UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~ACT OF~~For ~~1934~~the fiscal year ended September 2, 2011

For the fiscal year ended September 3, 2010

¨ o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~ACT OF~~For ~~1934~~the transition period from ______ to ______

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. Employer
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
of incorporation or organization)	Identification No.)
11350 Technology Circle, Johns Creek, Georgia	30097-1502
(Address of principal executive offices)	(Zip Code)

11350 Technology Circle, Johns Creek, Georgia		30097-1502
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (770) 623-0096

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $.01 par value	Traded Over the Counter

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ~~¨ No~~ oNo x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ o No x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant'’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ¨ o Accelerated Filer ¨ o Non-Accelerated Filer. ¨ o Smaller reporting company x

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

As of ~~February~~ 26March 4, ~~2010~~2011 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the Common Stock held by non-affiliates was $1,~~622~~730,~~766~~951 based on the last sale price of the Common Stock as ~~quoted~~as reported on the ~~NASDAQ~~OTCQB ~~Stock~~market ~~Market~~place on such date. (The officers and directors of the registrant, and owners of over 10% of the registrant’s common stock, are considered affiliates for purposes of this calculation.)

As of November 115, ~~2010~~2011, 1213,~~647~~147,051 shares of registrant’s Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement pertaining to the ~~2011~~2012 Annual Meeting of Stockholders, only to the extent expressly so stated herein, are incorporated herein by reference into Part III.

WEGENER CORPORATION

FORM 10-K

YEAR ENDED SEPTEMBER 32, ~~2010~~2011

INDEX

PART I

		Page
PART I
Item 1.	Business	2
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	14
Item 2.	Properties	15
Item 3.	Legal Proceedings	15
Item 4.	(Removed and Reserved)	16
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 8.	Financial Statements and Supplementary Data	28
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	49
Item 9A.	Controls and Procedures	49
Item 9B.	Other Information	49
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	50
Item 11.	Executive Compensation	50
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	50
Item 13.	Certain Relationships and Related Transactions, and Director Independence	50
Item 14.	Principal Accountant Fees and Services	50
PART IV
Item 15.	Exhibits and Financial Statement Schedules	50

		Page
Item 1.	Business	2
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	(Removed and Reserved)	17
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
Item 6.	Selected Financial Data	20
Item 7.	Management's Discussion and Analysis of Financial
	Condition and Results of Operations	21
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 8.	Financial Statements and Supplementary Data	32
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	55
Item 9A.	Controls and Procedures	56
Item 9B.	Other Information	56
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	57
Item 11.	Executive Compensation	57
Item 12.	Security Ownership of Certain Beneficial Owners
	and Management and Related Stockholder Matters	57
Item 13.	Certain Relationships and Related Transactions, and Director Independence	57
Item 14.	Principal Accountant Fees and Services	57
PART IV
Item 15.	Exhibits and Financial Statement Schedules	58

PART I

ITEM 1. BUSINESS

Wegener® Corporation, the Registrant, together with its subsidiary, is referred to herein as “we,” “our,” “us,” the “Company” or “Wegener.” All references herein to 2011 and 2010 refer to the fiscal years ended September 2, 2011 and September 3, 2010, respectively. All references to year(s) or fiscal refer to our fiscal year(s).

Wegener Corporation was formed in 1977 and is a Delaware corporation. We conduct our continuing business through Wegener Communications, Inc. (WCI), a wholly-owned subsidiary. WCI was formed in April 1978 and is a Georgia corporation. WCI is an international provider of digital video and audio solutions for broadcast television, radio, telco, private and cable networks. With over 30 years experience in optimizing point-to-multipoint multimedia distribution over satellite, fiber, and IP networks, WCI offers a comprehensive product line that handles the scheduling, management and delivery of media rich content to multiple devices, including video screens, computers and audio devices. WCI focuses on long and short-term strategies for bandwidth savings, dynamic advertising, live events and affiliate management.

WCI’s product line includes: iPump® media servers for file-based and live broadcasts; Compel® Network Control and Compel® Conditional Access for dynamic command, monitoring and addressing of multi-site video, audio, and data networks; and the Unity® satellite media receivers for live radio and video broadcasts. Applications served include: digital signage, linear and file-based TV distribution, linear and file-based radio distribution, Nielsen rating information, broadcast news distribution, business music distribution, corporate communications, video and audio simulcasts.

Recent Developments

The accompanying consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and liquidation of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that may be necessary in the event the Company cannot continue as a going concern.

Net loss for the year ended September 32, ~~2010~~2011, was $(21,~~313~~466,000) or $(0.1811) per share, compared to a net loss of $(2,~~606~~313,000) or $(0.2118) per share for the year ended ~~August~~ ~~28,~~September ~~2009~~3, ~~and net earnings of $383,000 or $0~~2010.~~03 per share for the year ended August 29, 2008.~~ ~~Fiscal 2008 net earnings included a gain on sale of patents of $894,000.~~ Revenues for fiscal ~~2010 decreased~~ 2011 increased $3189,~~734,~~000, or 292.51%, to $89,~~921~~110,000 from $128,~~655~~921,000 in fiscal ~~2009~~ 2010.

During the first, second, third and fourth quarters of fiscal ~~2010,~~2011 bookings were approximately $13.~~8 million~~2, $20.~~1 million~~7, $31.06 ~~million~~ and $10.49 million, respectively. During ~~These~~ fiscal 2010 bookings ~~and~~were ~~fiscal~~$8.3 ~~2011~~million. These bookings ~~to date, as well as our fiscal 2009 bookings,~~ were well below our expectations ~~and internal forecasts~~ primarily as a result of customer delays in purchasing decisions, deferral of project expenditures and general adverse economic and credit conditions.

During the ~~fourth~~prior ~~quarter~~three of fiscal ~~2008 and in fiscal 2009~~years, we made reductions in ~~headcount~~ ~~to bring the number of employees at August 28~~headcount, ~~2009, to 63 compared to 91 at August 29, 2008, and reduced~~ engineering consulting, and other operating and overhead expenses. ~~Beginning~~Throughout infiscal ~~January 2009~~2010, we ~~reduced~~continued a reduction in paid working hours Company-wide byof approximately 10%. During the first ~~and second~~quarter ~~quarters~~ of fiscal ~~2010~~2011, weto ~~made~~increase ~~further~~engineering ~~reductions~~capacity, inthe ~~headcount~~10% toreduction ~~bring the~~in ~~current~~paid ~~number~~working ofhours ~~employees~~was toeliminated 49for engineering personnel.

OnAt ~~July 16~~September 2, ~~2009~~2011, weour ~~entered~~primary ~~into~~source aof ~~non-binding~~liquidity ~~letter~~for ofcash ~~intent~~flows ~~(the~~was ~~“LOI”)~~our ~~with Sencore~~$4,250,000 ~~Inc~~loan facility, which initially matured on April 7, 2011. The loan facility automatically renews for successive twelve (~~“Sencore”~~12) month periods provided, however, the lender may terminate the facility by providing a ~~portfolio~~ninety ~~company~~(90) day written notice of ~~The~~termination ~~Riverside~~at ~~Company,~~any ~~a private~~time ~~equity~~after ~~firm~~April 7, ~~regarding~~2011. No aassurances ~~possible~~may ~~acquisition~~be given that our loan facility will continue for the duration of ~~Wegener~~the ~~Corporation~~twelve ~~by Sencore~~month renewal period. ~~The~~In ~~exclusivity~~the ~~period~~event ~~set~~of ~~forth~~a inninety ~~the~~day ~~LOI~~notice ~~expired September~~of 13termination of our loan facility, ~~2009.~~we ~~Wegener~~would ~~Corporation’s~~need ~~Board~~to ofobtain ~~Directors~~additional ~~unanimously~~credit ~~voted~~ facilities or raise additional capital to ~~terminate~~continue ~~the~~as ~~LOI~~a going concern and onto ~~September~~execute 17our business plan. There is no assurance that such financing would be available or, ~~2009~~if available, ~~officially~~that ~~notified~~we ~~Sencore~~would ~~of the~~be ~~termination~~able to complete financing on satisfactory terms.

WCI’s loan facility was amended effective October 8, 2009 and provided a maximum credit limit of $4,000,000, with interest charged at the rate of twelve percent (12%) per annum. The term of the amended loan facility is eighteen (18) months beginning October 8, 2009, or upon demand in the event of default as provided by the loan facility. Effective September 3, 2010, the maximum credit limit was increased to $4,250,000 and the annual interest rate was reduced to eight percent (8.0%) per annum.

Segment Information and Financial Information by Geographical Area

Segment information and financial information by geographical area contained in Note 13 to the consolidated financial statements contained in this report are incorporated herein by reference in response to this item.

MARKETS AND INDUSTRY OVERVIEW

The primary markets we serve are business and private networks, broadcast television and program originators~~, radio~~ ~~broadcasters,~~ and ~~headends~~radio broadcasters.

Business/Private Networks

Business networks consist of corporations and enterprises distributing video, audio and/or data among their sites. Private networks consist of networks that target video, audio and/or data to a select group of subscribers or viewers. Our equipment is currently used for a large percentage of the horse racing video distribution to off-track betting locations in the United States and Sweden. We also have a strong presence in background music networks and faith-based networks. We continue to expand ~~our presence~~a inglobal footprint of digital signage networks, providing networked equipment to distribute and display information and advertisements dynamically to retail customers and employees. Business and private network customers include Muzak ~~LLC~~, The Church of Jesus Christ of Latter-~~Day~~day Saints and ~~Swedish ATG~~Kanal 75. InWe ~~addition, we~~ work through third-party integrators, such as ~~USSI,~~ ~~Satellite~~SSL ~~Store~~Digital ~~Link~~S.A. de C.V. Comtelsat, Kanal75 and Microspace to reach this market.

Business and private networks are interested in ~~reducing~~developing ~~bandwidth~~dynamic ~~costs~~multi-platform by(television, ~~utilizing~~web, IPmobile) ~~infrastructure~~communication ~~that~~strategies ~~they may~~to ~~have~~reach inconsumers ~~place~~and empower employees. Organizations also look for technology to ~~distribute~~conserve ~~some~~bandwidth, ofprovide ~~their~~simple ~~programming terrestrially. When~~network ~~the~~integration, ~~number~~while ofsupporting ~~sites~~remote ismonitoring ~~large~~and ortrouble ~~there~~shooting. Many ~~are~~networks ~~live programs~~prefer ~~that~~to ~~are~~have ~~broadcast,~~hybrid ~~then~~distribution ~~satellite~~options isso ~~still~~they ~~the~~can ~~most~~use ~~effective~~IP ~~means~~or ~~of distribution~~satellite to deliver content. ~~Many~~Private ~~private~~ and business networks ~~are~~continue ~~also~~to ~~interested~~ show strong interest in store-forward technology to ~~reduce their satellite bandwidth usage and to~~ localize their messaging on a site-by-site basis, support on-demand education and reduce overall network bandwidth demands.. Digital signage is one of the largest growth areas within the business and private networks market. Digital signage ~~networks~~is ~~are~~a ~~those~~broad ~~that~~term ~~display~~which ~~content~~can ~~in the~~include ~~front-office~~kiosk, screen, wayfinder, video playlist, video wall, billboard, menu boards and interactive environments. Digital signage networks can be used in to educate consumers, advertise products and brand the environment in a dynamic fashion. Digital signage networks are also often used to educate employees. It is making inroads with non-profit organizations to share information.

Broadcast Television and Program Originators

Broadcast television consists of (1) broadcast networks (companies that distribute broadcast television channels nationally to their affiliates typically via satellite); and (2) broadcast stations (local stations which are typically affiliates of national broadcasters that distribute typically free-to-air television to local viewers). Program originators consist of programmers that provide television programming to cable, DTH satellite (direct-to-home) and telecom companies for distribution to consumers. Broadcast television and programmer customers include HDNet and ~~ION~~Worship ~~Media~~Network.

Broadcast networks have launched high definition channels of all their primary broadcast channels and broadcast stations have launched high definition channels in most markets throughout the United States. Broadcast networks continue to see their viewership eroded by program originators.

Program originators continue to distribute their programming over satellite to cable, DTH satellite, and telecom companies. In addition, many offer programming through other means such as the internet and mobile phones. Program originators continue to launch new channels and original programming to compete for advertising dollars and are offering increasing numbers of HD channels, as well as distributing video-on-demand content. They are concerned about the effect that personal video recorders could potentially have on their advertising revenue as well as the security of their high value content being stored in consumers’ homes in a digital and potentially easy to copy format.

Broadcast Radio

Broadcast radio consists of companies that broadcast, typically free-to-air, radio signals to local listeners. Radio network customers include BBC World Service, EMF Broadcasting, Dial Global, Christian Radio Consortium, Salem Radio Network and American Family Radio.

Broadcast radio operators are interested in regionalizing their broadcasts to give a local feel to the programming. They also want to shift their programming for time-zones so that “drive times” are able to be addressed with particular morning and afternoon shows and advertisements, which can demand higher advertising dollars. In addition, they continue to come under pressure from advertisers to ensure verification and accuracy of advertisements.Radio

~~Headends~~Broadcast radio consists of companies that broadcast, typically free-to-air, radio signals to local listeners. Radio network customers include BBC World Service, EMF Broadcasting, Dial Global, Christian Radio Consortium, and Salem Radio Network.

~~Headends~~Broadcast ~~consist~~radio ofoperators ~~cable~~are ~~headends, telco~~interested ~~headends~~in ~~and~~regionalizing ~~DTH~~their ~~satellite~~broadcasts ~~headends. Cable~~to ~~headends~~give ~~consist~~a ~~of cable~~local ~~distribution~~feel ~~companies,~~to ~~such~~the asprogramming. ~~cable~~Where ~~multiple~~possible, ~~system~~they ~~operators~~wish ~~(MSOs)~~to ~~and other~~offer ~~headends. Telecom~~affiliates isflexibility ~~comprised~~to ofcustom ~~telephony~~local ~~companies~~broadcasts ~~now offering~~by ~~television~~shifting ~~services~~their toprogramming ~~consumers. They~~for ~~are~~time-zones ~~launching~~so ~~video service~~that ~~offerings~~“drive times” are able to ~~compete~~be addressed with ~~cable~~particular morning and ~~DTH~~afternoon ~~satellite~~shows ~~companies~~and advertisements, ~~due~~which tocan ~~a decline~~demand inhigher ~~telephone~~advertising ~~subscribers~~dollars. In ~~and~~addition, ~~the~~they ~~ability~~continue to ~~reduce~~come ~~subscriber churn~~under pressure from advertisers to ensure verification and accuracy of advertisements.

With the drop in costs and the analog cut-off complete, more HD televisions are being purchased by consumers. This is dramatically increasing the amount of HD programs being offered on cable, satellite and telecom networks.

Cable, DTH satellite and telecom companies are all competing to provide consumers with television, telephone, high speed internet services and, in some cases, cell phone service. To gain and maintain subscribers, they continue to roll out high definition, video-on-demand services and personal video recording devices.

Satellite teleports are expanding their distribution systems to include terrestrial delivery as well as satellite.

PRODUCTS

Our products include: iPump® Media Servers, Unity® Satellite Receivers, Compel® Network Control and Content Management Systems, Nielsen Media Research Products, ~~SMD~~ ~~Set Top Boxes,~~ Digital Television (DTV) Digital Stream Processors, third-party uplink products and customized products. See Note 13 to the consolidated financial statements for information on the concentration of products representing 10% or more of revenues in the past ~~three~~two fiscal years.

iPump® Media Servers

The iPump® product line combines the features of our integrated receiver decoders (IRD) with advanced media server functionality and IP router capabilities. The iPump® receives and stores television, radio and other digital files from broadcast, cable and business network operations utilizing file-based broadcasting technology compared to traditional real-time linear broadcasts. File-based broadcasting technology allows network operators to store content at receive locations with an iPump® and then play back the content locally either based on schedules or on-demand user selection. Network operators with repetitive content in their programming line-up can reduce their satellite space segment costs by sending programming, advertising and playback schedules via stored files into the iPump® for later playback according to the schedules. The network operator can then utilize limited satellite time to refresh the programming, advertising and play-out schedules without the necessity to maintain a constant signal on the satellite.

A feature of the iPump® and Compel® system is IP network delivery of files and commands to the iPump®. With this ability, network operators can launch iPump® networks over the internet or private IP networks. Additionally, they can control their network from one integrated Compel® control system while feeding select sites via IP that they cannot reach with their satellite either due to location outside of the satellite footprint or inability to place a satellite dish.

There are four models of the iPump® that utilize file-based broadcasting technology. The iPump® 6400 Professional Media Server is designed for broadcast television and private network customers. The iPump® 6420 Audio Media Server is designed specifically to meet the needs of radio broadcasters. The iPump® 562 and iPump® 525 Enterprise Media Servers are designed specifically for private network and enterprise applications, such as digital signage. The iPump® 562 and iPump® 525 Media Servers support MPEG-4/h.264 video decoding for high definition and standard definition video. In addition, the iPump® 562 supports Digital Video Broadcast (DVB)-S2 satellite demodulation. The iPump® 525 is designed specifically to support terrestrial content distribution and control.

We are targeting all of our core markets for the iPump® product line. Within these markets, applications for the iPump® products include: digital signage, corporate communications, training/education, time-zone shifting, regional advertising insertion, and news distribution.

Unity Receivers

The Unity® 552 is targeted to meet the needs of private and business television networks. The Unity® 552 supports MPEG-2 and MPEG-4/h.264 video with high definition support and DVB-S and DVB-S2 demodulation. By upgrading to MPEG-4/h.264 video and DVB-S2 modulation, network operators can reduce their bandwidth utilization by approximately half. This allows them to launch additional services, reduce their expenses or convert to high definition video. The Unity® 551 utilizes MPEG-2 for video distribution and is also targeted for private and business television networks.

The Unity® 4600 receiver is a digital satellite receiver used primarily by program originators to distribute programming to cable and telecom headends. It offers analog and digital outputs to support analog and digital headends. DVB-S2 satellite demodulation support is available on the product. Cable headends utilize the Unity® 4600 to support digital high definition television distribution.4

The Unity® ~~4650~~ 4600 receiver is a digital satellite receiver used primarily by ~~broadcast~~program ~~television networks. The~~originators ~~Unity®~~to ~~4650 receiver~~distribute isanalog ~~a video~~ and ~~audio~~digital ~~decoder that features MPEG~~programming. DVB-2S2 ~~4:2:0~~satellite ~~and~~demodulation ~~4:2:2~~support ~~video for~~is ~~broadcast~~available ~~television~~on ~~network~~the ~~distribution~~product.

The Unity® 202 audio receiver is designed for business music providers. It allows users to select audio formats and offers audio storage for advertising insertion and disaster recovery. It is our second generation file-based broadcasting business music receiver.

Compel® Network Control ~~and Content Management System and CompelConnect.com®~~Systems

Our Compel® Network Control System has been a key differentiator to our products since 1989. Compel® is used in ~~over~~networks ~~150~~worldwide ~~networks~~to ~~controlling~~control over 100,000 receivers, and it features grouping and addressing controls that provide flexibility in network management. Receivers can be controlled as individual sites and as groups. Commands are synchronized with video and audio programming, which allows users to regionalize programming and blackout programming from nonsubscribers, as well as target commercials to subscribers. Compel® network control systems include Compel® for radio broadcasting and background music applications and Compel® 2 for advanced content ingest, content management, digital signage, live and file-based video applications.

Compel® option modules include Conditional Access, ~~MediaPlan®~~for ~~Content Management~~satellite-enabled ~~(CM) and MediaPlanÒ i/o Ingest~~broadcasts. Conditional Access utilizes a secure microprocessor in Unity® and iPump® receiver to deliver fast, secure conditional access to a network without the high cost of smart card systems. Unity® satellite receivers and iPump® media servers are controlled by the Compel® Network Control System, so the markets for Compel® are the same as for iPump® and Unity® receivers.

The next generation of Compel® is the Compel® 2 network control system~~, which is currently under development~~. Compel® 2 retains the features of the Compel® network control system while adding new features designed to enhance the user interface and simplify operations for dynamic media distribution. Compel® 2 supports multiple applications, users and networks. For digital signage applications, Compel® 2 features integrated standards-based ingest tools to streamline content management and optimize media player output and user friendly screens to help design, schedule and sequence custom combinations of video, graphics and text overlays. The control system has been streamlined by unifying many different screens and utilities within a single, user friendly, web-based graphical user interface. Using a web browser access, operators can control live and file-based media distribution networks from any web-enabled remote location. Built upon a scalable open architecture, Compel® 2 also makes it easier for network administrators to limit access of employees or affiliates to only those features and functions their jobs require. New set-up features allow administrators to create classes of users that designate each user’s level of access.

~~CompelControl~~CompelConnect.com™ provides the operations available in Compel® 2 as a software as a service (SaaS) offering. Customers can purchase rights to use Compel® 2 via the Internet on a monthly basis. We are targeting smaller networks where the economics of the network could not support a Compel® purchase for the service. CompelConnect.com service revenues were less than 1% of total revenues in fiscal 2011.

MediaPlanÒ CM and MediaPlanÒ i/o products are control and management system modules to our CompelÒ Control System. The MediaPlan® products are crucial for customers when controlling iPump® Media Server networks and are a competitive advantage in sales of iPump® Media Servers.

MediaPlan® CM is a powerful content management system used for managing media and other files and actively tracking their delivery throughout the iPump® network. In a file-based broadcasting network, media is simultaneously stored in multiple iPumps® in the field, rather than all in one repository at a central location; therefore, management of the dispersed media assets becomes a crucial part of the network operation. Operators need easy ways to view the content on individual iPumps® and automated mechanisms for updating/deleting media as it changes. MediaPlan® CM is designed to address those and many other specific needs of managing media files in a file-based broadcasting network. Operators can create libraries of assets, generate descriptive metadata information, view content at each iPump®, send requested content directly to targeted users and track file usage.

MediaPlan® i/o is the media creation product for the iPump® network. In traditional linear networks, network operators are required to compress the video, distribute it to remote locations and decompress it for broadcast, all within one or two seconds. This requires the use of real-time encoders to compress the video and audio as it is sent to the receivers at the remote locations. In file-based broadcasting networks, the paradigm changes and the process of video and audio compression, media distribution and decompression of the media for broadcast can be done at different times. Network operators can prepare the media files containing the compressed video and audio ahead of airtime. Additionally, they can distribute the media files any time before airing, so they can optimize the use of their bandwidth. When it is time for the program to be broadcast, it merely needs to be played from the local hard drive on the iPump®, not transported through the network. As the media creation tool, MediaPlan® i/o handles the first part of the process, the creation of media files containing compressed video and audio which will be sent to iPumps®. The functions of MediaPlan are being integrated into Compel® 2 as options.

CompelConnect.com® is the newest offering for Compel® 2 control. It transitions Compel® to a SaaS (software as a service) model, so users of CompelConnect.com® can access Compel® via the Internet and use it as needed. Customers purchase bandwidth and rights to use Compel® on a monthly service basis, rather than purchasing Compel® 2 as an up-front capital expense. This is targeted for users of Compel® 2 that have either a small number of sites or limited bandwidth requirements.

Nielsen Media Research Products

We offer two products to encode Nielsen Media Research identification tags into media for Nielsen program ratings: the NAVE IIc® and SpoTTrac® Encoders.

The NAVE IIc® watermarks program audio with tagging information that identifies the television program and the television station that originated the program. The watermarks are used by Nielsen devices to automate the process of cataloging viewers’ television viewing habits which ultimately translate into Nielsen ratings. The NAVE IIc® makes advances over prior units in that it inserts the watermarks for audio in the digital domain and can simultaneously insert watermarking on an entire transport stream with up to four programs. Alternatively, stations have to down-convert to analog audio to insert Nielsen data.

The SpoTTrac® Encoder is a turnkey workstation that encodes both the audio and video of television commercials, Public Service Announcements and other spots with Nielsen Media Research content identification information as they are being produced and distributed, so the content has the Nielsen codes all the way from the program origination point. The tracked data is collected and integrated into Nielsen Tracking Service’s reporting and performance management tools.

~~SMD Set Top Box~~5

Telecom operators use the SMD 515 Set Top Box (SMD) as the device in consumers’ homes to receive IPTV (internet protocol television) services. It is currently integrated with Conklin-Intracom’s middleware and conditional access solution for use by multiple telcom operators in North America to provide premium IPTV services including high definition programming, video on demand and integrated personal video recording.

DTV Digital Stream Processors

The DTV Digital Stream Processor product line is designed for cable and telecom headends. It allows them to integrate local off-air HD broadcast television channels and digital programs and easily insert them into their networks. Our products provide for multiple signals to be inserted with one unit. Models include DTV 720, DTV 742 and DTV 744.

Uplink Equipment

We offer our customers complete system solutions for video and audio distribution. The complete system solution requires us to resell components, such as encoders, modulators and IP encapsulators from other manufacturers.

Customized Products

We offer our customers the option to create custom products for their needs when they cannot find off-the-shelf products to satisfy their requirements. They pay non-recurring engineering expenses through product pricing and/or up-front milestone payments. Typically the products are based on our standard products and require modifications to fit particular customer needs. This is an area of competitive advantage for us.

MARKET OPPORTUNITY

Growth opportunities are most significant in the technologies in which we have been making significant R&D investments, including file-based broadcasting technology, digital signage, IP terrestrial distribution and MPEG-4/h.264 technology and DVB-S2. See “Research and Development” below.

We have completed shipments of file-based broadcasting networks, including iPump®, Compel® and MediaPlan®, in multiple applications, including digital signage, virtual channel generation and broadcast radio. Some examples of iPump® applications are described below.

A private network customer for digital signage and distance training is using the iPump® for both signage and training applications simultaneously. The customer is using the iPump’s optional feature to generate two networks from a single unit. A third output is streamed from the iPump over Ethernet to SMD Set-Tops. Within a retail environment, the main output and the SMD are being used for advertising at the point of sale and in the electronics department by outputting high quality video advertisements to large video monitors. Within eight months of deployment, the customer generated a positive return on equipment expenses through advertising revenue. With this asset, the customer is also generating a back-room training center for its employees at each site, basically for free, since the advertisements are funding the network. The customer can create customized training schedules at each location depending on the employees’ availability, or the employees can watch the materials on demand.

The virtual channel application of the iPump® allows a current private network customer to reduce its budget for satellite bandwidth by greater than 90% of what it had been spending prior to upgrading to iPump®. Satellite bandwidth utilization was one of the customer’s largest operating expenses, so this reduction represents a sizable savings, allowing the customer to launch an additional channel. This network used to run continuously, utilizing satellite bandwidth the entire time; now the customer uses bandwidth only twice a month to update the iPumps® with new content, advertisements and playout schedules. This example demonstrates the significant savings that potential customers may achieve with the iPump®.

iPump® broadcast radio customers are using file-based broadcasting technology to update its operations and enable localization of broadcasts. It allows them to send repetitive material to their affiliates a single time and provides an easy interface for affiliates to access the audio files. With the iPump®, radio broadcasters can create a localized listening experience for each affiliate location to drive increased advertising dollars and listener loyalty. One customer regularly generates over 150,000 playlists per week through their iPump® network to localize all of its radio channels throughout the country.

The digital signage market is still very fragmented and as the industry consolidates, there is increased opportunity for our products. We have fielded multiple networks with over two thousand sites of digital signage into the banking sector. Other sectors with fielded iPump® networks include retail and medical.

Integrating IP terrestrial delivery into our products increases the market for them, since it enables customers to use them in tandem with satellite delivery networks, or completely autonomously with solely terrestrial delivery. Terrestrial delivery is particularly cost effective when networks have smaller numbers of receive locations. Integrating this function into our solutions allows us to target smaller networks for our solutions that had not been relevant with satellite only solutions.

Another area of growth for us relates to the development of MPEG-4/h.264 video decoding and DVB-S2 satellite demodulation products (see “Research and Development” below for additional information). The Unity® 552, iPump® 562 and iPump® 525 products offers MPEG-4/h.264 and/or DVB-S2 technology. The MPEG-4/h.264 standard is the latest evolutionary step in video compression and DVB-S2 is the newest technology in satellite modulation. The two technologies combined reduce the bandwidth requirements of satellite media distribution approximately in half. This reduction in bandwidth requirements is significant, as bandwidth utilization is one of the largest operating costs for our customers. This new technology can drive growth in two ways. First, existing satellite operators can replace their existing equipment with new MPEG-4/h.264 and DVB-S2 capable equipment since they can justify the capital expense with the operational benefits of the transition. Additionally, the lower operating expenses enable new business models to develop that could not be supported by the older technology’s cost structure.

SALES AND MARKETING

Domestically, we sell our products principally through our own direct sales force, which is organized geographically and by market segment. We have sales representatives in Georgia, New York and Eastern Canada. We use a major domestic value added reseller for additional sales coverage in the cable market. We have relationships with a few key integrators as an additional sales channel. Internationally, we sell primarily through independent distributors and integrators, mostly in North America, South America and Europe. The majority of our sales have payment terms of net 30 days. Due to the technical nature of our business, system integration engineering supports sales.

Our marketing organization develops strategies for product lines and provides direction to product development on product feature requirements. Marketing is also responsible for setting price levels and general support of the sales force, particularly with major proposal responses, presentations and demonstrations. We focus on establishing WCI’s brand further within the industry, including participation on technical committees, publication of articles in industry journals, speaking opportunities at industry events and exhibitions at trade shows.

Manufacturing and Suppliers; Sources and Availability of Raw Materials

During fiscal years ~~2010~~2011 and ~~2009~~2010, we used offshore manufacturers for a significant amount of our finished goods or component inventories. An offshore manufacturer, with facilities located in Taiwan and the Peoples Republic of China, accounted for approximately 7958% and 68 79% of inventory purchases in fiscal ~~2010~~ 2011 and fiscal ~~2009~~2010, respectively. Raw materials consist of passive electronic components, electronic circuit boards and fabricated sheet metal. Approximately 20% of our raw materials are purchased directly from manufacturers and the other 80% are purchased from distributors. Passive and active components include parts such as resistors, integrated circuits and diodes. We use approximately ten distributors and two contract manufacturers to supply our electronic components. We often use a single contract manufacturer or subcontractor to supply a total subassembly or turnkey solution for higher volume products. Direct suppliers provide sheet metal, electronic circuit boards and other materials built to specifications. We maintain relationships with approximately 20 direct suppliers. Most of our materials are available from a number of different suppliers; however, certain components used in existing and future products are currently available from a single or a limited number of sources. Although we believe that all single-source components currently are available in adequate quantities, there can be no assurance that shortages or unanticipated delivery interruptions will not develop in the future. Any disruption or termination of supply of certain single-source components or agreements with contract manufacturers could have an adverse effect on our business and results of operations. Our manufacturing operations consist primarily of final assembly and testing of our products, utilizing technically trained personnel, electronic test equipment and proprietary test programs.

Intellectual Property

Currently, we hold ~~five~~six U.S. patents and have ~~two~~one patent ~~applications~~ application pending. During the fourth quarter of fiscal 2008, we completed the sale of seven patents and patent applications to EPAX Consulting Limited Liability Company relating to product distinction, system architecture and IP networking for net proceeds of approximately $1,075,000 and recorded a gain of $894,000. We retain a worldwide, non-exclusive, royalty-free license under the patents for use in both existing and future products. A patent covering advanced receiver grouping techniques in Compel® expired on November 14, 2008. In addition to the advanced grouping techniques, we believe Compel®, along with our MediaPlanÒ CM and MediaPlanÒ i/o modules, offers other significant features and functionalities for complex network control applications that provide us with an advantage over competitive control systems. Compel®, which has been operational since 1989, will continue to be upgraded and enhanced. The expiration of the Compel® patent has, to date, not had a material adverse effect on our business and results of operations. However, no assurances may be given that a material adverse effect will not occur in the future (see Item 1A. “Risk Factors” section below).

We hold nine active trademarks, such as Compel®, iPump®, Wegener® and Unity® and have two pending trademark applications.

Although we attempt to protect our intellectual property rights through patents, trademarks, copyrights, licensing arrangements and other measures, we cannot assure you that any patent, trademark, copyright or other intellectual property rights owned by us will not be invalidated, circumvented or challenged, that such intellectual property rights will provide competitive advantages to us, or that any of our pending or future patent and trademark applications will be issued. We also cannot assure you that others will not develop technologies that are similar or superior to our technology, duplicate our technology or design around the patents that we own. In order to develop and market successfully certain of our planned products for digital applications, we may be required to enter into technology development or licensing agreements with third parties. Although many companies are often willing to enter into such technology development or licensing agreements, we cannot assure you that such agreements will be negotiated on terms acceptable to us, or at all. The failure to enter into technology development or licensing agreements, when necessary, could limit our ability to develop and market new products and could cause our business to suffer. Third parties have in the past claimed, and may in the future claim, that we have infringed their current or future intellectual property rights. There can be no assurance that we will prevail in any intellectual property infringement litigation given the complex technical issues and inherent uncertainties in litigation. Even if we prevail in litigation, such litigation could result in substantial costs and diversion of resources and could negatively affect our business, operating results, financial position and cash flows.

Although we believe that the patents and trademarks we own are of value, we believe that success in our industry will be dependent upon new product introductions, frequent product enhancements, and customer support and service. However, we intend to protect our rights when, in our view, these rights are infringed upon. Additionally, we license certain analog audio processing technology to several manufacturing companies which generated royalty revenues of approximately $66,000 in fiscal 2008. No royalty revenues were recorded in fiscal 2010 and 2009 due to licensees no longer producing products using the analog audio processing technology. We do not expect to receive future royalty revenues from our licensees.

As of September 32, ~~2010~~2011, we have entered into approximately six license agreements for utilization of various technologies. These agreements currently require royalty payments, or may require future royalties for products under development, none of which are expected to have a material adverse effect on our financial condition or results of operations.

Seasonal Variations in Business

There do not appear to be any seasonal variations in our business.

Working Capital Practices

Information contained under the caption " “Management'’s Discussion and Analysis of Financial Condition and Results of Operations"” (MD&A) section of this report is incorporated herein by reference in response to this item.

Dependence upon a Limited Number of Customers

We sell to a variety of domestic and international customers on an open-unsecured account basis. These customers principally operate in the cable television, broadcast, business music, private network and data communications industries. Sales to Muzak LLC and ~~The~~SSL ~~Church~~Digital ofS.A. ~~Jesus~~de ~~Christ~~C.V. ~~of Latter-Day Saints~~ accounted for approximately 2224.86% and 1017.7% of revenues in fiscal ~~2010, respectively~~2011. Sales to ~~Jones~~Muzak ~~Radio~~LLC ~~Networks,~~and ~~Muzak~~Corporation ~~and~~of ~~Mega~~the ~~Hertz~~ Presiding Bishop of The Church of Jesus Christ of Latter-Day Saints accounted for approximately 2122.98%, ~~18.1%~~ and 10.7% of revenues in fiscal ~~2009~~2010, respectively. ~~Sales~~At toSeptember ~~Big~~2, ~~Ten Network~~2011, ~~Conklin-Intracom~~four ~~and~~customers ~~Mega Hertz~~ accounted for approximately 1428.41%, 1315.35%, 14.0% and 1210.1%, respectively, of ~~revenues~~our inaccounts ~~fiscal 2008, respectively~~receivable. At September 3, 2010, four customers accounted for approximately 24.1%, 18.1%, 14.1% and 10.7%, respectively, of our accounts ~~receivable. At~~ ~~August 28, 2009, three customers accounted for more than 50.1% of our accounts~~ receivable. Sales to a relatively small number of major customers have typically comprised a majority of our revenues. This trend is expected to continue in fiscal ~~2011~~2012 and beyond. The loss of one or more of these customers would likely have, at least in the near term, a material adverse effect on our results of operations.

Backlog of Orders

Our backlog is comprised of undelivered, firm customer orders, which are scheduled to ship within 18 months. Our eighteen month backlog was approximately $53,~~972~~534,000 at September 32, ~~2010~~2011, $45,~~316~~972,000 at ~~August~~September 283, ~~2009~~2010, and $84,~~491~~316,000 at August 2928, ~~2008~~ 2009. Approximately $32,~~542~~642,000 of the September 32, ~~2010~~2011, backlog is expected to ship during fiscal ~~2011~~2012. At September 32, ~~2010~~2011, ~~two~~three customers accounted for 8788% of the eighteen month backlog and 8884% of the backlog expected to ship during fiscal ~~2011~~2012. Reference is hereby made to the information contained in MD&A, which is incorporated herein by reference in response to this item.

Competitive Conditions

We compete both with companies that have substantially greater resources and with small specialized companies. Competitive forces generally change on a year-by-year basis for the markets we serve due to the length of time required to develop new products. Through relationships with component and integrated solution providers, we believe we are positioned to provide complete end-to-end digital video and audio systems to our customers.

Broadcast Television and Program Originators

Competition for our products in the broadcast television and program originators market is from large and well-established companies such as Tandberg, Motorola and Cisco. We believe our Unity® products have a competitive advantage with our advanced Compel® control, so we focus on opportunities where that advantage is of value to the customer.

Headends

Competition for our DTV products is mostly from smaller companies that do not have as favorable a reputation in the cable television market. Significant orders for this product line will depend on the overall growth of broadcast and telecom HDTV offerings.

Competition for the SMD Set Top box is from companies producing cable set-top boxes as well as from companies specifically addressing the IPTV market.

Broadcast Radio

Competition is currently limited to a few companies for our iPump® Media Server in the broadcast radio market. Our solution includes Compel® Network Control and our full-featured iPump® 6420 Media Server.

Business and Private Networks

Competition in the business and private networks market generally comes from smaller companies with unique products tailored to the needs of the customer. Competition in this field is increasing, although still limited, and we expect to be among the industry key players. We believe our products are well positioned for this market and have competitive advantages, such as our powerful network control and targeting capabilities. Digital signage is a new and growing market which is currently very fragmented.

Research and Development

Our research and development activities are designed to strengthen and enhance our existing products and systems and to develop new products and systems. Our development strategy is to identify features, products and systems which are, or are expected to be, needed by a number of customers. A major portion of the fiscal ~~2010~~2011 and ~~2009~~ 2010 research and development expenses were spent on product development of our iPump® 6420, iPump® 562, iPump® 525, Compel®, and Unity® 552 products. WCI’s research and development expenses totaled $1,~~148~~232,000 in fiscal ~~2010~~2011 and $1,~~962~~148,000 in fiscal ~~2009~~2010. Additional information contained in the “Products” and “Intellectual Property” sections above and in MD&A is incorporated herein by reference in response to this item.

Technological advances occur frequently in our industry and our product offerings must be upgraded with the advances to remain current with industry trends and attract potential customers. During fiscal 2010, we invested in new technologies while they are still very innovative and of high value to customers. During fiscal 2010, we invested in file-based broadcasting, digital signage, and network management. We anticipate that we will continue to invest in these technologies in the coming years.

109

With our file-based broadcasting solutions, network operators can intersperse live broadcasts with files that are prepositioned on the receiver’s hard drive before they are played to air. This allows operators to manage their bandwidth more closely and to regionalize their broadcasts to make them more relevant for each market. Our iPump® products, in combination with Compel® and MediaPlan® control, provide advanced file-based broadcasting solutions for applications such as digital signage and broadcast radio.

The digital signage market requires products to integrate text and graphics onto the screen with video to aid in advertising, information distribution and branding. Our iPump® and Compel® products had major additions to the digital signage offerings during fiscal 2010 to better serve the market.

Network control and management have long been a differentiator for our Unity® receivers and iPump® media servers. Through fiscal ~~2010~~2011, we continued to invest in network control for our products, which allows customers to create dynamic environments with their receivers and to gain additional advertising revenue by regionalizing broadcasts and advertisements. When network control is included in a file-based broadcasting network, it becomes a very complex operation to manage the media content and data files on media servers throughout the network. It is imperative to customers that it is managed properly, as the content often has limited viewing rights, so it must be deleted when rights have expired or replaced by newer versions over time. Network control and management products, such as Compel® and MediaPlan®, manage such operations.

During fiscal ~~2010~~2011, we launched CompelConnect.com service based on our new Compel 2 product, which was under development during fiscal 2011 and 2010. CompelConnect.com service revenues were less than 1% of total revenues in fiscal 2011.

Employees

As of September 32, ~~2010~~2011, we had 4948 full-time employees employed by WCI and no employees employed by Wegener Corporation. No employees are parties to a collective bargaining agreement and we believe that employee relations are good.

Available Information

Our Web site is http://www.wegener.com. Information contained on our Web site should not be considered incorporated by reference in this Form 10-K.

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the Company, for purposes of section 401(b) of Regulation S-K, are as follows:

Name and Business Experience	Age	Office Held
C. Troy Woodbury, Jr. President and Chief Executive Officer of the Company and WCI since October 2009. Treasurer and Chief Financial Officer of the Company from June 1988 to October 2009 and Director since 1989. Treasurer and Chief Financial Officer of WCI from 1992 to October 2009. Senior Vice President of Finance of WCI from March 2002 to October 2009. Executive Vice President of WCI from July 1995 to March 2002. Chief Operating Officer of WCI from September 1992 to June 1998. Group Controller for Scientific-Atlanta, Inc. from March 1975 to June 1988.	6364	President and Chief Executive Officer of the Company and WCI
James Traicoff Treasurer and Chief Financial Officer of the Company and WCI since October 2009. Controller of the Company and WCI from July 1988 to October 2009.	6061	Treasurer and Chief Financial Officer of the Company and WCI

On October 13, 2009, Ned L. Mountain tendered his resignation as director of Wegener Corporation and effective October 16, 2009, Mr. Mountain left WCI. Mr. Mountain was President and Chief Operating Officer of WCI from January 2005 to October 2009 and Director of the Company from May 2003 to October 2009. Effective October 9, 2009, the Board of Directors appointed C. Troy Woodbury Jr. as President and Chief Executive Officer of Wegener Corporation and WCI. James Traicoff was appointed Treasurer and Chief Financial Officer of Wegener Corporation and WCI. Robert Placek resigned as President and Chief Executive Officer of Wegener Corporation on October 9, 2009, but remains as Chairman of the Board of Wegener Corporation.10

ITEM 1A.

RISK FACTORS

Our business, financial condition and operating results can be affected by a number of factors, including those listed below, any one of which could cause our actual results to vary materially from recent results or from our anticipated future results. Any of these risks could also materially and adversely affect our business, financial condition or the price of our common stock.

We may not have sufficient capital to continue as a going concern.

Our bookings and revenues during fiscal ~~2010~~2011 and to date in fiscal ~~2011~~2012 have been insufficient to attain profitable operations and to provide adequate levels of cash flow from operations. We have experienced recurring net losses from operations, which have caused an accumulated deficit of approximately $2021,~~265~~731,000 at September 32, ~~2010~~2011. We had a working capital deficit of approximately $34,~~248~~441,000 at September 32, ~~2010~~2011 compared to a working capital deficit of approximately $13,~~139~~248,000 at ~~August~~September 283, ~~2009~~2010. Our ability to continue as a going concern will depend upon our ability to increase our bookings and revenues in the near term to attain profitable operations and to generate sufficient cash flow from operations. Should increased revenues not materialize, we are committed to further reducing operating costs to bring them in line with reduced revenue levels. Should we be unable to achieve near term profitability and generate sufficient cash flow from operations and if we are unable to sufficiently reduce operating costs, we would need to raise additional capital or increase our borrowings. No assurances can be given that operating costs can be sufficiently reduced, or if required, that additional capital or borrowings would be available to allow us to continue as a going concern. The audit reports relating to the Consolidated Financial Statements for the years ended September 32, ~~2010,~~2011 ~~August 28, 2009~~ and ~~August~~September 293, ~~2008~~ 2010 contain explanatory paragraphs regarding the Company’s ability to continue as a going concern.

The volatility and disruption of the capital and credit markets, and adverse changes in the global economy, will likely have a negative impact on our ability to access the capital and credit markets.

The capital and credit markets ~~have~~remain ~~become increasingly~~ tight as a result of adverse economic conditions that have caused the failure and near failure of a number of large financial services companies. If the capital and credit markets continue to experience crisis and the availability of funds remains low, it is likely that our ability to access the capital and credit markets will be limited, available on less favorable terms or not available at all during this period in the event we need to raise additional capital or obtain additional credit facilities in order to continue as a going concern. In addition, if current global economic conditions persist for an extended period of time or worsen substantially, our business may suffer in a manner which could cause us to fail to satisfy the representations, warranties and covenants to which we are subject under our existing credit facility.

Conditions and changes in the national and global economic environments may adversely affect our business and financial results.

Economic conditions have been weak and global financial markets have experienced a severe downturn. The current global economic slowdown and tight credit markets has led many of our customers to delay or plan lower capital expenditures, and we believe that these economic and credit conditions caused certain of our customers to reduce or delay orders for our products. If adverse economic and credit conditions resulting from slower economic activity and tight credit markets remain weak or deteriorate further, we may continue to experience a material adverse impact on our business, financial condition and results of operations.

Our future bookings, revenues, cash flow from operations and operating results are difficult to predict and may fluctuate materially.

Our future operating results are difficult to predict and may be materially affected by a number of factors, including: the timing of purchasing decisions by our customers, the timing of new product announcements or introductions by us or our competitors, competitive pricing pressures, adequate availability of components and offshore manufacturing capacity. Additional factors affecting our operating results include our ability to hire, retain and motivate adequate numbers of engineers and other qualified employees, changes in product mix, and the effect of adverse changes in economic conditions in the United States and international markets. In addition, our markets have historically been cyclical and subject to significant economic downturns. Our business is subject to rapid technological changes and there can be no assurance, depending on the mix of future business, that products stocked in inventory will not be rendered obsolete before we ship them. Our cash collections from our accounts receivable are impacted by the timing and levels of our bookings and revenues. As a result of these and other factors, there can be no assurance that we will not experience material fluctuations in future operating results and cash flows from operations on a quarterly or annual basis.

Our fluctuations in bookings and revenues affect our cash flow from operations. In addition, our credit facility imposes a maximum borrowing limit, requires compliance with debt representation, warranty and covenant provisions, and matures on April 7, 2011.11

Our ~~cash~~ ~~collections~~lender ~~from~~has ~~our accounts receivable are impacted by~~ the ~~timing~~right ~~and levels of our bookings and revenues. Any shortfalls in such collections would require us~~ to ~~increase~~terminate ~~borrowings under~~ our ~~credit~~loan facility ~~which~~ ~~has~~at aany ~~maximum~~time ~~available credit limit of $4,250,000. Our loan facility requires us to be in compliance with certain representations, warranties and covenants. Among which, we were required~~ by ~~September~~providing 3, 2010 to be in compliance with the solvency representation provision. This representation requires us to be able to pay our debts as they become due, have sufficient capital to carry on our business and own property at a ~~fair~~ninety ~~saleable value greater than the amount required to pay our debts. The solvency representation provision was subsequently extended to the last day of our second quarter in fiscal 2011~~ (~~March 4, 2011~~90)~~. A~~ ~~breach~~day ofwritten ~~this or~~notice ~~other restrictive provisions~~ of ~~the loan facility could result in a default on our indebtedness~~termination. If a default occurs, any outstanding indebtedness, together with accrued interest, would be immediately due and payable, and the lender could proceed against our assets that secure that indebtedness. No assurances may be given that upon maturity (April 7, 2011) our loan facility will be renewed. In the event the loan facility is not renewed, we would need to obtain additional credit facilities or raise additional capital to continue as a going concern and to execute our business plan There is no assurance that such financing would be available or, if available, that we would be able to complete financing on satisfactory terms.

The initial term of our loan facility matured on April 7, 2011. The loan facility automatically renews for successive twelve (12) month periods provided, however, the lender may terminate the facility by providing a ninety (90) day written notice of termination at any time after April 7, 2011. In the event of a ninety day notice of termination of our loan facility, we would need to obtain additional credit facilities or raise additional capital to continue as a going concern and to execute our business plan. There is no assurance that such financing would be available or, if available, that we would be able to complete financing on satisfactory terms.

We may not have sufficient financing to support future inventory purchases.

At September 2, 2011, our net inventory balances decreased $1,615,000 to $1,530,000 from $3,145,000 at September 3, 2010, compared to $4,464,000 at August 28, 2009. The decrease in inventory levels during fiscal 2011 and prior fiscal years has minimized the amount of required inventory purchases during those periods to meet revenue levels. We will need to increase inventory purchases in future quarters in order to have sufficient inventory balances to support revenue levels in fiscal 2012 and beyond. A substantial portion of future inventory purchases will be with our offshore suppliers whom we have been paying under extended payment terms and credit limits which are beyond normal payment terms and credit limits. In order to have sufficient liquidity available for future inventory purchases it is likely we will need additional credit limits and continued extended payment terms from offshore and domestic suppliers; increased customer deposits from future bookings; additional borrowing capacity and/or additional capital. No assurances may be given that we will be able to generate sufficient liquidity from these or other sources that may be required to support future inventory purchases.

Our line of credit balance at June 3, 2011 has reached the maximum available credit limit of $4,250,000, as a result, our near term liquidity is dependent on our working capital. Additional capital or borrowings, if needed, may not be available to continue as a going concern.

With our line of credit currently at the maximum limit, our very near term liquidity is dependent on our working capital and primarily on the timely collection of accounts receivable balances and conversion of inventory into receivable balances. During the second quarter of fiscal 2011 and continuing to date, the days outstanding of our accounts receivable has increased beyond our expectations, primarily due to a delay in payment from one customer, which has adversely impacted our cash balances. Our low level of bookings has lengthened the cycle of conversion of inventory into receivable balances and then into cash balances.

Our near term liquidity and ability to continue as a going concern is dependent on our ability to timely collect our existing accounts receivable balances and to generate sufficient new orders and revenues in the very near term to provide sufficient cash flow from operations to pay our current level of operating expenses, to provide for inventory purchases and to reduce past due amounts owed to vendors and service providers. No assurances may be given that the Company will be able to achieve sufficient levels of new orders in the near term to provide adequate levels of cash flow from operations. Should we be unable to achieve near term profitability and generate sufficient cash flow from operations, we would need to raise additional capital or obtain additional borrowings beyond our existing loan facility. We currently have limited sources of capital, including the public and private placement of equity securities and additional debt financing. No assurances can be given that additional capital or borrowings would be available to allow us to continue as a going concern. If near term shippable bookings are insufficient to provide adequate levels of near term liquidity and any required additional capital or borrowings are unavailable we will likely be forced to enter into federal bankruptcy proceedings. See also Note 1 to the Consolidated Financial Statements and “MD&A- Liquidity and Capital Resources.”

Our inability to pay vendors within normal trade payment terms could adversely impact our operations.

Our bookings and revenues during fiscal ~~2010~~2011, as well as to date in fiscal ~~2011~~2012, have been insufficient to attain profitable operations and to provide adequate levels of cash flow from operations. During fiscal 2011 and fiscal 2010, as well as to date in fiscal ~~2011~~2012, due to insufficient cash flow from operations and maximum borrowing limitations under our loan facility, we negotiated extended payment terms with our offshore vendor and have been extending other vendors beyond normal payment terms. Until such vendors are paid within normal payment terms, no assurances can be given that required services and materials needed to support operations will continue to be provided. In addition, no assurances can be given that vendors will not pursue legal means to collect past due balances owed. Any interruption of services or materials would likely have an adverse impact on our operations.

1312

The Nasdaq Stock Market delisted our securities, which could limit investors’ ability to trade in our securities.

~~On December~~During 9,fiscal ~~2009~~2010, we ~~received~~were aunable ~~letter~~to (maintain compliance with the ~~“December~~listing ~~9th Letter”~~requirements of The Nasdaq Stock Market (Nasdaq). As a result on April 20, 2010, we received notification from Nasdaq ~~indicating~~ that the ~~Company’s~~our ~~securities~~common stock would be delisted ~~from~~ . Nasdaq atsuspended ~~the~~trading ~~opening~~ of ~~business~~our oncommon ~~December~~stock ~~16,~~shares ~~2009~~effective ~~and~~at athe ~~Form~~open ~~25-NSE would~~of betrading ~~filed~~on ~~with~~April ~~the~~22, ~~Securities~~2010 and ~~Exchange~~our ~~Commission~~common ~~(the~~stock ~~“Commission”) which~~has ~~would~~not ~~remove~~traded ~~the~~on ~~Company’s~~NASDAQ ~~securities~~since ~~from~~that ~~listing~~time. ~~and~~As ~~registration~~a ~~on Nasdaq. However~~result, ~~the~~on ~~December~~April ~~9th~~22, ~~Letter also~~2010, ~~indicated~~our ~~that~~common anstock ~~official~~began ~~appeal~~trading by over-the-counter ~~Company~~under to the ~~Nasdaq~~symbol ~~Hearing Panel~~WGNR.PK. ~~(the~~On ~~“Panel”)~~June ~~would~~9, ~~stay~~2010, ~~the~~NASDAQ ~~suspension~~filed ofa ~~the~~Form ~~Company’s~~25 ~~securities~~with ~~and~~ the ~~filing~~Securities ofand ~~the~~Exchange ~~Form~~Commission ~~25-NSE~~to ~~pending~~complete the ~~Panel’s determination~~delisting. ~~On December~~ ~~11,~~The ~~2009,~~delisting ~~the~~became ~~Company~~effective ~~officially~~ten ~~filed~~days anafter ~~appeal~~the ~~with~~filing ~~the Panel~~of Form 25.

On February 17, 2010, the Company received notification from Nasdaq (the “Notification”), that as a result of the information presented by the Company at the appeal hearing held on January 13, 2010, the Panel granted the Company’s request to remain listed on Nasdaq subject to conditions stipulated in the Notification.

The Notification stipulated that on or before June 7, 2010 (the “Exception Deadline”), the Company would be required to be compliant with Listing Rule 5550(b) which required shareholders’ equity of at least $2,500,000 or the Company meeting the listing alternatives of (i) a market value of listed securities of $35 million, or (ii) net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years. In addition, the Company was required to be compliant with Marketplace Rule 4320 (current Listing Rule 5550(a) (2)), which required the Company’s common stock to maintain a minimum bid price of $1.00 per share. In order to regain such compliance, the Company’s common stock must maintain a minimum closing bid price of $1.00 per share for a period of ten consecutive trading days or beyond ten trading days at the determination of the Panel.

The Company was required to notify the Panel of any significant events occurring prior to June 7, 2010, including, without limitation, any event that might call into question the Company’s historical financial information or that might impact the Company’s ability to maintain compliance with any Nasdaq listing requirement or the Exception Deadline. The Panel reserved the right to reconsider their decision based on any event, condition or circumstance that existed or developed that would, in the opinion of the Panel, make continued listing of the Company’s common stock inadvisable or unwarranted.

On April 8, 2010, we notified the Panel that based on our current level of existing backlog of orders scheduled to ship in our fiscal third quarter ending May 28, 2010, and our expected level of new shippable bookings for the third quarter, we did not expect that we would be able to comply with the Nasdaq requirements by the Exception Deadline. On April 20, 2010, the Company received notification from Nasdaq that the Panel had determined to delist the Company’s common stock. Nasdaq suspended trading of our common stock shares effective at the open of trading on April 22, 2010 and our common stock has not traded on NASDAQ since that time. As a result, on April 22, 2010, our common stock began trading over-the-counter under the symbol WGNR.PK. On June 9, 2010, NASDAQ filed a Form 25 with the Securities and Exchange Commission to complete the delisting. The delisting became effective ten days after the filing of Form 25.

The delisting of our common stock by Nasdaq could adversely affect the trading market for our common stock, 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 and the Company’s ability to raise additional capital.

We have in the past experienced delays in product development and introduction, and there can be no assurance that we will not experience further delays in connection with our current product development or future development activities.

Delays in development, testing, manufacture and/or release of new products or features, including digital receivers, Compel® network control software, MediaPlan® content management software, streaming media, and other products could adversely affect our sales and results of operations. In addition, there can be no assurance that we will successfully identify new product opportunities, develop and bring new products to market in a timely manner and achieve market acceptance of our products, or that products and technologies developed by others will not render our products or technologies obsolete or noncompetitive.

Our lengthy and variable qualification and sales cycles make it difficult to predict the timing of a sale or whether a sale will be made.

As is typical in our industry, our customers may expend significant efforts in evaluating and qualifying our products. This evaluation and qualification process frequently results in a lengthy sales cycle, typically ranging from three to six months and sometimes longer. While our customers are evaluating our products and before they place an order with us, we may incur substantial sales, marketing, and research and development expenses, expend significant management efforts, increase manufacturing capacity and order long-lead-time supplies prior to receiving an order. Even after this evaluation process, it is possible that a potential customer will not purchase our products.

Our customer base is concentrated and the loss of one or more of our key customers would harm our business.

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 ~~2011~~2012 and beyond. In fiscal ~~2010~~2011, two customers accounted for approximately 2224.96% and 1017.87% of revenues, respectively. At September 32, ~~2010~~2011, ~~two~~three customers accounted for 8788% of the eighteen month backlog and 8884% of the backlog expected to ship during fiscal ~~2011~~2012. In addition, recent disruptions in global economic and market conditions could result in decreases in demand for our products as the current tightening in credit in financial markets may adversely affect the ability of our major customers to obtain financing for significant purchases. The loss of any significant customer or any reduction in orders by any significant customer would adversely affect our business and operating results and potentially our liquidity.

We rely on third-party subcontractors, certain suppliers and offshore manufacturers.

We use offshore manufacturers for a significant amount of finished goods or component inventories. One offshore manufacturer accounted for approximately 7958% and 6879% of inventory purchases in fiscal ~~2010~~2011 and ~~2009~~2010, respectively. Certain raw materials, video sub-components and licensed video processing technologies used in existing and future products are currently available from a single source or limited sources. Any disruption or termination of supply of certain single-source components or technologies, or interruption of supply from offshore manufacturers, would likely have a material adverse effect on our business and results of operations, at least in the near term.

Our intellectual property rights may be insufficient to protect our competitive position. In addition, our pending or future intellectual property applications may not be issued.

We hold ~~five~~ six U.S patents and nine active trademarks, such as Compel®, iPump®, Wegener® and Unity®. (see also “Intellectual Property” section above). Currently we have ~~two~~ one patent and two trademark applications pending. Although we attempt to protect our intellectual property rights through patents, trademarks, copyrights, licensing arrangements and other measures, we cannot assure you that any patent, trademark, copyright or other intellectual property rights owned by us will not be invalidated, circumvented or challenged, that such intellectual property rights will provide competitive advantages to us, or that any of our pending or future patent and trademark applications will be issued. We also cannot assure you that others will not develop technologies that are similar or superior to our technology, duplicate our technology or design around the patents that we own.

We may not be able to license necessary third-party technology or it may be expensive to do so. In addition, claims that we infringe third-party intellectual property rights could result in significant expenses and restrictions on our ability to sell our products in particular markets.

In order to develop and market successfully certain of our planned products for digital applications, we may be required to enter into technology development or licensing agreements with third parties. Although many companies are often willing to enter into such technology development or licensing agreements, we cannot assure you that such agreements will be negotiated on terms acceptable to us, or at all. The failure to enter into technology development or licensing agreements, when necessary, could limit our ability to develop and market new products and could cause our business to suffer. Third parties have in the past claimed, and may in the future claim, that we have infringed their current or future intellectual property rights. There can be no assurance that we will prevail in any intellectual property infringement litigation given the complex technical issues and inherent uncertainties in litigation. Even if we prevail in litigation, such litigation could result in substantial costs and diversion of resources and could negatively affect our business, operating results, financial position and cash flows.

Competition in our industry is intense and can result in reduced sales and market share.

We compete with companies ~~which~~that have substantially larger operations and greater financial, engineering, marketing, production and other resources than we have. These competitors may develop and market their products faster, devote greater marketing and sales resources, or offer more aggressive pricing, than we can. As a result, this could cause us to lose orders or customers or force reductions in pricing, all of which would have a material adverse effect on our financial position and results of operations.

Our business is subject to rapid changes in technology and new product introductions.

The market for our products is characterized by rapidly changing technology, evolving industry standards and frequent product introductions. Product introductions are generally characterized by increased functionality and better quality, sometimes at reduced prices. The introduction of products embodying new technology may render existing products obsolete and unmarketable. Our ability to successfully develop and introduce on a timely basis new and enhanced products that embody new technology, and achieve levels of functionality and price acceptable to the market, will be a significant factor in our ability to grow and to remain competitive. If we are unable, for technological or other reasons, to develop competitive products in a timely manner in response to changes in the industry, our business and operating results will be materially and adversely affected.

Our stock price is subject to volatility.

Our common stock has experienced substantial price volatility and such volatility may occur in the future, particularly as a result of quarter to quarter variations in the actual or anticipated financial results of the Company or other companies in the satellite communications industry or in the markets we serve. These and other factors may adversely affect the market price of our common stock.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

Not applicable

ITEM 2.

PROPERTIES

Our executive, sales, engineering and administrative offices are located at 11350 Technology Circle, Johns Creek, Georgia 30097-1502. This 40,000 square foot facility, which is located on a 4.7 acre site, was purchased by WCI in February 1987. During August 1989, WCI purchased an additional 4.4 acres of adjacent property which remains undeveloped. WCI also leases a 9,500 square foot manufacturing facility in Alpharetta, Georgia under a three year lease expiring in January 2013 with future annual rents of approximately $~~62,000 in fiscal 2011, $~~64,000 in fiscal 2012 and $27,000 in fiscal 2013. WCI'’s 40,000 square foot facility, including the 4.7 acre site on which the building is located, and 4.4 acres of adjacent land are pledged as collateral under our line of credit facility.

ITEM 3.

LEGAL PROCEEDINGS

On June 1, 2006, a complaint was filed by Rembrandt Technologies, LP (Rembrandt) against Charter Communications, Inc. (Charter), Cox Communications Inc. (Cox), CSC Holdings, Inc. (CSC) and Cablevisions Systems Corp. (Cablevision) in the United States District Court for the Eastern District of Texas alleging patent infringement. The complaint alleges that products and services sold by Charter infringe certain Rembrandt patents related to cable modem, voice-over internet, and video technology and applications. The case may be expensive to defend and there may be substantial monetary exposure if Rembrandt is successful in its claim against Charter and then elects to pursue other cable operators that use the allegedly infringing products. Wegener has not been named a party in the suit. However, subsequent to December 1, 2006, Charter has requested us to defend and indemnify Charter to the extent that the Rembrandt allegations are premised upon Charter’s use of products that we have sold to Charter. To date, we have not agreed to Charter’s request.

On June 1, 2006, a complaint substantially similar to the above described suit was filed by Rembrandt against Time Warner Cable (TWC) in the United States District Court for the Eastern District of Texas. Wegener has not been named a party in the suit, but TWC has requested us (as well as other equipment vendors) to contribute a portion of the defense costs related to this matter as a result of the products that we and others have sold to TWC. To date, we have not agreed to contribute to the payment of legal costs related to this case.

In addition, Cisco Systems, Inc. (Scientific Atlanta) has made indemnity demands against us, related to the fact that a number of Cisco’s customers that are defendants in the Rembrandt lawsuit have made indemnity demands against Cisco. Cisco’s demands are based upon allegations that Wegener sold devices to these companies that are implicated by the patent infringement claims in the Rembrandt lawsuit. To date, we have not agreed to Cisco’s demands.

These actions have been consolidated into a multi-district action pending in the United States District Court for the District of Delaware. On October 23, 2009, the Delaware District Court issued an Order dismissing eight of the substantive patent claims embodied in the consolidated action, as well as all counterclaims. The parties also have agreed to summary judgment of non-infringement on a remaining patent claim. On September 7, ~~but~~2011, the ~~grounds~~Delaware ~~for~~District ~~such~~Court ~~summary judgment~~issued ~~have~~a ~~not~~Final ~~yet~~Judgment ~~been~~and ~~finalized~~Order dismissing the claims. On ~~The~~November ~~Court~~13, ~~subsequently~~2009, ~~asked~~the ~~each~~Court ofallowed the parties to the consolidated lawsuits to ~~submit~~file ~~any~~ motions for fees and costs with respect to one another. On byJuly ~~November~~13, 162011, ~~2009~~the Court ruled that the motion for attorney’s fees and costs was premature. ~~Parties~~On ~~have submitted~~September ~~briefs~~28, on2011, ~~that~~Rembrandt ~~issue~~Technologies LP filed a Notice of Appeal from the Court’s September 7, ~~which~~2011 ~~has~~judgment, ~~yet~~the toCourt’s beconstruction ~~decided~~ruling byconcerning one of the patents in question, and all prior rulings, orders and judgments of the Court. At this point, we are presently unable to assess the impact, if any, of this litigation on Wegener.

On October 4, 2010, a Second Amended Complaint was filed by Multimedia Patent Trust (“MPT”) against Fox News Networks, LLC (“Fox News”) and other parties in the United States District Court for the Southern District of California for patent infringement. (The initial Complaint was filed on January 19, 2010). The Second Amended Complaint asserts that Fox News has infringed upon certain MPT patents relating to video compression, encoding and decoding. This litigation may be very expensive to defend and there could be significant financial exposure if MPT is successful in its claims. On November 3, 2010, however, Fox News wrote to Wegener, asking Wegener to fully indemnify, hold harmless and defend Fox News in connection with the litigation. In its letter, Fox News states that it has identified Wegener as a vendor that provided Fox News with products and/or services relating to video compression. Fox News states further that it believes that MPT’s claims give rise to indemnity obligations and other obligations for Wegener products obtained from Wegener by Fox News. The November 3, 2010 letter ~~asks~~asked Wegener to acknowledge such tender on or before November 24, 2010. Wegener has not agreed to do so, nor has Wegener acknowledged or agreed that the specific claims against Fox News by MPT give rise to such obligations on the part of Wegener. On August 11, 2011, counsel for MPT served a subpoena on Wegener seeking certain documents relating to the subject matter of the patent infringement action. On September 8, 2011, Wegener produced certain documents in response to that subpoena. Additional responsive documents may be produced in the future on a schedule to be agreed upon by Wegener and MPT. At this point, we are unable to assess the impact of this litigation, if any, on Wegener.

ITEM 4.

REMOVED AND RESERVED

PART II

ITEM 5. MARKET FOR THE REGISTRANT'’S COMMON EQUITY, ~~RELATED~~RELATEDSTOCKHOLDER ~~STOCKHOLDER~~ MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

On April 22, 2010, our Common Stock began trading over-the-counter under the symbol WGNR.PK. Prior to April 22, 2010 our Common Stock traded on The NASDAQ Stock Market. As of November 1, ~~2010~~2011, there were approximately ~~333~~335 holders of record of our Common Stock. This number does not reflect beneficial ownership of shares held in nominee or “street” name.

17The quarterly ranges of high and low sale prices for fiscal 2011 and 2010 were as follows:

The quarterly ranges of high and low sale prices for fiscal 2010 and 2009 were as follows:

	Fiscal 2011		Fiscal 2010
	High	Low	High	Low
First Quarter	$.14	$ .07	$.38	$ .20
Second Quarter	.18	.09	.29	.08
Third Quarter	.18	.06	.30	.10
Fourth Quarter	.08	.03	.15	.07

	Fiscal 2010				Fiscal 2009
	High		Low		High		Low
First Quarter	$	.38	$	.20	$	1.10	$	.32
Second Quarter		.29		.08		.54		.10
Third Quarter		.30		.10		.45		.15
Fourth Quarter		.15		.07		.38		.10

Dividends

We have not paid any cash dividends on our Common Stock. For the foreseeable future, our Board of Directors does not intend to pay cash dividends, but rather plans to retain any earnings to support our operations. Furthermore, we are prohibited from paying dividends under our loan agreement, as more fully described in MD&A and in Note 9 to the consolidated financial statements contained in this report.

Recent Sales of Unregistered Securities

~~There~~ On December 6, 2010, pursuant to our 2010 Incentive Plan, the Compensation Committee authorized the issuance to all eligible employees of the Company common stock options to purchase an aggregate of 563,700 shares of common stock and issued equally to the four non-employee members of the Board common stock options to purchase an aggregate of 100,000 shares of common stock. Stock options for 638,700 shares of common stock are exercisable at $0.125 and one stock option for 25,000 shares of common stock, issued to a 10% or greater stockholder and executive officer, is exercisable at $0.1375. The options vested upon issuance and expire five years from the date of issuance. In addition, 500,000 shares of restricted common stock were nogranted ~~unregistered~~to ~~sales~~two executive officers. The issuances of the restricted stock were made in reliance upon an exemption from securities ~~during~~registration afforded by the ~~fiscal~~provisions ~~year~~of ~~ended September~~Section 34(2) of the Securities Act of 1933, ~~2010~~as amended, and the provisions of Regulation D promulgated thereunder.

As of November 15, 2011, a registration statement for the 2010 Incentive Plan has not been filed, although the Company currently intends to file a Form S-8 Registration Statement. Therefore, all of the foregoing securities are deemed restricted securities for purposes of the Securities Act.

Stock Performance Graph

The following graph compares the cumulative total stockholder return of our ~~common stock~~Common Stock with the cumulative total return of the NASDAQ Composite Index and the NASDAQ Telecommunications Index for the five fiscal years ended September 32, ~~2010~~2011. The graph assumes that $100 was invested on September 21, ~~2005~~2006 in our ~~common~~Common ~~stock~~Stock and each index and that all dividends were reinvested. We have not declared any cash dividends on our ~~common~~Common ~~stock~~Stock. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.

1816

9/2/05

9/1/06

8/31/07

8/29/08

8/28/09

9/3/10

9/1/06

8/31/07

8/29/08

8/28/09

9/3/10

9/2/11

Wegener Corporation

100.00

82.54

~~100~~46.0003

18.25

7.94

6.35

~~100.00~~

~~82.54~~

~~46.03~~

~~18.25~~

~~7.94~~

NASDAQ Composite

100.00

120.88

~~100~~109.0033

94.74

100.35

122.93

~~102.72~~

~~124.11~~

~~110.06~~

~~94.81~~

~~100.82~~

NASDAQ Telecommunications

100.00

140.77

~~100~~119.0037

100.87

100.61

106.58

~~101.86~~

~~142.10~~

~~122.80~~

~~103.52~~

~~104.15~~

(1) The stock performance graph shall not be deemed soliciting material or to be filed with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 (the “Exchange Act”) or to the liabilities of Section 18 of the Exchange Act, nor shall it be incorporated by reference into any past or future filing under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except to the extent we specifically request that it be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.

Equity Compensation Plan Information

The following table summarizes information as of September 32, ~~2010~~2011, regarding our ~~common~~ ~~stock~~Common Stock reserved for issuance under our equity compensation plans.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options (a)		Weighted-Average Exercise Price of Outstanding Options (b)		Number of Securities Remaining Available for Future Issuance Under the Plans (Excluding Securities Reflected in Column (a)) (c)

Equity Compensation Plans Approved by Security Holders		1,308,875	$	0.74		1,352,500

Equity Compensation Plans Not Approved by Security Holders		-		-		-
Total		1,308,8375	$	0.74		1,352,500

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options (a)		Weighted-Average Exercise Price of Outstanding Options (b)		Number of Securities Remaining Available for Future Issuance Under the Plans (Excluding Securities Reflected in Column (a)) (c)
Equity Compensation Plans Approved by Security Holders		665,375	$	1.33		1,250,000
Equity Compensation Plans Not Approved by Security Holders		-		-		-
Total		665,375	$	1.33		1,250,000

ITEM 6.

SELECTED FINANCIAL DATA

(in thousands, except per share amounts)

	September 3, 2010			August 28, 2009			August 29, 2008			August 31, 2007			September 1, 2006
	September 2, 2011			September 3, 2010			August 28, 2009			August 29, 2008			August 31, 2007
Revenues, net	$	89,~~921~~111		$	128,~~655~~921		$	2112,~~494~~655		$	21,~~546~~494		$	2021,~~388~~546
Operating (loss) income (a)		(1,~~841~~100	)		(21,~~477~~841	)		~~540~~(2,477	)		~~(613~~540	)		(~~2,811~~613	)
Net (loss) earnings (a)		(21,~~313~~466	)		(2,~~606~~313	)		~~383~~(2,606	)		~~(753~~383	)		(~~2,883~~753	)
Net (loss) earnings per share
Basic	$	(.1811	)	$	(.2118	)	$	(.0321	)	$	(.0603	)	$	(.2306	)
Diluted	$	(.1811	)	$	(.2118	)	$	(.0321	)	$	(.0603	)	$	(.2306	)
Cash dividends paid per share (b)		-			-			-			-			-
Total assets	$	87,~~362~~285		$	98,~~542~~362		$	139,~~213~~542		$	1213,~~812~~213		$	1112,~~128~~812
Long-term obligations inclusive of current maturities		-			-			-			-			-

(a)

The year ended August 29, 2008 includes a fourth quarter gain on sale of patents of $894,000.

(b) We have never paid cash dividends on our ~~common~~Common ~~stock~~Stock and do not intend to pay cash dividends in the foreseeable future. Additionally, our line of credit precludes the payment of dividends.

20ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~ITEM 7~~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. ~~MANAGEMENT'S~~ Forward-looking ~~DISCUSSION~~statements ~~AND~~may ~~ANALYSIS~~be OFidentified ~~FINANCIAL~~by ~~CONDITION AND~~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: the Company’s ability to continue as a going concern; ~~RESULTS~~customer OFacceptance ~~OPERATIONS~~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 and industry conditions which may not improve during fiscal year 2012 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 risks and uncertainties detailed from time to time in the Company’s periodic Securities and Exchange Commission filings, including the Company’s most recent Annual Report on 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.

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: the Company’s ability to continue as a going concern; 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 and industry conditions which may not improve during fiscal year 2011 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 risks and uncertainties detailed from time to time in the Company’s periodic Securities and Exchange Commission filings, including the Company’s most recent Annual Report on 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.18

These risks were exacerbated by the 2008 crisis in national and international financial markets and the resulting global economic downturn which ishas ~~continuing~~ continued into ~~2010~~2011, and we are unable to predict with certainty what long-term effects these developments will continue to have on our Company. During 2008 and into 2009, the capital and credit markets experienced ~~unprecedented levels of~~ extended volatility and disruption. We believe that these unprecedented developments adversely affected our business, financial condition and results of operations in fiscal years ~~2010~~2011 and ~~2009~~2010.

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 an international provider of digital video and audio solutions for broadcast television, radio, telco, private and cable networks. With over 30 years experience in optimizing point-to-multipoint multimedia distribution over satellite, fiber, and IP networks, WCI offers a comprehensive product line that handles the scheduling, management and delivery of media rich content to multiple devices, including video screens, computers and audio devices. WCI focuses on long- and short-term strategies for bandwidth savings, dynamic advertising, live events and affiliate management.

We operate on a 52-53 week fiscal year. The fiscal year ends on the Friday nearest to August 31. Fiscal year ~~2010~~2011 contained fifty-~~three~~ two weeks while fiscal ~~years~~ ~~2009~~year ~~and~~2010 ~~2008~~ contained 52fifty-three weeks. The additional week in fiscal 2010 did not have a material impact on our financial position as of September 3, 2010, or our results of operations and cash flows for the year then ended. All references herein to ~~2010,~~2011 ~~2009~~ and ~~2008,~~2010 refer to the fiscal years ended September 32, ~~2010,~~2011 ~~August 28, 2009,~~ and ~~August~~September 293, ~~2008~~2010, respectively.

Our fiscal ~~2010~~2011 revenues ~~decreased~~increased $3189,~~734,~~000, or 292.51%, to $89,~~921~~110,000 from $128,~~655~~921,000 in fiscal ~~2009~~2010. Our net loss for fiscal ~~2010~~2011 was $(21,~~313~~466,000) or $(0.1811) per share compared to a net loss of $(2,~~606~~ 313,000) or $(0.2118) per share for fiscal ~~2009~~2010.

The accompanying Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. The audit reports relating to the Consolidated Financial Statements for the years ended September 3, ~~2010~~2, ~~August~~2011 ~~28, 2009~~ and ~~August~~September 293, ~~2008~~2010 contain explanatory paragraphs regarding the Company’s ability to continue as a going concern.

2119

Current Financial Position and Liquidity

During the first, second, third and fourth quarters of fiscal ~~2010~~2011 bookings were approximately $13.~~8 million~~2, $20.~~1 million~~7, $31.06 ~~million~~ and $10.~~4 million~~9, respectively. These fiscal ~~2010~~2011 bookings and fiscal ~~2011~~2012 bookings to date, as well as our fiscal ~~2009~~2010 bookings, were well below our expectations and internal forecasts primarily as a result of customer delays in purchasing decisions, deferral of project expenditures and general adverse economic and credit conditions.

Our bookings and revenues during fiscal ~~2010~~2011 and to date have been insufficient to attain profitable operations and to provide adequate levels of cash flow from operations. Our near term liquidity and ability to continue as a going concern ~~will~~is ~~depend~~dependent ~~upon~~on our ability to ~~increase~~timely collect our ~~bookings~~existing accounts receivable balances and to generate sufficient new orders and revenues in the very near term to ~~attain~~ ~~profitable~~provide sufficient cash flow from operations to pay our current level of operating expenses, to provide for inventory purchases and to ~~generate~~reduce ~~sufficient~~past ~~cash~~due ~~flow~~amounts ~~from operations~~owed to vendors and service providers. ~~Should~~No ~~increased~~assurances ~~revenues~~may ~~not~~be ~~materialize,~~given wethat ~~are~~the ~~committed~~Company will be able to ~~further~~ ~~reducing~~achieve ~~operating~~sufficient ~~costs~~levels toof ~~bring~~new ~~them~~orders in ~~line~~the ~~with~~near ~~reduced~~term ~~revenue~~ to provide adequate levels of cash flow from operations. Should we be unable to achieve near term profitability and generate sufficient cash flow from operations ~~and if we are unable to sufficiently reduce operating costs~~, we would need to raise additional capital or ~~increase~~obtain ~~our~~additional borrowings. Nobeyond ~~assurances~~our ~~can~~existing beloan ~~given~~facility. ~~that~~We ~~operating~~currently ~~costs~~have ~~can be~~limited ~~sufficiently~~sources ~~reduced~~of capital, orincluding ifthe ~~required,~~public and private placement of equity securities and additional debt financing. No assurances can be given that additional capital or borrowings would be available to allow us to continue as a going concern. If wenear term shippable bookings are ~~unable~~ insufficient to ~~continue~~provide asadequate alevels ~~going~~of ~~concern,~~near term liquidity and any required additional capital or borrowings are unavailable we will likely be forced to ~~seek~~enter ~~protection under~~into ~~the~~ federal bankruptcy ~~laws~~proceedings. (See Note 1 to the Consolidated Financial Statements).

At September 32, ~~2010~~2011, our primary source of liquidity for cash flows was aour $4,250,000 loan facility, which ~~matures~~initially matured on April 7, 2011. The loan facility automatically renews for successive twelve (12) month periods provided, however, the lender may terminate the facility by providing a ninety (90) day written notice of termination at any time after April 7, 2011. During fiscal ~~2010~~2011, our line of credit net borrowings increased $1400,~~051,~~000 to the outstanding balance of $34,~~850~~250,000 at September 32, ~~2010~~2011 from $23,~~799~~850,000 at ~~August~~September 283, ~~2009~~ 2010. At November 115, ~~2010~~2011, the outstanding balance on the loan facility ~~amounted~~remained toat $4,~~100~~250,000 and our cash balances were approximately $~~351~~275,000.

Operating activities provided $71787,000 of cash and investing activities used $~~895~~943,000 of cash, which consisted of capitalized software additions of $~~848~~899,000, and equipment additions of $3944,000 ~~and $8,000 for license agreements and legal fees related to the filing of applications for various patents and trademarks~~. (See the Liquidity and Capital Resources section for further discussion.)

Current Developments

~~We announced~~At ~~our~~the ~~new~~2011 Digital Signage ~~solution~~Expo atin ~~the~~February ~~2010~~2011, ~~Digital~~we ~~Signage~~presented ~~Expo~~a ~~in February~~variety ~~2010~~of ~~and~~features atfor ~~InfoComm~~our ~~2010~~digitial insignage ~~June~~products ~~2010.~~including ~~Our~~our ~~Digital~~Open ~~Signage~~Ingest solution ~~includes~~ for CompelConnect.com™ ~~SaaS~~controlled ~~(software-as-~~digital signs, a~~-service)~~ ~~network~~blending ~~control~~of ~~and iPump®~~live ~~media~~video ~~players.~~feeds Itwith isdigital ~~designed~~signage tousing ~~seamlessly~~Apantac’s ~~scale~~Multiviewer ~~from~~and a ~~pilot~~preview toof ~~a multi-site~~our ~~installation~~new ~~and~~Media ~~provides~~Library ~~signage~~Access ~~creation~~mode ~~tools~~for WEGENER iPump® media servers to ~~design~~support ~~and control~~training programs requiring video, ~~graphic~~on ~~and~~demand. ~~text~~The ~~sequences,~~Open ~~along~~Ingest ~~with~~solution ~~scheduling~~helps ~~tools~~organizations ~~to maximize~~distribute the ~~use~~workload of ~~local~~updating ~~advertising~~multiple signs to more people, ~~branding~~in a secure fashion, and ~~emergency notifications~~without sacrificing an organization’s unique business rules. ~~Our~~ The Apantac Multiviewer creates opportunities for organizations to blend existing subscription-based live programming with WEGENER CompelConnect.com™ digital signage. ~~products~~The ~~are~~iPump ~~targeted~~library ~~for~~mode ~~use~~is ~~by advertising~~an ~~agencies,~~updated ~~banks,~~approach ~~corporate~~to ~~communications,~~accessing ~~private~~stored videos on WEGENER iPump media ~~networks, healthcare,~~players. The ~~houses~~new oflibrary ~~worship~~mode supports custom on-screen-display graphics, ~~retail~~a full featured remote control and ~~systems~~remote ~~integrators~~access ~~for~~to ~~support~~media ~~of multiple~~through ~~clients,~~a ~~marketing~~web ~~zones~~interface. In ~~and~~addition ~~applications~~the ~~simultaneously~~library mode supports training programs requiring video on demand capability.

At the ~~2010~~ 2011 National Association of Broadcasters (NAB) Convention in April ~~2010~~2011, we exhibited aCompel® ~~number~~network ofcontrolled ~~innovative~~ media ~~localization~~applications ~~solutions~~for tobroadcast ~~promote~~television, ~~the various~~radio ~~ways file-based broadcasting tools can be used to enhance commercial and private media~~ networks, ~~with local audio~~enterprise, ~~graphic~~retail and ~~video~~non-profit ~~content.~~organizations ~~For broadcast~~featuring ~~television~~unique ~~applications,~~media welocalization ~~presented~~strategies ~~our~~by ~~next~~optimizing ~~generation~~control of ~~solutions to~~a ~~increase~~vast ~~advertising~~array ~~and~~of ~~branding~~media ~~opportunities~~play-out ~~for content providers~~features. ~~Combining~~Our ~~file-based~~enhanced ~~workflows~~localization ~~and~~strategies ~~standard~~included ~~broadcasting techniques for live video, we introduced methods to insert and overlay multimedia elements over live high definition~~ (HDi) ~~or standard definition (SD)~~ video onprogram ainsertion ~~network-wide scale~~ which ~~will~~allows ~~allow~~users ~~content~~to ~~providers~~distribute toand ~~customize national~~store ~~live~~video ~~feeds~~programs ~~with~~or ~~static~~advertisements ~~and~~at ~~moving~~each ~~text~~receive ~~messages~~site, ~~transparent~~remotely ~~graphics overlays~~schedule ~~and~~ local insertions of stored video~~. Our~~ ~~basic~~over ~~configuration is an add-on to~~ a ~~standard~~live ~~satellite~~feed, ~~receiver~~or ~~network utilizing Compel® network control and iPump® 6400 media servers. For radio broadcasting~~alternately, weuse ~~exhibited~~the ~~our~~stored ~~and iPump®~~content ~~6420 professional audio server which allows radio broadcasters new opportunities~~ to ~~combine~~ ~~file-based~~run ~~content~~custom ~~with~~playlists ~~live~~at ~~broadcasts~~each ~~including,~~site ~~(i) ShowShifting™ which~~eliminating ~~allows~~the ~~either~~need ~~affiliates~~for orreal ~~the~~time network ~~operator to~~feeds; ~~specify when and how often specific syndication programs play and~~ (ii) ~~MicroCasting™~~efficient -radio ~~which~~broadcasting ~~provides~~using ~~remote~~broadcasters ~~affiliate~~to ~~stations with~~pre-position ~~highly~~select ~~customized~~radio ~~content while retaining all of the normal network features including: local ad insertion~~programming, ~~local~~ liners, ~~downstream equipment cueing,~~ and ~~Radio~~advertisements ~~Broadcast~~at ~~Data~~each ~~System~~site, ~~(RBDS)~~blend ~~data. Our~~stored ~~Compel®~~content ~~network control~~with ~~platform~~live ~~included~~programming ~~refinements specifically designed for central-casting radio networks including supporting thousands of grouping options~~ and ~~combinations~~ toenable ~~assist~~each ~~dynamic~~site ~~content distribution~~ to ~~affiliates. In addition~~record welive ~~exhibited~~shows ~~our~~for ~~media localization network control tool which included CompelConnect.com™ , a new software~~time-~~as-a-service~~shifted broadcasts; (~~SaaS~~iii) ~~which~~broadcast ~~provides management~~signage ~~tools~~allowing ~~for~~users ~~content~~to ~~distribution,~~enhance ~~scheduling,~~live ~~playout~~network ~~control~~feeds ~~and continuous~~with ~~monitoring~~unique oftext ~~iPump®~~and ~~media receivers/players.~~graphic ~~Using~~overlays ~~partitioned~~and ~~web~~to ~~access,~~schedule ~~clients~~video ~~have access to a full~~re-~~featured~~sizing ~~remote~~at ~~Compel®~~specific ~~network control~~times ~~system~~to ~~via~~increase ~~the~~signage ~~Internet~~opportunities.

2220

~~On February~~In 17addition, ~~2010,~~ we ~~received notification from The Nasdaq Stock Market (“Nasdaq”) (the “Notification”), that as a result of the information~~ presented at ~~an appeal hearing held on January 13, 2010, the Panel granted~~ our ~~request~~Open ~~to remain~~Ingest ~~listed on Nasdaq subject to conditions stipulated in the Notification. The Notification stipulated that on or before June 7~~solution, ~~2010~~ ~~(the~~demonstrated ~~“Exception Deadline”), we were required to have shareholders’ equity of at least $2,500,000 and~~ our ~~common~~multi-video ~~stock~~inputs ~~to maintain a minimum bid price of $1.00 per share~~ for adigital ~~period~~signage ofby ~~ten~~combining ~~consecutive~~digital ~~trading~~signage ~~days. On April~~with 8,local ~~2010,~~video ~~we notified the Panel that based on our current level of existing backlog of orders scheduled to ship in our fiscal third quarter ending May 28, 2010,~~ and ~~our~~demonstrated expected level of new shippable bookings for the third quarter, we did not expect that we would be able to comply with the Nasdaq requirements by the Exception Deadline. On April 20, 2010, the Company received notification from Nasdaq that the Panel had determined to delist the Company’s common stock shares. Nasdaq suspended trading of our ~~common~~Media ~~stock~~Library ~~shares effective~~Access atwhich ~~the~~allows ~~open of trading on April 22, 2010 and our common stock has not traded on NASDAQ since that time. As a result, on April 22, 2010, our common stock began trading over~~end-~~the-counter~~users ~~under the symbol WGNR.PK. On June 9, 2010, NASDAQ filed a Form 25 with the Securities and Exchange Commission~~ to ~~complete the~~view ~~delisting.~~media ~~The~~on ~~delisting~~local ~~became~~displays ~~effective~~or ~~ten~~wirelessly ~~days~~via ~~after~~mobile ~~the filing of Form 25~~devices.

During the second quarter of fiscal 2007, the Board of Directors formed a committee of independent directors to explore strategic and financial alternatives to enhance shareholder value. We retained an outside financial advisor to assist us in this evaluation process. The strategic alternatives included: (i) technology licensing agreements, (ii) product development and marketing arrangements, joint ventures or strategic partnerships, (iii) strategic acquisitions, mergers or other business combinations, or (iv) the merger or sale of all or part of the Company. On July 16, 2009, we entered into a non-binding letter of intent (the “LOI”) with Sencore, Inc. (“Sencore”), a portfolio company of The Riverside Company, a private equity firm, regarding a possible acquisition of Wegener Corporation by Sencore. The exclusivity period set forth in the LOI expired September 13, 2009. Wegener Corporation’s Board of Directors unanimously voted to terminate the LOI and on September 17, 2009, officially notified Sencore of the termination. Effective October 8, 2009, based on its completion of a twelfth amendment to our revolving line of credit and term loan facility, Wegener Corporation’s Board of Directors voted to conclude the strategic alternatives review process and disband the committee. (See the Liquidity and Capital Rescources section for further discussion.)

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the components of the results of operations as a percentage of revenue:

	September 3, 2010			August 28, 2009			August 29, 2008
	September 2, 2011			September 3, 2010
Revenues, net		100.0	%		100.0	%		~~100.0~~	%
Cost of products sold		70.1			69.5			60.9
Cost of revenues		65.2			70.1
Gross margin		2934.98			3029.59			~~39.1~~
Selling, general, and administrative		3733.73			3437.57			~~25.8~~
Research and development		1213.95			1512.59			~~14.9~~
Gain on sale of patents		-			-			(4.2	)
Operating (loss) income		(12.0	)		(20.6	)
Operating (loss) income		(20.6	)		(19.6	)		2.5
Interest expense		(4.1	)		(5.3	)
Interest expense		(5.3	)		(1.0	)		(0.7	)
Net (loss) earnings		(16.1	)%		(25.9	)%
Net (loss) earnings		(25.9	)%		(20.6	)%		1.8	%

~~During the~~Net ~~fourth~~loss ~~quarter~~for ~~of fiscal 2008 and in fiscal 2009, we made reductions in headcount to bring~~ the ~~number~~year ofended ~~employees~~September ~~at August 28~~2, ~~2009~~2011, towas ~~63 compared to 91 at August 29~~$(1, ~~2008~~466,000) ~~and~~or ~~reduced engineering consulting and other operating and overhead expenses~~$(0. ~~Beginning~~11) inper ~~January 2009~~share, wecompared ~~reduced~~to ~~paid working~~a ~~hours~~net ~~Company-wide~~loss ~~by approximately 10%. During the first and second quarters~~ of ~~fiscal 2010~~$(2,313,000) weor ~~made~~$(0.18) ~~further~~per ~~reductions~~share infor ~~headcount to bring~~ the ~~current~~year ~~number~~ended ofSeptember ~~employees~~3, ~~to 49~~2010.

~~Net~~Revenues ~~loss~~ for ~~the~~fiscal ~~year~~2011 ~~ended~~increased ~~September 3~~$189,000, ~~2010~~or 2.1%, ~~was~~to $(29,~~313~~110,000) orfrom $(08,921,000 in fiscal 2010.~~18)~~ Our ~~per~~revenue ~~share, compared~~levels are not subject to significant annual fluctuations in unit pricing. Revenues for fiscal 2011, were adversely affected by lower than expected shippable bookings primarily as a ~~net~~result ~~loss~~of customer delays in purchasing decisions and a deferral of ~~$(2~~project expenditures. Product volumes are driven by product mix of orders. In addition,~~606~~ revenues and order backlog are subject to the timing of significant orders from customers,~~000)~~ orand ~~$(0~~as a result revenue levels may fluctuate on a quarterly and yearly basis.21 Fiscal 2011 revenues included (i) ~~per~~continued ~~share~~shipments ~~for~~of ~~the~~Encompass ~~year~~LE2 ~~ended August~~audio 28receivers to business music provider, ~~2009~~Muzak LLC, (ii) ipump® 6420 audio media servers to Salem Communications and ~~net~~to ~~earnings~~Educational Media Foundation for network expansion projects and (iii) shipments of ~~$383,000~~Unity® or550 ~~$0.03~~receivers ~~per~~to ~~share~~a faith-based private network for ~~the~~continued ~~year ended~~network ~~August~~expansion. 29In addition, ~~2008~~Unity® 550 receivers were shipped to Microspace to provide digital signage displays to their retail client. ~~Fiscal~~ ~~2008~~In ~~net~~addition, ~~earnings~~fiscal 2011 revenues included aipump® ~~gain~~562 ~~on sale~~enterprise ofmedia ~~patents~~receivers offor ~~$894~~an international satellite digital signage project,~~000~~ ipump® 6400 media server equipment for an international health and education network and NAVE IIc® encoders used to encode Nielsen Media Research identification tags into media for Nielsen program ratings.

23WCI’s backlog of orders scheduled to ship within 18 months was $3,534,000 at September 2, 2011 and $5,972,000 at September 3, 2010. The total multi-year backlog at September 2, 2011 was also $3,534,000 compared to $6,100,000 at September 3, 2010. Approximately $2,642,000 of the September 2, 2011, backlog is expected to ship during fiscal 2012. At September 2, 2011, three customers accounted for 88% of the eighteen month backlog and 84% of the backlog expected to ship during fiscal 2012.

~~Revenues~~Sales ~~for~~to ~~fiscal~~a ~~2010~~relatively ~~decreased $3,734,000,~~small ornumber ~~29.5%,~~of tomajor ~~$8,921,000~~customers ~~from~~have ~~$12,655,000~~typically incomprised ~~fiscal 2009. Direct~~a ~~Broadcast~~majority ~~Satellite~~of ~~(DBS)~~our revenues ~~(including~~and ~~service revenues)~~that intrend ~~fiscal~~is ~~2010~~expected ~~decreased $3,727,000, or 29.5%,~~ to ~~$8,904,000 from $12,631,000 in fiscal 2009~~continue. ~~The~~In ~~decrease in revenues in~~ fiscal ~~2010 was~~2011, ~~due~~two tocustomers aaccounted ~~decrease~~for inapproximately ~~the~~24.6% ~~volume~~and 17.7% of ~~shippable~~revenues, ~~bookings~~respectively. ~~Our revenue~~(See ~~levels~~Note ~~are~~13 ~~not subject~~ to ~~significant~~the ~~annual~~Consolidated ~~fluctuations~~Financial inStatements, ~~unit pricing. Product~~“Segment ~~volumes~~Information ~~are~~and ~~driven by product mix of orders~~Concentrations”.) InFuture ~~addition,~~ revenues ~~and order backlog~~ are subject to the timing of significant orders from customers, and asare adifficult ~~result~~to ~~revenue levels may fluctuate on a quarterly and yearly basis~~forecast. ~~Fiscal~~As 2010 revenues included continued shipments of (i) Encompass LE2 to business music provider, Muzak LLC., (ii) Unity® 4600, Unity® 550 and Unity® 4650 receivers to Roberts Communications Network for network upgrades, (iii) shipments of our Unity® 550 for network upgrades to a ~~faith-based~~ ~~private network and (iv) shipments of Compel® network control software~~result, ~~iPump®~~ ~~6420~~we ~~media~~expect ~~servers~~future ~~and Unity®~~revenue ~~4600~~levels ~~receivers to BBC World Services for network upgrades. In addition, revenues included shipments of our network control system~~ and ~~Unity®~~operating ~~202~~results ~~enterprise audio receivers~~ to ~~a new~~continue ~~international customer for upgrades~~ to ~~its~~fluctuate ~~existing~~from ~~background~~quarter music network, shipments of iPump® 6420 media servers and Compel® network control software for Educational Media Foundation’s network expansion and continued shipments of our SpoTTrac® and NAVE IIc® encoders used to ~~encode Nielsen Media Research identification tags into media for Nielsen program ratings~~quarter.

~~Revenues for~~International ~~fiscal~~sales ~~2009~~were ~~decreased~~ $82,~~839~~629,000, or 4128.19%, toof ~~$12,655,000 from $21,494,000 in fiscal 2008. Direct Broadcast Satellite (DBS)~~ revenues ~~(including service revenues)~~ in fiscal ~~2009~~2011 ~~decreased~~compared to $81,~~834~~802,000, or 4120.2%, toof ~~$12,631,000 from $21,465,000 in fiscal 2008. The decrease in~~ revenues in fiscal ~~2009~~ ~~was due to a decrease in the volume of shippable bookings~~2010. ~~Fiscal~~International ~~2009 included revenues from~~ shipments ofare ~~(i)~~generally ~~our iPump® 6420~~project ~~media servers and Compel® network control software to Dial Global~~specific, ~~Comtelsat De Mexico~~ and totherefore ~~Educational~~revenues ~~Media Foundation~~are ~~for~~subject ~~their network expansion, (ii) continued shipments of our Encompass LE2, our next generation business music audio receiver,~~ to ~~business music~~variations ~~provider~~from ~~Muzak~~year ~~LLC, and (iii) our SpoTTrac® and NAVE IIc® encoders used~~ to ~~encode~~year ~~Nielsen~~based ~~Media~~on ~~Research~~the ~~identification~~timing ~~tags~~of ~~into~~customer ~~media for Nielsen program ratings~~orders. InAdditional ~~addition,~~financial ~~shipments~~information inon ~~fiscal~~geographic ~~2009 continued~~areas tois ~~MegaHertz~~provided ~~for~~in ~~distribution~~Note of13 ~~our products~~ to the ~~U.S.~~consolidated ~~cable market~~financial statements.

~~WCI's backlog~~Gross profit as a percent of ~~orders~~sales ~~scheduled~~was 34.8% in fiscal 2011 compared to ~~ship~~29.9% ~~within~~in 18fiscal ~~months~~2010. Gross ~~was~~profit margin dollars increased $5498,~~972,~~000, ator ~~September 3~~18.7%, ~~2010,~~to $43,~~316~~167,000 atin ~~August~~fiscal ~~28,~~2011 ~~2009,~~from ~~and~~ $82,~~491~~669,000 atin ~~August~~fiscal ~~29, 2008~~2010. ~~The~~Fiscal ~~total~~2011 ~~multi-year~~gross ~~backlog~~margin atpercentages ~~September~~and 3,dollars ~~2010~~benefited ~~was~~ from a recovery of inventory reserve provisions in the amount of $6269,~~100,000~~500 ~~compared~~resulting from the sale of fully reserved inventory. Warranty provisions charged to cost of revenues were $6112,~~800,~~000 ~~at August~~in ~~28,~~fiscal ~~2009.~~2011 ~~Approximately~~ and $350,~~542,~~000 ofin ~~the~~fiscal ~~September~~2010. 3,Profit margins in fiscal 2011 and 2010 included inventory reserve charges of $110,000 ~~backlog~~and is$90,000, ~~expected~~respectively, to ~~ship~~provide ~~during~~for slow-moving and excess inventory primarily associated with first generation digital products. Capitalized software amortization expenses included in cost of revenues in fiscal 2011~~. At~~ ~~September~~were 3$874, ~~2010~~000, ~~two~~compared ~~customers~~to ~~accounted~~$850,000 ~~for~~in ~~87%~~fiscal of2010. ~~the~~Capitalized ~~eighteen month~~software ~~backlog~~amortization ~~and~~expenses ~~88%~~in offiscal ~~the~~2012 ~~backlog~~are expected to ~~ship~~approximate ~~during~~ fiscal 2011 expenses.

Sales to a relatively small number of major customers have typically comprised a majority of our revenues and that trend is expected to continue. In fiscal 2010, two customers accounted for approximately 22.9% and 10.8% of revenues, respectively. (See Note 13 to the Consolidated Financial Statements, “Segment Information and Concentrations”.) Future revenues are subject to the timing of significant orders from customers and are difficult to forecast. As a result, we expect future revenue levels and operating results to continue to fluctuate from quarter to quarter.21

~~International~~Selling, ~~sales~~general, ~~were~~and administrative (SG&A) expenses decreased $1327,~~802,~~000, or 20 9.27%, ofto ~~revenues~~$3,035,000 in fiscal ~~2010~~2011 ~~compared~~from to $13,~~595~~362,000 orin 12fiscal 2010.6 As a percentage of revenues, SG&A expenses were 33.3% of revenues in fiscal ~~2009,~~2011 and 37.7% in fiscal 2010. Corporate SG&A expenses in fiscal 2011 increased $391,~~686,~~000, or 17.21%, ofto ~~revenues~~$622,000 from $531,000 in fiscal ~~2008~~ 2010. ~~International~~Corporate ~~shipments~~SG&A ~~are~~expenses in ~~generally~~fiscal ~~project~~2011 ~~specific~~included non-cash share-based compensation expenses of approximately $111,000 for stock option and ~~therefore~~ ~~revenues~~restricted ~~are~~stock ~~subject~~awards compared to ~~variations~~none in the same period of fiscal 2010. WCI’s SG&A expenses decreased $417,000, or 14.7%, to $2,414,000 in fiscal 2011 from ~~year~~$2,831,000 in fiscal 2010. WCI’s SG&A severance expenses in fiscal 2011 decreased $147,000 to ~~year~~$24,000 ~~based~~from on$171,000 in the ~~timing~~ same period of ~~customer~~fiscal ~~orders~~2010. Additional ~~financial~~decreases ~~information~~in ~~on geographic~~SG&A ~~areas~~expenses isin ~~provided~~fiscal 2011 included (i) salaries and related payroll costs of $192,000 due to a reduction in ~~Note~~headcount; 13(ii) general overhead costs of $63,000 due to the ~~consolidated~~cost ~~financial statements~~reduction efforts of overhead expenses; and (iii) professional fees of $80,000. These decreases were offset by an increase in bad debt provisions of $53,000.

~~Gross~~Research ~~profit~~and asdevelopment aexpenditures, ~~percent~~including ofcapitalized ~~sales~~software ~~was 29.9%~~development incosts, ~~fiscal~~were ~~2010~~$2,130,000 ~~compared~~or ~~to 30~~22.51% of revenues in fiscal ~~2009,~~2011 and ~~39.~~$1,996,000 or 22.4% of revenues in fiscal ~~2008~~ 2010. ~~Gross~~During ~~profit~~the ~~margin~~first ~~dollars~~quarter ~~decreased~~of $1fiscal 2011,~~187~~ to increase engineering capacity,~~000,~~ orthe ~~30.8~~10%, ~~to $2,669,000~~reduction in ~~fiscal~~company-wide ~~2010~~paid ~~from~~working ~~$3,856,000~~hours inwas ~~fiscal~~eliminated ~~2009~~for engineering personnel. ~~Fiscal~~The ~~2008 gross~~increase ~~profit~~in ~~margin~~expenditures ~~dollars~~during ~~amounted~~fiscal to2011 ~~$8,398,000. Warranty provisions~~compared ~~charged~~ to ~~cost~~fiscal of2010 ~~products~~was ~~sold~~related ~~were~~to ~~$50,000~~the increase in ~~fiscal~~working ~~2010,~~hours ~~none~~which ~~in fiscal~~was ~~2009~~partially ~~and~~offset ~~$50,000~~by a reduction in ~~fiscal~~average ~~2008. Profit~~head ~~margins~~count in fiscal ~~2009 and~~2011 ~~2008~~compared ~~were~~to ~~favorably~~the ~~impacted~~same byperiod ~~the~~in ~~reversal~~fiscal of2010. Software andevelopment ~~accrued~~costs ~~warranty liability~~totaling of $~~130~~899,000 and $~~310~~848,000 were capitalized during fiscal 2011 and 2010, respectively,. The ~~for~~increases ~~previously~~in ~~estimated warranty~~capitalized ~~provisions~~software ~~that~~costs ~~were~~in nofiscal ~~longer~~2011 ~~required. Profit~~compared ~~margins~~to in fiscal 2010 were primarily due to the increase in working hours. Research and ~~2009~~development ~~included~~expenses, ~~inventory~~excluding ~~reserve~~capitalized ~~charges~~software ofdevelopment ~~$90~~costs,~~000~~ ~~and~~were $~~630~~1,~~000~~232, ~~respectively,~~000 toor ~~provide~~13.5% ~~for~~of ~~slow-moving~~revenues in fiscal 2011 and ~~excess~~$1,148,000 ~~inventory~~or ~~primarily associated~~12.9% ~~with~~of ~~first~~revenues ~~generation~~in ~~digital~~fiscal ~~products~~2010. NoSubsequent ~~inventory~~to ~~provisions~~September ~~were recorded~~2, in2011, ~~fiscal~~we ~~2008~~added one additional engineer. ~~Capitalized~~ ~~software~~We ~~amortization~~currently ~~expenses included~~anticipate inadding ~~cost~~two ofadditional ~~products~~engineering ~~sold~~staff into ~~fiscal~~accomplish ~~2010~~research ~~were~~and ~~$850,000,~~development ~~compared~~activities ~~to $949,000~~scheduled induring fiscal ~~2009~~2012 and ~~$1,238,000~~beyond. Should inadditional ~~fiscal~~engineering ~~2008.~~resources ~~Capitalized~~be ~~software amortization~~required ~~expenses~~ in fiscal ~~2011~~2012, ~~are~~we ~~expected~~believe toengineering ~~approximate~~consulting ~~fiscal~~services ~~2010 expenses~~would be sufficiently available.

24Interest expense was $367,000 in fiscal 2011 compared to $472,000 in fiscal 2010. The decrease was primarily due to a reduction in the annual interest rate on our loan facility from 12% to 8% effective at the beginning of fiscal 2011.

~~Selling,~~No ~~general,~~income ~~and~~tax ~~administrative (SG&A)~~benefit ~~expenses~~was ~~decreased~~recorded ~~$1,009,000,~~for orfiscal ~~23.1%,~~2011 due to ~~$3,362,000~~an increase in ~~fiscal~~the ~~2010 from~~deferred ~~$4,371,000~~tax inasset ~~fiscal~~valuation ~~2009~~allowance. AsIn afiscal ~~percentage of revenues~~2011, ~~SG&A expenses~~the ~~were~~deferred ~~37.7%~~tax ofasset ~~revenues~~increased ~~in fiscal 2010 and 34.5% in fiscal 2009. Corporate SG&A expenses in fiscal 2010 decreased~~ $~~465~~528,000, orprimarily ~~46.7%,~~due to ~~$531,000~~ ~~from~~an ~~$996,000~~increase in ~~fiscal~~the ~~2009. The~~net ~~decrease~~operating ~~was~~loss ~~mainly~~carryforward. ~~due to lower~~The ~~professional~~increase ~~fees~~in ~~and~~the ~~director~~deferred ~~compensation. WCI’s~~tax ~~SG&A~~asset ~~expenses decreased~~was ~~$544,000,~~offset orby ~~16.1%,~~a tocorresponding ~~$2,831,000~~increase in ~~fiscal~~the ~~2010~~valuation ~~from~~allowance. No ~~$3,375,000~~income ~~in fiscal~~tax ~~2009. WCI’s~~benefit ~~SG&A~~was ~~expenses~~recorded in fiscal 2010 ~~included approximately~~due ~~$171,000 of severance costs compared~~ to ~~approximately~~an ~~$62,000~~increase in the ~~same~~deferred ~~period~~tax ofasset ~~fiscal~~valuation ~~2009~~allowance. ~~The~~In ~~increase~~fiscal ~~in SG&A severance costs of $109~~2010,~~000~~ ~~were~~the ~~offset~~deferred bytax ~~decreases~~asset inincreased ~~(i) salaries and related payroll costs of~~ $~~488~~833,000 primarily due to ~~the~~an ~~reductions~~increase in ~~headcount~~the ~~and~~net aoperating ~~10%~~loss ~~reduction~~carryforward. At ~~in company-wide~~September ~~paid working hours beginning in January 2009~~2, ~~(ii) general overhead costs of $214~~2011,~~000~~ ~~due~~net todeferred ~~the~~tax ~~cost~~assets ~~reduction efforts, elimination~~ of ~~401(k) company matching expense and reductions in loan origination fee amortization expense , (iii) in-house commission expenses of~~ $327,~~000~~978, ~~and (iv) professional fees of $25,~~000. ~~These decreases~~ were ~~offset~~fully reserved by ana ~~increase~~valuation ~~in bad debt provisions of $80,000 and increased sales and marketing expenses of $27,000~~allowance.

~~Selling, general, and administrative (SG&~~A) ~~expenses~~valuation ~~decreased~~allowance ~~$1,168,000,~~is orestablished ~~21.1%,~~when toit ~~$4,371,000~~is in“more ~~fiscal~~likely ~~2009 from~~than ~~$5,539,000~~not” inthat ~~fiscal~~all ~~2008. As~~or a ~~percentage~~portion of ~~revenues,~~a ~~SG&A expenses~~deferred ~~were~~tax ~~34.5%~~asset ofwill ~~revenues~~not inbe ~~fiscal 2009 and 25~~realized.8% A inreview ~~fiscal~~of ~~2008. Corporate~~all ~~SG&A~~available ~~expenses~~positive inand ~~fiscal~~negative ~~2009~~evidence ~~decreased~~must ~~$150,000,~~be orconsidered ~~13.1%,~~in ~~to $996,000~~judging ~~from~~the ~~$1,146,000~~likelihood inof ~~fiscal~~realizing ~~2008~~tax benefits. ~~The~~Forming ~~decrease~~a ~~was~~conclusion ~~mainly~~that ~~due to lower~~a ~~professional~~valuation ~~fees~~allowance ~~and~~is ~~director~~not ~~compensation. WCI’s~~needed ~~SG&A~~is ~~expenses decreased~~difficult ~~$1,018,000,~~when orthere ~~23.2%,~~is tonegative ~~$3,375,000~~evidence insuch ~~fiscal~~as ~~2009~~cumulative ~~from~~losses ~~$4,393,000~~ in ~~fiscal~~ ~~2008~~recent years. ~~The~~Cumulative ~~decrease~~losses inare ~~WCI’s~~one ~~SG&A~~of ~~expenses~~the inmost ~~fiscal~~difficult ~~2009 was~~pieces ~~mainly due to decreases in (i) salaries and related payroll costs~~ of ~~$318,000~~ ~~primarily~~negative ~~due~~evidence to aovercome ~~10% reduction~~ in ~~company-wide~~the ~~paid~~absence ~~working~~of ~~hours beginning~~sufficient inexisting ~~January~~orders ~~2009~~ and ~~reductions~~backlog ~~in headcount,~~ (~~ii)~~versus ~~sales~~forecasted ~~and~~future ~~marketing expenses of $270,000, (iii~~orders) ~~general~~supporting ~~overhead~~a ~~costs~~return ~~of $243,000 due~~ to ~~reductions in~~profitability. ~~recruiting~~Additional ~~and~~orders ~~training expenses~~ and ~~overall~~backlog ~~cost~~are ~~reduction~~currently ~~efforts~~needed ~~of overhead~~for ~~expenses,~~profitability ~~(iv)~~ in~~-house~~ ~~commission~~fiscal ~~expenses~~2012. Our ofassessment ~~$147,000~~indicated ~~due~~that to a ~~decrease~~ infull ~~bookings,~~valuation ~~and~~allowance ~~(v)~~for ~~professional~~our ~~fees~~net ofdeferred ~~$40,000.~~tax ~~SG&A~~assets ~~expenses included~~was ~~$8,000~~required as of ~~noncash~~September ~~share-based~~2, ~~compensation~~2011 ~~expense~~and inSeptember ~~fiscal~~3, ~~2008 compared to none in fiscal 2009~~2010.

~~Research~~ At ~~and~~September ~~development~~2, ~~expenditures~~2011, ~~including~~ ~~capitalized~~we ~~software~~had ~~development~~a ~~costs,~~federal ~~were~~net operating loss carryforward of $115,~~996~~614,000, ~~or 22.4%~~ of ~~revenues~~ inwhich ~~fiscal 2010,~~ $21,~~959~~438,000 orexpires ~~23.4% of revenues~~ in fiscal ~~2009~~2021, ~~and~~ $41,~~427~~296,000 ~~or 20.6% of revenues~~ in fiscal ~~2008. The~~2023, ~~decrease~~$3,396,000 in ~~expenditures~~ ~~during~~ fiscal ~~2010~~2024, ~~compared~~$1,454,000 ~~to fiscal 2009 was mainly due to lower salaries as a result of reduced head count and the 10% reduction~~ in ~~company-wide paid working hours beginning in January 2009. The decrease in expenditures during~~ fiscal 2009 compared to fiscal 2008 was mainly due to lower salaries as a result of the reduced head count and the 10% reduction in company-wide paid working hours and lower consulting costs. Software development costs totaling $8482025,~~000,~~ $~~997,000, and $~~1,~~214~~755,000 ~~were~~in ~~capitalized during~~ fiscal ~~2010~~2026, ~~2009 and 2008~~$265, ~~respectively. The~~000 ~~decreases~~ in ~~capitalized software costs in~~ fiscal ~~2010~~ compared to fiscal 2009 were primarily due to the reductions in headcount. The decreases in capitalized software costs in fiscal 2009 compared to fiscal 2008 were related to completed projects and the reductions in headcount and consulting costs. Research and development expenses2027, ~~excluding~~ ~~capitalized software development costs, were~~ $12,~~148~~221,000 ~~or 12.9% of revenues~~ in fiscal ~~2010~~2029, $12,~~962~~405,000 ~~or 15.5% of revenues~~ in fiscal ~~2009,~~2030 and $31,~~213~~384,000 ~~or 14.9% of revenues~~ in fiscal ~~2008~~2031. Additionally, Wewe ~~believe~~had ~~current~~an ~~staffing levels~~alternative ~~are~~minimum ~~adequate~~tax tocredit ~~accomplish~~of ~~research and development activities in fiscal 2011. Should additional engineering resources be required in fiscal 2011~~$134,000 wewhich ~~believe~~was ~~engineering~~fully ~~consulting~~offset ~~services~~by ~~would~~the bevaluation ~~sufficiently available~~allowance.

During the fourth quarter of fiscal 2008, we completed the sale of selected patents and patent applications to EPAX Consulting Limited Liability Company for net proceeds of approximately $1,075,000 and recorded a gain of $894,000. The group of patents and patent applications sold relate to product distinction, system architecture and IP networking. We retained a worldwide, non-exclusive, royalty-free license under the patents for use in both existing and future products.22

Interest expense was $472,000 in fiscal 2010 compared to $129,000 in fiscal 2009 and $159,000 in fiscal 2008. The increase was primarily due to the increase in our loan interest rate and an increase in the line of credit outstanding balances and unsecured promissory note borrowings. Effective September 3, 2010, the annual interest rate on the line of credit borrowings was reduced from 12% to 8%, as further discussed in the Liquidity and Capital Resources section.

No income tax benefit was recorded for fiscal 2010 due to an increase in the deferred tax asset valuation allowance. In fiscal 2010, the deferred tax asset increased $833,000 primarily due to an increase in the net operating loss carryforward. The increase in the deferred tax asset was offset by a corresponding increase in the valuation allowance. In fiscal 2009, the deferred tax asset increased $938,000 primarily due to an increase in the net operating loss carryforward and provision for inventory reserves, and decreased $199,000 due to the expiration of state income tax credits. The net increase of $739,000 in the deferred tax asset was offset by a corresponding increase in the valuation allowance. No income tax expense was recorded for fiscal 2008, due to utilization of net operating loss and alternative minimum tax credit carryforwards. At September 3, 2010, net deferred tax assets of $7,450,000 were fully reserved by a valuation allowance.

A valuation allowance is established when it is “more likely than not” that all or a portion of a deferred tax asset will not be realized. A review of all available positive and negative evidence must be considered in judging the likelihood of realizing tax benefits. Forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years. Cumulative losses are one of the most difficult pieces of negative evidence to overcome in the absence of sufficient existing orders and backlog (versus forecasted future orders) supporting a return to profitability. Additional orders and backlog are currently needed for profitability in fiscal 2011. Our assessment indicated that a full valuation allowance for our net deferred tax assets was required as of September 3, 2010 and August 28, 2009.

At September 3, 2010, we had a federal net operating loss carryforward of $14,219,000, of which $1,438,000 expires in fiscal 2021, $1,296,000 in fiscal 2023, $3,396,000 in fiscal 2024, $1,454,000 in fiscal 2025, $1,755,000 in fiscal 2026, $265,000 in fiscal 2027, $2,221,000 in fiscal 2029 and $2,394,000 in fiscal 2030. Additionally, we had an alternative minimum tax credit of $134,000 which was fully offset by the valuation allowance.

LIQUIDITY AND CAPITAL RESOURCES

We have experienced recurring net losses ~~from operations,~~ which have caused an accumulated deficit of approximately $2021,~~265~~731,000 at September 32, ~~2010 and raised substantial doubt as to our ability to continue as a going concern~~2011. We had a working capital deficit of approximately $34,~~248~~441,000 at September 32, ~~2010~~2011 compared to a working capital deficit of $13,~~139~~248,000 at ~~August~~ ~~28,~~September ~~2009 which compared to working capital of approximately $1~~3,~~053,000~~ ~~at August 29, 2008~~2010.

~~Our~~During ~~cash flow~~the ~~requirements~~first, ~~during~~second, third and fourth quarters of fiscal ~~2010~~2011 bookings were ~~financed~~approximately ~~primarily~~$3.2, by$0.7, ~~our~~$1.6 ~~loan facility~~and $0.9 million, respectively. During fiscal 2010, ~~our~~and ~~net~~fiscal ~~borrowings~~2009 ~~under~~bookings ~~our~~were ~~loan~~$8.3 ~~facility increased~~million and $15.5 million,~~051,000~~ torespectively. These ~~$3,850,000~~bookings atwere ~~September~~well 3below our expectations primarily as a result of customer delays in purchasing decisions, ~~2010~~deferral of project expenditures and general adverse economic and credit conditions.

~~During the~~Our ~~fourth~~backlog ~~quarter~~scheduled ofto ~~fiscal~~ship ~~2008~~within ~~and~~18 inmonths ~~fiscal~~was ~~2009,~~approximately we$3.5 ~~made~~million ~~reductions in headcount to bring the number of employees~~ at ~~August~~September 282, ~~2009,~~2011. The tototal 63multi-year ~~compared~~backlog ~~to 91~~ at ~~August~~September 292, ~~2008~~2011, ~~and~~was ~~reduced~~also ~~engineering~~approximately ~~consulting~~$3.5 ~~and other operating and overhead expenses~~million. ~~Beginning~~Approximately ~~in January 2009 and continuing through out fiscal 2010, we reduced paid working hours Company-wide by approximately 10%~~$2. ~~During~~6 ~~the~~million ~~first and second quarters~~ of ~~fiscal 2010, we made further reductions in headcount to bring~~ the ~~current~~September ~~number of employees to 49. During fiscal 2009 and fiscal 2010~~2, ~~as well as to date in fiscal~~ 2011, ~~due~~backlog tois ~~insufficient~~scheduled cash flow from operations and a maximum borrowing limit under our loan facility, we negotiated extended payment terms with our two offshore vendors and have been extending other vendors beyond normal payment terms. Until such vendors are paid within normal payment terms, no assurances can be given that required services and materials needed to ~~support~~ ~~operations~~ship ~~will~~during ~~continue~~fiscal ~~to be provided~~2012. In addition, no assurances can be given that vendors will not pursue legal means to collect past due balances owed. Any interruption of services or materials would likely have an adverse impact on our operations.

~~During the~~Our ~~first,~~bookings ~~second, third~~ and ~~fourth~~revenues ~~quarters~~during of fiscal ~~2010 bookings were approximately $1.8 million~~2011, ~~$2.1~~as ~~million,~~well ~~$3.0~~as ~~million~~to ~~and~~date ~~$1.4~~in ~~million~~fiscal 2012, ~~respectively.~~ ~~Fiscal~~have ~~2009~~been ~~bookings~~insufficient ~~were~~to ~~approximately~~attain ~~$5.5~~profitable ~~million.~~operations ~~These fiscal 2010 bookings~~ and to ~~fiscal~~provide ~~2009~~adequate ~~bookings,~~levels asof ~~well~~cash asflow ~~our~~from ~~fiscal~~operations. In ~~2008 bookings~~addition, ~~particularly~~ ~~during~~significant ~~the~~fiscal ~~fourth~~2012 ~~quarter~~shippable ofbookings ~~fiscal~~are ~~2008,~~currently ~~were~~required ~~well~~to ~~below~~meet our ~~expectations~~ ~~primarily~~quarterly asfinancial aand ~~result~~cash offlow ~~customer~~projections ~~delays~~beginning in ~~purchasing~~the ~~decisions, deferral~~first quarter of ~~project~~fiscal ~~expenditures~~2012 and ~~general~~continuing ~~adverse~~for ~~economic~~each ~~and~~subsequent ~~credit conditions~~quarter.

~~Our backlog~~During ~~scheduled~~the toprior ~~ship~~three ~~within~~fiscal ~~eighteen~~years, ~~months~~we ~~was~~made ~~approximately~~reductions ~~$6.0~~in ~~million at~~headcount, ~~September~~engineering 3consulting, ~~2010,~~and ~~compared~~other tooperating $4and overhead expenses.3 Beginning ~~million~~in atJanuary ~~August~~2009 28and continuing throughout fiscal 2010, ~~2009~~ we reduced paid working hours Company-wide by approximately 10%. ~~The~~During ~~total~~the ~~multi-year~~first ~~backlog~~quarter atof ~~September~~fiscal 32011, ~~2010~~to increase engineering capacity, the 10% reduction in paid working hours was ~~approximately~~ $6eliminated for engineering personnel.1 During ~~million~~fiscal years 2009 through fiscal 2011, ~~compared~~as well as to $6date in fiscal 2012, due to insufficient cash flow from operations and borrowing limitations under our loan facility, we negotiated extended payment terms with our two offshore vendors and have been extending other vendors well beyond normal payment terms.8 ~~million~~Until atsuch ~~August~~vendors 28are paid within normal payment terms, ~~2009~~ no assurances can be given that required services and materials needed to support operations will continue to be provided. ~~Approximately~~In $3addition, no assurances can be given that vendors will not pursue legal means to collect past due balances owed.5 Any ~~million~~interruption of ~~the~~services ~~September~~or 3,materials ~~2010~~or ~~backlog~~initiation ~~is scheduled~~of legal means to ~~ship~~collect ~~during~~balances ~~fiscal~~owed ~~2011~~would likely have an adverse impact on our operations and could impact our ability to continue as a going concern.

Our ~~bookings~~ ~~and~~cash ~~revenues~~flow requirements during fiscal ~~2010,~~2011 aswere ~~well~~financed asprimarily toby ~~date~~our inline ~~fiscal~~of ~~2011, have~~credit ~~been~~borrowings ~~insufficient to attain profitable operations~~ and to ~~provide~~our ~~adequate levels~~working ~~of cash flow from operations~~capital. In ~~addition,~~During ~~significant~~ fiscal 2011, ~~shippable~~our ~~bookings~~net ~~are~~borrowings ~~currently~~under ~~required to meet~~ our ~~financial~~loan ~~and~~facility ~~cash flow~~increased ~~projections~~$400,000 ~~beginning~~to in the ~~first~~maximum ~~quarter~~credit limit of ~~fiscal 2011 and continuing for each subsequent quarter. We currently estimate that~~$4,250,000 ~~depending~~at ~~on product~~September ~~mix~~2, ~~break-even~~2011 ~~revenue levels range~~ from ~~approximately~~ $~~13.0~~3,850,000 ~~million~~at ~~to $13.5~~September ~~million~~3, ~~on an annual basis~~2010.

26With our line of credit currently at the maximum limit, our very near term liquidity is dependent on our working capital and primarily on the timely collection of accounts receivable balances and conversion of inventory into receivable balances. During fiscal 2011 and continuing to date, the days outstanding of our accounts receivable has increased beyond our expectations, primarily due to a delay in payment from one customer, which has adversely impacted our cash balances. Our low level of bookings has lengthened the cycle of conversion of inventory into receivable balances and then into cash balances.

Our near term liquidity and ability to continue as a going concern ~~will~~is ~~depend~~dependent ~~upon~~on our ability to ~~increase~~ timely collect our ~~bookings~~existing accounts receivable balances and to generate sufficient new orders and revenues in the very near term to ~~attain~~provide ~~profitable operations and generate~~ sufficient cash flow from operations. ~~Should~~to ~~increased~~pay ~~revenues~~our ~~not materialize,~~current welevel ~~are~~of ~~committed~~operating expenses, to ~~further~~provide ~~reducing~~for ~~operating~~inventory ~~costs~~purchases and to ~~bring~~reduce ~~them in~~past ~~line~~due ~~with~~amounts ~~reduced~~owed ~~revenue~~to ~~levels~~vendors and service providers. ~~Should~~ weNo assurances may be ~~unable~~given that the Company will be able to achieve sufficient levels of new orders in the near term ~~profitability~~to ~~and~~provide ~~generate~~adequate ~~sufficient~~levels of cash flow from operations. Should ~~and if~~ we ~~are~~be unable to ~~further~~achieve ~~reduce~~near ~~operating~~term ~~costs~~profitability and generate sufficient cash flow from operations, we would need to raise additional capital or obtain additional borrowings beyond our existing loan facility. NoWe ~~assurances~~currently ~~can~~have belimited ~~given~~sources ~~that~~of ~~operating~~capital, ~~costs~~including ~~can~~the bepublic ~~further reduced,~~and orprivate ifplacement ~~required,~~of equity securities and additional debt financing. No assurances can be given that additional capital or borrowings would be available to allow us to continue as a going concern. If wenear term shippable bookings are ~~unable~~insufficient to ~~continue~~ asprovide aadequate ~~going~~levels ~~concern,~~of near term liquidity and any required additional capital or borrowings are unavailable we will likely be forced to ~~seek~~enter ~~protection~~into ~~under the~~ federal bankruptcy ~~laws~~proceedings.

On July 16, 2009, we entered into a non-binding letter of intent (the “LOI”) with Sencore, Inc. (“Sencore”), a portfolio company of The Riverside Company, a private equity firm, regarding a possible acquisition of Wegener Corporation by Sencore. The exclusivity period set forth in the LOI expired September 13, 2009. Wegener Corporation’s Board of Directors unanimously voted to terminate the LOI and on September 17, 2009, officially notified Sencore of the termination.

Financing Agreements

~~Effective September~~WCI’s ~~16,~~revolving ~~2009,~~line weof ~~entered~~credit ~~into an Eleventh Amendment~~ (“~~Amendment~~loan facility”), toamended ~~the Loan~~ and ~~Security~~effective ~~Agreement~~October ~~(the~~8, ~~“Loan~~2009, ~~Agreement”)~~is ~~with~~provided ~~Bank~~by ofThe ~~America,~~David NE.A. Chymiak Trust Dated December 15, 1999 (the “~~Bank~~Trust”). The ~~Amendment~~Trust ~~extended~~is ~~the~~controlled ~~maturity~~by ~~date~~David ofE. ~~our~~Chymiak ~~revolving~~who ~~line~~is ~~of credit~~a ~~and~~beneficial ~~term~~owner ~~loan~~of ~~facility~~8.5% ~~(“Loan~~of ~~Facility”)~~our ~~with~~outstanding ~~the~~common ~~Bank~~stock. The toloan ~~November~~facility ~~30, 2009~~provides ~~(previously~~a ~~September 30, 2009), reduced the~~ maximum ~~available~~ credit limit to of $4,~~000~~250,000 ~~(previously~~excluding ~~$5,000,000)~~any ~~and~~accrued ~~increased~~unpaid ~~the~~ interest ~~rate~~and tobears ~~the Bank’s~~interest ~~prime~~at the rate ~~plus~~of ~~two~~eight percent (~~previously~~8.0%) ~~the~~per ~~Bank’s prime rate)~~annum. InAt ~~addition~~September 2, ~~the~~2011, ~~Amendment allowed for over advances in excess of~~ the ~~existing~~outstanding ~~availability~~balance ~~collateral~~on ~~formulas of up to five hundred thousand dollars during~~ the ~~term~~loan offacility ~~the Loan Facility. The Amendment~~ was ~~subject~~ toat the ~~Bank~~maximum ~~receiving,~~credit onlimit orof ~~before October 15~~$4, ~~2009~~250,000 aand ~~fully~~accrued ~~executed asset~~unpaid ~~purchase~~interest ~~agreement~~amounted ~~or merger agreement satisfactory~~ to ~~the~~approximately ~~Bank~~$771,000. At inNovember ~~its reasonable~~15, ~~business judgment~~2011, ~~for~~ the ~~sale~~outstanding orbalance ~~merger~~on ofthe ~~Wegener~~line ~~Corporation~~of ~~to or~~credit ~~into~~remained aat ~~third-party purchaser; provided~~$4, ~~however~~250,000. All ~~the~~principal ~~failure~~and tointerest soshall ~~provide such~~be ~~fully~~payable ~~executed~~in ~~asset~~U.S. ~~purchase~~dollars or, ~~merger~~upon mutual agreement toof the ~~Bank~~parties ondecided orin ~~before October~~good ~~15,~~faith ~~2009~~at ~~would~~the ~~have~~time ~~been~~payment anis ~~automatic~~due, ~~event~~other ofgood ~~default~~and asvaluable ~~defined~~consideration. The ~~and set~~loan ~~forth~~facility inis ~~the~~secured ~~Loan~~by ~~Agreement,~~a ~~and~~first ~~the~~lien ~~Bank~~on ~~would~~substantially ~~have~~ all of ~~its~~WCI’s ~~rights~~assets, ~~and remedies~~including asland ~~provided~~and ~~for in the Loan Agreement without further notice. At August 28~~buildings, ~~2009,~~and weis ~~were~~guaranteed inby ~~violation~~Wegener ~~of the Bank’s tangible net worth debt covenant~~Corporation.

On October 8, 2009, the Bank assigned its rights (the “Assignment”) under the Loan Agreement to The David E. Chymiak Trust Dated December 15, 1999 (the “Trust”). David E Chymiak is a beneficial owner of 8.8% of our outstanding common stock. The David E. Chymiak Trust Dated December 15, 1999, is controlled by Mr. Chymiak. Immediately before becoming such assignee, the Trust entered into a twelfth amendment to the Loan Agreement, dated October 8, 2009 (the “Twelfth Amendment”) which became effective immediately upon the consummation of the Assignment. Accordingly, by virtue of the Assignment, the Trust succeeded to all the rights and obligations of the Bank under the Loan Agreement, except as otherwise provided in the Twelfth Amendment. In connection with the Assignment, the Trust paid a total of $2,941,000 to the Bank amounting to all amounts we owed to the Bank. Therefore, we no longer have a lending relationship with the Bank. (See Note 9 to the Consolidated Financial Statements). 23

~~Among other~~The ~~things,~~initial the Twelfth Amendment provided a maximum loan limit of four million dollars (the “Loan Limit”), excluding any accrued unpaid interest and bore interest at the rate of twelve percent (12%) per annum. Effective September 3, 2010, the Loan Limit was increased to $4,250,000 and the annual interest rate was reduced to eight (8.0%) per annum. The term of the ~~Loan~~amended ~~Agreement~~loan isfacility ~~eighteen~~matured ~~(18)~~on ~~months~~April ~~beginning October 8~~7, ~~2009 (“Original Term”), or upon demand in the event of default as provided by the Loan Agreement~~2011. The ~~Twelfth~~loan ~~Amendment~~facility automatically renews for successive twelve (12) month periods provided, however, the Trust may terminate the ~~Loan~~facility ~~Agreement~~ by providing ~~the~~a ~~Borrower~~ ninety (90) ~~days’~~day ~~prior~~ written notice of termination at any time ~~beginning on or~~ after ~~ninety~~April ~~(90)~~7, ~~days prior to the expiration of the Original Term~~2011. Principal and interest shall be payable upon the earlier of the maturity date, an event of default as provided by the loan facility, or 90 days following the date on which the Trust provides written notice to terminate the agreement. All principal and interest shall be payable in U.S. dollars and/or such other good and valuable consideration as the parties may agree in good faith at the time payment is due. The Twelfth Amendment removed collateral availability advance formula provisions which limited the maximum borrowing to the amount of available collateral and the 2.0% annual facility fee provision. In ~~addition, it removed~~ the ~~minimum~~event ~~tangible net worth and minimum fixed coverage ratio annual debt covenant provisions. The Twelfth Amendment suspended the Loan Agreement’s solvency representation provision until the last day~~ of ~~our third quarter of fiscal 2010 (May 28, 2010). On June 11, 2010, the Company and the Trust entered into~~ a ~~Thirteenth~~ninety ~~Amendment~~day tonotice ~~the Loan Agreement. The Thirteenth Amendment further suspended the date~~ of ~~compliance~~termination ~~for the solvency representation to the last day~~ of our ~~fiscal~~loan ~~2010 fourth quarter ending on September 3~~facility, ~~2010. This~~we ~~representation~~would ~~requires~~need ~~the Company~~ to beobtain ~~able~~additional tocredit ~~pay~~facilities ~~its~~or ~~debts~~raise asadditional ~~they become due, have sufficient~~ capital to ~~carry on~~continue ~~its~~as ~~business and own property at~~ a ~~fair~~going ~~saleable~~concern ~~value~~and ~~greater than the amount required~~ to ~~pay~~execute ~~its~~our ~~debts~~business plan. ~~The~~There ~~solvency~~is ~~representation provision~~no ~~was~~assurance ~~subsequently~~that ~~extended~~such tofinancing ~~the~~would ~~last~~be ~~day~~available ~~of our second quarter in fiscal 2011 (March 4~~or, ~~2011). In~~if ~~addition~~available, that we ~~are~~would ~~required~~be able to ~~retain certain~~complete ~~executive~~financing ~~officers~~on ~~and~~satisfactory ~~are precluded from paying dividends~~terms. ~~The Twelfth Amendment removed the minimum tangible net worth and minimum fixed coverage ratio annual debt covenant provisions.~~

27The amended loan facility’s debt covenants required us to be in compliance with a solvency representation provision which required us to be able to pay our debts as they become due, have sufficient capital to carry on our business and own property at a fair saleable value greater than the amount required to pay our debts. At the end of our fiscal 2011 third quarter (June 3, 2011), we were not in compliance with the solvency representation provision, however, on June 29, 2011, the loan facility’s security agreement was amended to remove the solvency representation provision from the debt covenants. In addition, we are required to retain certain executive officers and are precluded from paying dividends.

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 September 3, 2010, balances outstanding on the revolving line of credit amounted to $3,850,000. At November 1, 2010, the outstanding balance on the line of credit amounted to $4,100,000 and our cash balances were approximately $351,000.

No assurances may be given that upon maturity (April 7, 2011) our Loan Agreement will be renewed. In the event the Loan Agreement is not renewed, we would need to obtain additional credit facilities or raise additional capital to continue as a going concern and to execute our business plan There is no assurance that such financing would be available or, if available, that we would be able to complete financing on satisfactory terms.

On October 1, 2009, we entered into an unsecured promissory note with David E. Chymiak in the amount of two hundred and fifty thousand dollars ($250,000). The loan bore interest at the rate of 8.0% per year with an initial maturity date of October 31, 2009. The maturity date was subsequently extended to September 10, 2010. Principal and interest on the unsecured promissory note were paid in full during the fourth quarter of fiscal 2010.

Operating Activities

Cash provided by operating activities was $71787,000 in fiscal ~~2010,~~2011 ~~$120,000 in fiscal 2009~~ and $~~771~~71,000 in fiscal ~~2008~~ 2010. Fiscal ~~2010~~2011 net loss adjusted for expense provisions and depreciation and amortization (before working capital changes) ~~used~~provided cash of $~~994~~104,000. Decreases in inventories and other assets provided cash of $1,~~165~~472,000 while changes in accounts receivable and customer deposits used cash of $~~396~~558,000. ~~Increases~~Decreases in accounts payable and accrued expenses ~~provided~~ used cash of $~~335~~103,000. A decrease in deferred revenue used cash of $39128,000.

Net accounts receivable increased $52422,000 to $12,~~634~~056,000 at September 32, ~~2010~~2011, from $1,~~582~~634,000 at ~~August~~September 283, ~~2009,~~2010. The ~~compared~~increase in fiscal 2011 was primarily due to ~~$2,963,000~~an atincrease ~~August~~in ~~29, 2008~~the days outstanding of our accounts receivable due to a delay in payment from one customer. The allowance for doubtful accounts was $~~140~~265,000 at September 3, ~~2010~~2, ~~$146,000~~2011 ~~at August 28, 2009~~ and $~~230~~140,000 at ~~August~~September 293, ~~2008~~ 2010. In fiscal ~~2010~~2011, the allowance for doubtful accounts was increased by $80133,000 and reduced by write-offs of $868,000. Write-offs were $8486,000 in fiscal ~~2009 and $21,000 in fiscal 2008~~2010.

Customer deposits decreased $~~264~~3,000 to $~~240~~237,000 at September 32, ~~2010~~2011, from $~~504~~240,000 at ~~August~~September 283, ~~2009~~2010. ~~The decrease~~Customer ~~in customer~~ deposits ~~was~~vary ~~due~~with tothe ~~completion~~timing ofand ~~shipments~~terms ~~in fiscal 2010~~ of acustomer ~~large~~bookings ~~order~~and towere ~~one~~adversely ~~customer. Customer~~impacted ~~deposits~~by ~~vary with~~ the ~~timing~~ ~~and~~low ~~terms~~level of ~~customer~~ bookings in fiscal 2011.

At September 32, ~~2010~~2011, our net inventory balances decreased $1,~~319~~615,000 to $31,~~145~~530,000 from $43,~~464~~145,000 at ~~August~~September 283, ~~2009~~2010, compared to $64,~~295~~464,000 at August 2928, ~~2008~~2009. The ~~higher~~decrease ~~level of inventories~~ in ~~fiscal~~inventory ~~2008~~levels ~~was~~during ~~primarily~~fiscal ~~due~~2011 toand ~~our~~prior ~~new~~ fiscal ~~2008~~years ~~product introductions~~has ofminimized the ~~iPump®~~amount ~~562 Enterprise~~of ~~Media~~required ~~Server,~~inventory ~~the~~purchases ~~Unity®~~during ~~552 receiver~~those ~~and~~periods ~~the~~to ~~Encompass-LE2~~meet ~~audio~~revenue ~~receiver~~levels. We Inwill ~~addition,~~need ~~inventory~~to ~~levels were~~increase ~~increased~~inventory ~~for~~purchases ~~the~~in ~~iPump®~~subsequent ~~6400 Media~~quarters ~~Server~~in ~~and~~order ~~Nielsen~~to ~~Media~~have ~~Research~~sufficient ~~products. These~~ inventory ~~purchases~~ ~~required~~balances ~~sufficient~~to ~~lead~~support ~~times~~revenue ~~with~~levels ~~our~~in ~~offshore~~fiscal ~~manufacturers~~2012 and ~~which~~ ~~required~~beyond. A ~~estimates~~substantial portion of ~~expected~~ future ~~bookings. Our~~inventory ~~fiscal~~purchases ~~2008 bookings~~will ~~were~~be ~~below~~with our ~~expectations~~offshore ~~which~~suppliers ~~resulted~~whom inwe ~~higher~~have ~~than~~been ~~expected inventories~~paying atunder ~~August~~extended ~~29,~~payment ~~2008. During~~terms ~~fiscal 2009~~ and ~~2010,~~credit ~~we implemented~~limits ~~efforts~~which toare ~~reduce~~beyond ~~inventory~~normal ~~levels. Inventory~~payment ~~reserves were~~terms ~~increased~~and bycredit ~~provisions~~limits. In ~~charged~~order to ~~cost~~have ofsufficient ~~products~~liquidity ~~sold~~available offor ~~$90,000~~future ~~and $630,000~~inventory inpurchases ~~fiscal~~it ~~2010~~is ~~and~~likely ~~2009,~~we ~~respectively,~~will toneed ~~provide~~additional ~~for~~credit ~~slow-moving~~limits and ~~excess~~ ~~inventory~~continued ~~primarily~~extended ~~associated~~payment ~~with~~terms ~~first~~from ~~generation~~offshore ~~digital~~and ~~products.~~domestic ~~No inventory~~suppliers; ~~provisions~~increased ~~were~~customer ~~recorded~~deposits infrom ~~fiscal~~future ~~2008. Inventory~~bookings; ~~reserves were~~additional ~~decreased~~borrowing bycapacity ~~write-offs~~and/or ofadditional ~~$304,000~~capital. No inassurances ~~fiscal~~may ~~2010,~~be ~~$11,000~~given inthat ~~fiscal~~we ~~2009 and~~will ~~$21,000~~be inable ~~fiscal~~to ~~2008.~~generate ~~Decreases~~sufficient inliquidity ~~inventories~~from inthese ~~fiscal~~or ~~2010~~other ~~and~~sources ~~2009 provided~~that ~~$1,228,000~~may ~~and~~be ~~$1,202,000,~~required ~~respectively,~~to ~~of cash. Increases~~support infuture ~~inventories~~inventory ~~in fiscal 2008 used $2,915,000 of cash~~purchases.

28Inventory reserves were increased by provisions charged to cost of revenues of $110,000 and $90,000 in fiscal 2011 and 2010, respectively, to provide for slow-moving and excess inventory primarily associated with first generation digital products. Inventory reserves were decreased by write-offs of fully reserved inventory of $967,000 in fiscal 2011 and $304,000 in fiscal 2010. In fiscal 2011 we had an inventory reserve recovery of $269,500 as a result of a sale of fully reserved inventory. Decreases in net inventories in fiscal 2011 and 2010 provided $1,505,000 and $1,228,000, respectively, of cash.

Investing Activities

Cash used by investing activities in fiscal ~~2010~~2011 was $~~895~~943,000 compared to $1895,~~015,~~000 in fiscal ~~2009 and $537,000 in fiscal 2008. In fiscal~~ 2010, investing activities consisted of capitalized software additions of $848,000, equipment additions of $39,000 and $8,000 for legal fees related to the filing of applications for various patents and trademarks. In fiscal ~~2009~~2011, investing activities consisted of capitalized software additions of $~~997~~899,000, and equipment additions of $244,000 ~~and $17,000 for legal fees related to the filing of applications for various patents and trademarks~~. In fiscal ~~2008~~2010, investing activities consisted of capitalized software additions of $1848,~~214,~~000, equipment additions of $~~335~~39,000 and $638,000 for ~~license agreements and~~ legal fees related to the filing of applications for various patents and trademarks~~, while proceeds from the sale of patents and patent applications provided $1,075,000 of cash~~. Capitalized software expenditures were incurred primarily for the development of Compel® network control and MediaPlan® software, the iPump® Media Server, and MPEG-4/h.264 products.

Financing Activities

Financing activities in fiscal ~~2010~~ 2011 provided $1400,~~051,~~000 of cash from line of credit borrowings ~~and $250,000 of cash from a note payable borrowing and used $250,000 of cash for repayment of the note payable~~. Financing activities in fiscal ~~2009~~2010 provided $~~916~~1,051,000 of cash from ~~net~~ line of credit borrowings and ~~used~~ $25250,000 of cash ~~for~~from ~~loan facility~~a ~~fees.~~note ~~Financing~~payable ~~activities~~borrowing inand ~~fiscal 2008~~ used $~~132~~250,000 of cash ~~to reduce~~for ~~net~~repayment ~~line~~ of ~~credit~~the ~~borrowings~~note ~~and $100,000 of cash for loan facility fees~~payable.

Contractual Obligations

We have ~~one~~ two manufacturing and purchasing ~~agreement~~agreements for certain finished goods and sub-assembly inventories. At September 32, ~~2010~~2011, outstanding purchase commitments under these agreements amounted to $~~274~~1,444,000. At September 32, ~~2010~~2011, we had no letters of credit outstanding.

The following summarizes our contractual obligations as of September 32, ~~2010~~ 2011 and the effects such obligations are expected to have on liquidity and cash flow in future periods:

	Payments Due by Period
Contractual Obligations	Total		One Year		2 –3 Years		4 –5 Years
Operating leases	$	~~157~~94,000	$	6765,000	$	9029,000	$	-
Line of credit		34,~~850~~250,000		34,~~850~~250,000		-		-
Purchase commitments		~~274~~1,444,000		~~274~~1,444,000		-		-
Total	$	45,~~281~~788,000	$	45,~~191~~759,000	$	9029,000	$	-

The Company has never paid cash dividends on its common stock and does not intend to pay cash dividends in the foreseeable future.

OFF-BALANCE SHEET ARRANGEMENTS

At September 32, ~~2010~~2011, we had no off-balance sheet arrangements.

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 judgments. These policies are as follows:

Revenue Recognition – Our principal sources of revenue are from ~~hardware products,~~the sale of satellite communications equipment and network control software products, and product repair services, extended maintenance contracts and ~~software~~installation and ~~hardware~~ training services. Historically, product repair services, maintenance contracts and installation and training services are less than 10% of our net revenues. Our revenue recognition policies are in compliance with FASB Accounting Standards Codification (ASC) Topic 605 “Revenue Recognition.” Revenue is recognized when persuasive evidence of an agreement with the customer exists, delivery has occurred or services have been provided, the ~~sale~~sales price is fixed or determinable, collectability is reasonably assured, and risk of loss and title have transferred to the customer. Revenue from ~~product~~hardware ~~sales~~products is recognized when risk of loss and title has transferred which is generally upon shipment. orIn in some cases, particularly with international shipments, customer contracts are fulfilled under terms known as ex-works, in accordance with international commercial terms. In these instances, revenue is recognized upon delivery, which is the date that the goods are made available to the customer as requested by the customer and no further obligations of the Company remain. Hardware products are typically sold on a stand-alone basis but may include separate hardware maintenance contracts. Embedded in our hardware products is internally developed software of varying applications that function together with the hardware to deliver the product’s essential functionality. The embedded software is not sold separately, is not a significant focus of the marketing effort and we do not provide post-contract customer support specific to embedded software. The functionality that the software provides is marketed as part of the overall product. Service revenues are recognized at the time of performance. Extended maintenance contract revenues are recognized ratably over the term of the arrangement, which is typically one year. For network control software products we recognize revenue in accordance with the applicable software revenue recognition guidance. Typical deliverables in a software arrangement may include network control software, extended software maintenance contracts, training and installation. Provisions for returns, discounts and trade-ins, based on historical experience, have not been material.

2925

When arrangements contain multiple elements, wethe ~~evaluate~~deliverables ~~all~~are ~~deliverables~~separated ininto ~~the arrangement~~more atthan ~~the~~one ~~outset~~unit of accounting when the ~~arrangement~~following ~~based~~criteria onare ~~applicable~~met: ~~accounting guidance~~(i) the ondelivered ~~accounting~~element(s) ~~for~~has ~~revenue~~value ~~arrangements~~to ~~with~~the ~~multiple~~customer ~~deliverables.~~on ~~If the~~a ~~undelivered~~stand-alone ~~elements~~basis, ~~qualify~~and as(ii) if ~~separate~~a ~~units~~general right of ~~accounting~~return ~~based~~exists ~~on applicable~~relative ~~accounting~~to ~~guidance~~the delivered item, ~~which~~delivery ~~include~~or ~~that~~performance of the ~~delivered~~undelivered ~~elements~~element(s) ~~have value~~is toprobable and substantially in the ~~customer~~control onof athe ~~stand-alone~~Company. ~~basis~~We ~~and~~allocate ~~that~~revenue ~~objective~~to ~~and~~all ~~reliable evidence~~deliverables ofbased ~~fair~~on ~~value~~their ~~exists~~relative ~~for~~selling ~~undelivered~~prices. ~~elements~~In such circumstances, we ~~allocate~~use ~~the arrangement~~a ~~fee~~hierarchy ~~based~~to ondetermine the ~~relative~~selling ~~fair~~price ~~value~~to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence of ~~the~~selling ~~elements~~price (“VSOE”), (ii) third-party evidence of ~~the arrangement.~~selling Ifprice a(“TPE”), ~~delivered~~and ~~element~~(iii) management’s ~~does~~best ~~not~~estimate ~~meet~~of the ~~criteria~~selling inprice ~~the~~(“BESP”). ~~applicable accounting~~VSOE ~~guidance~~generally toexists beonly ~~considered~~when awe ~~separate~~sell ~~unit~~the ofdeliverable ~~accounting,~~separately ~~revenue~~and is ~~deferred~~ ~~until~~the price actually charged by the ~~undelivered~~Company ~~elements~~for ~~are~~that ~~fulfilled~~deliverable. WeThe ~~establish~~objective ~~fair~~of ~~value by~~BESP ~~reference~~is to determine the price at which the ~~customer~~Company iswould ~~required~~transact toa ~~pay~~sale ~~when~~if anthe ~~item~~product isor service were sold ~~separately~~ ~~using~~on ~~contractually~~a ~~stated~~stand-alone basis. We determine the BESP for a product or service by considering multiple factors including, ~~substantive~~but ~~renewal~~not ~~rates~~limited to, ~~where applicable~~geographies, ormarket ~~the~~conditions, ~~average~~competitive ~~price~~landscape, ofinternal ~~recently~~costs, ~~completed~~gross ~~stand~~margin ~~alone~~objectives, ~~sales transactions~~and pricing practices. If ~~Accordingly,~~a delivered element does not meet the ~~determination~~criteria asin the applicable accounting guidance to ~~whether~~be ~~appropriate~~considered ~~objective and~~a ~~reliable~~separate ~~evidence~~unit of ~~fair~~accounting, ~~value~~revenue ~~exists~~is deferred until the undelivered elements are fulfilled. Accordingly, the determination of BESP can impact the timing of revenue recognition for an arrangement.

~~Embedded~~ We recognize revenue in ~~our~~certain ~~hardware~~circumstances ~~products~~before isdelivery ~~internally~~has ~~developed~~occurred ~~software~~(commonly ofreferred ~~varying applications~~to as “bill and hold” transactions). In ~~The~~such ~~embedded~~circumstances, ~~software~~among isother ~~not~~things, ~~sold~~risk ~~separately~~of ownership has passed to the buyer, isthe ~~not~~buyer has made a ~~significant focus~~written offixed commitment to purchase the ~~marketing~~finished ~~effort~~goods, the buyer has requested the finished goods be held for future delivery as scheduled and wedesignated doby ~~not~~them, ~~provide~~and ~~post-contract~~no ~~customer support~~additional ~~specific~~performance toobligations ~~embedded~~by ~~software~~the Company exist. For ~~The~~these ~~functionality~~transactions, ~~that~~the finished goods are segregated from inventory and normal billing and credit terms are granted. For the ~~software provides~~year isended ~~marketed~~September as2, ~~part~~2011, $550,000 of ~~the~~revenue ~~overall~~to ~~product~~one customer were recorded as bill and ishold ~~incidental~~transactions toin the ~~product~~ asfirst aquarter ~~whole~~of fiscal 2011. At ~~Significant~~September ~~judgment~~2, ~~may~~2011, beall ~~required~~products had been delivered and accounts receivable for these revenues were paid in ~~determining~~full. For ~~whether a~~the ~~product~~year isended aSeptember ~~software~~3, or2010, ~~hardware~~no ~~product~~revenues were recorded as bill and hold transactions.

~~Revenue~~ ~~from~~These ~~our~~policies ~~network~~require ~~control~~management, ~~software~~at ~~products~~the ~~and~~time ~~software-related~~of ~~elements~~the ~~is recognized~~transaction, into ~~accordance~~assess ~~with~~whether ~~ASC~~the ~~Topic~~amounts ~~985-605~~due ~~“Software-Revenue~~are ~~Recognition.” Software-related~~fixed ~~elements~~or ~~include~~determinable, ~~all~~collection ~~non-software deliverables for which a software deliverable~~ is ~~essential~~reasonably toassured, ~~its functionality. When software arrangements contain multiple elements~~ and ~~vendor~~to ~~specific~~perform ~~objective~~an ~~evidence (VSOE)~~evaluation of ~~fair~~arrangements ~~value~~containing ~~exists~~multiple ~~for all undelivered~~ elements, weincluding ~~account~~management’s ~~for~~estimate ~~the delivered~~of ~~elements using~~ the ~~residual~~selling ~~method~~price. These Inassessments ~~arrangements~~are ~~where~~based ~~VSOE~~on ofthe ~~fair value~~terms isof ~~not available for all undelivered elements, we would defer~~ the ~~recognition~~ ~~of all revenue under an~~ arrangement ~~until~~with ~~all~~the ~~elements~~customer, ~~except~~past ~~post contract~~history ~~support,~~and ~~have~~creditworthiness ~~been~~of ~~delivered. When post contract support remains~~ the ~~only~~ ~~undelivered element for such contracts, revenue is then recognized using the residual method~~customer. If ~~Fair~~management ~~value~~determines ofthat ~~software-related~~collection ~~elements~~ is ~~based~~not ~~on separate~~reasonably ~~sales~~assured ~~to other customers~~ or ~~upon~~undelivered ~~renewal~~elements ~~rates quoted in contracts when the quoted renewal rates~~ are ~~deemed~~unfulfilled, torevenue berecognition ~~substantive.~~is ~~Software~~deferred ~~and~~until ~~hardware maintenance~~these ~~contract~~conditions ~~revenues~~ are ~~recognized ratably over the term of the arrangement, which is typically one year~~satisfied.

~~At September~~Inventory 3- Inventories are valued at the lower of cost (at standard, ~~2010~~which approximates actual cost on a first-in, ~~deferred~~first-out ~~extended~~basis) ~~service~~or ~~maintenance~~market. Inventories ~~revenues~~include ~~were~~the ~~$519~~cost of raw materials,~~000,~~ labor and ~~deferred~~manufacturing ~~revenues~~overhead. We ~~related~~make inventory reserve provisions to ~~the~~properly ~~fair~~reflect inventory value based on a review of ~~undelivered~~inventory ~~elements~~quantities ~~were $10~~on hand,~~000~~ sales forecasts, new products being developed and technology changes. These reserves are to provide for items that are potentially slow-moving, excess or obsolete. Changes in market conditions, lower than expected tocustomer bedemand ~~recognized~~and asrapidly ~~revenue~~changing technology could result in ~~varying~~additional ~~amounts throughout~~obsolete ~~fiscal~~and slow-moving inventory that is unsaleable or saleable at reduced prices, which could require additional inventory reserve provisions. At September 2, 2011, inventories, net of reserve provisions of approximately $3,888,000, amounted to $1,530,000. At September 3, 2010, inventories, net of reserve provisions of approximately $4,475,000, amounted to $3,145,000.

~~We recognize~~Capitalized ~~revenue~~Software inCosts ~~certain~~- ~~circumstances~~Software ~~before~~development ~~delivery~~costs ~~has~~are ~~occurred (commonly~~capitalized ~~referred~~subsequent to asestablishing ~~“bill~~technological ~~and hold” transactions)~~feasibility. Capitalized Incosts ~~such~~are ~~circumstances, among~~amortized ~~other~~based ~~things,~~on ~~risk~~the larger of ~~ownership has passed to~~ the ~~buyer,~~amounts ~~the~~computed ~~buyer~~using ~~has made~~ (a) ~~written~~the ~~fixed~~ratio ~~commitment~~that tocurrent ~~purchase~~gross ~~the~~revenues ~~finished~~for ~~goods,~~each ~~the~~product ~~buyer~~bears ~~has requested~~to the ~~finished~~total ~~goods~~of becurrent ~~held~~and ~~for~~anticipated future ~~delivery~~gross asrevenues ~~scheduled~~for ~~and designated~~that ~~by them~~product, ~~and~~or no(b) ~~additional~~the ~~performance~~straight-line ~~obligations~~method byover the ~~Company exist.~~remaining ~~For~~estimated ~~these~~economic ~~transactions,~~life of the ~~finished~~product. Expected ~~goods~~future ~~are~~revenues ~~segregated from inventory~~ and ~~normal~~estimated ~~billing~~economic ~~and~~lives ~~credit~~are ~~terms~~subject ~~are~~to ~~granted.~~revisions ~~For~~due ~~the~~to ~~year~~market ~~ended September 3~~conditions, ~~2010,~~technology nochanges ~~revenues were recorded as bill~~ and ~~hold~~other ~~transactions. For~~factors ~~the~~resulting ~~year~~in ~~ended~~shortfalls ~~August~~of ~~28,~~expected ~~2009,~~ revenues ~~attributable~~or toreduced ~~two~~economic ~~customers in the amount of $1~~lives,~~236,000~~ ~~were~~which ~~recorded~~could ~~prior~~result toin ~~delivery~~additional asamortization ~~bill~~expense ~~and~~or ~~hold transactions~~write-offs. At ~~August~~September 282, ~~2009~~2011, ~~accounts~~capitalized ~~receivable~~software ~~for~~costs, ~~these~~net ~~revenues~~of ~~were paid~~accumulated ~~in full. For the year ended August 29~~amortization, ~~2008,~~amounted ~~revenues attributable~~ to ~~one customer in the amount of~~ $~~495~~1,288,000 ~~were recorded prior to delivery as bill and hold transactions~~. At ~~August~~September 293, ~~2008~~2010, ~~accounts~~capitalized ~~receivable~~software ~~for~~costs, ~~these~~net ~~revenues were~~of ~~paid~~accumulated inamortization, ~~full~~amounted to $1,263,000.

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 to perform an evaluation of arrangements containing multiple elements. These assessments are based on the terms of the arrangement with the customer, past history and creditworthiness of the customer. If management determines that collection is not reasonably assured or undelivered elements are unfulfilled, revenue recognition is deferred until these conditions are satisfied.26

~~Inventory -~~Impairment ~~Inventories~~of ~~are~~Long-lived ~~valued~~Assets – Long-lived atassets, ~~the~~including ~~lower~~property ofand ~~cost~~equipment ~~(at~~and ~~standard,~~intangible ~~which~~assets ~~approximates actual~~are ~~cost~~evaluated onfor aimpairment ~~first-in,~~whenever ~~first-out~~events ~~basis)~~ or ~~market.~~changes ~~Inventories~~in ~~include~~circumstances indicate that the ~~cost~~ ofcarrying ~~raw~~amount ~~materials,~~of ~~labor~~such ~~and~~assets ~~manufacturing~~may not ~~overhead~~be recoverable. WeIf ~~make~~the ~~inventory reserve~~sum ~~provisions~~of tothe ~~properly~~expected ~~reflect~~future ~~inventory~~undiscounted ~~value~~cash ~~based~~flows onis aless ~~review~~than ~~of inventory~~the ~~quantities~~carrying onamount ~~hand,~~of ~~sales~~the ~~forecasts~~asset, ~~new~~an ~~products~~impairment ~~being~~loss ~~developed~~is ~~and technology~~recognized ~~changes.~~in ~~These~~the ~~reserves~~amount ~~are~~that tothe ~~provide~~carrying ~~for~~amount ~~items~~of ~~that~~the ~~are~~asset ~~potentially slow-moving,~~exceeds ~~excess~~its orfair ~~obsolete~~value. Fair ~~Changes~~value inis ~~market~~determined ~~conditions,~~based ~~lower~~on ~~than expected~~discounted ~~customer~~future ~~demand~~net ~~and~~cash ~~rapidly~~flows ~~changing~~associated ~~technology~~with ~~could~~the ~~result~~use ~~in additional~~of ~~obsolete~~the ~~and~~asset. Our ~~slow-moving~~impairment ~~inventory~~analysis ~~that~~contains isuncertainties ~~unsaleable~~due orto ~~saleable~~judgment ~~at reduced~~in ~~prices,~~assumptions ~~which~~and ~~could~~estimates ~~require~~surrounding ~~additional~~undiscounted ~~inventory~~future ~~reserve~~cash ~~provisions.~~flows ~~At September~~of 3,the ~~2010,~~long-lived ~~inventories~~asset, ~~net~~including offorecasting ~~reserve~~useful ~~provisions~~lives of ~~approximately $4,475,000,~~assets ~~amounted~~and toselecting ~~$3,145,000.~~the Atdiscount ~~August~~rate ~~28,~~that ~~2009,~~reflects ~~inventories,~~the ~~net~~risk ~~of reserve~~inherent ~~provisions~~in offuture ~~approximately~~cash ~~$4,689,000,~~flows ~~amounted~~ to ~~$4,464,000~~ determine fair value.

30Deferred Tax Asset Valuation Allowance – Deferred tax assets are recognized for deductible temporary differences, net operating loss carryforwards and tax credit carryforwards, if it is more likely than not that the tax benefits will be realized. Realization of our deferred tax assets is dependent upon generating sufficient future taxable income prior to the expiration of the loss and tax credit carryforwards. The valuation allowance increased $528,000 in fiscal 2011 and $833,000 in fiscal 2010. At September 2, 2011 and at September 3, 2010, net deferred tax assets of $7,978,000 and $7,450,000, respectively, were fully reserved by a valuation allowance.

~~Capitalized Software~~Accounts ~~Costs~~Receivable ~~- Software~~Valuation ~~development~~– ~~costs~~We ~~are~~maintain ~~capitalized~~allowances ~~subsequent~~for todoubtful ~~establishing technological~~accounts ~~feasibility.~~for ~~Capitalized~~estimated ~~costs~~losses ~~are~~resulting ~~amortized~~from ~~based on~~ the ~~larger~~ inability of ~~the~~our ~~amounts~~customers ~~computed using (a) the ratio that current gross revenues for each product bears~~ to ~~the~~make ~~total~~required ofpayments. If ~~current and anticipated future gross revenues for that product, or (b)~~ the ~~straight-line~~financial ~~method~~condition ~~over the remaining estimated economic life~~ of ~~the~~our ~~product.~~customers ~~Expected~~were ~~future revenues and estimated economic lives are subject~~ to ~~revisions due to market conditions~~deteriorate, ~~technology changes and other factors~~ resulting in ~~shortfalls~~an impairment of ~~expected~~their ~~revenues~~ability orto ~~reduced~~make ~~economic lives~~payments, ~~which could result in~~ additional ~~amortization~~allowances ~~expense~~may orbe ~~write-offs~~required. At September 32, ~~2010~~2011, ~~capitalized~~accounts ~~software~~receivable ~~costs,~~ net of ~~accumulated~~allowances ~~amortization,~~ for doubtful accounts amounted to $12,~~263~~056,000. At ~~August~~September 283, ~~2009~~2010, ~~capitalized~~accounts ~~software~~receivable ~~costs,~~ net of ~~accumulated~~ ~~amortization,~~allowances for doubtful accounts amounted to $1,~~265~~634,000.

Deferred Tax Asset Valuation Allowance – Deferred tax assets are recognized for deductible temporary differences, net operating loss carryforwards and tax credit carryforwards, if it is more likely than not that the tax benefits will be realized. Realization of our deferred tax assets is dependent upon generating sufficient future taxable income prior to the expiration of the loss and tax credit carryforwards. The valuation allowance increased $833,000 in fiscal 2010, $739,000 in fiscal 2009, and decreased $141,000 in fiscal 2008. At September 3, 2010, net deferred tax assets of $7,450,000 were fully reserved by a valuation allowance. At August 28, 2009, net deferred tax assets of $6,617,000 were fully reserved by a valuation allowance.

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 may be required. At September 3, 2010, accounts receivable net of allowances for doubtful accounts amounted to $1,634,000. At August 28, 2009, accounts receivable net of allowances for doubtful accounts amounted to $1,582,000.

IMPACT OF INFLATION

We do not believe that inflation has had a material impact on revenues or expenses during the past three fiscal years.

IMPACT OF RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS

In June 2009, the FASB ~~Accounting Standards Codification (Codification) was~~ issued ~~to become the source of~~ authoritative ~~U.S. generally~~guidance ~~accepted accounting~~that ~~principles~~changed ~~(GAAP) to be applied by non-governmental entities and supersede all then-existing non-Securities and Exchange Commission (SEC) accounting and reporting standards. Rules and interpretive releases of~~ the ~~SEC under~~consolidation ~~authority~~model ~~of federal securities laws are also sources of authoritative GAAP~~ for ~~SEC~~variable ~~registrants.~~interest ~~All other non-grandfathered non-SEC accounting literature not included in the Codification became non-authoritative~~entities. ~~The Codification~~This guidance was effective for ~~financial~~the ~~statements~~Company ~~issued~~on ~~for interim and annual periods ending after~~ September 154, ~~2009. The Company adopted the provisions in the first quarter of fiscal~~ 2010. ~~References~~and ~~made~~did tonot ~~FASB guidance throughout this document~~ have ~~been~~a ~~updated~~material ~~for the codification. The adoption did not~~ impact ~~the~~on ~~Company’s~~its financial position, ~~or its~~ results of operations, and cash flows.

~~In June 2009~~On September 4, 2010, we adopted guidance issued by the FASB ~~issued~~on ~~authoritative~~revenue recognition. Under the new guidance on arrangements that ~~changed~~include software elements, tangible products that have software components that are essential to the ~~consolidation~~ ~~model~~functionality ~~for~~of ~~variable~~the ~~interest~~tangible ~~entities~~product are no longer within the scope of the software revenue recognition guidance, and software-enabled products are now subject to other relevant revenue recognition guidance. ~~The~~Additionally, ~~provisions~~the FASB issued guidance on revenue arrangements with multiple deliverables that are ~~effective for~~outside the ~~first~~scope ~~quarter~~of the software revenue recognition guidance. Under the new guidance, when vendor specific objective evidence or third party evidence of ~~fiscal~~the ~~2011~~selling price for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The ~~adoption~~new isguidance ~~not~~included ~~expected~~new todisclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition. Adoption of the new guidance did not have a material impact on ~~the~~our ~~Company’s~~ consolidated financial ~~position~~statements or ~~its~~result ~~results~~in any change in our units of ~~operations~~ accounting or timing of revenue recognition and is not expected to have a material impact in subsequent periods.

In ~~September~~ ~~2006~~May 2011, the FASB issued ~~authoritative~~ ~~guidance~~an ~~for~~ update to the accounting on fair value ~~measurements,~~measurement ~~which~~to ~~established~~provide ~~the~~a consistent definition of fair value~~, provided~~ aand ~~framework~~ensure ~~for~~that ~~measuring~~the fair value measurement and ~~expanded the~~ disclosure requirements ~~about~~are ~~fair~~similar ~~value~~between ~~measurements~~U.S. ~~This~~GAAP ~~guidance~~and ~~did~~International ~~not~~Financial ~~require~~Reporting ~~any new~~Standards ~~fair~~(“IFRS”). ~~value~~This ~~measurements~~update ~~but~~changes ~~rather~~certain ~~applies~~fair tovalue ~~all~~measurement ~~other~~principles ~~accounting pronouncements~~and ~~that~~enhances ~~require~~the ordisclosure ~~permit~~requirements for fair value measurements. InThis ~~February~~update ~~2008,~~ does not extend the ~~FASB~~use ~~issued~~of ~~authoritative~~fair value accounting, but provides guidance ~~which~~on ~~delayed~~how byit ashould ~~year~~be ~~the~~applied ~~effective date~~where ~~for~~its ~~certain~~use ~~non-financial~~is ~~assets~~already ~~and~~required ~~liabilities.~~or ~~The~~permitted ~~Company~~by ~~adopted~~other ~~the provisions~~standards ofwithin ~~the~~U.S. ~~guidance~~GAAP ~~for~~or ~~financial~~IFRS. ~~assets~~This ~~and~~update ~~liabilities~~is ineffective ~~the~~for ~~first quarter~~interim ofand ~~fiscal~~annual ~~2009.~~periods ~~The~~beginning ~~adoption~~after ~~did~~December 15, ~~not~~2011 ~~have~~and ais ~~material~~applied ~~impact~~prospectively. onEarly ~~the Company’s~~adoption ~~financial~~is ~~position~~prohibited. orThis ~~its~~guidance ~~results~~is ofeffective ~~operations.~~for ~~The~~the Company ~~adopted~~ at the ~~remaining~~beginning ~~provisions~~of in the ~~first~~third quarter ofin fiscal ~~2010~~2012 ~~for~~(March ~~non-financial assets~~3, 2012) and ~~liabilities,~~it ~~including~~is ~~goodwill~~currently ~~and~~evaluating ~~intangible~~the ~~assets.~~impact, ~~This~~if ~~adoption likewise~~any, ~~did~~of ~~not~~this ~~have~~new aaccounting ~~material~~update ~~impact~~ on ~~the~~its ~~Company’s~~ financial position, ~~or its~~ results of operations, or cash flows.

3127

In September 2009, the Emerging Issues Task Force issued new guidance pertaining to the accounting for revenue arrangements with multiple deliverables. The new guidance addressed how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting, and how the arrangement consideration should be allocated among the separate units of accounting. The new guidance is effective for fiscal years beginning after June 15, 2010 and may be applied retrospectively or prospectively for new or materially modified arrangements. In addition, early adoption is permitted. The Company has evaluated this new guidance and believes it will not have a material impact on the Company’s financial position or its results of operations.

In September 2009, the Emerging Issues Task Force issued new guidance that changed the accounting model for revenue arrangements that include both tangible products and software elements that are “essential to the functionality” and removes these products from the scope of current software revenue guidance. The new guidance shall be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Earlier application is permitted as of the beginning of a Company’s fiscal year provided the Company has not previously issued financial statements for any period within that year. An entity shall not elect early application of this guidance unless it also elects early application of the new rule pertaining to accounting for revenue arrangements with multiple deliverables. The Company has evaluated this new guidance and believes it will not have a material impact on the Company’s financial position or its results of operations.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide the information required by this Item, pursuant to 305(e) of Regulation S-K.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Page	~~Page~~
Management’s Statement of Responsibility	29	33
Report of Independent Registered Public Accounting Firm (Habif, Arogeti & Wynne, LLP)	30	34
Report of Independent Registered Public Accounting Firm (BDO USA, LLP formerly known as BDO Seidman, LLP)		35
Consolidated Statements of Operations
Consolidated Statements of Operations Years ended September 3, 2010, August 28, 2009, and August 29, 2008		36
Years ended September 2, 2011 and September 3, 2010	31
Consolidated Balance Sheets As of September 3, 2010 and August 28, 2009.		37
Consolidated Balance Sheets
Consolidated Statements of (Capital Deficit) Shareholders' Equity Years ended September 3, 2010, August 28, 2009, and August 29, 2008		38
As of September 2, 2011 and September 3, 2010.	32
Consolidated Statements of Cash Flows Years ended September 3, 2010, August 28, 2009, and August 29, 2008		39
Consolidated Statements of Capital Deficit
Notes to Consolidated Financial Statements		40
Years ended September 2, 2011 and September 3, 2010	33
Consolidated Supporting Schedules Filed:
Consolidated Statements of Cash Flows
Schedule II-Valuation and Qualifying Accounts Years ended September 3, 2010, August 28, 2009, and August 29, 2008		61
Years ended September 2, 2011 and September 3, 2010	34
Notes to Consolidated Financial Statements	35
Consolidated Supporting Schedules Filed:
Schedule II-Valuation and Qualifying Accounts
Years ended September 2, 2011 and September 3, 2010	52

3228

MANAGEMENT'’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of Wegener Corporation is responsible for the accuracy and consistency of all the information contained in the annual report, including the accompanying consolidated financial statements. These statements have been prepared ~~to conform~~in conformity with ~~generally accepted~~ accounting principles ~~appropriate~~generally toaccepted in the ~~circumstances~~ ofUnited ~~the~~States ~~Company~~of America. The statements include amounts based on estimates and judgments as required.

Wegener Corporation maintains internal accounting controls designed to provide reasonable assurance that the financial records are accurate, that the assets of the Company are safeguarded, and that the financial statements present fairly the consolidated financial position, results of operations and cash flows of the Company.

The Audit Committee of the Board of Directors reviews the scope of the audits and the findings of the independent registered public accounting firm. The auditors meet regularly with the Audit Committee to discuss audit and financial reporting issues, with and without management present.

Habif, Arogeti & Wynne, LLP, the Company'’s independent registered public accounting firm, has audited the financial statements as of and for the ~~year~~years ended September 2, 2011 and September 3, 2010 prepared by management. ~~BDO~~Their ~~USA,~~opinion ~~LLP~~on ~~(formerly known as BDO Seidman, LLP) has audited~~ the ~~financial~~ statements asis ofpresented ~~August 28, 2009 and for each of the two years in the period ended August 28, 2009, prepared by management. Both firm’s opinions~~ on the ~~statements~~following ~~are presented below~~page.

C. Troy Woodbury, Jr.

President and Chief Executive Officer

James Traicoff

Treasurer and Chief Financial Officer

3329

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders of Wegener Corporation

Johns Creek, Georgia

We have audited the accompanying consolidated balance ~~sheet~~sheets of Wegener Corporation and subsidiary as of September 2, 2011 and September 3, 2010, and the related consolidated statements of operations, (capital deficit) ~~shareholders' equity~~ and cash flows for the ~~year~~ years then ended. These financial statements are the responsibility of the Company'’s management. Our responsibility is to express an opinion on these financial statements based on our ~~audit~~audits.

We conducted our ~~audit~~audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our ~~audit~~audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our ~~audit~~audits ~~provides~~provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wegener Corporation and subsidiary as of September 2, 2011 and September 3, 2010, and the results of their operations and their cash flows for the ~~year~~years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management'’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Habif, Arogeti & Wynne, LLP

Habif, Arogeti & Wynne, LLP

Atlanta, Georgia

~~November~~ 15December 1, ~~2010~~2011

3430

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders of Wegener Corporation

Johns Creek, Georgia

We have audited the accompanying consolidated balance sheet of Wegener Corporation and subsidiary as of August 28, 2009, and the related consolidated statements of operations, (capital deficit) shareholders' equity and cash flows for each of the two years in the period ended August 28, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wegener Corporation and subsidiary at August 28, 2009, and the results of its operations and its cash flows for each of the two years in the period ended August 28, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ BDO USA, LLP

BDO USA, LLP (formerly known as BDO Seidman, LLP)

Atlanta, Georgia

November 25, 2009

Wegener Corporation and subsidiary

CONSOLIDATED STATEMENTS OF OPERATIONS

	Years ended
	September 3, 2010			August 28, 2009			August 29, 2008
	September 2, 2011			September 3, 2010
Revenues, net	$	89,~~921~~110,~~419~~823		$	128,~~655~~921,~~107~~419		$	~~21,494,493~~
Operating costs and expenses
Cost of products sold		6,252,225			8,798,915			13,096,881
Cost of revenues		5,943,828			6,252,225
Selling, general and administrative		3,~~362~~035,~~234~~497			43,~~370~~362,~~941~~234			~~5,538,901~~
Research and development		1,~~148~~231,~~211~~672			1,~~961~~148,~~827~~211			~~3,213,131~~
Gain on sale of patents		-			-			(894,127	)
Operating costs and expenses		10,210,997			10,762,670
Operating costs and expenses		10,762,670			15,131,683			20,954,786
Operating loss		(1,100,174	)		(1,841,251	)
Operating (loss) income		(1,841,251	)		(2,476,576	)		539,707
Interest expense-related party		(340,189	)		(448,426	)
Interest expense-related party		(448,426	)		-			-
Interest expense		(26,048	)		(23,703	)
Interest expense		(23,703	)		(129,123	)		(158,586	)
Net loss	$	(1,466,411	)	$	(2,313,380	)
Interest income		-			-			2,162
Net loss per share
Net (loss) earnings	$	(2,313,380	)	$	(2,605,699	)	$	383,283
Basic and diluted	$	(.11	)	$	(.18	)
Net (loss) earnings per share
Shares used in per share calculation
Basic	$	(.18	)	$	(.21	)	$	.03
Basic and diluted		13,019,304			12,647,051
Diluted	$	(.18	)	$	(.21	)	$	.03
Shares used in per share calculation
Basic		12,647,051			12,647,051			12,647,051
Diluted		12,647,051			12,647,051			12,659,414

See accompanying notes to consolidated financial statements.

3631

Wegener Corporation and subsidiary

CONSOLIDATED BALANCE SHEETS

	September 3, 2010			August 28, 2009
	September 2, 2011			September 3, 2010
Assets
Current assets
Cash	$	~~231~~475,~~091~~548		$	3231,~~476~~091
Accounts receivable, net		12,~~633~~056,~~971~~339			1,~~581~~633,~~926~~971
Inventories, net		31,~~145~~530,~~090~~366			43,~~463~~145,~~586~~090
Other		~~234~~268,~~986~~092			~~171~~234,~~676~~986
Total current assets		54,~~245~~330,~~138~~345			65,~~220~~245,~~664~~138
Property and equipment, net		1,~~618~~469,~~015~~206			1,~~720~~618,~~031~~015
Capitalized software costs, net		1,~~263~~287,~~405~~638			1,~~265~~263,~~445~~405
Other assets		~~234~~197,~~944~~400			~~335~~234,~~557~~944
Total assets	$	87,~~361~~284,~~502~~589		$	98,~~541~~361,~~697~~502
Liabilities and (Capital Deficit) Shareholders’ Equity
Liabilities and Capital Deficit
Current liabilities
Line of credit-related party	$	34,~~850~~250,000		$	-3,850,000
Bank line of credit		-			2,799,088
Accounts payable		1,813,493			2,142,114
Accounts payable		2,142,114			1,964,367
Accrued expenses		2,069,636			1,731,522
Accrued expenses		1,731,522			1,523,925
Deferred revenue		401,480			529,583
Deferred revenue		529,583			568,673
Customer deposits		237,204			239,971
Customer deposits		239,971			503,952
Total current liabilities		8,771,813			8,493,190
Total current liabilities		8,493,190			7,360,005
Commitments and contingencies
(Capital deficit) shareholders’ equity
Capital deficit
Common stock, $.01 par value; 30,000,000 shares authorized; 12,647,051 shares issued and outstanding		126,471			126,471
Preferred stock, $20.00 par value; 250,000 shares authorized; none issued and outstanding		-			-
Additional paid-in capital		20,006,702			20,006,702
Common stock, $.01 par value; 30,000,000 shares authorized; 13,147,051 and 12,647,051shares issued and outstanding		131,471			126,471
Accumulated deficit		(20,264,861	)		(17,951,481	)
Additional paid-in capital		20,112,577			20,006,702
Total (capital deficit) shareholders’ equity		(131,688	)		2,181,692
Accumulated deficit		(21,731,272	)		(20,264,861	)
Total liabilities and (capital deficit) shareholders’ equity	$	8,361,502		$	9,541,697
Total capital deficit		(1,487,224	)		(131,688	)
Total liabilities and capital deficit	$	7,284,589		$	8,361,502

See accompanying notes to consolidated financial statements.

3732

~~Wegener Corporation~~CONSOLIDATED ~~and~~STATEMENTS ~~subsidiary~~OF CAPITAL DEFICIT

CONSOLIDATED STATEMENTS OF (CAPITAL DEFICIT)

	Common Stock
	Shares		Amount		Additional Paid-in Capital		Accumulated Deficit
BALANCE at August 28, 2009		12,647,051	$	126,471	$	20,006,702	$	(17,951,481	)
Net loss for the year		-		-		-		(2,313,380	)
BALANCE at September 3, 2010		12,647,051	$	126,471	$	20,006,702	$	(20,264,861	)
Common stock awards		500,000		5,000		57,500		-
Share based compensation		-		-		48,375		-
Net loss for the year		-		-		-		(1,466,411	)
BALANCE at September 2, 2011		13,147,051	$	131,471	$	20,112,577	$	(21,731,272	)

SHAREHOLDERS’ EQUITY

					Additional
	Common Stock				Paid-in		Accumulated
	Shares		Amount		Capital		Deficit
BALANCE at August 31, 2007		12,647,051	$	126,471	$	19,999,022	$	(15,729,065	)
Share-based compensation		-		-		7,680		-
Net earnings for the year		-		-		-		383,283
BALANCE at August 29, 2008		12,647,051	$	126,471	$	20,006,702	$	(15,345,782	)
Net loss for the year		-		-		-		(2,605,699	)
BALANCE at August 28, 2009		12,647,051	$	126,471	$	20,006,702	$	(17,951,481	)
Net loss for the year		-		-		-		(2,313,380	)
BALANCE at September 3, 2010		12,647,051	$	126,471	$	20,006,702	$	(20,264,861	)

See accompanying notes to consolidated financial statements.

3833

Wegener Corporation and subsidiary

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years ended
	Years Ended
	September 3, 2010			August 28, 2009			August 29, 2008
	September 2, 2011			September 3, 2010
Cash flows from operating activities
Net (loss) earnings	$	(2,313,380	)	$	(2,605,699	)	$	383,283
Net loss	$	(1,466,411	)	$	(2,313,380	)
Adjustments to reconcile net (loss) earnings to cash provided by operating activities
Adjustments to reconcile net loss to cash provided by operating activities
Depreciation and amortization		1,~~099~~104,~~368~~494			1,~~437~~099,~~847~~368			~~1,853,499~~
Gain on sale of patents		-			-			(894,127	)
Share-based compensation expense		110,875			-
Share-based compensation expense		-			-			7,680
Increase in provision for bad debts		133,000			80,000
Increase in provision for bad debts		80,000			-			-
Increase in provision for inventory reserves		110,000			90,000
Increase in provision for inventory reserves		90,000			630,000			-
Increase (decrease) in provision for warranty reserves		112,000			50,000
Increase (decrease) in provision for warranty reserves		50,000			(130,000	)		(260,000	)
Changes in assets and liabilities
Changes in assets and liabilities
Accounts receivable		(555,368	)		(132,045	)
Accounts receivable		(132,045	)		1,381,134			2,209,288
Inventories		1,504,724			1,228,496
Inventories		1,228,496			1,201,890			(2,915,066	)
Other assets		(32,520	)		(63,310	)
Other assets		(63,310	)		56,075			(16,985	)
Accounts payable		(328,621	)		177,747
Accounts payable		177,747			(7,012	)		826,052
Accrued expenses		226,114			157,597
Accrued expenses		157,597			(217,962	)		(477,335	)
Deferred revenue		(128,103	)		(39,090	)
Deferred revenue		(39,090	)		(202,848	)		(2,662	)
Customer deposits		(2,767	)		(263,981	)
Customer deposits		(263,981	)		(1,423,615	)		56,894
Net cash provided by operating activities		787,417			71,402
Net cash provided by operating activities		71,402			119,810			770,521
Cash flows from investing activities
Cash flows from investing activities
Property and equipment expenditures		(44,289	)		(38,958	)
Property and equipment expenditures		(38,958	)		(1,742	)		(335,161	)
Capitalized software additions		(898,671	)		(848,240	)
Capitalized software additions		(848,240	)		(996,731	)		(1,213,870	)
License agreements, patents, and trademark expenditures		-			(7,501	)
License agreements, patents, and trademark expenditures		(7,501	)		(16,729	)		(62,734	)
Net cash used for investing activities operating activities		(942,960	)		(894,699	)
Proceeds from sale of patents		-			-			1,075,000
Cash flows from financing activities
Net cash used for investing activities		(894,699	)		(1,015,202	)		(536,765	)
Change in borrowings under revolving line-of-credit-related party		400,000			1,050,912
Cash flows from financing activities
Proceeds from note payable		-			250,000
Change in borrowings under revolving line-of-credit		1,050,912			915,845			(132,461	)
Repayment of note payable		-			(250,000	)
Proceeds from note payable		250,000			-			-
Net cash provided by financing activities		400,000			1,050,912
Repayment of note payable		(250,000	)		-			-
Increase in cash		244,457			227,615
Loan facility fees		-			(25,000	)		(100,000	)
Cash, beginning of year		231,091			3,476
Net cash provided by (used for) financing activities		1,050,912			890,845			(232,461	)
Cash, end of year	$	475,548		$	231,091
Increase (decrease) in cash		227,615			(4,547	)		1,295
Supplementary information:
Cash, beginning of year		3,476			8,023			6,728
Cash paid for interest	$	25,856		$	35,639
Cash, end of year	$	231,091		$	3,476		$	8,023
Supplementary information:
Cash paid for interest	$	35,639		$	129,123		$	158,586

See accompanying notes to consolidated financial statements.

3934

Wegener Corporation and subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Going Concern

We have experienced recurring net losses ~~from operations,~~ which have caused an accumulated deficit of approximately $2021,~~265~~731,000 at September 32, ~~2010~~2011. We had a working capital deficit of approximately $34,~~248~~441,000 at September 32, ~~2010~~ 2011 compared to a working capital deficit of $13,~~139~~248,000 at ~~August~~September 283, ~~2009~~ 2010.

~~Our~~During ~~cash flow~~the ~~requirements~~first, ~~during~~second, ~~fiscal~~third ~~2010~~and ~~were~~fourth ~~financed~~quarters ~~primarily~~of ~~by our loan facility. During~~ fiscal ~~2010,~~2011 ~~our~~bookings ~~net~~were ~~borrowings~~approximately ~~under our loan facility increased~~ $13.2,~~051,000~~ to $30.7,~~850,000~~ at$1.6 ~~September~~and ~~3, 2010 from approximately~~ $~~2,799,000~~0.9 ~~at August 28~~million, ~~2009~~respectively. During ~~Our~~fiscal ~~loan~~2010 ~~facility~~bookings ~~was~~were ~~amended effective October~~ $8,.3 ~~2009,~~million. These ~~provides~~bookings awere ~~maximum~~well ~~borrowing~~below ~~limit~~our ofexpectations ~~$4,250,000~~primarily ~~and~~as ~~matures~~a onresult ~~April 7,~~of ~~2011.~~customer Asdelays ~~described~~ in ~~Note~~purchasing 9decisions, ~~the~~deferral ~~bank~~of ~~assigned~~project ~~our~~expenditures ~~facility~~and togeneral aadverse ~~related party.~~economic ~~At November 1, 2010, the outstanding balance on the loan facility amounted to $4,100,000~~ and ~~our~~credit ~~cash balances were approximately $351,000~~conditions.

~~No assurances~~Our ~~may~~backlog bescheduled ~~given~~to ~~that~~ship ~~upon~~within ~~maturity~~eighteen ~~our~~months ~~loan~~was ~~facility~~approximately ~~will be renewed~~$3.5 ~~In the~~million ~~event~~at ~~the~~September ~~loan facility is not renewed~~2, we2011. The ~~would~~total ~~need~~multi-year tobacklog ~~obtain~~at ~~additional credit~~September ~~facilities~~2, or2011, ~~raise~~was ~~additional~~also ~~capital~~approximately to$3.5 ~~continue~~million. Approximately as$2.6 amillion ~~going~~of ~~concern~~the ~~and to~~September ~~execute~~2, ~~our~~2011 ~~business~~backlog ~~plan There~~ is noscheduled ~~assurance that such financing would be available or, if available, that we would be able~~ to ~~complete~~ship ~~financing~~during ~~on satisfactory~~fiscal ~~terms~~2012.

~~During the~~Our ~~fourth~~bookings ~~quarter of fiscal 2008~~ and inrevenues during fiscal ~~2009~~2011, weas ~~made~~well ~~reductions~~as ~~in headcount~~ to ~~bring~~date ~~the~~in ~~number~~fiscal ~~of employees at August 28~~2012, ~~2009,~~have tobeen 63insufficient ~~compared~~ to 91 atattain ~~August~~profitable ~~29,~~operations ~~2008,~~ and to ~~reduced~~provide ~~engineering~~adequate ~~consulting~~levels ~~and~~of ~~other~~cash ~~operating and~~flow ~~overhead~~from ~~expenses~~operations. In ~~Beginning~~addition, insignificant ~~January 2009 and continuing throughout~~ fiscal ~~2010,~~2012 weshippable ~~reduced~~bookings ~~paid~~are ~~working~~currently ~~hours~~required ~~Company-wide~~to bymeet ~~approximately~~our ~~10%. During~~quarterly ~~the~~financial ~~first~~ and ~~second~~cash ~~quarters~~flow ofprojections ~~fiscal~~beginning ~~2010, we made further reductions~~ in ~~headcount to bring~~ the ~~current~~first ~~number~~quarter of ~~employees to 49. During~~ fiscal ~~2009 and~~2012 ~~fiscal 2010, as well as to date in fiscal 2011, due to insufficient cash flow from operations~~ and acontinuing ~~maximum~~for ~~borrowing~~each ~~limit~~subsequent ~~under~~quarter. We ~~our~~currently ~~loan~~estimate ~~facility~~that, ~~we negotiated~~depending ~~extended~~on ~~payment~~product ~~terms with our two offshore vendors and have been extending other vendors beyond normal payment terms. Until such vendors are paid within normal payment terms~~mix, nobreak-even ~~assurances~~revenue ~~can~~levels berange ~~given~~from ~~that~~approximately ~~required services and materials needed to support operations will continue to be provided~~$13.0 ~~In addition,~~million ~~no assurances can be given that vendors will not pursue legal means~~ to ~~collect~~ ~~past due balances owed~~$13.5 ~~Any~~million ~~interruption~~on ~~of services or materials or initiation of legal means to collect balances owed would likely have~~ an ~~adverse impact~~annual ~~on our operations and could impact our ability to continue as a going concern~~basis.

During the ~~first~~prior three fiscal years, ~~second~~we made reductions in headcount, ~~third~~engineering consulting, and ~~fourth~~other ~~quarters~~operating ofand overhead expenses. Beginning in January 2009 and continuing throughout fiscal 2010, ~~bookings~~we ~~were~~ reduced paid working hours Company-wide by approximately $110%.8 During ~~million~~the first quarter of fiscal 2011, ~~$2.1~~to ~~million~~increase engineering capacity, ~~$3.0~~the ~~million~~10% ~~and~~reduction ~~$1.4~~in ~~million, respectively.~~paid ~~These~~working hours was eliminated for engineering personnel. During fiscal ~~2010~~years ~~bookings~~2009 through fiscal 2011, as well as ~~our~~to date in fiscal ~~2009~~2012, due to insufficient cash flow from operations and ~~fiscal 2008~~borrowing ~~bookings~~limitations under our loan facility, ~~particularly~~we ~~during~~negotiated ~~the~~extended ~~fourth~~payment ~~quarter~~terms ofwith ~~fiscal~~our ~~2008,~~two ~~were~~offshore vendors and have been extending other vendors well ~~below~~ ~~our~~beyond ~~expectations~~normal ~~primarily~~payment asterms. aUntil ~~result~~such ofvendors ~~customer~~are ~~delays~~paid inwithin ~~purchasing decisions~~normal payment terms, ~~deferral~~no ofassurances ~~project~~can ~~expenditures~~be given that required services and ~~general~~materials needed to support operations will continue to be provided. In addition, no assurances can be given that vendors will not pursue legal means to collect past due balances owed. Any interruption of services or materials or initiation of legal means to collect balances owed would likely have an adverse ~~economic~~impact on our operations and ~~credit~~ ~~conditions~~could impact our ability to continue as a going concern.

~~Our backlog~~At ~~scheduled~~September to2, ~~ship~~2011, ~~within~~our ~~eighteen~~primary ~~months~~source of liquidity for cash flows was ~~approximately~~our $~~6.0~~4,250,000 ~~million at~~loan ~~September~~facility, 3which initially matured on April 7, ~~2010~~2011. The ~~total~~loan ~~multi-year~~facility ~~backlog~~automatically atrenews ~~September~~for 3successive twelve (12) month periods provided, ~~2010~~however, ~~was approximately~~the ~~$6.1~~lender ~~million.~~may ~~Approximately~~terminate $3the facility by providing a ninety (90) day written notice of termination at any time after April 7, 2011.5 No ~~million~~assurances may be given that our loan facility will continue for the duration of the ~~September~~twelve 3month renewal period. In the event of a ninety day notice of termination of our loan facility, ~~2010 backlog~~we would need to obtain additional credit facilities or raise additional capital to continue as a going concern and to execute our business plan. There is ~~scheduled~~no assurance that such financing would be available or, if available, that we would be able to ~~ship~~complete ~~during~~financing ~~fiscal~~on ~~2011~~satisfactory terms.

Our ~~bookings~~ ~~and~~cash ~~revenues~~flow requirements during fiscal ~~2010,~~2011 aswere ~~well~~financed asprimarily toby ~~date~~our inline of credit borrowings and our working capital. During fiscal 2011, ~~have~~ ~~been~~our ~~insufficient~~net toborrowings ~~attain~~under ~~profitable~~our ~~operations~~loan ~~and~~facility toincreased ~~provide~~$400,000 ~~adequate levels~~to ofthe ~~cash~~maximum ~~flow~~credit ~~from~~limit ~~operations.~~of ~~In addition~~$4,250,000 ~~significant~~at ~~fiscal~~September 2, 2011 ~~shippable~~ ~~bookings~~from ~~are~~3,850,000 ~~currently~~at ~~required~~September to3, ~~meet~~2010. At ~~our~~November ~~quarterly~~15, ~~financial~~2011, ~~and cash~~the ~~flow~~outstanding ~~projections~~balance ~~beginning~~on in the ~~first~~line ~~quarter~~ of ~~fiscal~~credit ~~2011~~remained at $4,250,000 and ~~continuing~~ ~~for~~our ~~each~~cash ~~subsequent~~balances ~~quarter~~were approximately $275,000.

~~Our~~With ~~near term~~our ~~liquidity~~line ~~and~~of ~~ability~~credit tocurrently ~~continue~~at asthe amaximum ~~going~~limit, ~~concern will depend upon~~ our ~~ability~~ tovery ~~timely collect our existing accounts receivable balances and to generate sufficient new orders and revenues in the~~ near term toliquidity ~~provide sufficient~~is ~~cash~~dependent ~~flow~~on ~~from operations to pay~~ our ~~operating~~working ~~expenses~~capital and toprimarily ~~reduce past~~on ~~due~~the ~~amounts~~timely ~~owed~~collection toof ~~vendors~~accounts ~~and~~receivable ~~service~~balances ~~providers.~~and ~~Should~~conversion ~~increased revenues~~of ~~not~~inventory ~~materialize,~~into wereceivable ~~are committed to further reducing operating costs to bring them in line with reduced revenue levels~~balances. ~~Should~~During wefiscal be2011 ~~unable to achieve near term profitability~~ and ~~generate~~continuing ~~sufficient cash flow from operations and if we are unable~~ to ~~further reduce operating costs~~date, wethe ~~would~~days ~~need to~~outstanding ~~raise~~of ~~additional~~our ~~capital~~accounts orreceivable ~~obtain~~has ~~additional~~increased ~~borrowings~~ beyond our ~~existing loan~~expectations, ~~facility.~~primarily Nodue ~~assurances~~to ~~can~~a bedelay ~~given~~in ~~that~~payment ~~operating~~from ~~costs~~one ~~can be further reduced~~customer, orwhich ifhas ~~required,~~adversely ~~that~~impacted ~~additional~~our ~~capital~~cash ~~or borrowings would be available to allow us to continue as a going concern~~balances. IfOur welow ~~are~~level ~~unable~~of ~~to continue~~bookings ashas alengthened ~~going~~the ~~concern,~~cycle weof ~~will~~conversion ~~likely~~of beinventory ~~forced~~into toreceivable ~~seek~~balances ~~protection~~and ~~under the~~then ~~federal~~into ~~bankruptcy~~cash ~~laws~~balances.

4035

~~Wegener Corporation~~Our near term liquidity and ~~subsidiary~~ability to continue as a going concern is dependent on our ability to timely collect our existing accounts receivable balances and to generate sufficient new orders and revenues in the very near term to provide sufficient cash flow from operations to pay our current level of operating expenses, to provide for inventory purchases and to reduce past due amounts owed to vendors and service providers. No assurances may be given that the Company will be able to achieve sufficient levels of new orders in the near term to provide adequate levels of cash flow from operations. Should we be unable to achieve near term profitability and generate sufficient cash flow from operations, we would need to raise additional capital or obtain additional borrowings beyond our existing loan facility. We currently have limited sources of capital, including the public and private placement of equity securities and additional debt financing. No assurances can be given that additional capital or borrowings would be available to allow us to continue as a going concern. If near term shippable bookings are insufficient to provide adequate levels of near term liquidity and any required additional capital or borrowings are unavailable, we will likely be forced to enter into federal bankruptcy proceedings.

On February 17, 2010, we received notification from The Nasdaq Stock Market (“Nasdaq”) (the “Notification”), that as a result of the information presented at an appeal hearing held on January 13, 2010, our request to remain listed on Nasdaq was granted subject to conditions stipulated in the Notification. The Notification stipulated that on or before June 7, 2010 (the “Exception Deadline”), we were required to have stockholders’ equity of at least $2,500,000 and our common stock to maintain a minimum bid price of $1.00 per share for a period of ten consecutive trading days. On April 8, 2010, we notified the Panel that based on our current level of existing backlog of orders scheduled to ship in our fiscal third quarter ending May 28, 2010, and our expected level of new shippable bookings for the third quarter, we did not expect that we would be able to comply with the Nasdaq requirements by the Exception Deadline. On April 20, 2010, the Company received notification from Nasdaq, that the Panel had determined to delist the Company’s common stock shares. Nasdaq suspended trading of our common stock shares effective at the open of trading on April 22, 2010 and our common stock has not traded on NASDAQ since that time. As a result, on April 22, 2010, our common stock began trading over-the-counter under the symbol WGNR.PK. On June 9, 2010, NASDAQ filed a Form 25 with the Securities and Exchange Commission to complete the delisting. The delisting became effective ten days after the filing of Form 25.

2. Summary of Significant Accounting Policies

Nature of Operations and Principles of Consolidation. The consolidated financial statements include the accounts of Wegener Corporation (WGNR, “we,” “our,” “us” or the “Company"”) and its wholly-owned subsidiary. , Wegener Communications, Inc. ~~(WCI) designs~~We design, ~~manufactures~~manufacture and ~~distributes~~distribute satellite communications electronics equipment in the U.S. and internationally. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted ~~accounting~~in ~~principles~~the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Examples include valuation allowances for deferred tax assets, and provisions for bad debts, inventory obsolescence and warranties. Actual results could vary from these estimates.

Fiscal Year. We operate on a 52-53 week fiscal year. The fiscal year ends on the Friday nearest to August 31. Fiscal year ~~2010~~2011 contained fifty-~~three~~two weeks while fiscal ~~years~~year ~~2009 and~~2010 ~~2008~~ contained 52fifty-three weeks. All references herein to ~~2010,~~2011 ~~2009~~ and ~~2008,~~2010 refer to the fiscal years ended September 32, ~~2010,~~2011 ~~August~~and ~~28,~~September ~~2009~~3, ~~and August 29~~2010, ~~2008,~~ respectively.

Cash and Bank Overdrafts. Cash balances consist of checking account ~~balances~~ balances held at a high credit-quality financial institution. 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~~ Any remaining balances of overdrafts ~~are~~would be included in our accounts payable balances. At September 2, 2011 and at September 3, 2010 outstanding checks in the amount of $~~161~~82,000 ~~were~~and ~~offset against cash balances. At August 28, 2009 outstanding checks in the amount of~~ $~~323~~161,000, respectively, were ~~included~~offset inagainst ~~accounts~~cash ~~payable~~ balances.

Accounts Receivable. Accounts receivable are stated at the amounts billed to customers under normal trade terms, less an allowance for doubtful accounts. Credit is extended based on the evaluation of the customer’s financial condition and generally we do not require collateral from our customers. However, in certain circumstances letters of credit or deposits may be required from customers. The allowance for doubtful accounts is provided based upon a review of individual customer accounts, historical payment information and existing economic conditions. Accounts receivable standard terms are net 30 days from the date of invoice. Receivables are charged to the allowance for doubtful accounts when all attempts to collect have failed and they are determined to be uncollectible. Historically, we have not experienced significant losses related to receivables from individual customers or groups of customers in any particular industry or geographic area.

~~Our policy is not to require collateral on accounts receivable. However, in certain circumstances letters of credit or deposits may be required from customers.~~ We are subject to concentrations of credit risk principally through accounts receivable, as a substantial portion of our customers are affiliated with the cable television, radio, business broadcast and telecommunications industries.

41Inventories. Inventories are stated 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, direct labor and manufacturing overhead. The Company makes provisions for obsolete or slow-moving inventories as necessary to properly reflect inventory at its net realizable value.

~~Wegener Corporation~~Property, Equipment and ~~subsidiary~~Depreciation. Property and equipment are stated at cost. Depreciation is computed over the estimated useful lives of the assets on the straight-line method for financial reporting and accelerated methods for income tax purposes. Substantial betterments or improvements to property and equipment that significantly add to the productive capacity or extend the useful life of an asset are capitalized. The cost of repairs and maintenance are expensed as incurred.

Inventories. Inventories are stated 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. The Company makes provisions for obsolete or slow-moving inventories as necessary to properly reflect inventory at its net realizable value.36

~~Property~~Other Assets. Other assets consist primarily of technology licenses, ~~Equipment~~ patents and ~~Depreciation~~trademarks. Costs ~~Property~~of ~~and equipment~~license agreements are ~~stated~~amortized aton ~~cost.~~a ~~Depreciation~~straight-line isbasis ~~computed~~ over the lesser of the contractual term or their estimated useful lives. Legal ofexpenses related to the ~~assets~~filing onof ~~the~~patent ~~straight-line~~and ~~method~~trademark ~~for~~applications ~~financial~~are ~~reporting~~capitalized. Upon ~~and accelerated~~issuance, ~~methods~~these ~~for~~costs ~~income~~will ~~tax~~also ~~purposes.~~be ~~Substantial~~amortized ~~betterments~~on toa ~~property and~~straight-line ~~equipment~~basis ~~are~~over ~~capitalized,~~the ~~and~~lesser ~~repairs~~of the legal life of the patents and ~~maintenance~~trademarks ~~are~~or ~~expensed~~their ~~as incurred~~estimated useful lives.

~~Other~~ Impairment of Long-lived Assets. ~~Other~~ Long-lived assets, ~~consist~~including ~~primarily~~property ofand ~~technology~~equipment ~~licenses,~~and ~~patents~~intangible ~~and trademarks.~~assets ~~Costs~~are ofevaluated ~~license~~for ~~agreements~~impairment ~~are~~whenever ~~amortized~~events onor achanges ~~straight-line~~in ~~basis over~~circumstances ~~their~~indicate ~~estimated~~that ~~useful~~the ~~lives.~~carrying ~~Legal~~amount ~~expenses~~of ~~related~~such toassets may not be recoverable. If the ~~filing~~sum of ~~patent~~ ~~and~~the ~~trademark~~expected ~~applications~~future ~~are~~undiscounted ~~capitalized.~~cash ~~Upon~~flows ~~issuance,~~is ~~these~~less ~~costs will~~than ~~also~~the becarrying ~~amortized~~amount onof athe ~~straight-line~~asset, ~~basis~~an ~~over~~impairment loss is recognized in the ~~lesser~~amount ofthat the ~~legal life~~carrying amount of the ~~patents~~asset ~~and~~exceeds ~~trademarks~~its orfair ~~their~~value. Fair ~~estimated~~value ~~useful~~is ~~lives~~determined based on discounted future net cash flows associated with the use of the asset.

Revenue Recognition. Our principal sources of revenue are from the sale of satellite communications equipment (“hardware products,”) and network control software products (“software products”), and product repair services, extended maintenance contracts and ~~software~~installation and ~~hardware~~training services (“services”). Historically, product repair services, maintenance contracts and installation and training services are less than 10% of our net revenues. Provisions for returns, discounts and trade-ins, based on historical experience, have not been material. Our revenue recognition policies are in compliance with FASB Accounting Standards Codification (ASC) Topic 605 “Revenue Recognition.” Revenue is recognized when persuasive evidence of an agreement with the customer exists, delivery has occurred or services have been provided, the ~~sale~~sales price is fixed or determinable, collectability is reasonably assured, and risk of loss and title have transferred to the customer. Revenue from product sales is recognized when risk of loss and title has transferred which is generally upon shipment or in some cases upon delivery. Service revenues are recognized at the time of performance. Provisions for returns, discounts and trade-ins, based on historical experience, have not been material.

~~When arrangements~~Revenue ~~contain~~from ~~multiple~~hardware ~~elements,~~products weis ~~evaluate~~recognized ~~all~~when ~~deliverables~~risk inof ~~the arrangement~~loss atand ~~the~~title ~~outset~~has oftransferred ~~the~~which ~~arrangement~~is ~~based~~generally onupon ~~applicable~~shipment. ~~accounting guidance~~In onsome ~~accounting~~cases, ~~for~~particularly ~~revenue~~with ~~arrangements~~international ~~with~~shipments ~~multiple~~and ~~deliverables.~~domestic ~~If the~~shipment ~~undelivered~~using ~~elements~~common ~~qualify~~carriers asarranged ~~separate~~by ~~units~~the ofcustomer, ~~accounting~~customer ~~based~~contracts ~~on applicable~~are ~~accounting~~fulfilled ~~guidance,~~under ~~which~~terms ~~include~~known ~~that~~as ~~the~~ex-works, ~~delivered~~in ~~elements~~accordance ~~have value~~with tointernational ~~the~~commercial ~~customer~~terms. In onthese ainstances, ~~stand-alone~~revenue ~~basis~~is ~~and~~recognized ~~that~~upon ~~objective~~delivery, ~~and~~which ~~reliable evidence~~is ofthe ~~fair~~date ~~value~~that ~~exists~~the ~~for~~goods ~~undelivered~~are ~~elements,~~made weavailable ~~allocate~~to the ~~arrangement~~ ~~fee~~customer ~~based~~as onrequested by the ~~relative~~customer ~~fair~~and ~~value~~no offurther ~~the~~obligations ~~elements~~ of the ~~arrangement.~~ IfCompany aremain. Hardware ~~delivered~~products ~~element~~are ~~does~~typically ~~not~~sold ~~meet~~on ~~the~~a ~~criteria~~stand-alone inbasis ~~the~~but ~~applicable accounting~~may ~~guidance~~include toseparate behardware ~~considered~~maintenance acontracts. Embedded ~~separate~~in ~~unit~~our ofhardware ~~accounting,~~products ~~revenue~~ is ~~deferred~~ ~~until~~internally ~~the~~developed ~~undelivered~~software ~~elements~~of ~~are~~varying ~~fulfilled.~~applications Wethat ~~establish~~function ~~fair~~together ~~value by~~with ~~reference~~the hardware to ~~the~~deliver ~~price~~ the ~~customer~~product’s isessential ~~required~~functionality. The toembedded ~~pay~~software ~~when an item~~ is not sold ~~separately~~ ~~using contractually stated~~separately, ~~substantive~~is ~~renewal~~not ~~rates,~~a ~~where applicable,~~significant orfocus of the ~~average~~marketing ~~price~~effort ofand ~~recently~~we ~~completed~~do ~~stand~~not ~~alone~~provide ~~sales transactions.~~post-contract ~~Accordingly,~~customer ~~the~~support ~~determination~~specific as to ~~whether~~embedded ~~appropriate~~software. The ~~objective and~~functionality ~~reliable~~that ~~evidence~~the ofsoftware ~~fair~~provides ~~value~~is ~~exists~~marketed ~~can~~as ~~impact~~part ~~the timing~~ of ~~revenue recognition~~the ~~for~~overall ~~an arrangement~~product.

~~Embedded in~~When ~~our~~arrangements ~~hardware~~contain ~~products~~multiple iselements, ~~internally~~the ~~developed~~deliverables ~~software~~are separated into more than one unit of ~~varying applications.~~accounting ~~The~~when ~~embedded~~the ~~software~~following iscriteria ~~not~~are ~~sold~~met: ~~separately~~(i) the delivered element(s) has value to the customer on a stand-alone basis, isand ~~not~~(ii) if a ~~significant focus~~general right of return exists relative to the ~~marketing~~delivered ~~effort~~item, delivery or performance of the undelivered element(s) is probable and wesubstantially doin ~~not~~the ~~provide~~control ~~post-contract~~of ~~customer support~~the ~~specific~~Company. We allocate revenue to ~~embedded~~all ~~software~~deliverables based on their relative selling prices. ~~The~~In ~~functionality~~such ~~that~~circumstances, we use a hierarchy to determine the ~~software provides~~selling isprice ~~marketed~~to asbe ~~part~~used for allocating revenue to deliverables: (i) vendor-specific objective evidence of selling price (“VSOE”), (ii) third-party evidence of selling price (“TPE”), and (iii) management’s best estimate of the ~~overall~~selling ~~product~~price (“BESP”). VSOE generally exists only when we sell the deliverable separately and is ~~incidental~~the price actually charged by the Company for that deliverable. The objective of BESP is to determine the price at which the Company would transact a sale if the product asor service were sold on a ~~whole~~stand-alone basis. We determine the BESP for a product or service by considering multiple factors including, but not limited to, geographies, market conditions, competitive landscape, internal costs, gross margin objectives, and pricing practices. If a delivered element does not meet the criteria in the applicable accounting guidance to be considered a separate unit of accounting, revenue is deferred until the undelivered elements are fulfilled. Accordingly, the determination of BESP can impact the timing of revenue recognition for an arrangement.

Revenue from our network control software products and software-related elements is recognized in accordance with ASC Topic 985-605 “Software-Revenue Recognition.” Software-related elements include all non-software deliverables for which a software deliverable is essential to its functionality. Typical deliverables in a software arrangement may include network control software, extended software maintenance contracts, training and installation. When software arrangements contain multiple elements and ~~vendor specific objective evidence (~~VSOE) of fair value exists for all undelivered elements, we account for the delivered elements using the residual method. In arrangements where VSOE of fair value is not available for all undelivered elements, we defer the recognition of all revenue under an arrangement until all elements, except post contract support, have been delivered. When post contract support remains the only undelivered element for such contracts, revenue is then recognized using the residual method. Fair value of software-related elements is based on separate sales to other customers or upon renewal rates quoted in contracts when the quoted renewal rates are deemed to be substantive. Software and hardware maintenance contract revenues are recognized ratably over the term of the arrangement, which is typically one year.

At September 3, 2010, deferred extended service maintenance revenues were $519,000, and deferred revenues related to the fair value of undelivered elements were $10,000 and are expected to be recognized as revenue in varying amounts throughout fiscal 2011.37

42Service revenues are recognized at the time of performance. Extended maintenance contract revenues are recognized ratably over the term of the arrangement, which is typically one year.

~~Wegener Corporation~~At September 2, 2011, deferred extended service maintenance revenues were $391,000, and ~~subsidiary~~deferred revenues related to the fair value of undelivered elements were $10,000 and are expected to be recognized as revenue in varying amounts throughout fiscal 2012.

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 by the Company exist. For these transactions, the finished goods are segregated from inventory and normal billing and credit terms are granted. For the year ended September 3 2, ~~2010~~2011, no$550,000 ~~revenues~~of revenue to one customer were recorded as bill and hold transactions~~. For~~ in the ~~year~~first ~~ended~~quarter ~~August~~of ~~28,~~fiscal ~~2009,~~2011. At ~~revenues~~September ~~attributable~~2, to2011, ~~two~~all ~~customers~~products ~~in the~~had ~~amount~~been ofdelivered ~~$1,236,000~~and ~~were~~accounts ~~recorded~~receivable ~~prior~~for tothese ~~delivery~~revenues aswere ~~bill~~paid ~~and~~in ~~hold transactions~~full. For Atthe ~~August~~year 28ended September 3, ~~2009~~2010, ~~accounts~~no ~~receivable~~revenues ~~for~~were ~~these~~recorded ~~revenues~~as ~~were paid~~bill inand ~~full~~hold transactions.

We have included all shipping and handling billings to customers in revenues, and freight costs incurred for product shipments have been included in cost of ~~products~~ ~~sold~~revenues.

Research and Development/Capitalized Software Costs. We expense research and development costs, including expenditures related to development of our software products that do not qualify for capitalization. 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. This has resulted in amortization periods ranging from two to three years. 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. Software development costs capitalized during fiscal ~~2010,~~2011 ~~2009~~ and ~~2008,~~2010 totaled $~~848~~899,000, ~~$997,000~~ and $1848,~~214,~~000, respectively. Amortization expense, included in cost of ~~products sold~~revenues, was $~~850~~874,000, ~~$949,000~~ and $1850,~~238,~~000 for the same periods, respectively. Capitalized software costs, net of accumulated amortization, were $1,~~263~~288,000 at September 32, ~~2010~~2011 and $1,~~265~~263,000 at ~~August~~September 283, ~~2009~~2010. Accumulated amortization amounted to $7,~~629~~349,000 at September 32, ~~2010~~2011 and $137,~~694~~629,000 at ~~August~~ 28September 3, ~~2009~~2010. During fiscal years 2011 and 2010, approximately $1,154,000 and $6,915,000, respectively, of fully amortized capitalized software cost associated with products no longer being sold or supported was written off against the accumulated amortization balance. This had no effect on net capitalized software cost at September 2, 2011 and September 3, 2010 or fiscal 2011 and fiscal 2010 cost of ~~products sold~~revenues.

Advertising and Sales Promotion Expenses. Our policy is to expense advertising and sales promotion costs as incurred. Advertising and sales promotion expenses include media advertising, trade shows, customer events, product literature and market research costs. These expenses totaled $~~128~~85,000, ~~$178,000~~ and $~~258~~128,000 for fiscal years ~~2010,~~2011 ~~2009~~ and ~~2008~~2010, respectively.

~~Long~~Share-~~Lived Assets~~Based Compensation. We ~~Long~~account for share-~~lived~~based ~~assets~~payments ~~are~~to ~~reviewed~~employees, ~~for~~including ~~impairment~~grants ~~whenever~~of ~~events~~employee ~~or changes~~stock options, in ~~circumstances~~accordance ~~indicate~~with ASC Topic 718, “Compensation-Stock Compensation” (ASC 718). ASC 718 requires that these awards be recognized as compensation expense in the ~~carrying~~consolidated ~~amount~~financial ofstatements anbased ~~asset~~on ~~may~~their ~~not be~~fair ~~recoverable~~values. IfThat ~~the~~expense ~~sum~~will ofbe recognized over the ~~expected~~period ~~future~~during ~~undiscounted~~which ~~cash~~an ~~flows~~employee is ~~less~~ ~~than~~required ~~the~~to ~~carrying~~provide ~~amount~~services ofin exchange for the ~~asset~~award, aknown ~~loss~~as isthe ~~recognized~~requisite ~~for~~service ~~the difference~~period ~~between~~(usually the ~~fair~~vesting ~~value~~period). In fiscal year 2011, share-based compensation expense included in selling, general and ~~carrying~~administrative ~~value~~expenses ofamounted ~~the~~to ~~asset~~approximately $111,000. For fiscal year 2010 there was no share-based compensation expense.

~~Share-Based Compensation~~Income Taxes. Income ~~We account~~taxes ~~for~~are ~~share-~~based ~~payments~~on toincome ~~employees,~~(loss) ~~including~~for ~~grants~~financial ofreporting ~~employee stock~~purposes ~~options,~~and inreflect ~~accordance~~a ~~with~~current ~~ASC~~tax ~~Topic~~liability ~~718, “Compensation-Stock Compensation”~~ (~~ASC 718~~asset). ~~ASC~~for ~~718~~the ~~requires~~estimated ~~that~~taxes ~~these~~payable ~~awards~~(recoverable) ~~be recognized as compensation expense~~ in the ~~consolidated~~current ~~financial~~year’s ~~statements~~tax ~~based~~return onand ~~their fair~~changes ~~values~~in deferred taxes. Deferred ~~That~~tax ~~expense~~assets ~~will~~or beliabilities are recognized ~~over~~for the ~~period~~estimated ~~during~~tax ~~which~~effects ~~an employee~~of istemporary ~~required~~differences tobetween ~~provide~~financial ~~services~~reporting inand ~~exchange~~taxable income (loss) and for ~~the~~tax ~~award,~~credit ~~known~~and asloss ~~the requisite~~carryforwards ~~service~~based ~~period~~on ~~(usually~~enacted ~~the~~tax ~~vesting~~laws ~~period)~~and rates. Valuation ~~For~~allowances ~~fiscal~~are ~~years~~established ~~2010~~to ~~and 2009~~reduce ~~there~~deferred ~~was~~tax noassets ~~share-based~~to ~~compensation~~amounts ~~expense~~that we expect are more likely than not to be realizable. At InSeptember ~~fiscal~~2, ~~2008~~2011, ~~share-based compensation~~net ~~expense~~deferred ~~included~~tax inassets ~~selling,~~were ~~general~~fully ~~and~~offset ~~administrative~~by ~~expenses amounted~~a tovaluation allowance of $87,978,000.

~~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:~~38

	Year ended
	August 29, 2008
Risk-free interest rate		3.45	%
Expected term	5.0 years
Expected volatility		70	%
Expected annual dividends		-
Forfeiture rate		-

Net Loss Per Share. Basic and diluted net loss per share was computed in accordance with ASC Topic 260 “Earnings Per Share.” Basic net loss per share is computed by dividing net loss (numerator) by the weighted average number of common shares outstanding (denominator) during the period and exclude the dilutive effect of stock options. Because the Company reported a net loss in fiscal 2011 and fiscal 2010, common stock equivalents, which consisted of stock options, were anti-dilutive; therefore, the amounts reported for basic and dilutive loss per share were the same.

43The following tables represent required disclosure of the reconciliation of the net loss and shares of the basic and diluted net loss per share computations:

Wegener Corporation and subsidiary

	Years ended
	September 2, 2011			September 3, 2010
Basic and diluted
Net loss	$	(1,466,411	)	$	(2,313,380	)
Weighted average shares outstanding		13,019,304			12,647,051
Net loss per share	$	(.11	)	$	(.18	)

The weighted average fair value of options granted was as follows:

	Year ended
	August 29, 2008
Per share option value	$	.51
Aggregate total	$	8,000

Income Taxes. Income taxes are based on income (loss) for financial reporting purposes and reflect a current tax liability (asset) for the estimated taxes payable (recoverable) in the current year’s tax return and changes in deferred taxes. Deferred tax assets or liabilities are recognized for the estimated tax effects of temporary differences between financial reporting and taxable income (loss) and for tax credit and loss carryforwards based on enacted tax laws and rates. Valuation allowances are established to reduce deferred tax assets to amounts that we expect are more likely than not to be realizable. At September 3, 2010, net deferred tax assets were fully offset by a valuation allowance of $7,450,000.

Earnings Per Share. Basic and diluted net (loss) earnings per share were computed in accordance with ASC Topic 260 “Earnings Per Share.” Basic net (loss) earnings per share are computed by dividing net (loss) earnings available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period and exclude the dilutive effect of stock options. Diluted net (loss) earnings per share gives effect to all dilutive potential common shares outstanding during a period. In computing diluted net (loss) 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 hypothetical exercise of stock options.

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

	Years ended
	September 3, 2010			August 28, 2009			August 29, 2008
Basic
Net (loss) earnings	$	(2,313,380	)	$	(2,605,699	)	$	383,283
Weighted average shares outstanding		12,647,051			12,647,051			12,647,051
Net (loss) earnings per share	$	(.18	)	$	(.21	)	$	.03
Diluted
Net (loss) earnings	$	(2,313,380	)	$	(2,605,699	)	$	383,283
Weighted average shares outstanding		12,647,051			12,647,051			12,647,051
Effect of dilutive potential common shares:
Stock options		-			-			12,363
Total		12,647,051			12,647,051			12,659,414
Net (loss) earnings per share	$	(.18	)	$	(.21	)	$	.03

Wegener Corporation and subsidiary

Stock options excluded from the diluted loss per share calculation due to their antidilutive effect are as follows:

	Years ended
	September 3,		August 28,		August 29,
	September 2, 2011		September 3, 2010
	2010		2009		2008
Common stock options:
Common stock options:
Number of underlying shares		1,308,875		665,375
Number of shares		665,375		731,375		839,531
Range of exercise prices	$	.125 to $2.50	$	.63 to $2.50
Range of exercise prices	$	.63 to $2.50	$	.63 to $2.50	$	1.00 to $2.72

Fair Value Measurements. The Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

•

Level 1 – Quoted prices in active markets for identical assets or liabilities.

•

Level 2 – Observable inputs, other than quoted prices included in Level 1, such as quoted prices for markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Fair Value of Financial Instruments. The carrying amount of cash and other current assets and liabilities, such as accounts receivable and accounts payable as presented in the consolidated financial statements, approximates fair value based on the short-term nature of these instruments. We believe the carrying amounts of our line of credit borrowings approximate fair value because the interest rates at September 3 2, ~~2010~~2011, approximated market interest rates.

Foreign Currency. The U.S. dollar is our functional currency for financial reporting. International sales are predominately made and remitted in U.S. dollars.

Recently Issued ~~Or Adopted~~ Accounting Standards. On InSeptember ~~June 2009~~4, 2010, we adopted guidance issued by the FASB ~~Accounting~~ ~~Standards~~on ~~Codification~~revenue ~~(Codification)~~recognition. ~~was~~Under ~~issued~~the tonew ~~become~~guidance ~~the~~on ~~source of~~arrangements ~~authoritative~~that ~~U.S. generally~~include ~~accepted~~software ~~accounting~~elements, ~~principles~~tangible ~~(GAAP)~~products tothat ~~be applied~~have bysoftware ~~non-governmental~~components ~~entities~~that ~~and~~are ~~supersede~~essential ~~all~~to ~~then-existing non-Securities~~the ~~and~~functionality ~~Exchange~~of ~~Commission~~the ~~(SEC)~~tangible ~~accounting~~product ~~and~~are ~~reporting~~no ~~standards. Rules~~longer ~~and~~within ~~interpretive~~the ~~releases~~scope of the ~~SEC~~software ~~under~~revenue ~~authority~~recognition ofguidance, ~~federal~~and ~~securities laws~~software-enabled products are ~~also~~now ~~sources~~subject ofto ~~authoritative~~other ~~GAAP~~relevant ~~for~~revenue ~~SEC~~recognition ~~registrants~~guidance. ~~All~~Additionally, ~~other non-grandfathered~~the ~~non-SEC~~FASB ~~accounting~~issued ~~literature~~guidance ~~not~~on ~~included~~revenue inarrangements ~~the~~with ~~Codification became~~multiple ~~non-authoritative.~~deliverables ~~The~~that ~~Codification~~are ~~was~~outside ~~effective~~the ~~for~~scope ~~financial statements~~of ~~issued~~the ~~for~~software ~~interim~~revenue ~~and~~recognition ~~annual~~guidance. ~~periods~~Under ~~ending~~the ~~after~~new ~~September 15~~guidance, ~~2009.~~ ~~The~~when ~~Company~~vendor ~~adopted~~specific objective evidence or third party evidence of the ~~provisions~~selling price for deliverables in ~~the~~an ~~first~~arrangement ~~quarter~~cannot be determined, a best estimate of ~~fiscal~~the ~~2010. References~~selling ~~made~~price is required to ~~FASB~~separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance ~~throughout~~included ~~this~~new ~~document~~disclosure ~~have~~requirements ~~been~~on ~~updated~~how ~~for~~ the ~~codification~~application of the relative selling price method affects the timing and amount of revenue recognition. ~~The~~Adoption ~~adoption~~of the new guidance did not have a material impact ~~the~~on ~~Company’s~~our consolidated financial ~~position~~ statements or ~~its~~result ~~results~~in any change in our units of ~~operations~~accounting or timing of revenue recognition and is not expected to have a material impact in subsequent periods.

In ~~June 2009~~ May 2011, the FASB issued ~~authoritative~~an ~~guidance~~update to the accounting on fair value measurement to provide a consistent definition of fair value and ensure that ~~changed~~the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards (“IFRS”). This update changes certain fair value measurement principles and enhances the ~~consolidation~~ ~~model~~disclosure requirements for ~~variable~~fair ~~interest~~value ~~entities~~measurements. ~~The~~This ~~provisions~~update ~~are~~does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards within U.S. GAAP or IFRS. This update is effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively. Early adoption is prohibited. This guidance is effective for the ~~first~~Company ~~quarter~~at the beginning of the third quarter in fiscal ~~2011~~2012 (March 3, 2012). The adoption is not expected to have a material impact on the Company’s financial position or its results of operations.

In September 2006, FASB issued authoritative guidance for fair value measurements, which established the definition of fair value, provided a framework for measuring fair value and expanded the disclosure requirements about fair value measurements. This guidance did not require any new fair value measurements but rather applies to all other accounting pronouncements that require or permit fair value measurements. In February 2008, the FASB issued authoritative guidance which delayed by a year the effective date for certain non-financial assets and liabilities. The Company adopted the provisions of the guidance for financial assets and liabilities in the first quarter of fiscal 2009. The adoption did not have a material impact on the Company’s financial position or its results of operations. The Company adopted the remaining provisions in the first quarter of fiscal 2010 for non-financial assets and liabilities, including goodwill and intangible assets. This adoption likewise did not have a material impact on the Company’s financial position or its results of operations.

Wegener Corporation and subsidiary

In September 2009, the Emerging Issues Task Force issued new guidance pertaining to the accounting for revenue arrangements with multiple deliverables. The new guidance addressed how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting, and how the arrangement consideration should be allocated among the separate units of accounting. The new guidance is effective for fiscal years beginning after June 15, 2010 and may be applied retrospectively or prospectively for new or materially modified arrangements. In addition, early adoption is permitted. The Company has evaluated this new guidance and believes it will not have a material impact on our financial position or our results of operations.

In September 2009, the Emerging Issues Task Force issued new guidance that changed the accounting model for revenue arrangements that include both tangible products and software elements that are “essential to the functionality” and removes these products from the scope of current software revenue guidance. The new guidance shall be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Earlier application is permitted as of the beginning of a Company’s fiscal year provided the Company has not previously issued financial statements for any period within that year. An entity shall not elect early application of this guidance unless it also elects early application of the new rule pertaining to accounting for revenue arrangements with multiple deliverables. The Company has evaluated this new guidance and believes it will not have a material impact on our financial position or our results of operations.

3. Accounts Receivable

Accounts receivable are summarized as follows:

	September 3, 2010			August 28, 2009
	September 2, 2011			September 3, 2010
Accounts receivable – trade	$	12,~~743~~321,~~411~~372		$	1,~~649~~743,~~047~~411
Other receivables		~~30,253~~-			7830,~~889~~253
		1,773,664			1,727,936
		2,321,372			1,773,664
Less: allowance for doubtful accounts		(~~139~~265,~~693~~033	)		(~~146~~139,~~010~~693	)
Accounts receivable, net	$	12,~~633~~056,~~971~~339		$	1,~~581~~633,~~926~~971

A relatively small number of major customers have typically comprised a majority of our revenues and that trend is expected to continue throughout fiscal 2012 and beyond (see Note 13). At September 2, 2011, four customers accounted for approximately 28.1%, 15.5%, 14.0% and 10.1%, respectively, of our accounts receivable while at September 3, 2010, four customers accounted for approximately 24.2%, 18.1%, 14.1% and 10.7%, respectively, of our accounts receivable.

4. Inventories

Inventories are summarized as follows:

	September 3, 2010			August 28, 2009
	September 2, 2011			September 3, 2010
Raw materials	$	32,~~641~~317,~~664~~852		$	43,~~430~~641,~~492~~664
Work-in-process		~~703~~649,~~531~~384			~~958~~703,~~658~~531
Finished goods		32,~~275~~450,~~183~~746			3,~~763~~275,~~793~~183
		7,620,378			9,152,943
		5,417,982			7,620,378
Less: inventory reserves		(43,~~475~~887,~~288~~616	)		(4,~~689~~475,~~357~~288	)
Inventories, net	$	31,~~145~~530,~~090~~366		$	43,~~463~~145,~~586~~090

We have invested a significant amount of financial resources to acquire certain raw materials, sub-assemblies and finished goods, to incur direct labor and to contract to have specific outplant procedures performed on certain inventory in process. We purchased this inventory based upon prior backlog and anticipated future sales based upon our existing knowledge of the marketplace. Our inventory reserve of approximately $43,~~630~~888,000 at September 3 2, ~~2010~~2011, is 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. 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.

4640

Wegener Corporation and subsidiary

5. Property and Equipment

Major classes of property and equipment consisted of the following:

	Estimated Useful Lives (Years)		~~September 3, 2010~~	September 2, 2011			~~August 28, 2009~~	September 3, 2010
Land	-	-	$	~~707,210~~$	707,210		$	~~707,210~~$	707,210
Buildings and improvements	~~3-30~~	3-30		~~3,778,469~~	3,802,373			~~3,751,290~~	3,778,469
Machinery and equipment	~~3-5~~	3-5		~~10,447,085~~	9,949,547			~~10,490,572~~	10,447,085
Furniture and fixtures	5	5		~~587,136~~	587,136			~~587,599~~	587,136
Total property and equipment				~~15,519,900~~	15,046,266			~~15,536,671~~	15,519,900
Less accumulated depreciation and amortization				(13,901,885	)			(13,816,640	)
Less accumulated depreciation					(13,577,060	)			(13,901,885	)
Property and equipment, net			$	~~1,618,015~~$	1,469,206		$	~~1,720,031~~$	1,618,015

Depreciation expense for fiscal ~~2010,~~2011 ~~2009~~ and ~~2008,~~2010 totaled approximately $~~141~~193,000~~, $329,000,~~ and $~~404~~141,000, respectively. Repair and maintenance expenses amounted to $~~134~~120,000, ~~$154,000~~ and $~~205~~134,000 during fiscal years ~~2010,~~2011 ~~2009~~ and ~~2008~~2010, respectively.

6. Other Assets

Other assets consisted of the following:

	September 2, 2011
	Cost		Accumulated Amortization			Net
License agreements	$	958,800	$	(958,800	)	$	-
Patents and patent applications		299,540		(118,221	)		181,319
Trademarks and trademark applications		82,820		(73,628	)		9,192
Other		6,889		-			6,889
	$	1,348,049	$	(1,150,649	)	$	197,400

	September 3, 2010
	Cost		Accumulated Amortization			Net
License agreements	$	958,800	$	(958,800	)	$	-
Patents and patent applications		300,124		(89,407	)		210,717
Trademarks and trademark applications		82,820		(65,482	)		17,338
Other		6,889		-			6,889
	$	1,348,633	$	(1,113,689	)	$	234,944

	August 28, 2009
	Cost		Accumulated Amortization			Net
License agreements	$	958,800	$	(953,384	)	$	5,416
Patents and patent applications		353,057		(66,799	)		286,258
Trademarks and trademark applications		82,820		(54,159	)		28,661
Loan facility fees		25,000		(16,667	)		8,333
Other		6,889		-			6,889
	$	1,426,566	$	(1,091,009	)	$	335,557

Amortization expense of other assets amounted to $37,000 and $108,000 for fiscal years 2011 and 2010, respectively. Amortization expense for fiscal 2010 included $60,000 related to write-offs of two patent applications due to rejection of the applications.

~~Amortization expense~~We conduct an ongoing review of ~~other~~our ~~assets~~intellectual ~~amounted~~property torights ~~$108~~and potential trademarks. As of September 2,~~000~~ 2011, we incurred legal fees of $~~160~~85,000, related to the filing of applications for various patents and $~~212~~1,000 ~~for~~related ~~fiscal years~~to ~~2010~~the filing of trademarks. Upon issuance, ~~2009~~these costs will be amortized on a straight-line basis over the lesser of the legal life of the patents and ~~2008,~~trademarks ~~respectively~~or their estimated useful lives of four to ten years. ~~Amortization~~If ~~expense~~it ~~for~~becomes ~~fiscal~~more ~~2010 included~~likely ~~$60~~than not that the patent application will not be granted,~~000~~ ~~related~~we towill write~~-offs~~ off the deferred cost at that time. At September 2, 2011, the cost of ~~two~~registered ~~patent~~patents ~~applications~~and ~~due~~trademarks amounted to ~~rejection~~ $215,000 and $82,000, respectively. License agreements are amortized over the lesser of the ~~applications~~contractual term or their estimated useful lives of one to five years.

Wegener Corporation and subsidiary

We conduct an ongoing review of our intellectual property rights and potential trademarks. As of September 3, 2010, we incurred legal fees of $109,000 related to the filing of applications for various patents and $1,000 related to the filing of trademarks. Upon issuance, these costs will be amortized on a straight-line basis over the lesser of the legal life of the patents and trademarks or their estimated useful lives of four to ten years. If it becomes more likely than not that the patent application will not be granted, we will write off the deferred cost at that time. At September 3, 2010, the cost of registered patents and trademarks amounted to $161,000 and $82,000, respectively. License agreements were amortized over their estimated useful life of one to five years.

7. Accrued Expenses

Accrued expenses consisted of the following:

	September 3, 2010		August 28, 2009
	September 2, 2011		September 3, 2010
Vacation	$	~~538~~573,~~268~~212	$	~~530~~538,~~652~~268
Interest		~~436~~777,~~490~~589		-436,490
Payroll and related expenses		~~101~~109,~~939~~889		~~223~~101,~~319~~939
Royalties		99194,~~212~~671		~~161~~99,~~247~~212
Warranty		~~136~~122,~~448~~638		98136,~~882~~448
Taxes and insurance		9734,~~810~~757		~~154~~97,~~035~~810
Commissions		2331,~~413~~529		3123,~~516~~413
Professional fees		~~155~~195,~~238~~476		~~290~~155,~~072~~238
Other		~~142~~29,~~704~~875		34142,~~202~~704
	$	12,~~731~~069,~~522~~636	$	1,~~523~~731,~~925~~522

Accrued Warranty

We warrant our products for a 12 to 14 month period beginning at the date of shipment. Our ~~The~~general 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.~~ Based on historical claim rates, provisions for ~~routine~~ warranty repairs are not material. ~~Warranty~~and ~~provisions are~~we ~~made~~expense costs for ~~non-routine~~ warranty ~~claims~~repairs ~~based~~at onthe ~~estimated~~point ~~costs~~at towhich the expense is considered probable. Although we may not be ~~incurred~~ contractually required, at ~~the~~management’s ~~point~~discretion, and in ~~time~~a insingle ~~which~~limited ~~the~~circumstance, we made post warranty ~~claim~~accommodations isto ~~identified.~~a ~~For~~specific ~~the~~customer ~~fiscal year~~based ~~ended~~upon ~~September~~ongoing 3,negotiations ~~2010~~with that customer, and warranty provisions were increased by $50112,000 and ~~reduced~~ by $1250,000 ~~for~~during ~~satisfied~~fiscal ~~warranty~~years ~~claims. For~~2011 ~~the~~and ~~fiscal~~2010, ~~year~~respectively, ~~ended August~~based ~~28,~~upon ~~2009,~~what management determined to be the ~~warranty~~most ~~provisions~~probable ~~were~~amount ~~reduced~~of byultimate ~~$130,000~~settlement. ~~for~~The ~~previously estimated~~total ~~provisions~~cumulative ~~that~~amount ~~were~~of noaccrued ~~longer~~warranty ~~required~~related to the single occurrence was approximately $210,000. ~~For~~ During the ~~fiscal~~fourth ~~year ended~~quarter ~~August~~of 29fiscal 2011, ~~2008~~$123,000 of the ~~warranty~~cumulative ~~provision~~amount was ~~increased~~offset byagainst accounts receivable balances which left a balance of $5087,000, ~~reduced by~~at ~~$45~~September 2,~~000~~ ~~for~~2011. At ~~satisfied~~September ~~warranty~~3, ~~claims~~2010, ~~and~~the ~~reduced~~amount byof ~~$310,000~~accrued ~~for~~warranty ~~previously estimated~~related ~~provisions~~to ~~that~~the ~~were~~single nooccurrence ~~longer~~was ~~required~~approximately $98,000.

8. 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. At September 32, ~~2010~~2011, deferred extended service maintenance revenues were $~~519~~391,000, and deferred revenues related to future performance obligations were $10,000 and are expected to be recognized as revenue in varying amounts throughout fiscal ~~2011~~2012. At ~~August~~September 283, ~~2009~~2010, deferred extended service maintenance revenues were $~~537~~519,000, and deferred revenues related to future performance obligations were $3210,000.

9. Financing Agreements

Revolving Line of Credit ~~and Term Loan Facilities~~

~~On October~~The 8,initial ~~2009,~~term of the ~~Bank~~amended ~~assigned~~loan ~~its~~facility ~~rights~~matured ~~(the~~on ~~“Assignment”)~~April ~~under~~7, ~~the~~2011. The ~~Loan Agreement~~loan tofacility ~~The~~automatically ~~David~~renews E.for ~~Chymiak~~successive ~~Trust~~twelve ~~Dated~~(12) ~~December~~month 15periods provided, ~~1999~~however, (the “Trust~~”). David~~ E.may ~~Chymiak~~terminate isthe afacility ~~beneficial~~by ~~owner~~providing ofa ~~8.8%~~ninety of(90) ~~our~~day ~~outstanding~~written ~~common~~notice ~~stock. The~~of ~~David~~termination E.at ~~Chymiak~~any ~~Trust~~time ~~Dated~~after ~~December~~April 157, ~~1999,~~2011. Principal isand ~~controlled~~interest byshall ~~Mr. Chymiak.~~be ~~Immediately~~payable ~~before~~upon ~~becoming~~the ~~such~~earlier ~~assignee,~~of the ~~Trust~~maturity ~~entered~~date, ~~into~~an ~~a Twelfth~~event ~~amendment~~of todefault as provided by the ~~Loan~~loan ~~Agreement~~facility, ~~dated~~or ~~October~~90 8,days ~~2009~~following (the ~~“Twelfth Amendment”)~~date on which ~~became~~the ~~effective~~Trust ~~immediately~~provides ~~upon~~written ~~the~~notice ~~consummation~~to ofterminate the ~~Assignment~~ agreement. In ~~Accordingly,~~the byevent ~~virtue~~of a ninety day notice of ~~the~~termination ~~Assignment~~of our loan facility, ~~the~~we ~~Trust~~would ~~succeeded~~need to ~~all the~~obtain ~~rights~~additional ~~and~~credit ~~obligations~~facilities ofor ~~the~~raise ~~Bank~~additional ~~under~~capital ~~the~~to ~~Loan~~continue ~~Agreement,~~as ~~except~~a ~~as otherwise~~going ~~provided~~concern inand ~~the~~to ~~Twelfth~~execute ~~Amendment~~our business plan. There ~~Therefore~~is no assurance that such financing would be available or, if available, that we nowould ~~longer~~be ~~have~~able ~~a lending~~to ~~relationship~~complete ~~with~~financing ~~the~~on ~~Bank~~satisfactory terms.

4842

~~Wegener Corporation~~The amended loan facility’s debt covenants required us to be in compliance with a solvency representation provision which required us to be able to pay our debts as they become due, have sufficient capital to carry on our business and ~~subsidiary~~own property at a fair saleable value greater than the amount required to pay our debts. At the end of our fiscal 2011 third quarter (June 3, 2011), we were not in compliance with the solvency representation provision, however, on June 29, 2011, the loan facility’s security agreement was amended to remove the solvency representation provision from the debt covenants. In addition, we are required to retain certain executive officers and are precluded from paying dividends. At September 2, 2011, we were in compliance with the debt covenants.

WCI’s loan facility, as provided by the Twelfth amendment, provided a maximum credit limit of $4,000,000 excluding any accrued unpaid interest and bore interest at the rate of twelve percent (12%) per annum. Effective September 3, 2010, the maximum credit limit was increased to $4,250,000 and the annual interest rate was reduced to eight percent (8.0%) per annum. The term of the amended loan facility is eighteen (18) months beginning October 8, 2009 (“Original Term”), or upon demand in the event of default as defined by the loan facility. The loan facility automatically renews for successive twelve (12) month periods provided, however, the Trust may terminate the loan facility by providing ninety (90) days’ prior written notice of termination at any time beginning on or after ninety (90) days prior to the expiration of the Original Term. Principal and interest shall be payable upon the earlier of the maturity date (April 7, 2011), an event of default, or 90 days following the date on which the Trust provides written notice to terminate the agreement. All principal and interest shall be payable in U.S. dollars or, upon mutual agreement of the parties decided in good faith at the time payment is due, other good and valuable consideration.

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 September 3, 2010, the outstanding balance on the revolving line of credit amounted to $3,850,000. At November 1, 2010, the outstanding balance on the line of credit amounted to $4,100,000.

The amended loan facility required us to be in compliance with a solvency representation provision on the last day of fiscal 2010 (September 3, 2010). This representation required us to be able to pay our debts as they become due, have sufficient capital to carry on our business and own property at a fair saleable value greater than the amount required to pay our debts. The solvency representation provision was subsequently extended to the last day of our second quarter in fiscal 2011 (March 4, 2011). In addition, we are required to retain certain executive officers and are precluded from paying dividends. The Twelfth Amendment removed the minimum tangible net worth and minimum fixed coverage ratio annual debt covenant provisions.

No assurances may be given that upon maturity (April 7, 2011) our loan facility will be renewed. In the event the loan facility is not renewed, we would need to obtain additional credit facilities or raise additional capital to continue as a going concern and to execute our business plan There is no assurance that such financing would be available or, if available, that we would be able to complete financing on satisfactory terms.

On October 1, 2009, we entered into an unsecured promissory note with David E. Chymiak in the amount of two hundred and fifty thousand dollars ($250,000). The loan bore interest at the rate of eight percent (8.0%) per year with an initial maturity date of October 31, 2009. The maturity date was subsequently extended to September 10, 2010. Principal and interest on the unsecured promissory note were paid in full during the fourth quarter of fiscal 2010.

10. Income Taxes

No income tax benefit was recorded for fiscal ~~2010~~2011 due to an increase in the deferred tax asset valuation allowance. In fiscal ~~2010~~2011, the deferred tax asset increased $~~833~~528,000 primarily due to an increase in the net operating loss carryforward. The increase in the deferred tax asset was offset by a corresponding increase in the valuation allowance. No income tax benefit was recorded in fiscal ~~2009~~2010 due to an increase in the deferred tax asset valuation allowance. In fiscal ~~2009~~2010, the deferred tax asset increased $~~938~~833,000 primarily due to an increase in the net operating loss carryforward ~~and a provision for inventory reserves, and decreased $199,000 due to the expiration of state income tax credits~~. No income tax expense was recorded for fiscal 2008 due to utilization of net operating loss and alternative minimum tax credit carryforwards. In fiscal 2008, the deferred tax asset decreased $141,000, which was offset by a decrease in the valuation allowance by the same amount.

Wegener Corporation and subsidiary

The effective income tax rate differs from the U.S. federal statutory rate as follows:

	Years Ended
	September 3, 2010			August 28, 2009			August 29, 2008
	September 2, 2011			September 3, 2010
Statutory U.S. income tax rate		34.0%	%		34.0%	%		~~(34.0~~	)%
State taxes, net of federal benefits		2.0			2.0			~~(2.1~~	)
Expired state tax credit		-			(7.6	)		-
Valuation allowance		(34.8)			(36.0)
Valuation allowance		(36.0	)		(28.4	)		36.0
Non-deductible expenses		(1.1)			(.1)
Non-deductible expenses		(.1	)		(.1	)		(0.8	)
Other, net		(.1)			.1
Other, net		.1			.1			0.9
Effective income tax rate		-%			-%
Effective income tax rate		-	%		-	%		-	%

The effective tax rate for fiscal ~~2010,~~2011 ~~2009~~ and ~~2008~~2010 reflected the recording of a full valuation allowance against net deferred tax assets, as further discussed below.

Deferred tax assets and liabilities that arise as a result of temporary differences are as follows:

	September 3, 2010			August 28, 2009
	September 2, 2011			September 3, 2010
Deferred tax assets (liabilities):
Inventory reserves	$	2,~~290~~224,000		$	2,~~301~~290,000
Accounts receivable allowance		53101,000			5653,000
Accrued expenses		~~256~~311,000			~~239~~256,000
Net operating loss carryforwards		5,~~167~~637,000			45,~~352~~167,000
AMT credit carryovers		134,000			134,000
Depreciation		9371,000			~~137~~93,000
Capitalized software costs		(~~480~~490,000	)		(~~481~~480,000	)
Other		(6310,000	)		(~~121~~63,000	)
Deferred tax assets		7,~~450~~978,000			67,~~617~~450,000
Valuation allowance		(7,~~450~~ 978,000	)		(67,~~617~~450,000	)
Net deferred tax asset	$	-		$	-
Consolidated balance sheet classifications:
Current deferred tax asset	$	2,~~610~~699,000		$	2,~~548~~610,000
Noncurrent deferred tax asset		45,~~840~~279,000			4,~~069~~840,000
Valuation allowance		(7,~~450~~978,000	)		(67,~~617~~450,000	)
Net deferred tax asset	$	-		$	-

A valuation allowance is established when it is “more likely than not” that all or a portion of a deferred tax asset will not be realized. A review of all available positive and negative evidence was considered in judging the likelihood of realizing tax benefits. Forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years. Cumulative losses are one of the most difficult pieces of negative evidence to overcome in the absence of sufficient existing orders and backlog (versus forecasted future orders) supporting a return to profitability. Our assessment indicated that a full valuation allowance for our net deferred tax assets was required as of September 32, ~~2010~~ 2011 and ~~August~~September 283, ~~2009~~2010. The valuation allowance increased $~~833~~528,000 in fiscal ~~2010~~ 2011. At September 32, ~~2010~~2011, net deferred tax assets of $7,~~450~~978,000 were fully reserved by a valuation allowance.

~~Effective~~ At September 1 2, ~~2007~~2011, we ~~adopted~~had ~~authoritative~~a ~~guidance~~federal onnet ~~accounting~~operating ~~for uncertain~~loss ~~income~~carryforward ~~tax~~of ~~positions. Accordingly~~$15,614,000, ~~assets~~of ~~and~~which ~~liabilities~~$1,438,000 ~~are recognized~~expires ~~for~~in afiscal ~~tax~~2021, ~~position~~$1,296,000 ~~based~~in ~~solely~~fiscal on2023, ~~its~~$3,396,000 ~~technical~~in ~~merits~~fiscal ~~that~~2024, ~~is believed~~$1,454,000 toin befiscal ~~more~~2025, ~~likely~~$1,755,000 ~~than~~in ~~not~~fiscal to2026, be$265,000 ~~fully~~in ~~sustainable~~fiscal ~~upon~~2027, ~~examination. As of September 3~~$2,221,000 ~~2010~~in ~~and~~fiscal ~~August 28~~2029, ~~2009~~$2,405,000 ~~there~~in ~~was~~fiscal no2030 ~~accrual~~and ~~for~~$1,384,000 ~~interest~~in ~~or penalties~~fiscal ~~related to uncertain tax positions~~2031. Additionally, ~~Our~~we ~~accounting~~had ~~policy~~an ~~for penalties~~alternative ~~and~~minimum ~~interest~~tax iscredit toof ~~include~~$134,000 ~~such~~which ~~amounts,~~was iffully ~~any,~~offset inby ~~income~~the ~~tax expense~~valuation allowance.

50Assets and liabilities are recognized for a tax position, based solely on its technical merits that is believed to be more likely than not to be fully sustainable upon examination. As of September 2, 2011 and September 3, 2010, there was no accrual for interest or penalties related to uncertain tax positions. Our accounting policy for penalties and interest is to include such amounts, if any, in income tax expense.

~~Wegener~~We ~~Corporation~~reassess the validity of our conclusions regarding uncertain income tax positions on a quarterly basis to determine if facts or circumstances have arisen that might cause us to change our judgment regarding the likelihood of a tax position’s sustainability under audit. As we believe that all such positions are fully supportable by existing Federal law and ~~subsidiary~~ related interpretations, there are no uncertain positions to consider in accordance with ASC Topic 740 “Income Taxes”.

We ~~reassess~~ ~~the~~are ~~validity~~subject ofto ~~our~~U.S. ~~conclusions~~federal ~~regarding uncertain~~ income tax ~~positions~~ onas awell ~~quarterly~~as ~~basis~~income totax ~~determine~~of ifnumerous ~~facts~~state orjurisdictions. ~~circumstances~~We ~~have arisen~~are ~~that~~subject ~~might cause us~~ to ~~change~~U.S. ~~our~~federal ~~judgment~~tax ~~regarding~~examinations ~~the~~by ~~likelihood~~tax ofauthorities ~~a tax~~for ~~position’s~~fiscal ~~sustainability~~years ~~under~~2008 ~~audit~~through 2011. AsIncome wetax ~~believe~~examinations that ~~all~~we ~~such~~may ~~positions are~~be ~~fully~~subject ~~supportable~~to byfrom ~~existing~~the ~~Federal~~various ~~law~~state ~~and~~taxing ~~related~~authorities ~~interpretations,~~vary ~~there are~~by ~~no uncertain positions to consider in accordance with ASC 740~~jurisdiction.

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 2007 through 2010. Income tax examinations that we may be subject to from the various state taxing authorities vary by jurisdiction.

11. Share-Based Compensation Plans

2011 and 2010 Incentive Plans. On February 1, 2011, our stockholders approved the 2011 Incentive Plan (the “2011 Plan”). The effective date of the 2011 Plan was January 1, 2011. On February 2, 2010, our stockholders approved the 2010 Incentive Plan (the “2010 Plan”). The effective date of the 2010 Plan was January 1, 2010. The 2011 Plan and the 2010 Plan ~~has~~each ahave ten-year ~~term~~terms. Each ~~The 2010~~ Plan provides for awards of up to an aggregate of 1,250,000 shares of common stock which may be represented by (i) incentive or nonqualified stock options, (ii) stock appreciation rights (tandem and free-standing), (iii) restricted stock, (iv) deferred stock, or (v) performance units entitling the holder, upon satisfaction of certain performance criteria, to awards of common stock or cash. The maximum total number of shares of ~~restricted~~Restricted ~~stock~~Stock, ~~deferred stock~~Deferred Stock and/or ~~performance~~Performance ~~units~~Units that may be granted at full value shall not exceed 500,000 shares. Eligible participants include officers and other key employees, non-employee directors, consultants and advisors to the Company. The exercise price per share in the case of incentive stock options and any tandem stock appreciation rights may not be less than 100% of the fair market value on the date of grant or, in the case of an option granted to a 10% or greater stockholder, not less than 110% of the fair market value on the date of grant. The exercise price for any other option and stock appreciation rights shall be at least 100% of the fair market value on the date of grant. The exercise period for nonqualified stock options may not exceed ten years and one day from the date of the grant, and the exercise period for incentive stock options or stock appreciation rights shall not exceed ten years from the date of the grant (five years for a 10% or greater stockholder). No awards have been granted under the ~~2010~~ 2011 Plan.

~~1998 Incentive Plan.~~ On ~~February~~ 26December 6, ~~1998~~2010, ~~our~~pursuant ~~stockholders~~to ~~approved~~the 2010 Plan, the ~~1998~~Compensation ~~Incentive~~Committee ~~Plan~~authorized (the ~~“1998 Plan”).~~issuance ~~The~~to ~~effective~~all ~~date~~eligible employees of the ~~1998~~Company ~~Plan~~common isstock ~~January~~options 1,to ~~1998~~purchase ~~and~~an ~~the~~aggregate ~~1998~~of ~~Plan had~~563,700 ashares ~~ten-year~~of ~~term.~~common ~~The~~stock ~~1998~~and ~~Incentive~~issued ~~Plan~~equally ~~expired~~to ~~and~~the ~~terminated~~four ~~effective December~~non-employee ~~31,~~members ~~2007.~~of ~~The~~the ~~Plan~~Board ~~provided~~of ~~for~~Directors ~~awards~~common ofstock upoptions to purchase an aggregate of 2 100,000~~,000~~ shares of common stock. ~~which~~Stock ~~could~~options befor ~~represented~~638,700 byshares ~~(i)~~of ~~incentive~~common ~~or nonqualified~~ stock ~~options,~~are ~~(ii)~~exercisable ~~stock~~at ~~appreciation~~$0.125 ~~rights,~~and ~~(iii)~~one ~~restricted~~ stock option for 25,000 ~~(iv)~~shares ~~deferred~~of common stock, orissued ~~(v)~~to ~~performance~~a ~~units~~10% ~~entitling~~or ~~the~~greater ~~holder~~stockholder and executive officer, ~~upon satisfaction~~is ofexercisable ~~certain~~at ~~performance~~$0.1375. ~~criteria,~~The tooptions ~~awards~~vest ofupon ~~common~~issuance ~~stock~~and orexpire ~~cash~~five years from the date of issuance. In addition, ~~the~~500,000 ~~1998~~shares ~~Plan~~of ~~provided~~restricted ~~for~~common ~~loans~~stock ~~and~~were ~~supplemental~~granted ~~cash payments~~ to ~~persons~~ ~~participating~~two inexecutive ~~the~~officers. The ~~1998~~aggregate ~~Plan~~grant indate ~~connection~~fair ~~with~~values ~~awards~~of ~~granted. Eligible~~the ~~participants~~stock ~~included~~options ~~officers~~ and ~~other~~restricted ~~key~~common ~~employees,~~stock ~~non-employee directors~~were $48,000 ~~consultants~~ and ~~advisors~~$63,000, ~~to the Company~~respectively. The ~~exercise~~total ~~price~~amount ~~per~~of ~~share in~~approximately ~~the~~$111,000 ~~case~~was ofincluded ~~incentive~~in ~~stock~~selling, ~~options~~general and ~~any~~administrative ~~tandem~~expense ~~stock~~in ~~appreciation~~fiscal ~~rights could~~2011. ~~not~~The beweighted ~~less~~average ~~than~~fair ~~100%~~value of ~~the~~stock ~~fair~~options ~~market~~granted ~~value~~was on$.073. The ~~the~~weighted-average ~~date~~assumptions ofused ~~grant or,~~ in the ~~case~~Black-Scholes ~~of an~~ option ~~granted~~pricing tomodel afor ~~10%~~the orstock ~~greater~~option ~~stockholder,~~grants ~~could~~were ~~not~~as befollows: ~~less than~~expected ~~110%~~volatility of- the ~~fair~~Company’s ~~market~~stock ~~value~~began ontrading over-the-counter ~~date~~in ofApril ~~grant.~~2010, ~~The~~and ~~exercise~~we ~~price~~believe ~~for any~~there ~~other~~is ~~option~~insufficient ~~and~~data ~~stock~~to ~~appreciation~~project ~~rights~~the ~~could~~Company’s befuture atvolatility, ~~least~~as ~~75%~~a ofresult, the ~~fair market~~expected ~~value~~volatility onof ~~the~~similar ~~date~~public ofentities ~~grant.~~in ~~The~~similar ~~exercise~~industries ~~period~~was ~~for~~considered ~~nonqualified~~in ~~stock options~~estimating ~~could~~our ~~not~~volatility ~~exceed~~of ~~ten~~100%; ~~years~~risk ~~and~~free ~~one~~interest ~~day~~rate ~~from~~- ~~the~~.75% ~~date~~based ofupon ~~the~~observed ~~grant,~~interest ~~and the~~rates ~~expiration~~appropriate ~~period~~ for ~~incentive~~the ~~stock~~expected ~~options~~term orof our employee stock ~~appreciation~~options; ~~rights could~~expected ~~not~~life ~~exceed~~– ~~ten~~2.5 years ~~from~~because the ~~date~~Company ofhas had minimal experience with the ~~grant~~exercise ~~(five~~of ~~years~~options for ause ~~10%~~in ~~or greater~~determining ~~stockholder).~~the ~~The~~expected ~~1998~~life ~~Plan~~for ~~contained~~each anaward, ~~automatic~~the ~~option~~simplified ~~grant~~method ~~program to~~was ~~non-employee~~used ~~members~~to ofcalculate ~~the~~an ~~Board~~expected oflife ~~Directors.~~based ~~Such~~on ~~members~~the ~~could~~midpoint ~~each~~between ~~be granted~~the anissue ~~option~~(vesting) todate ~~purchase~~and ~~3,000~~the ~~shares~~end of ~~common~~the ~~stock~~contractual onterm of the ~~last~~stock ~~day~~award; ~~of each~~expected ~~December~~dividend onyield ~~which~~– ~~regular~~none ~~trading~~because ~~occurred~~the onCompany ~~the~~does ~~NASDAQ~~not ~~Stock~~currently ~~Market~~pay dividends. In addition, ~~at an~~tax ~~exercise~~reimbursement ~~price~~bonuses ~~equal~~related to the ~~fair~~restricted ~~market~~stock ~~value~~awards ofwere ~~such~~granted ~~stock~~in on the ~~date~~amount of ~~grant.~~ ~~Such~~$32,319 ~~options~~which ~~could~~was berecognized ~~exercisable~~as ~~during~~selling, ~~the~~general ~~period~~and ofadministrative ~~ten~~expense ~~years~~in ~~and~~fiscal ~~one day~~2011. ~~from~~During ~~the~~fiscal ~~date~~2011, ofoptions ~~grant~~exercisable ofat ~~the option~~$0.125 Onfor ~~December 31~~20,200 ~~2007,~~shares ~~the~~of ~~five non-employee~~common ~~directors~~stock were ~~granted~~forfeited. At ~~options~~September to2, ~~purchase~~2011, an102,500 ~~aggregate~~shares of ~~15,000 shares~~common atstock anremained ~~exercise~~available ~~price~~for ofissuance $0under the 2010 Incentive Plan.~~85.~~

1989 Directors' Incentive Plan. On January 9, 1990, the stockholders approved the Wegener Corporation 1989 Directors' Incentive Plan (“1989 Plan”), permitting certain participating directors of the Company to be eligible to receive incentive awards consisting of common stock of the Company, performance units or stock appreciation rights payable in stock or cash, or nonqualified stock options to purchase such stock, or any combination of the foregoing, together with supplemental cash payments. The aggregate number of shares of common stock that could be awarded under the 1989 plan was 300,000 shares. The exercise price per share for nonqualified stock options or stock appreciation rights could not be less than 85% of fair market value on the date the award is made or not more than nine trading days immediately preceding such date. The expiration period for a nonqualified stock option was ten years and one day from the date of the grant. The expiration period for stock appreciation rights, including any extension, could not exceed ten years from the date of grant. This plan terminated and expired effective December 1, 1999. During fiscal 2009, options for 16,000 shares of common stock expired. At August 28, 2009, no options remained outstanding under the 1989 Plan.44

511998 Incentive Plan. On February 26, 1998, our stockholders approved the 1998 Incentive Plan (the “1998 Plan”). The effective date of the 1998 Plan is January 1, 1998 and the 1998 Plan had a ten-year term. The 1998 Incentive Plan expired and terminated effective December 31, 2007. The Plan provided for awards of up to an aggregate of 2,000,000 shares of common stock which could be represented by (i) incentive or nonqualified stock options, (ii) stock appreciation rights, (iii) restricted stock, (iv) deferred stock, or (v) performance units entitling the holder, upon satisfaction of certain performance criteria, to awards of common stock or cash. In addition, the 1998 Plan provided for loans and supplemental cash payments to persons participating in the 1998 Plan in connection with awards granted. Eligible participants included officers and other key employees, non-employee directors, consultants and advisors to the Company. The exercise price per share in the case of incentive stock options and any tandem stock appreciation rights could not be less than 100% of the fair market value on the date of grant or, in the case of an option granted to a 10% or greater stockholder, could not be less than 110% of the fair market value on the date of grant. The exercise price for any other option and stock appreciation rights could be at least 75% of the fair market value on the date of grant. The exercise period for nonqualified stock options could not exceed ten years and one day from the date of the grant, and the expiration period for incentive stock options or stock appreciation rights could not exceed ten years from the date of the grant (five years for a 10% or greater stockholder). The 1998 Plan contained an automatic option grant program to non-employee members of the Board of Directors. Such members could each be granted an option to purchase 3,000 shares of common stock on the last day of each December on which regular trading occurred on the NASDAQ Stock Market, at an exercise price equal to the fair market value of such stock on the date of grant. Such options could be exercisable during the period of ten years and one day from the date of grant of the option. At September 2, 2011, options for 661,375 remained outstanding under the 1998 Incentive Plan.

Wegener Corporation and subsidiary

A summary of stock option transactions for the above plans follows:

	Number of Shares			Range of Exercise Prices		Weighted Average Exercise Price
Outstanding at:
August 31, 2007		971,531		$	.63 – 2.72	$	1.55
Granted		15,000			.85		.85
Forfeited or cancelled		(58,000	)		1.41 – 2.21		1.45
Outstanding at:
August 29, 2008		928,531		$	.63 – 2.72	$	1.55
Forfeited or cancelled		(197,156	)		1.41 – 2.21		2.03
Outstanding at:
August 28, 2009		731,375		$	.63 – 2.50	$	1.42
Forfeited or cancelled		(66,000	)		2.31		2.31
Outstanding at September 3, 2010		665,375		$	.63 – 2.50	$	1.33
Outstanding at:
Available for issue at September 3, 2010		-			-		-
September 3, 2010		665,375		$	.63 – 2.50	$	1.33
Granted		663,700			.125 – .1375		.126
Forfeited or cancelled		(20,200	)		.125 – .63		.22
Outstanding at September 2, 2011		1,308,875		$	.125 – 2.50	$	.74
Available for issue at September 2, 2011		1,352,500			-		-
Options exercisable at:
September 2, 2011		1,308,875		$	.125 – 2.50	$	.74
September 3, 2010		665,375		$	.63 – 2.50	$	1.33
August 28, 2009		731,375		$	63 – 2.50	$	1.55.

The weighted average remaining contractual life of options outstanding and exercisable at September 32, ~~2010~~2011, was 3.01 years. There was no intrinsic value of the options outstanding and exercisable at September 32, ~~2010~~2011. The weighted average grant-date fair value of options granted during fiscal year ~~2008~~2011 was $0.51073.

12. Employee Benefit Plans

WCI has a 401(k) Profit Sharing Plan and Trust (the “Plan”) covering substantially all employees. Amounts to be contributed to the Plan each year are subject to the approval of the Board of Directors. No profit sharing contributions were declared for fiscal years ~~2010,~~2011 ~~2009~~ and ~~2008~~ 2010.

Eligible WCI employees are permitted to make contributions, up to certain regulatory limits, to the Plan on a tax deferred basis under Section 401(k) of the Internal Revenue Code. The Plan provides for a minimum company matching contribution on a quarterly basis at the rate of 25% of employee contributions with a quarterly discretionary match. During ~~the fourth quarter of~~ fiscal ~~2009~~years 2011 and ~~for fiscal~~ 2010, all matching contributions, including a discretionary matching contribution of 25%, were suspended. In addition, the Plan was amended to make all ~~company~~Company matching contributions discretionary. ~~During~~Any ~~fiscal year 2008, an additional discretionary~~ matching ~~contribution of 25% of employee~~ contributions ~~was~~ ~~made~~would ~~for~~be ~~all quarters. All matching contributions are~~ in the form of the Company’s stock or cash at the discretion of the Board of Directors. ~~During fiscal 2009 and 2008, all matching contributions in the amount of $155,000 and $298,000, respectively, were in the form of cash.~~

13. Segment Information and Concentrations

ASC Topic 280 “Segment Reporting,” established standards for the way that public business enterprises report information about operating segments in their financial statements. The standard defines operating segments as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on these standards, we have determined that we operate in a single operating segment: the manufacture and sale of satellite communications equipment.

Wegener Corporation and subsidiary

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

Years ended

September 3, 2010

August 28, 2009

August 29, 2008

September 2, 2011

September 3, 2010

Direct Broadcast Satellite

8,~~516~~711,~~561~~536

128,~~012~~516,~~781~~561

~~20,920,764~~

Analog and Custom Products

~~16,875~~-

2316,~~822~~875

~~29,335~~

Service

~~387~~399,~~983~~287

~~618~~387,~~504~~983

~~544,394~~

Revenues, net

89,~~921~~110,~~419~~823

128,~~655~~921,~~107~~419

~~21,494,493~~

Concentrations of products representing 10% or more of the year’s revenues are as follows:

	Years ended
	September 3, 2010				August 28, 2009			August 29, 2008
	September 2, 2011			September 3, 2010
Products:
Private network receivers	11.5%	~~13.3~~	%	13.3%	(a		)	(a		)
iPump media servers	(a29.5%		)	(a)		~~19.2~~	%		~~14.1~~	%
Professional and broadcast receivers	(a)	~~11.9~~	%	11.9%		~~12.4~~	%		~~27.4~~	%
SMD 515 set top boxes	(a)		)	(a)	(a		)		~~12.8~~	%
Audio broadcast receivers	25.4%	~~28.0~~	%	28.0%		~~18.1~~	%		~~10.0~~	%
Network control products	(a)	~~11.4~~	%	11.4%		~~13.7~~	%	(a		)

(a)

Revenues for the year were less than 10% of total revenues.

Products representing 10% or more of annual revenues are subject to fluctuations from 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. Fiscal ~~2010~~2011 product mix included ~~Unity~~ipump®~~550 private~~ 6400 media server equipment for an international health and education network, ~~receivers~~ipump® to6420 aaudio ~~faith-based~~media ~~organization~~servers to radio broadcasters for network ~~upgrades~~expansion ~~and~~ projects, continued shipments of Unity® ~~201audio~~ 201 audio broadcast receivers to background music providers.,Unity®550 ~~Fiscal~~private ~~2009~~network ~~and~~receivers ~~2008~~to ~~product mix~~a ~~featured~~faith-based ~~new~~organization ~~iPump® media server products~~ for ~~broadcast radio customers adopting store and forward technologies in their~~ network upgrades and ato ~~new~~service ~~customer~~providers for a digital signage ~~network.~~ ~~The~~displays ~~Unity®~~to ~~4600~~their ~~and 4650~~retail ~~professional~~client. Fiscal ~~and~~2010 ~~broadcast~~product ~~receiver~~mix ~~products~~included inUnity®550 ~~fiscal~~private ~~2008~~network ~~benefited~~receivers ~~from~~ to a ~~new~~faith-based ~~cable~~organization for network upgrades and ~~expansion~~continued shipments of ~~high~~Unity® ~~definition~~201 ~~television~~audio ~~distribution~~broadcast ~~by cable headends~~receivers.

Revenues by geographic areas are as follows:

Years ended

September 3, 2010

August 28, 2009

August 29, 2008

September 2, 2011

September 3, 2010

Geographic Area:

United States

76,~~119~~481,~~816~~592

117,~~060~~119,~~100~~816

~~17,808,780~~

Canada

4876,~~650~~399

3648,~~945~~650

~~359,881~~

Europe

1660,~~235,258~~256

~~479~~1,~~501~~235,258

~~952,965~~

Latin America and Mexico

~~336~~1,~~850~~769,891

1336,~~070,943~~850

~~2,288,407~~

Other

~~180~~122,~~845~~685

7180,~~618~~845

~~84,460~~

Revenues, net

89,~~921~~110,~~419~~823

128,~~655~~921,~~107~~419

~~21,494,493~~

Revenues attributed to geographic areas are based on the location of the customer. All of our assets are located in the United States.

We sell to a variety of domestic and international customers on an open, unsecured account basis. These customers principally operate in the cable television, broadcast business music, private network and data communications industries. Customers representing 10% or more of the fiscal year’s revenues are as follows:

	Years ended
	September 2, 2011	September 3, 2010
Customer 1	24.6%	22.8%
Customer 2	(a)	10.7%
Customer 3	17.7%	(a)

Wegener Corporation and subsidiary

	Years ended
	September 3,			August 28,			August 29,
	2010			2009			2008
Customer 1		22.8	%		18.1	%	(a		)
Customer 2		10.7	%	(a		)	(a		)
Customer 3	(a		)		21.2	%	(a		)
Customer 4	(a		)		10.7	%		13.3	%
Customer 5	(a		)	(a		)		14.4	%
Customer 6	(a		)	(a		)		12.1	%

(a)

Revenues for the year were less than 10% of total revenues.

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 ~~2011~~ 2012 and beyond. Future revenues are subject to the timing of significant orders from customers and are difficult to forecast. As a result, future revenue levels may fluctuate from quarter to quarter.

At September 3 2, ~~2010~~2011, four customers accounted for approximately 2428.21%, 1815.15%, 14.10% and 10.71%, respectively, of our accounts receivable while at ~~August~~September 283, ~~2009~~ 2010, ~~three~~four customers accounted for approximately 2224.82%, 1518.41%, 14.1% and 1110.87%, respectively, of our accounts receivable. When deemed appropriate, we use letters of credit and credit insurance to mitigate the credit risk associated with foreign sales.

14. Commitments and Contingencies

Purchase Commitments

We have ~~one~~ two manufacturing and purchasing ~~agreement~~agreements for certain finished goods inventories. At September 32, ~~2010~~2011, outstanding purchase commitments under ~~this~~these ~~agreement~~agreements amounted to $~~274~~1,444,000.

Operating Leases

We lease certain office and manufacturing facilities and equipment under long-term noncancelable operating leases that expire through fiscal 2013. Approximate future minimum lease commitments are as follows: ~~2011-$67,000;~~ 2012-$6465,000; 2013-$2729,000. Rent expense under all leases was approximately $~~101~~78,000, ~~$153,000~~ and $~~195~~101,000 for fiscal years ~~2010,~~2011 ~~2009~~ and ~~2008~~2010, respectively.

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 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 costs, damages and expenses (including reasonable attorneys’ fees) finally awarded in any suit by a third party against the purchaser to the extent based upon a finding the design or manufacture of the purchased item infringes the proprietary rights of such third party. Certain requests for indemnification have been received by us pursuant to these arrangements.

Wegener Corporation and subsidiary

These actions have been consolidated into a multi-district action pending in the United States District Court for the District of Delaware. The ~~On October 23, 2009, the~~ Delaware District Court issued an Order dismissing eight of the substantive patent claims embodied in the consolidated action, as well as all counterclaims. The parties also ~~have~~ agreed to summary judgment of non-infringement on a remaining patent claim~~, but the grounds for such summary judgment have not yet been finalized~~. The Court subsequently asked each of the parties to the consolidated lawsuits to submit any motions for fees and costs with respect to one another by November 16, 2009. Parties have submitted briefs on that issue, which has yet to be decided by the Court.

On ~~October~~ 4,November ~~2010~~13, ~~a Second Amended Complaint was filed by Multimedia Patent Trust (“MPT”) against Fox News Networks~~2009, ~~LLC~~the ~~(“Fox~~Court ~~News”)~~allowed ~~and~~the ~~other~~ parties into the ~~United~~ ~~States~~consolidated ~~District~~lawsuits ~~Court~~to ~~for~~file ~~the~~motions ~~Southern District of California~~ for ~~patent infringement.~~fees ~~(The~~and ~~initial~~costs ~~Complaint~~with ~~was~~respect ~~filed~~to onone ~~January 19, 2010)~~another. On ~~The~~July ~~Second Amended~~13, ~~Complaint asserts that Fox News has infringed upon certain MPT patents relating to video compression~~2011, ~~encoding~~the ~~and~~Court ~~decoding.~~ruled ~~This~~that ~~litigation~~the ~~may~~motion ~~be very~~for ~~expensive~~attorney’s tofees ~~defend~~ and ~~there~~costs ~~could~~was ~~be significant financial exposure if MPT is successful in its claims~~premature. On ~~November~~September 37, ~~2010~~2011, ~~however,~~the ~~Fox~~Delaware ~~News~~District ~~wrote~~Court ~~to Wegener,~~issued ~~asking~~a ~~Wegener~~Final toJudgment ~~fully indemnify, hold harmless~~ and ~~defend~~Order ~~Fox~~dismissing ~~News in connection with~~ the ~~litigation~~claims. On InSeptember ~~its~~28, ~~letter~~2011, ~~Fox~~Rembrandt ~~News~~Technologies ~~states~~LP ~~that~~filed ~~it has identified Wegener as~~ a ~~vendor~~Notice ~~that~~of ~~provided~~Appeal ~~Fox~~from ~~News~~the ~~with products and/or services relating to video compression. Fox News states further that it believes that MPT~~Court’s ~~claims~~September ~~give~~7, ~~rise~~2011 ~~to indemnity obligations and other obligations for Wegener products obtained from Wegener by Fox News. The November 3~~judgment, ~~2010~~the ~~letter asks~~Court’s ~~Wegener~~construction toruling ~~acknowledge~~concerning ~~such~~one ~~tender~~of onthe orpatents ~~before~~in ~~November 24~~question, ~~2010.~~and ~~Wegener has~~all ~~not~~prior ~~agreed to do so~~rulings, ~~nor~~orders ~~has~~and ~~Wegener~~judgments ~~acknowledged~~of ~~or agreed that~~ the ~~specific~~ ~~claims against Fox by MPT give rise to such obligations on the part of Wegener~~Court. At this point, we are presently unable to assess the impact, if any, of this litigation~~, if~~ ~~any,~~ on Wegener.

On October 4, 2010, a Second Amended Complaint was filed by Multimedia Patent Trust (MPT) against Fox News Networks, LLC (Fox News) and other parties in the United States District Court for the Southern District of California for patent infringement. (The initial Complaint was filed on January 19, 2010). The Second Amended Complaint asserts that Fox News has infringed upon certain MPT patents relating to video compression, encoding and decoding. This litigation may be very expensive to defend and there could be significant financial exposure if MPT is successful in its claims. On November 3, 2010, however, Fox News wrote to Wegener, asking Wegener to fully indemnify, hold harmless and defend Fox News in connection with the litigation. In its letter, Fox News states that it has identified Wegener as a vendor that provided Fox News with products and/or services relating to video compression. Fox News states further that it believes that MPT’s claims give rise to indemnity obligations and other obligations for Wegener products obtained from Wegener by Fox News. The November 3, 2010 letter asked Wegener to acknowledge such tender on or before November 24, 2010. Wegener has not agreed to do so, nor has Wegener acknowledged or agreed that the specific claims against Fox News by MPT give rise to such obligations on the part of Wegener. On August 11, 2011, counsel for MPT served a subpoena on Wegener seeking certain documents relating to the subject matter of the patent infringement action. On September 8, 2011, Wegener produced certain documents in response to that subpoena. Additional responsive documents may be produced in the future on a schedule to be agreed upon by Wegener and MPT. At this point, we are unable to assess the impact of this litigation, if any, on Wegener.

To date, there have been no findings related to the above matters that our products and/or services have infringed upon the proprietary rights of others. Although it is reasonably possible a liability may be incurred in the future related to these indemnification claims, at this point, any possible range of loss cannot be reasonably estimated.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On June 3, 2010, the Audit Committee of the Board of Directors of Wegener Corporation (the “Company”) dismissed BDO USA, LLP, formerly known as BDO Seidman, LLP (“BDO USA”) as the Company’s independent registered public accounting firm, effective on that date.None

The reports of BDO USA on the financial statements of the Company for the fiscal years ended August 28, 2009 and August 29, 2008 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles, except BDO USA’s audit reports were modified for an uncertainty regarding the Company’s ability to continue as a going concern. In the Annual Reports on Form 10-K filed by the Company for the fiscal years ended August 28, 2009 and August 29, 2008, BDO USA’s audit reports stated that the Company had suffered recurring losses from operations and had a net capital deficiency that raised substantial doubt about the Company’s ability to continue as a going concern. During the fiscal years ended August 28, 2009 and August 29, 2008 and through June 3, 2010, there were no disagreements between the Company and BDO USA on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of BDO USA would have caused them to make reference thereto in their reports on the financial statements for such fiscal years. During the period described in the preceding sentence, there were no “reportable events,” as such term is defined in Item 304(a)(1)(v) of Regulation S-K.

Wegener Corporation and subsidiary

The Company provided BDO USA with a copy of this disclosure and requested that BDO USA furnish it with a letter addressed to the United States Securities and Exchange Commission stating whether it agrees with the above statements. A copy of BDO USA’s letter, dated June 8, 2010, was attached as Exhibit 16.1 to our Form 8-K filed on June 8, 2010.

On June 3, 2010, the Audit Committee of the Board of Directors of the Company appointed Habif, Arogeti & Wynne, LLP (“Habif, Arogeti & Wynne”) as the Company’s independent registered public accounting firm for fiscal year 2010. During the fiscal years ended August 28, 2009 and August 29, 2008 and through the date of the appointment of Habif, Arogeti & Wynne, neither the Company nor anyone on the Company’s behalf consulted with Habif, Arogeti & Wynne with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, (ii) the type of audit opinion that might be rendered on the Company’s financial statements, or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management has evaluated, with the participation of our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), the effectiveness of the design and operation of 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) as of the end of the period covered by this report (September 32, ~~2010~~2011). Based upon that evaluation, our CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective to ensure that the information required to be disclosed in our reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Report of Management on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Securities Exchange Act Rule 13a-15(f).

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of its internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, using the criteria for effective internal control over financial reporting described in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that, as of September 32, ~~2010~~2011, the Company’s internal control over financial reporting was effective.

This annual report does not include an attestation report of the Company'’s registered public accounting firm regarding internal control over financial reporting. Management'’s report was not subject to attestation by the Company'’s registered public accounting firm pursuant to the exemption provided to issuers that are not “large accelerated filers” nor “accelerated filers” under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.

OTHER INFORMATION

None

5649

Wegener Corporation and subsidiary

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information contained in the Proxy Statement pertaining to the ~~2011~~2012 Annual Meeting of Stockholders (“Proxy Statement”) is incorporated herein by reference in partial response to this item. See also Item 1. “Business - Executive Officers of the Registrant” on page 11 of this Report.

ITEM 11.

EXECUTIVE COMPENSATION

Information contained in the Proxy Statement is incorporated herein by reference in response to this item. ~~See also exhibit 10.8 which is incorporated herein by reference.~~

See also exhibit 10.8 which is incorporated herein by reference.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information contained in the Proxy Statement is incorporated herein by reference in response to this item. See also Item 5, “MARKET FOR THE REGISTRANT'’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES-Equity Compensation Plan Information” on page 1617 of this report.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information contained in the Proxy Statement is incorporated herein by reference in response to this item.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information contained in the Proxy Statement is incorporated herein by reference in response to this item.

Wegener Corporation and subsidiary

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) The following consolidated financial statements of Wegener Corporation and subsidiary and the related Reports of Independent Registered Public Accounting Firms thereon are filed as part of this report:

Report of Independent Registered Public Accounting Firm (Habif, Arogeti & Wynne, LLP).

~~Report~~Consolidated ~~of Independent~~Balance ~~Registered~~Sheets ~~Public~~- ~~Accounting~~September ~~Firm (BDO USA~~2, ~~LLP,~~2011 ~~formerly~~and ~~known~~September ~~as BDO Seidman~~3, ~~LLP)~~2010.

Consolidated ~~Balance~~ ~~Sheets~~Statements –of Operations - Years ended September 32, ~~2010~~2011 and ~~August~~September 283, ~~2009~~2010.

Consolidated Statements of ~~Operations~~Capital Deficit - Years ended September 32, ~~2010,~~2011 ~~August~~and ~~28,~~September ~~2009~~3, ~~and August 29, 2008~~2010.

Consolidated Statements of ~~(Capital~~Cash ~~Deficit)~~Flows ~~Shareholders' Equity~~ - Years ended September 32, ~~2010,~~ ~~August~~2011 ~~28, 2009,~~ and ~~August~~September 293, ~~2008~~2010.

Consolidated Statements of Cash Flows - Years ended September 3, 2010, August 28, 2009, and August 29, 2008.

Notes to Consolidated Financial Statements.

Separate financial statements of the Registrant have been omitted because the Registrant is primarily a holding company and the subsidiary included in the consolidated financial statements is wholly-owned.

(a) (2)	The following consolidated financial statements schedule for Wegener Corporation and subsidiary is included herein:
	Schedule II-Valuation and Qualifying Accounts
	Years ended September 3, 2010, August 28, 2009 and August 29, 2008.
(a) (3)	The exhibits filed in response to Item 601 of Regulation S-K are listed in the Exhibit Index below.
(b)	See Part IV, Item 15(a) (3).
(c)	See Part IV, item 15(a) (2).

(a)

(2)

The following consolidated financial statements schedule for Wegener Corporation and subsidiary is included herein:

58Schedule II-Valuation and Qualifying Accounts

~~Wegener Corporation~~Years ended September 2, 2011 and ~~subsidiary~~September 3, 2010.

(a)

(3)

The exhibits filed in response to Item 601 of Regulation S-K are listed in the Exhibit Index below.

(b)

See Part IV, Item 15(a) (3).

(c)

See Part IV, item 15(a) (2).

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders of Wegener Corporation

Johns Creek, Georgia

The ~~audit~~audits referred to in our report dated ~~November~~December 151, ~~2010~~2011, relating to the consolidated financial statements of Wegener Corporation and subsidiary, which is contained in Item 8 of this Form 10-K also included the ~~audit~~audits of the financial statement schedule listed in the accompanying index. The financial statement schedule is the responsibility of the Company'’s management. Our responsibility is to express an opinion on the financial statement schedule based on our ~~audit~~audits.

In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Habif, Arogeti & Wynne, LLP.

Habif, Arogeti & Wynne, LLP.

Atlanta, Georgia

~~November 15~~December 1, ~~2010~~2011

5950

Wegener Corporation and subsidiary

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders of Wegener Corporation

Johns Creek, Georgia

The audits referred to in our report dated November 25, 2009, relating to the consolidated financial statements of Wegener Corporation and subsidiary, which is contained in Item 8 of this Form 10-K also included the audit of the financial statement schedule listed in the accompanying index. The financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits.

BDO USA, LLP (formerly known as BDO Seidman, LLP)

Atlanta, Georgia

November 25, 2009

Wegener Corporation and subsidiary

SCHEDULE II

WEGENER CORPORATION AND SUBSIDIARY

VALUATION AND QUALIFYING ACCOUNTS

	Balance at Beginning of Period		Charged to Costs and Expenses		Write-offs			Recoveries			Balance at End of Period
Allowance for doubtful accounts receivable:
Year ended September 2, 2011	$	139,693	$	133,000	$	(7,660	)	$	-		$	265,033
Year ended September 3, 2010	$	146,010	$	80,000	$	(86,317	)	$	-		$	139,693
Year ended August 28, 2009	$	230,233	$	-	$	(84,223	)	$	-		$	146,010
Year ended August 29, 2008	$	251,316	$	-	$	(21,083	)	$	-		$	230,233
Inventory Reserves:
Year ended September 2, 2011	$	4,475,288	$	110,000	$	(967,172	)	$	269,500		$	3,887,616
Year ended September 3, 2010	$	4,689,357	$	90,000	$	(304,069	)	$	-		$	4,475,288
Year ended August 28, 2009	$	4,070,305	$	630,000	$	(10,948	)	$	-		$	4,689,357
Year ended August 29, 2008	$	4,092,313	$	-	$	(22,008	)	$	-		$	4,070,305
Accrued Warranty:
Year ended September 2, 2011	$	136,448	$	112,000	$	(125,810	)	$	-		$	122,638
Year ended September 3, 2010	$	98,882	$	50,000	$	(12,434	)	$	-		$	136,448
Year ended August 28, 2009	$	228,882	$	-	$	-		$	(130,000	)	$	98,882
Year ended August 29, 2008	$	534,052	$	50,000	$	(45,170	)	$	(310,000	)	$	228,882

6151

Wegener Corporation and subsidiary

EXHIBIT INDEX

The following documents are filed as exhibits to this report. An asterisk (*) identifies exhibits filed herewith. Exhibits which are not required for this report are omitted. Exhibits 10.3 through 10.6, 10.8, 10.10 and 10.11 identify management contracts or compensatory plans.

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)

3.1.2		Amendment to Certificate of Incorporation effective January 27, 2009.

3.2		By-laws of the Company, as Amended and Restated May 17, 2006. (19)

3.2.1		Amendments to Article III, Section 3.2 and Article XII of the By-laws of the Company, effective as of September 29, 2006. (4)

4.1		See By-Laws and Certificate of Incorporation, Exhibits 3.1 and 3.2. See Articles II and VIII of the By-Laws and Article IV of the Certificate.

4.2		Loan and Security Agreement and Demand Note dated June 5, 1996, by and between Wegener Communications, Inc. and LaSalle National Bank respecting $8,500,000 combined revolving credit note and term note. (5)

4.2.1		Loan and Security Agreement – First Amendment dated August 4, 1998, by and between Wegener Communications, Inc. and LaSalle National Bank respecting $10,000,000 combined revolving credit note and term note. (6)

4.2.2		Loan and Security Agreement – Third Amendment dated December 11, 2000, by and between Wegener Communications, Inc., and LaSalle National Bank respecting $10,000,000 combined revolving credit note and term note. (7)

4.2.3		Loan and Security Agreement – Fourth Amendment dated March 28, 2002, by and between Wegener Communications, Inc., and LaSalle National Bank respecting $5,000,000 combined revolving credit note and term note. (8)

4.2.4		Loan and Security Agreement – Fifth Amendment dated June 27, 2003, by and between Wegener Communications, Inc. and LaSalle National Bank respecting $5,000,000 combined revolving credit note and term note. (9)

4.2.5		Loan and Security Agreement – Sixth Amendment dated June 27, 2004, by and between Wegener Communications, Inc. and LaSalle National Bank respecting $5,000,000 combined revolving credit note and term note. (10)

4.2.6		Loan and Security Agreement – Seventh Amendment dated July 13, 2006, by and between Wegener Communications, Inc. and LaSalle National Bank respecting $5,000,000 combined revolving credit note and term note. (20)

4.2.7		Loan and Security Agreement – Eighth Amendment dated November 15, 2006, by and between Wegener Communications, Inc. and LaSalle National Bank respecting $5,000,000 combined revolving credit note and term note. (20)

6252

Wegener Corporation and subsidiary

Exhibit No.		Description of Exhibit

4.2.8		Loan and Security Agreement – Ninth Amendment dated June 28, 2007, by and between Wegener Communications, Inc. and LaSalle National Bank respecting $5,000,000 combined revolving credit note and term note. (21)

4.2.9		Loan and Security Agreement – Tenth Amendment dated September 8, 2008, by and between Wegener Communications, Inc. and LaSalle National Bank respecting $5,000,000 combined revolving credit note and term note.

4.2.10		Loan and Security Agreement – Eleventh Amendment dated September 14, 2009, by and between Wegener Communications, Inc. and LaSalle National Bank respecting $4,000,000 combined revolving credit note and term note. (23)

4.2.11		Loan and Security Agreement –Twelfth Amendment dated October 8, 2009, by and between Wegener Communications, Inc. and The David E. Chymiak Trust Dated December 15, 1999, as assignee of the Bank of America, N.A., successor interest by merger to LaSalle Bank National Association, respecting $4,000,000 combined revolving credit note and term note. (24)

4.2.12		Loan and Security Agreement –Thirteenth Amendment dated June 11, 2010, by and between Wegener Communications, Inc. and The David E. Chymiak Trust Dated December 15, 1999, as assignee of the Bank of America, N.A., successor interest by merger to LaSalle Bank National Association, respecting $4,000,000 combined revolving credit note and term note. (25)

4.2.13		Loan and Security Agreement –Fourteenth Amendment dated September 3, 2010, by and between Wegener Communications, Inc. and The David E. Chymiak Trust Dated December 15, 1999, as assignee of the Bank of America, N.A., successor interest by merger to LaSalle Bank National Association, respecting $4,250,000 combined revolving credit note and term note. (27)

4.2.14		Loan and Security Agreement –Fiftteenth Amendment dated November 8, 2010, by and between Wegener Communications, Inc. and The David E. Chymiak Trust Dated December 15, 1999, as assignee of the Bank of America, N.A., successor interest by merger to LaSalle Bank National Association, respecting $4,250,000 combined revolving credit note and term note. (28)

4.2.15		Loan and Security Agreement –Sixteenth Amendment dated April 13, 2011, by and between Wegener Communications, Inc. and The David E. Chymiak Trust Dated December 15, 1999, as assignee of the Bank of America, N.A., successor interest by merger to LaSalle Bank National Association, respecting $4,250,000 combined revolving credit note and term note. (29)

4.2.16		Loan and Security Agreement –Seventeenth Amendment dated June 29, 2011, by and between Wegener Communications, Inc. and The David E. Chymiak Trust Dated December 15, 1999, as assignee of the Bank of America, N.A., successor interest by merger to LaSalle Bank National Association, respecting $4,250,000 combined revolving credit note and term note. (30)

4.3		Stockholder Rights Agreement. (3)

4.3.1		Amendment No. 1, dated as of September 29, 2006, to the Company’s Stockholder Rights Agreement. (4)

10.1		License Agreement, Distributorship and Supply Agreement, and Purchase Pooling and Warehouse Agreement dated May 28, 1994, by and between Wegener Communications, Inc. and Cross Technologies, Inc. (11)

Exhibit No.			Description of Exhibit
4.2.8			Loan and Security Agreement – Ninth Amendment dated June 28, 2007, by and between Wegener Communications, Inc. and LaSalle National Bank respecting $5,000,000 combined revolving credit note and term note. (21)
4.2.9			Loan and Security Agreement – Tenth Amendment dated September 8, 2008, by and between Wegener Communications, Inc. and LaSalle National Bank respecting $5,000,000 combined revolving credit note and term note.
4.2.10			Loan and Security Agreement – Eleventh Amendment dated September 14, 2009, by and between Wegener Communications, Inc. and LaSalle National Bank respecting $4,000,000 combined revolving credit note and term note. (23)
4.2.11			Loan and Security Agreement –Twelfth Amendment dated October 8, 2009, by and between Wegener Communications, Inc. and The David E. Chymiak Trust Dated December 15, 1999, as assignee of the Bank of America, N.A., successor interest by merger to LaSalle Bank National Association, respecting $4,000,000 combined revolving credit note and term note. (24)
4.2.12			Loan and Security Agreement –Thirteenth Amendment dated June 11, 2010, by and between Wegener Communications, Inc. and The David E. Chymiak Trust Dated December 15, 1999, as assignee of the Bank of America, N.A., successor interest by merger to LaSalle Bank National Association, respecting $4,000,000 combined revolving credit note and term note. (25)
4.2.13			Loan and Security Agreement –Fourteenth Amendment dated September 3, 2010, by and between Wegener Communications, Inc. and The David E. Chymiak Trust Dated December 15, 1999, as assignee of the Bank of America, N.A., successor interest by merger to LaSalle Bank National Association, respecting $4,250,000 combined revolving credit note and term note. (27)
4.2.14			Loan and Security Agreement –Fiftteenth Amendment dated November 8, 2010, by and between Wegener Communications, Inc. and The David E. Chymiak Trust Dated December 15, 1999, as assignee of the Bank of America, N.A., successor interest by merger to LaSalle Bank National Association, respecting $4,250,000 combined revolving credit note and term note. (28)
4.3			Stockholder Rights Agreement. (3)
4.3.1			Amendment No. 1, dated as of September 29, 2006, to the Company's Stockholder Rights Agreement. (4)
10.1			License Agreement, Distributorship and Supply Agreement, and Purchase Pooling and Warehouse Agreement dated May 28, 1994, by and between Wegener Communications, Inc. and Cross Technologies, Inc. (11)
10.2			Wegener Communications, Inc. 401(k) Profit Sharing Plan and Trust dated January 1, 1982, amended and restated as of January 1, 1984. (12)
10.3			1989 Directors' Incentive Plan. (13)
10.3.1			Amendment to 1989 Directors’ Incentive Plan effective February 1, 1995. (14)
10.4			1998 Incentive Plan. (15)
10.5			Form of Agreement between Wegener Corporation and Robert A. Placek, Ned L. Mountain, and C. Troy Woodbury, Jr. respecting severance payments in the event of a change of control. (16)

Exhibit No.		Description of Exhibit

10.2		Wegener Communications, Inc. 401(k) Profit Sharing Plan and Trust dated January 1, 1982, amended and restated as of January 1, 1984. (12)

10.3		1989 Directors’ Incentive Plan. (13)

10.3.1		Amendment to 1989 Directors’ Incentive Plan effective February 1, 1995. (14)

10.4		1998 Incentive Plan. (15)

10.5		Form of Agreement between Wegener Corporation and Robert A. Placek, Ned L. Mountain, and C. Troy Woodbury, Jr. respecting severance payments in the event of a change of control. (16)

10.6		Director Compensation Plan for 2004. (17)

10.7		Agreement, dated September 29, 2006, by and among Wegener Corporation, Henry Partners, L.P., Matthew Partners, L.P., Henry Investment Trust, L.P., and David W. Wright. (4)

10.8	*	Executive Compensation for the fiscal year ended September 2, 2011.

10.9		Patent Purchase Agreement effective as of May 22, 2008, by and between Wegener Communications, Inc. and EPAX Consulting Limited Liability Company.(22)

10.10		Amendments to Agreement between Wegener Corporation and Ned L. Mountain, and C. Troy Woodbury, Jr., respectively, respecting severance payments in the event of a change of control.

10.11		Agreement between Wegener Corporation and Robert A. Placek respecting payments in the event of termination of employment.

10.12		2010 Incentive Plan (26)

10.13		2011 Incentive Plan (31)

14.1		Wegener Corporation Code of Business Conduct and Ethics. (18)

21.1		Subsidiary of the Registrant. (17)

23.1	*	Consent of Habif, Arogeti & Wynne, LLP.

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.

~~Wegener Corporation and subsidiary~~54

Exhibit No.			Description of Exhibit
(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.+
10.6			Director Compensation Plan for 2004. (17)
(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.+
10.7			Agreement, dated September 29, 2006, by and among Wegener Corporation, Henry Partners, L.P., Matthew Partners, L.P., Henry Investment Trust, L.P., and David W. Wright. (4)
(3)		Incorporated by reference to the Company’s Current Report on Form 8-K, dated May 1, 2003, as filed with the Commission on May 6, 2003.+
10.8	*		Executive Compensation for the fiscal year ended September 3, 2010.
(4)		Incorporated by reference to the Company’s Current Report on Form 8-K, dated September 29, 2006, as filed with the Commission on October 3, 2006.+
10.9			Patent Purchase Agreement effective as of May 22, 2008, by and between Wegener Communications, Inc. and EPAX Consulting Limited Liability Company.(22)
(5)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended August 30, 1996, as filed with the Commission on November 27, 1996.+
10.10			Amendments to Agreement between Wegener Corporation and Ned L. Mountain, and C. Troy Woodbury, Jr., respectively, respecting severance payments in the event of a change of control.
(6)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended August 28, 1998, as filed with the Commission on November 10, 1998.+
10.11			Agreement between Wegener Corporation and Robert A. Placek respecting payments in the event of termination of employment.
(7)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 2, 2001, as filed with the Commission on April 16, 2001.+
10.12			2010 Incentive Plan (26)
(8)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2002, as filed with the Commission on Jun e 28, 2002.+
14.1			Wegener Corporation Code of Business Conduct and Ethics. (18)
(9)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 30, 2003, as filed with the Commission on July 9, 2003.+
21.1			Subsidiary of the Registrant. (17)
(10)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 28, 2004, as filed with the Commission on July 12, 2004.+
23.1	*		Consent of Habif, Arogeti & Wynne, LLP.
(11)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended September 2, 1994, as filed with the Commission on December 16, 1994.+
23.2	*		Consent of BDO USA, LLP, formerly known as BDO Seidman, LLP.
(12)		Incorporated by reference to the Company’s Annual Report on Form 10-K/A for the fiscal year ended September 2, 2005, as filed with the Commission on January 10, 2006.+
31.1	*		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(13)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1990, as filed with the Commission on November 29, 1990.+
31.2	*		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(14)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended September 1, 1995, as filed with the Commission on December 14, 1995.+
32.1	*		Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(15)		Incorporated by reference to the Company’s Registration Statement on Form S-8 (No. 333-51205), as filed with the Commission on April 28, 1998.
32.2	*		Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(16)		Incorporated by reference to the Company’s Schedule 14D-9, as filed with the Commission on May 6, 2003.+
(17)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended September 3, 2004, as filed with the Commission on December 2, 2004.+
(18)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended August 29, 2003, as filed with the Commission on November 26, 2003.+
(19)		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.+
(20)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended September 1, 2006, as filed with the Commission on November 30, 2006.+
(21)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 1, 2007, as filed with the Commission on July 16, 2007.+
(22)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 30, 2008, as filed with the Commission on July 10, 2008.+
(23)		Incorporated by reference to the Company’s Current Report on Form 8-K, dated September 13, 2009, as filed with the Commission on September 17, 2009.+
(24)		Incorporated by reference to the Company’s Current Report on Form 8-K, dated October 8, 2009, as filed with the Commission on October 14, 2009.+
(25)		Incorporated by reference to the Company’s Current Report on Form 8-K, dated June 11, 2010, as filed with the Commission on June 14, 2010.+
(26)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 26, 2010, as filed with the Commission on April 12, 2010.+
(27)		Incorporated by reference to the Company’s Current Report on Form 8-K, dated September 3, 2010, as filed with the Commission on September 7, 2010.+
(28)		Incorporated by reference to the Company’s Current Report on Form 8-K, dated November 8, 2010, as filed with the Commission on November 9, 2010.+
(29)		Incorporated by reference to the Company’s Current Report on Form 8-K, dated April 13, 2011, as filed with the Commission on April 14, 2011.+
(30)		Incorporated by reference to the Company’s Current Report on Form 8-K, dated June 29, 2011, as filed with the Commission on June 29, 2011.+
(31)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 4, 2011, as filed with the Commission on April 18, 2011.+
+		SEC file No. 0-11003

(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 1, 2003, as filed with the Commission on May 6, 2003.+
(4)		Incorporated by reference to the Company's Current Report on Form 8-K, dated September 29, 2006, as filed with the Commission on October 3, 2006.+
(5)		Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended August 30, 1996, as filed with the Commission on November 27, 1996.+
(6)		Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended August 28, 1998, as filed with the Commission on November 10, 1998.+
(7)		Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 2, 2001, as filed with the Commission on April 16, 2001.+
(8)		Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2002, as filed with the Commission on Jun e 28, 2002.+
(9)		Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended May 30, 2003, as filed with the Commission on July 9, 2003.+
(10)		Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended May 28, 2004, as filed with the Commission on July 12, 2004.+

Wegener Corporation and subsidiary

(11)		Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 2, 1994, as filed with the Commission on December 16, 1994.+
(12)		Incorporated by reference to the Company's Annual Report on Form 10-K/A for the fiscal year ended September 2, 2005, as filed with the Commission on January 10, 2006.+
(13)		Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1990, as filed with the Commission on November 29, 1990.+
(14)		Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 1, 1995, as filed with the Commission on December 14, 1995.+
(15)		Incorporated by reference to the Company's Registration Statement on Form S-8 (No. 333-51205), as filed with the Commission on April 28, 1998.
(16)		Incorporated by reference to the Company's Schedule 14D-9, as filed with the Commission on May 6, 2003.+
(17)		Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 3, 2004, as filed with the Commission on December 2, 2004.+
(18)		Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended August 29, 2003, as filed with the Commission on November 26, 2003.+
(19)		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.+
(20)		Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended September 1, 2006, as filed with the Commission on November 30, 2006.+
(21)		Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 1, 2007, as filed with the Commission on July 16, 2007.+
(22)		Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended May 30, 2008, as filed with the Commission on July 10, 2008.+
(23)		Incorporated by reference to the Company's Current Report on Form 8-K, dated September 13, 2009, as filed with the Commission on September 17, 2009.+
(24)		Incorporated by reference to the Company's Current Report on Form 8-K, dated October 8, 2009, as filed with the Commission on October 14, 2009.+
(25)		Incorporated by reference to the Company's Current Report on Form 8-K, dated June 11, 2010, as filed with the Commission on June 14, 2010.+
(26)		Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended February 26, 2010, as filed with the Commission on April 12, 2010.+
(27)		Incorporated by reference to the Company's Current Report on Form 8-K, dated September 3, 2010, as filed with the Commission on September 7, 2010.+
(28)		Incorporated by reference to the Company's Current Report on Form 8-K, dated November 8, 2010, as filed with the Commission on November 9, 2010.+
+		SEC file No. 0-11003

Wegener Corporation and subsidiary

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities 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
Date: November 15, 2010	By	/s/ C. Troy Woodbury, Jr.
Date: December 1, 2011	By:	/s/ C. Troy Woodbury, Jr.
		C. Troy Woodbury, Jr.
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on this 1st ~~15th~~ day of ~~November~~December ~~2010~~2011.

Signature Title /s/ Robert A. Placek Chairman of the Board, Director Robert A. Placek /s/ C. Troy Woodbury, Jr. President and Chief Executive Officer, Director C. Troy Woodbury, Jr. (Principal Executive Officer) /s/ James Traicoff Treasurer and Chief Financial Officer James Traicoff (Principal Financial and Accounting Officer) /s/ Phylis Eagle-Oldson Director Phylis Eagle-Oldson /s/ ~~Thomas G. Elliot Director Thomas G. Elliot /s/~~ Jeffrey J. Haas Director Jeffrey J. Haas /s/ Stephen J. Lococo Director Stephen J. Lococo

6656

DIRECTORS Robert A. Placek Chairman of the Board Phylis Eagle-Oldson President and Chief Executive Officer of Emma L. Bowen Foundation Jeffrey J. Haas Professor of Law New York Law School Stephen J. Lococo President and Portfolio Manager of Footprints Asset Management & Research C. Troy Woodbury, Jr. President and Chief Executive Officer Wegener Corporation and ~~subsidiary~~Wegener Communications, Inc. OFFICERS C. Troy Woodbury, Jr. President and Chief Executive Officer James Traicoff Treasurer and Chief Financial Officer INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Habif, Arogeti &Wynne, LLP 5 Concourse Parkway Suite 1000 Atlanta, Georgia 30328 TRANSFER AGENT Securities Transfer Corporation 2591 Dallas Parkway Suite 102 Frisco, Texas 75034 CORPORATE HEADQUARTERS 11350 Technology Circle Johns Creek /Atlanta, Georgia 30097-1502 ANNUAL MEETING The annual meeting of stockholders will be held on January 31, 2012 at 9:00 a.m. at the Corporate Headquarters. COMMON STOCK OTCQB Symbol: WGNR.PK

DIRECTORS

Robert A. Placek

Chairman of the Board

Phylis Eagle-Oldson

President and Chief Executive

Officer of Emma L. Bowen

Foundation

Thomas G. Elliot

Principal

TGE & Associates

Jeffrey J. Haas

Professor of Law

New York Law School

Stephen J. Lococo

President and Portfolio

Manager of Footprints Asset

Management & Research

C. Troy Woodbury, Jr.

President and Chief

Executive Officer

Wegener Corporation and Wegener Communications, Inc.

OFFICERS

C. Troy Woodbury, Jr.

President and Chief

Executive Officer

James Traicoff

Treasurer and Chief

Financial Officer

INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

Habif, Arogeti &Wynne, LLP

5 Concourse Parkway

Suite 1000

Atlanta, Georgia 30328

TRANSFER AGENT

Securities Transfer Corporation

2591 Dallas Parkway

Suite 102

Frisco, Texas 75034

CORPORATE

HEADQUARTERS

11350 Technology Circle

Johns Creek /Atlanta, Georgia 30097-1502

ANNUAL MEETING

The annual meeting of stockholders will be held on January 25, 2011 at 9:00 a.m. at the Corporate Headquarters.

COMMON STOCK

OTCQB Symbol: WGNR.PK

FORM 10-K REPORT

Wegener Corporation'’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission, is available free of charge by written request to:

James Traicoff

Investor Relations

Wegener Corporation

11350 Technology Circle

Johns Creek, Georgia

30097-1502

WEB SITE

HTTP://WWW.WEGENER.COM

QUARTERLY COMMON STOCK PRICES

STOCK PRICES

The Company’s common stock is traded over-the-counter.

The quarterly ranges of high and low sale prices for fiscal ~~2010~~2011 and ~~2009~~2010 were as follows:

	High		Low
Fiscal Year Ended September 3, 2010
Fiscal Year Ended September 2, 2011
First Quarter	$	.3814	$	.2007
Second Quarter		.2918		.0809
Third Quarter		.3018		.1006
Fourth Quarter		.1508		.0703
Fiscal Year Ended August 28, 2009
First Quarter	$	1.10	$	. 32
Second Quarter		.54		.10
Third Quarter		.45		.15
Fourth Quarter		.38		.10

~~The Company~~Fiscal ~~had~~Year ~~approximately~~Ended 333*September ~~shareholders of record at November 1~~3, 2010~~. The Company has never paid cash dividends on its common stock and does not intend to pay cash dividends in the foreseeable future.~~

First Quarter	$	.38	$	.20
Second Quarter		.29		. 08
Third Quarter		.30		.10
Fourth Quarter		.15		.07

The Company had approximately 335* shareholders of record at November 1, 2011. The Company has never paid cash dividends on its common stock and does not intend to pay cash dividends in the foreseeable future.

*(This number does not reflect beneficial ownership of shares held in nominee names).

6757

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