1, 2006.
      The total multi-year backlog at August 29, 2008 was $13,300,000 compared to
      $17,080,000 at August 31, 2007. Approximately $7,206,000 of the August 29,
      2008,
      backlog is expected to ship during fiscal 2009. Four customers accounted for
      85.1% of the backlog at August 29, 2008 and for 83.4% of the backlog expected
      to
      ship during fiscal 2009. Sales to a relatively small number of major customers
      have typically comprised a majority of our revenues and that trend is expected
      to continue. (See Note 14 to the Consolidated Financial Statements, “Segment
      Information and Concentrations”.) Future revenues are subject to the timing of
      significant orders from customers and are difficult to forecast. As a result,
      we
      expect future revenue levels and operating results to continue to fluctuate
      from
      quarter to quarter.




International
      sales are generated through a direct sales organization and through foreign
      distributors. International sales were $3,686,000 or 17.2% of revenues in fiscal
      2008 compared to $5,288,000 or 24.5% of revenues in fiscal 2007, and $3,396,000
      or 16.7% of revenues in fiscal 2006. International shipments are generally
      project specific, and therefore revenues are subject to variations from year
      to
      year based on the timing of customer orders. All international sales are
      denominated in U.S. dollars. Additional financial information on geographic
      areas is provided in note 14 to the consolidated financial
      statements.


22




Gross
      profit as a percent of sales was 39.1% in fiscal 2008 compared to 35.2% in
      fiscal 2007, and 32.2% in fiscal 2006. Gross profit margin dollars increased
      $814,000, or 10.7%, to $8,397,000 in fiscal 2008 from $7,583,000 in fiscal
      2007.
      Fiscal 2006 gross profit margin dollars amounted to $6,556,000. Profit margins
      in fiscal 2008 were favorably impacted by the reversal of an accrued warranty
      liability of $310,000 for previously estimated warranty provisions that were
      no
      longer required. Warranty provisions charged to cost of sales were $50,000
      in
      fiscal 2008, $625,000 in fiscal 2007 and $110,000 in fiscal 2006. The increase
      in warranty provisions in fiscal 2007 was related to new product introductions.
      Profit margins in fiscal 2008 included no inventory reserve charges compared
      to
      $250,000 in fiscal 2007 and $350,000 in fiscal 2006. Capitalized software
      amortization expenses included in cost of sales in fiscal 2008 were $1,238,000,
      compared to $1,517,000 in fiscal 2007 and $1,936,000 in fiscal 2006.




Selling,
      general, and administrative (SG&A) expenses increased $376,000, or 7.3%, to
      $5,539,000 in fiscal 2008 from $5,163,000 in fiscal 2007. As a percentage of
      revenues, SG&A expenses were 25.8% of revenues in fiscal 2008 and 24.0% in
      fiscal 2007. Corporate SG&A expenses in fiscal 2008 increased $125,000, or
      12.2%, to $1,146,000 from $1,021,000 in fiscal 2007. The increase was mainly
      due
      to increased professional fees related to Sarbanes-Oxley compliance.  WCI’s
      SG&A expenses increased $252,000, or 6.1%, to $4,393,000 in fiscal 2008 from
      $4,141,000 in fiscal 2007. The increase in WCI’s SG&A expenses in fiscal
      2008 was mainly due to increases in (i) salaries and related payroll costs
      of
      $88,000, (ii) employee placement fees and related training of $38,000, (iii)
      general overhead costs of $91,000, and (iv) professional fees of $42,000. These
      increases were offset by lower sales and marketing expenses of $50,000. WCI’s
      SG&A expenses in fiscal 2008 included no bad debt provision expense compared
      to a benefit of $50,000 from the reversal of bad debt provisions in fiscal
      2007.
      SG&A expenses included $8,000 of noncash share-based compensation expense in
      fiscal 2008 compared to $17,700 in fiscal 2007.




Selling,
      general, and administrative (SG&A) expenses decreased $1,153,000, or 18.3%,
      to $5,162,000 in fiscal 2007 from $6,315,000 in fiscal 2006. As a percentage
      of
      revenues, SG&A expenses were 24.0% of revenues in fiscal 2007 and 31.0% in
      fiscal 2006. Corporate SG&A expenses in fiscal 2007 decreased $479,000, or
      31.9%, to $1,021,000 from $1,500,000 in fiscal 2006. The decrease was mainly
      due
      to a reduction in professional fees related
      to dissident shareholder issues. WCI’s
      SG&A expenses decreased $674,000, or 14.0%, to $4,142,000 in fiscal 2007
      from $4,815,000 in fiscal 2006. The decrease in WCI’s SG&A expenses in
      fiscal 2007 was mainly due to (i) lower professional fees of $177,000, (ii)
      outside sales commissions of $102,000 which fluctuate due to the project
      specific nature of these expenses, (iii) salaries and related expenses of
      $209,000 due to lower headcount, and (iv) marketing expenses of $127,000.
      SG&A overhead expenses decreased $77,000. SG&A expenses included $17,700
      of noncash share-based compensation expense in fiscal 2007 compared to $30,000
      in fiscal 2006.




Research
      and development expenditures, including capitalized software development costs,
      were $4,427,000 or 20.5% of revenues in fiscal 2008, $4,562,000 or 21.2% of
      revenues in fiscal 2007, and $4,451,000 or 21.8% of revenues in fiscal 2006. The
      decrease in expenditures fiscal
      2008 compared to fiscal 2007 was
      mainly due to lower consulting costs, which were partially offset by increases
      in salaries, headcount and recruiting costs related to new hires. The
      increase in expenditures in fiscal 2007 compared to fiscal 2006 was due to increased
      salaries related to increases in compensation and headcount and increased
      recruiting costs related to new hires, which were offset by reductions in
      consulting and prototype parts costs. Software
      development costs totaling $1,214,000, $1,528,000, and $1,399,000 were
      capitalized during fiscal 2008, 2007 and 2006, respectively. The
      decreases in capitalized software costs
      in
      fiscal 2008 compared to fiscal 2007 were
      related to completed projects. The
      increase in capitalized software costs in fiscal 2007 compared to fiscal 2006
      was due to increased expenditures related to MPEG-4/H.264 products. Research
      and
      development expenses, excluding capitalized software development costs, were
      $3,213,000 or 14.9% of revenues in fiscal 2008, $3,033,000 or 14.1% of revenues
      in fiscal 2007, and $3,052,000 or 15.0% of revenues in fiscal 2006. We expect
      research and development expenditures to decrease in fiscal 2009 compared to
      fiscal 2008 due to completed projects.





During
      the fourth quarter of fiscal 2008, we completed the sale of selected patents
      and
      patent applications to EPAX Consulting Limited Liability Company for net
      proceeds of approximately $1,075,000 and recorded a gain of $894,000. The group
      of patents and patent applications sold relate to product distinction, system
      architecture and IP networking. We retained a worldwide, non-exclusive,
      royalty-free license under the patents for use in both existing and future
      products.





Interest
      expense was $159,000 in fiscal 2008 compared to $150,000 in fiscal 2007 and
      $98,000 in fiscal 2006. The increase in fiscal 2007 compared to fiscal 2006
      was
      due to an increase in average line-of-credit borrowings. We believe that
      interest expense in fiscal 2009 will increase compared to fiscal 2008 as a
      result of expected increases in average line of credit borrowings, as well
      as
      potential increases in our loan interest rate, as further discussed in the
      Liquidity and Capital Resources section.


23




Interest
      income was $2,000 in fiscal 2008 compared to $10,000 in fiscal 2007 and $26,000
      in fiscal 2006. Interest income in fiscal 2006 included a one-time benefit
      of
      $18,000 from interest paid on the collection of Adelphia Communications
      receivables.




No
      income
      tax expense was recorded for fiscal 2008, due to utilization of net operating
      loss and alternative minimum tax credit carryforwards. In fiscal 2008, the
      deferred tax asset decreased $141,000 which was offset by a decrease in the
      valuation allowance by the same amount. No income tax benefits were recorded
      in
      fiscal 2007 and 2006 due to an increase in the deferred tax asset valuation
      allowance of $271,000 and $1,038,000, respectively. At August 29, 2008, net
      deferred tax assets of $5,878,000 were fully reserved by a valuation allowance.





SFAS
      No.
      109, "Accounting for Income Taxes," requires that a valuation allowance be
      established when it is “more likely than not” that all or a portion of a
      deferred tax asset will not be realized. A review of all available positive
      and
      negative evidence must be considered in judging the likelihood of realizing
      tax
      benefits. Forming a conclusion that a valuation allowance is not needed is
      difficult when there is negative evidence such as cumulative losses in recent
      years. Cumulative losses are one of the most difficult pieces of negative
      evidence to overcome in the absence of sufficient existing orders and backlog
      (versus forecasted future orders) supporting a return to profitability.
      Additional orders and backlog are currently needed for profitability in fiscal
      2009. Our assessment in applying SFAS No. 109 indicated that a full valuation
      allowance for our net deferred tax assets was required as of August 29, 2008
      and
      August 31, 2007.





At
      August
      29, 2008, we had a federal net operating loss carryforward of $9,604,000, of
      which $1,604,000 expires in fiscal 2021, $1,296,000 in fiscal 2023, $3,396,000
      in fiscal 2024, $1,454,000 in fiscal 2025, $1,755,000 in fiscal 2026 and $99,000
      in fiscal 2027. Additionally, we had an alternative minimum tax credit of
      $134,000 and a state income tax credit of $199,000, expiring in fiscal 2009,
      all
      of which were fully offset by the valuation allowance.




**LIQUIDITY
      AND CAPITAL RESOURCES**




At
      August
      29, 2008, our net inventory balances increased $2,915,000 to $6,295,000 from
      $3,380,000 at August 31, 2007. The increase in inventories was primarily due
      to
      our new fiscal 2008 product introductions of the iPump ® 562
      Enterprise Media Server, the Unity ® 552
      receiver and the Encompass-LE2 audio receiver. In addition, inventory levels
      were increased for the iPump ® 6400
      Media Server and Nielsen Media Research products. At August 29, 2008,
      outstanding inventory purchase commitments amounted to $1,856,000. These
      inventory purchases and purchase commitments were made based on existing orders
      and expected future bookings.




Our
      fiscal 2008 bookings were below our expectations,
      particularly during the fourth quarter of fiscal 2008, primarily
      as a result of customer delays in purchasing decisions, deferral of project
      expenditures, foreign exchange rate fluctuations and adverse economic
      conditions.WCI's backlog of orders scheduled to ship within 18 months
      was $8,491,000 at August 29, 2008, $10,170,000 at August 31, 2007, and
      $10,700,000 at September 1, 2006. The total multi-year backlog at August 29,
      2008 was $13,300,000 compared to $17,080,000 at August 31, 2007. Approximately
      $7,206,000 of the August 29, 2008, backlog is expected to ship during fiscal
      2009.




Significant
      fiscal 2009 shippable bookings are currently required to meet our financial
      projections beginning in the first quarter of fiscal 2009 and continuing for
      each subsequent quarter. During the fourth quarter of fiscal 2008, and
      subsequent to August 29, 2008, we made reductions in headcount to bring the
      current number of employees to 84, and reduced engineering consulting and other
      overhead expenses. Should adequate capital or financing not be available, and
      if
      increased revenues not materialize, we are committed to further reducing
      operating costs to bring them in line with reduced revenue levels. No assurances
      can be given that operating costs can be sufficiently reduced to allow us to
      continue as a going concern. Through November 21, 2008 bookings and
      revenues to date were insufficient to provide adequate levels of cash flow
      from
      operations or adequate levels of collateral to support required borrowings
      during the second quarter of fiscal 2009. As a result, we need to raise
      additional capital or obtain additional credit facilities during
      the second quarter of fiscal 2009 to continue as a going concern and to execute
      our business plan .
      Although we are in discussions with potential financing sources, there is no
      assurance that such financing will be available or that we will be able to
      complete financing on satisfactory terms, if at all. Our ability to continue
      as
      a going concern will depend upon our ability to obtain additional capital or
      financing in
      the
      very short term and to
      subsequently increase our bookings and revenues in
      the
      longer term to
      attain profitable operations. The accompanying consolidated financial statements
      do not include any adjustments to reflect the possible future effects on the
      recoverability and classification of assets or the amounts and classification
      of
      liabilities that may result from the possible inability of the Company to
      continue as a going concern. The
      auditreport
      relating to the consolidated financial statements for the year ended August
      29,
      2008, contains an explanatory paragraph regarding the Company’s ability to
      continue as a going concern.




24


At
      August
      29, 2008, our primary source of liquidity was a $5,000,000 bank loan facility,
      which matures on September 30, 2009. During fiscal 2008, our line of credit
      net
      borrowings decreased $132,000 to the outstanding balance of $1,883,000 at August
      29, 2008 from $2,016,000 at August 31, 2007. During fiscal 2008, the average
      daily balance outstanding was $2,086,000 and the highest outstanding balance
      was
      $3,274,000. At August 29, 2008, approximately $3,117,000 remained available
      to
      borrow under the advance formulas. **** At
      November 21, 2008, the outstanding balance on the line of credit increased
      to
      $3,268,000 and our borrowing availability decreased to $559,000.





**Financing
      Agreements**





WCI’s
      bank loan facility provides a maximum available credit limit of $5,000,000
      subject to availability advance formulas. The loan facility matures on September
      30, 2009, or upon demand and requires an annual facility fee of 2% of the
      maximum credit limit. The loan automatically renews from year to year unless
      the
      bank makes demand for repayment prior to maturity; provided, however, absent
      an
      event of default, the bank shall give at least 120 days notice of its intention
      to demand the loan’s repayment or to terminate the loan agreement. The loan
      facility consists of a term loan and a revolving line of credit with a combined
      borrowing limit of $5,000,000, bearing interest at the bank’s prime rate (5.00%
      at August 29, 2008). The bank retained the right to adjust the interest rate,
      subject to the financial performance of the Company.





The
      term
      loan facility provides for a maximum of $1,000,000 for advances of up to 80%
      of
      the cost of equipment acquisitions. Principal advances are payable monthly
      over
      60 months with a balloon payment due at maturity. The revolving line of credit
      is subject to availability advance formulas of 80% against eligible accounts
      receivable; 20% of eligible raw materials inventories; 20% of eligible
      work-in-process kit inventories; and 40% to 50% of eligible finished goods
      inventories and 50% of import letter of credit commitment balances. In
      addition, the facility provides for advances in excess of the availability
      formulas of up to $1,000,000 during the term of the facility. The
      loan
      is secured by a first lien on substantially all of WCI’s assets, including land
      and buildings, and is guaranteed by Wegener Corporation. At August 29, 2008,
      balances outstanding on the revolving line of credit amounted to $1,883,000.
      No
      borrowings were outstanding under the equipment term loan portions of the loan
      facility. The loan facility is also used to support import letters of credit
      issued to offshore manufacturers. At August 29, 2008, no letters of credit
      were
      outstanding.





During
      fiscal 2008, the average daily balance outstanding was $2,086,000 and the
      highest outstanding balance was $3,274,000. During fiscal 2009 we expect the
      average daily balance to increase .
      At
      November 21, 2008, the outstanding balance on the line of credit increased
      to
      $3,268,000 and our borrowing availability decreased to $559,000.





Under
      the
      loan facility, at the end of each fiscal year we are required to maintain a
      minimum tangible net worth and a minimum fixed charge coverage ratio. In
      addition, we are required to retain certain executive officers, maintain certain
      financial ratios, and are precluded from paying dividends. At August 29, 2008
      we
      were in compliance with the covenants. While we are currently in compliance,
      in
      the event of a default the bank has the right to demand payment of the loan
      facility.





In
      addition, at August 29, 2008, we had land and buildings with a cost basis of
      $4,457,000 (including land held for sale of $354,000). Although land and
      buildings are subject to a lien under the loan facility, they are not currently
      used in the existing loan facility’s availability advance formulas and have no
      mortgage balances outstanding. We
      are
      pursuing ways
      to
      utilize these assets to support additional overall borrowing capacities either
      with our existing bank or from other sources. During the third quarter of fiscal
      2007, the Company’s Board of Directors authorized and approved the listing for
      sale of the 4.4 acres of undeveloped land located adjacent to the Company’s
      headquarters facility in Johns Creek, Georgia (See Note 5 to the Consolidated
      Financial Statements). On November 26, 2008, we executed a contract to sell
      the
      land for approximately $840,000 less applicable commissions and closing costs.
      The contract is subject to various contingencies including a rezoning of the
      property which could take up to one year to complete. No assurances may be
      given
      that the sale will be consummated. Proceeds from the sale of the land would
      be
      used to pay any balances outstanding on the revolving line of
      credit.





**Operating
      Activities**





Cash
      provided by operating activities was $771,000 in fiscal 2008, while operating
      activities used cash of $955,000 in fiscal 2007 and provided cash of $1,623,000
      in fiscal 2006. Fiscal 2008 net earnings adjusted for expense provisions and
      depreciation and amortization (before working capital changes) provided cash
      of
      $1,090,000. Increases in inventories and other assets used cash of $2,932,000
      while changes in accounts receivable and customer deposits provided cash of
      $2,266,000. Changes in accounts payable, accrued expenses and deferred revenue
      provided cash of $346,000.


25




Net
      accounts receivable decreased $2,209,000 to $2,963,000 at August 29, 2008,
      from
      $5,172,000 at August 31, 2007, compared to $1,780,000 at September 1, 2006.
      Accounts receivable at August 31, 2007, included one customer in the amount
      of
      $2,295,000, which was fully paid subsequent to August 31, 2007. The allowance
      for doubtful accounts was $230,000 at August 29, 2008, $251,000 at August 31,
      2007 and $301,000 at September 1, 2006. In fiscal 2007, reductions in the
      allowance for doubtful accounts provided benefits of $50,000. Write-offs were
      $21,000 in fiscal 2008 and $46,000 in fiscal 2006. Recoveries in fiscal 2006
      were $1,000.




Customer
      deposits increased $57,000 to $1,928,000 at August 29, 2008, from $1,870,000
      at
      August 31, 2007. Customer deposits vary with the timing and terms of customer
      bookings.





At
      August
      29, 2008, our net inventory balances increased $2,915,000 to $6,295,000 from
      $3,380,000 at August 31, 2007.  The
      increase in inventories was primarily due to our new fiscal 2008 product
      introductions of the iPump ® 562
      Enterprise Media Server, the Unity ® 552
      receiver and the Encompass-LE2 audio receiver. In addition, inventory levels
      were increased for the iPump ® 6400
      Media Server and Nielsen Media Research products. These inventory purchases
      require sufficient lead times with our offshore manufacturers and which require
      estimates of expected future bookings. Our fiscal 2008 bookings were below
      our
      expectations which resulted in higher than expected inventories at August 29,
      2008. While no assurances may be given, we believe inventory levels will
      decrease during fiscal 2009. During fiscal 2008, there were no increases to
      the
      inventory reserve provision. Inventory reserves were increased by provisions
      charged to cost of sales of $250,000 in fiscal 2007 and $350,000 in fiscal
      2006.
      Inventory reserves were decreased by write-offs of $21,000 in fiscal 2008 and
      none in fiscal 2007 and 2006. Increases in inventories in fiscal 2008 used
      $2,915,000 of cash. During fiscal 2007, a decrease in inventories provided
      $228,000 of cash, while in fiscal 2006 inventory increases used cash of
      $252,000.





**Investing
      Activities**





Cash
      used
      by investing activities in fiscal 2008 was $537,000 compared to $1,970,000
      in
      fiscal 2007 and $1,734,000 in fiscal 2006. In fiscal 2008, investing activities
      consisted of capitalized software additions of $1,214,000, equipment additions
      of $336,000 and $62,000 for license agreements and legal fees related to the
      filing of applications for various patents and trademarks. Proceeds from the
      sale of patents and patent applications provided $1,075,000 of cash. Capitalized
      software expenditures were incurred primarily for the development of
      Compel ® network
      control and MediaPlan ® software, the iPump ® Media
      Server, and MPEG-4/h.264 products. Property and equipment expenditures were
      for
      planned additions of principally manufacturing and engineering test equipment.
      Fiscal 2009 expenditures for investing activities are expected to approximate
      fiscal 2008 levels.





**Financing
      Activities**





Financing
      activities in fiscal 2008 used $132,000 of cash to reduce net line-of-credit
      borrowings and $100,000 of cash for loan facility fees. Financing activities
      in
      fiscal 2007 provided $2,016,000 of cash from the net line-of-credit borrowings
      and $57,000 from exercised stock options and used $100,000 of cash for loan
      facility fees.





**Contractual
      Obligations**




We
      have
      two manufacturing and purchasing agreements for certain finished goods
      inventories.  At  August
      29, 2008, outstanding purchase commitments under these agreements amounted
      to
      $1,856,000. At August 29, 2008, we had no letters of credit
      outstanding.





The
      following summarizes our contractual obligations as of August 29, 2008 and
      the
      effects such obligations are expected to have on liquidity and cash flow in
      future periods:




26


Payments Due by PeriodContractual Obligations
              
              Total
              
              One Year
              
              2 –3 Years
              
              4 –5 YearsOperating
                  leases
              
              $
              191,000
              
              $
              166,000
              
              $
              25,000
              
              $
              -Bank
                  line of credit
              
              
              1,883,000
              
              
              1,883,000
              
              
              -
              
              
              -Purchase
                  commitments
              
              
              1,856,000
              
              
              1,856,000
              
              
              -
              
              
              -Total
              
              $
              3,930,000
              
              $
              3,905,000
              
              $
              25,000
              
              $
              -




The
      Company has never paid cash dividends on its common stock and does not intend
      to
      pay cash dividends in the foreseeable future.




**OFF-BALANCE
      SHEET ARRANGEMENTS**




At
      August
      29, 2008, we had no off-balance sheet arrangements.




**CRITICAL
      ACCOUNTING POLICIES**




Certain
      accounting policies are very important to the portrayal of our financial
      condition and results of operations and require management’s most subjective or
      difficult judgments. These policies are as follows:




**Revenue
      Recognition** –
Our
      revenue recognition policies are in compliance with Staff Accounting Bulletin
      (SAB) No. 104, “Revenue Recognition,” SAB No. 101, “Revenue Recognition in
      Financial Statements.” Revenue is recognized when persuasive evidence of an
      agreement with the customer exists, products are shipped or title passes
      pursuant to the terms of the agreement with the customer, the amount due from
      the customer is fixed or determinable, collectibility is reasonably assured,
      and
      there are no significant future performance obligations. Service revenues are
      recognized at the time of performance. Revenues from separate extended service
      maintenance agreements are recognized ratably over the term of the agreements,
      which is typically one year. The unrecognized revenue portion of maintenance
      contracts invoiced and the fair value of future performance obligations are
      recorded as deferred revenue. In addition, any invoices generated in excess
      of
      revenue recognized are recorded as deferred revenue until the revenue
      recognition criteria are met. At August 29, 2008, deferred extended service
      maintenance revenues were $733,000 and deferred revenues related to future
      performance obligations were $38,000 and are expected to be recognized as
      revenue in varying amounts throughout fiscal 2009. We recognize revenue in
      certain circumstances before delivery has occurred (commonly referred to as
      “bill and hold” transactions). In such circumstances, among other things, risk
      of ownership has passed to the buyer, the buyer has made a written fixed
      commitment to purchase the finished goods, the buyer has requested the finished
      goods be held for future delivery as scheduled and designated by them, and
      no
      additional performance obligations exist by us. For these transactions, the
      finished goods are segregated from inventory and normal billing and credit
      terms
      are granted. For the year ended August 29, 2008, revenues attributable to one
      customer in the amount of $495,000 were recorded prior to delivery as bill
      and
      hold transactions. At August 29, 2008, accounts receivable for these revenues
      were paid in full.




These
      policies require management, at the time of the transaction, to assess whether
      the amounts due are fixed or determinable, collection is reasonably assured
      and
      no future performance obligations exist. These assessments are based on the
      terms of the agreement with the customer, past history and creditworthiness
      of
      the customer. If management determines that collection is not reasonably assured
      or future performance obligations exist, revenue recognition is deferred until
      these conditions are satisfied.




Our
      principal sources of revenues are from the sales of various satellite
      communications equipment. Embedded in our products is internally developed
      software of varying applications **.** We
      evaluate our products to assess whether software is more than incidental to
      a
      product. When we conclude that software is more than incidental to a product,
      we
      will account for the product as a software product. Revenue on software products
      and software-related elements is recognized in accordance with SOP
      No. 97-2, “Software Revenue Recognition” as amended by SOP No. 98-9,
“Software Revenue Recognition, with Respect to Certain Transactions.”
Significant judgment may be required in determining whether a product is a
      software or hardware product.




27


**Inventory
      Reserves** -
      Inventories are valued at the lower of cost (at standard, which approximates
      actual cost on a first-in, first-out basis) or market. Inventories include
      the
      cost of raw materials, labor and manufacturing overhead. We make inventory
      reserve provisions to properly reflect inventory value based on a review of
      inventory quantities on hand, sales forecasts, new products being developed
      and
      technology changes. These reserves are to provide for items that are potentially
      slow-moving, excess or obsolete. Changes in market conditions, lower than
      expected customer demand and rapidly changing technology could result in
      additional obsolete and slow-moving inventory that is unsaleable or saleable
      at
      reduced prices, which could require additional inventory reserve provisions.
      At
      August 29, 2008, inventories, net of reserve provisions of approximately
      $4,070,000, amounted to $6,295,000.




**Capitalized
      Software Costs** **-** Software
      development costs are capitalized subsequent to establishing technological
      feasibility. Capitalized costs are amortized based on the larger of the amounts
      computed using (a) the ratio that current gross revenues for each product bears
      to the total of current and anticipated future gross revenues for that product,
      or (b) the straight-line method over the remaining estimated economic life
      of
      the product. Expected future revenues and estimated economic lives are subject
      to revisions due to market conditions, technology changes and other factors
      resulting in shortfalls of expected revenues or reduced economic lives, which
      could result in additional amortization expense or write-offs. At August 29,
      2008, capitalized software costs, net of accumulated amortization, amounted
      to
      $1,218,000.




**Deferred
      Tax Asset Valuation Allowance** –
      Deferred tax assets are recognized for deductible temporary differences, net
      operating loss carryforwards and credit carryforwards, if it is more likely
      than
      not that the tax benefits will be realized. Realization of our deferred tax
      assets is dependent upon generating sufficient future taxable income prior
      to
      the expiration of the loss and credit carryforwards. The valuation allowance
      decreased $141,000 in fiscal 2008, and increased $271,000 in fiscal 2007 and
      $1,038,000 in fiscal 2006. At August 29, 2008, net deferred tax assets of
      $5,878,000 were fully reserved by a valuation allowance.




**Accounts
      Receivable Valuation** –
We
      maintain allowances for doubtful accounts for estimated losses resulting from
      the inability of our customers to make required payments. If the financial
      condition of our customers were to deteriorate, resulting in an impairment
      of
      their ability to make payments, additional allowances may be required. At August
      29, 2008, accounts receivable net of allowances for doubtful accounts amounted
      to $2,963,000.




**IMPACT
      OF INFLATION**




We
      do not
      believe that inflation has had a material impact on revenues or expenses during
      the past three fiscal years.




**IMPACT
      OF RECENTLY ISSUED ACCOUNTING STANDARDS**




In
      December 2007, the Financial Accounting Standards Board (FASB) issued SFAS
      No.
      141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R)
      establishes principles and requirements for how the acquirer recognizes and
      measures in its financial statements the identifiable assets acquired, the
      liabilities assumed, and any noncontrolling interest in the acquiree; recognizes
      and measures the goodwill acquired in a business combination or a gain from
      a
      bargain purchase; determines what information to disclose to enable users of
      the
      financial statements to evaluate the nature and financial effects of a business
      combination. SFAS No. 141(R) is effective as of the beginning of an entity’s
      first fiscal year that begins after December 15, 2008. The Company has not
      determined the impact, if any, SFAS No. 141(R) will have on its future financial
      statements.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements” (“SFAS No. 160”). SFAS No. 160 establishes
      new accounting and reporting standards for the noncontrolling interest in a
      subsidiary and for the deconsolidation of a subsidiary. Specifically, this
      statement requires the recognition of a noncontrolling interest (minority
      interest) as equity in the consolidated financial statements and separate from
      the parent’s equity. The amount of net income attributable to the noncontrolling
      interest will be included in consolidated net income on the face of the income
      statement. SFAS No. 160 clarifies that changes in a parent’s ownership interest
      in a subsidiary that do not result in deconsolidation are equity transactions
      if
      the parent retains its controlling financial interest. In addition, this
      statement requires that a parent recognize a gain or loss in net income when
      a
      subsidiary is deconsolidated. Such gain or loss will be measured using the
      fair
      value of the noncontrolling equity investment on the deconsolidation date.
      SFAS
      No. 160 also includes expanded disclosure requirements regarding the interests
      of the parent and its noncontrolling interest. SFAS No. 160 is effective for
      fiscal years beginning on or after December 15, 2008. Earlier adoption is
      prohibited. The Company has not determined the impact, if any, SFAS No. 160
      will
      have on its future financial statements.




28


In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
      for Financial Assets and Financial Liabilities” ** (SFAS
      No.
      159). SFAS No. 159 provides companies with an option to report selected
      financial assets and liabilities at fair value. SFAS No. 159 also establishes
      presentation and disclosure requirements designed to facilitate comparisons
      between companies that choose different measurement attributes for similar
      types
      of assets and liabilities and to provide additional information that will help
      investors and other financial statement users to easily understand the effect
      of
      the company’s choice to use fair value on its earnings. Additionally, SFAS No.
      159 requires entities to display the fair value of those assets and liabilities
      for which the company has chosen to use fair value on the face of the balance
      sheet. SFAS No. 159 is effective as of the beginning of an entity’s first
      fiscal year beginning after November 15, 2007. We are currently assessing
      the impact of SFAS No. 159, if any, which we will be required to adopt at the
      start of fiscal year 2009.




In
        September 2006, FASB issued SFAS No. 157, Fair Value Measurements, which
        defines
        fair value, provides a framework for measuring fair value, and expands the
        disclosures required for fair value measurements. SFAS No. 157 is effective
        for
        fiscal years beginning after November 15, 2007 and will be adopted by the
        Company beginning in the first quarter of fiscal 2009. Although the Company
        will
        continue to evaluate the application of SFAS No. 157, management does not
        currently believe adoption will have a material impact on the Company’s
        financial condition or operating results. SFAS No. 157 applies to other
        accounting pronouncements that require fair value measurements; it does not
        require any new fair value measurements. SFAS No. 157 is effective for fiscal
        years beginning after November 15, 2007 and will be adopted by the Company
        beginning in the first quarter of fiscal 2009. Although the Company will
        continue to evaluate the application of SFAS No. 157, management does not
        currently believe adoption will have a material impact on the Company’s
        financial condition or operating results. In February 2008, the FASB issued
        FASB
        Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement No.
        157.
        FSP 157-2 delays the effective date of SFAS No. 157 to fiscal years beginning
        after November 15, 2008 for all non-financial assets and non-financial
        liabilities, except for items that are recognized or disclosed at fair value
        in
        the financial statements on a recurring basis (at least annually) and will
        be
        adopted by the Company beginning in the first quarter of fiscal
        2010.




In
        September 2006, FASB issued SFAS No. 157, Fair Value Measurements, which
        defines
        fair value, provides a framework for measuring fair value, and expands the
        disclosures required for fair value measurements. SFAS No. 157 applies to
        other
        accounting pronouncements that require fair value measurements; it does not
        require any new fair value measurements. SFAS No. 157 is effective for fiscal
        years beginning after November 15, 2007 and will be adopted by the Company
        beginning in the first quarter of fiscal 2009. Although the Company will
        continue to evaluate the application of SFAS No. 157, management does not
        currently believe adoption will have a material impact on the Company’s
        financial condition or operating results. In February 2008, the FASB issued
        FASB
        Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement No.
        157.
        FSP 157-2 delays the effective date of SFAS No. 157 to fiscal years beginning
        after November 15, 2008 for all non-financial assets and non-financial
        liabilities, except for items that are recognized or disclosed at fair value
        in
        the financial statements on a recurring basis (at least annually) and will
        be
        adopted by the Company beginning in the first quarter of fiscal
        2010.




**ITEM
      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**




Our
      exposure to market rate risk for changes in interest rates relates primarily
      to
      our revolving line of credit facility and cash equivalents. The interest rate
      on
      certain advances under the line of credit and term loan facility fluctuates
      with
      the bank’s prime rate (5.00% at August 29, 2008). At August 29, 2008, balances
      outstanding on the revolving line of credit amounted to $1,883,000.





We
      do not
      enter into derivative financial instruments. All sales and purchases are
      denominated in U.S. dollars.




29





**ITEM
      8.**   **FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA**





PageManagement’s
                Statement of Responsibility
            31Report
                of Independent Registered Public Accounting Firm
            32Consolidated
                Statements of Operations Years ended August 29, 2008, August 31,
                2007, and
                September 1, 2006
            33Consolidated
                Balance Sheets As of August 29, 2008 and August 31, 2007.
            34Consolidated
                Statements of Shareholders' Equity Years ended August 29, 2008, August
                31,
                2007, and September 1, 2006
            35Consolidated
                Statements of Cash Flows Years ended August 29, 2008, August 31,
                2007, and
                September 1, 2006
            36Notes
                to Consolidated Financial Statements
            37Consolidated
                Supporting Schedules Filed:Schedule
                II-Valuation and Qualifying Accounts Years ended August 29, 2008,
                August
                31, 2007, and September 1, 2006
            55




30





MANAGEMENT'S
      RESPONSIBILITY FOR FINANCIAL STATEMENTS




The
      management of Wegener Corporation is responsible for the accuracy
      and **** consistency
      of all the information contained in the annual report **,** including the accompanying consolidated financial statements. These statements
      have been prepared to conform with generally accepted accounting principles
      appropriate to the circumstances of the Company. The statements include amounts
      based on estimates and judgments as required.





Wegener
      Corporation maintains internal accounting controls designed to provide
      reasonable assurance that the financial records are accurate, that the assets
      of
      the Company are safeguarded, and that the financial statements present fairly
      the consolidated financial position, results of operations and cash flows of
      the
      Company.





The
      Audit
      Committee of the Board of Directors reviews the scope of the audits and the
      findings of the independent registered public accounting firm. The auditors
      meet
      regularly with the Audit Committee to discuss audit and financial reporting
      issues, with and without management present.


BDO
      Seidman, LLP the Company's independent registered public accounting firm, has
      audited the financial statements prepared by management. Their opinion on the
      statements is presented below.











Robert
      A.
      Placek,


President,
      Chief Executive Officer


and
      Chairman of the Board











C.
      Troy
      Woodbury, Jr.


Treasurer
      and Chief Financial Officer




31





REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





Board
      of
      Directors and Shareholders of Wegener Corporation


Johns
      Creek, Georgia





We
      have
      audited the accompanying consolidated balance sheets of Wegener Corporation
      and
      subsidiary as of August 29, 2008 and August 31, 2007, and the related
      consolidated statements of operations, shareholders' equity and cash flows
      for
      each of the three years in the period ended August 29, 2008. These financial
      statements are the responsibility of the Company's management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audits included consideration of internal control
      over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion.





An
      audit
      also includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements, assessing the accounting principles
      used and significant estimates made by management, 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 Wegener Corporation and
      subsidiary at August 29, 2008 and August 31, 2007, and the results of its
      operations and its cash flows for each of the three years in the period ended
      August 29, 2008, in conformity with accounting principles generally accepted
      in
      the United States of America.




The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 1 to the financial
      statements, the Company has suffered recurring losses from operations and has
      a
      net capital deficiency that raise substantial doubt about its ability to
      continue as a going concern. Management's plans in regard to these matters
      are
      also described in Note 1. The financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.




Atlanta,
                Georgia
            BDO
                Seidman, LLPNovember
                26, 2008




32


*Wegener
      Corporation and Subsidiary*


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**





Year ended**August 29,**
              **2008**
            
            August 31,
              2007
            
            September 1,
              2006Revenues,
                net
            
            **$**
            **21,494,493**
            
            $
            21,546,029
            
            $
            20,387,783Operating
                costs and expensesCost
                of products sold
            
            
            **13,096,881**
            
            
            13,962,644
            
            
            13,831,311Selling,
                general and administrative
            
            
            **5,538,901**
            
            
            5,162,848
            
            
            6,315,485Research
                and development
            
            
            **3,213,131**
            
            
            3,033,358
            
            
            3,051,982Gain
                on sale of patents
            
            
            **(894,127**
            **)**
            
            -
            
            
            -Operating
                costs and expenses
            
            
            **20,954,786**
            
            
            22,158,850
            
            
            23,198,778Operating
                income (loss)
            
            
            **539,707**
            
            
            (612,821
            )
            
            (2,810,995
            )Interest
                expense
            
            
            **(158,586**
            **)**
            
            (149,590
            )
            
            (97,919
            )Interest
                income
            
            
            **2,162**
            
            
            9,649
            
            
            25,919Net
                earnings (loss)
            
            **$**
            **383,283**
            
            $
            (752,762
            )
            $
            (2,882,995
            )Net
                earnings (loss) per shareBasic
            
            **$**
            **.03**
            
            $
            (.06
            )
            $
            (.23
            )Diluted
            
            **$**
            **.03**
            
            $
            (.06
            )
            $
            (.23
            )Shares
                used in per share calculationBasic
            
            
            **12,647,051**
            
            
            12,614,007
            
            
            12,579,051Diluted
            
            
            **12,659,414**
            
            
            12,614,007
            
            
            12,579,051





*See
      accompanying notes to consolidated financial statements* .


33




*Wegener
      Corporation and Subsidiary*




**CONSOLIDATED
      BALANCE SHEETS**





**August 29,**
              **2008**
            
            August 31,
              2007**Assets**Current
                assetsCash
            
            **$**
            **8,023**
            
            $
            6,728Accounts
                receivable, net
            
            
            **2,963,060**
            
            
            5,172,348Inventories,
                net
            
            
            **6,295,476**
            
            
            3,380,410Other
            
            
            **211,832**
            
            
            194,847****Total
                current assets
            
            
            **9,478,391**
            
            
            8,754,333Property
                and equipment, net
            
            
            **1,709,250**
            
            
            1,777,677Capitalized
                software costs, net
            
            
            **1,217,585**
            
            
            1,241,577Other
                assets
            
            
            **454,050**
            
            
            684,238Land
                held for sale
            
            
            **353,712**
            
            
            353,712****Total
                assets
            
            **$**
            **13,212,988**
            
            $
            12,811,537******Liabilities
                and Shareholders’ Equity**Current
                liabilitiesBank
                line of credit
            
            **$**
            **1,883,243**
            
            $
            2,015,704Accounts
                payable
            
            
            **1,971,379**
            
            
            1,145,327Accrued
                expenses
            
            
            **1,871,887**
            
            
            2,609,222Deferred
                revenue
            
            
            **771,521**
            
            
            774,183Customer
                deposits
            
            
            **1,927,567**
            
            
            1,870,673Total
                current liabilities
            
            
            **8,425,597**
            
            
            8,415,109Commitments
                and contingenciesShareholders’
                equityCommon
                stock, $.01 par value; 20,000,000 shares, authorized; 12,647,051
                and
                12,647,051 shares respectively, issued and outstanding
            
            
            **126,471**
            
            
            126,471Additional
                paid-in capital
            
            
            **20,006,702**
            
            
            19,999,022Deficit
            
            
            **(15,345,782**
            **)**
            
            (15,729,065
            )Total
                shareholders’ equity
            
            
            **4,787,391**
            
            
            4,396,428Total
                liabilities and shareholders’ equity
            
            **$**
            **13,212,988**
            
            $
            12,811,537




*See
      accompanying notes to consolidated financial statements.*




34




*Wegener
      Corporation and Subsidiary*





**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY**





Common Stock
            
            Additional
              Paid-inShares
            
            Amount
            
            Capital
            
            DeficitBALANCE
                at September 2, 2005
            
            
            12,579,051
            
            $
            125,791
            
            $
            19,892,482
            
            $
            (12,093,308
            )Share-based
                compensation
            
            
            -
            
            
            -
            
            
            32,433
            
            
            -Net
                loss for the year
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,882,995
            )BALANCE
                at September 1, 2006
            
            
            12,579,051
            
            $
            125,791
            
            $
            19,924,915
            
            $
            (14,976,303
            )Common
                stock issued through stock options
            
            
            68,000
            
            
            680
            
            
            56,440
            
            
            -Share-based
                compensation
            
            
            -
            
            
            -
            
            
            17,667
            
            
            -Net
                loss for the year
            
            
            -
            
            
            -
            
            
            -
            
            
            (752,762
            )BALANCE
                at August 31, 2007
            
            
            12,647,051
            
            $
            126 
                ,471
            
            $
            19,999,022
            
            $
            (15,729,065
            )Share-based
                compensation
            
            
            -
            
            
            -
            
            
            7,680
            
            
            -Net
                earnings for the year
            
            
            -
            
            
            -
            
            
            -
            
            
            383,283**BALANCE
                at August 29, 2008**
            
            
            **12,647,051**
            
            **$**
            **126,471**
            
            **$**
            **20,006,702**
            
            **$**
            **(15,345,782**
            **)**




See
      accompanying notes to consolidated financial statements ****




35


*Wegener
      Corporation and Subsidiary*





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


Year ended**August 29,**
                **2008**
              
              August 31,
                2007
              
              September 1,
                2006**Cash
                  flows from operating activities**Net
                  earnings (loss)
              
              **$**
              **383,283**
              
              $
              (752,762
              )
              $
              (2,882,995
              )Adjustments
                  to reconcile net earnings (loss) to cash provided by (used for)
                  operating
                  activitiesDepreciation
                  and amortization
              
              
              **1,853,499**
              
              
              2,311,047
              
              
              2,671,963Gain
                  on sale of patents
              
              
              **(894,127**
              **)**
              
              -
              
              
              -Share-based
                  compensation expense
              
              
              **7,680**
              
              
              17,667
              
              
              32,433Decrease
                  in provision for bad debts
              
              
              -
              
              
              (50,000
              )
              
              (25,000
              )Increase
                  in provision for inventory reserves
              
              
              -
              
              
              250,000
              
              
              350,000(Decrease)
                  increase in provision for warranty reserves
              
              
              **(260,000**
              **)**
              
              625,000
              
              
              110,000Changes
                  in assets and liabilitiesAccounts
                  receivable
              
              
              **2,209,288**
              
              
              (3,342,227
              )
              
              553,987Inventories
              
              
              **(2,915,066**
              **)**
              
              227,617
              
              
              (251,605
              )Other
                  assets
              
              
              **(16,985**
              **)**
              
              38,281
              
              
              (1,947
              )Accounts
                  payable
              
              
              **826,052**
              
              
              (380,982
              )
              
              635,745Accrued
                  expenses
              
              
              **(477,335**
              **)**
              
              (169,490
              )
              
              (179,746
              )Deferred
                  revenue
              
              
              **(2,662**
              **)**
              
              (334,553
              )
              
              899,741Customer
                  deposits
              
              
              **56,894**
              
              
              605,868
              
              
              (288,955
              )Net
                  cash provided by (used for) operating activities
              
              
              **770,521**
              
              
              (954,534
              )
              
              1,623,621**Cash
                  flows from investing activities**Property
                  and equipment expenditures
              
              
              **(335,161**
              **)**
              
              (256,085
              )
              
              (221,085
              )Capitalized
                  software additions
              
              
              **(1,213,870**
              **)**
              
              (1,528,343
              )
              
              (1,399,448License
                  agreements, patents, and trademark expenditures
              
              
              **(62,734**
              **)**
              
              (185,918
              )
              
              (113,676
              )Proceeds
                  from sale of patents
              
              
              **1,075,000**
              
              
              -
              
              
              -Net
                  cash used for investing activities
              
              
              **(536,765**
              **)**
              
              (1,970,346
              )
              
              (1,734,209)**Cash
                  flows from financing activities**Net
                  change in borrowings under revolving line-of-credit
              
              
              **(132,461**
              **)**
              
              2,015,704
              
              
              -Loan
                  facility fees
              
              
              **(100,000**
              **)**
              
              (100,000
              )
              
              (37,500
              )Proceeds
                  from stock options exercised
              
              
              -
              
              
              57,120
              
              
              -Net
                  cash (used for) provided by financing activities
              
              
              **(232,461**
              **)**
              
              1,972,824
              
              
              (37,500
              )Increase
                  (decrease) in cash
              
              
              **1,295**
              
              
              (952,056
              )
              
              (148,088
              )Cash,
                  beginning of year
              
              
              **6,728**
              
              
              958,784
              
              
              1,106,872Cash,
                  end of year
              
              **$**
              **8,023**
              
              $
              6,728
              
              $
              958,784Supplementary
                  information:Cash
                  paid for interest
              
              **$**
              **158,586**
              
              $
              149,590
              
              $
              97,919




*See
      accompanying notes to consolidated financial statements.* ******




36


*Wegener
      Corporation and Subsidiary*





NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS




**Note
      1. Going Concern**




At
      August
      29, 2008, our net inventory balances increased $2,915,000 to $6,295,000 from
      $3,380,000 at August 31, 2007. The increase in inventories was primarily due
      to
      our new fiscal 2008 product introductions of the iPump ® 562
      Enterprise Media Server, the Unity ® 552
      receiver and the Encompass-LE2 audio receiver. In addition, inventory levels
      were increased for the iPump ® 6400
      Media Server and Nielsen Media Research products. At August 29, 2008,
      outstanding inventory purchase commitments amounted to $1,856,000. These
      inventory purchases and purchase commitments were made based on existing orders
      and expected future bookings. Our fiscal 2008 bookings were below our
      expectations,
      particularly during the fourth quarter of fiscal 2008, primarily as a result
      of
      customer delays in purchasing decisions, deferral of project expenditures,
      foreign exchange rate fluctuations and adverse economic conditions.WCI's
      backlog of orders scheduled to ship within 18 months was $8,491,000 at August
      29, 2008, $10,170,000 at August 31, 2007, and $10,700,000 at September 1, 2006.
      The total multi-year backlog at August 29, 2008 was $13,300,000 compared to
      $17,080,000 at August 31, 2007. Approximately $7,206,000 of the August 29,
      2008,
      backlog is expected to ship during fiscal 2009. Significant fiscal 2009
      shippable bookings are currently required to meet our financial projections
      beginning in the first quarter of fiscal 2009 and continuing for each subsequent
      quarter. During the fourth quarter of fiscal 2008, and subsequent to August
      29,
      2008, we made reductions in headcount to bring the current number of employees
      to 84, and reduced engineering consulting and other overhead expenses. Should
      adequate capital or financing not be available, and if increased revenues not
      materialize, we are committed to further reducing operating costs to bring
      them
      in line with reduced revenue levels. No assurances can be given that operating
      costs can be sufficiently reduced to allow us to continue as a going
      concern.  Through November 21, 2008 bookings and revenues to date were
      insufficient to provide adequate levels of cash flow from operations or adequate
      levels of collateral to support required borrowings during the second quarter
      of
      fiscal 2009 to continue as a going concern and to execute our business plan.
      As
      a result, we need to raise additional capital or obtain additional credit
      facilities during
      the second quarter of fiscal 2009 .
      Although we are in discussions with potential financing sources, there is no
      assurance that such financing will be available or that we will be able to
      complete financing on satisfactory terms, if at all. Our ability to continue
      as
      a going concern will depend upon our ability to obtain additional capital or
      financing in
      the
      very short term and to
      subsequently increase our bookings and revenues in
      the
      longer term to
      attain profitable operations. The accompanying consolidated financial statements
      do not include any adjustments to reflect the possible future effects on the
      recoverability and classification of assets or the amounts and classification
      of
      liabilities that may result from the possible inability of the Company to
      continue as a going concern.





At
      November 21, 2008, the outstanding balance on the line of credit increased
      to
      $3,268,000 from $1,833,000 at August 29, 2008 and our borrowing availability
      decreased to $559,000 from $3,117,000 at August 29, 2008.





**2.
      Summary of Significant Accounting Policies**





**Nature
      of Operations and Principles of Consolidation.** The
      financial statements include the accounts of Wegener Corporation (WGNR, “we,”
“our,” “us” or the “Company") and its wholly-owned subsidiary. Wegener
      Communications, Inc. (WCI) designs, manufactures and distributes satellite
      communications electronics equipment in the U.S. and internationally. All
      significant intercompany balances and transactions have been eliminated in
      consolidation.





**Use
      of Estimates.** The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities, the disclosure of
      contingent assets and liabilities at the date of the financial statements,
      and
      the reported amounts of revenue and expenses during the reporting period.
      Examples include valuation allowances for deferred tax assets, and provisions
      for bad debts, inventory obsolescence and warranties. Actual results could
      vary
      from these estimates.





**Reclassifications.** Certain
      reclassifications have been made to the 2007 and 2006 financial statements
      to
      conform to the 2008 presentation.





**Fiscal
      Year.** **** We
      operate on a 52-53 week fiscal year. The fiscal year ends on the Friday nearest
      to August 31. Fiscal years 2008, 2007 and 2006 contained 52 weeks. All
      references herein to 2008, 2007 and 2006, refer to the fiscal years ending
      August 29, 2008, August 31, 2007, and September 1, 2006,
      respectively.


37


*Wegener
      Corporation and Subsidiary*





**Cash
      and Bank Overdrafts** . Cash
      balances consist of checking account balances  held
      at a
      high credit-quality financial institution. Bank overdrafts consist of
      outstanding checks that have not cleared our bank. Overdrafts are offset against
      cash balances to the extent that cash balances are available in the account
      on
      which the checks are issued. Remaining balances of overdrafts are included
      in
      our accounts payable balances. At August 29, 2008 and August 31, 2007,
      outstanding checks in the amount of $418,000 and $357,000, respectively, were
      included in accounts payable balances.





**Accounts
      Receivable** .
      Accounts receivable are stated at the amounts billed to customers under normal
      trade terms, less an allowance for doubtful accounts. Credit is extended based
      on the evaluation of the customer’s financial condition and generally we do not
      require collateral from our customers. The allowance for doubtful accounts
      is
      provided based upon a review of individual customer accounts, historical payment
      information and existing economic conditions. Accounts receivable standard
      terms
      are net 30 days from date of invoice. Receivables are charged to the allowance
      for doubtful accounts when all attempts to collect have failed and they are
      determined to be uncollectible. Historically, we have not experienced
      significant losses related to receivables from individual customers or groups
      of
      customers in any particular industry or geographic area.





Our
      policy is not to require collateral on accounts receivable. However, in certain
      circumstances letters of credit or deposits may be required from customers.
      We
      are subject to concentrations of credit risk principally through accounts
      receivable, as a substantial portion of our customers are affiliated with the
      cable television, radio, business broadcast and telecommunications industries.
      At August 29, 2008, two customers accounted for approximately 12.3% and 11.9%,
      respectively, of our accounts receivable. At August 31, 2007, one customer
      accounted for approximately 40.6% of our accounts receivable.





**Inventories** **.** Inventories
      are stated at the lower of cost (at standard, which approximates actual cost
      on
      a first-in, first-out basis) or market. Inventories include the cost of raw
      materials, labor and manufacturing overhead. The Company makes provisions for
      obsolete or slow-moving inventories as necessary to properly reflect inventory
      value.





**Property,
      Equipment and Depreciation** . Property
      and equipment are stated at cost. Certain assets financed under lease contracts
      have been capitalized. Depreciation is computed over the estimated useful lives
      of the assets on the straight-line method for financial reporting and
      accelerated methods for income tax purposes. Substantial betterments to property
      and equipment are capitalized, and repairs and maintenance are expensed as
      incurred.





**Other
      Assets** . Other
      assets consist primarily of technology licenses, patents, trademarks and loan
      facility fees. Costs of license agreements are amortized on a straight-line
      basis over their estimated useful lives. Legal expenses related to the filing
      of
      patent and trademark applications are capitalized. Upon issuance, these costs
      will also be amortized on a straight-line basis over the lesser of the legal
      life of the patents and trademarks or their estimated useful lives. Annual
      loan
      facility fees are amortized evenly over twelve months.





**Revenue
      Recognition** . Our
      revenue recognition policies are in compliance with Staff Accounting Bulletin
      (SAB) No. 104, “Revenue Recognition,” SAB No. 101, “Revenue Recognition in
      Financial Statements.” Revenue is recognized when persuasive evidence of an
      agreement with the customer exists, products are shipped or title passes
      pursuant to the terms of the agreement with the customer, the amount due from
      the customer is fixed or determinable, collectibility is reasonably assured,
      and
      when there are no significant future performance obligations. Service revenues
      are recognized at the time of performance. Extended service maintenance contract
      revenues are recognized ratably over the maintenance contract term, which is
      typically one year. The unrecognized revenue portion of maintenance contracts
      invoiced and the fair value of future performance obligations are recorded
      as
      deferred revenue. In addition, any invoices generated in excess of revenue
      recognized are recorded as deferred revenue until the revenue recognition
      criteria are met. At August 29, 2008, deferred extended service maintenance
      revenues were $733,000 and deferred revenues related to future performance
      obligations were $38,000 and are expected to be recognized as revenue in varying
      amounts throughout fiscal 2009.





We
      recognize revenue in certain circumstances before delivery has occurred
      (commonly referred to as “bill and hold” transactions). In such circumstances,
      among other things, risk of ownership has passed to the buyer, the buyer has
      made a written fixed commitment to purchase the finished goods, the buyer has
      requested the finished goods to be held for future delivery as scheduled and
      designated by them, and no additional performance obligations by the Company
      exist. For these transactions, the finished goods are segregated from inventory
      and normal billing and credit terms are granted. For the year ended August
      29,
      2008, revenues attributable to one customer in the amount of $495,000 were
      recorded prior to delivery as bill and hold transactions. At August 29, 2008,
      accounts receivable for these revenues were paid in full.


38


*Wegener
      Corporation and Subsidiary*





These
      policies require management, at the time of the transaction, to assess whether
      the amounts due are fixed or determinable, collection is reasonably assured,
      and
      no future performance obligations exist. These assessments are based on the
      terms of the agreement with the customer, past history and creditworthiness
      of
      the customer. If management determines that collection is not reasonably assured
      or future performance obligations exist, revenue recognition is deferred until
      these conditions are satisfied.





Our
      principal sources of revenues are from the sales of various satellite
      communications equipment. Embedded in the Company’s products is internally
      developed software of varying applications. We evaluate our products to assess
      whether software is more than incidental to a product. When we conclude that
      software is more than incidental to a product, we will account for the product
      as a software product. Revenue on software products and software-related
      elements is recognized in accordance with SOP No. 97-2, “Software Revenue
      Recognition” as amended by SOP No. 98-9, “Software Revenue Recognition, with
      Respect to Certain Transactions.” Significant judgment may be required in
      determining whether a product is a software or hardware product.





In
      accordance with EITF Issue 00-10, “Accounting for Shipping and Handling Fees and
      Costs,” we include all shipping and handling billings to customers in revenues,
      and freight costs incurred for product shipments are included in cost of
      products sold.





**Research
      and Development/Capitalized Software Costs** .
      We
      expense research and development costs, including expenditures related to
      development of our software products that do not qualify for capitalization.
      Software development costs are capitalized subsequent to establishing
      technological feasibility. Capitalized costs are amortized based on the larger
      of the amounts computed using (a) the ratio that current gross revenues for
      each
      product bears to the total of current and anticipated future gross revenues
      for
      that product or (b) the straight-line method over the remaining estimated
      economic life of the product. This has resulted in amortization periods of
      primarily three years. Expected future revenues and estimated economic lives
      are
      subject to revisions due to market conditions, technology changes and other
      factors resulting in shortfalls of expected revenues or reduced economic lives.
      Software development costs capitalized during fiscal 2008, 2007 and 2006,
      totaled $1,214,000, $1,528,000 and $1,399,000, respectively. Amortization
      expense, included in cost of products sold, was $1,238,000, $1,517,000 and
      $1,936,000 for the same periods, respectively. Capitalized software costs,
      net
      of accumulated amortization, were $1,218,000 at August 29, 2008 and $1,242,000
      at August 31, 2007. Accumulated amortization amounted to $12,745,000 at August
      29, 2008 and $11,507,000 at August 31, 2007.




**Advertising
      and Sales Promotion Expenses** . **** Our
      policy is to expense advertising and sales promotion costs as incurred.
      Advertising and sales promotion expenses include media advertising, trade shows,
      customer events, product literature and market research costs. These expenses
      totaled $258,000, $329,000 and $277,000 for fiscal years 2008, 2007 and 2006,
      respectively.





**Long-Lived
      Assets** .
      Long-lived assets are reviewed for impairment whenever events or changes in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable. If the sum of the expected future undiscounted cash flows is less
      than the carrying amount of the asset, a loss is recognized for the difference
      between the fair value and carrying value of the asset. Assets to be disposed
      of
      are reported at the lower of the carrying amount or fair value less costs to
      sell.




**Share-Based
      Compensation** **.** We
      account for share-based payments to employees, including grants of employee
      stock options, in accordance with Statement of Financial Accounting Standards
      (SFAS) No. 123 (Revised 2004), “Share-Based Payment” (SFAS No. 123R). SFAS No.
      123R requires that these awards be recognized as compensation expense in the
      consolidated financial statements based on their fair values. That expense
      will
      be recognized over the period during which an employee is required to provide
      services in exchange for the award, known as the requisite service period
      (usually the vesting period). For fiscal years 2008, 2007 and 2006, stock-based
      compensation expense included in selling, general and administrative expenses
      amounted to $8,000, $18,000 and $32,000, respectively.


39


*Wegener
      Corporation and Subsidiary*





The
      fair
      value of each option was estimated on the date of grant using the Black-Scholes
      option pricing model with the following weighted average
      assumptions:





Year ended**August 29,**
              **2008**
            
            August 31,
              2007
            
            September 1,
              2006Risk
                free interest rate
            
            
            **3.45**
            **%**
            
            4.70
            %
            
            4.41
            %Expected
                term
            
            
            **5.0
                years**
            
            
            10.0
                years
            
            
            5.6
                yearsVolatility
            
            
            **70**
            **%**
            
            90
            %
            
            90
            %Expected
                annual dividends
            
            
            **none**
            
            
            none
            
            
            noneForfeiture
                rate
            
            
            -
            
            
            -
            
            
            -





The
      weighted average fair value of options granted was as follows:





Year ended**August 29,**
              **2008**
            
            August 31,
              2007
            
            September 1,
              2006Per
                share option value
            
            **$**
            **.51**
            
            $
            .90
            
            $
            1.07Aggregate
                total
            
            **$**
            **8,000**
            
            $
            16,000
            
            $
            34,000





As
      of
      August 29, 2008, no compensation costs related to non-vested stock options
      remain to be recognized.





**Income
      Taxes.** Income
      taxes are based on income (loss) for financial reporting purposes and reflect
      a
      current tax liability (asset) for the estimated taxes payable (recoverable)
      in
      the current year tax return and changes in deferred taxes. Deferred tax assets
      or liabilities are recognized for the estimated tax effects of temporary
      differences between financial reporting and taxable income (loss) and for tax
      credit and loss carryforwards based on enacted tax laws and rates. Valuation
      allowances are established to reduce deferred tax assets to amounts that we
      expect are more likely than not realizable. At August 29, 2008, net deferred
      tax
      assets were fully offset by a valuation allowance of $5,878,000.





**Earnings
      Per Share.** Basic
      and
      diluted net earnings (loss) per share were computed in accordance with SFAS
      No.
      128, “Earnings per Share.” Basic net earnings per share are computed by dividing
      net earnings available to common shareholders (numerator) by the weighted
      average number of common shares outstanding (denominator) during the period
      and
      exclude the dilutive effect of stock options. Diluted net earnings per share
      gives effect to all dilutive potential common shares outstanding during a
      period. In computing diluted net earnings per share, the average stock price
      for
      the period is used in determining the number of shares assumed to be reacquired
      under the treasury stock method from the hypothetical exercise of stock
      options.


40




*Wegener
      Corporation and Subsidiary*


The
      following tables represent required disclosure of the reconciliation of the
      earnings and shares of the basic and diluted net earnings (loss) per share
      computations:





Year
                ended**August
                29,**
              **2008**
            
            August
                31,
              2007
            
            September
                1,
              2006**Basic**Net
                earnings (loss)
            
            **$**
            **383,283**
            
            $
            (752,762
            )
            $
            (2,882,995
            )Weighted
                average shares outstanding
            
            
            **12,647,051**
            
            
            12,614,007
            
            
            12,579,051Net
                earnings (loss) per share
            
            **$**
            **.03**
            
            $
            (.06
            )
            $
            (.23
            )**Diluted**Net
                earnings (loss)
            
            **$**
            **383,283**
            
            $
            (752,762
            )
            $
            (2,882,995
            )Weighted
                average shares outstanding
            
            
            **12,647,051**
            
            
            12,614,007
            
            
            12,579,051Effect
                of dilutive potential common shares:Stock
                options
            
            
            **12,363**
            
            
            **-**
            
            
            -Total
            
            
            **12,659,414**
            
            
            12,614,007
            
            
            12,579,051Net
                earnings (loss) per share
            
            **$**
            **.03**
            
            $
            (.06
            )
            $
            (.23
            )




Stock
      options excluded from the diluted loss per share calculation due to their
      antidilutive effect are as follows:




Year ended**August 29,**
              **2008**
            
            August 31,
              2007
            
            September 1,
              2006Common
                stock options:Number
                of shares
            
            
            **839,531**
            
            
            971,531
            
            
            1,282,531Range
                of exercise prices
            
            **$**
            **1.00
                to $2.72**
            
            $
            .63
                to $2.72
            
            $
            .63
                to $2.72





**Fair
      Value of financial Instruments** .
      The
      carrying amount of cash and other current assets and liabilities, such as
      accounts receivable and accounts payable as presented in the consolidated
      financial statements, approximates fair value based on the short-term nature
      of
      these instruments. We believe the carrying amounts of our line of credit
      approximate fair value because the interest rates are subject to change with,
      or
      approximate, market interest rates.





**Foreign
      Currency.**  The
      U.S.
      dollar is our functional currency for financial reporting. International sales
      are made and remitted in U.S. dollars.





**Recently
      Issued Accounting Standards** .
      In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) establishes principles and
      requirements for how the acquirer recognizes and measures in its financial
      statements the identifiable assets acquired, the liabilities assumed, and any
      noncontrolling interest in the acquiree; recognizes and measures the goodwill
      acquired in a business combination or a gain from a bargain purchase; determines
      what information to disclose to enable users of the financial statements to
      evaluate the nature and financial effects of a business combination. SFAS No.
      141(R) is effective as of the beginning of an entity’s first fiscal year that
      begins after December 15, 2008. The Company has not determined the impact,
      if
      any, SFAS No. 141(R) will have on its future financial statements.




41


*Wegener
        Corporation and Subsidiary*




In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements” (“SFAS No. 160”). SFAS No. 160 establishes
      new accounting and reporting standards for the noncontrolling interest in a
      subsidiary and for the deconsolidation of a subsidiary. Specifically, this
      statement requires the recognition of a noncontrolling interest (minority
      interest) as equity in the consolidated financial statements and separate from
      the parent’s equity. The amount of net income attributable to the noncontrolling
      interest will be included in consolidated net income on the face of the income
      statement. SFAS No. 160 clarifies that changes in a parent’s ownership interest
      in a subsidiary that do not result in deconsolidation are equity transactions
      if
      the parent retains its controlling financial interest. In addition, this
      statement requires that a parent recognize a gain or loss in net income when
      a
      subsidiary is deconsolidated. Such gain or loss will be measured using the
      fair
      value of the noncontrolling equity investment on the deconsolidation date.
      SFAS
      No. 160 also includes expanded disclosure requirements regarding the interests
      of the parent and its noncontrolling interest. SFAS No. 160 is effective for
      fiscal years beginning on or after December 15, 2008. Earlier adoption is
      prohibited. The Company has not determined the impact, if any, SFAS No. 160
      will
      have on its future financial statements.


In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
      for Financial Assets and Financial Liabilities” ** (SFAS
      No.
      159). SFAS No. 159 provides companies with an option to report selected
      financial assets and liabilities at fair value. SFAS No. 159 also establishes
      presentation and disclosure requirements designed to facilitate comparisons
      between companies that choose different measurement attributes for similar
      types
      of assets and liabilities and to provide additional information that will help
      investors and other financial statement users to easily understand the effect
      of
      the company’s choice to use fair value on its earnings. Additionally, SFAS No.
      159 requires entities to display the fair value of those assets and liabilities
      for which the company has chosen to use fair value on the face of the balance
      sheet. SFAS No. 159 is effective as of the beginning of an entity’s first
      fiscal year beginning after November 15, 2007. We are currently assessing
      the impact of SFAS No. 159, if any, which we will be required to adopt at the
      start of fiscal year 2009.




In
        September 2006, FASB issued SFAS No. 157, Fair Value Measurements, which
        defines
        fair value, provides a framework for measuring fair value, and expands the
        disclosures required for fair value measurements. SFAS No. 157 applies to
        other
        accounting pronouncements that require fair value measurements; it does not
        require any new fair value measurements. SFAS No. 157 is effective for fiscal
        years beginning after November 15, 2007 and will be adopted by the Company
        beginning in the first quarter of fiscal 2009. Although the Company will
        continue to evaluate the application of SFAS No. 157, management does not
        currently believe adoption will have a material impact on the Company’s
        financial condition or operating results. In February 2008, the FASB issued
        FASB
        Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement No.
        157.
        FSP 157-2 delays the effective date of SFAS No. 157 to fiscal years beginning
        after November 15, 2008 for all non-financial assets and non-financial
        liabilities, except for items that are recognized or disclosed at fair value
        in
        the financial statements on a recurring basis (at least annually) and will
        be
        adopted by the Company beginning in the first quarter of fiscal
        2010.


**3.
      Accounts Receivable**


Accounts
      receivable are summarized as follows:





**August 29,**
              **2008**
            
            August 31,
              2007Accounts
                receivable – trade
            
            **$**
            **3,090,272**
            
            $
            5,345,196Other
                receivables
            
            
            **103,021**
            
            
            78,468**3,193,293**
            
            
            5,423,664Less
                allowance for doubtful accounts
            
            
            **(230,233**
            **)**
            
            (251,316
            )Accounts
                receivable, net
            
            **$**
            **2,963,060**
            
            $
            5,172,348


42


*Wegener
      Corporation and Subsidiary*


**4.
      Inventories**


Inventories
      are summarized as follows:





**August 29,**
              **2008**
            
            August 31,
              2007Raw
                materials
            
            **$**
            **5,312,531**
            
            $
            3,482,396Work-in-process
            
            
            **1,301,753**
            
            
            962,286Finished
                goods
            
            
            **3,751,497**
            
            
            3,028,041**10,365,781**
            
            
            7,472,723Less
                inventory reserves
            
            
            **(4,070,305**
            **)**
            
            (4,092,313
            )Inventories,
                net
            
            **$**
            **6,295,476**
            
            $
            3,380,410





We
      have
      invested a significant amount of financial resources to acquire certain raw
      materials, sub-assemblies and finished goods, to incur direct labor and to
      contract to have specific outplant procedures performed on certain inventory
      in
      process. We purchased this inventory based upon prior backlog and anticipated
      future sales based upon our existing knowledge of the marketplace. Our inventory
      reserve of
      approximately $4,070,000 at
      August 29, 2008, is to provide for items that are potentially slow-moving,
      excess or obsolete. Changes in market conditions, lower than expected customer
      demand and rapidly changing technology could result in additional obsolete
      and
      slow-moving inventory that is unsaleable or saleable at reduced prices. No
      estimate can be made of a range of amounts of loss from obsolescence that is
      reasonably possible should our sales efforts not be successful.




**5.
      Land Held for Sale**


During
      the third quarter of fiscal 2007, the Company’s Board of Directors authorized
      and approved the listing for sale of the 4.4 acres of undeveloped land located
      adjacent to the Company’s headquarters facility in Johns Creek, Georgia. The
      Company evaluated the criteria of SFAS No. 144 (as amended), “Accounting for the
      Impairment or Disposal of Long-Lived Assets” (SFAS No. 144) and concluded that
      these assets qualified as assets held for sale.  In accordance with SFAS
      No. 144, the land was reclassified to land held for sale at its historic
      carrying value of $354,000 (lower of carrying amount or fair value less costs
      to
      sell) in the consolidated balance sheet as of August 29, 2008. The land was
      acquired in August 1989 and no impairment charges were recorded related to
      the
      reclassification. On November 26, 2008, we executed a contract to sell the
      land
      for approximately $840,000 less applicable commissions and closing costs. The
      contract is subject to various contingencies including a rezoning of the
      property which could require up to one year to complete. No assurances may
      be
      given that the sale will be consummated.





**6.
      Property and Equipment**


Major
      classes of property and equipment consist of the following:





Estimated
              Useful Lives
              (Years)
            
            **August 29,**
              **2008**
            
            August 31,
              2007Land
            
            
            -
            
            **$**
            **353,498**
            
            $
            353,498Buildings
                and improvements
            
            
            3-30
            
            
            **3,751,290**
            
            
            3,751,290Machinery
                and equipment
            
            
            3-5
            
            
            **10,508,729**
            
            
            10,176,288Furniture
                and fixtures
            
            
            5
            
            
            **587,599**
            
            
            584,879Total
                property and equipment
            
            
            
            
            
            **15,201,116**
            
            
            14,865,955Less
                accumulated depreciationand
                amortization
            
            
            
            
            
            **(13,491,866**
            **)**
            
            (13,088,278
            )Property
                and equipment, net
            
            
            
            
            **$**
            **1,709,250**
            
            $
            1,777,677





Depreciation
      expense for fiscal 2008, 2007 and 2006, totaled approximately $404,000,
      $413,000, and $454,000, respectively. Assets recorded under a capital lease
      included in property and equipment at August 29, 2008, are machinery and
      equipment of approximately $613,000, which were fully amortized. Repair and
      maintenance expenses amounted to $205,000, $220,000 and $214,000 during fiscal
      years 2008, 2007 and 2006, respectively.


43


*Wegener
      Corporation and Subsidiary*


**7.
      Other Assets**


Other
      assets consist of the following:


**August
                29, 2008****Cost**
            
            **Accumulated**
              **Amortization**
            
            **Net**License
                agreements
            
            **$**
            **958,800**
            
            **$**
            **(925,384**
            **)**
            **$**
            **33,416**Patents
                and patent applications
            
            
            **336,328**
            
            
            **(47,725**
            **)**
            
            **288,603**Trademarks
                and trademark applications
            
            
            **82,820**
            
            
            **(41,011**
            **)**
            
            **41,809**Loan
                facility fees
            
            
            **100,000**
            
            
            **(16,667**
            **)**
            
            **83,333**Other
            
            
            **6,889**
            
            
            **-**
            
            
            **6,889****$**
            **1,484,837**
            
            **$**
            **(1,030,787**
            **)**
            **$**
            **454,050**





August
                31, 2007Cost
            
            Accumulated
              Amortization
            
            NetLicense
                agreements
            
            $
            933,800
            
            $
            (862,198
            )
            $
            71,602Patents
                and patent applications
            
            
            472,551
            
            
            (14,006
            )
            
            458,545Trademarks
                and trademark applications
            
            
            89,736
            
            
            (25,867
            )
            
            63,869Loan
                facility fees
            
            
            137,500
            
            
            (54,167
            )
            
            83,333Other
            
            
            6,889
            
            
            -
            
            
            6,889$
            1,640,476
            
            $
            (956,238
            )
            $
            684,238





Amortization
      expense of other assets amounted to $212,000, $381,000, and $244,000 for fiscal
      years 2008, 2007 and 2006, respectively. Amortization expense for the year
      ended
      August 31, 2007 included $111,000 related to write-offs of remaining net
      balances of certain license agreements due to termination of the
      agreements.





During
      the fourth quarter of fiscal 2008, we completed the sale of selected patents
      and
      patent applications to EPAX Consulting Limited Liability Company for net
      proceeds of approximately $1,075,000 and recorded a gain of $894,000. The group
      of patents and patent applications sold relate to product distinction, system
      architecture and IP networking. We retained a worldwide, non-exclusive,
      royalty-free license under the patents for use in both existing and future
      products.





We
      conduct an ongoing review of our intellectual property rights and potential
      trademarks. As of August 29, 2008, we incurred legal fees of $297,000 related
      to
      the filing of applications for various patents and $29,000 related to the filing
      of trademarks. Upon issuance, these costs will be amortized on a straight-line
      basis over the lesser of the legal life of the patents and trademarks or their
      estimated useful lives of four to ten years. If it becomes more likely than
      not
      that the patent application will not be granted, we will write off the deferred
      cost at that time. At August 29, 2008, the cost of registered patents and
      trademarks amounted to $39,000 and $54,000, respectively. **** License
      agreements are amortized over their estimated useful life of one to five years.
      Loan facility fees are amortized over twelve months.




During
      the second quarter of fiscal 2003, we entered into a license agreement with
      StarGuide Digital Networks, Inc., a Nevada corporation. This agreement granted
      a
      number of limited licenses of StarGuide patents related to delivering IP data
      by
      satellite and store/forward audio. These licenses extend to and conclude upon
      the last to expire of any licensed patent. At August 29, 2008, this license
      was
      fully amortized and requires no additional renewal fee. The agreement provides
      for a continuing running royalty payment on certain of our products. We believe
      that these royalties will not have a material adverse effect on our financial
      condition or results of operations. In addition, as of August 29, 2008, we
      have
      entered into seven other license agreements for utilization of various
      technologies. These agreements generally are for a one year period with annual
      renewal fees currently ranging from $10,000 to $15,000. In addition, these
      agreements currently require royalty payments, or may require future royalties
      for products under development, none of which are expected to have a material
      adverse effect on our financial condition or results of operations.




44


*Wegener
      Corporation and Subsidiary*


**8.
      Accrued Expenses**


Accrued
      expenses consist of the following:


**August 29,**
            
            August 31,**2008**
            
            2007Vacation
            
            **$**
            **557,478**
            
            $
            541,503Payroll
                and related expenses
            
            
            **354,673**
            
            
            382,690Royalties
            
            
            **159,115**
            
            
            76,989Warranty
            
            
            **228,882**
            
            
            534,052Taxes
                and insurance
            
            
            **150,318**
            
            
            61,935Commissions
            
            
            **37,391**
            
            
            104,876Professional
                fees
            
            
            **337,408**
            
            
            425,433Other
            
            
            **46,622**
            
            
            481,744**$**
            **1,871,887**
            
            $
            2,609,222




**Accrued
      Warranty**


We
      warrant our products for a 12 to 14 month period beginning at the date of
      shipment. The warranty provides for repair or replacement of defective products
      returned during the warranty period at no cost to the customer. We expense
      costs
      for routine warranty repairs as incurred. Additional provisions are made for
      non-routine warranty repairs based on estimated costs to repair at the point
      in
      time in which the warranty claim is identified. Accrued warranty liabilities
      amounted to $229,000 at August 29, 2008 and $534,000 at August 31, 2007. For
      the
      fiscal year ended August 29, 2008, the accrual was increased by $50,000, reduced
      by $45,000 for satisfied warranty claims and reduced by $310,000 for previously
      estimated provisions that were no longer required. For the fiscal year ended
      August 31, 2007, the accrual was increased by $625,000 and reduced by $426,000
      for satisfied warranty claims. Net warranty recoveries amounted to $260,000
      in
      fiscal 2008. Warranty expense amounted to $625,000 in fiscal 2007. For the
      fiscal year ended September 1, 2006, the accrual was increased by $110,000.
      Warranty expense recognized during the year ended September 1, 2006, amounted
      to
      $110,000.





**9.
      Deferred Revenue**


Deferred
      revenue consists of the unrecognized revenue portion of extended service
      maintenance contracts and the fair value of revenue related to future
      performance obligations. Extended service maintenance contract revenues are
      recognized ratably over the maintenance contract term, which is typically one
      year. At August 29, 2008, deferred extended service maintenance revenues were
      $733,000, and deferred revenues related to future performance obligations were
      $38,000 and are expected to be recognized as revenue in varying amounts
      throughout fiscal 2009. At August 31, 2007, deferred extended service
      maintenance revenues were $489,000 and deferred revenues related to future
      performance obligations were $285,000.





**10.
      Financing Agreements**


**Revolving
      Line of Credit and Term Loan Facility**


WCI’s
      bank loan facility provides a maximum available credit limit of $5,000,000
      subject to availability advance formulas. The loan facility matures on September
      30, 2009, or upon demand and requires an annual facility fee of 2% of the
      maximum credit limit. The loan automatically renews from year to year unless
      the
      bank makes demand for repayment prior to maturity; provided, however, absent
      an
      event of default, the bank shall give at least 120 days notice of its intention
      to demand the loan’s repayment or to terminate the loan agreement. The loan
      facility consists of a term loan and a revolving line of credit with a combined
      borrowing limit of $5,000,000, bearing interest at the bank’s prime rate (5.00%
      at August 29, 2008). The bank retained the right to adjust the interest rate,
      subject to the financial performance of the Company.





The
      term
      loan facility provides for a maximum of $1,000,000 for advances of up to 80%
      of
      the cost of equipment acquisitions. Principal advances are payable monthly
      over
      60 months with a balloon payment due at maturity. The revolving line of credit
      is subject to availability advance formulas of 80% against eligible accounts
      receivable; 20% of eligible raw materials inventories; 20% of eligible
      work-in-process kit inventories; and 40% to 50% of eligible finished goods
      inventories and 50% of import letter of credit commitment balances. In addition,
      the facility provides for advances in excess of the availability formulas of
      up
      to $1,000,000 during the term of the facility. The loan is secured by a first
      lien on substantially all of WCI’s assets, including land and buildings, and is
      guaranteed by Wegener Corporation. At August 29, 2008, balances outstanding
      on
      the revolving line of credit amounted to $1,883,000. No borrowings were
      outstanding under the equipment term loan portions of the loan facility. The
      loan facility is also used to support import letters of credit issued to
      offshore manufacturers. At August 29, 2008, no letters of credit were
      outstanding.


45


*Wegener
        Corporation and Subsidiary*


At
      August
      29, 2008, approximately $3,117,000 was available to borrow under the advance
      formulas. During fiscal 2008, the average daily balance outstanding was
      $2,086,000 and the highest outstanding balance was $3,274,000. During fiscal
      2009 we expect the average daily balance to increase. At November 21, 2008,
      the
      outstanding balance on the line of credit increased to $3,268,000 and our
      borrowing availability decreased to $559,000.





Under
      the
      loan facility, at the end of each fiscal year we are required to maintain a
      minimum tangible net worth and a minimum fixed charge coverage ratio. In
      addition, we are required to retain certain executive officers, maintain certain
      financial ratios, and are precluded from paying dividends. At August 29, 2008
      we
      were in compliance with the covenants. While
      we
      are currently in compliance, in the event of a default the bank has the right
      to
      demand payment of the loan facility.





At
      August
      29, 2008, we had land and buildings with a cost basis of $4,457,000 (including
      land held for sale of $354,000). Although land and buildings are subject to
      a
      lien under the loan facility, they are not currently used in the existing loan
      facility’s availability advance formulas and have no mortgage balances
      outstanding. We
      are
      pursuing ways
      to
      utilize these assets to support additional overall borrowing capacities either
      with our existing bank or from other sources. During the third quarter of fiscal
      2007, the Company’s Board of Directors authorized and approved the listing for
      sale of the 4.4 acres of undeveloped land located adjacent to the Company’s
      headquarters facility in Johns Creek, Georgia (See Note 5 to the Consolidated
      Financial Statements). Proceeds from the sale of the land would be used to
      pay
      any balances outstanding on the revolving line of credit.




**11.
      Income Taxes**


No
      income
      tax expense was recorded for fiscal 2008 due to utilization of net operating
      loss and alternative minimum tax credit carryforwards. In fiscal 2008, the
      deferred tax asset decreased $141,000, which was offset by a decrease in the
      valuation allowance by the same amount. No income tax benefits were recorded
      in
      fiscal 2007 and 2006 as the Company incurred net losses of $(753,000) and
      $(2,883,000), respectively, and the increase in the deferred tax asset was
      offset by a corresponding increase in the valuation allowance due to the
      uncertainty as to the realization of the deferred tax asset.





The
      effective income tax rate differs from the U.S. federal statutory rate as
      follows:


Year ended**August 29,**
              
              August 31,
              
              September 1,**2008**
              
              2007
              
              2006Statutory
                  U.S. income tax rate
              
              
              **(34.0**
              **)%**
              
              34.0
              %
              
              34.0
              %State
                  taxes, net of federal benefits
              
              
              **(2.1**
              **)**
              
              2.0
              
              
              2.0Valuation
                  allowance
              
              
              **36.0**
              
              
              (36.0
              )
              
              (36.0
              )Non-deductible
                  expenses
              
              
              **(0.8**
              **)**
              
              (0.4
              )
              
              (0.2
              )Other,
                  net
              
              
              **0.9**
              
              
              0.4
              
              
              0.2Effective
                  income tax rate
              
              
              **-**
              **%**
              
              **-**
              **%**
              
              **-**
              **%**




The
      effective tax rate for fiscal 2008, 2007 and 2006 reflected the recording of
      a
      full valuation allowance against net deferred
      tax assets, as further discussed below.




46


*Wegener
        Corporation and Subsidiary*


Deferred
      tax assets and liabilities that arise as a result of temporary differences
      are
      as follows:





**August 29,**
              **2008**
            
            August 31,
              2007Deferred
                tax assets (liabilities):Accounts
                receivable and inventory reserves
            
            **$**
            **2,149,000**
            
            $
            2,148,000Accrued
                expenses
            
            
            **298,000**
            
            
            409,000Net
                operating loss carryforwards
            
            
            **3,570,000**
            
            
            3,644,000Credit
                carryforwards
            
            
            **199,000**
            
            
            199,000AMT
                credit carryovers
            
            
            **134,000**
            
            
            138,000Depreciation
            
            
            **118,000**
            
            
            141,000Capitalized
                software costs
            
            
            **(463,000**
            **)**
            
            (472,000
            )Other
            
            
            **(127,000**
            **)**
            
            (188,000
            )Deferred
                tax assets
            
            
            **5,878,000**
            
            
            6,019,000Valuation
                allowance
            
            
            **(5,878,000**
            **)**
            
            (6,019,000
            )Net
                deferred tax asset
            
            **$**
            **-**
            
            $
            -Consolidated
                balance sheet classifications:Current
                deferred tax asset
            
            **$**
            **2,393,000**
            
            $
            2,442,000Noncurrent
                deferred tax asset
            
            
            **3,485,000**
            
            
            3,577,000Valuation
                allowance
            
            
            **(5,878,000**
            **)**
            
            (6,019,000
            )Net
                deferred tax asset
            
            **$**
            **-**
            
            $
            -





SFAS
      No.
      109, "Accounting for Income Taxes," requires that a valuation allowance be
      established when it is “more likely than not” that all or a portion of a
      deferred tax asset will not be realized. A review of all available positive
      and
      negative evidence was considered in judging the likelihood of realizing tax
      benefits. Forming a conclusion that a valuation allowance is not needed is
      difficult when there is negative evidence such as cumulative losses in recent
      years. Cumulative losses is one of the most difficult pieces of negative
      evidence to overcome in the absence of sufficient existing orders and backlog
      (versus forecasted future orders) supporting a return to profitability. Our
      assessment in applying SFAS No. 109 indicated that a full valuation allowance
      for our net deferred tax assets was required as of August 29, 2008 and August
      31, 2007. The valuation allowance decreased $141,000 in fiscal 2008. At August
      29, 2008, net deferred tax assets of $5,878,000 were fully reserved by a
      valuation allowance.





At
      August
      29, 2008, we had a federal net operating loss carryforward of $9,604,000, of
      which $1,604,000 expires in fiscal 2021, $1,296,000 in fiscal 2023, $3,396,000
      in fiscal 2024, $1,454,000 in fiscal 2025, $1,755,000 in fiscal 2026 and $99,000
      in fiscal 2027. Additionally, we had an alternative minimum tax credit of
      $134,000 and a state income tax credit of $199,000, expiring in fiscal 2009,
      all
      of which were fully offset by the valuation allowance.




We
      adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income
      Taxes, an Interpretation of FASB Statement No. 109” (FIN 48) as of
      September 1, 2007, the first day of the first quarter of fiscal 2008. The
      adoption of FIN 48 had no impact on our financial position or results of
      operations. We are subject to U.S. federal income tax as well as income tax
      of
      numerous state jurisdictions. We are subject to U.S. federal tax examinations
      by
      tax authorities for fiscal years 2004 through 2007. Income tax examinations
      that
      we may be subject to from the various state taxing authorities vary by
      jurisdiction. Our policy under FIN 48 for penalties and interest is to include
      such amounts, if any, in income tax expense.


47


*Wegener
      Corporation and Subsidiary*


**12** **.** **Share-Based
      Compensation Plans**


**1998
      Incentive Plan.** On
      February 26, 1998, our stockholders approved the 1998 Incentive Plan (the “1998
      Plan”). The effective date of the 1998 Plan is January 1, 1998 and the 1998 Plan
      had a ten-year term. The 1998 Incentive Plan expired and terminated effective
      December 31, 2007. The Plan provides for awards of up to an aggregate of
      2,000,000 shares of common stock which may be represented by (i) incentive
      or
      nonqualified stock options, (ii) stock appreciation rights (tandem and
      free-standing), (iii) restricted stock, (iv) deferred stock, or (v) performance
      units entitling the holder, upon satisfaction of certain performance criteria,
      to awards of common stock or cash. In addition, the 1998 Plan provides for
      loans
      and supplemental cash payments to persons participating in the 1998 Plan in
      connection with awards granted. Eligible participants include officers and
      other
      key employees, non-employee directors, consultants and advisors to the Company.
      The exercise price per share in the case of incentive stock options and any
      tandem stock appreciation rights may not be less than 100% of the fair market
      value on the date of grant or, in the case of an option granted to a 10% or
      greater stockholder, not less than 110% of the fair market value on the date
      of
      grant. The exercise price for any other option and stock appreciation rights
      shall be at least 75% of the fair market value on the date of grant. The
      exercise period for nonqualified stock options may not exceed ten years and
      one
      day from the date of the grant, and the expiration period for incentive stock
      options or stock appreciation rights shall not exceed ten years from the date
      of
      the grant (five years for a 10% or greater stockholder). The 1998 Plan contains
      an automatic option grant program to non-employee members of the Board of
      Directors. Such members will each be granted an option to purchase 3,000 shares
      of common stock on the last day of each December on which regular trading occurs
      on the NASDAQ Stock Market, at an exercise price equal to the fair market value
      of such stock on the date of grant. Such options will be exercisable during
      the
      period of ten years and one day from the date of grant of the option. On
      December 31, 2007, the five non-employee directors were granted options to
      purchase an aggregate of 15,000 shares at an exercise price of $0.85. On
      December 31, 2006, the six non-employee directors were granted options to
      purchase an aggregate of 18,000 shares at an exercise price of $1.03. During
      fiscal 2006, an option to purchase 20,000 shares (10,000 shares vesting upon
      issuance and 10,000 vesting in one year from date of issue) at an exercise
      price
      of $1.70 was granted to a new employee. On December 31, 2005, the four
      non-employee directors were granted options to purchase an aggregate of 12,000
      shares at an exercise price of $1.34. Effective as of September 2, 2005, the
      Board of Directors approved the acceleration of vesting on all remaining
      unvested out-of-the-money options. Options for 346,000 shares, exercisable
      at
      $2.21, became fully vested on September 2, 2005. Of these options, 75% were
      scheduled to vest over the next three years. The purpose of the vesting
      acceleration was to reduce the expense that would be associated with these
      options in accordance with the adoption of SFAS No.123R.





**1989
      Directors' Incentive Plan.** On
      January 9, 1990, the stockholders approved the Wegener Corporation 1989
      Directors' Incentive Plan (“1989 Plan”), permitting certain participating
      directors of the Company to be eligible to receive incentive awards consisting
      of common stock of the Company, performance units or stock appreciation rights
      payable in stock or cash, or nonqualified stock options to purchase such stock,
      or any combination of the foregoing, together with supplemental cash payments.
      The aggregate number of shares of common stock that could be awarded under
      the
      1989 plan was 300,000 shares. The exercise price per share for nonqualified
      stock options or stock appreciation rights could not be less than 85% of fair
      market value on the date the award is made or not more than nine trading days
      immediately preceding such date. The expiration period for a nonqualified stock
      option was ten years and one day from the date of the grant. The expiration
      period for stock appreciation rights, including any extension, could not exceed
      ten years from the date of grant. This plan terminated and expired effective
      December 1, 1999. At August 29, 2008, options for 16,000 shares of common stock
      remained outstanding under the 1989 Directors’ Incentive Plan.





A
      summary
      of stock option transactions for the above plans follows:




Number
              of Shares
            
            Range of
              Exercise Prices
            
            Weighted
              Average
              Exercise PriceOutstanding
                atSeptember
                2, 2005
            
            
            1,313,531
            
            $
            .63
                – 2.72
            
            $
            1.58Granted
            
            
            32,000
            
            
            1.34
                – 1.70
            
            
            1.57Forfeited
                or cancelled
            
            
            (63,000
            )
            
            .84
                – 5.63
            
            
            2.01Outstanding
                atSeptember
                1, 2006
            
            
            1,282,531
            
            $
            .63
                – 2.72
            
            $
            1.56Granted
            
            
            18,000
            
            
            1.03
            
            
            1.03Exercised
            
            
            (68,000
            )
            
            .84
            
            
            .84Forfeited
                or cancelled
            
            
            (261,000
            )
            
            .84
                – 2.39
            
            
            1.75Outstanding
                atAugust
                31, 2007
            
            
            971,531
            
            $
            .63
                – 2.72
            
            $
            1.55Granted
            
            
            15,000
            
            
            .85
            
            
            .85Forfeited
                or cancelled
            
            
            (58,000
            )
            
            1.41
                – 2.21
            
            
            1.45**Outstanding
                at August 29, 2008**
            
            
            **928,531**
            
            **$**
            **.63
                – 2.72**
            
            **$**
            **1.55****Available
                for issue at August 29, 2008**
            
            
            **-**
            
            
            **-**
            
            
            **-****Options
                exercisable at:****August
                29, 2008**
            
            
            **928,531**
            
            **$**
            **.63
                – 2.72**
            
            **$**
            **1.55**August
                31, 2007
            
            
            971,531
            
            $
            .63
                – 2.72
            
            $
            1.55





The
      weighted average remaining contractual life of options outstanding and
      exercisable at August 29, 2008, was 3.4 years. There was no intrinsic value
      of
      the options outstanding and exercisable at August 29, 2008. The weighted average
      grant-date fair value of options granted during fiscal years 2008, 2007 and
      2006, was $0.51, $1.03 and $1.07, respectively.


48


*Wegener
        Corporation and Subsidiary*


**13.
      Employee Benefit Plans**


WCI
      has a
      401(k) Profit Sharing **** Plan
      and
      Trust covering substantially all employees. Amounts to be contributed to the
      plan each year are subject to the approval of the Board of Directors. No profit
      sharing contributions were declared for fiscal years 2008, 2007 and
      2006.





Eligible
      WCI employees are permitted to make contributions, up to certain regulatory
      limits, to the plan on a tax deferred basis under Section 401(k) of the Internal
      Revenue Code. The plan provides for a minimum Company matching contribution
      on a
      quarterly basis at the rate of 25% of employee contributions with a quarterly
      discretionary match. During fiscal years 2008, 2007 and 2006, an additional
      discretionary matching contribution of 25% of employee contributions was made
      for all quarters. All matching contributions are in the form of Company stock
      or
      cash at the discretion of the Board of Directors. During fiscal 2008, 2007
      and
      2006, all matching contributions in the amount of $298,000, $288,000 and
      $258,000, respectively, were in the form of cash.





**14.**  **Segment
      Information and Concentrations**


SFAS
      No.
      131, “Disclosures about Segments of an Enterprise and Related Information,’’
established standards for the way that public business enterprises report
      information about operating segments in their financial statements. The standard
      defines operating segments as components of an enterprise about which separate
      financial information is available that is evaluated regularly by the chief
      operating decision maker in deciding how to allocate resources and in assessing
      performance. Based on these standards, we have determined that we operate in
      a
      single operating segment: the manufacture and sale of satellite communications
      equipment.





In
      this
      single operating segment we have three sources of revenues as
      follows:


Year ended**August 29,**
                **2008**
              
              August 31,
                2007
              
              September 1,
                2006Direct
                  Broadcast Satellite
              
              **$**
              **20,920,764**
              
              $
              20,821,987
              
              $
              19,681,011Analog
                  and Custom Products
              
              
              **29,335**
              
              
              129,529
              
              
              129,218Service
              
              
              **544,394**
              
              
              594,513
              
              
              577,554Revenues,
                  net
              
              **$**
              **21,494,493**
              
              $
              21,546,029
              
              $
              20,387,783





Concentrations
      of products representing 10% or more of the year’s revenues are as
      follows:


Year endedProducts
              
              **August 29,**
                **2008**
              
              August 31,
                2007
              
              September 1,
                2006iPump
                  media servers
              
              
              **14.1**
              **%**
              
              32.0
              %
              
              
              (a)Professional
                  and broadcast receivers
              
              
              **27.4**
              **%**
              
              20.6
              %
              
              12.0
              %SMD
                  515 set top boxes
              
              
              **12.8**
              **%**
              
              
              (a)
              
              
              (a)Audio
                  broadcast receivers
              
              
              **10.0**
              **%**
              
              
              (a)
              
              17.5
              %Nielsen
                  encoders
              
              
              
              **(a)**
              
              
              (a)
              
              10.7
              %




(a)
      Revenues for the year were less than 10% of total revenues.





Products
      representing 10% or more of annual revenues are subject to fluctuations from
      year to year as new products and technologies are introduced, new product
      features and enhancements are added, and as customers upgrade or expand their
      network operations. Fiscal 2008 and 2007 product mix featured new
      iPump ® products
      for broadcast radio customers adopting store and forward technologies in their
      network upgrades and a new customer for a digital signage network. The
      Unity ® 4600 and
      4650 products benefited from a new cable network and expansion of high
      definition television distribution by cable headends. A new Unity ® 201
      audio broadcast receiver for business music applications was developed during
      fiscal 2007 and began shipping in the first quarter of fiscal 2008.


49


*Wegener
        Corporation and Subsidiary*


Revenues
      by geographic areas are as follows:


Year
                  ended**August 29,**
                **2008**
              
              August 31,
                2007
              
              September 1,
                2006Geographic
                  AreaUnited
                  States
              
              **$**
              **17,808,780**
              
              $
              16,257,878
              
              $
              16,992,280Canada
              
              
              **359,881**
              
              
              258,889
              
              
              163,754Europe
              
              
              **952,965**
              
              
              1,739,715
              
              
              3,082,301Latin
                  America and Mexico
              
              
              **2,288,407**
              
              
              3,272,959
              
              
              102,183Other
              
              
              **84,460**
              
              
              16,588
              
              
              47,265Revenues,
                  net
              
              **$**
              **21,494,493**
              
              $
              21,546,029
              
              $
              20,387,783





Revenues
      attributed to geographic areas are based on the location of the customer. All
      of
      our assets are located in the United States.





We
      sell
      to a variety of domestic and international customers on an open-unsecured
      account basis. These customers principally operate in the cable television,
      broadcast business music, private network and data communications industries.
      Customers representing 10% or more of the fiscal year’s revenues are as
      follows:


Year ended**August 29,**
                **2008**
              
              August 31,
                2007
              
              September 1,
                2006Customer
                  1
              
              
              **14.4**
              **%**
              
              
              (a)
              
              
              (a)Customer
                  2
              
              
              **13.3**
              **%**
              
              10.3
              %
              
              
              (a)Customer
                  3
              
              
              **12.1**
              **%**
              
              
              (a)
              
              
              (a)Customer
                  4
              
              
              
              **(a)**
              
              15.4
              %
              
              
              (a)Customer
                  5
              
              
              
              **(a)**
              
              14.2
              %
              
              
              (a)Customer
                  6
              
              
              
              **(a)**
              
              
              (a)
              
              21.8
              %Customer
                  7
              
              
              
              **(a)**
              
              
              (a)
              
              10.7
              %Customer
                  8
              
              
              
              **(a)**
              
              
              (a)
              
              10.5
              %




(a)
        Revenues for the year were less than 10% of total revenues.
  Sales
        to
        a relatively small number of major customers have typically comprised a majority
        of our revenues and that trend is expected to continue throughout fiscal
        2009
        and beyond. Future revenues are subject to the timing of significant orders
        from
        customers and are difficult to forecast. As a result, future revenue levels
        may
        fluctuate from quarter to quarter.





At
      August
      29, 2008, two customers accounted for approximately 12.3% and 11.9%,
      respectively, of our accounts receivable, while at August 31, 2007, one customer
      accounted for 40.6% of our accounts receivable. When deemed appropriate, we
      use
      letters of credit and credit insurance to mitigate the credit risk associated
      with foreign sales.





During
      fiscal years 2008 and 2007, we used offshore manufacturers for a significant
      amount of our finished goods or component inventories. Three offshore
      manufacturers accounted for approximately 52%, 21% and 3% of inventory purchases
      in fiscal 2008, respectively, and two offshore manufacturers accounted for
      approximately 41% and 23% in fiscal 2007, respectively. They have facilities
      located in Taiwan and the Peoples Republic of China. If these suppliers are
      unable to meet the Company’s needs, losses of potential customers could result,
      which could adversely affect operating results.





**15.
      Commitments and Contingencies**


**Purchase
      Commitments**


We
      have
      two manufacturing and purchasing agreements for certain finished goods
      inventories. At  August
      29, 2008, outstanding purchase commitments under these agreements amounted
      to
      $1,856,000. At August 29, 2008, we had no letters of credit
      outstanding.


50


*Wegener
        Corporation and Subsidiary*


**Operating
      Leases**


We
      lease
      certain office and manufacturing facilities, vehicles and equipment under
      long-term noncancelable operating leases that expire through fiscal 2009.
      Approximate future minimum lease commitments are as follows: 2009-$166,000;
      2010-$18,000; 2011-$7,000. Rent expense under all leases was approximately
      $195,000, $210,000 and $213,000 for fiscal years 2008, 2007 and 2006,
      respectively.





**Indemnification
      Obligations**


We
      are
      obligated to indemnify our officers and the members of our Board of Directors
      pursuant to our bylaws and contractual indemnity agreements. We routinely sell
      products with limited intellectual property indemnification included in the
      terms of sale or in certain contractual arrangements. The scope of these
      indemnities varies, but in some instances includes indemnification for damages
      and expenses (including reasonable attorneys’ fees). Certain requests for
      indemnification have been received by us pursuant to these arrangements (see
      Part I, Item 3. Legal Proceedings for further discussion).





**16.
      Quarterly Financial Data (Unaudited)**





QuarterFirst
            
            Second
            
            Third
            
            Fourth
            
            Year**Fiscal
                2008****Revenues,
                net**
            
            **$**
            **5,025,929**
            
            **$**
            **6,666,420**
            
            **$**
            **4,392,919**
            
            **$**
            **5,409,225**
            
            **$**
            **21,494,493****Gross
                profit**
            
            
            **2,063,190**
            
            
            **2,541,054**
            
            
            **1,598,851**
            
            
            **2,194,517**
            
            
            **8,397,612****Operating
                income (loss)**
            
            
            **(9,364**
            **)**
            
            **366,284**
            
            
            **(735,646**
            **)**
            
            **918,433
                (a**
            **)**
            
            **539,707**
            **(a)****Net
                earnings (loss)**
            
            
            **(50,507**
            **)**
            
            **336,325**
            
            
            **(775,124**
            **)**
            
            **872,589
                (a**
            **)**
            
            **383,283**
            **(a)****Net
                earnings (loss) per share****Basic**
            
            
            **(.00**
            **)**
            
            **.03**
            
            
            **(.06**
            **)**
            
            **.07**
            
            
            **.03****Diluted**
            
            
            **(.00**
            **)**
            
            **.03**
            
            
            **(.06**
            **)**
            
            **.07**
            
            
            **.03**Fiscal
                2007Revenues,
                net
            
            $
            4,783,477
            
            $
            4,770,665
            
            $
            6,247,080
            
            $
            5,744,807
            
            $
            21,546,029Gross
                profit
            
            
            1,177,975
            
            
            1,949,115
            
            
            2,271,944
            
            
            2,184,351
            
            
            7,583,385Operating
                (loss) income
            
            
            (941,506
            )
            
            (162,163
            )
            
            290,122
            
            
            200,726
            
            
            (612,821
            )Net
                (loss) earnings
            
            
            (961,950
            )
            
            (183,274
            )
            
            250,702
            
            
            141,760
            
            
            (752,762
            )Net
                (loss) earnings per shareBasic
            
            
            (.08
            )
            
            (.01
            )
            
            .02
            
            
            .01
            
            
            (.06
            )Diluted
            
            
            (.08
            )
            
            (.01
            )
            
            .02
            
            
            .01
            
            
            (.06
            )




(a)
      Includes gain on sale of patents of $894,127





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





None.





**ITEM 9A.** **CONTROLS
        AND PROCEDURES**





Not
      applicable





**ITEM
        9A (T).** **CONTROLS
        AND PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**





Management
      has evaluated, with the participation of our Chief Executive Officer (CEO)
      and
      our Chief Financial Officer (CFO), the effectiveness of the design and operation
      of the Company’s disclosure controls and procedures (as defined in Rules
      13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended)
      as
      of the end of the period covered by this report (August 29, 2008). Based upon
      that evaluation, our CEO and CFO have concluded that the Company’s disclosure
      controls and procedures were effective to ensure that the information required
      to be disclosed in our reports that we file or submit under the Securities
      Exchange Act of 1934 is recorded, processed, summarized and reported, within
      the
      time periods specified  in the Commission’s rules and forms, including
      to ensure that information required to be disclosed by us in the reports filed
      or submitted under the Securities Exchange Act of 1934 is accumulated and
      communicated to our management, including our principal executive and principal
      financial officers, or persons performing similar functions, as appropriate
      to
      allow timely decisions regarding required disclosure.


51


*Wegener
        Corporation and Subsidiary*


**Report
      of Management on Internal Control over Financial Reporting**





Management
      of the Company is responsible for establishing and maintaining adequate internal
      control over financial reporting as such term is defined in Securities Exchange
      Act Rule 13a-15(f).




The
      Company’s management assessed the effectiveness of its internal control over
      financial reporting, as required by Section 404 of the Sarbanes-Oxley Act,
      using
      the criteria for effective internal control over financial reporting described
      in “Internal Control – Integrated Framework” issued by the Committee of
      Sponsoring Organizations of the Treadway Commission. Based on this assessment,
      management concluded that, as of August 29, 2008, the Company’s internal control
      over financial reporting was effective.




This
      annual report does not include an attestation report of the Company's registered
      public accounting firm regarding internal control over financial reporting.
      Management's report was not subject to attestation by the Company's registered
      public accounting firm pursuant to temporary rules of the Securities and
      Exchange Commission that permit the Company to provide only management's report
      in this annual report.





There
      has
      been no change in our internal control over financial reporting during our
      most
      recent fiscal quarter that has materially affected, or is reasonably likely
      to
      materially affect, our internal control over financial reporting.





**ITEM
      9B. OTHER INFORMATION**





None





**PART
      III**





**ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**





Information
      contained in the Proxy Statement pertaining to the 2009 Annual Meeting of
      Stockholders (“Proxy Statement”) is incorporated herein by reference in partial
      response to this item. See also Item 1. “Business - Executive Officers of the
      Registrant” on page 11 of this Report.





**ITEM
      11. EXECUTIVE COMPENSATION**





Information
      contained in the Proxy Statement is incorporated herein by reference in response
      to this item.





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





Information
      contained in the Proxy Statement is incorporated herein by reference in response
      to this item. See also Item 5, “MARKET FOR THE REGISTRANT'S COMMON EQUITY,
      RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES-Equity
      Compensation Plan Information” on page 16 of this report.





**ITEM 13.**
            **CERTAIN
                RELATIONSHIPS********AND
                RELATED TRANSACTIONS, AND DIRECTOR
                INDEPENDENCE**





Information
      contained in the Proxy Statement is incorporated herein by reference in response
      to this item.





**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





Information
      contained in the Proxy Statement is incorporated herein by reference in response
      to this item.


52


*Wegener
        Corporation and Subsidiary*


**PART
      IV**





**ITEM
      15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**





( a)  (1)
      The
      following consolidated financial statements of Wegener Corporation and
      subsidiary and the related Report of Independent Registered Public Accounting
      Firm thereon are filed as part of this report:





Report
      of
      Independent Registered Public Accounting Firm.





Consolidated
      Balance Sheets – August 29, 2008 and August 31, 2007.





Consolidated
      Statements of Operations - Years ended August 29, 2008, August 31, 2007 and
      September 1, 2006.





Consolidated
      Statements of Shareholders' Equity - Years ended August 29, 2008, August 31,
      2007 and September 1, 2006.





Consolidated
      Statements of Cash Flows - Years ended August 29, 2008, August 31, 2007 and
      September 1, 2006.





Notes
      to
      Consolidated Financial Statements.





Separate
      financial statements of the Registrant have been omitted because the Registrant
      is primarily a holding company and all subsidiary included in the consolidated
      financial statements are wholly-owned.





(a)
            (2)
            The
                following consolidated financial statements schedule for Wegener
                Corporation and subsidiary is included
                herein:





Schedule
      II-Valuation and Qualifying Accounts Years ended August 29, 2008, August 31,
      2007 and September 1, 2006.




(a)
            (3)
            The
                exhibits filed in response to Item 601 of Regulation S-K are listed
                in the
                Exhibit Index
                below.




(b)   See
      Part
      IV, Item 15(a) (3).




(c)   See
      Part
      IV, item 15(a) (2).


53


*Wegener
        Corporation and Subsidiary*


REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





Board
      of
      Directors and Shareholders of Wegener Corporation


Johns
      Creek, Georgia





The
      audits referred to in our report dated November 26, 2008, relating to the
      consolidated financial statements of Wegener Corporation and subsidiary, which
      is contained in Item 8 of this Form 10-K included the audit of the financial
      statement schedule listed in the accompanying index. The financial statement
      schedule is the responsibility of the Company's management. Our responsibility
      is to express an opinion on the financial statement schedule based on our
      audits.





In
      our
      opinion, such financial statement schedule, when considered in relation to
      the basic consolidated financial statements taken as a whole, presents
      fairly, in all material respects, the information set forth
      therein.


Atlanta,
                  Georgia
              BDO
                  Seidman, LLP


November
        26, 2008
  54
 *Wegener
          Corporation and Subsidiary*


**SCHEDULE
      II**


**WEGENER
      CORPORATION AND SUBSIDIARY**


**VALUATION
      AND QUALIFYING ACCOUNTS**





Balance at
              Beginning
              of Period
            
            Charged to
              Costs and
              Expenses
            
            Write-offs
            
            Recoveries
            
            Balance at
              End of
              PeriodAllowance
                for doubtfulaccounts
                receivable:**Year
                ended August 29, 2008**
            
            **$**
            **251,316**
            
            **$**
            **-**
            
            **$**
            **(21,083**
            **)**
            **$**
            **-**
            
            **$**
            **230,233**Year
                ended August 31, 2007
            
            $
            301,012
            
            $
            (50,000
            )
            $
            -
            
            $
            304
            
            $
            251,316Year
                ended September 1, 2006
            
            $
            371,053
            
            $
            (25,000
            )
            $
            (46,436
            )
            $
            1,395
            
            $
            301,012Inventory
                Reserves:**Year
                ended August 29, 2008**
            
            **$**
            **4,092,313**
            
            **$**
            **-**
            
            **$**
            **(22,008**
            **)**
            **$**
            **-**
            
            **$**
            **4,070,305**Year
                ended August 31, 2007
            
            $
            3,842,313
            
            $
            250,000
            
            $
            -
            
            $
            -
            
            $
            4,092,313Year
                ended September 1, 2006
            
            $
            3,492,313
            
            $
            350,000
            
            $
            -
            
            $
            -
            
            $
            3,842,313





55


*Wegener
        Corporation and Subsidiary*


EXHIBIT
      INDEX





The
      following documents are filed as exhibits to this report. An asterisk (*)
      identifies exhibits filed herewith. Exhibits which are not required for this
      report are omitted. Exhibits 10.3 through 10.6, 10.8, 10.10 and 10.11 identify
      management contracts or compensatory plans.





**Exhibit
                No.**
            
            
            
            **Description
                of Exhibit**3.1
            
            
            
            Certificate
                of Incorporation as amended through May 4, 1989. (1)3.1.1
            
            
            
            Amendment
                to Certificate of Incorporation. (2)3.2
            
            
            
            By-laws
                of the Company, as Amended and Restated May 17, 2006.
                (19)3.2.1
            
            
            
            Amendments
                to Article III, Section 3.2 and Article XII of the By-laws of the
                Company,
                effective as of September 29, 2006. (4)4.1
            
            
            
            See
                By-Laws and Certificate of Incorporation, Exhibits 3.1 and 3.2. See
                Articles II and VIII of the By-Laws and Article IV of the
                Certificate.4.2
            
            
            
            Loan
                and Security Agreement and Demand Note dated June 5, 1996, by and
                between
                Wegener Communications, Inc. and LaSalle National Bank respecting
                $8,500,000 combined revolving credit note and term note.
                (5)4.2.1
            
            
            
            Loan
                and Security Agreement – First Amendment dated August 4, 1998, by and
                between Wegener Communications, Inc. and LaSalle National Bank respecting
                $10,000,000 combined revolving credit note and term note.
                (6)4.2.2
            
            
            
            Loan
                and Security Agreement – Third Amendment dated December 11, 2000, by and
                between Wegener Communications, Inc., and LaSalle National Bank respecting
                $10,000,000 combined revolving credit note and term note.
                (7)4.2.3
            
            
            
            Loan
                and Security Agreement – Fourth Amendment dated March 28, 2002, by and
                between Wegener Communications, Inc., and LaSalle National Bank respecting
                $5,000,000 combined revolving credit note and term note.
                (8)4.2.4
            
            
            
            Loan
                and Security Agreement – Fifth Amendment dated June 27, 2003, by and
                between Wegener Communications, Inc. and LaSalle National Bank respecting
                $5,000,000 combined revolving credit note and term note.
                (9)4.2.5
            
            
            
            Loan
                and Security Agreement – Sixth Amendment dated June 27, 2004, by and
                between Wegener Communications, Inc. and LaSalle National Bank respecting
                $5,000,000 combined revolving credit note and term note.
                (10)4.2.6
            
            
            
            Loan
                and Security Agreement – Seventh Amendment dated July 13, 2006, by and
                between Wegener Communications, Inc. and LaSalle National Bank respecting
                $5,000,000 combined revolving credit note and term note.
                (20)4.2.7
            
            
            
            Loan
                and Security Agreement – Eighth Amendment dated November 15, 2006, by and
                between Wegener Communications, Inc. and LaSalle National Bank respecting
                $5,000,000 combined revolving credit note and term note.
                (20)4.2.8
            
            
            
            Loan
                and Security Agreement – Ninth Amendment dated June 28, 2007, by and
                between Wegener Communications, Inc. and LaSalle National Bank respecting
                $5,000,000 combined revolving credit note and term note.
                (21)




56


*Wegener
        Corporation and Subsidiary*


**Exhibit
                No.**
            
            
            
            **Description
                of Exhibit**4.2.9
            *
            
            
            Loan
                and Security Agreement – Tenth Amendment dated September 8, 2008, by and
                between Wegener Communications, Inc. and LaSalle National Bank respecting
                $5,000,000 combined revolving credit note and term note.4.3
            
            
            
            Stockholder
                Rights Agreement. (3)4.3.1
            
            
            
            Amendment
                No. 1, dated as of September 29, 2006, to the Company's Stockholder
                Rights
                Agreement. (4)10.1
            
            
            
            License
                Agreement, Distributorship and Supply Agreement, and Purchase Pooling
                and
                Warehouse Agreement dated May 28, 1994, by and between Wegener
                Communications, Inc. and Cross Technologies, Inc. (11)10.2
            
            
            
            Wegener
                Communications, Inc. 401(k) Profit Sharing Plan and Trust dated January
                1,
                1982, amended and restated as of January 1, 1984. (12)10.3
            
            
            
            1989
                Directors' Incentive Plan. (13)10.3.1
            
            
            
            Amendment
                to 1989 Directors’ Incentive Plan effective February 1, 1995.
                (14)10.4
            
            
            
            1998
                Incentive Plan. (15)10.5
            
            
            
            Form
                of Agreement between Wegener Corporation and Robert A. Placek, Ned
                L.
                Mountain, and C. Troy Woodbury, Jr. respecting severance payments
                in the
                event of a change of control. (16)10.6
            
            
            
            Director
                Compensation Plan for 2004. (17)10.7
            
            
            
            Agreement,
                dated September 29, 2006, by and among Wegener Corporation, Henry
                Partners, L.P., Matthew Partners, L.P., Henry Investment Trust, L.P.,
                and
                David W. Wright. (4)10.8
            *
            
            
            Executive
                Compensation for the fiscal year ended August 29, 2008.10.9
            
            
            
            Patent
                Purchase Agreement effective as of May 22, 2008, by and between Wegener
                Communications, Inc. and EPAX Consulting Limited Liability
                Company.(22)10.10
            *
            
            
            Amendments
                to Agreement between Wegener Corporation and Ned L. Mountain, and
                C. Troy
                Woodbury, Jr., respectively, respecting severance payments in the
                event of
                a change of control.10.11
            *
            
            
            Agreement
                between Wegener Corporation and Robert A. Placek respecting payments
                in
                the event of termination of employment.14.1
            
            
            
            Wegener
                Corporation Code of Business Conduct and Ethics. (18)21.1
            
            
            
            Subsidiary
                of the Registrant. (17)23.1
            *
            
            
            Consent
                of BDO Seidman, LLP.31.1
            *
            
            
            Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.




57


*Wegener
        Corporation and Subsidiary*


**Exhibit
                No.**
            
            
            
            **Description
                of Exhibit**31.2
            *
            
            
            Certification
                of the Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            *
            
            
            Certification
                of the Chief Executive Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.32.2
            *
            
            
            Certification
                of the Chief Financial Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.




(1)
            
            Incorporated
                by reference to the Company's Annual Report on Form 10-K for the
                fiscal
                year ended September 1, 1989, as filed with the Commission on November
                30,
                1989.+(2)
            
            Incorporated
                by reference to the Company's Quarterly Report on Form 10-Q for the
                quarter ended May 30, 1997, as filed with the Commission on June
                30,
                1997.+(3)
            
            Incorporated
                by reference to the Company's Current Report on Form 8-K, dated May
                1,
                2003, as filed with the Commission on May 6, 2003.+(4)
            
            Incorporated
                by reference to the Company's Current Report on Form 8-K, dated September
                29, 2006, as filed with the Commission on October 3,
                2006.+(5)
            
            Incorporated
                by reference to the Company's Annual Report on Form 10-K for the
                fiscal
                year ended August 30, 1996, as filed with the Commission on November
                27,
                1996.+(6)
            
            Incorporated
                by reference to the Company's Annual Report on Form 10-K for the
                fiscal
                year ended August 28, 1998, as filed with the Commission on November
                10,
                1998.+(7)
            
            Incorporated
                by reference to the Company's Quarterly Report on Form 10-Q for the
                quarter ended March 2, 2001, as filed with the Commission on April
                16,
                2001.+(8)
            
            Incorporated
                by reference to the Company's Quarterly Report on Form 10-Q for the
                quarter ended May 31, 2002, as filed with the Commission on Jun e
                28,
                2002.+(9)
            
            Incorporated
                by reference to the Company's Quarterly Report on Form 10-Q for the
                quarter ended May 30, 2003, as filed with the Commission on July
                9,
                2003.+(10)
            
            Incorporated
                by reference to the Company's Quarterly Report on Form 10-Q for the
                quarter ended May 28, 2004, as filed with the Commission on July
                12,
                2004.+(11)
            
            Incorporated
                by reference to the Company's Annual Report on Form 10-K for the
                fiscal
                year ended September 2, 1994, as filed with the Commission on December
                16,
                1994.+(12)
            
            Incorporated
                by reference to the Company's Annual Report on Form 10-K/A for the
                fiscal
                year ended September 2, 2005, as filed with the Commission on January
                10,
                2006.+(13)
            
            Incorporated
                by reference to the Company's Annual Report on Form 10-K for the
                fiscal
                year ended August 31, 1990, as filed with the Commission on November
                29,
                1990.+(14)
            
            Incorporated
                by reference to the Company's Annual Report on Form 10-K for the
                fiscal
                year ended September 1, 1995, as filed with the Commission on December
                14,
                1995.+(15)
            
            Incorporated
                by reference to the Company's Registration Statement on Form S-8
                (No.
                333-51205), as filed with the Commission on April 28,
                1998.(16)
            
            Incorporated
                by reference to the Company's Schedule 14D-9, as filed with the Commission
                on May 6, 2003.+(17)
            
            Incorporated
                by reference to the Company's Annual Report on Form 10-K for the
                fiscal
                year ended September 3, 2004, as filed with the Commission on December
                2,
                2004.+(18)
            
            Incorporated
                by reference to the Company's Annual Report on Form 10-K for the
                fiscal
                year ended August 29, 2003, as filed with the Commission on November
                26,
                2003.+(19)
            
            Incorporated
                by reference to the Company's Current Report on Form 8-K, dated May
                17,
                2006, as filed with the Commission on May 22, 2006.+(20)
            
            Incorporated
                by reference to the Company's Annual Report on Form 10-K for the
                fiscal
                year ended September 1, 2006, as filed with the Commission on November
                30,
                2006.+(21)
            
            Incorporated
                by reference to the Company's Quarterly Report on Form 10-Q for the
                quarter ended June 1, 2007, as filed with the Commission on July
                16,
                2007.+(22)
            
            Incorporated
                by reference to the Company's Quarterly Report on Form 10-Q for the
                quarter ended May 30, 2008, as filed with the Commission on July
                10,
                2008.++
            
            SEC
                file No. 0-11003


58







*Wegener
      Corporation and Subsidiary*





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.





WEGENER
                CORPORATIONDate:
                November 26, 2008
            By
            /s/
                Robert A. PlacekRobert
                A. PlacekPresident 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 indicated on this 26th day of November 2008.





Signature
            
            Title/s/
                Robert A. Placek
            
            President,
                Chief Executive Officer and Chairman of the Board,Robert
                A. Placek
            
            Director
                (Principal Executive Officer)/s/
                C. Troy Woodbury, Jr.
            
            Treasurer
                and Chief Financial Officer, DirectorC.
                Troy Woodbury, Jr.
            
            (Principal
                Financial and Accounting Officer)/s/
                Ned L. Mountain
            
            President
                and Chief Operating Officer of WCI, DirectorNed
                L. Mountain/s/
                Phylis Eagle-Oldson
            
            DirectorPhylis
                Eagle-Oldson/s/
                Thomas G. Elliot
            
            DirectorThomas
                G. Elliot/s/
                Jeffrey J. Haas
            
            DirectorJeffrey
                J. Haas/s/
                Stephen J. Lococo
            
            DirectorStephen
                J. Lococo/s/
                David W. Wright
            
            DirectorDavid
                W. Wright


59


*Wegener
        Corporation and Subsidiary*
 
 **DIRECTORS**
 Robert
        A.
        Placek
 Chairman
        of the Board,
 President
        and Chief
 Executive
        Officer
 Wegener
        Corporation and
 Chairman
        and Chief Executive
 Officer
        Wegener
 Communications,
        Inc.
 
 Phylis
        Eagle-Oldson
 President
        and Chief Executive
 Officer
        of Emma L. Bowen
 Foundation
 
 Thomas
        G.
        Elliot
 Principal
 TGE
&
        Associates
 
 Jeffrey
        J. Haas
 Professor
        of Law
 New
        York
        Law School
 
 Stephen
        J. Lococo
 President
        and Portfolio
 Manager
        of Footprints Asset
 Management
        & Research
  Ned
        L.
        Mountain
 President
        and Chief Operating
 Officer
 Wegener
        Communications, Inc.
 
 C.
        Troy
        Woodbury, Jr.
 Treasurer
        and Chief
 Financial
        Officer
 Wegener
        Corporation
 
 David
        W.
        Wright
 President
 Henry
        Investment Trust, L.P.
 
 **OFFICERS**
 Robert
        A.
        Placek
 Chairman
        of the Board,
 President
        and Chief
 Executive
        Officer
 
 Ned
        L.
        Mountain
 President
        and Chief Operating Officer
 Wegener
        Communications, Inc.
 
 C.
        Troy
        Woodbury, Jr.
 Treasurer
        and Chief
 Financial
        Officer
 
 **INDEPENDENT
        REGISTERED**
 **PUBLIC
        ACCOUNTING FIRM**
 BDO
        Seidman, LLP
 1100
        Peachtree Street
 Suite
        700
 Atlanta,
        Georgia 30309-4516
 
 **TRANSFER
        AGENT**
 Securities
        Transfer Corporation
 2591
        Dallas Parkway
 Suite
        102
 Frisco,
        Texas 75034
 
 **CORPORATE**
 **HEADQUARTERS**
 11350
        Technology Circle
 Johns
        Creek /Atlanta, Georgia 30097-1502
 
 **ANNUAL
        MEETING**
 The
        annual meeting of stockholders will be held on January 20, 2009 at 7:00 p.m.
        at
        the Corporate Headquarters.
 
 **COMMON
        STOCK NASDAQ**
 NASDAQ
        Stock Market Symbol: WGNR
  **FORM
        10-K REPORT**
 Wegener
        Corporation's Annual Report on Form 10-K, filed with the Securities and Exchange
        Commission, is available free of charge by written request to:
  Elaine
        Miller, Secretary
 Investor
        Relations
 Wegener
        Corporation
 11350
        Technology Circle
 Johns
        Creek, Georgia
 30097-1502
 
 **WEB
        SITE**
 HTTP://WWW.WEGENER.COM
 
 **QUARTERLY
        COMMON**
 **STOCK
        PRICES**
 The
        Company’s common stock is traded on the NASDAQ Stock Market. The quarterly
        ranges of high and low sale prices for fiscal 2008 and 2007 were as
        follows:
 High
                
                Low**Fiscal
                    Year Ending August 29, 2008**First
                    Quarter
                
                $
                1.22
                
                $
                .83Second
                    Quarter
                
                
                1.01
                
                
                .76Third
                    Quarter
                
                
                1.49
                
                
                .74Fourth
                    Quarter
                
                
                1.22
                
                
                .58**Fiscal
                    Year Ending August 31, 2007**First
                    Quarter
                
                $
                1.85
                
                $
                1.17Second
                    Quarter
                
                
                1.57
                
                
                1.15Third
                    Quarter
                
                
                1.74
                
                
                1.25Fourth
                    Quarter
                
                
                1.60
                
                
                .76
 The
        Company had approximately 343* shareholders of record at November 3, 2008.
        The
        Company has never paid cash dividends on its common stock and does not intend
        to
        pay cash dividends in the foreseeable future.
 *(This
        number does not reflect beneficial ownership of shares held in nominee
        names).
  60