##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-QSB
  þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 28, 2008
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act
 For the transition period from
 _____ 
to  _____
 Commission File Number: 0-8588
 TECHNICAL COMMUNICATIONS CORPORATION
  Massachusetts
    
    04-2295040(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)100 Domino Drive, Concord, MA
    
    01742-2892(Address of principal executive offices)
    
    (Zip Code)
 (978) 287-5100
  (Former name, former address and former fiscal year,
  þ o
 o þ
  o þ




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##### 



PagePART I Financial InformationItem 1. Financial Statements:Condensed Consolidated Balance Sheets as of June 28, 2008 (unaudited) and September 29, 2007
    
    
    2Condensed Consolidated Statements of Operations for the Three Months ended June 28, 2008 and June 30, 2007 (unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Nine Months ended June 28, 2008 and June 30, 2007 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months ended June 28, 2008 and June 30, 2007 (unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    13Item 3. Controls and Procedures
    
    
    20PART II Other InformationItem 1. Legal Proceedings
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3. Defaults Upon Senior Securities
    
    
    21Item 4. Submission of Matters to a Vote of Security Holders
    
    
    21Item 5. Other Information
    
    
    21Item 6. Exhibits
    
    
    21Signatures
    
    
    22Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1
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June 28, 2008
    
    
    September 29, 2007(Unaudited)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    4,050,215
    
    
    $
    2,622,288Accounts receivable  trade, less allowance of $25,000
at June 28, 2008 and $35,000 at September 29, 2007
    
    
    394,560
    
    
    
    420,527Inventories, net
    
    
    1,711,946
    
    
    
    1,908,157Other current assets
    
    
    119,076
    
    
    
    96,051Total current assets
    
    
    6,275,797
    
    
    
    5,047,023Equipment and leasehold improvements
    
    
    3,076,934
    
    
    
    2,961,268Less: accumulated depreciation and amortization
    
    
    (2,887,797
    )
    
    
    (2,853,906
    )Equipment and leasehold improvements, net
    
    
    189,137
    
    
    
    107,362Total Assets
    
    $
    6,464,934
    
    
    $
    5,154,385Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    150,371
    
    
    $
    253,683Accrued liabilitiesAccrued compensation and related expenses
    
    
    398,060
    
    
    
    449,111Accrued expenses
    
    
    171,196
    
    
    
    263,235Total current liabilities
    
    
    719,627
    
    
    
    966,029Stockholders Equity:Common stock, par value $.10 per share;
7,000,000 shares authorized; 1,433,767 shares issued
and outstanding at June 28, 2008 and 1,382,767 at
September 29, 2007
    
    
    143,377
    
    
    
    138,277Additional paid-in capital
    
    
    1,921,211
    
    
    
    1,517,599Retained earnings
    
    
    3,680,719
    
    
    
    2,532,480Total stockholders equity
    
    
    5,745,307
    
    
    
    4,188,356Total Liabilities and Stockholders Equity
    
    $
    6,464,934
    
    
    $
    5,154,385
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 2




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Three Months EndedJune 28, 2008
    
    
    June 30, 2007Net sales
    
    $
    1,699,817
    
    
    $
    1,119,531Cost of sales
    
    
    679,127
    
    
    
    369,388Gross profit
    
    
    1,020,690
    
    
    
    750,143Operating expenses:Selling, general and
administrative expenses
    
    
    658,957
    
    
    
    407,239Product development costs
    
    
    192,218
    
    
    
    258,592Total operating expenses
    
    
    851,175
    
    
    
    665,831Operating income
    
    
    169,515
    
    
    
    84,312Other income:Interest income
    
    
    16,896
    
    
    
    24,326Total other income
    
    
    16,896
    
    
    
    24,326Net income before provision for income taxes
    
    
    186,411
    
    
    
    108,638Provision for income taxes
    
    
    
    
    
    
    Net income
    
    $
    186,411
    
    
    $
    108,638Net income per common share:Basic
    
    $
    0.13
    
    
    $
    0.08Diluted
    
    $
    0.11
    
    
    $
    0.07Weighted average shares:Basic
    
    
    1,433,535
    
    
    
    1,378,025Diluted
    
    
    1,722,608
    
    
    
    1,597,152
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 3




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Nine Months EndedJune 28, 2008
    
    
    June 30, 2007Net sales
    
    $
    5,647,929
    
    
    $
    3,169,341Cost of sales
    
    
    2,083,831
    
    
    
    917,235Gross profit
    
    
    3,564,098
    
    
    
    2,252,106Operating expenses:Selling, general and
administrative expenses
    
    
    1,709,298
    
    
    
    1,267,412Product development costs
    
    
    779,499
    
    
    
    745,537Total operating expenses
    
    
    2,488,797
    
    
    
    2,012,949Operating income
    
    
    1,075,301
    
    
    
    239,157Other income (expense):Interest income
    
    
    72,938
    
    
    
    65,189Interest expense
    
    
    
    
    
    
    (624
    )Total other income:
    
    
    72,938
    
    
    
    64,565Net income before provision for income taxes
    
    
    1,148,239
    
    
    
    303,722Provision for income taxes
    
    
    
    
    
    
    Net income
    
    $
    1,148,239
    
    
    $
    303,722Net income per common share:Basic
    
    $
    0.82
    
    
    $
    0.22Diluted
    
    $
    0.69
    
    
    $
    0.20Weighted average shares:Basic
    
    
    1,407,808
    
    
    
    1,374,358Diluted
    
    
    1,667,364
    
    
    
    1,521,628
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 4




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Nine Months EndedJune 28, 2008
    
    
    June 30, 2007Operating Activities:Net income
    
    $
    1,148,239
    
    
    $
    303,722Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    33,891
    
    
    
    22,900Stock-based compensation
    
    
    125,852
    
    
    
    74,313Changes in assets and liabilities:Accounts receivable
    
    
    25,967
    
    
    
    (89,422
    )Inventories
    
    
    196,211
    
    
    
    (277,677
    )Other current assets
    
    
    (23,025
    )
    
    
    (19,651
    )Accounts payable and other accrued liabilities
    
    
    (246,402
    )
    
    
    282,943Net cash provided by operating activities
    
    
    1,260,733
    
    
    
    297,128Investing Activities:Additions to equipment and leasehold improvements
    
    
    (115,666
    )
    
    
    (36,345
    )Net cash used in investing activities
    
    
    (115,666
    )
    
    
    (36,345
    )Financing Activities:Proceeds from stock issuance
    
    
    282,860
    
    
    
    8,472Net cash provided by financing activities
    
    
    282,860
    
    
    
    8,472Net increase in cash and cash equivalents
    
    
    1,427,927
    
    
    
    269,255Cash and cash equivalents at beginning of the period
    
    
    2,622,288
    
    
    
    1,870,713Cash and cash equivalents at the end of the period
    
    $
    4,050,215
    
    
    $
    2,139,968Supplemental Disclosures:Interest paid
    
    $
    
    
    
    $
    624Income taxes paid
    
    
    19,000
    
    
    
    503
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 5




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 STATEMENT OF FAIR PRESENTATION
 Interim Financial Statements
  NOTE 1. Summary of Significant Accounting Policies and Significant Judgments and
Estimates
 Basis of Presentation
    Revenue Recognition
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
   Inventory
  Accounts Receivable
  Accounting for Income Taxes
   Page 7




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  Accounting for Uncertainty in Income Taxes Accounting for Income Taxes
    Stock-Based Compensation
 Share-Based Payment
  Page 8




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
 Share-based Payment
 Three Months EndedJune 28, 2008
    
    
    June 30, 2007Assumptions:Option life
    
    5 years
    
    
    5 yearsRisk-free interest rate
    
    
    3.18
    %
    
    
    4.58
    %Stock volatility
    
    
    90
    %
    
    
    149
    %Dividend yield
    
    
    -0-
    
    
    
    -0-
  June 28, 2008
    
    
    June 30, 20073 months
    
    
    9 months
    
    
    3 months
    
    
    9 monthsCost of sales
    
    $
    1,692
    
    
    $
    5,587
    
    
    $
    1,769
    
    
    $
    5,159Selling, general and administrative
    
    
    3,022
    
    
    
    86,062
    
    
    
    14,788
    
    
    
    46,457Product development costs
    
    
    13,683
    
    
    
    34,203
    
    
    
    7,993
    
    
    
    22,697Total share-based compensation expense
before taxes
    
    $
    18,397
    
    
    $
    125,852
    
    
    $
    24,550
    
    
    $
    74,313
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  Options OutstandingNumber of
    
    
    Weighted Average
    
    
    Weighted AverageShares
    
    
    Exercise Price
    
    
    Contractual LifeOutstanding at September 29, 2007
    
    
    612,034
    
    
    $
    3.12Grants
    
    
    34,000Exercises
    
    
    (51,000
    )Cancellations
    
    
    (21,000
    )Outstanding at June 28, 2008
    
    
    574,034
    
    
    $
    3.01
    
    
    4.66 years
  Weighted-Average
    
    
    
    
    
    
    
    
    
    
    ExercisableRemaining
    
    
    Weighted
    
    
    Exercisable
    
    
    Weighted-Range of
    
    
    Number of
    
    
    Contractual
    
    
    Average
    
    
    Number of
    
    
    AverageExercise Prices
    
    
    Shares
    
    
    Life (years)
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise Price$0.01 - $1.00
    
    
    
    160,334
    
    
    
    4.31
    
    
    $
    0.96
    
    
    
    160,334
    
    
    $
    0.96$1.01 - $2.00
    
    
    
    1,200
    
    
    
    3.56
    
    
    $
    1.27
    
    
    
    1,200
    
    
    $
    1.27$2.01 - $3.00
    
    
    
    68,200
    
    
    
    4.61
    
    
    $
    2.56
    
    
    
    60,460
    
    
    $
    2.51$3.01 - $4.00
    
    
    
    302,800
    
    
    
    4.24
    
    
    $
    3.73
    
    
    
    268,700
    
    
    $
    3.75$4.01 - $5.00
    
    
    
    3,500
    
    
    
    4.97
    
    
    $
    4.71
    
    
    
    2,300
    
    
    $
    4.57$5.01 - $10.00
    
    
    
    38,000
    
    
    
    9.53
    
    
    $
    6.69
    
    
    
    14,800
    
    
    $
    7.28574,034
    
    
    
    4.66
    
    
    $
    3.13
    
    
    
    507,794
    
    
    $
    2.82
  Newly Issued Pronouncements
 Fair Value
Measurements
 The Fair
Value Option for Financial Assets and Financial Liabilities  Including an Amendment of Statement
of Financial Accounting Standards No. 115
  Page 10




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
 NOTE 2. Inventories
  June 28, 2008
    
    
    September 29, 2007(unaudited)Finished goods
    
    $
    51,834
    
    
    $
    408,995Work in process
    
    
    639,690
    
    
    
    478,883Raw materials
    
    
    1,020,422
    
    
    
    1,020,279$
    1,711,946
    
    
    $
    1,908,157
 NOTE 3. Income Taxes
   NOTE 4. Earnings Per Share
 Earnings Per Share
 June 28, 2008
    
    
    June 30, 20073 months
    
    
    9 months
    
    
    3 months
    
    
    9 monthsNet income
    
    $
    186,411
    
    
    $
    1,148,239
    
    
    $
    108,638
    
    
    $
    303,722Weighted average shares  basic
    
    
    1,433,535
    
    
    
    1,407,808
    
    
    
    1,378,025
    
    
    
    1,374,358Dilutive effect of stock options
    
    
    289,073
    
    
    
    259,556
    
    
    
    219,127
    
    
    
    147,270Weighted average shares  diluted
    
    
    1,722,608
    
    
    
    1,667,364
    
    
    
    1,597,152
    
    
    
    1,521,628Basic income per share
    
    $
    0.13
    
    
    $
    0.82
    
    
    $
    0.08
    
    
    $
    0.22Diluted income per share
    
    $
    0.11
    
    
    $
    0.69
    
    
    $
    0.07
    
    
    $
    0.20
  NOTE 5. Major Customers and Export Sales
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  June 28, 2008
    
    
    June 30, 20073 months
    
    
    9 months
    
    
    3 months
    
    
    9 monthsDomestic
    
    $
    1,662,206
    
    
    $
    5,260,437
    
    
    $
    1,104,711
    
    
    $
    2,754,292Foreign
    
    
    37,611
    
    
    
    387,492
    
    
    
    14,820
    
    
    
    415,049Total sales
    
    $
    1,699,817
    
    
    $
    5,647,929
    
    
    $
    1,119,531
    
    
    $
    3,169,341
  June 28, 2008
    
    
    June 30, 20073 months
    
    
    9 months
    
    
    3 months
    
    
    9 monthsThailand
    
    
    72.6
    %
    
    
    13.6
    %
    
    
    33.3
    %
    
    
    1.2
    %Canada
    
    
    20.3
    %
    
    
    2.0
    %
    
    
    
    
    
    
    Saudi Arabia
    
    
    
    
    
    
    24.4
    %
    
    
    
    
    
    
    1.5
    %United Kingdom
    
    
    
    
    
    
    23.0
    %
    
    
    
    
    
    
    Sri Lanka
    
    
    
    
    
    
    15.2
    %
    
    
    
    
    
    
    3.4
    %Colombia
    
    
    
    
    
    
    10.2
    %
    
    
    37.0
    %
    
    
    1.5
    %Lebanon
    
    
    
    
    
    
    9.2
    %
    
    
    
    
    
    
    Morocco
    
    
    
    
    
    
    
    
    
    
    14.0
    %
    
    
    3.2
    %Indonesia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28.1
    %Sweden
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23.7
    %Bahrain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17.1
    %Italy
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.5
    %Other
    
    
    7.1
    %
    
    
    2.4
    %
    
    
    15.7
    %
    
    
    6.8
    %
  June 28, 2008
    
    
    June 30, 20073 months
    
    
    9 months
    
    
    3 months
    
    
    9 monthsNorth America
    
    
    20.3
    %
    
    
    2.0
    %
    
    
    
    
    
    
    Central and South America
    
    
    
    
    
    
    10.2
    %
    
    
    37.0
    %
    
    
    1.5
    %Europe
    
    
    
    
    
    
    24.6
    %
    
    
    2.5
    %
    
    
    42.2
    %Mid-East and Africa
    
    
    6.5
    %
    
    
    49.5
    %
    
    
    21.6
    %
    
    
    26.8
    %Far East
    
    
    73.2
    %
    
    
    13.7
    %
    
    
    38.9
    %
    
    
    29.5
    %
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Item 2. Managements Discussion and Analysis or Plan of Operation
 Forward-Looking Statements
  Overview
  Critical Accounting and Significant Judgments and Estimates
 Summary of Significant Accounting Policies and Significant
Judgments and Estimates
  Page 13




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Results of Operations
 Three Months ended June 28, 2008 as compared to Three Months ended June 30, 2007
 Net Sales
   2008
    
    
    2007Thailand
    
    $
    27,000
    
    
    $
    5,000Other
    
    
    11,000
    
    
    
    10,000$
    38,000
    
    
    $
    15,000
   Gross Profit
   Page 14




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Operating Costs and Expenses
 Selling, General and Administrative Expenses
    Product Development Costs
    Net Income
   Page 15




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Nine Months ended June 28, 2008 as compared to Nine Months ended June 30, 2007
 Net Sales
   2008
    
    
    2007Saudi Arabia
    
    $
    94,000
    
    
    $
    5,000United Kingdom
    
    
    89,000
    
    
    
    Sri Lanka
    
    
    59,000
    
    
    
    14,000Thailand
    
    
    53,000
    
    
    
    5,000Colombia
    
    
    40,000
    
    
    
    6,000Lebanon
    
    
    36,000
    
    
    
    Indonesia
    
    
    
    
    
    
    117,000Sweden
    
    
    
    
    
    
    99,000Bahrain
    
    
    
    
    
    
    71,000Italy
    
    
    
    
    
    
    56,000Other
    
    
    17,000
    
    
    
    42,000$
    388,000
    
    
    $
    415,000
    Page 16




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Gross Profit
  Operating Costs and Expenses
 Selling, General and Administrative Expenses
    Product Development Costs
     Page 17




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Net Income
   Liquidity and Capital Resources
      Page 18




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Page 19




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Off-Balance Sheet Arrangements
  
 Item 3. Controls and Procedures
 Evaluation of disclosure controls and procedures.
 Changes in internal control over financial reporting
  Page 20




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Legal Proceedings
  
 Unregistered Sales of Equity Securities and Use of Proceeds
  
 Defaults Upon Senior Securities
  
 Submission of Matters to a Vote of Security Holders
  
 Other Information
  
 Exhibits and Reports on Form 8-K
 10.1
    
    

Contract
with US Army CECOM Acquisitions Center dated April 18, 2008
(Confidential portions of this exhibit have been omitted and filed
separately with the Securities and Exchange Commission pursuant to a
request for confidential treatment.)31.1
    
    
    Certification of principal executive officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of principal financial officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200232.1
    
    
    Certifications of Chief Executive and Chief Financial Officers
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 
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TECHNICAL COMMUNICATIONS CORPORATION(Registrant)August 11, 2008
Date
    
    
    
    By:
    
    /s/ Carl H. Guild, Jr.

Carl H. Guild, Jr., President and ChiefExecutive OfficerAugust 11, 2008

Date
    
    
    
    By:
    
    /s/ Michael P. Malone

Michael P. Malone, Chief Financial Officer
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Exhibit No.
    
    Description10.1
    
    

Contract with US Army CECOM Acquisitions Center dated April 18, 2008 (Confidential portions of this exhibit have been omitted and filed
separately with the Securities and Exchange Commission pursuant to a
request for confidential treatment.)31.1
    
    
    Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 200231.2
    
    
    Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232.1
    
    
    Certifications of Chief Executive and Chief Financial Officers pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
  Page 23