================================================================================

                                    FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
(Mark One)
   [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                       EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended August 29, 1997

                                      OR
   [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

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 of incorporation)                                 (I.R.S. Employer
                                                           Identification No.)

11350 Technology Circle, Duluth, 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: None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: 

                          Common Stock, $.01 par value

                                (Title of class)

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

                      YES   X                      NO
                          -----                       -----

   As of December 2, 1997,  11,598,453 shares of registrant's  Common Stock were
outstanding  and  the  aggregate  market  value  of the  Common  Stock  held  by
nonaffiliates  was $14,225,408  based on the last sale price of the Common Stock
as  quoted on the  NASDAQ  Small-Cap  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.)

   Indicate by check mark if disclosure of  delinquent  filers  pursuant to Item
405 of Regulation S-K (ss. 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. [ ]

                      DOCUMENTS INCORPORATED BY REFERENCE
      Portions of the definitive  Proxy Statement  pertaining to the January 27,
1998 Annual  Meeting of  Stockholders,  only to the extent  expressly  so stated
herein, are incorporated herein by reference into Part III.

================================================================================

<PAGE>




                               WEGENER CORPORATION
                                    FORM 10-K
                           YEAR ENDED AUGUST 29, 1997
                                      INDEX


                                     PART I



                                                                           Page
Item  1.  Business...........................................................2
Item  2.  Properties.........................................................9
Item  3.  Legal  Proceedings.................................................9


                                     PART II


Item  5.    Market for Registrant's Common Stock and Related Stockholder
            Matters..........................................................9
Item  6.    Selected Financial Data.........................................10
Item  7.    Management's Discussion and Analysis of Financial
            Condition and Results of Operations.............................11
Item  8.    Financial Statements and Supplementary Data.....................18


                                    PART III


Item 10.    Directors and Executive Officers of the Registrant..............33
Item 11.    Executive Compensation..........................................33
Item 12.    Security Ownership of Certain Beneficial Owners
            and Management..................................................33
Item 13.    Certain Relationships and Related Transactions..................33


                                     PART IV


Item 14.    Exhibits, Financial Statement Schedules, and
            Reports on Form 8-K.............................................34























                                       1



<PAGE>


                                     PART I
ITEM 1.     BUSINESS

      Wegener Corporation,  the Registrant,  together with its subsidiaries,  is
referred to herein as the "Company".


      (a)   General development of business.


      Wegener Corporation was formed in 1977 and is a Delaware corporation.  The
Company conducts its continuing  business through Wegener  Communications,  Inc.
(WCI), its wholly-owned  subsidiary,  and Wegener Communications  International,
Inc., a wholly-owned subsidiary of WCI.


      WCI  was  formed  in  April  1978  and  is  a  Georgia  corporation.   Its
wholly-owned subsidiary, Wegener Communications International,  Inc., is a Small
Foreign  Sales  Corporation.   WCI,  a  market  leader  in  digital  and  analog
compression technology, designs and manufactures communications transmission and
receiving equipment for the business broadcast,  data communications,  cable and
broadcast radio and television industries for worldwide markets.


      (b)   Financial information about industry segments.


      Segment  information  contained in Note 11 to the  consolidated  financial
statements  on page 30 of this document is  incorporated  herein by reference in
response to this item.


      (c)   Narrative description of business.


            (i)   Principal products produced and services rendered, and

            (ii)  Status of a product or segment.

Satellite Communications Electronics.
-------------------------------------

WCI manufacturers  electronics for the distance learning,  broadcast  television
and  radio,  cable  television,   business  music,   private  network  and  data
communications  industries.  WCI services all of the products that it sells. The
Company  warrants  its  products  for a  period  of  one  year.  There  were  no
significant warranty claims outstanding as of August 29, 1997.


Throughout  fiscal 1996 and fiscal  1997,  WCI  continued to produce and develop
digital compression products. During 1997 WCI introduced COMPEL Control software
and the UNITY Digital Broadcast  product family.  Wegener's digital products are
in use worldwide in distance  learning,  radio,  cable  television,  and private
business networks.  In terms of new orders,  compressed digital products are the
fastest  growing product  segment for the Company.  As expected,  demand for the
Company's analog products has begun to decline  following market demand for, and
the Company's emphasis on, digital technology.







                                       2

<PAGE>

DIGITAL  COMMUNICATIONS.  The demand for digital products is being driven by the
high cost of satellite  capacity.  Satellite capacity is scarce due to pressures
on both the supply and demand side of the market. On the supply side, satellites
are extremely  expensive to launch,  build,  and maintain.  The useful life of a
satellite  is  limited by the amount of  positioning  fuel that can be  carried.
Also,  the  placement of  satellites  is regulated by the FCC and  therefore the
number of  satellites  within  range of any given  location is  limited.  On the
demand side,  the cost of receive  hardware is being  steadily  reduced  through
advancing  technology.  The reduction in the cost of network hardware  increases
the economic  feasibility of a greater number of networks.  This is evidenced by
the trend in both  television and radio towards  narrow-casting  to well-defined
market segments as opposed to broadcasting  to the general  population.  Digital
compression  technology  allows a four to  ten-fold,  or more,  increase  in the
throughput of a satellite channel. For the network, this compression  represents
an opportunity  to reduce the cost of satellite use. For the satellite  operator
it represents an opportunity  to increase the revenue  generated by an expensive
asset. Due to existing satellite transponder contracts and the cost of replacing
existing  analog  hardware,  the digital  conversion of major networks is taking
longer than anticipated.  These network conversions are expected to occur in the
near  future,  but it is  impossible  to predict the precise  timing of customer
internal  decision  processes.  Management  believes  the  market as a whole has
considerable built up demand for digital technology.


With ongoing  breakthroughs  in digital  compression,  digitized audio and video
products have become increasingly  important.  WCI manufactures MPEG-2 broadcast
quality digital video products for commercial program  distribution.  During the
first quarter of fiscal 1997 WCI completed deliveries of its MPEG-2 products for
use  by NBC in the  MSNBC  network.  The  order  comprised  over  450  satellite
receivers and over 80 transmit  systems.  Turner  Broadcasting also expanded its
usage of WCI's digital broadcast products.  Remote feeds from London, Jerusalem,
Moscow, and Hong Kong are now transmitted using Wegener's DV2000 products.  Most
significant,  in fiscal 1997 an order was placed by FOX/Liberty Networks, L.L.C.
to convert existing analog cable networks to digital transmission.


WCI's  lower data rate  products  are in use by Eli Lilly and  Company for their
global business  network.  Ongoing projects  include  shipments of digital video
products to Dow Jones Investor Network and Reuters Financial  Television for use
in  terrestrial  and  satellite  business  information  networks  which  deliver
compressed video to subscribers' desktops.


The Company's  digital  audio  products  employ MPEG digital  audio  compression
technology and are used to distribute  radio and business  music  programming to
network  affiliates.  During fiscal 1997,  ABC Radio  Network,  Jones  Satellite
Networks,  Moody  Broadcasting and a variety of smaller networks  throughout the
world chose WCI digital audio products to upgrade their networks.


The Company also manufacturers  specialized data communications products used in
satellite  broadcast data  applications.  Bookings for these  products  remained
strong in fiscal 1997.  WCI  manufactures  satellite data receivers for Glenayre
Technologies  which are being used to expand Glenayre's paging network.  Reuters
also uses WCI data equipment to expand  distribution for its international  news
feed.











                                       3

<PAGE>

CABLE TELEVISION  PRODUCTS.  Cable television  product bookings  experienced the
greatest  growth of any of WCI's  markets.  In the third quarter of fiscal 1997,
WCI  received  an $11.8  million  order for WCI's  new UNITY  digital  broadcast
receiver  and COMPEL  network  control  software  for use by FOX Sports  Net, FX
Networks,  and fXM: Movies for FOX. Subsequent to fiscal year end, FOX placed an
additional order for $2.8 million of UNITY receivers bringing the total order to
$14.6 million.  The UNITY receivers will provide  automated program delivery for
FOX's cable affiliates and regional  networks.  Shipments are scheduled to begin
in the second  quarter of fiscal 1998 and  continue  throughout  fiscal 1998 and
into the first quarter of fiscal 1999.  Other WCI's products are widely employed
in the cable industry to provide a variety of audio,  data,  network control and
video services to cable subscribers.


WCI  cue and  control  equipment  for  cable  television  networks  are  used on
advertising  supported  networks to permit  affiliated  cable  systems to insert
local commercials at appropriate  times.  Control equipment  delivers  switching
commands from the network to provide program routing and blackouts.


A wide variety of data  transmission  products  are used to deliver  specialized
data services to cable headends and subscribers.  These  applications range from
data to feed news  services,  weather and program  guide  graphics,  delivery to
personal computers, and control of cable subscribers' addressable converters.


An  additional  product  family  of the  cable  television  segment  is  graphic
generators.  These products deliver custom data by satellite that is graphically
displayed  on a  subscriber's  television.  Products in this area were among the
first  generated by WCI. WCI has continued to add new products to this family to
meet market demand.


RADIO AND TELEVISION BROADCASTING.  Broadcasters use WCI equipment to distribute
digital audio, analog audio, video, and cue/network control signals.  Television
networks,  such as NBC and Turner  Broadcasting,  use WCI products to distribute
programming from remote locations and between affiliates.  Satellite based radio
networks   distribute   programming  and  network  control  signals  to  network
affiliates.


OPTICAL  FIBER  AND  TERRESTRIAL  MICROWAVE.  Most  of  WCI's  products  used on
satellite  communications  links are easily used on existing  microwave or fiber
circuits.  Typical  applications  are voice and data circuits  that  accompany a
television signal.


BUSINESS  MUSIC.  This  market  consists  of  suppliers  of  business  music  to
restaurants,  offices and various retail  establishments.  WCI  manufactures the
equipment  required to transmit  audio and data from the business music supplier
to the end user via  satellite  circuits.  The  equipment is  controlled  by the
business music supplier using WCI's network control technology.  Potential users
of  this  WCI  equipment  include  any  business  purchasing  background  music,
foreground music and broadcast data.














                                       4

<PAGE>

      (iii) Sources and availability of raw materials.

      Raw materials consist of passive electronic components, electronic circuit
boards and fabricated sheet metal. WCI purchases  approximately  one-half of its
raw  materials  from  direct  dealers  and  the  other  half is  purchased  from
distributors.  Passive and active  components  include  parts such as resistors,
integrated  circuits and diodes.  WCI uses  approximately  ten  distributors  to
supply its electronic components. Direct sources provide sheet metal, electronic
circuit  boards  and other  materials  built to  specifications.  WCI  maintains
relationships  with approximately  twenty direct dealers.  Most of the Company's
materials are available from a number of different suppliers;  however,  certain
components  used in existing and future  products are currently  available  from
single or limited sources.  Although the Company believes 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 could have an adverse effect on the Company's business
and results of operations.

      (iv)  Patents, trademarks, licenses, franchises and concessions held.

      The Company holds certain patents with respect to some of its products and
markets its services and  products  under  various  trademarks  and  tradenames.
Additionally, the Company licenses certain analog audio processing technology to
several   manufacturing   companies   which   generated   royalty   revenues  of
approximately  $121,000,  $112,000 and $173,000 in fiscal 1997,  1996, and 1995,
respectively.  Although  the Company  believes  that the patents and  trademarks
owned are of value,  the Company  believes  that success in its industry will be
dependent upon new product  introductions,  frequent product  enhancements,  and
customer support and service. However, the Company intends to protect its rights
when, in its view, these rights are infringed upon.

      (v)   Seasonal variations in business.

      There  does not  appear to be any  seasonal  variations  in the  Company's
business.

      (vi)  Working capital practices.

      Information  contained  under the  caption  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations" (MD&A) on pages 11-18
of this document is incorporated herein by reference in response to this item.

      (vii) Dependence upon a limited number of customers.


      The Company sells 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 The Church of Jesus  Christ of  Latter-Day
Saints  accounted for  approximately  11.0% of revenues in fiscal 1997. Sales to
Ascent Network Services,  Inc. accounted for approximately  14.2% of revenues in
fiscal 1996. Sales to Glenayre Technologies accounted for approximately 15.0% of
revenues in fiscal 1995. At August 29, 1997, one customer accounted for 27.7% of
the Company's accounts  receivable.  At August 30, 1996, two customers accounted
for 34.6% and 10.8% respectively, of the Company's accounts receivable. Sales to
a relatively small number of major customers have typically comprised a majority
of the  Company's  revenues.  This trend is expected to continue in fiscal 1998.
There can be no assurance that the loss of one or more of these  customers would
not have an adverse effect on the Company's operations.






                                       5

<PAGE>

      (viii) Backlog of orders.

      The Company's  backlog is comprised of undelivered,  firm customer orders,
which are scheduled to ship within eighteen  months.  The Company's  backlog was
approximately $19,501,000 at August 29, 1997 and $13,807,000 at August 30, 1996.
Reference  is  hereby  made to page 12 of this  document  which is  incorporated
herein by reference in response to this item.

      Approximately  $17,464,000  of the August 29, 1997  backlog is expected to
ship during fiscal 1998, and the remainder in fiscal 1999.


      (ix)  Government contracts.

      Not applicable.

      (x)   Competitive Conditions.


      The Company  competes  with  companies  which have  substantially  greater
resources  and a larger  number of products  than the  Company,  as well as with
small  specialized  companies.  Competition  in the emerging  distance  learning
industry is comprised of both established  firms as well as relative  newcomers.
Through  relationships  with  satellite  service  providers,   the  Company  has
positioned itself to provide end-to-end solutions to its customers.  Competition
in  the  market  for  the  Company's  MPEG-2  broadcast  television  electronics
products,   including   digital  video  equipment,   is  driven  by  timeliness,
performance,  and price. The Company's  broadcast  digital video products are in
production  and are  competitively  priced,  with  unique,  desirable  features.
Management believes these products are physically smaller and priced below other
equivalent  products on the market  today.  The  competitive  situation  of data
products  is  significantly  different  than that of the  markets  for other WCI
products.  Due to the large number of potential end users,  both small and large
competitors continue to emerge. The Company believes it has positioned itself to
capitalize on the market trends in this business through careful  development of
its product and market  strategies,  which have proven  successful in increasing
revenues from this sector.  In the cable television  market the Company believes
that the competitive position for many of its products is dominant. However, the
UNITY product family is potentially  competing with  significant and established
firms. WCI believes that it maintains a competitive  advantage in the market for
advertising-supported  networks  through  its  ability to  provide  regionalized
programming and control. Other products for cable television include proprietary
cueing and network  control  devices.  Competition  for radio network  products,
including the Company's  digital audio products,  is very aggressive and pricing
is very  competitive.  The Company believes that its continued success in all of
its markets will depend on aggressive marketing and product development.


      (xi)  Research and development activities.

      The  Company's  research and  development  is designed to  strengthen  and
broaden its  existing  products  and systems  and to develop  new  products  and
systems.  A major portion of the fiscal 1997 research and  development  expenses
were spent in the digital  video  product  area.  WCI research  and  development
expenses  totalled  $1,999,000 in fiscal 1997,  $2,286,000  in fiscal 1996,  and
$1,985,000  in fiscal  1995.  Additional  information  contained in MDA on pages
11-18 of this document is  incorporated  herein by reference in response to this
item.






                                       6


<PAGE>

      (xii) Environmental disclosures.


      Federal,  state and local pollution control  requirements have no material
effect upon the capital  expenditures,  earnings or the competitive  position of
the Company.


      (xiii) Number of employees.

      As of August 29, 1997,  the Company had 136 employees  employed by the WCI
manufacturing  subsidiary.  No employees are parties to a collective  bargaining
agreement and the Company believes that its relationships with its employees are
good.

            (d)   Financial  information  about foreign and domestic  operations
                  and export sales.

      Information contained under the caption  "Consolidation" in Note 1 on page
23 of this document, and in Note 11 on page 30 of this document are incorporated
herein by reference in response to this item.














































                                       7

<PAGE>



EXECUTIVE OFFICERS OF THE REGISTRANT

      The executive officers of the Company are as follows:

NAME AND BUSINESS EXPERIENCE              AGE          OFFICE HELD


ROBERT  A.  PLACEK                        59         President,             
President and Chief Executive Officer                Chief Executive      
of the Company  since August 1987 and                Officer              
Director since July 1987. Chairman of                and Chairman of the  
the Board since 1995.  President  and                Board                
Director of WCI since 1979.               

C. TROY WOODBURY, JR.                     50         Treasurer and           
Treasurer and Chief Financial Officer                Chief Financial
of the  Company  since  June 1988 and                Officer        
Director  since 1989.  Executive Vice     
President  of WCI  since  July  1996.
Treasurer and Chief Operating Officer
of WCI since  September  1992.  Group
Controller  for   Scientific-Atlanta,
Inc. from March 1975 to June 1988.

JAMES T. TRAICOFF                         47         Controller         
Controller   of  the  Company   since
November  1991;  Controller  for  WCI
since July 1988;  Controller  for BBL
Industries,  Inc.  from April 1985 to
July 1988.






   



























                                        8

<PAGE>




ITEM 2.     PROPERTIES

      The  executive  offices of the  Company  are  located at 11350  Technology
Circle, Duluth, 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  approximately  11,300 square feet under long-term leases expiring during
fiscal 1999, at an annual  rental of  approximately  $79,000.  This space is for
additional warehouse and manufacturing capacity. WCI's manufacturing facility is
subject  to a  mortgage  note  securing  the  indebtedness.  WCI's  4.4 acres of
adjacent  land is  pledged  as  collateral  under the  Company's  line of credit
facility.

ITEM 3.     LEGAL PROCEEDINGS

      No significant legal proceedings were pending as of August 29, 1997.



                                     PART II


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

        The  Company's  Common  Stock is traded on the NASDAQ  Small-Cap  Market
(NASDAQ  symbol  WGNR).  As of  December 2, 1997 there were  approximately  423*
holders of record of Common  Stock.  *(This  number does not reflect  beneficial
ownership of shares held in nominee names).

   The quarterly  ranges of high and low closing sale prices for fiscal 1997 and
1996 were as follows:

                                     Fiscal 97                 Fiscal 96
                                     ---------                 ---------
                                High          Low          High         Low
            First Quarter       $6           $3 7/8       $12          $ 9
            Second Quarter       4 1/8        2 5/8        13 3/4        8 1/2
            Third Quarter        3 7/8        1 7/16       10 5/8        7 3/4
            Fourth Quarter       3 1/2        1 13/16      12 1/4        5 5/8

        The Company has not paid any cash dividends on its Common Stock. For the
foreseeable future, the Company's Board of Directors does not intend to pay cash
dividends,  but  rather  plans to  retain  earnings  to  support  the  Company's
operations and growth.




















                                       9

<PAGE>



ITEM 6.     SELECTED FINANCIAL DATA


                             SELECTED FINANCIAL DATA
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                     Year Ended
                                 ----------------------------------------------------------------
                                 August 29,    August 30,  September 1, September 2, August 27,
                                    1997         1996        1995         1994        1993
-------------------------------------------------------------------------------------------------
<S>                              <C>            <C>          <C>          <C>         <C>     
 Revenue                         $ 21,812       $ 23,195     $ 19,488     $ 16,521    $ 14,673
 Earnings (loss) from
    continuing operations          (1,809)         1,456          385          (69)       (428)
 Earnings (loss) per  share
    from continuing operations   $   (.19) (2)  $    .16     $    .05     $   (.01)   $   (.06)

 Earnings (loss) per share       $   (.19) (2)  $    .16     $    .05     $   (.01)   $   (.07)
  
 Cash dividends paid per share (1)      -              -            -            -           -
------------------------------------------------------------------------------------------------

 Total assets                    $ 25,614       $ 27,737     $ 22,018     $ 11,893    $ 10,827
 
 Long-term obligations and
 current maturities                 3,667          7,935        2,796        2,979       3,556
------------------------------------------------------------------------------------------------
 

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


(2)  Fully diluted earnings per share were anti-dilutive.


</TABLE>


























                                       10

<PAGE>



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,  such as  statements  relating to financial  results,  plans for future
business development activities,  capital spending or financing sources, capital
structure  and  the  effects  of  regulation  and  competition,   and  are  thus
prospective. Such forward-looking statements are subject to risks, uncertainties
and other factors  which could cause actual  results to differ  materially  from
future  results  expressed  or  implied  by  such  forward-looking   statements.
Potential  risks and  uncertainties  include,  but are not limited to,  economic
conditions,   product  demand,  timing  of  orders,   governmental   regulation,
technological  developments,  competition and other uncertainties  detailed from
time to time in the Company's Securities and Exchange Commission filings.

        The Company  manufactures  satellite  communications  equipment  through
Wegener Communications,  Inc. (WCI), a wholly-owned subsidiary. WCI manufactures
products for transmission of audio, data, and video via satellite.

RESULTS OF OPERATIONS

        Net loss for the year ended August 29, 1997 was  $(1,809,000) or $(0.19)
per share,  compared to net  earnings of  $1,456,000  or $0.16 per share for the
year ended  August 30,  1996 and  $385,000 or $0.05 per share for the year ended
September 1, 1995.

        Revenues  for fiscal 1997  decreased  $1,383,000  to  $21,812,000,  from
$23,195,000 in fiscal 1996,  which compared to revenues of $19,488,000 in fiscal
1995.  During fiscal 1997,  the Company  continued to focus on improved  product
quality and the development of new products.  Direct  Broadcast  Satellite (DBS)
revenues in fiscal 1997 decreased  $698,000 to $18,207,000  from  $18,905,000 in
fiscal 1996.  Telecom and Custom Product revenues  decreased  $685,000 in fiscal
1997 to $3,605,000  from $4,290,000 in fiscal 1996. The decrease in DBS revenues
was due to lower than  expected  orders for the  digital  product  line and late
deliveries  of  scheduled  fiscal  1997  shipments.  The Company  believes  that
bookings  of new orders  were  impacted by several  factors.  Customer  decision
processes  were  impacted by  introductions  of newer  MPEG-2  technology  which
resulted in longer evaluation periods of MPEG-1 and MPEG-2  technologies as well
as competitors products and performance claims.  Existing satellite  transponder
contracts,  along with additional  space segment  becoming  available,  provided
adequate  transponder  capacity for current  service which  resulted in networks
deferring conversions to digital broadcasting.  Budget decisions and constraints
of certain broadcast network customers resulted in deferring placement of orders
into fiscal 1998. Orders by customers for products used in the distance learning
markets are subject to state or federal funding approvals, which has resulted in
the sales process  taking from eighteen  months to three years to complete.  The
Business TV market was impacted by an evaluation  period during which  customers
defined their network  requirements and compared equipment  alternatives between
low-end non-addressable network systems versus high-end addressable networks. As
the  market  became  segmented,  sales  efforts  were  focused on the market for
addressable  systems where the Company believes it has a competitive  advantage.
Orders for digital audio products to convert  existing  analog radio networks to
digital  broadcasting  were  impacted  by  industry  consolidations  which  have
resulted in deferring  purchasing decisions into fiscal 1998. Late deliveries of
scheduled  fiscal 1997 deliveries  resulted from delays in internally  developed
software  and vendor  design  problems in a sole  sourced  assembly.  Internally
developed  software was completed in the fourth  quarter of fiscal 1997.  Design








                                       11

<PAGE>

changes by outside  vendors  and rework of  related  components  were  completed
subsequent to fiscal 1997. The Telecom and Custom Product Group revenue decrease
was  primarily  due to a higher  level of  shipments  in  fiscal  1996 of uplink
equipment to radio networks for conversion from analog to digital  broadcasting.
WCI's  backlog of orders  scheduled  to ship within  eighteen  months  increased
$5,694,000 or 41.2% to $19,501,000 at August 29, 1997 from $13,807,000 at August
30, 1996 which  compares to  $12,725,000  at September  1, 1995.  Approximately,
$17,464,000  of the August 29, 1997  backlog is  expected to ship during  fiscal
1998.  Orders  received  subsequent to fiscal 1997,  which are scheduled to ship
during fiscal 1998 amounted to $5,888,000, bringing the total orders received to
date and expected to ship within fiscal 1998 to $23,352,000. The Company expects
to book  sufficient  additional  orders to achieve its fiscal 1998 business plan
which  reflects an increase in revenues  compared to fiscal 1997 and a return to
profitability.

        International  sales are generated  through a direct sales  organization
and through foreign  distributors.  International sales were $2,964,000 or 13.6%
of  revenues in fiscal  1997,  compared  to  $2,549,000  or 11.0% of revenues in
fiscal 1996,  and  $3,926,000  or 20.1% of revenues in fiscal  1995.  Management
believes that international sales could increase as more business  opportunities
become  available for WCI products in the future.  All  international  sales are
denominated in U.S. dollars.

        Gross  profit  decreased  $2,548,000  in fiscal 1997  compared to fiscal
1996.  Gross profit as a percent of sales was 22.6% in fiscal 1997,  compared to
32.2% in fiscal 1996 and 34.1% in fiscal  1995.  The  decrease in profit  margin
dollars and  percentages  in fiscal 1997 compared to fiscal 1996 were mainly due
to (1) a sales mix of  products  with  higher  material  costs  which  decreased
margins by  approximately  $936,000 or 4.3% of sales;  (2) lower  revenues which
decreased the margin contribution to cover fixed overhead costs by approximately
$608,000  or 2.8%  of  sales;  and (3) an  increase  in  manufacturing  overhead
expenses  of  $577,000  or  2.6%  of  sales,  principally  due to  increases  in
amortization  and  write-offs  of  capitalized  software.  Additionally,  profit
margins  were  adversely   impacted  by  start-up  costs   associated  with  the
introduction  of new digital video  products and higher than  expected  material
component costs of certain products. The gross profit in fiscal 1997 was reduced
by charges of $825,000 in reserves for slow-moving and obsolete inventory and by
$242,000  for  write-offs  of  capitalized  software.  These  reserves  resulted
primarily  from the need to reduce to net  realizable  value  the  inventory  of
slower  moving,  mature  analog  products  and  earlier  generations  of digital
products. These products continue to sell but at reduced rates. This compares to
an  inventory  reserve  charge of  $775,000 in fiscal 1996 and $77,000 in fiscal
1995.

        Selling,  general and administrative  expenses  increased  $1,210,000 or
30.6% to  $5,161,000  in  fiscal  1997 from  $3,951,000  in  fiscal  1996.  As a
percentage of revenues,  selling, general and administrative expenses were 23.7%
of  revenues  in fiscal 1997 and 17.0% in fiscal  1996.  The dollar  increase of
expenses  in fiscal 1997 from fiscal  1996  includes  increases  in (1) bad debt
expense of $297,000; (2) restructuring expense of $100,000; (3) depreciation and
amortization  expense of $111,000,  principally  for loan  origination  fees and
convertible  bond issuance costs; and (4)  professional  fees of $98,000.  Other
increases of  approximately  $398,000  were due to higher  levels of selling and
marketing   expenses   and   compensation   expenses.   Selling,   general   and
administrative  expenses increased $280,000 or 7.6% to $3,951,000 in fiscal 1996
from $3,671,000 in fiscal 1995.

        Research and development  expenditures,  including  capitalized software
development  costs,  were  $3,089,000  or  14.2% of  revenues  in  fiscal  1997,
$3,180,000  or 13.7% of  revenues in fiscal  1996,  and  $2,453,000  or 12.6% of








                                       12

<PAGE>

revenues in fiscal 1995.  The decrease in the dollar amount of  expenditures  in
fiscal  1997 as compared to fiscal  1996 is  primarily  due to lower  proto-type
material  costs  and  consulting  expenses  which  were  partially  offset by an
increase in engineering  personnel.  During fiscal 1997,  $1,090,000 of software
development  costs were capitalized in accordance with SFAS 86, and $894,000 and
$468,000 of software development costs were capitalized in fiscal 1996 and 1995,
respectively.  Research and development expenses, excluding capitalized software
development  costs,  were  $1,999,000  or  9.2%  of  revenues  in  fiscal  1997,
$2,286,000  or 9.9% of  revenues  in fiscal  1996,  and  $1,985,000  or 10.2% of
revenues in fiscal 1995.

        Interest expense decreased 21.6% in fiscal 1997 compared to fiscal 1996,
and increased  10.6% in fiscal 1996 compared to fiscal 1995. The decrease during
fiscal 1997 was  primarily  due to a decrease in the weighted  average  interest
rate of total  indebtedness  including the convertible  debentures.  The Company
believes  that  interest  expense in fiscal 1998 will  decrease as a result of a
decrease in outstanding debt.

        Fiscal 1997 income tax benefit was  comprised  of a deferred  income tax
benefit of $946,000.  The Company has  provided no deferred tax asset  valuation
allowance at August 29, 1997 based on management's  assessment that existing tax
benefits  will "more  likely than not" be realized  in future tax  returns.  The
Company  expects to achieve  its  current  business  plan for fiscal  1998 which
reflects  an  increase  in  revenues  compared  to  fiscal  1997 and a return to
profitability.  The  income  tax  benefit  recognized  during  fiscal  1997  was
principally  the result of an  increase  in the  Company's  net  operating  loss
carryforward.  The  Company  recognized  an income tax benefit in fiscal 1996 of
$848,000  due to the  reversal of the  valuation  allowance  on the deferred tax
assets.   No  income  tax  benefit  was   recognized   in  fiscal  1995  due  to
fully-reserved  deferred  tax  benefits  related to federal net  operating  loss
carryforwards, deductible temporary differences, and tax credit carryforwards.

            The Company  operates on a 52-53 week fiscal  year.  The fiscal year
ends on the Friday nearest to August 31. Fiscal 1997, 1996 and 1995 contained 52
weeks.

LIQUIDITY AND CAPITAL RESOURCES

      Cash  provided  by  operating  activities  in fiscal  1997 was  $6,325,000
compared to cash used in operating  activities of $6,041,000  and  $2,488,000 in
fiscal 1996 and 1995,  respectively.  The primary sources of cash from operating
activities  in  fiscal  1997  were (1) a  decrease  in  accounts  receivable  of
$2,137,000;  (2) a decrease in inventories of $1,877,000; and (3) an increase in
customer  deposits of  $2,588,000.  These  sources  were offset by a decrease in
accounts payable of $746,000.

      Cash used by investment  activities was $2,128,000 in fiscal 1997 compared
to $1,472,000 in 1996 and $958,000 in 1995. Cash used in 1997 includes  property
and equipment  expenditures of $1,038,000 and capitalized  software additions of
$1,090,000.

      Cash used by financing  activities  was $2,126,000 in fiscal 1997 compared
to cash  provided  by  financing  activities  of  $2,771,000  in fiscal 1996 and
$8,358,000 in fiscal 1995.  In fiscal 1997,  financing  activities  used cash of
$1,530,000  for a reduction of the  line-of-credit  and  $539,000 for  scheduled
repayments  of  long-term  obligations.  In fiscal 1996,  net proceeds  from the
issuance  of  convertible   debentures  and  long-term  debt  provided  cash  of
$5,074,000.








                                       13

<PAGE>

        Net accounts  receivable  decreased  35.1% to  $4,613,000  at August 29,
1997, from $7,106,000 at August 30, 1996, compared to $4,572,000 at September 1,
1995. The decrease in fiscal 1997 was primarily due to a $1,438,000  decrease in
revenues  during the fourth quarter of fiscal 1997 compared to fiscal 1996 and a
decrease in the days  outstanding.  The  allowance  for  doubtful  accounts  was
$362,000  at August  29,  1997,  $58,000  at August  30,  1996,  and  $42,000 at
September  1,  1995.  Write-offs  in fiscal  1997,  1996 and 1995 were  $53,000,
$70,000 and  $149,000,  respectively.  Increases to the allowance and charges to
general and  administrative  expense were  $357,000 in fiscal  1997,  $60,000 in
fiscal 1996 and $70,000 in fiscal 1995.

        During  fiscal 1997,  inventory  reserves  were  increased by provisions
charged to cost of sales of $825,000 and were reduced by write-offs of $481,000.
The increase in the provision was to provide additional  reserves for (1) slower
moving analog Telecom products;  (2) excess digital audio  inventories;  and (3)
potentially  slow-moving  inventories  of earlier  generations  of other digital
products.  During  fiscal  1997,  decreases  in  inventories  provided  cash  of
$1,877,000   while  in  fiscal  1996  increases  in  inventories  used  cash  of
$6,237,000.  During fiscal 1996 inventory  reserves were increased by provisions
charged to cost of sales of $775,000. During fiscal 1995 inventory reserves were
reduced by write-offs of $196,000 and increased by provisions charged to cost of
sales of $77,000.

      On  May  31,  1996,  the  Company  issued  $5,000,000  of  8%  Convertible
debentures,  due May  31,1999,  in a private  placement  to  various  accredited
investors for net proceeds to the Company of $4,700,000.  The proceeds were used
for working  capital and reduction of the  line-of-credit  note  payable.  These
debentures are  convertible at the option of the holders at any time through May
31, 1999, into a number of shares of common stock at a price equal to the lesser
of (i)  $12.25  per share or (ii) a  percentage,  based on the  holding  period,
ranging  from 95% to 82.5% (82.5% at August 29, 1997 and August 30, 1996) of the
average of the lowest sale price on each of the five  trading  days  immediately
preceding the conversion  date.  Interest at the rate of 8% per annum is payable
quarterly in cash or, at the option of the Company, by adding the amount of such
interest to the  outstanding  principal  amount due under the debenture.  During
fiscal  1997  and  1996  debentures  in  the  amount  of  $101,222  and  $33,973
respectively,  were issued for payment of accrued interest.  During fiscal 1997,
$3,850,000  principal  amount of debentures were converted into 2,131,987 shares
of common stock.  No debentures were converted in fiscal 1996. The Company filed
two  Registration  Statements to register up to 3,680,000 shares of common stock
underlying  such  debentures  for  resale  following  conversion.  These  shares
constitute management's estimate of the maximum number of shares of common stock
to be issued upon  conversion,  giving  effect to possible  fluctuations  in the
market  price of common  stock.  Subsequent  to August  29,  1997,  $964,192  of
debentures were converted into 659,023 shares of common stock.

        WCI maintains a secured  revolving line of credit and term loan facility
with a combined  maximum  available  credit limit of $8,500,000  expiring May 4,
1999 or upon demand.  The term loan portion provides for a maximum of $1,000,000
for advances of up to 80% of the cost of equipment acquisitions. Interest on the
term loan is payable  monthly at the bank's prime rate (8.5% at August 29, 1997)
plus 1 1/2%.  Principal  advances  are payable  monthly over sixty months with a
balloon  payment  due at  maturity.  Interest  on the  revolving  line of credit
portion is payable monthly at the bank's prime rate plus 1/2%. Additionally, the
facility  requires an annual facility fee of 1% of the maximum credit limit. The
revolving  line of credit is subject to  availability  advance  formulas  of 80%
against eligible accounts receivable;  20% of eligible raw material inventories;
20% of  eligible  work-in-process  kit  inventories;  and 40% to 50% of eligible
finished goods inventories. Advances against inventory are subject to a sublimit
of  $2,000,000.  The loans are secured by a first lien on  substantially  all of








                                       14

<PAGE>


WCI's  assets  except  assets  secured  under  the  existing  mortgage  note and
equipment  note on which the bank has a second lien.  The Company is required to
maintain a minimum  tangible  net worth with  annual  increases  at each  fiscal
year-end  commencing with fiscal year 1997, retain certain key employees,  limit
expenditures  of WGNR to $600,000 per fiscal year,  and is precluded from paying
dividends.  At August 29,  1997 the  Company  was in  violation  of the  minimum
tangible  net worth  covenant  by  approximately  $369,000  as to which the bank
granted a waiver. The revolving line of credit had no outstanding  balance as of
August 29, 1997,  compared to $1,530,000 at August 30, 1996,  and  $3,079,000 at
September 1, 1995. At August 29, 1997,  $5,223,000 was available to borrow under
the advance formulas, as defined.  While no assurances may be given, the Company
anticipates  that it will be in compliance  with the minimum  tangible net worth
convenant or in the event that it is not, the Company  believes  that it will be
able to obtain a waiver prior to requiring any future  borrowings on the line of
credit. If however, the Company is unable to meet the minimum tangible net worth
covenant or obtain a waiver,  it may be required to obtain  other debt or equity
financing. WGNR guarantees the revolving line of credit and term loan.

       Subsequent  to August  29,  1997,  the  Company  received  an  additional
customer  deposit in the  amount of  $8,577,000  related to the August 29,  1997
order backlog. The Company does not have any material scheduled  commitments for
capital  expenditures  during fiscal 1998. The Company  expects that its current
cash and cash  equivalents  combined  with  expected  cash flows from  operating
activities  and the  Company's  available  line of credit will be  sufficient to
support the Company's operations during fiscal 1998.

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

IMPACT OF INFLATION

        The Company does not believe that inflation has had a material impact on
revenues or expenses during its last three fiscal years.


IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

      In March 1997,  the  Financial  Accounting  Standards  Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings per Share."
SFAS No. 128  simplifies  the  standards  for  computing  earnings per share and
requires presentation of two new amounts,  basic and diluted earnings per share.
The Company  will be  required to  retroactively  adopt this  statement  when it
reports its  operating  results for the quarter and year ended  August 28, 1998.
When the Company presents this  information,  it expects to report the following
restated amounts:
                                            Year Ended       
                                        1997           1996  
            -------------------------------------------------
                                                             
            Basic earnings             $(.19)          $.17  
            (loss) per share                                 
            -------------------------------------------------
                                                             
            Diluted earnings           $(.19)          $.16  
            (loss) per share                                 
            -------------------------------------------------












                                       15

<PAGE>
            
      In June  1997,  the FASB  issued  SFAS No.  130  "Reporting  Comprehensive
Income" which  addresses  standards  for reporting and display of  comprehensive
income and its components in a full set of financial statements. SFAS No. 130 is
effective for fiscal years  beginning  after December 15, 1997. The Company will
be required to adopt this  statement  when it reports its operating  results for
the quarter  ending  November 27,  1998.  The adoption is not expected to have a
material impact on the Company's consolidated financial statements.

      Additionally,  in June 1997,  the FASB  issued  SFAS No. 131  "Disclosures
about Segments of an Enterprise and Related  Information." SFAS No. 131 requires
companies to report certain information about operating  segments,  products and
services,  geographical  areas in which they operate,  and major customers.  The
statement is effective for fiscal years  beginning  after December 15, 1997. The
Company will be required to  retroactively  adopt this statement when it reports
its  operating  results  for the  quarter and year ended  August 29,  1999.  The
adoption is not expected to have a material impact on the Company's consolidated
financial statements.

OUTLOOK:  ISSUES AND UNCERTAINTIES

      The market for the Company's 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
or  marketable  at  substantially  reduced  prices.  The  Company's  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 the Company's  ability
to grow and to remain  competitive.  If the Company is unable, for technological
or other reasons, to develop competitive products in a timely manner in response
to changes in the industry, the Company's business and operating results will be
materially and adversely affected.

      The Company  competes  with  companies  which have  substantially  greater
resources  and a larger  number of products  than the  Company,  as well as with
small  specialized  companies.  Competition  in the emerging  distance  learning
industry is comprised of both established  firms as well as relative  newcomers.
Through  relationships  with  satellite  service  providers,   the  Company  has
positioned itself to provide end-to-end solutions to its customers.  Competition
in  the  market  for  the  Company's  MPEG-2  broadcast  television  electronics
products,   including   digital  video  equipment,   is  driven  by  timeliness,
performance,  and price. Although design improvements  continue,  the Company is
delivering its broadcast  digital video products which are aggressively  priced,
with unique,  desirable  features.  These  products are  physically  smaller and
priced below other  equivalent  products on the market today.  In addition,  the
Company is beginning to market  digital video products to cable  networks,  but,
because the Company is still a relative newcomer to cable program  distribution,
competition in this segment will be primarily  against larger,  more established
entities.  Due to the large number of potential end users,  both small and large
competitors  continue  to  emerge.   Competition  for  radio  network  products,
including the Company's  digital audio products,  is very aggressive and pricing
is very  competitive.  The Company believes that its continued success in all of
its markets will depend on aggressive marketing and product development.

      The  demand  for  digital  products  is being  driven  by the high cost of
satellite  capacity.  Satellite  capacity is scarce due to pressures on both the
supply  and  demand  side of the  market.  On the supply  side,  satellites  are
extremely  expensive  to launch,  build,  and  maintain.  The  useful  life of a
satellite  is  limited by the amount of  positioning  fuel that can be  carried.









                                       16

<PAGE>

Also,  the  placement of  satellites  is regulated by the FCC and  therefore the
number of  satellites  within  range of any given  location is  limited.  On the
demand side,  the cost of receive  hardware is being  steadily  reduced  through
advancing  technology.  The reduction in the cost of network hardware  increases
the economic  feasibility of a greater number of networks.  This is evidenced by
the trend in both  television and radio towards  narrow-casting  to well-defined
market segments as opposed to broadcasting  to the general  population.  Digital
compression  technology  allows a four to  ten-fold,  or more,  increase  in the
throughput of a satellite channel. For the network, this compression  represents
an opportunity  to reduce the cost of satellite use. For the satellite  operator
it represents an opportunity  to increase the revenue  generated by an expensive
asset. Due to existing satellite transponder contracts and the cost of replacing
existing  analog  hardware,  the digital  conversion of major networks is taking
longer than anticipated.  These network conversions are expected to occur in the
near future,  but it is impossible  to predict the precise  timing of customer's
internal  decision  processes.  Management  believes  the  market as a whole has
considerable built up demand for digital technology.  Although no assurances can
be given,  the Company expects to directly benefit from this increase in demand.
There may be fluctuations in the Company's  revenues and operating  results from
quarter to quarter due to several  factors,  including the timing of significant
orders  from  customers  and the  timing  of new  product  introductions  by the
Company.

      The Company has invested a  significant  amount of financial  resources to
acquire certain raw materials,  incur direct labor and contract to have specific
outplant  procedures  performed on inventory in process.  As of August 29, 1997,
approximately  $8,000,000 of inventory was related to MPEG-1 and MPEG-2  digital
components.  The Company purchased this inventory based upon current backlog and
anticipated future sales based upon existing  knowledge of the marketplace.  The
Company's  inventory reserve of $1,865,000 at August 29, 1997, 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 are reasonably  possible should the Company's sales
efforts not be successful.

      The Company's  gross margin  percentage is subject to variations  based on
the  product  mix  sold in any  period  and on  sales  volumes.  Start-up  costs
associated  with new product  introductions  could  adversely  impact  costs and
future margins.  The Company  believes  margins could increase in fiscal 1998 if
the  Company is  successful  in  increasing  revenues,  improving  manufacturing
efficiencies,  reducing start-up costs on new products,  achieving reductions in
material costs with planned  redesign of certain  products,  implementing  other
cost reductions, and streamlining operations to reduce costs. However, there can
be no assurance that increased margins will in fact be realized.

      Certain raw materials, video sub-components, and licensed video processing
technologies  used in existing and future products are currently  available from
single or limited sources.  Although the Company believes 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  technologies  could have an adverse  effect on the
Company's business and results of operations.

      The Company has made significant investments in capitalized software costs
principally related to the digital audio and video products.  At August 29, 1997
capitalized software costs were $1,701,000. These costs are being amortized over
anticipated future gross revenues for the product or the 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.





                                       17

<PAGE>

During fiscal 1997,  $242,000 of capitalized  software costs were written-off to
cost of sales due to a  reduction  of expected  revenues on certain  slow-moving
products.

      The industry in which the Company  operates is subject to rapid technology
changes  and  frequent  product  introductions.  The  Company  expects to remain
committed  to such  research  and  development  expenditures  as are required to
effectively  compete and maintain pace with the rapid  technological  changes in
the communications  industry and to support innovative engineering and design in
its future products.

      The Company had an  accumulated  deficit of $2,878,000 at August 29, 1997.
The  Company  is  very   focused  on   controlling   both  direct  and  indirect
manufacturing costs and other operating  expenses.  These costs will be adjusted
as  necessary  if the  revenues  of the  Company  do not  increase  as  planned.
Management  believes  that  digital  compression  technology  may be  profitably
employed to create  increased  demand for its satellite  receiving  equipment if
those  products  are  manufactured  in a  high  volume  standardized  production
environment.  While  no  assurances  may  be  given,  management  believes  that
implementation  of the  current  business  plan for fiscal  1998 will  result in
increased revenues compared to fiscal 1997 and a return to profitability.














































                                       18

<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

WEGENER CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                Year ended
                                               -------------------------------------------------
                                                 August 29,     August 30,      September 1,
                                                    1997           1996             1995
------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>             <C>         
Revenue                                        $ 21,811,870    $ 23,195,052    $ 19,488,113
------------------------------------------------------------------------------------------------

Operating costs and expenses
    Cost of products sold                        16,885,840      15,721,320      12,841,412
    Selling, general and administrative           5,160,975       3,951,086       3,671,203
    Research and development                      1,999,106       2,286,378       1,984,661
------------------------------------------------------------------------------------------------

Operating costs and expenses                     24,045,921      21,958,784      18,497,276
------------------------------------------------------------------------------------------------

Operating income (loss)                          (2,234,051)      1,236,268         990,837
    Interest expense                               (545,914)       (696,513)       (629,772)
    Interest income                                  24,160          67,606          24,232
    Other (expense) income, net                         605             717            (427)
------------------------------------------------------------------------------------------------

Earnings (loss) before income taxes              (2,755,200)        608,078         384,870

Income tax benefit                                  946,000         848,000            --
------------------------------------------------------------------------------------------------

Net earnings (loss)                            $ (1,809,200)   $  1,456,078    $    384,870
================================================================================================

Earnings (loss) per share                      $       (.19)   $        .16    $        .05
================================================================================================

Shares used in per share calculation              9,640,127       9,055,351       7,447,627
================================================================================================
</TABLE>


See accompanying notes to consolidated financial statements.
















                                                 19

<PAGE>

<TABLE>
<CAPTION>
                                                             WEGENER CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                                                     August 29,      August 30,
                                                                        1997            1996
--------------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>         
Assets

Current assets
    Cash and cash equivalents                                      $  2,242,433    $    171,687
    Accounts receivable                                               4,612,634       7,105,984
    Inventories                                                       9,992,672      12,694,823
    Deferred income taxes                                             1,241,000       1,123,000
    Other                                                                21,376          54,996
 -------------------------------------------------------------------------------------------------

         Total current assets                                        18,110,115      21,150,490

Property and equipment                                                4,979,856       4,727,659
Capitalized software costs                                            1,701,416       1,267,836
Deferred income taxes                                                   553,000            --
Other assets                                                            269,566         590,715
 -------------------------------------------------------------------------------------------------

                                                                   $ 25,613,953    $ 27,736,700
 -------------------------------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current liabilities
    Note payable                                                   $       --      $  1,530,332
    Accounts payable                                                  2,128,941       2,874,923
    Accrued expenses                                                  1,440,945       1,519,952
    Customer deposits                                                 3,458,401         645,235
    Current maturities of long-term obligations                         599,157         569,626
 -------------------------------------------------------------------------------------------------

          Total current liabilities                                   7,627,444       7,140,068

Long-term obligations, less current maturities                        1,782,460       2,331,443
Convertible debentures                                                1,285,195       5,033,973
Deferred income taxes                                                      --           275,000
 -------------------------------------------------------------------------------------------------

          Total liabilities                                          10,695,099      14,780,484
 =================================================================================================

Commitments

Shareholders' equity
    Common stock, $.01 par value; 20,000,000 shares
        authorized; 11,363,917 and 9,231,930 shares issued              113,639          92,319
    Additional paid-in capital                                       18,084,700      14,369,157
    Deficit                                                          (2,877,675)     (1,068,475)
    Less treasury stock, at cost (432,730 and 470,397 shares)          (401,810)       (436,785)
 -------------------------------------------------------------------------------------------------


         Total shareholders' equity                                  14,918,854      12,956,216
 -------------------------------------------------------------------------------------------------

                                                                   $ 25,613,953    $ 27,736,700
 =================================================================================================
                                      See accompanying notes to consolidated financial statements.
</TABLE>

                                          20

<PAGE>

WEGENER CORPORATION AND SUBSIDIARIES

                                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                              Common Stock            Additional                        Treasury Stock
                                              ------------              Paid-in                          --------------
                                         Shares          Amount         Capital       Deficit         Shares         Amount
-----------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>           <C>           <C>             <C>            <C>

BALANCE, at September 2, 1994            7,493,680        74,937       6,498,358     (2,909,423)     (589,351)      (631,242)

    Treasury stock reissued through
       stock options and 401(k) plan            -             -          (11,809)             -        73,997        152,712
    Issuance of restricted common
       stock in private placement        1,700,000        17,000       7,644,638              -             -              -
    Net earnings for the year                   -             -                -        384,870             -              -
-----------------------------------------------------------------------------------------------------------------------------

BALANCE, at September 1, 1995            9,193,680        91,937      14,131,187     (2,524,553)     (515,354)      (478,530)

    Treasury stock reissued through
       stock options, commissions               
          and 401(k) plan                       -             -          126,134              -        44,957         41,745
    Issuance of common stock for
       exercise of warrants and           
          options                          38,250           382          111,836              -             -              -
    Net earnings for the year                   -             -                -      1,456,078             -              -
------------------------------------------------------------------------------------------------------------------------------

BALANCE, at August 30, 1996             9,231,930        92,319       14,369,157     (1,068,475)     (470,397)      (436,785)

    Treasury stock reissued through
       stock options and 401(k) plan            -             -           61,474              -        37,667         34,975
    Issuance of common stock for
       convertible debentures           2,131,987        21,320        3,654,069              -             -              -
    Net earnings (loss) for the year            -             -                -     (1,809,200)            -              -
-----------------------------------------------------------------------------------------------------------------------------
BALANCE, at August 29, 1997             11,363,917      $113,639     $18,084,700    $(2,877,675)     (432,730)     $(401,810)
=============================================================================================================================
</TABLE>



See accompanying notes to consolidated financial statements.












































                                                               21

<PAGE>

<TABLE>
<CAPTION>
                                                             WEGENER CORPORATION AND SUBSIDIARIES

                             CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                         Year ended     Year ended     Year ended
                                                         August 29,     August 30,     September 1,
                                                            1997           1996           1995
--------------------------------------------------------------------------------------------------
<S>                                                     <C>            <C>            <C>        
Cash provided (used) by operating activities
    Net earnings (loss)                                 $(1,809,200)   $ 1,456,078    $   384,870
    Adjustments to reconcile net earnings (loss) to
           cash provided (used) by operating activities   
        Depreciation and amortization                     1,471,201      1,050,964        679,654 
        Write-down of capitalized software                  241,841           --             --   
        Issuance of treasury stock for                                                            
            compensation expenses                            90,263        142,333         98,198 
        Issuance of convertible debt for interest                                                 
            expense                                         101,222         33,973           --   
        Bad debt allowance                                  356,555         60,000         70,000 
        Inventory reserves                                  825,000        775,000         77,000 
        Deferred income taxes                              (946,000)      (848,000)          --   
        Warranty provisions                                 146,000           --           70,000 
        Changes in assets and liabilities                                                         
            Accounts receivable                           2,136,795     (2,594,395)    (1,730,110)
            Inventories                                   1,877,151     (6,237,302)    (3,001,417)
            Other assets                                     (8,115)         2,932        (89,880)
            Accounts payable                               (745,982)      (887,296)       693,961 
            Customer deposits and accrued expenses        2,588,159      1,004,370        259,661
--------------------------------------------------------------------------------------------------
                                                          6,324,890     (6,041,343)    (2,488,063)
--------------------------------------------------------------------------------------------------

Cash provided (used) by investment activities
    Property and equipment expenditures                  (1,038,413)      (578,801)      (489,873)
    Capitalized software additions                       (1,089,931)      (893,532)      (468,415)
--------------------------------------------------------------------------------------------------
                                                         (2,128,344)    (1,472,333)      (958,288)
--------------------------------------------------------------------------------------------------

Cash provided (used) by financing activities
    Net change in borrowings under
         revolving line-of-credit                        (1,530,332)    (1,548,633)     1,097,199
    Repayment of long-term debt and capitalized
        lease obligations                                  (539,074)      (891,996)      (850,044)
    Proceeds from long-term debt                               --        5,617,037        453,594
    Proceeds from issuance of common stock                     --          112,219      7,661,638
    Debt issuance costs                                     (62,581)      (542,771)       (47,294)
    Proceeds from stock options exercised                     6,187         25,545         42,705
--------------------------------------------------------------------------------------------------
                                                         (2,125,800)     2,771,401      8,357,798
-------------------------------------------------------------------------------------------------

Increase (decrease) in cash and cash equivalents          2,070,746     (4,742,275)     4,911,447
Cash and cash equivalents, beginning of year                171,687      4,913,962          2,515
--------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of year                  $ 2,242,433    $   171,687    $ 4,913,962
==================================================================================================
</TABLE>


See accompanying notes to consolidated financial statements.

                                             22

<PAGE>
<TABLE>
<CAPTION>
<S><C> 
                                                                WEGENER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION.  The financial  statements  include the accounts of Wegener  Corporation  (WGNR) (the
"Company")  and  its  wholly-owned  subsidiaries.   Wegener  Communications,   Inc.  (WCI)  designs,
manufactures  and  distributes  satellite  communications  electronics  equipment  in the U.S.,  and
internationally  through Wegener  Communications  International  Inc. 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. Actual results could vary from these estimates.

FISCAL YEAR.  The Company  operates on a 52-53 week fiscal year.  The fiscal year ends on the Friday
nearest to August 31. Fiscal 1997 and 1996 contained 52 weeks.  Fiscal 1995 contained 53 weeks.  The
financial statement effect is not significant.

CASH EQUIVALENTS.  Cash equivalents consist of highly liquid investments with original maturities of
three  months or less.  At August  29,  1997 cash  equivalents  of  $2,200,000  consisted  of a bank
certificate of deposit. There were no cash equivalents at August 30, 1996.

INVENTORIES.  Inventories are stated at the lower of cost (standards,  which approximate 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 are
financed under lease contracts which have been capitalized.  Aggregate lease payments, discounted at
appropriate  rates,  have been  recorded as  long-term  debt,  the related  leased  assets have been
capitalized,  and the amortization of such assets is included in depreciation expense.  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.  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.

REVENUE  RECOGNITION.  Product  sales and services  are recorded  when the product is shipped or the
service is rendered to the customer.

RESEARCH  AND  DEVELOPMENT.   The  Company  expenses  research  and  development  costs,   including
expenditures  related to  development  of the  Company's  software  products that do not qualify for
capitalization.   Software  development  costs  are  capitalized   subsequent  to  establishing  the
technological  feasibility of a product.  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.  During fiscal 1997,
$242,000 of  capitalized  software  costs were  written-off  to cost of sales due to a reduction  of
expected revenues on certain  slow-moving  products.  Software  development costs capitalized during
fiscal 1997, 1996, and 1995 totaled $1,090,000,  $894,000 and $468,000,  respectively.  Amortization
expense,  included in cost of goods sold was $415,000,  $252,000,  and $88,000 for the same periods.
Capitalized software costs, net of accumulated amortization,  were $1,701,000 at August 29, 1997 and
$1,268,000 at August 30, 1996. Accumulated  amortization amounted to $813,000 at August 29, 1997 and
$398,000 at August 30, 1996.

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.

                                                 23

<PAGE>

                                                                WEGENER CORPORATION AND SUBSIDIARIES

EARNINGS PER SHARE.  Earnings (loss) per share are computed based on the weighted  average number of
common and dilutive common equivalent shares  outstanding during each year. Common equivalent shares
are  calculated  using the treasury stock method and include  dilutive  stock options,  warrants and
awards.  The convertible  debentures are not considered to be common stock  equivalents.  For fiscal
1997,  common stock  equivalents would not have an effect on the net loss per share since the effect
would  be  anti-dilutive.  For  fiscal  1997  and  1996,  fully  diluted  earnings  per  share  were
anti-dilutive.  In March 1997, the Financial  Accounting  Standards Board (FASB) issued Statement of
Financial  Accounting  Standards  (SFAS) No. 128 "Earnings per Share." SFAS No. 128  simplifies  the
standards for computing earnings per share and requires  presentation of two new amounts,  basic and
diluted earnings per share.  The Company will be required to retroactively  adopt this standard when
it reports  its  operating  results for the quarter  and year ended  August  1998.  When the Company
presents this information, it expects to report the following restated amounts:

                                                             Year Ended       
                                                        1997           1996  
            -----------------------------------------------------------------
            Basic earnings (loss) per share            $(.19)          $.17  
            -----------------------------------------------------------------                
            Diluted earnings (loss) per share          $(.19)          $.16  
            -----------------------------------------------------------------

In June 1997,  the FASB  issued  SFAS No.  130  "Reporting  Comprehensive  Income"  which  addresses
standards  for  reporting and display of  comprehensive  income and its  components in a full set of
financial statements.  SFAS No. 130 is effective for fiscal years beginning after December 15, 1997.
The Company will be required to adopt this statement  when it reports its operating  results for the
quarter  ending  November  27, 1998.  The adoption is not expected to have a material  impact on the
Company's consolidated financial statements.

FINANCIAL  INSTRUMENTS.  The Company's  financial  instruments consist of cash and cash equivalents,
trade  accounts  receivable,  accounts  payable,  accrued  expenses  and  long and  short-term  bank
borrowings  and  convertible  debentures.  The fair value of these  instruments  approximates  their
recorded value. The Company does not have financial  instruments  with  off-balance  sheet risk. The
fair value estimates were based on market information available to management as of August 29, 1997.

Financial instruments that potentially subject the Company to concentrations of credit risk, consist
principally of cash and cash  equivalents  and trade accounts  receivable.  The Company invests cash
through a  high-credit-quality  financial  institution  and  performs  periodic  evaluations  of the
relative credit standing of the financial institution. A concentration of credit risk may exist with
respect to trade  receivables,  as a substantial  portion of the Company's  customers are affiliated
with the cable  television,  business  broadcast  and  telecommunications  industries.  The  Company
performs  ongoing  credit  evaluations  of  customers  world-wide  and  generally  does not  require
collateral  from its customers.  Historically,  the Company has not experienced  significant  losses
related to receivables from individual  customers or groups of customers in any particular  industry
or geographic area.

FOREIGN  CURRENCY.  The U.S. dollar is the Company's  functional  currency for financial  reporting.
International sales are made and remitted in U.S. dollars.


2.  ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:
                                                            August 29,           August 30,
                                                               1997                  1996
----------------------------------------------------------------------------------------------------
                  Accounts receivable - trade                $4,881,565          $7,066,462
                  Other receivables                              92,812              97,434
----------------------------------------------------------------------------------------------------
                                                              4,974,377           7,163,896

                  Less allowance for doubtful accounts        (361,743)            (57,912)
----------------------------------------------------------------------------------------------------

                                                             $4,612,634          $7,105,984
====================================================================================================

                                                 24

<PAGE>
WEGENER CORPORATION AND SUBSIDIARIES

3.  INVENTORIES
Inventories are summarized as follows:
                                                                August 29,           August 30,
                                                                  1997                 1996
----------------------------------------------------------------------------------------------------
                  Raw materials                               $ 4,550,550         $   5,675,954
                  Work-in-process                               4,051,281             5,627,543
                  Finished goods                                3,256,294             2,913,252
----------------------------------------------------------------------------------------------------
                                                               11,858,125            14,216,749

                  Less inventory reserves                      (1,865,453)           (1,521,926)
----------------------------------------------------------------------------------------------------

                                                              $ 9,992,672         $  12,694,823
====================================================================================================

The  Company  has  invested a  significant  amount of  financial  resources  to acquire  certain raw
materials,  incur  direct  labor and  contract to have  specific  outplant  procedures  performed on
inventory in process.  As of August 29, 1997,  approximately  $8,000,000 of inventory was related to
MPEG-1 and MPEG-2  digital  components.  The Company  purchased  this  inventory  based upon current
backlog and anticipated future sales based upon existing knowledge of the marketplace. The Company's
inventory  reserve of $1,865,000  at August 29, 1997,  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 are reasonably possible should the Company's sales efforts not be successful.

4.  PROPERTY AND EQUIPMENT
Major classes of property and equipment consisted of the following:

                                                 Estimated
                                                Useful Lives     August 29,          August 30,
                                                  (Years)           1997                1996
----------------------------------------------------------------------------------------------------
                  Land                                -       $     707,210       $     707,210
                  Buildings and improvements       3-30           3,689,643           3,670,499
                  Machinery and equipment           3-5           7,369,121           6,538,216
                  Furniture and fixtures              5             621,965             609,603
                  Application software                5             734,590             734,590
----------------------------------------------------------------------------------------------------
                                                                 13,122,529          12,260,118
                  Less accumulated depreciation
                      and amortization                           (8,142,673)         (7,532,459)
----------------------------------------------------------------------------------------------------

                                                              $   4,979,856       $   4,727,659
====================================================================================================

Depreciation expense for fiscal 1997, 1996 and 1995 totaled approximately  $660,000,  $562,000,  and
$480,000, respectively.  Assets recorded under a capital lease included in property and equipment at
August 29, 1997 are machinery and equipment of approximately  $613,000 and accumulated  amortization
of  approximately  $216,000,  compared to  machinery  and  equipment of  approximately  $593,000 and
accumulated amortization of approximately $90,000 at August 30, 1996.

5.  ACCRUED EXPENSES
Accrued expenses consisted of the following:
                                                                August 29,           August 30,
                                                                  1997                  1996
----------------------------------------------------------------------------------------------------

                   Compensation                               $   530,521          $    588,512
                   Royalties                                      333,759               464,149
                   Other                                          576,665               467,291
----------------------------------------------------------------------------------------------------

                                                              $ 1,440,945          $  1,519,952
====================================================================================================

                                                 25

<PAGE>
                                                                WEGENER CORPORATION AND SUBSIDIARIES
6.  FINANCING AGREEMENTS
REVOLVING LINE-OF-CREDIT AND TERM LOAN FACILITY

WCI maintains a secured  revolving  line of credit and term loan  facility  with a combined  maximum
available  credit limit of  $8,500,000  expiring  May 4, 1999 or upon demand.  The term loan portion
provides  for a  maximum  of  $1,000,000  for  advances  of up to  80%  of  the  cost  of  equipment
acquisitions.  Interest on the term loan is payable monthly at the bank's prime rate (8.5% at August
29,  1997) plus 1 1/2%.  Principal  advances  are payable  monthly  over sixty months with a balloon
payment due at maturity.  Interest on the revolving line of credit portion is payable monthly at the
bank's prime rate plus 1/2%. Additionally,  the facility requires an annual fee of 1% of the maximum
credit  limit.  The  revolving  line of credit is subject to  availability  advance  formulas of 80%
against eligible  accounts  receivable;  20% of eligible raw material  inventories;  20% of eligible
work-in-process  kit inventories;  and 40% to 50% of eligible finished goods  inventories.  Advances
against inventory are subject to a sublimit of $2,000,000.  The loans are secured by a first lien on
substantially  all of WCI's  assets  except  assets  secured  under the existing  mortgage  note and
equipment  note on which the bank has a second  lien.  The Company is required to maintain a minimum
tangible net worth with annual  increases at each fiscal year-end  commencing with fiscal year 1997,
retain  certain key  employees,  limit  expenditures  of WGNR to $600,000  per fiscal  year,  and is
precluded  from paying  dividends.  At August 29, 1997 the Company was in  violation  of the minimum
tangible net worth  covenant by  approximately  $369,000 as to which the bank granted a waiver.  The
revolving line-of-credit and term loan had no outstanding balances as of August 29, 1997 compared to
$1,530,000  at August 30, 1996.  At August 29, 1997,  $5,223,000  was  available to borrow under the
advance  formulas.  While no assurances  may be given,  the Company  anticipates  that it will be in
compliance with the minimum tangible net worth convenant or in the event that it is not, the Company
believes  that it will be able to obtain a waiver prior to requiring  any future  borrowings  on the
line of credit. If however, the Company is unable to meet the minimum tangible net worth covenant or
obtain a waiver, it may be required to obtain other debt or equity financing.  Additionally, Wegener
Corporation  guarantees  the  revolving  line of credit and term loan.  Information  relative to the
revolving line-of credit is as follows:

                                                                              Year ended
                                                                     August 29,        August 30,
                                                                        1997              1996
----------------------------------------------------------------------------------------------------
 Maximum amount outstanding at any month-end                         $1,758,397        $3,684,934
 Average amount outstanding during the period                           201,117         2,388,500
 Weighted average interest rate during the period                          16.3%             12.6%
====================================================================================================



  LONG-TERM OBLIGATIONS
                                                                      August 29,        August 30, 
     Long-term obligations consist of:                                  1997              1996
----------------------------------------------------------------------------------------------------

     Mortgage note, payable $38,024 monthly, including interest
      through February 2002,  collateralized by real estate and
      cross collateralized under the loan facility, interest is
      charged at the bank's prime rate plus 1%.                       $1,651,200        $1,887,466
     Capital lease obligations, bearing interest ranging from 11.1%
      to 12.0%, principal and interest payable monthly, currently
      $13,706, final payments due from June 1998 through February
      2000                                                               257,259           431,070
     Other long-term obligations, collateralized by equipment            473,158           582,533
----------------------------------------------------------------------------------------------------
                                                                       2,381,617         2,901,069

     Less current maturities                                            (599,157)         (569,626)
----------------------------------------------------------------------------------------------------

                                                                      $1,782,460        $2,331,443
====================================================================================================

On April 8, 1996,  Wegener  Communications,  Inc.  (WCI), a wholly owned  subsidiary of the Company,
entered into a $600,000  promissory  note with interest at the rate of 9.6% per annum with principal
and interest payable in 60 consecutive  monthly  installments of $12,597  beginning May 1, 1996. The
note is secured by certain  machinery  and  equipment.  Proceeds  of the note were used for  working
capital. Wegener Corporation guarantees the note.

                                                 26

<PAGE>

WEGENER CORPORATION AND SUBSIDIARIES

A summary of future maturities of long-term debt and minimum capital lease obligations follows:

                                                                 Capital
                                                 Debt             Lease
                       Fiscal Year            Maturities       Obligations               Total
----------------------------------------------------------------------------------------------------
                         1998                $  463,329         $161,044           $   624,373
                         1999                   447,629          110,238               557,867
                         2000                   490,905           19,905               510,810
                         2001                   487,441                -               487,441
                         2002                   235,054                -               235,054
----------------------------------------------------------------------------------------------------
                                              2,124,358          291,187             2,415,545
                        Less interest                 -          (33,928)             (33,928)
----------------------------------------------------------------------------------------------------

                                             $2,124,358         $257,259            $2,381,617
====================================================================================================

The Company  leases  certain  office and  manufacturing  facilities,  vehicles and  equipment  under
long-term  noncancelable  operating  leases which expire through  fiscal 2002.  Future minimum lease
commitments are approximately as follows: 1998-$164,000;  1999-$102,000; 2000-$73,000; 2001-$73,000;
and 2002-$24,000.  Rent expense under all leases was approximately  $202,000,  $299,000 and $260,000
for fiscal years 1997, 1996, and 1995, respectively.


7.  CONVERTIBLE  DEBENTURES
On May 31, 1996, the Company issued $5,000,000 of 8% Convertible  debentures,  due May 31,1999, in a
private placement to various accredited investors for net proceeds to the Company of $4,700,000. The
proceeds were used for working  capital and  reduction of the  line-of-credit  note  payable.  These
debentures  are  convertible  at the option of the holders at any time through May 31, 1999,  into a
number of shares of common  stock at a price  equal to the  lesser of (i) $12.25 per share or (ii) a
percentage,  based on the holding  period,  ranging  from 95% to 82.5% (82.5% at August 29, 1997 and
August  30,  1996)  of the  average  of the  lowest  sale  price on each of the  five  trading  days
immediately preceding the conversion date. Interest at the rate of 8% per annum is payable quarterly
beginning  July 1,  1996 in cash or, at the  option of the  Company,  by adding  the  amount of such
interest to the outstanding  principal  amount due under the debenture.  During fiscal 1997 and 1996
debentures  in the amount of $101,222 and $33,973  respectively,  were issued for payment of accrued
interest.  During  fiscal 1997,  $3,850,000  principal  amount of  debentures  were  converted  into
2,131,987 shares of common stock.  The Company has filed two Registration  Statements to register up
to 3,680,000  shares of common stock  underlying  such debentures for resale  following  conversion.
These shares constitute  management's estimate of the maximum number of shares of common stock to be
issued upon conversion,  giving effect to possible fluctuations in the market price of common stock.
Subsequent to August 29, 1997,  $964,192 of debentures  were converted into 659,023 shares of common
stock.


8.  INCOME TAXES
Fiscal  1997  income tax benefit  was  comprised  of a deferred  income tax benefit of $946,000 as a
result of an increase in deferred tax assets of  $946,000.  The Company has provided no deferred tax
asset  valuation  allowance at August 29, 1997 based on  management's  assessment  that existing tax
benefits  will "more  likely  than not" be realized in future tax  returns.  The Company  expects to
achieve its current business plan for fiscal 1998 which reflects an increase in revenues compared to
fiscal 1997 and a return to profitability.  The income tax benefit recognized during fiscal 1997 was
principally the result of an increase in the Company's net operating loss carryforward.  Fiscal 1996
income tax benefit was comprised of a deferred income tax benefit of $848,000, which resulted from a
reduction of the deferred tax asset  valuation  allowance  from  $848,000 to zero.  Net deferred tax
assets  decreased  $241,000  during  fiscal 1996.  There was no current  federal or state income tax
expense in fiscal 1996 due to utilization of net federal and state operating loss carryforwards.  In
fiscal 1995  deferred  income tax expense of $109,000 was fully offset by reductions in the deferred
tax asset valuation allowance.

Differences  between the effective  income tax rate and the statutory  federal income rate in fiscal
1997 are primarily due to certain expenses not being deductible for tax purposes. In fiscal 1996 and
1995 the differences were primarily the result of changes in the valuation allowance.


                                                 27

<PAGE>
                                                                WEGENER CORPORATION AND SUBSIDIARIES

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

                                                           August 29,             August 30,
                                                              1997                   1996
----------------------------------------------------------------------------------------------------
   Deferred tax assets:
       Accounts receivable and inventory reserves          $1,075,000             $  634,000
       Accrued expenses                                       166,000                114,000
       Net operating loss carryforwards                     1,078,000                448,000
       General business credit carryforwards                  137,000                137,000
       AMT credit carryovers                                  159,000                159,000
----------------------------------------------------------------------------------------------------
           Total gross deferred tax assets                  2,615,000              1,492,000
   Deferred tax asset valuation allowance                           -                      -
----------------------------------------------------------------------------------------------------
       Total deferred tax assets                            2,615,000              1,492,000
   Deferred tax liabilities:
       Depreciation                                          (95,000)               (74,000)
       Capitalized software costs                           (653,000)              (497,000)
       Other                                                 (73,000)               (73,000)
----------------------------------------------------------------------------------------------------
       Total deferred tax liabilities                       (821,000)              (644,000)
----------------------------------------------------------------------------------------------------
   Net deferred tax asset                                  $1,794,000            $   848,000
====================================================================================================
   Consolidated balance sheet classifications:
       Current deferred tax asset                          $1,241,000            $1,123,000
       Noncurrent deferred tax asset                          553,000                     -
       Noncurrent deferred tax liability                            -              (275,000)
----------------------------------------------------------------------------------------------------
   Net deferred tax asset                                  $1,794,000            $   848,000
====================================================================================================

At August 29,  1997,  the  Company  had  approximately  $3,013,000  of federal  net  operating  loss
carryforwards which expire in 2008 through 2012; and $137,000 of alternative minimum tax credits and
$159,000  of other  federal  tax  credits  expiring  through  2004  available  to offset  future tax
liabilities.

Additionally, no provision for deferred tax liability has been made on the undistributed earnings of
a Foreign Sales  Corporation as the earnings will not be remitted in the foreseeable  future and are
considered  permanently  invested.  The amount of the  unrecognized  deferred tax  liability for the
undistributed earnings of approximately $405,000 was approximately $138,000.


9. COMMON STOCK AND STOCK OPTIONS.
1989  DIRECTORS'  STOCK  OPTION  PLAN.  On January 9, 1990,  the  stockholders  approved the Wegener
Corporation 1989 Directors' Incentive 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  non-qualified  stock options to
purchase such stock, or any combination of the foregoing,  together with supplemental cash payments.
During the second quarter of fiscal 1995, the Company amended the 1989 Directors'  Stock Option Plan
to increase  the  aggregate  number of shares of common  stock that may be awarded  from  100,000 to
300,000 shares; to remove the ineligibility  provision for certain directors;  and to grant annually
to each non-employee director, options to purchase 2,000 shares of common stock at an exercise price
equal to the fair market value of such stock on the date of grant.  The exercise price per share for
non-qualified  stock options or stock appreciation  rights shall 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 non-qualified stock option shall be ten years and one day from the
date of the grant. The expiration  period for stock  appreciation  rights,  including any extension,
shall not exceed ten years from the date of grant. During fiscal 1997, options for 193,000 shares of
common stock with  exercise  prices  ranging from $1.50 to $7.00 were  cancelled  and reissued at an
exercise price of $1.44 per share.

1988  INCENTIVE  PLAN.  On January 10,  1989,  the  stockholders  approved the 1988  Incentive  Plan
providing to key  employees  other than  directors of the Company,  incentive  awards  consisting of
common stock,  performance units or stock appreciation rights payable in stock or cash; or incentive
or  non-qualified  stock options to purchase stock;  or any combination of the above,  together with
supplemental  cash payments.  The aggregate number of shares issuable under the 1988 plan is 500,000
common shares.  The exercise  price per share in the case of incentive  stock options and any tandem
                                                 28

<PAGE>
WEGENER CORPORATION AND SUBSIDIARIES

stock  appreciation  rights will be the fair market value or, in the case of an option  granted to a
10% or greater  stockholder,  l10% of the fair market value. The exercise price for any other option
and stock appreciation  rights shall be at least 85% of the fair market value on the date the option
is granted.  The exercise period for non-qualified stock options shall be ten years and one day from
the date of the grant, and the expiration period for an incentive stock option or stock appreciation
rights shall not exceed ten years from the date of the grant. During fiscal 1997 options for 180,250
shares of common stock with exercise prices ranging from $1.50 to $7.00 per share were cancelled and
reissued at an exercise price of $1.44 per share. In addition,  new options were granted for 150,000
shares of common stock at an exercise price of $1.44 per share.

A summary of stock option transactions for the above plans follows:
                                                                            Weighted                                 
                                              Number        Range of         Average       
                                             of Shares  Exercise Prices   Exercise Price
            -----------------------------------------------------------------------------
            Outstanding at                                                                 
                September 2, 1994             95,500     $.  43-1.63         $   .79       
                   Granted                   403,785       1.50-7.00            3.69       
                   Exercised                 (39,141)       .75-1.93             .90       
                   Forfeited or cancelled     (1,500)            .75             .75       
            -----------------------------------------------------------------------------
            Outstanding at                                                                 
                September 1, 1995            458,644      $1.50-7.00          $3 .34       
                   Granted                     4,000           12.13           12.13       
                   Exercised                 (28,144)        .43-.75             .91       
                   Forfeited or cancelled                   -               -              
            -----------------------------------------------------------------------------
            Outstanding at                                                                 
                August 30, 1996              434,500      $.75-12.13          $ 3.58       
                   Granted or reissued       527,250       1.44-3.94            1.46       
                   Exercised                  (5,500)       .75-1.50            1.13       
                   Forfeited or cancelled   (377,250)      1.50-7.00            4.28       
            -----------------------------------------------------------------------------
            Outstanding at                                                                 
                August 29, 1997              579,000      $.75-12.13          $ 1.55      
            =============================================================================
            Options exercisable at                                                         
                August 29, 1997              315,500      $.75-12.13          $ 1.65       
                August 30, 1996              248,500       .75-12.12            3.30       
            =============================================================================
 
            Weighted average fair value of options                                         
                granted during the year ended                                            
            -----------------------------------------------------------------------------
                August 29, 1997                                              $198,562 
                August 30, 1996                                                29,607 
            =============================================================================

The weighted average  remaining  contractual life of options  outstanding at August 29, 1997 was 4.5
years.

The Company has adopted the disclosure-only  provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," but applies Accounting Principles Board Opinion No. 25 and related interpretations in
accounting  for its stock option plans.  If the Company had elected to recognize  compensation  cost
based on the fair value at the grant  dates for  options  issued  under the plans  described  above,
consistent  with the method  prescribed by SFAS No. 123, net earnings (loss) and earnings (loss) per
share would have been changed to the pro forma amounts indicated below:

                                                   Year Ended                           
                                                        1997            1996      
                      ----------------------------------------------------------- 
                      Net earnings (loss)                                         
                          As Reported              $(1,809,200)       $1,456,078  
                          Pro Forma                 (1,902,485)        1,426,471  
                      ----------------------------------------------------------- 
                      Earnings (loss) per share                                   
                          As Reported              $      (.19)          $   .16 
                          Pro Forma                       (.20)              .16  
                      =========================================================== 
                                                 29

<PAGE>
                                                                WEGENER CORPORATION AND SUBSIDIARIES

The fair value of stock  options used to compute pro forma net earnings  (loss) and earnings  (loss)
per  share  disclosures  is the  estimated  present  value at grant  date  using  the  Black-Scholes
option-pricing  model with the following weighted average assumptions for 1997 and 1996: No dividend
yield for both years;  expected volatility of 60% in 1997 and 40% in 1996; a risk free interest rate
of 6.62% in 1997 and 5.58% in 1996; and an expected  option life of 4.5 years in 1997 and 10.0 years
in 1996.

OTHER OPTIONS,  AWARDS AND WARRANTS.  At August 29, 1997,  options for 22,500 common  shares,  fully
exercisable at a price of $2.44 per share, expiring five years from date of grant, were outstanding.
During fiscal 1996 options for 4,500 common shares were  exercised.  In  conjunction  with a private
placement of common stock during  fiscal 1995 the Company  issued  warrants for 45,000  shares at an
exercise  price of $3.00 per share  expiring two years from the date of issue.  During  fiscal 1997,
warrants for 11,250 common  shares  expired.  During fiscal 1996,  warrants for 33,750 common shares
were  exercised.  In addition,  stock awards issued under the 1988  Incentive  Plan of 12,500 shares
remained outstanding at August 29, 1997.


10. EMPLOYEE BENEFIT PLANS.
WCI has a profit-sharing plan covering substantially all employees. Amounts to be contributed to the
plan  each  year are  determined  at the  discretion  of the  Board of  Directors  subject  to legal
limitations. No contributions were declared for fiscal years 1997, 1996 and 1995.

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 an annual  discretionary  match  subject to WCI's  profitability.  All  matching
contributions  are in the form of Company stock or cash at the discretion of the Company's  Board of
Directors.  Matching Company contributions in the form of common stock were approximately $90,000 in
fiscal 1997, $37,000 in fiscal 1996 and $44,000 in fiscal 1995.


11. SEGMENT INFORMATION AND SIGNIFICANT CUSTOMERS
WCI  operates in a single  industry  segment of  manufacture  and sale of  satellite  communications
electronics  equipment.  General corporate expenses included in selling,  general and administrative
expense were approximately $578,000, $412,000, and $368,000 in 1997, 1996 and 1995 respectively. Net
equipment sales to foreign customers were $2,964,000 for the year ended August 29, 1997,  $2,549,000
for the year ended August 30, 1996, and $3,926,000 for the year ended September 1, 1995. All foreign
sales are  denominated  in U.S.  dollars.  Sales to foreign  customers  in 1997,  1996 and 1995 were
primarily to customers located in Latin America,  Canada and Europe. Profit margins on foreign sales
are approximately the same as on domestic sales.

The Company sells 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. One customer accounted for 11.0% of revenues in
fiscal 1997. A second  customer  accounted for 14.2% of revenues in fiscal 1996. In fiscal 1995, one
customer accounted for 15% of the Company's revenues. At August 29, 1997, one customer accounted for
27.7% of the Company's accounts receivable. At August 30, 1996 two customers accounted for 34.6% and
10.8 respectively,  of the Company's accounts receivable. When deemed appropriate,  the Company uses
letters-of-credit and credit insurance to mitigate the credit risk associated with foreign sales.

Additionally,  in June  1997,  the FASB  issued  SFAS No.  131  "Disclosures  about  Segments  of an
Enterprise and Related  Information." SFAS No. 131 requires companies to report certain  information
about operating segments, products and services, geographical areas in which they operate, and major
customers.  The  statement is effective  for fiscal years  beginning  after  December 15, 1997.  The
Company will be required to retroactively adopt this statement when it reports its operating results
for the quarter and year ended  August 29,  1999.  The  adoption is not  expected to have a material
impact on the Company's consolidated financial statements.











                                                 30

<PAGE>
WEGENER CORPORATION AND SUBSIDIARIES

12. STATEMENT OF CASH FLOWS
Interest payments were approximately  $563,000,  $592,000,  and $647,000 for fiscal years 1997, 1996
and 1995,  respectively.  Non-cash  investing  and  financing  activities  in fiscal 1997 were:  (1)
Equipment  acquired under capital  leases of  approximately  $20,000;  (2) 32,167 shares of treasury
stock reissued for 401(k) matching Company  contributions  valued at approximately  $90,000, and (3)
2,131,987  shares of common stock were issued upon  conversion  of  $3,850,000  principal  amount of
convertible  debentures.  Non-cash  investing  and  financing  activities  in fiscal 1996 were:  (1)
Equipment  acquired under capital  leases of  approximately  $380,000;  (2) 6,517 shares of treasury
stock reissued for 401(k) matching Company  contributions  valued at approximately  $65,000; and (3)
10,296 shares of treasury stock reissued for compensation valued at approximately $77,000.  Non-cash
financing  activities  in  fiscal  1995  were:  (1)  Equipment  acquired  under  capital  leases  of
approximately  $213,000;  (2) 12,910 shares of treasury stock reissued for 401(k)  matching  Company
contributions valued at approximately  $37,000; and (3) 18,946 shares of treasury stock reissued for
compensation valued at approximately $62,000.

13. FOURTH QUARTER ADJUSTMENTS

During the fourth quarter of the year ended August 29, 1997, the Company recorded as charges to cost
of sales:  (1) an increase in the inventory  obsolescence  reserve of $825,000;  (2) a write-down of
capitalized  software in the amount of $242,000;  and (3) an increase in the  warranty  provision of
$70,000. In addition, charges to selling, general, and administrative expenses were recorded for (1)
an increase in the allowance of bad debts of $266,000; and (2) a restructuring reserve of $100,000.














































                                                 31

<PAGE>

                        MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS


The   management  of  Wegener   Corporation   is   BDO  Seidman,  LLP  the  Company's   independent 
responsible  for the accuracy and consistency of   certified  public  accountants,  has audited the
all  the  information  contained  in the  annual   financial  statements  prepared  by  management.
report, including the accompanying  consolidated   Their  opinion on the  statements  is  presented
financial statements. These statements have been   below.                                          
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   /s/ Robert A. Placek
accounting    controls   designed   to   provide
reasonable  assurance that the financial records   Robert A. Placek,                 
are accurate, that the assets of the Company are   President, Chief Executive Officer
safeguarded,  and that the financial  statements   and Chairman of the Board         
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   /s/ C. Troy Woodbury, Jr. 
of the independent certified public accountants.    
The  auditors  meet  regularly  with  the  Audit   C. Troy Woodbury, Jr.                
Committee   to  discuss   audit  and   financial   Treasurer and Chief Financial Officer
reporting  issues,  with and without  management   
present.


                         REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
    of Wegener Corporation
Duluth, Georgia


    We    have    audited    the    accompanying        In our  opinion,  the  financial  statements
consolidated    balance    sheets   of   Wegener    referred  to  above  present   fairly,   in  all
Corporation  and  subsidiaries  as of August 29,    material  respects,  the consolidated  financial
1997  and  August  30,  1996,  and  the  related    position of Wegener Corporation and subsidiaries
consolidated     statements    of    operations,    as of August 29,  1997 and  August 30,  1996 and
shareholders'  equity and cash flows for each of    the consolidated results of their operations and
three years in the period ended August 29, 1997.    their cash flows for each of the three  years in
These     financial     statements    are    the    the period ended  August 29, 1997 in  conformity
responsibility of the Company's management.  Our    with generally accepted accounting principles.  
responsibility is to express an opinion on these    
financial statements based on our audits.

    We conducted our audits in  accordance  with
generally  accepted  auditing  standards.  Those
standards  require  that we plan and perform the
audit  to  obtain  reasonable   assurance  about
whether  the  financial  statements  are free of
material   misstatement.   An   audit   includes
examining,  on a test basis, evidence supporting
the amounts  and  disclosures  in the  financial
statements. An audit also includes assessing the
accounting   principals   used  and  significant
estimates  made  by   management,   as  well  as
evaluating  the  overall   financial   statement    Atlanta, Georgia             BDO Seidman, LLP  
presentation. We believe that our audits provide    November 14, 1997                             
a reasonable basis for our opinion.                 

                                                32
</TABLE>


<PAGE>


                                        PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      Information  contained  under the caption  "ELECTION OF  DIRECTORS" in the
Proxy   Statement   pertaining  to  the  January  27,  1998  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 8 of this Report.

ITEM 11.    EXECUTIVE COMPENSATION

      Information  contained  under the captions  "EXECUTIVE  COMPENSATION"  and
"CERTAIN  RELATIONSHIPS AND RELATED  TRANSACTIONS,"  respectively,  of the Proxy
Statement is incorporated herein by reference in response to this item.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      Information  contained  under the  captions  "ELECTION OF  DIRECTORS"  and
"SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND MANAGEMENT" in the Proxy
Statement is incorporated herein by reference in response to this item.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Information contained under the caption "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS"  in the Proxy  Statement  is  incorporated  herein by reference in
response to this item.





































                                       33



<PAGE>


                                     PART IV

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

      (a)  (1)  The  following  consolidated  financial  statements  of  Wegener
Corporation  and  subsidiaries  and the related Report of Independent  Certified
Public Accountants thereon are filed as part of this report:

Consolidated Balance Sheets August 29, 1997 and August 30, 1996

Consolidated  Statements of Operations  Years ended August 29, 1997,  August 30,
   1996, and September 1, 1995

Consolidated  Statements  of  Shareholders'  Equity Years ended August 29, 1997,
   August 30, 1996, and September 1, 1995

Consolidated  Statements  of Cash Flows Years ended August 29, 1997,  August 30,
   1996, and September 1, 1995

Notes to Consolidated Financial Statements

Report of Independent Certified Public Accountants

      Separate financial  statements of the Registrant have been omitted because
the Registrant is primarily a holding company and all  subsidiaries  included in
the consolidated financial statements are deemed to be totally held.

      (a) (2) The  following  consolidated  financial  statements  schedule  for
Wegener  Corporation  and  subsidiaries,  and the related  Report of Independent
Certified Public Accountants are included herein, beginning on page 37:


       II   Valuation  and  Qualifying  Accounts  Years ended  August 29,  1997,
            August 30, 1996, and September 1, 1995





























                                       34

<PAGE>




      (a) (3) The exhibits  filed in response to Item 601 of  Regulation S K are
              listed in the Exhibit Index on pages 38 and 39.

      (b) There were no reports on Form 8-K filed for the Quarter  ended  August
          29, 1997.

      (c) See Part IV, Item 14(a)(3).

      (d) Not applicable.























































                                       35

<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

 Board of Directors and Shareholders
     of Wegener Corporation
 Duluth, Georgia

         The audit referred to in our report dated  November 14, 1997,  relating
to  the   consolidated   financial   statements  of  Wegener   Corporation   and
subsidiaries,  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 presents fairly, in
all material respects, the information set forth therein.






 Atlanta, Georgia                                           BDO Seidman, LLP
 November 14, 1997











































                                       36

<PAGE>

                                                   SCHEDULE II
                                       WEGENER CORPORATION AND SUBSIDIARIES
                                        VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>

                                  Balance at    Charged to                               Balance at
                                   Beginning     Costs and                                 End of
                                   of Period     Expenses      Write-offs  Recoveries      Period
                                   ---------     --------      ----------  ----------      ------
<S>                               <C>            <C>          <C>          <C>          <C>        

 Allowance for doubtful
     accounts receivable:

Year ended August 29, 1997        $  57,912      $ 356,555    $  (53,279)  $     555    $   361,743

Year ended August 30, 1996        $  41,602      $  60,000    $  (70,190)  $  26,500    $    57,912

Year ended September 1, 1995      $ 112,040      $  70,000    $ (148,714)  $   8,276    $    41,602





Inventory Reserves:

Year ended August 29, 1997      $ 1,521,926      $ 825,000    $ (481,473)  $       -    $ 1,865,453

Year ended August 30, 1996      $   736,290      $ 775,000    $   10,636   $       -    $ 1,521,926

Year ended September 1, 1995    $   855,093      $  77,000    $ (195,803)  $       -    $   736,290

</TABLE>


































                                                   37


<PAGE>



EXHIBIT INDEX
      The  following  documents  are filed as  exhibits  to this  report.  Those
exhibits  previously filed and  incorporated  herein by reference are identified
below by an asterisk.  For each such asterisked exhibit there is shown below the
description  of the previous  filing.  Exhibits  which are not required for this
report are omitted.

    Exhibit Number   Description of Document
    --------------   -----------------------

    *3.1             By-Laws (Reg. No. 2-81795, Exhibits 3(a) and 3(b)).

    *3.2             Certificate of  Incorporation  as amended  through
                     May 4, 1989 (1989 10-K,  filed  November 30, 1989,
                     Exhibit 3.2).

    *3.3             Amendment to Certificate of Incorporation (1997 10-Q,
                     filed June 27, 1997, Exhibit 3.1).

    *4.0             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.

    *4.1             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 (1996 10-K,  filed November 27,
                     1996, Exhibit 4.1).

    *4.2             Loan Agreement, Promissory Note and Deed to Secure Debt,
                     and Security Agreement dated February 27, 1987 between
                     Bank South, N.A. and Wegener Communications, Inc.
                     respecting $3,500,000 promissory note (1990 10-K, filed
                     November 29, 1990, Exhibit 4.4).

    *4.3             Promissory Note dated April 8, 1996 in favor of Lyon
                     Credit Corporation and Wegener Communications, Inc. in
                     the principal amount of $600,000 (1996 10Q, filed July
                     11, 1996, Exhibit 4.1).

    *4.4             8% Convertible Debentures dated May 31, 1996, aggregating
                     $5,000,000, due May 31, 1999 (1996 S-3, Registration No.
                     333-08017, filed July 11, 1996, Exhibit 4.1).

                     No  other   long-term   debt   instrument  of  the
                     Registrant   or   its   subsidiaries    authorizes
                     indebtedness  exceeding 10% of the total assets of
                     the   Registrant   and  its   subsidiaries   on  a
                     consolidated   basis  and  the  Registrant  hereby
                     undertakes to provide the Commission  upon request
                     with  any  long-term  debt  instrument  not  filed
                     herewith.

   *10.1             1988 Incentive Plan (1989 10-K, filed November 30, 1989,
                     Exhibit 10.2).

   *10.2             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. (1995 10-K, filed December 15,
                     1994, Exhibit 10.4).

                                       38

<PAGE>

   Exhibit Number    Description of Document
   --------------    -----------------------

   *10.3             Wegener Communications, Inc. Profit Sharing Plan and
                     Trust dated January 1, 1982, amended and restated as of
                     January 1, 1984.  (1987 10-K, dated and filed November
                     25, 1987, Exhibit 10.14).

   *10.4             1989 Directors' Incentive Plan (1990 10-K, filed November
                     29, 1990, Exhibit 10.9).

   *10.4.1           Amendment  to  1989   Directors'   Incentive  Plan
                     effective  February  1,  1995  (1995  10-K,  filed
                     December 13, 1996).

   *21.              Subsidiaries of the Registrant (1990 10-K, filed November
                     29, 1990, Exhibit 22).

     23.             Consent of BDO Seidman, LLP.

     27.             Financial Data Schedule.













































                                       39

<PAGE>


                                   SIGNATURES

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

 WEGENER CORPORATION
 Date:  December 11, 1997                   By     /s/ Robert A. Placek
                                                -----------------------
                                                     Robert A. Placek
                                                     President

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 11th day of December, 1997.

Signature                           Title

    /s/ Robert A. Placek            President, Chief Executive Officer and
 ------------------------------     Chairman of the Board
    Robert A. Placek               (Principal Executive Officer)

    /s/ C. Troy Woodbury, Jr.       Treasurer and Chief Financial Officer,
 ------------------------------     Director (Principal Accounting Officer)
    C. Troy Woodbury, Jr.            

    /s/ James T. Traicoff           Controller
 ------------------------------ 
   James T. Traicoff

    /s/ James H. Morgan, Jr.        Director
 ------------------------------   
   James H. Morgan, Jr.

    /s/ Joe K. Parks                Director
 ------------------------------ 
   Joe K. Parks




























                                       40

<PAGE>

<TABLE>
<CAPTION>

<S>                                  <C>                                   <C> 
DIRECTORS                            INDEPENDENT CERTIFIED                 QUARTERLY  COMMON  STOCK PRICES    
Robert A. Placek                     PUBLIC ACCOUNTANTS                    The   Company's   common  stock  is
Chairman of the Board,               BDO Seidman, LLP                      traded  on  the  NASDAQ   Small-Cap
President and Chief                  285 Peachtree Center Avenue           Market.  The  quarterly  ranges  of
Executive Officer                    Suite 800                             high and low  closing  sale  prices
Wegener Corporation                  Atlanta, Georgia 30303-1230           for  fiscal  1997 and 1996  were as
                                                                           follows:                           
James H. Morgan, Jr., Esq.           TRANSFER AGENT                                                           
Partner                              Securities Transfer Corporation                         High       Low   
Smith, Gambrell & Russell            16910 Dallas Parkway                  ----------------------------------
                                     Suite 100                                                                
C. Troy Woodbury, Jr.                Dallas, Texas 75248                   Fiscal Year Ending August 29, 1997 
Treasurer and Chief                                                                                           
Financial Officer                    CORPORATE                             First Quarter    $6        $3 7/8  
Wegener Corporation                  HEADQUARTERS                                                             
                                     11350 Technology Circle               Second Quarter    4 1/8     2 5/8  
Joe K. Parks                         Duluth/Atlanta, Georgia 30097-1502                                       
Retired, Served as                                                         Third Quarter     3 7/8     1 7/16 
Laboratory Director                  ANNUAL  MEETING The annual  meeting                                      
Systems Development Laboratory       of  stockholders  will  be  held on   Fourth Quarter    3 1/2     1 13/16
Georgia Tech Research Institute      January  27,  1998 at 7 p.m. at the   -----------------------------------
Georgia Institute of Technology      Corporate Headquarters.                                                  
                                                                           Fiscal Year Ending August 30, 1996 
OFFICERS                             COMMON STOCK NASDAQ                                                      
Robert A. Placek                     NASDAQ Small-Cap Market Symbol:       First Quarter    $12       $9      
Chairman of the Board,               WGNR                                                                     
President and Chief                                                        Second Quarter    13 3/4    8 1/2  
Executive Officer                    FORM 10-K REPORT                                                         
                                     Wegener Corporation's Annual Report   Third Quarter     10 5/8    7 3/4  
C. Troy Woodbury, Jr.                on  Form   10-K,   filed  with  the                                      
Treasurer and Chief                  Securities and Exchange Commission,   Fourth Quarter    12 1/4    5 5/8  
Financial Officer                    is  available  free  of  charge  by   -----------------------------------
                                     written request to:                                                      
James T. Traicoff                         Elaine Miller, Secretary         The Company had approximately  423*
Controller                                Investor Relations               shareholders  of record at December
                                          Wegener Corporation              2, 1997. The Company has never paid
                                          11350 Technology Circle          cash  dividends on its common stock
                                          Duluth, Georgia 30097-1502       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).                 
                                                                           


</TABLE>


























                                                 41