FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
(Mark One)
   [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 29, 1998

                                       OR

   [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to ________________________

Commission file No. 0-11003

                               WEGENER CORPORATION

               (Exact name of registrant as specified in its charter)

         DELAWARE                                                81-0371341
(State of incorporation)                                      (I.R.S. Employer
                                                             Identification No.)

11350 TECHNOLOGY CIRCLE, DULUTH, GEORGIA                         30097-1502
(Address of principal executive offices)                         (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 623-0096

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days:

                   YES  [ X ]                NO  [   ]

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of June 30, 1998.

Common Stock, $.01 par value                               11,938,158 Shares
----------------------------                           -------------------------
        Class                                          Outstanding June 30, 1998

<PAGE>

                      WEGENER CORPORATION AND SUBSIDIARIES
                  Form 10-Q For the Quarter Ended May 29, 1998

                                      INDEX
                                                                         Page(s)

PART I.  Financial Information

Item 1.  Consolidated Financial Statements

         Introduction ......................................................3

         Consolidated Statements of Operations
         (Unaudited) - Three and Nine Months Ended
         May 29, 1998 and May 30, 1997,.....................................4

         Consolidated Balance Sheets - May 29,
         1998 (Unaudited) and August 29, 1997 ..............................5

         Consolidated Statements of Shareholders' Equity
         (Unaudited) - Nine Months Ended May 29,
         1998 and May 30, 1997,.............................................6

         Consolidated Statements of Cash Flows
         (Unaudited) - Nine Months Ended May 29,
         1998 and May 30, 1997,.............................................7

         Notes to Consolidated Financial
         Statements (Unaudited) .........................................8-11

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations ...........................12-15

PART II. Other Information

Item 1.  None
Item 2.  None
Item 3.  None
Item 4.  None
Item 5.  None
Item 6.  Exhibits and Reports on Form 8-K .................................13

         Signatures .......................................................14

                                       2
<PAGE>

PART I. FINANCIAL INFORMATION                       Item 1. Financial Statements
-----------------------------                       ----------------------------

                INTRODUCTION - CONSOLIDATED FINANCIAL STATEMENTS

     The consolidated  financial  statements  included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
The consolidated  balance sheet as of May 29, 1998; the consolidated  statements
of  shareholders'  equity as of May 29, 1998 and May 30, 1997; the  consolidated
statements  of  operations  for the three and nine months ended May 29, 1998 and
May 30, 1997; and the consolidated  statements of cash flows for the nine months
ended May 29, 1998 and May 30,  1997;  have been  prepared  without  audit.  The
consolidated  balance  sheet  as  of  August  29,  1997  has  been  examined  by
independent  certified  public  accountants.  Certain  information  and footnote
disclosures  normally  included in financial  statements  prepared in accordance
with generally  accepted  accounting  principles  have been condensed or omitted
pursuant to such rules and  regulations,  although the Company believes that the
disclosures   herein  are  adequate  to  make  the  information   presented  not
misleading. It is suggested that these consolidated financial statements be read
in conjunction  with the financial  statements and the notes thereto included in
the Company's  Annual Report on Form 10-K,  for the fiscal year ended August 29,
1997, File No. 0-11003.

     In the opinion of the Company,  the  statements  for the unaudited  interim
periods  presented  include all  adjustments,  which were of a normal  recurring
nature,  necessary  to present a fair  statement  of the results of such interim
periods.  The results of operations  for the interim  periods  presented are not
necessarily indicative of the results of operations for the entire year.

                                       3
<PAGE>

                      WEGENER CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                   Three months ended             Nine months ended
                                                 MAY 29,         May 30,        MAY 29,         May 30,
                                                  1998            1997           1998            1997
---------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>            <C>             <C>         
Revenues                                      $  9,856,824    $  3,869,886   $ 26,728,108    $ 15,191,859
---------------------------------------------------------------------------------------------------------

Operating costs and expenses
    Cost of products sold                        6,372,206       3,417,356     17,376,137      11,165,205
    Selling, general, and administrative         1,398,765       1,374,836      3,643,979       3,411,819
    Research and development                       628,856         514,232      1,997,142       1,517,099
---------------------------------------------------------------------------------------------------------

Operating costs and expenses                     8,399,827       5,306,424     23,017,258      16,094,123
---------------------------------------------------------------------------------------------------------

Operating income (loss)                          1,456,997      (1,436,538)     3,710,850        (902,264)
    Interest expense                               (56,873)       (129,316)      (195,552)       (454,554)
    Interest income                                144,793             523        380,349           1,965
---------------------------------------------------------------------------------------------------------

Earnings (loss) before income taxes              1,544,917      (1,565,331)     3,895,647      (1,354,853)

Income tax expense (benefit)                       589,000        (568,000)     1,482,000        (488,000)
---------------------------------------------------------------------------------------------------------

Net earnings (loss)                           $    955,917    $   (997,331)  $  2,413,647    $   (866,853)
=========================================================================================================

Net earnings (loss) per share
    Basic                                     $        .08    $       (.10)  $        .21    $       (.09)
    Diluted                                   $        .08    $       (.10)  $        .20    $       (.09)
=========================================================================================================

Shares used in per share
  calculation
    Basic                                       11,920,135       9,603,653     11,697,534       9,211,055
    Diluted                                     12,278,345       9,603,653     12,074,941       9,211,055
=========================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                      WEGENER CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                    MAY 29,       August 29,
                                                                     1998            1997
---------------------------------------------------------------------------------------------
ASSETS                                                            (UNAUDITED)

Current assets
<S>                                                              <C>             <C>         
    Cash and cash equivalents                                    $  8,126,016    $  2,242,433
    Accounts receivable                                             4,718,413       4,612,634
    Inventories                                                     7,843,101       9,992,672
    Deferred income taxes                                           1,507,000       1,241,000
    Other                                                               7,952          21,376
---------------------------------------------------------------------------------------------

        Total current assets                                       22,202,482      18,110,115

Property and equipment                                              4,582,117       4,979,856
Capitalized software costs                                          1,389,189       1,701,416
Deferred income taxes                                                      --         553,000
Other assets                                                           73,276         269,566
---------------------------------------------------------------------------------------------

                                                                 $ 28,247,064    $ 25,613,953
=============================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
    Accounts payable                                             $  1,992,417    $  2,128,941
    Accrued expenses                                                2,069,249       1,440,945
    Customer deposits                                               2,835,654       3,458,401
    Current maturities of long-term obligations                       559,658         599,157
---------------------------------------------------------------------------------------------

       Total current liabilities                                    7,456,978       7,627,444

Long-term obligations, less current maturities                      1,399,009       1,782,460
Convertible debentures                                                     --       1,285,195
Deferred income taxes                                                 707,000              --
---------------------------------------------------------------------------------------------

       Total liabilities                                            9,562,987      10,695,099
---------------------------------------------------------------------------------------------

Commitments

Shareholders' equity
     Common stock, $.01 par value, 20,000,000 shares
          authorized; 12,314,575 and 11,363,917 shares issued         123,146         113,639
     Additional paid-in capital                                    19,375,640      18,084,700
     Deficit                                                         (464,028)     (2,877,675)
     Less treasury stock, at cost (377,667 and 432,730
          shares)                                                    (350,681)       (401,810)
---------------------------------------------------------------------------------------------

       Total shareholders' equity                                  18,684,077      14,918,854
---------------------------------------------------------------------------------------------

                                                                 $ 27,026,683    $ 25,613,953
=============================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

                      WEGENER CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                   (Unaudited)
                                                 
<TABLE>
<CAPTION>
                                                 Common Stock       Additional                       Treasury Stock
                                             --------------------     Paid-in                    ---------------------
                                              Shares      Amount      Capital       Deficit       Shares       Amount
----------------------------------------------------------------------------------------------------------------------
<S>                                          <C>         <C>        <C>           <C>            <C>         <C>       
BALANCE, at August 30, 1996                  9,231,930   $ 92,319   $14,369,157   $(1,068,475)   (470,397)   $(436,785)

    Treasury stock reissued through
       stock options and 401(k) plan                --         --        48,982            --      26,007       24,149
    Issuance of common stock for
       convertible debentures                2,131,987     21,320     3,654,068            --          --           --
    Net (loss) for the
       nine months                                  --         --            --      (866,853)         --           --
----------------------------------------------------------------------------------------------------------------------

BALANCE, at May 30, 1997                    11,363,917   $113,639   $18,072,207   $(1,935,328)   (444,390)   $(412,636)
======================================================================================================================

BALANCE, at August 29, 1997                 11,363,917   $113,639   $18,084,700   $(2,877,675)   (432,730)   $(401,810)

    Treasury stock reissued through
       stock options and 401(k) plan                --         --        52,620            --      55,063       51,129
    Issuance of common stock for
       convertible debentures                  950,658      9,507     1,238,320            --          --           --
    Net earnings for the nine months                --         --            --     2,413,647          --           --
----------------------------------------------------------------------------------------------------------------------

BALANCE, AT MAY 29, 1998                    12,314,575   $123,146   $19,375,640   $  (464,028)   (377,667)   $(350,681)
======================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       6
<PAGE>

                      WEGENER CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                               Nine months ended
                                                             MAY 29,        May 30,
                                                              1998           1997
------------------------------------------------------------------------------------

CASH PROVIDED (USED) BY OPERATING ACTIVITIES
<S>                                                       <C>            <C>         
    Net earnings (loss)                                   $ 2,413,647    $  (866,853)
    Adjustments to reconcile net earnings (loss) to
           cash provided by operating activities
        Depreciation and amortization                       1,544,012      1,059,217
        Bad debt allowance                                     50,000         91,000
        Warranty reserves                                          --         76,000
        Inventory reserves                                    650,000             --
        Issuance of treasury stock for
            compensation expenses                              79,756         66,944
    Issuance of convertible debt for interest expense              --         33,918
    Deferred income taxes                                     994,000       (488,000)
    Changes in assets and liabilities
            Accounts receivable                              (155,779)     3,459,563
            Inventories                                     1,499,571      1,185,991
            Other assets                                       13,424         25,793
            Accounts payable and accrued expenses             491,780     (2,356,024)
            Customer deposits                                (622,747)     2,378,745
------------------------------------------------------------------------------------

                                                            6,957,564      4,666,294
------------------------------------------------------------------------------------

CASH (USED) BY INVESTMENT ACTIVITIES
    Property and equipment expenditures                      (351,971)      (874,193)
    Capitalized software additions                           (323,154)      (763,691)
------------------------------------------------------------------------------------

                                                             (675,125)    (1,637,884)
------------------------------------------------------------------------------------

CASH PROVIDED (USED) BY FINANCING ACTIVITIES
    Net change in borrowings under
         revolving line-of-credit                                  --     (1,530,332)
    Repayment of long-term debt and capitalized
        lease obligations                                    (422,950)      (417,402)
    Proceeds from stock options exercised                      24,094          6,187
------------------------------------------------------------------------------------

                                                             (398,856)    (1,941,547)
------------------------------------------------------------------------------------

Increase (decrease) in cash and cash equivalents            5,883,583      1,086,863
Cash and cash equivalents, beginning of period              2,242,433        171,687
------------------------------------------------------------------------------------

Cash and cash equivalents, end of period                  $ 8,126,016    $ 1,258,550
====================================================================================

Supplemental disclosure of cash flow information:
    Cash paid during the nine months for:
          Interest                                        $   193,995    $   380,396
          Income taxes                                    $        --    $        --
====================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       7
<PAGE>

                      WEGENER CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1  SIGNIFICANT ACCOUNTING POLICIES

        The  significant  accounting  policies  followed  by the Company are set
        forth  in  Note  1  to  the  Company's  audited  consolidated  financial
        statements included in the annual report on Form 10-K for the year ended
        August 29, 1997.

        Earnings Per Share

        In February  1997,  the  Financial  Accounting  Standards  Board  issued
        Statement of  Financial  Accounting  Standards  No. 128,  "Earnings  Per
        Share".  The Statement  simplifies the standards for computing  earnings
        per share and improves their  comparability to international  standards.
        The Company  adopted this Standard  during the second  quarter of fiscal
        1998 as  required  and has  restated  earnings  per  share for all prior
        periods presented to conform to this standard.

        Basic net  earnings  per share is  computed  by  dividing  net  earnings
        available to common  shareholders  (numerator)  by the weighted  average
        number of common shares outstanding  (denominator) during the period and
        excludes  the  dilutive   effect  of  stock   options  and   convertible
        debentures.  Diluted net earnings per share gives effect to all dilutive
        potential  common  shares  outstanding  during a  period.  In  computing
        diluted net earnings per share,  the average  stock price for the period
        is used in  determining  the number of shares  assumed to be  reacquired
        under the treasury  stock method from the exercise of stock  options and
        the  if-converted  method to compute the dilutive  effect of convertible
        debentures.  A  reconciliation  of the numerator and  denominator of the
        basic and diluted net earnings per share is presented below (Note 5).

        Use of Estimates

        The  preparation  of financial  statements in conformity  with generally
        accepted accounting principles requires management to make estimates and
        assumptions  that affect the reported amounts of assets and liabilities,
        the disclosure of contingent  assets and  liabilities at the date of the
        financial  statements  and the reported  amounts of revenue and expenses
        during  the  reporting  period.  Actual  results  could  vary from these
        estimates.

        Fiscal Year

        The Company uses a  fifty-two,  fifty-three  week year.  The fiscal year
        ends on the  Friday  closest to August  31.  Fiscal  years 1998 and 1997
        contain fifty-two weeks.

                                       8
<PAGE>

                      WEGENER CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 2  ACCOUNTS RECEIVABLE

        Accounts receivable are summarized as follows:

                                         MAY 29,     August 29,
                                          1998          1997
                                      -----------    -----------
                                      (UNAUDITED)

        Accounts receivable - trade   $ 4,977,315    $ 4,881,565
        Other receivables                 152,351         92,812
                                      -----------    -----------

                                        5,129,666      4,974,377
        Less allowance for
             doubtful accounts           (411,253)      (361,743)
                                      -----------    -----------
                                      $ 4,718,413    $ 4,612,634
                                      ===========    ===========

NOTE 3  INVENTORIES

        Inventories are summarized as follows:

                                     MAY 29,       August 29,
                                      1998            1997
                                  ------------    ------------
                                  (UNAUDITED)

        Raw material              $  3,972,246    $  4,550,550
        Work-in-process              3,710,198       4,051,281
        Finished goods               2,676,940       3,256,294
                                  ------------    ------------
                                    10,359,384      11,858,125
        Less inventory reserves     (2,516,283)     (1,865,453)
                                  ------------    ------------

                                  $  7,843,101    $  9,992,672
                                  ============    ============

NOTE 4   INCOME TAXES

        For the nine months ended May 29, 1998, income tax expense of $1,482,000
        was  comprised  of a federal  and state  current  income tax  expense of
        $388,000 and $100,000,  respectively,  and a federal and state  deferred
        income tax expense of $937,000 and $57,000,  respectively.  Net deferred
        tax assets decreased $994,000 in the first nine months of fiscal 1998.

                                       9
<PAGE>

NOTE 5    EARNINGS PER SHARE

The following tables represent required  disclosure of the reconciliation of the
numerators  and  denominators  of the basic and diluted net earnings  (loss) per
share computations.

<TABLE>
<CAPTION>
                                                                         Three months ended
                                             ------------------------------------------------------------------------

                                                          MAY 29, 1998                         May 30, 1997
                                             ----------------------------------  ------------------------------------
                                                                          PER      Earnings                     Per
                                              EARNINGS       SHARES      SHARE      (loss)        Shares       share
                                             (NUMERATOR)  (DENOMINATOR)  AMOUNT   (Numerator)  (Denominator)   amount
                                             -----------  -------------  ------   -----------  -------------   ------
<S>                                            <C>         <C>           <C>       <C>           <C>           <C>    
Net earnings (loss)                            $955,917                            $(997,331)                        
                                               ========                            =========

Basic earnings (loss) per share:
    Net earnings (loss) available
        to common shareholders                 $955,917    11,920,135    $ 0.08    $(997,331)    9,603,653     $(0.10)
                                                                         ======                                ======

Effect of dilutive potential common shares:
        Stock options                                --       358,210                     --            --           
        Convertible debentures                       --            --                     --            --           
                                               --------    ----------              ---------     ---------


Diluted earnings (loss) per share:
    Net earnings (loss) available
        to common shareholders
        plus assumed conversions               $955,917    12,278,345    $ 0.08    $(997,331)    9,603,653     $(0.10)
                                               ========    ==========    ======    =========     =========     ====== 


<CAPTION>
                                                                          Nine months ended
                                             ------------------------------------------------------------------------

                                                          MAY 29, 1998                         May 30, 1997
                                             ----------------------------------  ------------------------------------
                                                                          PER      Earnings                     Per
                                              EARNINGS       SHARES      SHARE      (loss)        Shares       share
                                             (NUMERATOR)  (DENOMINATOR)  AMOUNT   (Numerator)  (Denominator)   amount
                                             -----------  -------------  ------   -----------  -------------   ------
<S>                                            <C>         <C>           <C>       <C>           <C>           <C>    
Net earnings (loss)                            $2,413,647                          $(866,853)                        
                                               ==========                          =========

Basic earnings (loss) per share:
    Net earnings (loss) available
        to common shareholders                 $2,413,647  11,697,534    $ 0.21    $(866,863)    9,211,055     $(0.09)
                                                                         ======                                ======

Effect of dilutive potential common shares:
        Stock options                                --       226,744                    --             --           
        Convertible debentures                    9,156       150,663                    --             --           
                                               --------    ----------              ---------     ---------

Diluted earnings (loss) per share:
    Net earnings (loss) available
        to common shareholders
        plus assumed conversions               $2,422,803  12,074,941    $ 0.20    $(866,853)    9,211,055     $(0.09)
                                               ==========  ==========    ======    =========     =========     ====== 
</TABLE>

                                       10
<PAGE>

Options and convertible debentures excluded from the diluted earnings (loss) per
share calculation due to their anti-dilutive effect are as follows:

<TABLE>
<CAPTION>
                                             Three months ended                  Nine months ended
                                          MAY 29,           May 30,           MAY 29,           May 30,
                                           1998              1997              1998              1997
                                      --------------    --------------    --------------    --------------
<S>                                   <C>                <C>              <C>                <C>
Common stock options:
    Number of shares                          26,000           529,220            48,500           496,204
    Range of exercise prices          $3.25 TO 12.13     $.75 to 12.13    $2.44 TO 12.13     $.75 to 12.13

Convertible debentures:
    Common shares calculated under
        the if-converted method                   --         1,334,394                --           781,850
                                      ==============    ==============    ==============    ==============
</TABLE>

                                       11
<PAGE>

                      WEGENER CORPORATION AND SUBSIDIARIES

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

This information  should be read in conjunction with the consolidated  financial
statements and the notes thereto included in Item 1 of this Quarterly Report and
the audited consolidated financial statements and notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations for the
year ended August 29, 1997 contained in the Company's 1997 Annual Report on Form
10-K.

Certain  statements  contained in this filing are  "forward-looking  statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, such
as  statements  relating  to  financial  results,  future  business  or  product
development  plans,  research  and  development  activities,  capital  spending,
financing  sources  or  capital   structure,   the  effects  of  regulation  and
competition,  and are thus  prospective.  Such  forward-looking  statements  are
subject to risks,  uncertainties  and other  factors  which could  cause  actual
results to differ  materially  from future results  expressed or implied by such
forward-looking  statements.  Potential risks and uncertainties include, but are
not limited to, economic  conditions,  customer plans and  commitments,  product
demand,  governmental regulation,  rapid technological developments and changes,
performance  issues with key  suppliers  and  subcontractors,  delays in product
development   and   testing,    material   availability,    new   and   existing
well-capitalized  competitors, and other uncertainties detailed in the Company's
Form  10-K for the  year  ended  August  29,  1997 and from  time to time in the
Company's periodic Securities and Exchange Commission filings.

The  Company,  through  Wegener  Communications,   Inc.  (WCI),  a  wholly-owned
subsidiary,  designs and manufactures  communications transmission and receiving
equipment for the business broadcast,  data communications,  cable and broadcast
radio and television industries.


RESULTS OF OPERATIONS THREE AND NINE MONTHS ENDED MAY 29, 1998 COMPARED TO THREE
AND NINE MONTHS ENDED MAY 30, 1997

The  operating  results for the three and nine month  periods ended May 29, 1998
were net earnings of $956,000 or $0.08 per share and net earnings of  $2,414,000
or $0.20  per  share,  respectively,  compared  to a net loss of  $(997,000)  or
$(0.10)  per  share  and  a  net  loss  of  $(867,000)  or  $(0.09)  per  share,
respectively, for the three and nine month periods ended May 30, 1997.

REVENUES - The  Company's  revenues for the three months ended May 29, 1998 were
$9.9  million,  up 154% from revenues of $3.9 million for the three months ended
May 30,  1997.  Revenues  were $26.7  million for the nine months  ended May 29,
1998,  up 76.0% from revenues of $15.2 million for the nine months ended May 30,
1997.

Direct Broadcast  Satellite (DBS) revenues  increased  $6,604,000 or 274% in the
third quarter of fiscal 1998 to $9,010,000 from $2,406,000 in the same period of
fiscal  1997.  The increase  was due to  increased  shipments  of digital  video
products,  principally to one customer for conversion of their cable  television
broadcast  network from analog to digital  compression  technology.  Telecom and
Customer Products Group revenues  decreased $555,000 or 45% in the third quarter
of fiscal 1998 to $687,000

                                       12
<PAGE>

from  $1,242,000 in the same period of fiscal 1997.  The decrease was mainly due
to lower  levels of  shipments  of cue and control  equipment  to provide  local
commercial  insertion  capabilities to cable television headend systems. For the
three months ended May 29, 1998, one customer accounted for approximately  53.8%
of total revenues.

For the nine months ended May 29, 1998,  DBS revenues  increased  $10,637,000 or
88.5% to $22,662,000  from  $12,025,000  for the nine months ended May 30, 1997.
The  increase  was  due  to  increased   shipments  of  digital  video  products
principally to one cable television  broadcast  network  customer.  For the nine
months ended May 29, 1998,  Telecom and Custom Product Group revenues  increased
$845,000 or 32% to $3,482,000  from $2,637,000 for the nine months ended May 30,
1997.  The  increase  was mainly due to higher  levels of  shipments  of cue and
control  equipment.  For the  nine  months  ended  May 29,  1998,  one  customer
accounted for  approximately  39.1% of total revenues.  The Company's backlog is
comprised of  undelivered,  firm  customer  orders,  which are scheduled to ship
within eighteen months.  WCI's total backlog was approximately  $11.5 million at
May 29, 1998,  compared to $19.5 million at August 29, 1997 and $19.3 million at
May 30, 1997.  The backlog as of May 30, 1997 included an initial order from FOX
Cable Networks for $11.8 million, the majority of which shipped during the first
nine  months of  fiscal  1998.  At May 29,  1998,  one  customer  accounted  for
approximately 36.4% of the backlog.

GROSS PROFIT MARGINS - The Company's gross profit margin  percentages were 35.4%
and 35.0% for the three and nine month  periods  ended May 29, 1998  compared to
11.7% and 26.5% for the three and nine month periods  ended May 30, 1997.  Gross
profit margin dollars increased $3,032,000 and $5,325,000 for the three and nine
month periods  ended May 29, 1998 from the same periods ended May 30, 1997.  The
increases in margin percentages and dollars were due to the increase in revenues
and a mix of higher  margin  products in the three and nine month  periods ended
May 29, 1998  compared to the same periods of fiscal 1997.  Profit  margins were
adversely  impacted  in the three and nine month  periods  ended May 29, 1998 by
inventory   reserve  charges  of  $300,000  and  $650,000,   respectively,   for
potentially  slow-moving  inventories  of early  generations  of  digital  video
products and charges of $100,000 and $200,000,  respectively,  for write-offs of
capitalized software costs associated with these products.

SELLING, GENERAL AND ADMINISTRATIVE - Selling, general and administrative (SG&A)
expenses  increased $24,000 or 1.7% to $1,399,000 for the three months ended May
29, 1998 from  $1,375,000  for the three months ended May 30, 1997. For the nine
months ended May 29, 1998 SG&A expenses increased $232,000 or 6.8% to $3,644,000
from  $3,412,000  for the same period ended May 30, 1997.  The increases for the
three and nine month  periods  were  mainly due to higher  levels of selling and
marketing  expenses,  incentive  compensation,   and  professional  fees.  As  a
percentage  of revenues,  SG&A  expenses  were 14.2% and 13.6% for the three and
nine month  periods  ended May 29, 1998 compared to 35.5% and 22.5% for the same
periods of fiscal  1997.  The  decreases in  percentages  for the three and nine
months  ended May 29, 1998  compared to the three and nine months  ended May 30,
1997 were primarily due to higher revenues.

RESEARCH AND  DEVELOPMENT  - Research and  development  expenditures,  including
capitalized  software  development  costs,  were $755,000 and $2,320,000 for the
three and nine month  periods  ended May 29,  1998,  compared  to  $808,000  and
$2,281,000 for the same periods of fiscal 1997. Capitalized software development
costs  amounted to $126,000 and  $323,000  for the third  quarter and first nine
months of fiscal 1998  compared to $294,000 and $764,000 for the same periods of
fiscal  1997.  The decrease in  expenditures  for the three months ended May 29,
1998 was  primarily  due to lower  engineering  consulting  expenses  which were
partially offset by an increase in engineering personnel.

                                       13
<PAGE>

The increase in expenditures for the nine months ended May 29, 1998 is primarily
due  to an  increase  in  engineering  personnel  and  higher  depreciation  and
proto-type  material  expenses which were partially offset by lower  engineering
consulting expenses. The decreases in capitalized software development costs for
the three and nine month  periods ended May 29, 1998 were  principally  due to a
decrease in  expenditures  associated  with  digital  video  products and Compel
network  control  software.   Research  and  development   expenses,   excluding
capitalized  software  expenditures,  were  $629,000  or  6.4% of  revenues  and
$1,997,000  or 7.5% of revenues for the three and nine months ended May 29, 1998
compared to $514,000 or 13.3% of revenues  and  $1,517,000  or 10.0% of revenues
for the same periods of fiscal 1997.

The Company remains  committed to such research and development  expenditures as
are  required  to   effectively   compete  and  maintain  pace  with  the  rapid
technological  changes in the communications  industry and to support innovative
engineering and design in its future products. The dollar amount of research and
development  expenditures  in fiscal 1998 is  expected  to increase  compared to
fiscal  1997 and to  decrease as a  percentage  of  revenues  due to an expected
increase in fiscal 1998 revenues.

INTEREST EXPENSE - Interest expense  decreased  $72,000 to $57,000 for the three
months ended May 29, 1998 from $129,000 for the three months ended May 30, 1997.
For the nine months ended May 29, 1998,  interest expense decreased  $259,000 to
$196,000 from $455,000 for the same period ended May 30, 1997. The decreases for
the three and nine month periods were primarily due to a decrease in the average
outstanding balance of the convertible debentures.

INTEREST  INCOME - Interest  income was  $145,000 and $380,000 for the three and
nine months, respectively,  ended May 29, 1998, compared to less than $1,000 and
$2,000 for the same periods  ended May 30, 1997.  The  increases  are due to the
increase in cash equivalent  balances at May 29, 1998,  primarily as a result of
customer  deposits  received  during  the  fiscal  year and cash  provided  from
operations.

INCOME TAX EXPENSES - For the nine months ended May 29, 1998, income tax expense
of $1,482,000 was comprised of a federal and state current income tax expense of
$388,000 and $100,000, respectively, and a federal and state deferred income tax
expense of $937,000 and $57,000, respectively.


LIQUIDITY AND CAPITAL RESOURCES NINE MONTHS ENDED MAY 29,1998

During the first nine months of fiscal 1998,  operating activities provided cash
of  $6,958,000.  Net earnings  adjusted for non-cash  expenses and a decrease in
inventories  provided  cash  of  $5,652,000  and  $1,500,000,  respectively.  An
increase in accounts  payable and  accrued  expenses  provided  cash of $491,000
while combined changes in accounts receivable and customer deposit balances used
cash of $779,000.  Cash used by investing  activities for property and equipment
expenditures  and  capitalized   software  additions  was  $675,000.   Financing
activities  used  cash  of  $423,000  for  scheduled   repayments  of  long-term
obligations and provided cash of $24,000 from the exercise of stock options.

At May 29,1998, no balances were outstanding under the revolving line-of-credit,
which expires May 4, 1999, or upon demand.  Borrowings  under the revolving line
of credit are subject to availability  advance  formulas of 80% against eligible
accounts receivable;  20% of eligible raw material inventories;  20% of eligible
work-in-process  kit  inventories;  and 40% to 50% of  eligible  finished  goods
inventories. Advances against inventory are subject to a sublimit of $2,000,000.

                                       14
<PAGE>

Approximately,  $3,710,000  was  available  to borrow at May  29,1998  under the
advance  formulas.  In addition,  at May 29,1998,  the Company was in compliance
with the line-of-credit covenants.

During  the  first  nine  months  of  fiscal  1998,  $1,285,000  of  convertible
debentures  were converted  into 950,658 shares of common stock.  No convertible
debentures remained outstanding at May 29,1998.

The Company  expects that its current cash and cash  equivalents  combined  with
expected  cash flows  from  operating  activities  and the  Company's  available
line-of-credit  will be sufficient to support the  Company's  operations  during
fiscal 1998 and fiscal 1999.

YEAR 2000

The  Company  has  performed a review of its  computer  systems and  products to
identify modifications required to become year 2000 compliant.  The Company does
not believe there is a material cost  associated with these  modifications,  and
currently  expects such  modifications to be completed by December 31, 1998. The
Company is in the process of reviewing the  implications of Year 2000 compliance
issues  associated  with  its  suppliers,   customers,   distributors,   banking
institutions, service providers and others. Any Year 2000 compliance problems by
these  parties  could  result in a  material  adverse  effect  on the  Company's
business, financial condition and results of operations.

                                       15
<PAGE>

                           PART II. OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K
          --------------------------------

          (a)  Exhibits: 27-Financial Data Schedule

          (b)  Reports on Form 8-K - No  reports  on Form 8-K were filed  during
               the quarter ended May 29, 1998.


                                       16
<PAGE>

                                   SIGNATURES
                                   ----------

     Pursuant to the  requirements  of the  Securities and Exchange Act of 1934,
the  Registrant  has duly  caused  this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                             WEGENER CORPORATION
                                             -------------------
                                                 (Registrant)

Date: July 10, 1998                          By: /s/ Robert A. Placek
                                                -------------------------------
                                                Robert A. Placek
                                                President
                                                (Principal Executive Officer)


Date: July 10, 1998                          By: /s/ C. Troy Woodbury, Jr.
                                                -------------------------------
                                                C. Troy Woodbury, Jr.
                                                Treasurer and Chief
                                                Financial Officer
                                                (Principal Financial and
                                                Accounting Officer)

                                       17