-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Aa0vrmYvmEoT4/Mtxx17BIfP+8Y8walHzE/+xrvV2rqgwfopyje8ek3h3qhd7U+o R/bujStlaAl9R716RNRUHg== 0000716688-07-000001.txt : 20070213 0000716688-07-000001.hdr.sgml : 20070213 20070213161725 ACCESSION NUMBER: 0000716688-07-000001 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070213 DATE AS OF CHANGE: 20070213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROWAVE FILTER CO INC /NY/ CENTRAL INDEX KEY: 0000716688 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 160928443 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-10976 FILM NUMBER: 07610417 BUSINESS ADDRESS: STREET 1: 6743 KINNE ST CITY: E SYRACUSE STATE: NY ZIP: 13057 BUSINESS PHONE: 3154373953 MAIL ADDRESS: STREET 1: 6743 KINNE ST CITY: EAST SYRACUSE STATE: NY ZIP: 13057 10QSB 1 mfc10q.txt MFC 10-QSB FOR 1ST QUARTER 2007 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB Quarterly Report Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended December 31, 2006 Commission file number 0-10976 MICROWAVE FILTER COMPANY, INC. (Exact name of registrant as specified in its charter.) New York 16-0928443 (State of Incorporation) (I.R.S. Employer Identification Number) 6743 Kinne Street, East Syracuse, N.Y. 13057 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (315) 438-4700 Indicate by check mark whether 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 shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ( x ) NO ( ) Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES ( ) NO ( x ) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ( ) NO ( x ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: Common Stock, $.10 Par Value - 2,902,010 shares as of January 31, 2007. PART I. - FINANCIAL INFORMATION MICROWAVE FILTER COMPANY, INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands) December 31, 2006 September 30, 2006 (Unaudited) Assets Current Assets: Cash and cash equivalents $ 520 $ 706 Investments 794 798 Accounts receivable-trade, net 312 344 Federal and state income tax recoverable 138 138 Inventories 547 491 Prepaid expenses and other current assets 92 95 ------- ------- Total current assets 2,403 2,572 Property, plant and equipment, net 527 554 ------- ------- Total assets $ 2,930 $ 3,126 ======= ======= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 145 $ 180 Customer deposits 19 20 Accrued payroll and related expenses 47 61 Accrued compensated absences 206 211 Other current liabilities 26 37 ------- ------- Total current liabilities 443 509 ------- ------- Total liabilities 443 509 ------- ------- Stockholders' Equity: Common stock,$.10 par value 432 432 Additional paid-in capital 3,249 3,249 Retained earnings 326 456 ------- ------- 4,007 4,137 Common stock in treasury, at cost (1,520) (1,520) ------- ------- Total stockholders' equity 2,487 2,617 ------- ------- Total liabilities and stockholders' equity $ 2,930 $ 3,126 ======= ======= See Accompanying Notes to Consolidated Financial Statements MICROWAVE FILTER COMPANY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2006 AND 2005 (Unaudited) (Amounts in thousands, except per share data) Three months ended December 31 2006 2005 Net sales $1,045 $1,080 Cost of goods sold 709 720 ------ ------ Gross profit 336 360 Selling, general and administrative expenses 486 501 ------ ------ Loss from operations (150) (141) Other income (net), principally interest 19 20 ------ ------ Loss before income taxes (131) (121) Provision (benefit) for income taxes 0 0 ------ ------ NET LOSS ($131) ($121) ====== ====== Per share data: Basic (loss) per share ($0.04) ($0.04) ====== ====== Diluted (loss) per share ($0.04) ($0.04) ====== ====== Shares used in computing net (loss) per share: Basic 2,902 2,909 Diluted 3,041 3,048 See Accompanying Notes to Consolidated Financial Statements MICROWAVE FILTER COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 31, 2006 AND 2005 (Unaudited) (Amounts in thousands) Three months ended December 31 2006 2005 Cash flows from operating activities: Net loss $ (131) $ (121) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 28 39 Change in assets and liabilities: Accounts receivable - trade 32 192 Federal and state income taxes 0 (40) Inventories (56) (62) Prepaid expenses and other assets 3 12 Accounts payable and accrued expenses (64) (68) Customer deposits (2) 12 ------ ------ Net cash used in operating activities (190) (36) ------ ------ Cash flows from investing activities: Investments 5 5 Capital expenditures (1) (11) ------ ------ Net cash provided by (used in) investing activities 4 (6) ------ ------ Cash flows from financing activities 0 0 ------ ------ Net (decrease) increase in cash and cash equivalents (186) (42) Cash and cash equivalents at beginning of period 706 1,252 ------ ------ Cash and cash equivalents at end of period $ 520 $1,210 ====== ====== See Accompanying Notes to Consolidated Financial Statements MICROWAVE FILTER COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2006 Note 1. Summary of Significant Accounting Policies The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The operating results for the three month period ended December 31, 2006 are not necessarily indicative of the results that may be expected for the year ended September 30, 2007. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10K for the year ended September 30, 2006. Note 2. Industry Segment Data The Company's primary business segment involves the operations of Microwave Filter Company, Inc. (MFC) which designs, develops, manufactures and sells electronic filters, both for radio and microwave frequencies, to help process signal distribution and to prevent unwanted signals from disrupting transmit or receive operations. Markets served include cable television, television and radio broadcast, satellite broadcast, mobile radio, commercial communications and defense electronics. Note 3. Inventories Inventories are stated at the lower of cost determined on the first-in, first-out method or market. Inventories net of reserve for obsolescence consisted of the following: (thousands of dollars) December 31, 2006 September 30, 2006 Raw materials and stock parts $445 $412 Work-in-process 32 20 Finished goods 70 59 ---- ---- $547 $491 ==== ==== The Company's reserve for obsolescence equaled $389,200 at December 31, 2006 and September 30, 2006. Note 4. Income Taxes The Company accounts for income taxes under Statement of Financial Accounting Standards (SFAS) No. 109. Deferred tax assets and liabilities are based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which are anticipated to be in effect when these differences reverse. The deferred tax provision is the result of the net change in the deferred tax assets and liabilities. A valuation allowance is established when it is necessary to reduce deferred tax assets to amounts expected to be realized. The Company has provided a full valuation allowance against its deferred tax assets. Note 5. Stock Options On April 9, 1998, the Board of Directors and Shareholders of Microwave Filter Company, Inc. approved the 1998 Microwave Filter Company, Inc. Incentive Stock Plan (the "1998 Plan"). Under the 1998 Plan, the Company may grant incentive stock options ("ISOs"), non-qualified stock options ("NQSOs") and stock appreciation rights to directors, officers and employees of the Company and its affiliates. The 1998 Plan reserves 150,000 shares for issuance. The exercise price of the ISOs and NQSOs will be 100% of the fair market value of the Common Stock on the date the ISOs and NQSOs are granted. The 1998 Plan will terminate on April 10, 2008. On June 21, 2004, the Board of Directors granted ISOs totaling 115,000 shares and NQSOs totaling 35,000 shares at an exercise price of $1.47. All options were 100% vested. We accounted for our incentive stock plan under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for stock issued to employees. No compensation expense has been recognized in the accompanying financial statements relative to our stock option plan. The Company has adopted the provisions of SFAS No. 123R, "Share-Based Payment", for the fiscal year beginning October 1, 2006. A summary of all stock option activity and information related to all options outstanding follows:
Three months ended December 31, 2006 ------------------ ISOs NQSOs -------- -------- Exercise Shares Exercise Shares Price Price -------- -------- -------- -------- Outstanding at beginning of period $1.47 108,548 $1.47 30,000 Granted - 0 - 0 Exercised - 0 - 0 Cancelled - 0 - 0 ------ -------- ------ -------- Outstanding at end of period $1.47 108,548 $1.47 30,000 ------ -------- ------ -------- Exercisable at end of period $1.47 108,548 $1.47 30,000 ------ -------- ------- --------
MICROWAVE FILTER COMPANY, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Microwave Filter Company, Inc. operates primarily in the United States and principally in one industry. The Company extends credit to business customers based upon ongoing credit evaluations. Microwave Filter Company, Inc. (MFC) designs, develops, manufactures and sells electronic filters, both for radio and microwave frequencies, to help process signal distribution and to prevent unwanted signals from disrupting transmit or receive operations. Markets served include cable television, television and radio broadcast, satellite broadcast, mobile radio, commercial communications and defense electronics. Niagara Scientific, Inc. (NSI), a wholly owned subsidiary, custom designs case packing machines to automatically pack products into shipping cases. Customers are typically processors of food and other commodity products with a need to reduce labor cost with a modest investment and quick payback. Critical Accounting Policies The Company's consolidated financial statements are based on the application of generally accepted accounting principles (GAAP). GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. The Company believes its use of estimates and underlying accounting assumptions adhere to GAAP and are consistently applied. Valuations based on estimates are reviewed for reasonableness and adequacy on a consistent basis throughout the Company. Primary areas where financial information of the Company is subject to the use of estimates, assumptions and the application of judgment include revenues, receivables, inventories, and taxes. Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2006 describes the significant accounting policies used in preparation of the consolidated financial statements. The most significant areas involving management judgments and estimates are described below and are considered by management to be critical to understanding the financial condition and results of operations of the Company. Revenues from product sales are recorded as the products are shipped and title and risk of loss have passed to the customer, provided that no significant vendor or post-contract support obligations remain and the collection of the related receivable is probable. Billings in advance of the Company's performance of such work are reflected as customer deposits in the accompanying consolidated balance sheet. Allowances for doubtful accounts are based on estimates of losses related to customer receivable balances. The establishment of reserves requires the use of judgment and assumptions regarding the potential for losses on receivable balances. The Company's inventories are stated at the lower of cost determined on the first-in, first-out method or market. The Company uses certain estimates and judgments and considers several factors including product demand and changes in technology to provide for excess and obsolescence reserves to properly value inventory. The Company established a warranty reserve which provides for the estimated cost of product returns based upon historical experience and any known conditions or circumstances. Our warranty obligation is affected by product that does not meet specifications and performance requirements and any related costs of addressing such matters. The Company accounts for income taxes under Statement of Financial Accounting Standards (SFAS) No. 109. Deferred tax assets and liabilities are based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which are anticipated to be in effect when these differences reverse. The deferred tax provision is the result of the net change in the deferred tax assets and liabilities. A valuation allowance is established when it is necessary to reduce deferred tax assets to amounts expected to be realized. The Company has provided a full valuation allowance against its deferred tax assets. RESULTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 2006 vs. THREE MONTHS ENDED DECEMBER 31, 2005. The following table sets forth the Company's net sales by major product group for the three months ended December 31, 2006 and 2005. Product group (in thousands) Fiscal 2007 Fiscal 2006 Microwave Filter (MFC): Cable TV $ 417 $ 386 RF/Microwave 292 407 Satellite 253 250 Broadcast TV 65 36 Niagara Scientific (NSI) 18 2 ------ ------ Total $1,045 $1,081 ====== ====== Sales backlog at 12/31 $ 782 $ 701 ====== ====== Net sales for the three months ended December 31, 2006 equaled $1,045,073, a decrease of $35,763 or 3.3% when compared to net sales of $1,080,836 for the three months ended December 31, 2005. MFC sales for the three months ended December 31, 2006 equaled $1,027,379, a decrease of $51,325 or 4.8%, when compared to sales of $1,078,704 for the three months ended December 31, 2005. The decrease in MFC sales can primarily be attributed to a decrease in the sales of the Company's RF/Microwave products during the quarter. MFC's RF/Microwave product sales for the three months ended December 31, 2006 equaled $291,941, a decrease of $114,591 or 28.1%, when compared to RF/Microwave product sales of $406,532 for the three months ended December 31, 2005. The decrease can be attributed to a decrease in sales to the U. S. Government. For the three months ended December 31, 2006 sales to the U.S. Government equaled $25,846 compared to sales of $179,738 during the three months ended December 31, 2005. MFC's Cable TV product sales for the three months ended December 31, 2006 equaled $416,967, an increase of $30,761 or 7.9%, when compared to sales of $386,206 during the same period last year. Despite the increase in Cable TV sales, management continues to project a decrease in demand for Cable TV products due to the shift from analog to digital television. Although the Company has developed filters for digital television, the demand for these types of filters is unknown at this time. MFC's Satellite product sales for the three months ended December 31, 2006 equaled $253,022, an increase of $2,753 or 1.1%, when compared to sales of $250,269 during the same period last year. The increase can be attributed to an increase in demand for the Company's filters which suppress strong out-of- band interference caused by military and civilian radar systems and other sources. Management expects demand for these types of filters to continue with the proliferation of earth stations world wide and increased sources of interference. MFC's Broadcast TV/Wireless Cable product sales for the three months ended December 31, 2006 equaled $65,449, an increase of $29,753 or 83.2%, when compared to sales of $35,696 during the same period last year primarily due to an increase in demand for UHF Broadcast products. NSI sales for the three months ended December 31, 2006 equaled $17,694, an increase of $15,562, when compared to sales of $2,132 for the three months ended December 31, 2005. NSI sales consist primarily of field service and spare part orders. NSI has been concentrating on quoting low risk jobs in an effort to maintain targeted profit margins. Although this may impact sales levels, it should improve profit margins and also allow engineering resources to focus on higher priorities. The Company's sales order backlog equaled $782,464 at December 31, 2006 compared to sales order backlog of $731,941 at September 30, 2006 and $700,835 at December 31, 2005. However, backlog is not necessarily indicative of future sales. Accordingly, the Company does not believe that its backlog as of any particular date is representative of actual sales for any succeeding period. Approximately 80% of the total sales order backlog at December 31, 2006 is scheduled to ship by September 30, 2007. The Company recorded a net loss of $130,564, or a loss of $.04 per share, for the three months ended December 31, 2006 compared to a net loss of $121,407, or a loss of $.04 per share, for the three months ended December 31, 2005. The decrease can primarily be attributed to the lower sales volume this year compared to the same period last year. Gross profit for the three months ended December 31, 2006 equaled $336,100, a decrease of $24,241 or 6.7%, when compared to gross profit of $360,341 for the three months ended December 31, 2005. As a percentage of sales, gross profit equaled 32.2% for the three months ended December 31, 2006 compared to 33.3% for the three months ended December 31, 2005. The decreases in gross profit can primarily be attributed to the lower sales volume. Selling, general and administrative (SGA) expenses for the three months ended December 31, 2006 equaled $485,620, a decrease of $15,562 or 3.1%, when compared to SG&A expenses of $501,182 for the three months ended December 31, 2005. As a percentage of sales, SGA expenses equaled 46.5% for the three months ended December 31, 2006 compared to 46.4% for the three months ended December 31, 2005. Other income is primarily interest income earned on invested cash balances. Other income equaled $18,956 for the three months ended December 31, 2006 compared to $19,434 for the three months ended December 31, 2005. Other income may fluctuate based on market interest rates and levels of invested cash balances. The provision (benefit) for income taxes equaled $0 for both the three months ended December 31, 2006 and 2005. Any benefit for the losses have been subject to a valuation allowance since the realization of the deferred tax benefit is not considered more likely than not. Off-Balance Sheet Arrangements At December 31, 2006 and 2005, the Company did not have any unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which might have been established for the purpose of facilitating off-balance sheet arrangements. LIQUIDITY and CAPITAL RESOURCES December 31, 2006 September 30, 2006 Cash & cash equivalents $519,934 $705,646 Investments $793,694 $798,544 Working capital $1,960,304 $2,063,269 Current ratio 5.43 to 1 5.05 to 1 Long-term debt $ 0 $ 0 Cash and cash equivalents decreased $185,712 to $519,934 at December 31,2006 when compared to cash and cash equivalents of $705,646 at September 30, 2006. The decrease was a result of $189,664 in net cash used in operating activities and $3,952 provided by investing activities. Cash used in operating activities can primarily be attributed to the net loss. The decrease of $31,755 in accounts receivable at December 31, 2006, when compared to September 30, 2006, can primarily be attributable to the decrease in shipments during the quarter ended December 31, 2006 when compared to the quarter ended September 30, 2006. The increase of $56,428 in inventories at December 31, 2006, when compared to September 30, 2006, can primarily be attributable to the increase in the sales order backlog and our customers scheduled delivery dates. Cash provided by investing activities during the three months ended December 31, 2006 consisted of funds provided by the sale of investments. At December 31, 2006, the Company had unused aggregate lines of credit totaling $750,000 collateralized by all inventory, equipment and accounts receivable. Management believes that its working capital requirements for the forseeable future will be met by its existing cash balances, future cash flows from operations and its current credit arrangements. FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL CONDITON OR BUSINESS - -------------------------------------------------------------------------------- An investment in our common stock involves a high degree of risk. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we may currently deem immaterial, may become important factors that harm our business, financial condition or results of operations. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. Demand for existing products may decline. Demand for our products depends upon, among other factors, the level of capital expenditures by current and prospective customers, the rate of economic growth in the markets in which we compete and the competitiveness of our products. Changes in any of these factors could have an adverse effect on our financial condition or results of operations. We must continue to assess and predict customer needs and evolving technologies. We must develop new products, including enhancements to existing products, and successfully manufacture, market and sell these products. If we are unsuccessful in these areas, our financial condition or results of operations could be adversely affected. Our inability to introduce new and enhanced products on a timely basis. Delays in development, testing, manufacture and/or release of new 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. Market acceptance of newly developed products may be slower than anticipated. The markets for our products are competitive and may be characterized by rapid technological change, new product development and evolving industry standards. If technologies supported by our products become obsolete or fail to gain widespread acceptance, our business could be harmed. Current and potential competitors may have substantially greater financial, technical, marketing, distribution and other resources than us, and have greater name recognition and market acceptance of their products and technologies. Our competitors may develop new technologies or products that may offer superior price or performance features and may render our products and technologies obsolete and noncompetitive. Pricing pressures from our customers and/or market pressure from competitors may reduce selling prices. Many of customers are under continuous pressure to reduce costs and, therefore, we expect to continue to experience pressure from these customers to reduce the prices of the products that we sell to them. To offset declining average sales prices, we believe that we must achieve manufacturing cost reductions and increase our sales volumes. If we are unable to offset declining average selling prices, our gross margins will decline, and this decline could materially harm our business, financial condition and operating results. We also compete with companies which have substantially larger operations and greater financial, engineering, marketing, production and other resources than we have. These competitors may develop their products more quickly, 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 selling prices, all of which would have a material adverse impact on our financial position and results of operations. Difficulty in obtaining an adequate supply of raw materials or components at reasonable prices. The Company depends on outside suppliers for raw materials, components and parts, and services. Although items are generally available from a number of suppliers, the Company purchases certain raw materials and components from a single supplier. If such a supplier should cease to supply an item, the Company believes that new sources could be found to provide the raw materials and components. However, manufacturing delays and added costs could result. The Company has not experienced significant delays of this nature in the past, but there can be no assurance that delays in delivery due to supply shortages will not occur in the future. Substantial periods of lead time for delivery of certain materials are sometimes experienced by the Company, making it necessary to inventory varied quantities of materials. Loss of key personnel or the inability to attract new employees. Our success depends in large part on the continued service of our key technical and management personnel, and on our ability to attract and retain qualified employees, particularly those involved in the development of new products and processes and the manufacture of existing products. The competition for these individuals is significant, and the loss of key employees could harm our business. RECENT PRONOUNCEMENTS - ---------------------- FASB Interpretation 48 was issued in July 2006 to clarify the criteria for recognizing tax benefits under FASB Statement No. 109, Accounting for Income Taxes. The Interpretation defines the threshold for recognizing the benefits of tax-return positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority and will affect many companies' reported results and their disclosures of uncertain tax positions. The Interpretation does not prescribe the type of evidence required to support meeting the more-likely-than-not threshold, stating that it depends on the individual facts and circumstances. The benefit recognized for a tax position meeting the more-likely-than-not criterion is measured based on the largest benefit that is more than 50 percent likely to be realized. The measurement of the related benefit is determined by considering the probabilities of the amounts that could be realized upon ultimate settlement, assuming the taxing authority has full knowledge of all relevant facts and including expected negotiated settlements with the taxing authority. Interpretation 48 is effective as of the beginning of the first fiscal year beginning after December 15, 2006 (the Company's 2008 fiscal year). The company is currently analyzing the financial statement impact of adopting this pronouncement. Accounting for Pension and Other Postretirement Benefits -- In September 2006, the FASB published Statement of Financial Accounting No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans. This statement requires companies to report on their balance sheets the funded status of pension and other post retirement benefit plans. The proposal would also require companies to measure plan assets and obligations as of the employer's balance-sheet date. As a result, companies would recognize on their balance sheets actuarial gains and losses and prior service cost that have not yet been included in income. This could significantly increase reported liabilities for many companies with a corresponding reduction in equity reported as accumulated other comprehensive income. The provisions for the statement are effective for fiscal years ending after December 15, 2006, (the Company's 2007 fiscal year) with earlier application encouraged. The Company does not expect the adoption of SFAS No. 158 in fiscal 2008 to have an impact on its results of operations or financial position. In September 2006, SEC Staff Accounting Bulletin No. 108 was issued to provide guidance on Quantifying Financial Statement Misstatements. Staff Accounting Bulletin No. 108 addresses how the effects of prior-year uncorrected misstatements should be considered when quantifying misstatements in current-year financial statements. The SAB requires registrants to quantify misstatements using both the balance sheet and income-statement approaches and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. The SAB does not change the staff's previous guidance in SAB 99 on evaluating the materiality of misstatements. When the effect of initial adoption is determined to be material, the SAB allows registrants to record that effect as a cumulative-effect adjustment to beginning-of-year retained earnings. The requirements are effective for annual financial statements covering the first fiscal year ending after November 15, 2006 (the Company's fiscal 2007). Fair Value Measurements. In September 2006, the FASB published Statement of Financial Accounting No. 157, Fair Value Measurements. This Statement establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The Statement applies only to fair-value measurements that are already required or permitted by other accounting standards and is expected to increase the consistency of those measurements. It will also affect current practices by nullifying the Emerging Issues Task Force (EITF) guidance that prohibited recognition of gains or losses at the inception of derivative transactions whose fair value is estimated by applying a model and by eliminating the use of "blockage" factors by brokers, dealers, and investment companies that have been applying AICPA Guides. The Statement is effective for fair-value measures already required or permitted by other standards for financial statements issued for fiscal years beginning after November 15, 2007 (the Company's fiscal 2009) and interim periods within those fiscal years. Early application is permissible only if no annual or interim financial statements have been issued for the earlier periods. The requirements of the Statement are applied prospectively, except for changes in fair value related to estimating he fair value of a large block position and instruments measured at fair value at initial recognition based on transaction price in accordance with EITF 02-3 or Statement 155. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 - -------------------------------------------------------------------------------- In an effort to provide investors a balanced view of the Company's current condition and future growth opportunities, this Quarterly Report on Form 10- QSB may include comments by the Company's management about future performance. These statements which are not historical information are "forward-looking statements" pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These, and other forward-looking statements, are subject to business and economic risks and uncertainties that could cause actual results to differ materially from those discussed. These risks and uncertainties include, but are not limited to: risks associated with demand for and market acceptance of existing and newly developed products as to which the Company has made significant investments; general economic and industry conditions; slower than anticipated penetration into the satellite communications, mobile radio and commercial and defense electronics markets; competitive products and pricing pressures; increased pricing pressure from our customers; risks relating to governmental regulatory actions in broadcast, communications and defense programs; as well as other risks and uncertainties, including but not limited to those detailed from time to time in the Company's Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. You are encouraged to review Microwave Filter Company's 2006 Annual Report and Form 10-K for the fiscal year ended September 30, 2006 and other Securities and Exchange Commission filings. Forward looking statements may be made directly in this document or "incorporated by reference" from other documents. You can find many of these statements by looking for words like "believes," "expects," "anticipates," "estimates," or similar expressions. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There has been no significant change in our exposures to market risk during the three months ended December 31, 2006. For a detailed discussion of market risk, see our Annual Report on Form 10-K for the fiscal year ended September 30, 2006, Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk. ITEM 4. CONTROLS AND PROCEDURES 1. Evaluation of disclosure controls and procedures. Based on their evaluation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on Form 10-QSB, the Company's chief executive officer and chief financial officer have concluded that the Company's disclosure controls and procedures are effective. 2. Changes in internal control over financial reporting. During the period covered by this Quarterly Report on Form 10-QSB, there were no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f)) that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is unaware of any material threatened or pending litigation against the Company. Item 1A. The Company is exposed to certain risk factors that may effect operations and/or financial results. The significant factors known to the Company are described in the Company's most recently filed annual report on Form 10-K and above. There have been no material changes from the risk factors as previously disclosed in the Company's annual report on Form 10-K. Item 2. Changes in Securities None during this reporting period. Item 3. Defaults Upon Senior Securities The Company has no senior securities. Item 4. Submission of Matters to a Vote of Security Holders None during this reporting period. Item 6. Exhibits and Reports on Form 8-K a. Exhibits 31.1 Section 13a-14(a)/15d-14(a) Certification of Carl F. Fahrenkrug 31.2 Section 13a-14(a)/15d-14(a) Certification of Richard L. Jones 32.1 Section 1350 Certification of Carl F. Fahrenkrug 32.2 Section 1350 Certification of Richard L. Jones b. Reports on Form 8-K None. Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MICROWAVE FILTER COMPANY, INC. February 14, 2007 Carl F. Fahrenkrug (Date) -------------------------- Carl F. Fahrenkrug Chief Executive Officer February 14, 2007 Richard L. Jones (Date) -------------------------- Richard L. Jones Chief Financial Officer EX-31 3 ex-31.txt EXHIBIT 31 Exhibit 31.1 CERTIFICATION I, Carl F. Fahrenkrug, Chief Executive Officer of Microwave Filter Company, Inc. certify that: 1. I have reviewed this Form 10-QSB of Microwave Filter Company, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. Date: February 14, 2007 /s/ Carl F. Fahrenkrug Carl F. Fahrenkrug Exhibit 31.2 CERTIFICATION I, Richard L. Jones, Chief Financial Officer of Microwave Filter Company, Inc. certify that: 1. I have reviewed this Form 10-QSB of Microwave Filter Company, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. Date: February 14, 2007 /s/ Richard L. Jones Richard L. Jones EX-32 4 ex-32.txt EXHIBIT 32 Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Carl F. Fahrenkrug, Chief Executive Officer of Microwave Filter Company, Inc. (the Company), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: (1) the quarterly Report on Form 10-QSB of the Company for the period ended December 31, 2006 (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d); and (2) the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 14, 2007 /s/ Carl F. Fahrenkrug Carl F. Fahrenkrug Chief Executive Officer Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Richard L. Jones, Chief Financial Officer of Microwave Filter Company, Inc. (the Company), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: (1) the quarterly Report on Form 10-QSB of the Company for the period ended December 31, 2006 (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d); and (2) the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 14, 2007 /s/ Richard L. Jones Richard L. Jones Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----