##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
  þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 27, 2009
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 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,
 Yes þ No o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 Yes o No þ




---



##### 



PagePART I Financial InformationItem 1. Financial Statements:Condensed Consolidated Balance Sheets as of
June 27, 2009 (unaudited) and September 27, 2008
    
    
    3Condensed Consolidated Income Statements for the
Three Months ended June 27, 2009 and June 28, 2008 (unaudited)
    
    
    4Condensed Consolidated Income Statements for the
Nine Months ended June 27, 2009 and June 28, 2008 (unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the
Nine Months ended June 27, 2009 and June 28, 2008 (unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20PART II Other InformationItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    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 31.1Exhibit 31.2Exhibit 32.1
   Page 2




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June 27, 2009
    
    
    September 27, 2008(Unaudited)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    3,966,096
    
    
    $
    3,622,903Accounts receivable  trade, less allowance of $25,000 at
June 27, 2009 and September 27, 2008
    
    
    1,115,790
    
    
    
    722,261Inventories, net
    
    
    2,360,830
    
    
    
    1,920,724Deferred income taxes
    
    
    75,000
    
    
    
    75,000Other current assets
    
    
    147,525
    
    
    
    105,666Total current assets
    
    
    7,665,241
    
    
    
    6,446,554Equipment and leasehold improvements
    
    
    3,339,929
    
    
    
    3,182,522Less: accumulated depreciation and amortization
    
    
    (2,993,318
    )
    
    
    (2,915,050
    )Equipment and leasehold improvements, net
    
    
    346,611
    
    
    
    267 472Total Assets
    
    $
    8,011,852
    
    
    $
    6,714,026Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    261,260
    
    
    $
    173,070Customer deposits
    
    
    873,845
    
    
    
    250,474Accrued liabilities:Accrued compensation and related expenses
    
    
    286,050
    
    
    
    448,179Accrued expenses
    
    
    130,442
    
    
    
    164,616Total current liabilities
    
    
    1,551,597
    
    
    
    1,036,339Stockholders Equity:Common stock, par value $.10 per share;7,000,000 shares authorized; 1,452,199 and 1,433,767 shares issued and outstanding at June 27, 2009 and September 27, 2008, respectively
    
    
    145,220
    
    
    
    143,377Additional paid-in capital
    
    
    2,013,890
    
    
    
    1,941,020Retained earnings
    
    
    4,301,145
    
    
    
    3,593,290Total stockholders equity
    
    
    6,460,255
    
    
    
    5,677,687Total Liabilities and Stockholders Equity
    
    $
    8,011,852
    
    
    $
    6,714,026
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 3




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Three Months EndedJune 27, 2009
    
    
    June 28, 2008Net sales
    
    $
    2,087,083
    
    
    $
    1,699,817Cost of sales
    
    
    803,714
    
    
    
    679,127Gross profit
    
    
    1,283,369
    
    
    
    1,020,690Operating expenses:Selling, general and administrative expenses
    
    
    526,524
    
    
    
    658,957Product development costs
    
    
    485,679
    
    
    
    192,218Total operating expenses
    
    
    1,012,203
    
    
    
    851,175Operating income
    
    
    271,166
    
    
    
    169,515Other income:Interest income
    
    
    5,808
    
    
    
    16,896Total other income
    
    
    5,808
    
    
    
    16,896Income before provision for income taxes
    
    
    276,974
    
    
    
    186,411Provision for income taxes
    
    
    
    
    
    
    Net income
    
    $
    276,974
    
    
    $
    186,411Net income per common share:Basic
    
    $
    0.19
    
    
    $
    0.13Diluted
    
    $
    0.17
    
    
    $
    0.11Weighted average shares:Basic
    
    
    1,451,967
    
    
    
    1,433,535Diluted
    
    
    1,621,671
    
    
    
    1,722,608
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 4




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Nine Months EndedJune 27, 2009
    
    
    June 28, 2008Net sales
    
    $
    5,987,130
    
    
    $
    5,647,929Cost of sales
    
    
    2,255,033
    
    
    
    2,083,831Gross profit
    
    
    3,732,097
    
    
    
    3,564,098Operating expenses:Selling, general and administrative expenses
    
    
    1,783,726
    
    
    
    1,709,298Product development costs
    
    
    1,277,488
    
    
    
    779,499Total operating expenses
    
    
    3,061,214
    
    
    
    2,488,797Operating income
    
    
    670,883
    
    
    
    1,075,301Other income:Interest income
    
    
    36,972
    
    
    
    72,938Total other income
    
    
    36,972
    
    
    
    72,938Income before provision for income taxes
    
    
    707,855
    
    
    
    1,148,239Provision for income taxes
    
    
    
    
    
    
    Net income
    
    $
    707,855
    
    
    $
    1,148,239Net income per common share:Basic
    
    $
    0.49
    
    
    $
    0.82Diluted
    
    $
    0.43
    
    
    $
    0.69Weighted average shares:Basic
    
    
    1,455,319
    
    
    
    1,407,808Diluted
    
    
    1,642,188
    
    
    
    1,667,364
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 5




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Nine Months EndedJune 27, 2009
    
    
    June 28, 2008Operating Activities:Net income
    
    $
    707,855
    
    
    $
    1,148,239Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    78,268
    
    
    
    33,891Stock-based compensation
    
    
    98,795
    
    
    
    125,852Changes in assets and liabilities:Accounts receivable
    
    
    (393,529
    )
    
    
    25,967Inventories
    
    
    (440,106
    )
    
    
    196,211Other current assets
    
    
    ( 41,859
    )
    
    
    ( 23,025
    )Accounts payable and other accrued liabilities
    
    
    488,865
    
    
    
    (246,402
    )Net cash provided by operating activities
    
    
    498,289
    
    
    
    1,260,733Investing Activities:Additions to equipment and leasehold improvements
    
    
    (157,407
    )
    
    
    (115,666
    )Net cash used in investing activities
    
    
    (157,407
    )
    
    
    (115,666
    )Financing Activities:Proceeds from stock issuance
    
    
    2,311
    
    
    
    282,860Net cash provided by financing activities
    
    
    2,311
    
    
    
    282,860Net increase in cash and cash equivalents
    
    
    343,193
    
    
    
    1,427,927Cash and cash equivalents at beginning of the period
    
    
    3,622,903
    
    
    
    2,622,288Cash and cash equivalents at the end of the period
    
    $
    3,966,096
    
    
    $
    4,050,215Supplemental Disclosures:Interest paid
    
    $
    
    
    
    $
    Income taxes paid
    
    
    16,200
    
    
    
    19,000
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 6




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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
 Revenue Recognition
  Page 7




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
   Inventory
  Accounts Receivable
  Accounting for Income Taxes
   Page 8




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##### Table of Contents



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
    Stock-Based Compensation
 Share-Based Payment
 Share-Based
Payment
 Three and Nine Months EndedJune 27, 2009
    
    
    June 28, 2008Assumptions:Option life
    
    5 years
    
    5 yearsRisk-free interest rate
    
    1.8% to 2.8%
    
    2.71% to 3.8%Stock volatility
    
    77% to 80%
    
    90% to 110%Dividend yield
    
    
    -0-
    
    
    
    -0-
   Page 9




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  June 27, 2009
    
    
    June 28, 20083 months
    
    
    9 months
    
    
    3 months
    
    
    9 monthsCost of sales
    
    $
    1,692
    
    
    $
    5,062
    
    
    $
    1,692
    
    
    $
    5,587Selling, general and administrative expenses
    
    
    1,558
    
    
    
    49,870
    
    
    
    3,022
    
    
    
    86,062Product development costs
    
    
    14,474
    
    
    
    43,863
    
    
    
    13,683
    
    
    
    34,203Total share-based compensation expense
before taxes
    
    $
    17,724
    
    
    $
    98,795
    
    
    $
    18,397
    
    
    $
    125,852
    Options OutstandingNumber of
    
    
    Weighted Average
    
    
    Weighted AverageShares
    
    
    Exercise Price
    
    
    Contractual LifeOutstanding at September 27, 2008
    
    
    581,034
    
    
    $
    3.05Grants
    
    
    25,500Exercises
    
    
    (108,834
    )Cancellations
    
    
    (5,000
    )Outstanding at June 27, 2009
    
    
    492,700
    
    
    $
    2.95
    
    
    4.97 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
    
    
    158,000
    
    
    
    3.30
    
    
    $
    0.96
    
    
    
    158,000
    
    
    $
    0.96$1.01  $2.00
    
    
    1,200
    
    
    
    2.56
    
    
    $
    1.27
    
    
    
    1,200
    
    
    $
    1.27$2.01  $3.00
    
    
    65,700
    
    
    
    3.53
    
    
    $
    2.54
    
    
    
    63,100
    
    
    $
    2.53$3.01  $4.00
    
    
    193,800
    
    
    
    5.39
    
    
    $
    3.59
    
    
    
    170,000
    
    
    $
    3.60$4.01  $5.00
    
    
    29,000
    
    
    
    8.94
    
    
    $
    4.79
    
    
    
    16,600
    
    
    $
    4.86$5.01  $10.00
    
    
    45,000
    
    
    
    8.62
    
    
    $
    6.62
    
    
    
    19,600
    
    
    $
    7.03492,700
    
    
    
    4.97
    
    
    $
    2.95
    
    
    
    428,500
    
    
    $
    2.66
  Page 10




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  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 Disclosures about Fair Value of Financial Instruments
    Page 11




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  NOTE 2. Inventories
  June 27, 2009
    
    
    September 27, 2008(unaudited)Finished goods
    
    $
    34,647
    
    
    $
    77,444Work in process
    
    
    760,037
    
    
    
    589,700Raw materials
    
    
    1,566,146
    
    
    
    1,253,580$
    2,360,830
    
    
    $
    1,920,724
 NOTE 3. Income Taxes
   NOTE 4. Earnings Per Share
 Earnings Per Share
 June 27, 2009
    
    
    June 28, 20083 months
    
    
    9 months
    
    
    3 months
    
    
    9 monthsNet income
    
    $
    276,974
    
    
    $
    707,855
    
    
    $
    186,411
    
    
    $
    1,148,239Weighted average shares  basic
    
    
    1,451,967
    
    
    
    1,455,319
    
    
    
    1,433,535
    
    
    
    1,407,808Dilutive effect of stock options
    
    
    169,704
    
    
    
    186,869
    
    
    
    289,073
    
    
    
    259,556Weighted average shares  diluted
    
    
    1,621,671
    
    
    
    1,642,188
    
    
    
    1,722,608
    
    
    
    1,667,364Basic net income per share
    
    $
    0.19
    
    
    $
    0.49
    
    
    $
    0.13
    
    
    $
    0.82Diluted net income per share
    
    $
    0.17
    
    
    $
    0.43
    
    
    $
    0.11
    
    
    $
    0.69
   Page 12




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
 NOTE 5. Major Customers and Export Sales
   June 27, 2009
    
    
    June 28, 20083 months
    
    
    9 months
    
    
    3 months
    
    
    9 monthsDomestic
    
    $
    1,926,608
    
    
    $
    5,649,269
    
    
    $
    1,662,206
    
    
    $
    5,260,437Foreign
    
    
    160,475
    
    
    
    337,861
    
    
    
    37,611
    
    
    
    387,492Total sales
    
    $
    2,087,083
    
    
    $
    5,987,130
    
    
    $
    1,699,817
    
    
    $
    5,647,929
  June 27, 2009
    
    
    June 28, 20083 months
    
    
    9 months
    
    
    3 months
    
    
    9 monthsSaudi Arabia
    
    
    35.8
    %
    
    
    56.4
    %
    
    
    
    
    
    
    24.4
    %Thailand
    
    
    47.6
    %
    
    
    22.6
    %
    
    
    72.6
    %
    
    
    13.6
    %Colombia
    
    
    13.4
    %
    
    
    9.4
    %
    
    
    
    
    
    
    10.2
    %Canada
    
    
    
    
    
    
    
    
    
    
    20.3
    %
    
    
    2.0
    %United Kingdom
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23.0
    %Sri Lanka
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.2
    %Other
    
    
    3.2
    %
    
    
    11.6
    %
    
    
    7.1
    %
    
    
    11.6
    %
  June 27, 2009
    
    
    June 28, 20083 months
    
    
    9 months
    
    
    3 months
    
    
    9 monthsNorth America
(excluding the U.S.)
    
    
    
    
    
    
    
    
    
    
    20.3
    %
    
    
    2.0
    %Central and South America
    
    
    13.4
    %
    
    
    11.2
    %
    
    
    
    
    
    
    10.2
    %Europe
    
    
    1.7
    %
    
    
    4.8
    %
    
    
    
    
    
    
    24.6
    %Mid-East and Africa
    
    
    37.3
    %
    
    
    60.5
    %
    
    
    6.5
    %
    
    
    49.5
    %Far East
    
    
    47.6
    %
    
    
    23.5
    %
    
    
    73.2
    %
    
    
    13.7
    %
  Page 13




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward-Looking Statements
  Overview
  Critical Accounting and Significant Judgments and Estimates
 Summary of Significant Accounting Policies and Significant
Judgments and Estimates
  Page 14




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Results of Operations
 Three Months ended June 27, 2009 as compared to Three Months ended June 28, 2008
 Net Sales
   2009
    
    
    2008Thailand
    
    $
    76,000
    
    
    $
    27,000Saudi Arabia
    
    
    57,000
    
    
    
    Colombia
    
    
    22,000
    
    
    
    Other
    
    
    5,000
    
    
    
    11,000$
    160,000
    
    
    $
    38,000
   Gross Profit
   Page 15




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##### Table of Contents



Operating Costs and Expenses
 Selling, General and Administrative Expenses
    Product Development Costs
    Net Income
   Page 16




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Nine Months ended June 27, 2009 as compared to Nine Months ended June 28, 2008
 Net Sales
   2009
    
    
    2008Saudi Arabia
    
    $
    190,000
    
    
    $
    94,000Thailand
    
    
    76,000
    
    
    
    53,000Colombia
    
    
    32,000
    
    
    
    40,000United Kingdom
    
    
    
    
    
    
    89,000Sri Lanka
    
    
    
    
    
    
    59,000Other
    
    
    40,000
    
    
    
    53,000$
    338,000
    
    
    $
    388,000
   Gross Profit
   Page 17




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##### Table of Contents



Operating Costs and Expenses
 Selling, General and Administrative Expenses
    Product Development Costs
    Net Income
    Page 18




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Liquidity and Capital Resources
          Page 19




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##### Table of Contents



Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures.
 Changes in internal control over financial reporting
  Page 20




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##### Table of Contents



Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 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 21




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TECHNICAL COMMUNICATIONS CORPORATION(Registrant)August 11, 2009
Date
    
    By:
    
    /s/ Carl H. Guild, Jr.

Carl H. Guild, Jr., President and Chief Executive OfficerAugust 11, 2009
    
    By:
    
    /s/ Michael P. MaloneDate
    
    
    
    Michael P. Malone, Chief Financial Officer
  Page 22




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##### Table of Contents



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