**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-Q**




(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 30, 2008




**OR**




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 No. 0-11003




**WEGENER
      CORPORATION**


(Exact
      name of registrant as specified in its charter)





**Delaware**
            
            **81-0371341**(State
                or other jurisdiction
            
            (I.R.S.
                Employerof
                incorporation or organization)
            
            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




**Registrant’s
      web site: HTTP://WWW.WEGENER.COM**




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
      o**




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
                accelerated filer o
            Accelerated
                filer oNon-accelerated
                filer o
            Smaller
                reporting company x(Do
                not check if a smaller reporting company)




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act).  **Yes
      o** **No
      x**




Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date:




Common
                Stock, $.01 par value
            
            12,647,051
                SharesClass
            
            Outstanding
                at June 30, 2008









**WEGENER
      CORPORATION**


**Form
      10-Q For the Quarter Ended May 30, 2008**





**INDEX**


**PART
                  I. Financial Information**Item
                  1.
              Financial
                  StatementsIntroduction
              3Consolidated
                  Statements of Operations(Unaudited)
                  - Three and Nine Months EndedMay
                  30, 2008 and June 1, 2007
              4Consolidated
                  Balance Sheets - May 30,2008
                  (Unaudited) and August 31, 2007
              5Consolidated
                  Statements of Shareholders' Equity(Unaudited)
                  - Nine Months Ended May 30,2008
                  and June 1, 2007
              6Consolidated
                  Statements of Cash Flows(Unaudited)
                  - Nine Months Ended May 30,2008
                  and June 1, 2007
              7Notes
                  to Consolidated FinancialStatements
                  (Unaudited)
              8Item
                  2.
              Management's
                  Discussion and Analysis of FinancialCondition
                  and Results of Operations
              18Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              24Item
                  4.
              Controls
                  and Procedures
              24Item
                  4T.
              Controls
                  and Procedures
              24**PART
                  II. Other Information**Item
                  6.
              Exhibits
              25Signatures
              26




2




**PART
      I.****FINANCIAL
      INFORMATION**




**ITEM
      1.**  **FINANCIAL
      STATEMENTS**




**INTRODUCTION
      - CONSOLIDATED FINANCIAL STATEMENTS**





The
      consolidated financial statements of WegenerTM Corporation
      (the “Company”, “we”, “our” or “us”) included herein have been prepared pursuant
      to the rules and regulations of the Securities and Exchange Commission. The
      consolidated balance sheet as of May 30, 2008; the consolidated statements
      of
      shareholders' equity as of May 30, 2008, and June 1, 2007; the consolidated
      statements of operations for the three and nine months ended May 30, 2008,
      and
      June 1, 2007; and the consolidated statements of cash flows for the nine months
      ended May 30, 2008, and June 1, 2007; have been prepared without audit. The
      consolidated balance sheet as of August 31, 2007, has been audited by
      independent registered 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 31,
      2007, 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




**WEGENER
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


(Unaudited)


Three
                  months ended
              
              Nine
                  months ended**May
                  30,**
                **2008**
              
              June
                  1,
                2007
              
              **May
                  30,**
                **2008**
              
              June
                  1,
                2007Revenue,
                  net
              
              **$**
              **4,392,919**
              
              $
              6,247,080
              
              **$**
              **16,085,268**
              
              $
              15,801,222Operating
                  costs and expensesCost
                  of products sold
              
              
              **2,794,068**
              
              
              3,975,135
              
              
              **9,882,172**
              
              
              10,402,187Selling,
                  general and administrative
              
              
              **1,475,383**
              
              
              1,274,377
              
              
              **4,144,125**
              
              
              3,910,969Research
                  and development
              
              
              **859,114**
              
              
              707,445
              
              
              **2,437,697**
              
              
              2,301,613Operating
                  costs and expenses
              
              
              **5,128,565**
              
              
              5,956,957
              
              
              **16,463,994**
              
              
              16,614,769Operating
                  (loss) income
              
              
              **(735,646**
              **)**
              
              290,123
              
              
              **(378,726**
              **)**
              
              (813,547
              )Interest
                  expense
              
              
              **(40,684**
              **)**
              
              (39,923
              )
              
              **(112,526**
              **)**
              
              (90,448
              )Other
                  income
              
              
              **1,206**
              
              
              502
              
              
              **1,946**
              
              
              9,473Net
                  (loss ) earnings
              
              **$**
              **(775,124**
              **)**
              $
              250,702
              
              **$**
              **(489,306**
              **)**
              $
              (894,522
              )Net
                  (loss) earnings per share:Basic
              
              **$**
              **(0.06**
              **)**
              $
              0.02
              
              **$**
              **(0.04**
              **)**
              $
              (0.07
              )Diluted
              
              **$**
              **(0.06**
              **)**
              $
              0.02
              
              **$**
              **(0.04**
              **)**
              $
              (0.07
              )Shares
                  used in per share calculationBasic
              
              
              **12,647,051**
              
              
              12,647,051
              
              
              **12,647,051**
              
              
              12,602,992Diluted
              
              
              **12,647,051**
              
              
              12,691,220
              
              
              **12,647,051**
              
              
              12,602,992





See
      accompanying notes to consolidated financial statements.




4




**WEGENER
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**




**May
                30,**
              **2008**
              **(Unaudited)**
            
            August
                31,
              2007**Assets**Current
                assetsCash
                and cash equivalents
            
            **$**
            **6,757**
            
            $
            6,728Accounts
                receivable, net
            
            
            **3,467,734**
            
            
            5,172,348Inventories,
                net
            
            
            **5,725,400**
            
            
            3,380,410Other
            
            
            **307,892**
            
            
            194,847Total
                current assets
            
            
            **9,507,783**
            
            
            8,754,333Property
                and equipment, net
            
            
            **1,782,376**
            
            
            1,777,677Capitalized
                software costs, net
            
            
            **1,181,007**
            
            
            1,241,577Other
                assets
            
            
            **550,674**
            
            
            684,238Land
                held for sale
            
            
            **353,712**
            
            
            353,712Total
                assets
            
            **$**
            **13,375,552**
            
            $
            12,811,537**Liabilities
                and Shareholders’ Equity**Current
                liabilitiesBank
                line of credit
            
            **$**
            **2,001,528**
            
            $
            2,015,704Accounts
                payable
            
            
            **2,549,570**
            
            
            1,145,327Accrued
                expenses
            
            
            **1,924,868**
            
            
            2,609,222Deferred
                revenue
            
            
            **2,050,961**
            
            
            774,183Customer
                deposits
            
            
            **933,823**
            
            
            1,870,673Total
                current liabilities
            
            
            **9,460,750**
            
            
            8,415,109Commitments
                and contingencies
            
            
            -
            
            
            -Shareholders’
                equityCommon
                  stock, $.01 par value; 20,000,000 shares authorized; 12,647,051
                  and
                  12,647,051 shares issued and outstanding,
                  respectively
            
            
            **126,471**
            
            
            126,471Additional
                paid-in capital
            
            
            **20,006,702**
            
            
            19,999,022Deficit
            
            
            **(16,218,371**
            **)**
            
            (15,729,065
            )Total
                shareholders’ equity
            
            
            **3,914,802**
            
            
            4,396,428Total
                liabilities and shareholders’ equity
            
            **$**
            **13,375,552**
            
            $
            12,811,537





See
      accompanying notes to consolidated financial statements.




5




**WEGENER
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY**


(Unaudited)





AdditionalCommon
                Stock
            
            Paid-inShares
            
            Amount
            
            Capital
            
            DeficitBalance
                  at September 1, 2006
            
            
            12,579,051
            
            $
            125,791
            
            $
            19,924,915
            
            $
            (14,976,303
            )Share-based
                compensation expense
            
            
            -
            
            
            -
            
            
            17,667
            
            
            -Common
                stock issued throughstock
                options
            
            
            68,000
            
            
            680
            
            
            56,440
            
            
            -Net
                loss for the nine months
            
            
            -
            
            
            -
            
            
            -
            
            
            (894,522
            )BALANCE
                at June 1, 2007
            
            
            12,647,051
            
            $
            126,471
            
            $
            19,999,022
            
            $
            (15,870,825
            )Balance
                at August 31, 2007
            
            
            12,647,051
            
            $
            126,471
            
            $
            19,999,022
            
            $
            (15,729,065
            )Share-based
                compensation expense
            
            
            -
            
            
            -
            
            
            7,680
            
            
            -Net
                loss for the nine months
            
            
            -
            
            
            -
            
            
            -
            
            
            (489,306
            )**BALANCE
                at May 30, 2008**
            
            
            **12,647,051**
            
            **$**
            **126,471**
            
            **$**
            **20,006,702**
            
            **$**
            **(16,218,371**
            **)**





See
      accompanying notes to consolidated financial statements.




6




**WEGENER
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


(Unaudited)


Nine
                  months ended**May
                  30,**
                **2008**
              
              June
                  1,
                2007**Cash
                  flows from operating activities**Net
                  loss
              
              **$**
              **(489,306**
              **)**
              $
              (894,522
              )Adjustments
                  to reconcile net loss to cash provided (used) by operating
                  activitiesDepreciation
                  and amortization
              
              
              **1,405,726**
              
              
              1,772,258Share-based
                  compensation expense
              
              
              **7,680**
              
              
              17,667Provision
                  for bad debts
              
              
              **35,000**
              
              
              (50,000
              )Provision
                  for inventory reserves
              
              
              **-**
              
              
              250,000Provision
                  for warranty reserves
              
              
              **(160,000**
              **)**
              
              150,000Changes
                  in assets and liabilities
              
              
              **1,669,614**
              
              
              (2,463,368
              )Accounts
                  receivableInventories
              
              
              **(2,344,990**
              **)**
              
              (590,173
              )Other
                  assets
              
              
              **(113,046**
              **)**
              
              104,542Accounts
                  payable
              
              
              **1,404,244**
              
              
              407,922Accrued
                  expenses
              
              
              **(524,354**
              **)**
              
              234,740Deferred
                  revenue
              
              
              **1,276,778**
              
              
              (284,397
              )Customer
                  deposits
              
              
              **(936,852**
              **)**
              
              (213,794
              )Net
                  cash provided (used) by operating activities
              
              
              **1,230,494**
              
              
              (1,559,125
              )**Cash
                  flows from investment activities**Property
                  and equipment expenditures
              
              
              **(311,203**
              **)**
              
              (169,470
              )Capitalized
                  software additions
              
              
              **(869,490**
              **)**
              
              (1,157,567
              )License
                  agreement, patent, and trademark, expenditures
              
              
              **(35,596**
              **)**
              
              (152,739
              )Net
                  cash used for investing activities
              
              
              **(1,216,289**
              **)**
              
              (1,479,776
              )**Cash
                  flows from financing activities**Net
                  change in revolving line of credit
              
              
              **(14,176**
              **)**
              
              2,041,563Proceeds
                  from stock options exercised
              
              
              **-**
              
              
              57,120Net
                  cash (used) provided by financing activities
              
              
              **(14,176**
              **)**
              
              2,098,683Increase
                  (decrease) in cash and cash equivalents
              
              
              **29**
              
              
              (940,218
              )Cash
                  and cash equivalents, beginning of period
              
              
              **6,728**
              
              
              958,784Cash
                  and cash equivalents, end of period
              
              **$**
              **6,757**
              
              $
              18,566Supplemental
                  disclosure of cash flow information:Cash
                  paid during the nine months for:Interest
              
              **$**
              **112,526**
              
              $
              90,448





See
      accompanying notes to consolidated financial statements.




7




**WEGENER
      CORPORATION AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1 Description of Business**


We
      design
      and manufacture equipment for the receiving and transmitting of video, audio
      and
      data programming over satellite, cable, broadcast and terrestrial networks.
      Applications for our equipment include IP data delivery, cable and broadcast
      television, radio networks, business television, digital signage, business
      music, distance education, and financial information distribution.
      COMPEL ® ,
      our
      patented network control system, provides network flexibility to regionalize
      programming, commercials and file transfers.





The
      equipment we provide enables our customers to implement complex networks
      involving real time switching and control to help them achieve their business
      plans. Using our technologies, our customers can provide targeted programming
      and advertising capabilities to their clients.





We
      also
      make a complete line of signal processing equipment used by the cable television
      industry to provide off-air digital and high definition signals to its
      subscribers. This equipment receives the signals from local terrestrial
      broadcasters and processes them in ways that make these signals compatible
      with
      existing cable plant infrastructure in wide use today.





Our
      primary customers are major broadcast networks, operators of large private
      satellite broadcast networks, and major cable television systems
      operators.




Our
      principal sources of revenues are from the sales of satellite communications
      equipment. Embedded in our products is internally developed software of varying
      applications. Historically, we have not sold or marketed our software separately
      or otherwise licensed our software apart from the related communications
      equipment. We operate in one business segment, the manufacture and sale of
      satellite communications equipment.





**Note
      2 Liquidity**


We
      have
      two manufacturing and purchasing agreements for certain finished goods
      inventories. At May 30, 2008, outstanding purchase commitments under these
      agreements amounted to $2,738,000. Approximately $2,152,000 of the purchase
      commitments are scheduled for delivery in the fourth quarter of fiscal 2008.
      These purchase commitments were made based on existing orders and expected
      future bookings. Our third quarter bookings were below our expectations and
      our
      third quarter was adversely impacted by one customer delaying delivery of its
      order for our SMD 515 IPTV set top box (see Item 2. Management’s Discussion and
      Analysis of Financial Condition and Results of Operations, for further
      discussion). Significant fourth quarter fiscal 2008 shippable bookings are
      currently required to meet our financial projections. As a result, our fourth
      quarter fiscal 2008 and first quarter fiscal 2009 cash flows could be adversely
      affected depending on the timing of shipments of delayed orders, the booking
      of
      additional near term shippable orders and the timing of resulting cash
      collections. Our borrowings would increase to support any resulting shortfall
      in
      cash flows and we could require an increase to our line of credit limit of
      $5,000,000. While no assurances may be given, we believe that the bank would
      provide an increase to the credit limit subject to having sufficient collateral
      under the existing line of credit advance formulas. Should near term shippable
      bookings not materialize and additional bank credit not be available, we would
      not be able to achieve our financial projections and additional sources of
      capital would be required. No assurances may be given that additional sources
      of
      capital, if needed, would be available.





**Note
      3**  **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 31, 2007.





**Revenue
      Recognition**


Our
      principal sources of revenues are from the sales of hardware products, network
      control software products, services and software and hardware maintenance
      contracts.





Our
      revenue recognition policies are in compliance with Staff Accounting Bulletin
      (SAB) No. 104, “Revenue Recognition”, SAB No. 101, “Revenue Recognition in
      Financial Statements” and EITF Issue No. 00-21, "Revenue Arrangements with
      Multiple Deliverables." Revenue is recognized when persuasive evidence of an
      agreement with the customer exists, products are shipped or title passes
      pursuant to the terms of the agreement with the customer, the amount due from
      the customer is fixed or determinable, collectibility is reasonably assured,
      and
      when there are no significant future performance obligations. Service revenues
      are recognized at the time of performance. Extended service maintenance contract
      revenues are recognized ratably over the maintenance contract term, which is
      typically one year. The unrecognized revenue portion of maintenance contracts
      invoiced and the fair value of future performance obligations are recorded
      as
      deferred revenue. In addition, invoices generated in excess of revenue
      recognized are recorded as deferred revenue until the revenue recognition
      criteria are met. At May 30, 2008, deferred extended service maintenance
      revenues were $645,000 and deferred revenues related to future performance
      obligations and invoices generated in excess of revenue recognized were
      $1,406,000 and are expected to be recognized as revenue in varying amounts
      throughout fiscal 2008 and into fiscal 2009.


8





We
      recognize revenue in certain circumstances before delivery has occurred
      (commonly referred to as “bill and hold” transactions). In such circumstances,
      among other things, risk of ownership has passed to the buyer, the buyer has
      made a written fixed commitment to purchase the finished goods, the buyer has
      requested the finished goods be held for future delivery as scheduled and
      designated by them, and no additional performance obligations exist by the
      Company. For these transactions, the finished goods are segregated from
      inventory and normal billing and credit terms are granted. For the nine months
      ended May 30, 2008, no revenues were recorded as bill and hold transactions.




These
      policies require management, at the time of the transaction, to assess whether
      the amounts due are fixed or determinable, collection is reasonably assured,
      and
      if future performance obligations exist. These assessments are based on the
      terms of the agreement with the customer, past history and credit worthiness
      of
      the customer. If management determines that collection is not reasonably assured
      or future performance obligations exist, revenue recognition is deferred until
      these conditions are satisfied.





Embedded
      in our products is internally developed software of varying
      applications **.** We
      evaluate our products to assess whether software is more than incidental to
      a
      product. When we conclude that software is more than incidental to a product,
      we
      account for the product as a software product. Revenue on software products
      and
      software-related elements is recognized in accordance with Statement
      of Position (SOP) No. 97-2 ,
      “Software Revenue Recognition,” as amended by SOP No. 98-9, “Software Revenue
      Recognition, with Respect to Certain Transactions.” Significant judgment may be
      required in determining whether a product is a software or hardware product.





In
      accordance with EITF Issue 00-10, “Accounting for Shipping and Handling Fees and
      Costs,” we include in revenues all shipping and handling billings to customers,
      and freight costs incurred for product shipments are included in cost of
      products sold.





**Earnings
      Per Share**


Basic
      and
      diluted net earnings per share were computed in accordance with Statement of
      Financial Accounting Standards No. 128, “Earnings Per Share.” 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. 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.





**Share-Based
      Compensation**


We
      account for share-based payments to employees, including grants of employee
      stock options, in accordance with Statement of Financial Accounting Standards
      (SFAS) No. 123 (Revised 2004), “Share-Based Payment” (SFAS 123R). SFAS 123R
      requires that these awards be recognized as compensation expense in the
      consolidated financial statements based on their fair values. That expense
      will
      be recognized over the period during which an employee is required to provide
      services in exchange for the award, known as the requisite service period
      (usually the vesting period). For the nine months ended May 30, 2008,
      share-based compensation expense included in selling, general and administrative
      expenses amounted to approximately $8,000 compared to approximately $18,000,
      for
      the same period ended June 1, 2007. The weighted average fair value of options
      granted during the nine months ended May 30, 2008 was $.51 with an aggregate
      total value of $8,000. The weighted average fair value of options granted during
      the nine months ended June 1, 2007 was $.90 with an aggregate total value of
      $16,000. As of May 30, 2008, no compensation costs related to non-vested stock
      options remain to be recognized.


9




The
      fair
      value of each option was estimated on the date of grant using the Black-Scholes
      option pricing model with the following weighted average
      assumptions:





Three months ended
            
            Nine months ended**May 30,**
            
            June 1,
            
            **May 30,**
            
            June 1,**2008**
            
            2007
            
            **2008**
            
            2007Risk
                  free interest rate
            
            
            **-**
            
            
            **-**
            
            
            **3.45%**
            
            
            4.70%Expected
                  term
            
            
            **-**
            
            
            **-**
            
            
            **5.0
                years**
            
            
            10.0
                yearsVolatility
            
            
            **-**
            
            
            **-**
            
            
            **70%**
            
            
            90%Expected
                  annual dividends
            
            
            **-**
            
            
            **-**
            
            
            **None**
            
            
            NoneForfeiture
                rate
            
            
            -
            
            
            -
            
            
            -
            
            
            -





The
      following table summarizes stock option transactions for the nine months ended
      May 30, 2008:





**Range of**
            
            **Weighted****Number**
            
            **Exercise**
            
            **Average****of Shares**
            
            **Prices**
            
            **Exercise Price**Outstanding
                at
              August
                31, 2007
            
            
            971,531
            
            $
            .63 –
                2.72
            
            $
            1.55Granted
            
            
            15,000
            
            
            .85
            
            
            .85Forfeited
                or cancelled
            
            
            (53,000
            )
            
            1.41 –
                2.21
            
            
            1.43**Outstanding
                at**
              **May
                30, 2008**
            
            
            **933,531**
            
            **$**
            **.63**–**2.72**
            
            **$**
            **1.55****Available
                for issue at**
              **May
                30, 2008**
            
            
            **-**
            
            
            **-**
            
            
            **-****Options
                exercisable at**
              **May
                30, 2008**
            
            
            **933,531**
            
            **$**
            **.63**–**2.72**
            
            **$**
            **1.55**August
                31, 2007
            
            
            971,531
            
            $
            .63 –
                2.72
            
            $
            1.56





The
      1998
      Incentive Plan expired and terminated effective December 31, 2007. The key
      terms
      of the stock options granted under our stock plans are included in the Company's
      Annual Report on Form 10-K for the fiscal year ended August 31,
      2007.





**Bank
      Overdrafts**


Bank
      overdrafts consist of outstanding checks that have not cleared our bank.
      Overdrafts are offset against cash balances to the extent that cash balances
      are
      available in the account on which the checks are issued. Remaining balances
      of
      overdrafts are included in our accounts payable balances. At May 30, 2008,
      outstanding checks in the amounts of $558,000 were included in accounts payable
      balances.





**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 revenues 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 2008 and 2007 contain fifty-two weeks.




10




**Note
      4**  **Accounts
      Receivable**


Accounts
      receivable are summarized as follows:





**May 30,**
              **2008**
            
            August 31,
              2007**(Unaudited)**Accounts
                receivable
            
            **$**
            **3,661,663**
            
            $
            5,345,196Other
                receivables
            
            
            **75,864**
            
            
            78,468**3,737,527**
            
            
            5,423,664Less
                allowance for doubtful accounts
            
            
            **(269,793**
            **)**
            
            (251,316
            )Accounts
                receivable, net
            
            **$**
            **3,467,734**
            
            $
            5,172,348





**Note
      5**  **Inventories**


Inventories
      are summarized as follows:





**May 30,**
            
            August 31,**2008**
            
            2007**(Unaudited)**Raw
                material
            
            **$**
            **4,499,483**
            
            $
            3,482,396Work-in-process
            
            
            **1,244,719**
            
            
            962,286Finished
                goods
            
            
            **4,051,503**
            
            
            3,028,041**9,795,705**
            
            
            7,472,723Less
                inventory reserves
            
            
            **(4,070,305**
            **)**
            
            (4,092,313
            )Inventories,
                net
            
            **$**
            **5,725,400**
            
            $
            3,380,410





Our
      inventory reserve of approximately $4,070,000 at May 30, 2008 is to provide
      for
      items that are potentially slow-moving, excess or obsolete. During the first
      nine months of fiscal 2008, inventory reserves were reduced by writeoffs of
      approximately $22,000. Changes in market conditions, lower than expected
      customer demand and rapidly changing technology could result in additional
      obsolete and slow-moving inventory that is unsaleable or saleable at reduced
      prices. No estimate can be made of a range of amounts of loss from obsolescence
      that is reasonably possible should our sales efforts not be
      successful.





**Note
      6**  **Land
      held for sale**


During
      the third quarter of fiscal 2007, the Board of Directors of the Company
      authorized and approved listing for sale the 4.4 acres of undeveloped land
      located adjacent to its headquarters facility in Duluth (Johns Creek), Georgia.
      The Company evaluated the criteria of Statement of Financial Standards (SFAS)
      No. 144 (as amended), “Accounting for the Impairment or Disposal of Long-Lived
      Assets” (SFAS No. 144) and concluded that these assets continue to qualify as
      assets held for sale.  In accordance with SFAS No. 144, the land is
      classified as land held for sale at its historic carrying value of $353,712
      (lower of carrying amount or fair value less costs to sell) in the consolidated
      balance sheet as of May 30, 2008. The land was acquired in August 1989 and
      no
      impairment charges were recorded related to the reclassification.





11




**Note
      7**  **Other
      Assets**


Other
      assets consisted of the following:





**May 30, 2008 (unaudited)****Cost**
            
            **Accumulated**
              **Amortization**
            
            **Net**License
                agreements
            
            **$**
            **933,800**
            
            **$**
            **(918,384**
            **)**
            **$**
            **15,416**Patents
                and patent applications
            
            
            **515,063**
            
            
            **(40,842**
            **)**
            
            **474,221**Trademarks
            
            
            **82,820**
            
            
            **(37,005**
            **)**
            
            **45,815**Loan
                facility fees
            
            
            **100,000**
            
            
            **(91,667**
            **)**
            
            **8,333**Other
            
            
            **6,889**
            
            
            **-**
            
            
            **6,889****$**
            **1,638,572**
            
            **$**
            **(1,087,898**
            **)**
            **$**
            **550,674**





August 31, 2007Cost
            
            Accumulated
              Amortization
            
            NetLicense
                agreements
            
            $
            933,800
            
            $
            (862,198
            )
            $
            71,602Patents
                and patent applications
            
            
            472,551
            
            
            (14,006
            )
            
            458,545Trademarks
            
            
            89,736
            
            
            (25,867
            )
            
            63,869Loan
                facility fees
            
            
            137,500
            
            
            (54,167
            )
            
            83,333Other
            
            
            6,889
            
            
            -
            
            
            6,889$
            1,640,476
            
            $
            (956,238
            )
            $
            684,238





Amortization
      expense of other assets for the three and nine months ended May 30, 2008,
      amounted to $50,000 and $169,000, respectively. Amortization expense of other
      assets for the three and nine months ended June 1, 2007, amounted to $190,000
      and $313,000, respectively. Amortization expense for the three and nine months
      ended June 1, 2007 included $111,000 related to write-offs of remaining net
      balances of certain license agreements due to termination of the
      agreements.





We
      conduct an ongoing review of our intellectual property rights and potential
      trademarks. At May 30, 2008, the cost of registered patents and trademarks
      amounted to $251,000 and $82,000, respectively. Additionally, as of May 30,
      2008, we have cumulatively incurred $264,000 of legal fees related to the filing
      of applications for various patents not yet approved and $1,000 related to
      the
      filing of trademarks. Upon issuance, these legal costs will be amortized on
      a
      straight-line basis over the lesser of the legal life of the patents and
      trademarks or the estimated useful lives of the patent or trademark. If it
      becomes more likely than not that a patent application will not be granted,
      we
      will write-off the deferred cost at that time. Patents and trademarks are
      amortized over their estimated useful life of four to ten years. License
      agreements are amortized over their estimated useful life of one to five years.
      Loan facility fees are amortized over 12 months.





During
      the third quarter of fiscal 2008, we signed an agreement to sell selected
      patents and patent applications to EPAX Consulting Limited Liability Company
      for
      net proceeds of approximately $1,075,000, subject to customary closing
      conditions. The group of patents and patent applications sold relate to product
      distinction, system architecture and IP networking. We retain a worldwide,
      non-exclusive, royalty-free license under the patents for use in both existing
      and future products. The transaction was completed subsequent to May 30,
      2008.




12




**Note
      8**  **Accrued
      Expenses**


Accrued
      expenses consist of the following:





**May 30,**
              
              August 31,**2008**
              
              2007**(Unaudited)**Vacation
              
              **$**
              **624,071**
              
              $
              541,503Payroll
                  and related expenses
              
              
              **215,873**
              
              
              382,690Royalties
              
              
              **138,056**
              
              
              76,989Warranty
              
              
              **360,052**
              
              
              534,052Taxes
                  and insurance
              
              
              **94,236**
              
              
              61,935Commissions
              
              
              **84,579**
              
              
              104,876Professional
                  fees
              
              
              **332,573**
              
              
              425,433Other
              
              
              **75,428**
              
              
              481,744**$**
              **1,924,868**
              
              $
              2,609,222





Accrued
      Warranty


We
      warrant our products for a 12 to 14 month period beginning at the date of
      shipment. The warranty provides for repair or replacement of defective products
      returned during the warranty period at no cost to the customer. We expense
      costs
      for routine warranty repairs as incurred. Additional provisions are made for
      non-routine warranty repairs based on estimated costs to repair at the point
      in
      time in which the warranty claim is identified. Accrued warranty liabilities
      amounted to $360,000 at May 30, 2008 and $534,000 at August 31, 2007. For the
      nine months ended May 30, 2008, the accrual was increased by $50,000 and reduced
      by $14,000 for satisfied warranty claims. Additionally, for the three and nine
      months ended May 30, 2008, the accrual was reduced by and cost of sales was
      credited for $210,000 for previously estimated provisions that were no longer
      required.





**Note
      9**  **Deferred
      Revenue**


Deferred
      revenue consists of the unrecognized revenue portion of extended service
      maintenance contracts and the fair value of revenue related to future
      performance obligations. Extended service maintenance contract revenues are
      recognized ratably over the maintenance contract term, which is typically one
      year. In addition, invoices generated in excess of revenue recognized are
      recorded as deferred revenue until revenue recognition criteria are met. At
      May
      30, 2008, deferred extended service maintenance revenues were $645,000 and
      deferred revenues related to future performance obligations and invoices
      generated in excess of revenue recognized were $1,406,000 and are expected
      to be
      recognized as revenue in varying amounts throughout fiscal 2008 and into fiscal
      2009.





**Note
      10 Financing Agreements**


Revolving
      Line of Credit and Term Loan Facility





WCI’s
      bank loan facility provides a maximum available credit limit of $5,000,000
      subject to availability advance formulas. The loan facility matures on September
      30, 2008, or upon demand, and requires an annual facility fee of 2% of the
      maximum credit limit. The loan automatically renews from year to year unless
      the
      bank makes demand for repayment prior to maturity; provided, however, absent
      an
      event of default, the bank shall give at least 120 days notice of its intention
      to demand the loans’s repayment or to terminate the loan agreement. The loan
      facility consists of a term loan and a revolving line of credit bearing interest
      at the bank’s prime rate (5.00% at May 30, 2008). The bank retained the right to
      adjust the interest rate, subject to the financial performance of the
      Company.





The
      term
      loan facility provides for a maximum of $1,000,000 for advances of up to 80%
      of
      the cost of equipment acquisitions. Principal advances are payable monthly
      over
      60 months with a balloon payment due at maturity. The revolving line of credit
      is subject to availability advance formulas of 80% against eligible accounts
      receivable; 20% of eligible raw materials inventories; 20% of eligible
      work-in-process kit inventories; and 40% to 50% of eligible finished goods
      inventories and 50% of import letter of credit commitment balances. In addition,
      the facility provides for advances in excess of the availability formulas of
      up
      to $1,000,000 during the term of the facility. The loan is secured by a first
      lien on substantially all of WCI’s assets, including land and buildings, and is
      guaranteed by Wegener Corporation. At May 30, 2008, balances outstanding on
      the
      revolving line of credit amounted to approximately $2,002,000. During the first
      nine months of fiscal 2008, the line of credit average daily balance outstanding
      was $1,647,000 and the highest outstanding balance was $3,274,000. No borrowings
      were outstanding under the equipment term loan portions of the loan facility.
      The loan facility is also used to support import letters of credit issued to
      offshore manufacturers, which at May 30, 2008, amounted to $1,133,000. At May
      30, 2008, approximately $1,865,000, net of outstanding letters of credit, was
      available to borrow under the advance formulas (see note 2 Liquidity and Item
      2.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations, for further discussion).




13




Under
      the
      loan facility, at the end of fiscal 2008 we are required to maintain a minimum
      tangible net worth. In addition, we are required to retain certain executive
      officers, maintain certain financial ratios, and are precluded from paying
      dividends.





At
      May
      30, 2008, we had land and buildings with a cost basis of $4,457,000 (including
      land held for sale of $354,000). Although land and buildings are subject to
      a
      lien under the loan facility, they are not currently used in the existing loan
      facility’s availability advance formulas and have no mortgage balances
      outstanding. During the third quarter of fiscal 2007, the Company’s Board of
      Directors authorized and approved the listing for sale of the 4.4 acres of
      undeveloped land located adjacent to the Company’s headquarters facility in
      Duluth (Johns Creek), Georgia (see note 6 to the consolidated financial
      statements). Proceeds from the sale of the land would be used to pay any
      balances outstanding on the revolving line of credit.





**Note
      11**  **Income
      Taxes**


There
      was
      no income tax benefit for the three and nine months ended May 30, 2008, as
      the
      Company incurred net losses of $(775,000) and $(489,000), respectively, and
      the
      increase in the deferred tax asset was offset by a corresponding increase in
      the
      valuation allowance due to the uncertainty as to the realization of the deferred
      tax asset. The valuation allowance increased $176,000 in the first nine months
      of fiscal 2008. At May 30, 2008, net deferred tax assets of $6,195,000 were
      fully reserved by a valuation allowance.




At
      May
      30, 2008, we had a federal net operating loss carryforward of approximately
      $10,249,000, which expires beginning fiscal 2020 through fiscal 2028.
      Additionally, we had an alternative minimum tax credit of $138,000 and state
      income tax credits of $199,000 expiring in fiscal 2009, both of which were
      fully
      offset by the valuation allowance.




We
      adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income
      Taxes, an Interpretation of FASB Statement No. 109” (FIN 48) as of
      September 1, 2007, the first day of the first quarter of fiscal 2008. The
      adoption of FIN 48 had no impact on our financial position or results of
      operations. We are subject to U.S. federal income tax as well as income tax
      of
      numerous state jurisdictions. We are subject to U.S. federal tax examinations
      by
      tax authorities for fiscal years 2004 through 2007. Income tax examinations
      that
      we may be subject to from the various state taxing authorities vary by
      jurisdiction. Our policy under FIN 48 for penalties and interest is to include
      such amounts, if any, in income tax expense.




14






**Note
      12 Earnings Per Share**


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


Three months ended**May 30, 2008**
              
              June 1, 2007**Earnings**
                **(Numerator)**
              
              **Shares**
                **(Denominator)**
              
              **Per**
                **share**
                **amount**
              
              Earnings
                (Numerator)
              
              Shares
                (Denominator)
              
              Per
                share
                amountNet
                  (loss) earnings
              
              **$**
              **(775,124**
              **)**
              
              
              
              
              
              
              $
              250,702**Basic
                  (loss) earnings per share**:Net
                  (loss) earnings available to common shareholders
              
              **$**
              **(775,124**
              **)**
              
              **12,647,051**
              
              **$**
              **(0.06**
              **)**
              $
              250,702
              
              
              12,647,051
              
              $
              0.02Effect
                  of dilutive potential common shares:Stock
                  options
              
              
              **-**
              
              
              **-**
              
              
              
              
              
              -
              
              
              44,169**Diluted
                  (loss) earnings per share:**Net
                  (loss) earnings available to common shareholders
              
              **$**
              **(775,124**
              **)**
              
              **12,647,051**
              
              **$**
              **(0.06**
              **)**
              $
              250,702
              
              
              12,691,220
              
              $
              0.02


Nine months ended**May 30, 2008**
              
              June 1, 2007**Earnings**
                **(Numerator)**
              
              **Shares**
                **(Denominator)**
              
              **Per**
                **share**
                **amount**
              
              Earnings
                (Numerator)
              
              Shares
                (Denominator)
              
              Per
                share
                amountNet
                  loss
              
              **$**
              **(489,306**
              **)**
              
              
              
              
              
              
              $
              (894,522
              )**Basic
                  loss per share:**Net
                  loss available to common shareholders
              
              **$**
              **(489,306**
              **)**
              
              **12,647,051**
              
              **$**
              **(0.04**
              **)**
              $
              (894,522
              )
              
              12,602,992
              
              $
              (0.07
              )Effect
                  of dilutive potential common shares:Stock
                  options
              
              
              **-**
              
              
              **-**
              
              
              
              
              
              -
              
              
              -**Diluted
                  loss per share:**Net
                  loss available to common shareholders
              
              **$**
              **(489,306**
              **)**
              
              **12,647,051**
              
              **$**
              **(0.04**
              **)**
              $
              (894,522
              )
              
              12,602,992
              
              $
              (0.07
              )




Stock
      options excluded from the diluted net earnings (loss) per share calculation
      due
      to their anti-dilutive effect are as follows:





Three months ended
            
            Nine months ended**May 30,**
              **2008**
            
            June 1,
              2007
            
            **May 30,**
              **2008**
            
            June 1,
              2007Common
                stock options:Number
                of shares
            
            **933,531**
            
            692,156
            
            **933,531**
            
            1,012,531Exercise
                price
            
            **$****.63
                to $2.72**
            
            $1.09
                to $2.72
            
            **$****0.63
                to $2.72**
            
            $0.63
                to $2.72





15




**Note
      13 Segment Information and Significant Customers
      (Unaudited)**


In
      accordance with Statement of Financial Accounting Standards No. 131, “Disclosure
      about Segments of an Enterprise and Related Information,” we operate within a
      single reportable segment, the manufacture and sale of satellite communications
      equipment.





In
      this
      single operating segment we have three sources of revenues as
      follows:


Three months ended
              
              Nine months ended**May 30,**
                **2008**
              
              June 1,
                2007
              
              **May 30,**
                **2008**
              
              June 1,
                2007Product
                  LineDirect
                  Broadcast Satellite
              
              **$**
              **4,246,745**
              
              $
              6,037,788
              
              **$**
              **15,636,319**
              
              $
              15,250,041Analog
                  and Custom Products
              
              
              **4,170**
              
              
              63,204
              
              
              **20,193**
              
              
              125,789Service
              
              
              **142,004**
              
              
              146,088
              
              
              **428,756**
              
              
              425,392**$**
              **4,392,919**
              
              $
              6,247,080
              
              **$**
              **16,085,268**
              
              $
              15,801,222


Concentrations
      of revenue are likely to occur in any one or more of our products in any of
      our
      reporting periods. Product revenues are subject to fluctuations from quarter
      to
      quarter and year to year as new products and technologies are introduced, new
      product features and enhancements are added and as customers upgrade or expand
      their network operations.





Concentration
      of products representing 10% or more of the respective period’s revenues is as
      follows:


Three months ended
              
              Nine months ended**May 30,**
                **2008**
              
              June 1,
                2007
              
              **May 30,**
                **2008**
              
              June 1,
                2007ProductiPump
                  Media Servers
              
              
              **30.0**
              **%**
              
              44.4
              %
              
              **12.2**
              **%**
              
              31.5
              %Professional
                  and broadcast receivers
              
              
              **14.7**
              **%**
              
              13.8
              %
              
              **32.4**
              **%**
              
              21.6
              %SMD
                  515 IPTV set top boxes
              
              
              **16.5**
              **%**
              
              
              (a)
              
              **10.3**
              **%**
              
              
              (a)Enterprise
                  media receivers
              
              
              
              **(a)**
              
              
              (a)
              
              **11.6**
              **%**
              
              
              (a)Audio
                  broadcast receivers
              
              
              **13.3**
              **%**
              
              
              (a)
              
              
              **(a)**
              
              
              (a)Network
                  control products
              
              
              
              **(a)**
              
              10.1
              %
              
              
              **(a)**
              
              
              (a)





(a)
      Revenues for the period were less than 10% of total revenues.




Concentration
      of products representing 10% or more of revenues in the prior three fiscal
      years
      is as follows:


Year endedProducts
              
              August 31,
                2007
              
              September 1,
                2006
              
              September 2,
                2005iPump
                  Media Server
              
              
              32.0
              %
              
              
              (a)
              
              11.6
              %Professional
                  and broadcast receivers
              
              
              20.6
              %
              
              12.0
              %
              
              12.6
              %Audio
                  broadcast receivers
              
              
              
              (a)
              
              17.5
              %
              
              18.6
              %Nielsen
                  encoders
              
              
              
              (a)
              
              10.7
              %
              
              
              (a)Uplink
                  Equipment
              
              
              
              (a)
              
              
              (a)
              
              12.0
              %


(a)
      Revenues for the period were less than 10% of total revenues.





Fiscal
      2007 product mix featured new iPump ® Media
      Server products for broadcast radio customers adopting store and forward
      technologies in their network upgrades and a new customer for a digital signage
      network. The professional and broadcast receivers products benefited from a
      new
      cable network and expansion of high definition television distribution by cable
      headends. A new audio broadcast receiver for business music applications was
      developed during fiscal 2007 and began shipping in the first quarter of fiscal
      2008.




16




Revenues
      by geographic area are as follows:


Three months ended
              
              Nine months ended**May 30,**
                **2008**
              
              June 1,
                2007
              
              **May 30,**
                **2008**
              
              June 1,
                2007Geographic
                  AreaUnited
                  States
              
              **$**
              **2,701,045**
              
              $
              4,022,462
              
              **$**
              **13,135,504**
              
              $
              12,377,705Latin
                  America
              
              
              **1,308,898**
              
              
              1,738,505
              
              
              **2,138,250**
              
              
              1,780,675Canada
              
              
              **42,951**
              
              
              9,310
              
              
              **343,166**
              
              
              113,642Europe
              
              
              **326,706**
              
              
              476,431
              
              
              **422,623**
              
              
              1,516,433Other
              
              
              **13,319**
              
              
              372
              
              
              **45,725**
              
              
              12,767**$**
              **4,392,919**
              
              $
              6,247,080
              
              **$**
              **16,085,268**
              
              $
              15,801,222




All
      of
      our long-lived assets are located in the United States.




Customers
      representing 10% or more of the respective period’s revenues are as
      follows:


Three months ended
              
              Nine months ended**May 30,**
                **2008**
              
              June 1,
                2007
              
              **May 30,**
                **2008**
              
              June 1,
                2007Customer
                  1
              
              
              **28.4**
              **%**
              
              26.4
              %
              
              **12.1**
              **%**
              
              10.4
              %Customer
                  2
              
              
              
              **(a)**
              
              
              (a)
              
              **19.2**
              **%**
              
              
              (a)Customer
                  3
              
              
              **16.6**
              **%**
              
              
              (a)
              
              
              **(a)**
              
              
              (a)Customer
                  4
              
              
              **15.2**
              **%**
              
              
              (a)
              
              **14.6**
              **%**
              
              
              (a)Customer
                  5
              
              
              **13.3**
              **%**
              
              
              (a)
              
              
              **(a)**
              
              
              (a)Customer
                  6
              
              
              
              **(a)**
              
              
              (a)
              
              **10.1**
              **%**
              
              
              (a)Customer
                  7
              
              
              
              **(a)**
              
              21.3
              %
              
              
              **(a)**
              
              19.4
              %




(a)  Revenues
      for the period were less than 10% of total revenues.





**Note
      14 Commitments**


We
      have
      two manufacturing and purchasing agreements for certain finished goods
      inventories. At May 30, 2008, outstanding purchase commitments under these
      agreements amounted to $2,738,000. Pursuant to the above agreements, at May
      30,
      2008, we had outstanding letters of credit in the amount of $1,133,000 (see
      Note
      2 and Item 2. Management’s Discussion and Analysis of Financial Condition and
      Results of Operations, Liquidity and Capital Resources section for further
      discussion).





**Note
      15 Guarantees and Warranty Liability**


Letters
      of Credit


We
      provide standby letters of credit in the ordinary course of business to certain
      suppliers pursuant to manufacturing and purchasing agreements. At May 30, 2008,
      outstanding letters of credit amounted to $1,133,000.





Financing
      Agreements


The
      Company guarantees the bank loan facility of WCI. The bank facility provides
      a
      maximum available credit limit of $5,000,000. At May 30, 2008, balances
      outstanding on the loan facility were $2,002,000.





Indemnification
      Obligations


We
      are
      obligated to indemnify our officers and the members of our Board of Directors
      pursuant to our bylaws and contractual indemnity agreements. We routinely sell
      products with a limited intellectual property indemnification included in the
      terms of sale or in certain contractual arrangements. The scope of these
      indemnities varies, but in some instances includes indemnification for damages
      and expenses (including reasonable attorneys’ fees). Certain requests for
      indemnification have been received by us pursuant to these arrangements (see
      Part II, Item 1. Legal Proceedings in our Quarterly report on Form 10-Q for
      the
      period ended November 30, 2007 for further discussion).




17




**Note
      16 Continued listing of shares on The Nasdaq Stock Market**


On
      December 26, 2007, we received a notice from The Nasdaq Stock Market (“Nasdaq”)
      indicating that for the prior 30 consecutive business days, the bid price of
      our
      common stock closed below the minimum $1.00 per share requirement for continued
      inclusion under Marketplace Rule 4310(c)(4) (the “Rule”). The notice also stated
      that we have been provided with 180 calendar days, or until June 23, 2008,
      to
      regain compliance in accordance with Marketplace Rule
      4310(c)(8)(D).





On
      May 5,
      2008, we received a notice from Nasdaq stating that, because the closing bid
      price of our common stock had been at $1.00 per share or greater for at least
      10
      consecutive business days, we had regained compliance.  If
      we
      fail to maintain compliance with the minimum bid price requirement and are
      delisted by
      Nasdaq, the trading market for our common stock would likely be adversely
      affected, as price quotations may not be as readily obtainable, which would
      likely have a material adverse effect on the market price of our common
      stock.




**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 31, 2007, contained in the Company’s 2007
      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, and the Company
      intends that such forward-looking statements are subject to the safe harbors
      created thereby.  Forward-looking statements may be identified by words
      such as "believes," "expects," "projects," "plans," "anticipates," and similar
      expressions, and include, for example, statements relating to expectations
      regarding  future sales, income and cash flows. Forward-looking statements
      are based upon the Company’s current expectations and assumptions, which are
      subject to a number of risks and uncertainties including, but not limited
      to:  customer acceptance and effectiveness of recently introduced products;
      development of additional business for the Company’s digital video and audio
      transmission product lines; effectiveness of the sales organization; the
      successful development and introduction of new products in the future; delays
      in
      the conversion by private and broadcast networks to next generation digital
      broadcast equipment; acceptance by various networks of standards for digital
      broadcasting; the Company’s liquidity position and capital resources; general
      market conditions which may not improve during fiscal year 2008  and
      beyond; and success of the Company’s research and development efforts aimed at
      developing new products. Additional potential risks and uncertainties include,
      but are not limited to, economic conditions, customer plans and commitments,
      product demand, government regulation, rapid technological developments and
      changes, intellectual property disputes, performance issues with key suppliers
      and subcontractors, delays in product development and testing, availability
      of
      raw materials, new and existing well-capitalized competitors, and other
      uncertainties detailed from time to time in the Company’s periodic Securities
      and Exchange Commission filings, including the Company’s most recent Form 10-K.
      Such forward-looking statements are subject to risks, uncertainties and other
      factors and are subject to change at any time, which could cause actual results
      to differ materially from future results expressed or implied by such
      forward-looking statements. Forward-looking statements speak only as of the
      date
      the statement was made. The Company does not undertake any obligation to update
      any forward-looking statements.




**OVERVIEW**




We
      design
      and manufacture satellite communications equipment through Wegener
      Communications, Inc. (WCI), a wholly-owned subsidiary. WCI is a leading provider
      of digital solutions for video, audio and Internet Protocol (IP) data networks.
      Applications include IP data delivery, broadcast television, cable television,
      radio networks, business television, distance education, business music and
      financial information distribution. COMPEL ® ,
      our
      patented network control system, provides network flexibility to regionalize
      programming, commercials and file transfers.




During
      the third quarter of fiscal 2008, bookings, consisting primarily of add-on
      orders from existing customers, were $1,927,000. Customers deferred
      approximately $4.4 million of orders that we expected to record in the third
      quarter. In addition, during the third quarter WCI entered into an agreement
      to
      sell selected patents and patent applications to EPAX Consulting Limited
      Liability Company for net proceeds of approximately $1,075,000, subject to
      customary closing conditions. The group of patents and patent applications
      sold
      relate to product distinction, system architecture and IP networking. WCI
      retains a worldwide, non-exclusive, royalty-free license under the patents
      for
      use in both existing and future products. The transaction was completed
      subsequent to May 30, 2008. Proceeds from this transaction were used to reduce
      our line of credit borrowings.




18




We
      have
      two manufacturing and purchasing agreements for certain finished goods
      inventories. At May 30, 2008, outstanding purchase commitments under these
      agreements amounted to $2,738,000. Approximately $2,152,000 of the purchase
      commitments are scheduled for delivery in the fourth quarter of fiscal 2008.
      These purchase commitments were made based on existing orders and expected
      future bookings. As discussed above, third quarter bookings were below our
      expectations and our third quarter was adversely impacted by one customer
      delaying delivery of its order for our SMD 515 IPTV set top box. Significant
      fourth quarter fiscal 2008 shippable bookings are currently required to meet
      our
      financial projections. As a result, our fourth quarter fiscal 2008 and first
      quarter fiscal 2009 cash flows could be adversely affected depending on the
      timing of shipments of delayed orders, the booking of additional near term
      shippable orders and the resulting cash collections. Our borrowings would
      increase to support any resulting shortfall in cash flows and we could require
      an increase to our line of credit limit of $5,000,000. While no assurances
      may
      be given, we believe that the bank would provide an increase to the credit
      limit
      subject to having sufficient collateral under the existing line of credit
      advance formulas. Should near term shippable bookings not materialize and
      additional bank credit not be available, we would not be able to achieve
      our financial projections and additional sources of capital would be required.
      No assurances may be given that additional sources of capital, if needed, would
      be available.





During
      the second quarter of fiscal 2008, we recorded $5.8 million in new orders.
      These
      orders included approximately $1.4 million from one of our larger private
      network customers for our new Unity ® 552
      Enterprise Media Receiver (Unity ® 552).
      The Unity ® 552 has
      bandwidth-efficient MPEG-4/h.264 video coding for both standard definition
      and
      high definition video, digital and analog outputs, as well as advanced DVB-S2
      demodulation. With these new features, network operators can reduce their
      bandwidth utilization by approximately half, resulting in considerably lower
      operational costs. The order shipped in the second quarter of fiscal 2008,
      and
      is expected to be the first of a series of orders from the customer for a
      complete network upgrade to the Unity ® 552. We
      received orders totaling over $2.1 million for our SMD 515 IPTV(internet
      protocol television) set top box from Conklin-Intracom for use by multiple
      telco
      operators in North America to provide premium IPTV services including high
      definition programming, video on demand and integrated personal video recording.
      The SMD 515, supporting Conklin-Intracom’s fs/cdn ® solution,
      is currently being used in field trials by five telco operators in North
      America. Approximately $230,000 of this order shipped in the second quarter,
      approximately $655,000 shipped in the third quarter and $1,215,000 was invoiced
      and recorded as deferred revenue until the revenue recognition criteria are
      met.
      An order for $1.2 million was received for our new iPump ® 562
      enterprise media server from Satellite Store Link (SSL) to support the expansion
      of SSL’s digital signage projects in Latin America and shipped in the third
      quarter of fiscal 2008. The iPump ® 562
      media
      server supports bandwidth-saving features, such as MPEG-4/h.264 video
      compression and file-based workflows. These features can be used in combination
      to create customized, high quality HD (high definition) and SD (standard
      definition) video channels for digital signage applications.





During
      the first quarter of fiscal 2008, bookings, consisting primarily of add-on
      orders from existing customers, were approximately $3.6 million.





Although
      significant shippable bookings are needed for the fourth quarter of fiscal
      2008,
      we currently believe that fourth quarter revenues will increase compared to
      third quarter fiscal 2008 revenues. Assuming we achieve our shippable booking
      forecast for the fourth quarter, and together with the completed sale of patents
      and patent applications subsequent to May 30, 2008 (discussed above), we
      currently believe the fourth quarter and fiscal 2008 will be
      profitable.




**Financial
      Position and Liquidity**





At
      May
      30, 2008, we had line of credit borrowings outstanding of $2,002,000. Our
      $5,000,000 bank loan facility is subject to availability advance formulas based
      on eligible accounts receivable, import letter of credit commitment balances
      and
      inventories. The loan facility matures on September 30, 2008, or upon demand.
      At
      May 30, 2008, **** approximately
      $1,865,000, net of outstanding letters of credit in the amount of $1,133,000,
      remained available to borrow under the advance formulas.





During
      the first nine months of fiscal 2008, our line of credit net outstanding
      borrowings decreased $14,000 from $2,016,000 at August 31, 2007 to $2,002,000
      at
      May 30, 2008. Operating activities provided $1,230,000 of cash and investing
      activities used $1,216,000 of cash, which consisted of capitalized software
      additions of $869,000, equipment additions of $311,000, and $36,000 for legal
      fees related to the filing of applications for various patents and
      trademarks.





(See
      the
      Liquidity and Capital Resources section on page 23 for further
      discussion.)




19


**RESULTS
        OF OPERATIONS**
 **THREE
        AND NINE MONTHS ENDED MAY 30, 2008 COMPARED TO THREE AND NINE MONTHS ENDED
        JUNE
        1, 2007**
 
 The
        following table sets forth, for the periods indicated, the components of
        the
        results of operations as a percentage of sales:
 
 Three months ended
              
              Nine months ended**May 30,**
                **2008**
              
              June 1,
                2007
              
              **May 30,**
                **2008**
              
              June 1,
                2007Revenues
              
              
              **100.0**
              **%**
              
              100.0
              %
              
              **100.0**
              **%**
              
              100.0
              %Cost
                  of products sold
              
              
              **63.6**
              
              
              63.6
              
              
              **61.4**
              
              
              65.8Gross
                  margin
              
              
              **36.4**
              
              
              36.4
              
              
              **38.6**
              
              
              34.2Selling,
                  general, and administrative
              
              
              **33.6**
              
              
              20.4
              
              
              **25.8**
              
              
              24.7Research
                  & development
              
              
              **19.5**
              
              
              11.3
              
              
              **15.1**
              
              
              14.6Operating
                  (loss) income
              
              
              **(16.7**
              **)**
              
              4.6
              
              
              **(2.3**
              **)**
              
              (5.1
              )Interest
                  expense
              
              
              **(0.9**
              **)**
              
              (0.6
              )
              
              **(0.7**
              **)**
              
              (0.6
              )Interest
                  income
              
              
              **-**
              
              
              -
              
              
              **-**
              
              
              -Net
                  (loss) earnings
              
              
              **(17.6**
              **)%**
              
              4.0
              %
              
              **(3.0**
              **)%**
              
              (5.7
              )%
 
 The
        operating results for the three and nine month periods ended May 30, 2008,
        were a
        net
        loss of $(775,000) or $(0.06) per share and a net loss of $(489,000) or $(0.04)
        per share ,
        respectively, compared to net earnings of $251,000 or $0.02 per share and
        a net
        loss of $(895,000) or $(0.07) per share for the same periods ended June 1,
        2007.
 
 **Revenues** -
        Revenues for the three months ended May 30, 2008 decreased $1,854,000 or
        29.7%
        to $4,393,000 as compared to $6,247,000 for the three months ended June 1,
        2007.
        Revenues for the nine months ended May 30, 2008 increased $284,000 or 1.8%
        to
        $16,085,000 as compared to $15,801,000 for the nine months ended June 1,
        2007.
  Direct
        Broadcast Satellite (DBS) revenues (including service revenues) decreased
        $1,795,000 or 29.0% in the third quarter of fiscal 2008 to $4,389,000 compared
        to $6,184,000 in the same period of fiscal 2007. For the nine months ended
        May
        30, 2008, DBS revenues increased $390,000 or 2.5% to $16,065,000 compared
        to
        $15,675,000 for the nine months ended June 1, 2007. Revenues for the third
        quarter of fiscal 2008 were adversely impacted by one customer delaying delivery
        of its order for our SMD 515 IPTV set top box which was scheduled for complete
        shipment in the third quarter. Approximately $1,215,000 was invoiced and
        recorded as deferred revenue until the revenue recognition criteria are met.
        In
        addition, approximately $456,000 of product did not ship in the third quarter
        due to delays in customer acceptance and software releases. The third quarter
        of
        fiscal 2008 included revenues from partial shipments of this order to
        Conklin-Intracom for use in providing premium IPTV services by telco operators
        in North America and shipments of our new iPump ® 562
        enterprise media server to Satellite Store Link (SSL) for expansion of SSL’s
        digital signage projects in Latin America. Shipments continued in the third
        quarter and first nine months of fiscal 2008 to MegaHertz for distribution
        of
        our products to the U.S. cable market and to business music provider Muzak
        LLC,
        of our new Encompass LE2, our next generation business music audio receiver.
        In
        addition, the first nine months included completion of shipments of our
        Unity ® 4600 to
        the Big Ten Network for the new cable network being distributed by Fox Cable
        Networks. Revenues and order backlog are subject to the timing of significant
        orders from customers and new product introductions, and as a result revenue
        levels may fluctuate from quarter to quarter.
 
 For
        the
        three months ended May 30, 2008, four customers accounted for 28.4%, 16.6%,
        15.2% and 13.3% of revenues, respectively. For the nine months ended May
        30,
        2008, two of these customers accounted for 14.6% and 12.1% of revenues,
        respectively and two other customers accounted for 19.2% and 10.1% of revenues,
        respectively. For the three months ended June 1, 2007, two customers accounted
        for 21.3% and 26.4% of revenues, respectively. For the nine months ended
        June 1,
        2007, these same customers accounted for 19.4% and 10.4% of revenues,
        respectively. Sales to a relatively small number of major customers have
        typically comprised a majority of our revenues and that trend is expected
        to
        continue throughout fiscal 2008 and beyond.
 
 Concentrations
        of revenue are likely to occur in any one or more of our products in any
        of our
        reporting periods. Product revenues are subject to fluctuations from quarter
        to
        quarter and year to year as new products and technologies are introduced,
        new
        product features and enhancements are added and as customers upgrade or expand
        their network operations (See note 13).
  20
  Our
        backlog is comprised of undelivered, firm customer orders, which are scheduled
        to ship within 18 months. WCI’s backlog was approximately $8.2 million at May
        30, 2008, compared to $10.2 million at August 31, 2007, and $7.7 million
        at June
        1, 2007. Four customers accounted for 36.9%, 14.8%, 13.5% and 10.2%,
        respectively, of the backlog at May 30, 2008. The total multi-year backlog
        at
        May 30, 2008, was approximately $13.6 million compared to $17.1 million at
        August 31, 2007 and $15.3 million at June 1, 2007.
 
 **Gross
        Profit Margins** - The
        Company's gross profit margin percentages were 36.4% and 38.6% for the three
        and
        nine months ended May 30, 2008, compared to 36.4% and 34.2% for the same
        periods
        ended June 1, 2007. Gross profit margin dollars decreased $673,000 or 29.6%
        and
        increased $804,000 or 14.9% for the three and nine month periods ended May
        30,
        2008, respectively, compared to the same periods ended June 1, 2007. Profit
        margins in the three and nine month periods of fiscal 2008 included capitalized
        software amortization expenses of $310,000 and $930,000, respectively, compared
        to $373,000 and $1,144,000 for the same periods of fiscal 2007. In addition,
        profit margins in the three and nine month periods of fiscal 2008 were favorably
        impacted by the reversal of an accrued warranty liability of $210,000 for
        previously estimated warranty provisions that were no longer required. Warranty
        provision expenses were $50,000 in the three and nine month periods of fiscal
        2008 compared to $50,000 and $150,000 in the same periods in fiscal 2007,
        respectively. Inventory reserve charges were $175,000 and $250,000 in the
        three
        and nine month periods of fiscal 2007, respectively, compared to none in
        the
        same periods of fiscal 2008. Margin dollars for the three months ended May
        30,
        2008, were adversely affected by the lower revenues, which increased unit
        fixed
        overhead costs, and a product mix of higher variable costs which were partially
        offset by the lower amortization expenses, inventory reserve charges and
        the
        warranty liability reversal.
 
 **Selling,
        General and Administrative** -
        Selling, general and administrative (SG&A) expenses increased $201,000 or
        15.8% to $1,475,000 for the three months ended May 30, 2008, compared to
        $1,274,000 for the same period of fiscal 2007. For the nine months ended
        May 30,
        2008, SG&A expenses increased $233,000 or 6.0% to $4,144,000 compared to
        $3,911,000 for the same period of fiscal 2007. Corporate SG&A expenses in
        the third quarter of fiscal 2008 increased $74,000, or 28.4%, to $335,000
        compared to $261,000 for the same period in fiscal 2007. For the nine months
        ended May 30, 2008, corporate SG&A expenses decreased $3,000, or 0.4%, to
        $827,000 compared to $830,000 in the same period in fiscal 2007. The increase
        for the three months was mainly due to increased professional fees and director
        compensation. WCI’s SG&A expenses increased $127,000, or 12.5%, to
        $1,140,000 from $1,013,000 and $236,000, or 7.7%, to $3,317,000 from $3,081,000
        for the three and nine months ended May 30, 2008, compared to the same periods
        in fiscal 2007. The increase in WCI’s SG&A expenses for the three months
        ended May 30, 2008 was mainly due to increases in salaries and related payroll
        costs of $78,000, marketing expenses of $34,000, general overhead costs of
        $29,000 and professional fees of $17,000, which were offset by lower in house
        commissions of $29,000. The increase in WCI’s SG&A expenses for the nine
        months ended May 30, 2008 was mainly due to increases in salaries and related
        payroll costs of $36,000, in house commissions of $31,000, employee placement
        fees of $19,000, general overhead costs of $65,000 and professional fees
        of
        $33,000, which were offset by lower sales and marketing expenses of $34,000.
        WCI’s SG&A expenses in the first nine months of fiscal 2008 included a bad
        debt provision expense of $35,000 compared to a benefit of $50,000 from the
        reversal of bad debt provisions in the same period in fiscal 2007. SG&A
        expenses included $8,000 of noncash share-based compensation expense in the
        nine
        months ended May 30, 2008, compared to $17,700 in the same period of fiscal
        2007. As a percentage of revenues, SG&A expenses were 33.6% and 25.8% for
        the three and nine month periods ended May 30, 2008, respectively, compared
        to
        20.4% and 24.8% for the same periods in fiscal 2007.
 
 **Research
        and Development** -
        Research and development (R&D) expenditures, including capitalized software
        development costs, were $1,184,000 or 27.0% of revenues, and $3,307,000 or
        20.6%
        of revenues, for the three and nine month periods ended May 30, 2008, compared
        to $1,090,000 or 17.4% of revenues, and $3,459,000 or 21.9% of revenues,
        for the
        same periods of fiscal 2007. The increase in expenditures in the three months
        ended May 30, 2008, was mainly due to salary
        increases, a higher headcount and increased recruiting costs related to new
        hires, which were partially offset by lower consulting costs. The
        decrease in expenditures in the nine months ended May 30, 2008, was mainly
        due
        to lower consulting costs, which were partially offset by the increased
        salaries, headcount and increased recruiting costs related to new hires.
        Capitalized software development costs amounted to $325,000 and $869,000
        for the
        third quarter and first nine months of fiscal 2008 compared to $383,000 and
        $1,158,000 for the same periods of fiscal 2007. The decreases in capitalized
        software costs were related to completed projects. Research and development
        expenses, excluding capitalized software expenditures, were $859,000 or 19.6%
        of
        revenues, and $2,438,000 or 15.2% of revenues, for the three and nine months
        ended May 30, 2008, respectively, compared to $707,000 or 11.3% of revenues,
        and
        $2,302,000 or 14.6% of revenues, for the same periods of fiscal 2007. The
        increases in expenses in the three and nine month periods of fiscal 2008
        compared to the same periods in fiscal 2007 were due to the increases in
        expenditures discussed above and the reductions in capitalized software
        development costs.
  21
  **Interest
        Expense** -
        Interest expense increased $1,000 to $41,000 for the three months ended May
        30,
        2008, compared to $40,000 for the three months ended June 1, 2007. For the
        nine
        months ended May 30, 2008, interest expense increased $23,000 to $113,000
        compared to $90,000 for the same period in fiscal 2007. The increase for
        the
        three and nine months in fiscal 2008 was primarily due to an increase in
        average
        line-of-credit borrowings which was partially offset by declines in the bank’s
        prime interest rate.
 
 **Other
        Income** **–** Other
        income was $1,000 and $2,000 for the three and nine month periods ended May
        30,
        2008, compared to $500 and $9,000 for the same periods ended June 1,
        2007.
 
 **Income
        Tax Expenses** **–** For the
        nine months ended May 30, 2008, no income tax benefit was recorded due to
        an
        increase in the deferred tax asset valuation allowance. The valuation allowance
        increased $176,000 in the first nine months of fiscal 2008. At May 30, 2008,
        net
        deferred tax assets of $6,195,000 were fully reserved by the valuation
        allowance. At May 30, 2008, we had a federal net operating loss carryforward
        of
        approximately $10,249,000, which expires beginning fiscal 2020 through fiscal
        2028. Additionally, we had an alternative minimum tax credit of $138,000
        and
        state income tax credits of $199,000 expiring in fiscal 2009, both of which
        were
        fully offset by the valuation allowance.
 
 **CRITICAL
        ACCOUNTING POLICIES**
 
 Certain
        accounting policies are very important to the portrayal of our financial
        condition and results of operations and require management’s most subjective or
        difficult judgements. These policies are as follows:
 
 **Revenue
        Recognition** –
Our
        revenue recognition policies are in compliance with Staff Accounting Bulletin
        (SAB) No. 104, “Revenue Recognition”, SAB No. 101, “Revenue Recognition in
        Financial Statements” and EITF Issue No. 00-21, "Revenue Arrangements with
        Multiple Deliverables." Revenue is recognized when persuasive evidence of
        an
        agreement with the customer exists, products are shipped or title passes
        pursuant to the terms of the agreement with the customer, the amount due
        from
        the customer is fixed or determinable, collectibility is reasonably assured,
        and
        there are no significant future performance obligations. Service revenues
        are
        recognized at the time of performance. Extended service maintenance contract
        revenues are recognized ratably over the maintenance contract term, which
        is
        typically one year. The unrecognized revenue portion of maintenance contracts
        invoiced and the fair value of future performance obligations are recorded
        as
        deferred revenue. In addition, invoices generated in excess of revenue
        recognized are recorded as deferred revenue until the revenue recognition
        criteria are met. At May 30, 2008, deferred extended service maintenance
        revenues were $645,000 and deferred revenues related to future performance
        obligations and invoices generated in excess of revenue recognized were
        $1,406,000 and are expected to be recognized as revenue in varying amounts
        throughout fiscal 2008 and into fiscal 2009.
 
 These
        policies require management, at the time of the transaction, to assess whether
        the amounts due are fixed or determinable, collection is reasonably assured,
        and
        if future performance obligations exist. These assessments are based on the
        terms of the agreement with the customer, past history and credit worthiness
        of
        the customer. If management determines that collection is not reasonably
        assured
        or future performance obligations exist, revenue recognition is deferred
        until
        these conditions are satisfied.
 
 Our
        principal sources of revenues are from the sales of various satellite
        communications equipment. Embedded in our products is internally developed
        software of varying applications **.** We
        evaluate our products to assess whether software is more than incidental
        to a
        product. When we conclude that software is more than incidental to a product,
        we
        will account for the product as a software product. Revenue on software products
        and software-related elements is recognized in accordance with SOP
        No. 97-2,
        “Software Revenue Recognition” as amended by SOP No. 98-9, “Software Revenue
        Recognition, with Respect to Certain Transactions.” Significant
        judgment may be required in determining whether a product is a software or
        hardware product.
 
 **Inventory
        Reserves** **-** Inventories
        are valued at the lower of cost (at standard, which approximates actual cost
        on
        a first-in, first-out basis) or market. Inventories include the cost of raw
        materials, labor and manufacturing overhead. We make inventory reserve
        provisions for obsolete or slow-moving inventories as necessary to properly
        reflect inventory value. These reserves are to provide for items that are
        potentially slow-moving, excess or obsolete. Changes in market conditions,
        lower
        than expected customer demand and rapidly changing technology could result
        in
        additional obsolete and slow-moving inventory that is unsaleable or saleable
        at
        reduced prices, which could require additional inventory reserve provisions.
        At
        May 30, 2008, inventories, net of reserve provisions, amounted to $5,725,000.
  22
  **Capitalized
        Software Costs** **-** Software
        development costs are capitalized subsequent to establishing technological
        feasibility. Capitalized costs are amortized based on the larger of the amounts
        computed using (a) the ratio that current gross revenues for each product
        bears
        to the total of current and anticipated future gross revenues for that product,
        or (b) the straight-line method over the remaining estimated economic life
        of
        the product. Expected future revenues and estimated economic lives are subject
        to revisions due to market conditions, technology changes and other factors
        resulting in shortfalls of expected revenues or reduced economic lives, which
        could result in additional amortization expense or write-offs. At May 30,
        2008,
        capitalized software costs, net of accumulated amortization, amounted to
        $1,181,000.
 
 **Deferred
        Tax Asset Valuation Allowance** –
        Deferred tax assets are recognized for deductible temporary differences,
        net
        operating loss carryforwards, and credit carryforwards if it is more likely
        than
        not that the tax benefits will be realized. Realization of our deferred tax
        assets depends on generating sufficient future taxable income prior to the
        expiration of the loss and credit carryforwards. At **** May
        30,
        2008, deferred tax assets in the amount of $6,195,000 were fully reserved
        by a
        valuation allowance. The valuation allowance increased $176,000 in the first
        nine months of fiscal 2008.
  **Accounts
        Receivable Valuation** –
We
        maintain allowances for doubtful accounts for estimated losses resulting
        from
        the inability of our customers to make required payments. If the financial
        condition of our customers were to deteriorate, resulting in an impairment
        of
        their ability to make payments, additional allowances would be required.
        At May
        30, 2008, accounts receivable, net of allowances for doubtful accounts, amounted
        to $3,468,000.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 **NINE
        MONTHS ENDED MAY 30, 2008**
  At
        May
        30, 2008, our primary source of liquidity was a $5,000,000 bank loan facility,
        which is subject to availability advance formulas based on eligible accounts
        receivable, import letter of credit commitment balances and inventories.
        The
        loan facility consists of a term loan and a revolving line of credit with
        a
        combined borrowing limit of $5,000,000, bearing interest at the bank’s prime
        rate (5.0% at May 30, 2008). The bank retained the right to adjust the interest
        rate, subject to the financial performance of the Company. The loan facility
        matures on September 30, 2008, or upon demand, and requires an annual facility
        fee of 2% of the maximum credit limit. The loan automatically renews from
        year
        to year unless the bank makes demand for repayment prior to maturity; provided,
        however, absent an event of default, the bank shall give at least 120 days
        notice of its intention to demand the loan’s repayment or to terminate the loan
        agreement. During the first nine months of fiscal 2008, our line of credit
        net
        outstanding borrowings decreased $14,000 to $2,002,000 at May 30, 2008 from
        $2,016,000 at August 31, 2007. During the first nine months of fiscal 2008,
        the
        line of credit average daily balance outstanding was $1,647,000 and the highest
        outstanding balance was $3,274,000. At May 30, 2008, **** approximately
        $1,865,000, net of outstanding letters of credit in the amount of $1,133,000,
        remained available to borrow under the advance formulas.
 
 The
        term
        loan facility provides for a maximum of $1,000,000 for advances of up to
        80% of
        the cost of equipment acquisitions. Principal advances are payable monthly
        over
        60 months with a balloon payment due at maturity. The revolving line of credit
        is subject to availability advance formulas of 80% against eligible accounts
        receivable; 20% of eligible raw materials inventories; 20% of eligible
        work-in-process kit inventories; and 40% to 50% of eligible finished goods
        inventories and 50% of import letter of credit commitment balances. In addition,
        the facility provides for advances in excess of the availability formulas
        of up
        to $1,000,000 during the term of the facility. The loan is secured by a first
        lien on substantially all of WCI’s assets, including land and buildings, and is
        guaranteed by Wegener Corporation. At May 30, 2008, balances outstanding
        on the
        revolving line of credit amounted to $2,002,000. No borrowings were outstanding
        under the equipment term loan portions of the loan facility. The loan facility
        is also used to support import letters of credit issued to offshore
        manufacturers, which at May 30, 2008, amounted to $1,133,000.
 
 Under
        the
        loan facility, at the end of fiscal 2008 we are required to maintain a minimum
        tangible net worth. In addition, we are required to retain certain executive
        officers, maintain certain financial ratios, and are precluded from paying
        dividends.
 
 During
        the first nine months of fiscal 2008, operating activities provided $1,230,000
        of cash. Net earnings adjusted for expense provisions and depreciation and
        amortization (before working capital changes) provided $799,000 of cash,
        while
        changes in accounts receivable and customer deposit balances
        provided  $732,000
        of cash. Changes in accounts payable and accrued expenses, inventories, deferred
        revenue and other assets used  $301,000
        of cash. Cash used by investing activities was $311,000 for property and
        equipment expenditures, $869,000 for capitalized software additions and $36,000
        for legal fees related to the filing of applications for various patents
        and
        trademarks. Financing activities used $14,000 of cash for net line-of-credit
        repayments.
  23
  We
        have
        two manufacturing and purchasing agreements for certain finished goods
        inventories. At May 30, 2008, outstanding purchase commitments under these
        agreements amounted to $2,738,000. Approximately $2,152,000 of the purchase
        commitments are scheduled for delivery in the fourth quarter of fiscal 2008.
        These purchase commitments were made based on existing orders and expected
        future bookings. As discussed above, third quarter bookings were below our
        expectations and our third quarter was adversely impacted by one customer
        delaying deliveries of their order for our SMD 515 IPTV set top box. Significant
        fourth quarter fiscal 2008 shippable bookings are currently required to meet
        our
        financial projections. As a result, our fourth quarter fiscal 2008 and first
        quarter fiscal 2009 cash flows could be adversely affected depending on the
        timing of shipments of delayed orders, the booking of additional near term
        shippable orders and the resulting cash collections. Our borrowings would
        increase to support any resulting shortfall in cash flows and we could require
        an increase to our line of credit limit of $5,000,000. While no assurances
        may
        be given, we believe that the bank would grant an increase to the credit
        limit
        subject to having sufficient collateral under the existing line of credit
        advance formulas. Should near term shippable bookings not materialize and
        additional bank credit not be available we would not be able to achieve our
        financial projections and additional sources of capital would be required.
        No
        assurances may be given that additional sources of capital, if needed, would
        be
        available.
 
 At
        May
        30, 2008, we had land and buildings with a cost basis of $4,457,000 (including
        land held for sale of $354,000). Although land and buildings are subject
        to a
        lien under the loan facility, they are not currently used in the existing
        loan
        facility’s availability advance formulas and have no mortgage balances
        outstanding. While no assurances may be given, we believe these assets could
        be
        used to support additional overall borrowing capacities either with our existing
        bank or from other sources. During the third quarter of fiscal 2007, the
        Company’s Board of Directors authorized and approved the listing for sale of the
        4.4 acres of undeveloped land located adjacent to the Company’s headquarters
        facility in Duluth (Johns Creek), Georgia (see note 6 to the consolidated
        financial statements). Proceeds from the sale of the land would be used to
        pay
        any balances outstanding on the revolving line of credit.
 
 The
        Company has never paid cash dividends on its common stock and does not intend
        to
        pay cash dividends in the foreseeable future.
  A
        summary
        of the Company’s long-term contractual obligations as of May 30, 2008 consisted
        of:
  Payments Due by PeriodContractual Obligations
                
                Total
                
                Fiscal
                  2008
                
                Fiscal
                  2009-2010
                
                Fiscal
                  2011-2012Operating
                    leases
                
                $
                114,000
                
                $
                45,000
                
                $
                69,000
                
                $
                -Bank
                    line of credit
                
                
                2,002,000
                
                
                -
                
                
                2,002,000
                
                
                -Purchase
                    commitments
                
                
                2,738,000
                
                
                2,152,000
                
                
                586,000
                
                
                -Total
                
                $
                4,854,000
                
                $
                2,197,000
                
                $
                2,657,000
                
                $
                -
 
 **ITEM
        3.**  **QUANTITATIVE
        AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
  Our
        exposure to market rate risk for changes in interest rates relates primarily
        to
        our revolving line of credit and cash equivalents. The interest rate on certain
        advances under the line of credit and term loan facility fluctuates with
        the
        bank’s prime rate. At May
        30,
        2008 ,
        line of
        credit outstanding borrowings amounted to  $2,002,000.
 
 We
        do not
        enter into derivative financial instruments. All sales and purchases are
        denominated in U.S. dollars.
  **ITEM
        4. CONTROLS AND PROCEDURES**
  Not
        applicable
 
 **ITEM
        4T.**  **CONTROLS
        AND PROCEDURES**
  The
        Company carried out an evaluation, under the supervision and with the
        participation of the Company’s management, including the Chief Executive Officer
        (CEO) and the Chief Financial Officer (CFO), of the effectiveness of the
        design
        and operation of the Company’s disclosure controls and procedures as of the end
        of the period covered by this report (May 30, 2008). Based upon that evaluation,
        the Company’s CEO and CFO have concluded that the Company’s disclosure controls
        and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
        Exchange Act of 1934, as amended) are effective. There has been no change
        in the
        Company’s internal control over financial reporting during our most recent
        fiscal quarter that has materially affected, or is reasonably likely to
        materially affect, the Company’s internal control over financial
        reporting.
  24
 
 **PART
        II. OTHER INFORMATION**
 
 **I** **TEM** **6.** **EXHIBITS**
 
 The
        following documents are filed as exhibits to this report. An asterisk identifies
        those exhibits previously filed and incorporated herein by reference. For
        each
        such asterisked exhibit there is shown below the description of the prior
        filing. Exhibits which are not required for this report are
        omitted.
 
 **Exhibit No.**
              
              
              **Description of Exhibit**3.1
              *
              
              Certificate
                  of Incorporation as amended through May 4, 1989. (1)3.1.1
              *
              
              Amendment
                  to Certificate of Incorporation. (2)3.2
              *
              
              By-laws
                  of the Company, as Amended and Restated May 17, 2006.
                  (3)10.1
              
              
              Patent
                  Purchase Agreement effective as of May 22, 2008, by and between
                  Wegener
                  Communications, Inc. and EPAX Consulting Limited Liability
                  Company.31.1
              
              
              Certification
                  of the Chief Executive Officer pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.31.2
              
              
              Certification
                  of the Chief Financial Officer pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.32.1
              
              
              Certification
                  of the Chief Executive Officer pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.32.2
              
              
              Certification
                  of the Chief Financial Officer pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.
 
 (1)
              
              Incorporated
                  by reference to the Company's Annual Report on Form 10-K for the
                  fiscal
                  year ended September 1, 1989, as filed with the Commission on November
                  30,
                  1989.+(2)
              
              Incorporated
                  by reference to the Company's Quarterly Report on Form 10-Q for
                  the
                  quarter ended May 30, 1997, as filed with the Commission on June
                  30,
                  1997.+(3)
              
              Incorporated
                  by reference to the Company's Current Report on Form 8-K, dated
                  May 17,
                  2006, as filed with the Commission on May 22, 2006.++
              
              SEC
                  file No. 0-11003
  25
 
 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, 2008
              By:
              /s/
                  Robert A. PlacekRobert
                  A. PlacekChairman
                  of the Board, President andChief
                  Executive Officer(Principal
                  Executive Officer)Date:
                  July 10, 2008
              By:
              /s/
                  C. Troy Woodbury, Jr.C.
                  Troy Woodbury, Jr.Treasurer
                  and ChiefFinancial
                  Officer(Principal
                  Financial and Accounting Officer)
  26