##### 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 March 29, 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 
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, if changed since last report)
 þ o
 o þ
  o þ




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##### 



PagePART I Financial InformationItem 1. Financial Statements:Condensed Consolidated Balance Sheets as of
March 29, 2008 (unaudited) and September 29, 2007
    
    
    2Condensed Consolidated Statements of Operations for the
Three Months ended March 29, 2008 and March 31, 2007 (unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the
Six Months ended March 29, 2008 and March 31, 2007 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the
Six Months ended March 29, 2008 and March 31, 2007 (unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    13Item 3. Controls and Procedures
    
    
    19PART II Other InformationItem 1. Legal Proceedings
    
    
    20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3. Defaults Upon Senior Securities
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits
    
    
    20Signatures
    
    
    21Exhibit 31.1Exhibit 31.2Exhibit 32.1
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March 29, 2008
    
    
    September 29, 2007(Unaudited)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    3,105,560
    
    
    $
    2,622,288Accounts receivable  trade, less allowance of $25,000
at March 29, 2008 and $35,000 at September 29, 2007
    
    
    1,029,795
    
    
    
    420,527Inventories
    
    
    1,856,560
    
    
    
    1,908,157Other current assets
    
    
    72,660
    
    
    
    96,051Total current assets
    
    
    6,064,575
    
    
    
    5,047,023Equipment and leasehold improvements
    
    
    3,000,948
    
    
    
    2,961,268Less: accumulated depreciation and amortization
    
    
    (2,874,778
    )
    
    
    (2,853,906
    )Equipment and leasehold improvements, net
    
    
    126,170
    
    
    
    107,362Total Assets
    
    $
    6,190,745
    
    
    $
    5,154,385Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    116,315
    
    
    $
    253,683Accrued liabilitiesAccrued compensation and related expenses
    
    
    342,861
    
    
    
    449,111Accrued expenses
    
    
    191,070
    
    
    
    263,235Total current liabilities
    
    
    650,246
    
    
    
    966,029Stockholders Equity:Common stock, par value $.10 per share;
7,000,000 shares authorized; 1,433,767 shares issued
and outstanding at March 29, 2008 and 1,382,767 at
September 29, 2007
    
    
    143,377
    
    
    
    138,277Additional paid-in capital
    
    
    1,902,814
    
    
    
    1,517,599Retained earnings
    
    
    3,494,308
    
    
    
    2,532,480Total stockholders equity
    
    
    5,540,499
    
    
    
    4,188,356Total Liabilities and Stockholders Equity
    
    $
    6,190,745
    
    
    $
    5,154,385
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 2




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Three Months EndedMarch 29, 2008
    
    
    March 31, 2007Net sales
    
    $
    1,659,012
    
    
    $
    1,288,150Cost of sales
    
    
    555,275
    
    
    
    319,015Gross profit
    
    
    1,103,737
    
    
    
    969,135Operating expenses:Selling, general and
administrative expenses
    
    
    614,910
    
    
    
    408,337Product development costs
    
    
    306,445
    
    
    
    268,153Total operating expenses
    
    
    921,355
    
    
    
    676,490Operating income
    
    
    182,382
    
    
    
    292,645Other income (expense):Interest income
    
    
    27,172
    
    
    
    19,801Interest expense
    
    
    
    
    
    
    (312
    )Total other income:
    
    
    27,172
    
    
    
    19,489Net income before provision for income taxes
    
    
    209,554
    
    
    
    312,134Provision for income taxes
    
    
    
    
    
    
    Net income
    
    $
    209,554
    
    
    $
    312,134Net income per common share:Basic
    
    $
    0.15
    
    
    $
    0.23Diluted
    
    $
    0.13
    
    
    $
    0.20Weighted average shares:Basic
    
    
    1,406,799
    
    
    
    1,375,505Diluted
    
    
    1,683,153
    
    
    
    1,534,338
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 3




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Six Months EndedMarch 29, 2008
    
    
    March 31, 2007Net sales
    
    $
    3,948,112
    
    
    $
    2,049,810Cost of sales
    
    
    1,404,704
    
    
    
    547,847Gross profit
    
    
    2,543,408
    
    
    
    1,501,963Operating expenses:Selling, general and
administrative expenses
    
    
    1,050,341
    
    
    
    860,173Product development costs
    
    
    587,281
    
    
    
    486,945Total operating expenses
    
    
    1,637,622
    
    
    
    1,347,118Operating income
    
    
    905,786
    
    
    
    154,845Other income (expense):Interest income
    
    
    56,042
    
    
    
    40,863Interest expense
    
    
    
    
    
    
    (624
    )Total other income:
    
    
    56,042
    
    
    
    140,239Net income before provision for income taxes
    
    
    961,828
    
    
    
    195,084Provision for income taxes
    
    
    
    
    
    
    Net income
    
    $
    961,828
    
    
    $
    195,084Net income per common share:Basic
    
    $
    0.69
    
    
    $
    0.14Diluted
    
    $
    0.59
    
    
    $
    0.13Weighted average shares:Basic
    
    
    1,394,667
    
    
    
    1,373,828Diluted
    
    
    1,631,731
    
    
    
    1,527,610
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  Page 4




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Six Months EndedMarch 29, 2008
    
    
    March 31, 2007Operating Activities:Net income
    
    $
    961,828
    
    
    $
    195,084Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    20,872
    
    
    
    14,994Stock-based compensation
    
    
    107,455
    
    
    
    49,763Changes in assets and liabilities:Accounts receivable
    
    
    (609,268
    )
    
    
    (41,362
    )Inventories
    
    
    51,597
    
    
    
    (165,817
    )Other current assets
    
    
    23,391
    
    
    
    29,057Accounts payable and other accrued liabilities
    
    
    (315,783
    )
    
    
    52,105Net cash provided by operating activities
    
    
    240,092
    
    
    
    133,824Investing Activities:Additions to equipment and leasehold improvements
    
    
    (39,680
    )
    
    
    (30,732
    )Net cash used in investing activities
    
    
    (39,680
    )
    
    
    (30,732
    )Financing Activities:Proceeds from stock issuance
    
    
    282,860
    
    
    
    6,591Net cash provided by financing activities
    
    
    282,860
    
    
    
    6,591Net increase in cash and cash equivalents
    
    
    483,272
    
    
    
    109,683Cash and cash equivalents at beginning of the period
    
    
    2,622,288
    
    
    
    1,870,713Cash and cash equivalents at the end of the period
    
    $
    3,105,560
    
    
    $
    1,980,396Supplemental Disclosures:Interest paid
    
    $
    
    
    
    $
    416Income taxes paid
    
    
    9,000
    
    
    
    
 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
    Revenue Recognition
   Page 6




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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 EndedMarch 29,
    
    
    March 31,2008
    
    
    2007Assumptions:Option life
    
    5 years
    
    
    5 yearsRisk-free interest rate
    
    
    2.71
    %
    
    
    4.625
    %Stock volatility
    
    
    97
    %
    
    
    150
    %Dividend yield
    
    
    -0-
    
    
    
    -0-
  March 29, 2008
    
    
    March 31, 20073 months
    
    
    6 months
    
    
    3 months
    
    
    6 monthsCost of sales
    
    $
    1,942
    
    
    $
    3,895
    
    
    $
    1,675
    
    
    $
    3,390Selling, general and administrative
    
    
    79,848
    
    
    
    83,040
    
    
    
    14,416
    
    
    
    31,669Product development costs
    
    
    11,790
    
    
    
    20,520
    
    
    
    7,277
    
    
    
    14,704Total share-based compensation expense
before taxes
    
    $
    93,580
    
    
    $
    107,455
    
    
    $
    23,368
    
    
    $
    49,763
    Page 9




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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
    
    
    51,000Cancellations
    
    
    Outstanding at March 29, 2008
    
    
    595,034
    
    
    $
    3.13
    
    
    4.75 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
    
    
    
    4.56
    
    
    $
    0.96
    
    
    
    160,334
    
    
    $
    0.96$1.01 - $2.00
    
    
    1,200
    
    
    
    3.81
    
    
    $
    1.27
    
    
    
    1,200
    
    
    $
    1.27$2.01 - $3.00
    
    
    68,200
    
    
    
    4.86
    
    
    $
    2.56
    
    
    
    58,260
    
    
    $
    2.49$3.01 - $4.00
    
    
    302,800
    
    
    
    4.49
    
    
    $
    3.73
    
    
    
    268,000
    
    
    $
    3.75$4.01 - $5.00
    
    
    3,500
    
    
    
    5.22
    
    
    $
    4.71
    
    
    
    2,000
    
    
    $
    4.50$5.01 - $10.00
    
    
    59,000
    
    
    
    6.46
    
    
    $
    6.58
    
    
    
    34,000
    
    
    $
    6.83595,034
    
    
    
    4.75
    
    
    $
    3.13
    
    
    
    523,794
    
    
    $
    2.95
  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
  March 29, 2008
    
    
    September 29, 2007(unaudited)Finished goods
    
    $
    213,078
    
    
    $
    408,995Work in process
    
    
    670,327
    
    
    
    478,883Raw materials
    
    
    973,155
    
    
    
    1,020,279$
    1,856,560
    
    
    $
    1,908,157
 NOTE 3. Income Taxes
   NOTE 4. Earnings Per Share
 Earnings Per Share
 March 29, 2008
    
    
    March 31, 20073 months
    
    
    6 months
    
    
    3 months
    
    
    6 monthsNet income
    
    $
    209,554
    
    
    $
    961,828
    
    
    $
    312,134
    
    
    $
    195,084Weighted average shares  basic
    
    
    1,406,799
    
    
    
    1,394,667
    
    
    
    1,375,505
    
    
    
    1,373,828Dilutive effect of stock options
    
    
    276,354
    
    
    
    237,064
    
    
    
    158,833
    
    
    
    153,782Weighted average shares  diluted
    
    
    1,683,153
    
    
    
    1,631,731
    
    
    
    1,534,338
    
    
    
    1,527,610Basic income per share
    
    $
    0.15
    
    
    $
    0.69
    
    
    $
    0.23
    
    
    $
    0.14Diluted income per share
    
    $
    0.13
    
    
    $
    0.59
    
    
    $
    0.20
    
    
    $
    0.13
  NOTE 5. Major Customers and Export Sales
   Page 11




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  March 29, 2008
    
    
    March 31, 20073 months
    
    
    6 months
    
    
    3 months
    
    
    6 monthsDomestic
    
    $
    1,563,932
    
    
    $
    3,598,231
    
    
    $
    1,272,410
    
    
    $
    1,649,581Foreign
    
    
    95,080
    
    
    
    349,881
    
    
    
    15,740
    
    
    
    400,229Total sales
    
    $
    1,659,012
    
    
    $
    3,948,112
    
    
    $
    1,288,150
    
    
    $
    2,049,810
  March 29, 2008
    
    
    March 31, 20073 months
    
    
    6 months
    
    
    3 months
    
    
    6 monthsSri Lanka
    
    
    61.8
    %
    
    
    16.8
    %
    
    
    
    
    
    
    3.5
    %Lebanon
    
    
    37.4
    %
    
    
    10.2
    %
    
    
    
    
    
    
    Saudi Arabia
    
    
    
    
    
    
    27.0
    %
    
    
    
    
    
    
    1.3
    %United Kingdom
    
    
    
    
    
    
    25.4
    %
    
    
    
    
    
    
    Colombia
    
    
    
    
    
    
    11.3
    %
    
    
    
    
    
    
    0.2
    %Morocco
    
    
    
    
    
    
    
    
    
    
    44.2
    %
    
    
    2.8
    %Tunisia
    
    
    
    
    
    
    
    
    
    
    29.8
    %
    
    
    1.2
    %Slovakia
    
    
    
    
    
    
    1.8
    %
    
    
    26.3
    %
    
    
    4.7
    %Austria
    
    
    
    
    
    
    
    
    
    
    10.2
    %
    
    
    0.4
    %Indonesia
    
    
    
    
    
    
    
    
    
    
    (19.1
    )%
    
    
    29.1
    %Sweden
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24.6
    %Bahrain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17.7
    %Italy
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14.0
    %Other
    
    
    0.8
    %
    
    
    7.5
    %
    
    
    8.6
    %
    
    
    0.5
    %
  March 29, 2008
    
    
    March 31, 20073 months
    
    
    6 months
    
    
    3 months
    
    
    6 monthsNorth America
(excluding the U.S.)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Central and South America
    
    
    
    
    
    
    11.3
    %
    
    
    
    
    
    
    0.2
    %Europe
    
    
    
    
    
    
    27.2
    %
    
    
    36.4
    %
    
    
    43.7
    %Mid-East and Africa
    
    
    100.0
    %
    
    
    54.2
    %
    
    
    82.6
    %
    
    
    27.0
    %Far East
    
    
    
    
    
    
    7.3
    %
    
    
    (19.0
    )%
    
    
    29.1
    %
  Page 12




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Item 2. Managements Discussion and Analysis or Plan of Operation
 Forward-Looking Statements
 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 March 29, 2008 as compared to Three Months ended March 31, 2007
 Net Sales
   2008
    
    
    2007Sri Lanka
    
    $
    59,000
    
    
    
    Lebanon
    
    
    36,000
    
    
    
    Morocco
    
    
    
    
    
    $
    7,000Other
    
    
    
    
    
    
    9,000$
    95,000
    
    
    $
    16,000
   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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Six Months ended March 29, 2008 as compared to Six Months ended March 31, 2007
 Net Sales
   2008
    
    
    2007Saudi Arabia
    
    $
    94,000
    
    
    $
    5,000United Kingdom
    
    
    89,000
    
    
    
    Sri Lanka
    
    
    59,000
    
    
    
    14,000Colombia
    
    
    40,000
    
    
    
    1,000Lebanon
    
    
    36,000
    
    
    
    Indonesia
    
    
    
    
    
    
    117,000Sweden
    
    
    
    
    
    
    99,000Bahrain
    
    
    
    
    
    
    71,000Italy
    
    
    
    
    
    
    56,000Morocco
    
    
    
    
    
    
    11,000Other
    
    
    32,000
    
    
    
    26,000$
    350,000
    
    
    $
    400,000
   Gross Profit
   Page 16




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Operating Costs and Expenses
 Selling, General and Administrative Expenses
    Product Development Costs
    Net Income
    Page 17




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Liquidity and Capital Resources
        Page 18




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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 19




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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
  Page 20




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TECHNICAL COMMUNICATIONS CORPORATION
     (Registrant)Date May 12, 2008
    By:
    /s/ Carl H. Guild, Jr.Date                       Carl H. Guild, Jr., President andChief Executive OfficerDate May 12, 2008
    By:
    /s/ Michael P. MaloneMichael P. Malone, Chief Financial Officer  Page 21




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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 22