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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 December 29, 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
December 29, 2007 (unaudited) and September 29, 2007
    
    
    2Condensed Consolidated Statements of Operations for the
Quarters ended December 29, 2007 and December 30, 2006 (unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows for the
Quarters ended December 29, 2007 and December 30, 2006 (unaudited)
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    12Item 3. Controls and Procedures
    
    
    16PART II Other InformationItem 1. Legal Proceedings
    
    
    17Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 3. Defaults Upon Senior Securities
    
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    
    17Item 5. Other Information
    
    
    17Item 6. Exhibits
    
    
    17Signatures
    
    
    18Exhibit 31.1Exhibit 31.2Exhibit 32.1
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December 29,
    
    
    September 29,2007
    
    
    2007(Unaudited)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    2,348,921
    
    
    $
    2,622,288Accounts receivable  trade, less allowance of $35,000
at December 29, 2007 and September 29, 2007
    
    
    1,155,937
    
    
    
    420,527Inventories
    
    
    1,703,829
    
    
    
    1,908,157Other current assets
    
    
    84,157
    
    
    
    96,051Total current assets
    
    
    5,292,844
    
    
    
    5,047,023Equipment and leasehold improvements
    
    
    2,991,287
    
    
    
    2,961,268Less: accumulated depreciation and amortization
    
    
    (2,864,643
    )
    
    
    (2,853,906
    )Equipment and leasehold improvements, net
    
    
    126,644
    
    
    
    107,362Total Assets
    
    $
    5,419,488
    
    
    $
    5,154,385Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    128,907
    
    
    $
    253,683Accrued liabilitiesAccrued compensation and related expenses
    
    
    151,355
    
    
    
    449,111Accrued expenses
    
    
    184,721
    
    
    
    263,235Total current liabilities
    
    
    464,983
    
    
    
    966,029Stockholders Equity:Common stock, par value $.10 per share;7,000,000 shares authorized; 1,382,767 shares issued
and outstanding at December 29, 2007 and
September 29, 2007
    
    
    138,277
    
    
    
    138,277Additional paid-in capital
    
    
    1,531,474
    
    
    
    1,517,599Retained earnings
    
    
    3,284,754
    
    
    
    2,532,480Total stockholders equity
    
    
    4,954,505
    
    
    
    4,188,356Total Liabilities and Stockholders Equity
    
    $
    5,419,488
    
    
    $
    5,154,385
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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Quarter EndedDecember 29,
    
    
    December 30,2007
    
    
    2006Net sales
    
    $
    2,289,100
    
    
    $
    761,660Cost of sales
    
    
    849,429
    
    
    
    228,832Gross profit
    
    
    1,439,671
    
    
    
    532,828Operating expenses:Selling, general and
administrative expenses
    
    
    435,431
    
    
    
    451,836Product development costs
    
    
    280,836
    
    
    
    218,792Total operating expenses
    
    
    716,267
    
    
    
    670,628Operating income (loss)
    
    
    723,404
    
    
    
    (137,800
    )Other income (expense):Interest income
    
    
    28,870
    
    
    
    21,062Interest expense
    
    
    
    
    
    
    (312
    )Total other income:
    
    
    28,870
    
    
    
    20,750Net income (loss) before provision for income taxes
    
    
    752,274
    
    
    
    (117,050
    )Provision for income taxes
    
    
    
    
    
    
    Net income (loss)
    
    $
    752,274
    
    
    $
    (117,050
    )Net income (loss) per common share:Basic
    
    $
    0.54
    
    
    $
    (0.09
    )Diluted
    
    $
    0.48
    
    
    $
    (0.09
    )Weighted average shares:Basic
    
    
    1,382,535
    
    
    
    1,372,151Diluted
    
    
    1,572,243
    
    
    
    1,372,151
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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Quarter EndedDecember 29,
    
    
    December 30,2007
    
    
    2006Operating Activities:Net income (loss)
    
    $
    752,274
    
    
    $
    (117,050
    )Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    10,737
    
    
    
    7,194Stock-based compensation
    
    
    13,875
    
    
    
    26,394Changes in assets and liabilities:Accounts receivable
    
    
    (735,410
    )
    
    
    (65,926
    )Inventories
    
    
    204,328
    
    
    
    (104,793
    )Other current assets
    
    
    11,894
    
    
    
    6,766Accounts payable and other accrued liabilities
    
    
    (501,046
    )
    
    
    23,871Net cash used in operating activities
    
    
    (243,348
    )
    
    
    (223,544
    )Investing Activities:Additions to equipment and leasehold improvements
    
    
    (30,019
    )
    
    
    (25,054
    )Net cash used in investing activities
    
    
    (30,019
    )
    
    
    (25,054
    )Financing Activities:Proceeds from stock issuance
    
    
    
    
    
    
    2,238Net cash provided by financing activities
    
    
    
    
    
    
    2,238Net decrease in cash and cash equivalents
    
    
    (273,367
    )
    
    
    (246,360
    )Cash and cash equivalents at beginning of the period
    
    
    2,622,288
    
    
    
    1,870,713Cash and cash equivalents at the end of the period
    
    $
    2,348,921
    
    
    $
    1,624,353Supplemental Disclosures:Interest paid
    
    $
    
    
    
    $
    312Income taxes paid
    
    
    1,500
    
    
    
    
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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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
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
   Inventory
  Accounts Receivable
  Accounting for Income Taxes
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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
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
 Share-based Payment
  Cost of sales
    
    $
    1,953
    
    
    $
    1,715Selling, general and administrative
    
    
    3,192
    
    
    
    17,252Product development costs
    
    
    8,730
    
    
    
    7,427Total share-based compensation expense before tax
    
    $
    13,875
    
    
    $
    26,394
    Options OutstandingNumber of
    
    
    Weighted Average
    
    
    Weighted AverageShares
    
    
    Exercise Price
    
    
    Contractual LifeOutstanding at September 29, 2007
    
    
    612,034
    
    
    $
    3.12Grants
    
    
    Exercises
    
    
    Cancellations
    
    
    Outstanding at December 29, 2007
    
    
    612,034
    
    
    $
    3.12
    
    
    4.3 years
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  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
    
    
    161,334
    
    
    
    4.78
    
    
    $
    0.96
    
    
    
    161,334
    
    
    $
    0.96$1.01 - $2.00
    
    
    1,200
    
    
    
    4.05
    
    
    $
    1.27
    
    
    
    1,200
    
    
    $
    1.27$2.01 - $3.00
    
    
    68,200
    
    
    
    5.11
    
    
    $
    2.56
    
    
    
    58,260
    
    
    $
    2.49$3.01 - $4.00
    
    
    302,800
    
    
    
    4.74
    
    
    $
    3.73
    
    
    
    266,000
    
    
    $
    3.75$4.01 - $5.00
    
    
    23,500
    
    
    
    0.93
    
    
    $
    4.96
    
    
    
    22,000
    
    
    $
    4.95$5.01 - $10.00
    
    
    55,000
    
    
    
    0.99
    
    
    $
    6.12
    
    
    
    50,000
    
    
    $
    6.22612,034
    
    
    
    4.30
    
    
    $
    3.12
    
    
    
    558,794
    
    
    $
    3.07
  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
  NOTE 2. Inventories
  December 29, 2007
    
    
    September 29, 2007(unaudited)Finished Goods
    
    $
    62,630
    
    
    $
    408,995Work in Process
    
    
    532,303
    
    
    
    478,883Raw Materials
    
    
    1,108,896
    
    
    
    1,020,279$
    1,703,829
    
    
    $
    1,908,157
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
 NOTE 3. Earnings (Loss) Per Share
 Earnings Per Share
 December 29, 2007
    
    
    December 30, 2006Net income (loss)
    
    $
    752,274
    
    
    $
    (117,050
    )Weighted average shares  basic
    
    
    1,382,535
    
    
    
    1,372,151Dilutive effect of stock options
    
    
    189,708
    
    
    
    Weighted average shares  diluted
    
    
    1,572,243
    
    
    
    1,372,151Basic income (loss) per share
    
    $
    0.54
    
    
    $
    (0.09
    )Diluted income (loss) per share
    
    $
    0.48
    
    
    $
    (0.09
    )
  NOTE 4. Major Customers and Export Sales
   December 29, 2007
    
    
    December 30, 2006Domestic
    
    $
    2,034,299
    
    
    $
    377,171Foreign
    
    
    254,801
    
    
    
    384,489Total sales
    
    $
    2,289,100
    
    
    $
    761,660
  December 29, 2007
    
    
    December 30, 2006Saudi Arabia
    
    
    37.0
    %
    
    
    1.4
    %United Kingdom
    
    
    34.9
    %
    
    
    Colombia
    
    
    15.5
    %
    
    
    0.2
    %Thailand
    
    
    10.0
    %
    
    
    Indonesia
    
    
    
    
    
    
    31.1
    %Sweden
    
    
    
    
    
    
    25.6
    %Bahrain
    
    
    
    
    
    
    18.5
    %Italy
    
    
    
    
    
    
    14.5
    %Other
    
    
    2.6
    %
    
    
    8.7
    %
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Contd)
  December 29, 2007
    
    
    December 30, 2006North America
(excluding the U.S.)
    
    
    
    
    
    
    Central and South America
    
    
    15.5
    %
    
    
    0.2
    %Europe
    
    
    37.4
    %
    
    
    44.0
    %Mid-East and Africa
    
    
    37.0
    %
    
    
    24.7
    %Far East
    
    
    10.1
    %
    
    
    31.1
    %
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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
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Results of Operations
 Quarter ended December 29, 2007 as compared to the Quarter ended December 30, 2006
 Net Sales
   2008
    
    
    2007Saudi Arabia
    
    $
    94,000
    
    
    $
    5,000United Kingdom
    
    
    89,000
    
    
    
    Colombia
    
    
    40,000
    
    
    
    1,000Thailand
    
    
    25,000
    
    
    
    Indonesia
    
    
    
    
    
    
    120,000Sweden
    
    
    
    
    
    
    99,000Bahrain
    
    
    
    
    
    
    71,000Italy
    
    
    
    
    
    
    56,000Other
    
    
    7,000
    
    
    
    33,000$
    255,000
    
    
    $
    385,000
   Gross Profit
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Operating Costs and Expenses
 Selling, General and Administrative Expenses
    Product Development Costs
    Net Income
    Page 14




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Liquidity and Capital Resources
         Page 15




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Off-Balance Sheet Arrangements
  
  Evaluation of disclosure controls and procedures.
 Changes in internal control over financial reporting
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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)February 12, 2008
Date
    
    
    
    By:
    
    /s/ Carl H. Guild, Jr.

Carl H. Guild, Jr., President and Chief 
    Executive OfficerFebruary 12, 2008
Date
    
    
    
    By:
    
    /s/ Michael P. Malone

Michael P. Malone, Chief Financial Officer
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EXHIBIT INDEX
 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 19