##### 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 30, 2007
 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 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 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 30, 2007 (unaudited) and September 30, 2006
    
    
    2Condensed Consolidated Statements of Operations for the Three months ended June 30, 2007 and June 24, 2006 (unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Nine months ended June 30, 2007 and June 24, 2006 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine months ended June 30, 2007 and June 24, 2006 (unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Management's Discussion and Analysis or Plan of Operation
    
    
    14Item 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 31.1Exhibit 31.2Exhibit 32.1
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June 30, 2007
    
    
    September 30, 2006(Unaudited)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    2,139,968
    
    
    $
    1,870,713Accounts receivable  trade, less allowance for
doubtful
accounts of $70,000
    
    
    295,742
    
    
    
    206,320Inventories
    
    
    1,782,290
    
    
    
    1,504,613Other current assets
    
    
    111,949
    
    
    
    92,298Total current assets
    
    
    4,329,949
    
    
    
    3,673,944Equipment and leasehold improvements
    
    
    5,114,077
    
    
    
    5,077,732Less: accumulated depreciation and amortization
    
    
    (5,017,239
    )
    
    
    (4,994,339
    )Equipment and leasehold improvements, net
    
    
    96,838
    
    
    
    83,393Total Assets
    
    $
    4,426,787
    
    
    $
    3,757,337Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    80,496
    
    
    $
    113,954Accrued liabilitiesAccrued compensation and related expenses
    
    
    290,231
    
    
    
    150,836Accrued expenses
    
    
    439,679
    
    
    
    262,673Total current liabilities
    
    
    810,406
    
    
    
    527,463Stockholders Equity:Common stock, par value $.10 per share;
7,000,000 shares authorized; 1,378,967 shares issued
and outstanding at June 30, 2007 and 1,371,691
shares issued and outstanding at September 30, 2006
    
    
    137,897
    
    
    
    137,169Additional paid-in capital
    
    
    1,488,757
    
    
    
    1,406,700Retained earnings
    
    
    1,989,727
    
    
    
    1,686,005Total stockholders equity
    
    
    3,616,381
    
    
    
    3,229,874Total Liabilities and Stockholders Equity
    
    $
    4,426,787
    
    
    $
    3,757,337
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 2




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Three Months EndedJune 30, 2007
    
    
    June 24, 2006Net sales
    
    $
    1,119,531
    
    
    $
    1,133,419Cost of sales
    
    
    369,388
    
    
    
    456,707Gross profit
    
    
    750,143
    
    
    
    676,712Operating expenses:Selling, general and
administrative expenses
    
    
    407,239
    
    
    
    332,439Product development costs
    
    
    258,592
    
    
    
    249,481Total operating expenses
    
    
    665,831
    
    
    
    581,920Operating income
    
    
    84,312
    
    
    
    94,792Other income (expense):Interest income
    
    
    24,326
    
    
    
    19,466Interest expense
    
    
    
    
    
    
    (312
    )Other
    
    
    
    
    
    
    450Total other income:
    
    
    24,326
    
    
    
    19,604Net income before provision for income taxes
    
    
    108,638
    
    
    
    114,396Provision for income taxes
    
    
    
    
    
    
    Net income
    
    $
    108,638
    
    
    $
    114,396Net income per common share:Basic
    
    $
    0.08
    
    
    $
    0.08Diluted
    
    $
    0.07
    
    
    $
    0.07Weighted average shares:Basic
    
    
    1,378,025
    
    
    
    1,371,441Diluted
    
    
    1,597,152
    
    
    
    1,528,508
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 3




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Nine Months EndedJune 30, 2007
    
    
    June 24, 2006Net sales
    
    $
    3,169,341
    
    
    $
    3,051,945Cost of sales
    
    
    917,235
    
    
    
    1,243,500Gross profit
    
    
    2,252,106
    
    
    
    1,808,445Operating expenses:Selling, general and
administrative expenses
    
    
    1,267,412
    
    
    
    1,198,151Product development costs
    
    
    745,537
    
    
    
    797,303Total operating expenses
    
    
    2,012,949
    
    
    
    1,995,454Operating income (loss)
    
    
    239,157
    
    
    
    (187,009
    )Other income (expense):Interest income
    
    
    65,189
    
    
    
    37,791Interest expense
    
    
    (624
    )
    
    
    (1,229
    )Other
    
    
    
    
    
    
    1,800Total other income:
    
    
    64,565
    
    
    
    38,362Net income (loss) before provision for income taxes
    
    
    303,722
    
    
    
    (148,647
    )Provision for income taxes
    
    
    
    
    
    
    Net income (loss)
    
    $
    303,722
    
    
    $
    (148,647
    )Net income (loss) per common share:Basic
    
    $
    0.22
    
    
    $
    (0.11
    )Diluted
    
    $
    0.20
    
    
    $
    (0.11
    )Weighted average shares:Basic
    
    
    1,374,358
    
    
    
    1,369,021Diluted
    
    
    1,521,628
    
    
    
    1,369,021
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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Nine Months EndedJune 30, 2007
    
    
    June 24, 2006Operating Activities:Net income (loss)
    
    $
    303,722
    
    
    $
    (148,647
    )Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation and amortization
    
    
    22,900
    
    
    
    23,749Stock-based compensation
    
    
    74,313
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    (89,422
    )
    
    
    406,672Inventories
    
    
    (277,677
    )
    
    
    143,415Other current assets
    
    
    (19,651
    )
    
    
    (15,919
    )Accounts payable and other accrued liabilities
    
    
    282,943
    
    
    
    199,088Net cash provided by operating activities
    
    
    297,128
    
    
    
    608,358Investing Activities:Additions to equipment and leasehold improvements
    
    
    (36,345
    )
    
    
    (10,741
    )Net cash used in investing activities
    
    
    (36,345
    )
    
    
    (10,741
    )Financing Activities:Proceeds from stock issuance
    
    
    8,472
    
    
    
    8,341Net cash provided by financing activities
    
    
    8,472
    
    
    
    8,341Net increase in cash and cash equivalents
    
    
    269,255
    
    
    
    605,958Cash and cash equivalents at beginning of the
period
    
    
    1,870,713
    
    
    
    1,199,175Cash and cash equivalents at the end of the period
    
    $
    2,139,968
    
    
    $
    1,805,133Supplemental Disclosures:Interest paid
    
    $
    624
    
    
    $
    1,229Income taxes paid
    
    
    503
    
    
    
    2,977
 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
   Basis of Presentation
 NOTE 1. Summary of Significant Accounting Policies and Significant Judgments and
Estimates
    Page 6




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  Revenue Recognition
      Inventory
   Page 7




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
 Accounts Receivable
  Stock-Based Compensation
    June 24, 2006(unaudited)3 months
    
    
    9 monthsNet income (loss), as reported
    
    $
    114,396
    
    
    $
    (148,647
    )Add: Stock-based employee compensation
expense included in net loss
    
    
    
    
    
    
    Deduct: Stock-based employee compensation
expense determined under fair-value method
    
    
    (19,835
    )
    
    
    (100,929
    )Pro forma net income (loss)
    
    $
    94,561
    
    
    $
    (249,576
    )Basic income (loss) per shareAs reported
    
    $
    0.08
    
    
    $
    (0.11
    )Pro forma
    
    $
    0.07
    
    
    $
    (0.18
    )Diluted income (loss) per shareAs reported
    
    $
    0.07
    
    
    $
    (0.11
    )Pro forma
    
    $
    0.06
    
    
    $
    (0.18
    )
  Page 8




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  Three Months EndedJune 30, 2007
    
    
    June 24, 2006Assumptions:Option life
    
    5 years
    
    
    5 yearsRisk-free interest rate
    
    
    4.58
    %
    
    
    4.83
    %Stock volatility
    
    
    149
    %
    
    
    162
    %Dividend yield
    
    
    -0-
    
    
    
    -0-
  Three months
    
    
    Nine MonthsCost of sales
    
    $
    1,769
    
    
    $
    5,159Selling, general and administrative
    
    
    14,788
    
    
    
    46,457Product development costs
    
    
    7,993
    
    
    
    22,697Total share-based compensation expense before tax
    
    $
    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 October 1, 2006
    
    
    627,234
    
    
    $
    3.29Grants
    
    
    16,500Exercises
    
    
    (6,900
    )Cancellations
    
    
    (21,000
    )Outstanding at June 30, 2007
    
    
    615,834
    
    
    $
    3.11
    
    
    4.8 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
    
    
    165,134
    
    
    
    5.26
    
    
    $
    0.96
    
    
    
    165,134
    
    
    $
    0.96$1.01-$2.00
    
    
    1,200
    
    
    
    4.55
    
    
    
    1.27
    
    
    
    1,200
    
    
    
    1.27$2.01-$3.00
    
    
    68,200
    
    
    
    5.61
    
    
    
    2.56
    
    
    
    55,320
    
    
    
    2.47$3.01-$4.00
    
    
    302,800
    
    
    
    5.23
    
    
    
    3.73
    
    
    
    248,400
    
    
    
    3.75$4.01-$5.00
    
    
    23,500
    
    
    
    1.43
    
    
    
    4.96
    
    
    
    22,000
    
    
    
    4.96$5.01-$10.00
    
    
    55,000
    
    
    
    1.49
    
    
    
    6.12
    
    
    
    50,000
    
    
    
    6.22615,834
    
    
    
    4.80
    
    
    $
    3.11
    
    
    
    542,054
    
    
    $
    3.04
  Accounting for Income Taxes
    Page 10




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  Newly Issued Pronouncements
     NOTE 2. Inventories
  June 30, 2007
    
    
    September 30, 2006(unaudited)Finished Goods
    
    $
    3,429
    
    
    $
    62,773Work in Process
    
    
    577,351
    
    
    
    481,226Raw Materials
    
    
    1,201,510
    
    
    
    960,614$
    1,782,290
    
    
    $
    1,504,613
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
 NOTE 3. Earnings (Loss) Per Share
  June 30, 2007
    
    
    June 24, 20063 months
    
    
    9 months
    
    
    3 months
    
    
    9 monthsNet income (loss)
    
    $
    108,638
    
    
    $
    303,722
    
    
    $
    114,396
    
    
    $
    (148,647
    )Weighted average shares  basic
    
    
    1,376,695
    
    
    
    1,374,423
    
    
    
    1,371,441
    
    
    
    1,369,021Dilutive effect of stock options
    
    
    219,127
    
    
    
    147,270
    
    
    
    157,066
    
    
    
    Weighted average shares  diluted
    
    
    1,595,822
    
    
    
    1,521,693
    
    
    
    1,528,508
    
    
    
    1,369,021Basic income (loss) per share
    
    $
    0.08
    
    
    $
    0.22
    
    
    $
    0.08
    
    
    $
    (0.11
    )Diluted income (loss) per share
    
    $
    0.07
    
    
    $
    0.20
    
    
    $
    0.07
    
    
    $
    (0.11
    )
  NOTE 4. Major Customers and Export Sales
   June 30, 2007
    
    
    June 24, 20063 months
    
    
    9 months
    
    
    3 months
    
    
    9 monthsDomestic
    
    $
    1,104,711
    
    
    $
    2,754,292
    
    
    $
    106,782
    
    
    $
    702,005Foreign
    
    
    14,820
    
    
    
    415,049
    
    
    
    1,026,637
    
    
    
    2,349,940Total sales
    
    $
    1,119,531
    
    
    $
    3,169,341
    
    
    $
    1,133,419
    
    
    $
    3,051,945
  Page 12




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  June 30, 2007
    
    
    June 24, 20063 months
    
    
    9 months
    
    
    3 months
    
    
    9 months(unaudited)
    
    
    (unaudited)Indonesia
    
    
    
    
    
    
    28.1
    %
    
    
    61.8
    %
    
    
    43.0
    %Sweden
    
    
    
    
    
    
    23.7
    %
    
    
    
    
    
    
    0.5
    %Bahrain
    
    
    
    
    
    
    17.1
    %
    
    
    
    
    
    
    Italy
    
    
    
    
    
    
    13.5
    %
    
    
    
    
    
    
    1.0
    %Morocco
    
    
    14.0
    %
    
    
    3.2
    %
    
    
    
    
    
    
    18.0
    %Thailand
    
    
    33.3
    %
    
    
    1.2
    %
    
    
    
    
    
    
    Venezuela
    
    
    
    
    
    
    
    
    
    
    31.1
    %
    
    
    18.2
    %Colombia
    
    
    37.0
    %
    
    
    1.5
    %
    
    
    
    
    
    
    7.8
    %Other
    
    
    15.7
    %
    
    
    11.7
    %
    
    
    7.1
    %
    
    
    11.5
    %
  June 30, 2007
    
    
    June 24, 20063 months
    
    
    9 months
    
    
    3 months
    
    
    9 months(unaudited)
    
    
    (unaudited)North America
(excluding the U.S.)
    
    
    
    
    
    
    
    
    
    
    0.9
    %
    
    
    0.4
    %Central and South America
    
    
    37.0
    %
    
    
    1.5
    %
    
    
    31.1
    %
    
    
    26.2
    %Europe
    
    
    2.5
    %
    
    
    42.2
    %
    
    
    6.2
    %
    
    
    5.5
    %Mid-East and Africa
    
    
    21.6
    %
    
    
    26.8
    %
    
    
    
    
    
    
    20.8
    %Far East
    
    
    38.9
    %
    
    
    29.5
    %
    
    
    61.8
    %
    
    
    47.1
    %
  Page 13




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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 30, 2007 as compared to the Three Months ended June 24, 2006
 Net Sales
   2007
    
    
    2006Morocco
    
    $
    2,000
    
    
    
    Colombia
    
    
    5,000
    
    
    
    Thailand
    
    
    5,000
    
    
    
    Indonesia
    
    
    
    
    
    
    634,000Venezuela
    
    
    
    
    
    
    319,000Other
    
    
    3,000
    
    
    
    73,000$
    15,000
    
    
    $
    1,026,000
   Gross Profit
   Page 15




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




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Nine Months ended June 30, 2007 as compared to the Nine Months ended June 24, 2006
 Net Sales
   2007
    
    
    2006Indonesia
    
    $
    117,000
    
    
    $
    1,011,000Sweden
    
    
    99,000
    
    
    
    Bahrain
    
    
    71,000
    
    
    
    Italy
    
    
    56,000
    
    
    
    24,000Morocco
    
    
    13,000
    
    
    
    424,000Venezuela
    
    
    
    
    
    
    428,000Colombia
    
    
    6,000
    
    
    
    184,000Other
    
    
    53,000
    
    
    
    279,000$
    415,000
    
    
    $
    2,350,000
  .
 Gross Profit
   Page 17




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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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Off-Balance Sheet Arrangements
  
  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
 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)Date August 13, 2007
    By:
    /s/ Carl H. Guild, Jr.Carl H. Guild, Jr., President andChief Executive OfficerDate August 13, 2007
    By:
    /s/ Michael P. MaloneMichael P. Malone, Chief Financial Officer  Page 22




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ExhibitNo.
    
    Description31.1
    
    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