##### 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 March 28, 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,
 þ o
 o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




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##### 



PagePART I Financial InformationItem 1. Financial Statements:Condensed
Consolidated Balance Sheets as of
March 28, 2009 (unaudited) and September 27, 2008
    
    
    3Condensed
Consolidated Income Statements for the
Three Months ended March 28, 2009 and March 29, 2008 (unaudited)
    
    
    4Condensed
Consolidated Income Statements for the
Six Months ended March 28, 2009 and March 29, 2008 (unaudited)
    
    
    5Condensed
Consolidated Statements of Cash Flows for the
Six Months ended March 28, 2009 and March 29, 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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March 28, 2009
    
    
    September 27, 2008(Unaudited)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    3,876,177
    
    
    $
    3,622,903Accounts receivable  trade, less allowance of $25,000 at
March 28, 2009 and September 27, 2008
    
    
    1,098,053
    
    
    
    722,261Inventories, net
    
    
    2,216,500
    
    
    
    1,920,724Deferred income taxes
    
    
    75,000
    
    
    
    75,000Other current assets
    
    
    124,907
    
    
    
    105,666Total current assets
    
    
    7,390,637
    
    
    
    6,446,554Equipment and leasehold improvements
    
    
    3,306,184
    
    
    
    3,182,522Less: accumulated depreciation and amortization
    
    
    (2,961,578
    )
    
    
    (2,915,050
    )Equipment and leasehold improvements, net
    
    
    344,606
    
    
    
    267 472Total Assets
    
    $
    7,735,243
    
    
    $
    6,714,026Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    242,517
    
    
    $
    173,070Accrued liabilities:Accrued compensation and related expenses
    
    
    321,880
    
    
    
    448,179Accrued expenses
    
    
    1,005,289
    
    
    
    415,090Total current liabilities
    
    
    1,569,686
    
    
    
    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 March 28, 2009 and
September 27, 2008, respectively
    
    
    145,220
    
    
    
    143,377Additional paid-in capital
    
    
    1,996,166
    
    
    
    1,941,020Retained earnings
    
    
    4,024,171
    
    
    
    3,593,290Total stockholders equity
    
    
    6,165,557
    
    
    
    5,677,687Total Liabilities and Stockholders Equity
    
    $
    7,735,243
    
    
    $
    6,714,026
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 3




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Three Months EndedMarch 28, 2009
    
    
    March 29, 2008Net sales
    
    $
    2,055,707
    
    
    $
    1,659,012Cost of sales
    
    
    791,989
    
    
    
    555,275Gross profit
    
    
    1,263,718
    
    
    
    1,103,737Operating expenses:Selling, general and
administrative expenses
    
    
    598,809
    
    
    
    614,910Product development costs
    
    
    450,867
    
    
    
    306,445Total operating expenses
    
    
    1,049,676
    
    
    
    921,355Operating income
    
    
    214,042
    
    
    
    182,382Other income:Interest income
    
    
    11,089
    
    
    
    27,172Total other income
    
    
    11,089
    
    
    
    27,712Income before provision for income taxes
    
    
    225,131
    
    
    
    209,554Provision for income taxes
    
    
    
    
    
    
    Net income
    
    $
    225,131
    
    
    $
    209,554Net income per common share:Basic
    
    $
    0.16
    
    
    $
    0.15Diluted
    
    $
    0.14
    
    
    $
    0.13Weighted average shares:Basic
    
    
    1,450,897
    
    
    
    1,406,799Diluted
    
    
    1,625,272
    
    
    
    1,683,153
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 4




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Six Months EndedMarch 28, 2009
    
    
    March 29, 2008Net sales
    
    $
    3,900,047
    
    
    $
    3,948,112Cost of sales
    
    
    1,451,319
    
    
    
    1,404,704Gross profit
    
    
    2,448,728
    
    
    
    2,543,408Operating expenses:Selling, general and
administrative expenses
    
    
    1,257,202
    
    
    
    1,050,341Product development costs
    
    
    791,809
    
    
    
    587,281Total operating expenses
    
    
    2,049,011
    
    
    
    1,637,622Operating income
    
    
    399,717
    
    
    
    905,786Other income:Interest income
    
    
    31,164
    
    
    
    56,042Total other income
    
    
    31,164
    
    
    
    56,042Income before provision for income taxes
    
    
    430,881
    
    
    
    961,828Provision for income taxes
    
    
    
    
    
    
    Net income
    
    $
    430,881
    
    
    $
    961,828Net income per common share:Basic
    
    $
    0.30
    
    
    $
    0.69Diluted
    
    $
    0.26
    
    
    $
    0.59Weighted average shares:Basic
    
    
    1,446,103
    
    
    
    1,394,667Diluted
    
    
    1,633,150
    
    
    
    1,631,731
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 5




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Six Months EndedMarch 28, 2009
    
    
    March 29, 2008Operating Activities:Net income
    
    $
    430,881
    
    
    $
    961,828Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    46,528
    
    
    
    20,872Stock-based compensation
    
    
    81,071
    
    
    
    107,455Changes in assets and liabilities:Accounts receivable
    
    
    (375,792
    )
    
    
    (609,268
    )Inventories
    
    
    (295,776
    )
    
    
    51,597Other current assets
    
    
    (19,241
    )
    
    
    23,391Accounts payable and other accrued liabilities
    
    
    506,954
    
    
    
    (315,783
    )Net cash provided by operating activities
    
    
    374,625
    
    
    
    240,092Investing Activities:Additions to equipment and leasehold improvements
    
    
    (123,662
    )
    
    
    (39,680
    )Net cash used in investing activities
    
    
    (123,662
    )
    
    
    (39,680
    )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
    
    
    253,274
    
    
    
    483,272Cash and cash equivalents at beginning of the period
    
    
    3,622,903
    
    
    
    2,622,288Cash and cash equivalents at the end of the period
    
    $
    3,876,177
    
    
    $
    3,105,560Supplemental Disclosures:Interest paid
    
    $
    
    
    
    $
    Income taxes paid
    
    
    16,200
    
    
    
    9,600
 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
   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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
    Stock-Based Compensation
 Share-Based Payment
 Share-based
Payment
 Three and Six Months EndedMarch 28, 2009
    
    
    March 29, 2008Assumptions:Option life
    
    5 years
    
    
    5 yearsRisk-free interest rate
    
    1.8% to 2.8%
    
    2.71% to  3.8%Stock volatility
    
    79% to  80%
    
    97% to 110%Dividend yield
    
    
    -0-
    
    
    
    -0-
   Page 9




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  March 28, 2009
    
    
    March 29, 20083 months
    
    
    6 months
    
    
    3 months
    
    
    6 monthsCost of sales
    
    $
    1,675
    
    
    $
    3,370
    
    
    $
    1,942
    
    
    $
    3,895Selling, general and administrative
    
    
    45,776
    
    
    
    48,312
    
    
    
    79,848
    
    
    
    83,040Product development costs
    
    
    14,205
    
    
    
    29,389
    
    
    
    11,790
    
    
    
    20,520Total share-based compensation expense
before taxes
    
    $
    61,656
    
    
    $
    81,071
    
    
    $
    93,580
    
    
    $
    107,455
    Options OutstandingNumber of
    
    
    Weighted Average
    
    
    Weighted AverageShares
    
    
    Exercise Price
    
    
    Contractual LifeOutstanding at September 27, 2008
    
    
    581,034
    
    
    $
    3.05Grants
    
    
    21,500Exercises
    
    
    (108,834
    )Cancellations
    
    
    (5,000
    )Outstanding at March 28, 2009
    
    
    488,700
    
    
    $
    2.94
    
    
    5.18 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
    
    
    
    3.55
    
    
    $
    0.96
    
    
    
    158,000
    
    
    $
    0.96$1.01  $2.00
    
    
    1,200
    
    
    
    2.81
    
    
    $
    1.27
    
    
    
    1,200
    
    
    $
    1.27$2.01  $3.00
    
    
    65,700
    
    
    
    3.78
    
    
    $
    2.54
    
    
    
    60,900
    
    
    $
    2.51$3.01  $4.00
    
    
    193,800
    
    
    
    5.64
    
    
    $
    3.59
    
    
    
    169,300
    
    
    $
    3.59$4.01  $5.00
    
    
    25,000
    
    
    
    9.04
    
    
    $
    4.90
    
    
    
    16,300
    
    
    $
    4.85$5.01  $10.00
    
    
    45,000
    
    
    
    8.87
    
    
    $
    6.62
    
    
    
    18,800
    
    
    $
    7.11488,700
    
    
    
    5.18
    
    
    $
    2.94
    
    
    
    424,500
    
    
    $
    2.66
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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
 NOTE 2. Inventories
  March 28, 2009
    
    
    September 27, 2008(unaudited)Finished goods
    
    $
    38,100
    
    
    $
    77,444Work in process
    
    
    1,003,173
    
    
    
    589,700Raw materials
    
    
    1,175,227
    
    
    
    1,253,580$
    2,216,500
    
    
    $
    1,920,724
  Page 11




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
 NOTE 3. Income Taxes
   NOTE 4. Earnings Per Share
 Earnings Per Share
 March 28, 2009
    
    
    March 29, 20083 months
    
    
    6 months
    
    
    3 months
    
    
    6 monthsNet income
    
    $
    225,131
    
    
    $
    430,881
    
    
    $
    209,554
    
    
    $
    961,828Weighted average shares  basic
    
    
    1,450,897
    
    
    
    1,446,103
    
    
    
    1,406,799
    
    
    
    1,394,667Dilutive effect of stock options
    
    
    174,375
    
    
    
    187,047
    
    
    
    276,354
    
    
    
    237,064Weighted average shares  diluted
    
    
    1,625,272
    
    
    
    1,633,150
    
    
    
    1,683,153
    
    
    
    1,631,731Basic income per share
    
    $
    0.16
    
    
    $
    0.30
    
    
    $
    0.15
    
    
    $
    0.69Diluted income per share
    
    $
    0.14
    
    
    $
    0.26
    
    
    $
    0.13
    
    
    $
    0.59
  NOTE 5. Major Customers and Export Sales
   March 28, 2009
    
    
    March 29, 20083 months
    
    
    6 months
    
    
    3 months
    
    
    6 monthsDomestic
    
    $
    2,012,627
    
    
    $
    3,722,660
    
    
    $
    1,563,932
    
    
    $
    3,598,231Foreign
    
    
    43,080
    
    
    
    177,387
    
    
    
    95,080
    
    
    
    349,881Total sales
    
    $
    2,055,707
    
    
    $
    3,900,047
    
    
    $
    1,659,012
    
    
    $
    3,948,112
   Page 12




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
 March
28, 2009
    
    
    March 29, 20083 months
    
    
    6 months
    
    
    3 months
    
    
    6 monthsSaudi Arabia
    
    
    62.3
    %
    
    
    75.0
    %
    
    
    
    
    
    
    27.0
    %Slovakia
    
    
    30.1
    %
    
    
    7.3
    %
    
    
    
    
    
    
    1.8
    %United Kingdom
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25.4
    %Sri Lanka
    
    
    
    
    
    
    
    
    
    
    61.8
    %
    
    
    16.8
    %Lebanon
    
    
    
    
    
    
    
    
    
    
    37.4
    %
    
    
    10.2
    %Colombia
    
    
    
    
    
    
    5.8
    %
    
    
    
    
    
    
    11.3
    %Other
    
    
    7.6
    %
    
    
    11.9
    %
    
    
    0.8
    %
    
    
    7.5
    %
  March 28, 2009
    
    
    March 29, 20083 months
    
    
    6 months
    
    
    3 months
    
    
    6 monthsNorth America
(excluding the U.S.)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Central and South America
    
    
    
    
    
    
    9.2
    %
    
    
    
    
    
    
    11.3
    %Europe
    
    
    20.0
    %
    
    
    7.6
    %
    
    
    
    
    
    
    27.2
    %Mid-East and Africa
    
    
    40.0
    %
    
    
    81.5
    %
    
    
    100
    %
    
    
    54.2
    %Far East
    
    
    40.0
    %
    
    
    1.7
    %
    
    
    
    
    
    
    7.3
    %
  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 March 28, 2009 as compared to Three Months ended March 29, 2008
 Net Sales
   2009
    
    
    2008Saudi Arabia
    
    $
    27,000
    
    
    $
    Slovakia
    
    
    13,000
    
    
    
    Sri Lanka
    
    
    
    
    
    
    59,000Lebanon
    
    
    
    
    
    
    36,000Other
    
    
    3,000
    
    
    
    $
    43,000
    
    
    $
    95,000
   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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Six Months ended March 28, 2009 as compared to Six Months ended March 29, 2008
 Net Sales
   2009
    
    
    2008Saudi Arabia
    
    $
    133,000
    
    
    $
    94,000United Kingdom
    
    
    
    
    
    
    89,000Sri Lanka
    
    
    
    
    
    
    59,000Colombia
    
    
    10,000
    
    
    
    40,000Lebanon
    
    
    
    
    
    
    36,000Other
    
    
    34,000
    
    
    
    32,000$
    177,000
    
    
    $
    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
  
 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)May 12, 2009
Date
    
    
    
    By:
    
    /s/ Carl H. Guild, Jr.

Carl H. Guild, Jr., President
and Chief Executive OfficerMay 12, 2009
Date
    
    
    
    By:
    
    /s/ Michael P. Malone

Michael P. Malone, 
Chief Financial Officer
  Page 22




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Exhibit Number
    
    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