Certain statements contained in this filing are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and the Company intends that such forward-looking statements are subject to the safe harbors created thereby. Forward-looking statements may be identified by words such as "believes," "expects," "projects," "plans," "anticipates," and similar expressions, and include, for example, statements relating to expectations regarding future sales, income and cash flows. Forward-looking statements are based upon the Company's current expectations and assumptions, which are subject to a number of risks and uncertainties including, but not limited to: customer acceptance and effectiveness of recently introduced products; development of additional business for the Company's digital video and audio transmission product lines; effectiveness of the sales organization; the successful development and introduction of new products in the future; delays in the conversion by private and broadcast networks to next generation digital broadcast equipment; acceptance by various networks of standards for digital broadcasting; the Company's liquidity position and capital resources; general market conditions which may not improve during fiscal year 2009 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, performance issues with key suppliers and subcontractors, delays in product development and testing, availability of raw materials, new and existing well-capitalized competitors, and other uncertainties detailed from time to time in the Company's periodic Securities Exchange Act filings, including Item 1.A, "Risk Factors," contained in the Company's 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.

These risks are exacerbated by the recent developments in national and international financial markets, and we are unable to predict what effect these uncertain market conditions will have on our Company. During 2008, the capital and credit markets have experienced extended volatility and disruption. In the last 90 days, the volatility and disruption have reached unprecedented levels. There can be no assurance that these unprecedented recent developments will not materially and adversely affect our business, financial condition and results of operations.

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 solutions for video, audio and IP data networks. Applications include IP data delivery, broadcast television, cable television, radio networks, business television, distance education, business music and financial information distribution. COMPELŇ, our network control system, provides network flexibility to regionalize programming, commercials and file transfers.

We operate on a 52-53 week fiscal year. The fiscal year ends on the Friday nearest to August 31. Fiscal years 2008, 2007 and 2006 contained 52 weeks. All references herein to 2008, 2007 and 2006, refer to the fiscal years ending August 29, 2008, August 31, 2007, and September 1, 2006, respectively.

Our fiscal 2008 revenues decreased $52,000, or 0.2%, to $21,494,000 from $21,546,000 in fiscal 2007. Our net earnings for fiscal 2008 were $383,000 or $0.03 per share compared to a net loss of $(753,000) or $(0.06) per share for fiscal 2007. Fiscal 2008 net earnings included a one-time gain on sale of patents of $894,000. Through November 21, 2008 bookings and revenues to date were insufficient to provide adequate levels of cash flow from operations or adequate levels of collateral to support required borrowings during the second quarter of fiscal 2009. As a result, we need to raise additional capital or obtain additional credit facilities during the second quarter of fiscal 2009 to continue as a going concern and to execute our business plan.

During the fourth quarter of fiscal 2008, we booked approximately $4.9 million of new orders. Dial Global, Triton Radio's sales and programming division, ordered $2.1 million of equipment consisting of iPump® 6420 audio media servers and network products which are scheduled to ship over the first three quarters of fiscal 2009. Following its acquisition of Jones Media America in June of this year, Dial Global is purchasing the equipment to upgrade and expand the file-based broadcasting platform that Jones Media currently uses to manage its 2,000-radio station network. This is the initial phase of a multi-year project to ultimately expand Dial Global's file-based distribution of programming, advertising and related services to their 6,000 radio affiliates. Mega Hertz placed an order for Unity® 4600 professional satellite receivers totaling over $800,000. The order began shipping during the first quarter of fiscal 2009 and included a new standard feature, DVB-S2 demodulation support, while still maintaining backward compatibility with DVB-S demodulation. DVB-S2 modulation offers broadcasters a wide range of choices to manage inclement weather, satellite service provider limitations, reduce operational costs or increase service (when compared with DVB-S). Bandwidth costs of a typical transmission can be reduced by 20% to 30% by switching from DVB-S to DVB-S2. In addition, Educational Media Foundation ordered 600 DVB-S2 tuner cards to upgrade their Unity® 4600 satellite receivers. This order shipped in the fourth quarter of fiscal 2008.

During the third quarter of fiscal 2008, bookings, consisting primarily of add-on orders from existing customers, were $1,927,000. In addition, during the third quarter WCI entered into an agreement to sell selected patents and patent applications to EPAX Consulting Limited Liability Company for net proceeds of approximately $1,075,000, which closed in the fourth quarter (See Note 7 to the Consolidated Financial Statements). The group of patents and patent applications sold relate to product distinction, system architecture and IP networking. WCI retained a worldwide, non-exclusive, royalty-free license under the patents for use in both existing and future products. Proceeds from this transaction were used to reduce our line of credit borrowings.

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

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

Current Financial Position and Liquidity

Through November 21, 2008 bookings and revenues to date were insufficient to provide adequate levels of cash flow from operations or adequate levels of collateral to support required borrowings during the second quarter of fiscal 2009. As a result, we need to raise additional capital or obtain additional credit facilities during the second quarter of fiscal 2009 to continue as a going concern and to execute our business plan. Although we are in discussions with potential financing sources, if we are unsuccessful in securing additional capital during this period, through additional equity and/or debt financings, we may not be able to continue as a going concern (See Note 1 to the Consolidated Financial Statements).

At August 29, 2008, we had line of credit borrowings outstanding of $1,883,000. Our $5,000,000 bank loan facility is subject to availability advance formulas based on eligible accounts receivable, import letter of credit commitment balances and inventories. The loan facility matures on September 30, 2009, or upon demand. At August 29, 2008, approximately $3,117,000 remained available to borrow under the advance formulas. At November 21, 2008, the outstanding balance on the line of credit increased to $3,268,000 and our borrowing availability decreased to $559,000.

During fiscal 2008, our line of credit net borrowings decreased $133,000 to the outstanding balance of $1,883,000 at August 29, 2008 from $2,016,000 at August 31, 2007. Operating activities provided $771,000 of cash and investing activities used $537,000 of cash, which consisted of capitalized software additions of $1,214,000, equipment additions of $335,000 and $63,000 for license agreements and legal fees related to the filing of applications for various patents and trademarks. Proceeds from the sale of patents and patent applications provided $1,075,000 of cash which was used to reduce our line of credit borrowings. Loan facility fees used $100,000 of cash.

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

Current Developments

We released the next generation Compel® II network control system at the 2008 National Association of Broadcasters (NAB) Convention in April 2008. Compel® II 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. 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® II 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.

In addition, at the NAB Convention we released the new iPump® 562 media server which supports bandwidth-saving features, such as MPEG-4/h.264 video compression, file-based workflows and DVB-S2 satellite demodulation. The iPump® 562 provides a cost-effective approach to supporting any multi-site video projects with high levels of customization per television screen. With Compel®, unique programming content can reach individual retail stores, departments, schools, or hospitals, and can be rapidly updated by central network operators. Employees at display locations do not have to manage or interact with the media servers because all functions and upgrades are scheduled and managed remotely from the Compel® network control system at the central operations center. The iPump® 562 is optimized for high quality video and on-screen graphics, and provides a superior viewing experience compared to PC solutions and targets applications where cost is a major factor.

Our Encompass LE2 began shipping to Muzak for use in its new digital music delivery service that incorporates satellite media distribution, media players, and content management technology. With Encompass LE2, Muzak's business customers can view and update their music program selections, scheduling, and preferences instantly using a web-based user interface. They can also create multiple zones of music throughout their business; customize schedules and playlists according to business types, regions, promotions, or other criteria; as well as upload and schedule in-store messages anytime. The music and messaging play from the same media player, which also stores back-up music to ensure 100-percent uptime during inclement weather.

Our Unity® 4600 satellite media receiver now supports next-generation DVB-S2 satellite demodulation as a standard feature. With its advanced coding and Forward Error Correction (FEC) options, DVB-S2 modulation provides broadcasters with additional flexibility to manage inclement weather and satellite service provider limitations, and can significantly reduce bandwidth consumption and operating costs without compromising signal integrity.

Subsequent to August 29, 2008, we announced the introduction of two new MediaPlan® i/o (input/output) content creation stations: MediaPlan® i/o Contributor and MediaPlan® i/o Professional. Both offer advanced tools for creating and preparing media content, including digitizing, encoding, editing, and controlling the quality of media assets prior to uploading them into the MediaPlan® content management system, which is part of our end-to-end solution for file-based content distribution.

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 Near Earth LLC as our exclusive financial advisor in this evaluation process. These strategic alternatives may include: (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. We are also evaluating various financing alternatives to unlock the market value of our headquarters and associated real estate to support our capital needs. On November 26, 2008, we executed a contract to sell the 4.4 acres of undeveloped land adjacent to our headquarters facility for approximately $840,000 less applicable commissions and closing costs. The contract is subject to various contingencies including a rezoning of the property. No assurances may be given that the sale will be consummated. To date, the committee has explored and considered a number of potential courses of action. There can be no assurance that these efforts will result in any specific transaction. We do not expect to disclose further developments regarding the process until the completion of the strategic alternatives review and a decision by the Board of Directors regarding a transaction or course of action.

RESULTS OF OPERATIONS

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

                                                        Year ended
                                        August 29,     August 31,     September 1,
                                           2008           2007            2006
Revenues, net                                 100.0 %        100.0 %          100.0 %
Cost of products sold                          60.9           64.8             67.8
Gross margin                                   39.1           35.2             32.2
Selling, general, and administrative           25.8           24.0             31.0
Research & development                         14.9           14.1             15.0
Gain on sale of patents                        (4.2 )            -                -
Operating income (loss)                         2.5           (2.8 )          (13.8 )
Interest expense                               (0.7 )         (0.7 )           (0.5 )
Interest income                                 0.0            0.0              0.1
Net earnings (loss)                             1.8 %         (3.5 )%         (14.1 )%

Net earnings for the year ended August 29, 2008, were $383,000 or $0.03 per share, compared to a net loss of $(753,000) or $(0.06) per share for the year ended August 31, 2007, and a net loss of $(2,883,000) or $(0.23) per share for the year ended September 1, 2006. Fiscal 2008 net earnings included a gain on sale of patents of $894,000.

Revenues for fiscal 2008 decreased $52,000, or 0.2%, to $21,494,000 from $21,546,000 in fiscal 2007. Direct Broadcast Satellite (DBS) revenues (including service revenues) in fiscal 2008 increased $49,000, or 0.2%, to $21,465,000 from $21,416,000 in fiscal 2007. Analog and Custom Products Group revenues were $29,000 in fiscal 2008 compared to $129,000 in fiscal 2007. Our revenue levels are not subject to significant annual fluctuations in unit pricing. Product volumes are driven by product mix of orders. In addition, revenues and order backlog are subject to the timing of significant orders from customers, and as a result revenue levels may fluctuate on a quarterly and yearly basis. Fiscal 2008 included revenues from shipments of (i) our SMD 515 IPTV (internet protocol television) set top box to Conklin-Intracom for use by multiple telco operators in North America, (ii) our new iPump® 562 enterprise media server to Satellite Store Link (SSL) for expansion of SSL's digital signage projects in Latin America, and (iii) our new Unity® 552 Enterprise Media Receiver (Unity® 552) to one of our larger private network customers. Additionally in fiscal 2008, we completed shipments of our Unity® 4600 to the Big Ten Network (BTN) for a new cable network being distributed by Fox Cable Networks. Shipments in fiscal 2008 continued to MegaHertz for distribution of our products to the U.S. cable market and to business music provider Muzak LLC, of our new Encompass LE2, our next generation business music audio receiver.

Revenues for fiscal 2007 increased $1,158,000, or 5.7%, to $21,546,000 from $20,388,000 in fiscal 2006. Direct Broadcast Satellite (DBS) revenues (including service revenues) in fiscal 2007 increased $1,158,000, or 5.7%, to $21,416,000 from $20,258,000 in fiscal 2006. Analog and Custom Products Group revenues were $129,000 for both fiscal years 2007 and 2006. Fiscal 2007 included revenues from a new $3.2 million contract from SSL to launch a digital signage network in Mexico. Initial shipments of Unity® 4600 satellite receivers began in the fourth quarter of fiscal 2007 for use by the BTN in the new cable network being distributed by Fox Cable Networks. Additionally, fiscal 2007 included continued revenues from fiscal 2006 orders from BBC World Service and Jones Radio Networks of iPump® Media Servers, digital encoders and Unity® receivers for their broadcast radio networks.

WCI's backlog of orders scheduled to ship within 18 months was $8,491,000 at August 29, 2008, $10,170,000 at August 31, 2007, and $10,700,000 at September 1, 2006. The total multi-year backlog at August 29, 2008 was $13,300,000 compared to $17,080,000 at August 31, 2007. Approximately $7,206,000 of the August 29, 2008, backlog is expected to ship during fiscal 2009. Four customers accounted for 85.1% of the backlog at August 29, 2008 and for 83.4% of the backlog expected to ship during fiscal 2009. Sales to a relatively small number of major customers have typically comprised a majority of our revenues and that trend is expected to continue. (See Note 14 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.

International sales are generated through a direct sales organization and through foreign distributors. International sales were $3,686,000 or 17.2% of revenues in fiscal 2008 compared to $5,288,000 or 24.5% of revenues in fiscal 2007, and $3,396,000 or 16.7% of revenues in fiscal 2006. International shipments are generally project specific, and therefore revenues are subject to variations from year to year based on the timing of customer orders. All international sales are denominated in U.S. dollars. Additional financial information on geographic areas is provided in note 14 to the consolidated financial statements.

Gross profit as a percent of sales was 39.1% in fiscal 2008 compared to 35.2% in fiscal 2007, and 32.2% in fiscal 2006. Gross profit margin dollars increased $814,000, or 10.7%, to $8,397,000 in fiscal 2008 from $7,583,000 in fiscal 2007. Fiscal 2006 gross profit margin dollars amounted to $6,556,000. Profit margins in fiscal 2008 were favorably impacted by the reversal of an accrued warranty liability of $310,000 for previously estimated warranty provisions that were no longer required. Warranty provisions charged to cost of sales were $50,000 in fiscal 2008, $625,000 in fiscal 2007 and $110,000 in fiscal 2006. The increase in warranty provisions in fiscal 2007 was related to new product introductions. Profit margins in fiscal 2008 included no inventory reserve charges compared to $250,000 in fiscal 2007 and $350,000 in fiscal 2006. Capitalized software amortization expenses included in cost of sales in fiscal 2008 were $1,238,000, compared to $1,517,000 in fiscal 2007 and $1,936,000 in fiscal 2006.

Selling, general, and administrative (SG&A) expenses increased $376,000, or 7.3%, to $5,539,000 in fiscal 2008 from $5,163,000 in fiscal 2007. As a percentage of revenues, SG&A expenses were 25.8% of revenues in fiscal 2008 and 24.0% in fiscal 2007. Corporate SG&A expenses in fiscal 2008 increased $125,000, or 12.2%, to $1,146,000 from $1,021,000 in fiscal 2007. The increase was mainly due to increased professional fees related to Sarbanes-Oxley compliance. WCI's SG&A expenses increased $252,000, or 6.1%, to $4,393,000 in fiscal 2008 from $4,141,000 in fiscal 2007. The increase in WCI's SG&A expenses in fiscal 2008 was mainly due to increases in (i) salaries and related payroll costs of $88,000, (ii) employee placement fees and related training of $38,000, (iii) general overhead costs of $91,000, and (iv) professional fees of $42,000. These increases were offset by lower sales and marketing expenses of $50,000. WCI's SG&A expenses in fiscal 2008 included no bad debt provision expense compared to a benefit of $50,000 from the reversal of bad debt provisions in fiscal 2007. SG&A expenses included $8,000 of noncash share-based compensation expense in fiscal 2008 compared to $17,700 in fiscal 2007.

Selling, general, and administrative (SG&A) expenses decreased $1,153,000, or 18.3%, to $5,162,000 in fiscal 2007 from $6,315,000 in fiscal 2006. As a percentage of revenues, SG&A expenses were 24.0% of revenues in fiscal 2007 and 31.0% in fiscal 2006. Corporate SG&A expenses in fiscal 2007 decreased $479,000, or 31.9%, to $1,021,000 from $1,500,000 in fiscal 2006. The decrease was mainly due to a reduction in professional fees related to dissident shareholder issues. WCI's SG&A expenses decreased $674,000, or 14.0%, to $4,142,000 in fiscal 2007 from $4,815,000 in fiscal 2006. The decrease in WCI's SG&A expenses in fiscal 2007 was mainly due to (i) lower professional fees of $177,000, (ii) outside sales commissions of $102,000 which fluctuate due to the project specific nature of these expenses, (iii) salaries and related expenses of $209,000 due to lower headcount, and (iv) marketing expenses of $127,000. SG&A overhead expenses decreased $77,000. SG&A expenses included $17,700 of noncash share-based compensation expense in fiscal 2007 compared to $30,000 in fiscal 2006.

Research and development expenditures, including capitalized software development costs, were $4,427,000 or 20.5% of revenues in fiscal 2008, $4,562,000 or 21.2% of revenues in fiscal 2007, and $4,451,000 or 21.8% of revenues in fiscal 2006. The decrease in expenditures fiscal 2008 compared to fiscal 2007 was mainly due to lower consulting costs, which were partially offset by increases in salaries, headcount and recruiting costs related to new hires. The increase in expenditures in fiscal 2007 compared to fiscal 2006 was due to increased salaries related to increases in compensation and headcount and increased recruiting costs related to new hires, which were offset by reductions in consulting and prototype parts costs. Software development costs totaling $1,214,000, $1,528,000, and $1,399,000 were capitalized during fiscal 2008, 2007 and 2006, respectively. The decreases in capitalized software costs in fiscal 2008 compared to fiscal 2007 were related to completed projects. The increase in capitalized software costs in fiscal 2007 compared to fiscal 2006 was due to increased expenditures related to MPEG-4/H.264 products. Research and development expenses, excluding capitalized software development costs, were $3,213,000 or 14.9% of revenues in fiscal 2008, $3,033,000 or 14.1% of revenues in fiscal 2007, and $3,052,000 or 15.0% of revenues in fiscal 2006. We expect research and development expenditures to decrease in fiscal 2009 compared to fiscal 2008 due to completed projects.

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.

Interest expense was $159,000 in fiscal 2008 compared to $150,000 in fiscal 2007 and $98,000 in fiscal 2006. The increase in fiscal 2007 compared to fiscal 2006 was due to an increase in average line-of-credit borrowings. We believe that interest expense in fiscal 2009 will increase compared to fiscal 2008 as a result of expected increases in average line of credit borrowings, as well as potential increases in our loan interest rate, as further discussed in the Liquidity and Capital Resources section.

Interest income was $2,000 in fiscal 2008 compared to $10,000 in fiscal 2007 and $26,000 in fiscal 2006. Interest income in fiscal 2006 included a one-time benefit of $18,000 from interest paid on the collection of Adelphia Communications receivables.

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. No income tax benefits were recorded in fiscal 2007 and 2006 due to an increase in the deferred tax asset valuation allowance of $271,000 and $1,038,000, respectively. At August 29, 2008, net deferred tax assets of $5,878,000 were fully reserved by a valuation allowance.

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