-----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, CqqACp2slppjuJwknlOpGQggNGe6FQghS+817ZduCh0cI7EI9ilZiKY/GI3WO0vr LEebYrNIY3up+ORVHfgYPg== 0000716688-10-000010.txt : 20100513 0000716688-10-000010.hdr.sgml : 20100513 20100513153127 ACCESSION NUMBER: 0000716688-10-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20100331 FILED AS OF DATE: 20100513 DATE AS OF CHANGE: 20100513 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10976 FILM NUMBER: 10828259 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 10-Q 1 mfc10q.txt MFC 10-Q FOR 2ND QTR 2010 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended March 31, 2010 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 the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports, and (2) has been subject to such filing requirements for the past 90 days. YES __X__ NO____ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ____ NO____ (The Registrant is not yet required to submit Interactive Data) Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act). Large accelerated filer ______ Accelerated filer ______ Non-accelerated filer ______ (Do not check if smaller reporting company) Smaller reporting company ____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 practicable date. Common Stock, $.10 Par Value - 2,592,818 shares as of May 3, 2010. PART I. - FINANCIAL INFORMATION MICROWAVE FILTER COMPANY, INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands) March 31, 2010 September 30, 2009 (Unaudited) Assets Current Assets: Cash and cash equivalents $ 1,278 $ 1,476 Accounts receivable-trade, net 395 248 Inventories 603 604 Prepaid expenses and other current assets 101 107 ------- ------- Total current assets 2,377 2,435 Property, plant and equipment, net 469 398 ------- ------- Total assets $ 2,846 $ 2,833 ======= ======= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 151 $ 144 Customer deposits 27 33 Accrued federal and state income taxes payable 2 2 Accrued payroll and related expenses 88 61 Accrued compensated absences 266 278 Other current liabilities 37 34 ------- ------- Total current liabilities 571 552 ------- ------- Total liabilities 571 552 ------- ------- Stockholders' Equity: Common stock,$.10 par value 432 432 Additional paid-in capital 3,249 3,249 Retained earnings 279 284 ------- ------- 3,960 3,965 Common stock in treasury, at cost (1,685) (1,685) ------- ------- Total stockholders' equity 2,275 2,281 ------- ------- Total liabilities and stockholders' equity $ 2,846 $ 2,833 ======= ======= See Accompanying Notes to Consolidated Financial Statements MICROWAVE FILTER COMPANY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 2010 AND 2009 (Unaudited) (Amounts in thousands, except per share data) Three months ended Six months ended March 31 March 31 2010 2009 2010 2009 Net sales $1,094 $1,223 $2,229 $2,473 Cost of goods sold 732 807 1,446 1,628 ------ ------ ------ ------ Gross profit 362 416 783 845 Selling, general and administrative expenses 383 383 792 825 ------ ------ ------ ------ (Loss) income from operations (21) 33 (9) 20 Other income (net), principally interest 2 4 4 10 ------ ------ ------ ------ (Loss) income before income taxes (19) 37 (5) 30 Provision for income taxes 0 0 0 0 ------ ------ ------ ------ NET (LOSS) INCOME ($19) $37 ($5) $30 ====== ====== ====== ====== Per share data: Basic (loss) earnings per share ($0.01) $0.01 $0.00 $0.01 ====== ====== ====== ====== Diluted (loss) earnings per share ($0.01) $0.01 $0.00 $0.01 ====== ====== ====== ====== Shares used in computing net (loss) earnings per share: Basic 2,593 2,595 2,593 2,631 Diluted 2,593 2,595 2,593 2,631 See Accompanying Notes to Consolidated Financial Statements MICROWAVE FILTER COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 2010 AND 2009 (Unaudited) (Amounts in thousands) Six months ended March 31 2010 2009 Cash flows from operating activities: Net (loss) income $ (5) $ 30 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 47 41 Change in assets and liabilities: Accounts receivable (147) (79) Inventories 1 (13) Prepaid expenses & other assets 6 (3) Accounts payable & accrued expenses 24 15 Customer deposits (6) 5 ----- ----- Net cash (used in) provided by operating activities (80) (4) ----- ----- Cash flows from investing activities: Capital expenditures (118) (87) ----- ----- Net cash (used in) provided by investing activities (118) (87) ----- ----- Cash flows from financing activities: Purchase of treasury stock 0 (154) ----- ----- Net cash (used in) provided by financing activities 0 (154) ----- ----- (Decrease) increase in cash and cash equivalents (198) (245) Cash and cash equivalents at beginning of period 1,476 1,417 ----- ----- Cash and cash equivalents at end of period $1,278 $1,172 ===== ===== See Accompanying Notes to Consolidated Financial Statements MICROWAVE FILTER COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2010 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-Q and Regulation S-K. 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 six month period ended March 31, 2010 are not necessarily indicative of the results that may be expected for the year ended September 30, 2010. 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, 2009. 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) March 31, 2010 September 30, 2009 Raw materials and stock parts $494 $500 Work-in-process 34 24 Finished goods 75 80 ---- ---- $603 $604 ==== ==== The Company's reserve for obsolescence equaled $401,321 at March 31, 2010 and September 30, 2009. Note 4. Income Taxes The Company accounts for income taxes under FASB ASC 740-10 (Prior Authoritative Literature: Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes). 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. The Company adopted FASB ASC 740-10 (Prior Authoritative Literature: FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109 (FIN 48) as of October 1, 2007. FASB ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax position taken or expected to be taken on a tax return. Additionally, it provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. No adjustments were required upon adoption. Note 5. Legal Matters The State of New York Workers' Compensation Board has commenced an action against Microwave Filter Company, Inc. to recover for an underfunded self insured program that Microwave Filter Company, Inc. participated in. Due to the relatively short period of time Microwave Filter Company, Inc. participated in the program and the limited amount of potential exposure, we do not expect the resolution of this action will have a material adverse effect on our financial condition, results of operations or cash flows. Note 6. Recent Pronouncements In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06), which amends ASC 820, Fair Value Measurements (ASC 820) to add new requirements for disclosures about significant transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements. ASU 2010-06 also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. Further, ASU 2010-06 amends guidance on employers' disclosures about postretirement benefit plan assets under Subtopic 20 of ASC 715, Compensation - Retirement Benefits (ASC 715) to require that disclosures be provided by classes of assets instead of by major categories of assets. This ASU became effective for the Company on January 1, 2010, except for the requirement to provide Level 3 activity of purchases, sales, issuances and settlements on a gross basis, which will be effective for the Company on January 1, 2011. The adoption of this pronouncement did not have an impact on the Company's financial statements. Note 7. Fair Value of Financial Instruments The carrying values of the Company cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of those instruments. The Company currently does not trade in or utilize derivative financial instruments. 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. 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, 2009 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 FASB ASC 740-10 (Prior Authoritative Literature: Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes). 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 MARCH 31, 2010 vs. THREE MONTHS ENDED MARCH 31, 2009 The following table sets forth the Company's net sales by major product group for the three months ended March 31, 2010 and 2009. Product group (in thousands) Fiscal 2010 Fiscal 2009 Microwave Filter (MFC): Cable TV $ 296 $ 406 RF/Microwave 406 394 Satellite 350 392 Broadcast TV 42 30 Niagara Scientific (NSI) 0 1 ------ ------ Total $1,094 $1,223 ====== ====== Sales backlog at 3/31 $ 679 $ 285 ====== ====== Net sales for the three months ended March 31, 2010 equaled $1,093,697, a decrease of $129,704 or 10.6%, when compared to net sales of $1,223,401 for the three months ended March 31, 2009. MFC's Cable TV product sales decreased $110,537 or 27.2% to $295,576 for the three months ended March 31, 2010 when compared to Cable TV product sales of $406,113 during the same period last year. Management continues to project a decrease in demand for Cable TV products due to the shift from analog to digital television. Due to the inherent nature of digital modulation versus analog modulation, fewer filters will be required. The Company has developed filters for digital television and there will still be requirements for analog filters for limited applications in commercial and private cable systems. The demand for these filters is unknown at this time but is expected to decline. MFC's RF/Microwave product sales increased $11,845 or 3% to $405,524 for the three months ended March 31, 2010 when compared to RF/Microwave product sales of $393,679 during the same period last year. MFC's RF/Microwave products are sold primarily to original equipment manufacturers (OEMs) that serve the mobile radio, commercial communications and defense electronics markets. The Company continues to invest in production engineering and infrastructure development to penetrate OEM (Original Equipment Manufacturer) market segments as they become popular. MFC is concentrating its technical resources and product development efforts toward potential high volume customers as part of a concentrated effort to provide substantial long-term growth. MFC's Satellite product sales decreased $42,497 or 10.8% to $349,928 for the three months ended March 31, 2010 when compared to Satellite product sales of $392,425 during the same period last year. The decrease can be attributed to a decrease 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 attributes the decrease in demand to the global economic conditions. MFC's Broadcast TV/Wireless Cable product sales increased $12,589 or 42.3% to $42,384 for the three months ended March 31, 2010 when compared to sales of $29,795 during the same period last year. The increase can be attributed to an increase in demand for UHF Broadcast products which are primarily sold to system integrators for rural communities. MFC's sales order backlog equaled $679,401 at March 31, 2010 compared to sales order backlog of $389,684 at December 31, 2009. 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 87% of the total sales order backlog at March 31, 2010 is scheduled to ship by September 30, 2010. Gross profit for the three months ended March 31, 2010 equaled $362,147, a decrease of $53,546 or 12.9%, when compared to gross profit of $415,693 for the three months ended March 31, 2009. The decrease in gross profit can primarily be attributed to the lower sales volume this year when compared to the same period last year. As a percentage of sales, gross profit equaled 33.1% for the three months ended March 31, 2010 compared to 34.0% for the three months ended March 31, 2009. Selling, general and administrative (SGA) expenses for the three months ended March 31, 2010 equaled $383,271, an increase of $383 or 0.1%, when compared to SG&A expenses of $382,888 for the three months ended March 31, 2009. As a percentage of sales, SGA expenses increased to 35.0% for the three months ended March 31, 2010 compared to 31.3% for the three months ended March 31, 2009 primarily due to the lower sales volume this year when compared to the same period last year. The Company recorded a loss from operations of $21,124 for the second quarter ended March 31, 2010 compared to income from operations of $32,805 for the three months ended March 31, 2009. The decrease in operating income can primarily be attributed to the lower sales volume this year when compared to the same period last year. Other income for the three months ended March 31, 2010 equaled $1,896, a decrease of $2,437 when compared to other income of $4,333 for the three months ended March 31, 2009. Other income is primarily interest income earned on invested cash balances. The decrease in other income can primarily be attributed to the decrease in invested cash balances and lower market interest rates when compared to last year. Other income may fluctuate based on market interest rates and levels of invested cash balances. The provision (benefit) for income taxes equaled $0 for the three months ended March 31, 2010 and March 31, 2009. Any benefit for losses has been subject to a valuation allowance since the realization of the deferred tax benefit is not considered more likely than not. SIX MONTHS ENDED MARCH 31, 2010 vs. SIX MONTHS ENDED MARCH 31, 2009 The following table sets forth the Company's net sales by major product group for the six months ended March 31, 2010 and 2009. Product group (in thousands) Fiscal 2010 Fiscal 2009 Microwave Filter (MFC): Cable TV $ 701 $ 827 RF/Microwave 684 680 Satellite 722 881 Broadcast TV 119 80 Niagara Scientific (NSI) 3 5 ------ ------ Total $2,229 $2,473 ====== ====== Sales backlog at 3/31 $ 679 $ 285 ====== ====== Net sales for the six months ended March 31, 2010 equaled $2,228,755, a decrease of $244,349 or 9.9%, when compared to net sales of $2,473,104 for the six months ended March 31, 2009. MFC's Cable TV product sales decreased $125,837 or 15.2% to $701,515 for the six months ended March 31, 2010 when compared to Cable TV product sales of $827,352 during the six months ended March 31, 2009. Management continues to project a decrease in demand for Cable TV products due to the shift from analog to digital television. Due to the inherent nature of digital modulation versus analog modulation, fewer filters will be required. The Company has developed filters for digital television and there will still be requirements for analog filters for limited applications in commercial and private cable systems. The demand for these filters is unknown at this time but is expected to decline. MFC's RF/Microwave product sales increased $3,748 or 0.6% to $683,520 for the six months ended March 31, 2010 when compared to RF/Microwave product sales of $679,772 during the same period last year. MFC's RF/Microwave products are sold primarily to original equipment manufacturers (OEMs) that serve the mobile radio, commercial communications and defense electronics markets. The Company continues to invest in production engineering and infrastructure development to penetrate OEM (Original Equipment Manufacturer) market segments as they become popular. MFC is concentrating its technical resources and product development efforts toward potential high volume customers as part of a concentrated effort to provide substantial long-term growth. MFC's Satellite product sales decreased $159,596 or 18.1% to $721,727 for the six months ended March 31, 2010 when compared to satellite product sales of $881,323 during the same period last year. The decrease can be attributed to a decrease 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 attributes the decrease in sales to the global economic conditions. MFC's Broadcast TV/Wireless Cable product sales increased $39,236 or 49.2% to $118,915 for the six months ended March 31, 2010 when compared to sales of $79,679 during the same period last year. The increase can be attributed to an increase in demand for UHF Broadcast products which are primarily sold to system integrators for rural communities. MFC's sales order backlog equaled $679,401 at March 31, 2010 compared to sales order backlog of $479,861 at September 30, 2009. 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 87% of the total sales order backlog at March 31, 2010 is scheduled to ship by September 30, 2010. Gross profit for the six months ended March 31, 2010 equaled $782,746, a decrease of $61,955 or 7.3%, when compared to gross profit of $844,701 for the six months ended March 31, 2009. The decrease can primarily be attributed to the lower sales volume this year when compared to the same period last year. As a percentage of sales, gross profit equaled 35.1% for the six months ended March 31, 2010 compared to 34.2% for the six months ended March 31, 2009. The increase in gross profit as a percentage of sales can be attributed to lower direct material costs as a percentage of sales this year when compared to the same period last year primarily due to product sales mix. SG&A expenses for the six months ended March 31, 2010 equaled $791,641, a decrease of $33,486 or 4.1%, when compared to SG&A expenses of $825,127 for the six months ended March 31, 2009. As a percentage of sales, SGA expenses increased to 35.5% for the six months ended March 31, 2010 compared to 33.4% for the six months ended March 31, 2009 primarily due to the lower sales volume this year when compared to the same period last year. The Company recorded a loss from operations of $8,895 for the six months ended March 31, 2010 compared to income from operations of $19,574 for the six months ended March 31, 2009. The decrease can primarily be attributed to the lower sales volume this year when compared to the same period last year. Other income for the six months ended March 31, 2010 equaled $3,751, a decrease of $6,220, when compared to other income of $9,971 for the six months ended March 31, 2009. Other income is primarily interest income earned on invested cash balances. The decrease in other income can primarily be attributed to the decrease in invested cash balances and lower market interest rates when compared to last year. Other income may fluctuate based on market interest rates and levels of invested cash balances. The provision (benefit) for income taxes equaled $0 for the six months ended March 31, 2010 and March 31, 2009. Any benefit for losses has 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 March 31, 2010 and 2009, 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 Mar. 31, 2010 Sep. 30, 2009 Cash & cash equivalents $1,278,064 $1,476,318 Working capital $1,806,510 $1,882,933 Current ratio 4.16 to 1 4.41 to 1 Long-term debt $ 0 $ 0 Cash and cash equivalents decreased $198,254 to $1,278,064 at March 31, 2010 when compared to cash and cash equivalents of $1,476,318 at September 30, 2009. The decrease was a result of $80,086 in net cash used in operating activities, $117,787 in net cash used for capital expenditures and $381 in net cash used to purchase treasury stock. The increase in accounts receivable of $147,775 at March 31, 2010 when compared to September 30, 2009 can primarily be attributed to the increase in shipments during the month of March 2010 when compared to the month of September 2009. At March 31, 2010, 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. 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-Q includes 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 2009 Annual Report and Form 10-K for the fiscal year ended September 30, 2009 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 six months ended March 31, 2010. For a detailed discussion of market risk, see our Annual Report on Form 10-K for the fiscal year ended September 30, 2009, Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk. ITEM 4. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness 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 amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures were effective as of the end of the period covered by this report. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There have been no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a- 15(f) and 15d-15(f) under the exchange act. Under the supervision and with the participation of the Company's management, including our principal executive officer and principal financial officer, the Company conducted an evaluation of its internal control over financial reporting based on criteria established in the framework in "Internal Control-Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, the Company's management concluded and certifies that its internal control over financial reporting was effective as of March 31, 2010. This Quarterly 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 temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this Quarterly Report. PART II - OTHER INFORMATION Item 1. Legal Proceedings The State of New York Workers' Compensation Board has commenced an action against Microwave Filter Company, Inc. to recover for an underfunded self insured program that Microwave Filter Company, Inc. participated in. Due to the relatively short period of time Microwave Filter Company, Inc. participated in the program and the limited amount of potential exposure, we do not expect the resolution of this action will have a material adverse effect on our financial condition, results of operations or cash flows. Item 1A. Risk Factors Not applicable. Item 2. Changes in Securities None during this reporting period. Item 3. Defaults Upon Senior Securities The Company has no senior securities. Item 4. (Removed and Reserved) Item 5. Other Information None. Item 6. Exhibits 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 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. May 13, 2010 Carl F. Fahrenkrug (Date) -------------------------- Carl F. Fahrenkrug Chief Executive Officer May 13, 2010 Richard L. Jones (Date) -------------------------- Richard L. Jones Chief Financial Officer EX-31 3 ex-31.txt EXHIBIT 31 Exhibit 31.1 RULE 13a-14(a) CERTIFICATION I, Carl F. Fahrenkrug, certify that: 1. I have reviewed this report on Form 10-Q of Microwave Filter Company, Inc.; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f))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 report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) 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 d) disclosed in this 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 registrant's internal control over financial reporting. Date: May 13, 2010 /s/ Carl F. Fahrenkrug Carl F. Fahrenkrug Chief Executive Officer Exhibit 31.2 RULE 13a-14(a) CERTIFICATION I, Richard L. Jones, certify that: 1. I have reviewed this report on Form 10-Q of Microwave Filter Company, Inc.; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f))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 report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) 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 d) disclosed in this 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 registrant's internal control over financial reporting. Date: May 13, 2010 /s/ Richard L. Jones Richard L. Jones Chief Financial Officer 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-Q of the Company for the period ended March 31, 2010 (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: May 13, 2010 /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-Q of the Company for the period ended March 31, 2010 (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: May 13, 2010 /s/ Richard L. Jones Richard L. Jones Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----