UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2010

OR

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

For the transition period from              to             

Commission file number 000-50812

MULTI-FINELINE ELECTRONIX, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-3947402
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3140 East Coronado Street

Anaheim, CA 92806

(Address of principal executive offices, Zip Code)

(714) 238-1488

(Registrant’s telephone number, including area code)

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 (§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  ¨

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

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

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

The number of outstanding shares of the registrant’s Common Stock, $0.0001 par value, as of July 31, 2010 was 24,909,531.

Multi-Fineline Electronix, Inc.

Index

PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)		1
		Condensed Consolidated Balance Sheets	1
		Condensed Consolidated Statements of Operations	2
		Condensed Consolidated Statements of Cash Flows	3
		Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		22
Item 4.	Controls and Procedures		23
PART II. OTHER INFORMATION
Item 1A.	Risk Factors		24
Item 2.	Unregistered sales of Equity Securities and Use of Proceeds		33
Item 5.	Other Information		33
Item 6.	Exhibits		34
	Signatures		37

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

MULTI-FINELINE ELECTRONIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)

	June 30, 2010		September 30, 2009
	(unaudited)
ASSETS
Cash and cash equivalents	$	150,257	$	139,721
Short-term investments		12,260		11,812
Accounts receivable, net of allowances of $1,555 and $2,152 at June 30, 2010 and September 30, 2009, respectively		113,988		129,270
Inventories		54,336		50,285
Deferred taxes		3,506		3,528
Income taxes receivable		4,656		6,612
Assets held for sale		2,958		2,958
Other current assets		2,990		4,377
Total current assets		344,951		348,563
Property, plant and equipment, net		164,134		150,099
Land use rights		3,698		3,103
Deferred taxes		3,584		3,688
Goodwill		7,537		7,537
Intangible assets, net		4,685		5,705
Other assets		10,601		7,235
Total assets	$	539,190	$	525,930
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	121,273	$	122,524
Accrued liabilities		23,050		20,603
Income taxes payable		2,539		3,400
Total current liabilities		146,862		146,527
Notes payable		—		10,852
Other liabilities		11,600		9,563
Total liabilities		158,462		166,942
Commitments and contingencies (Note 2)
Stockholders’ equity
Preferred stock, $0.0001 par value, 5,000,000 and 5,000,000 shares authorized at June 30, 2010 and September 30, 2009, respectively; 0 and 0 shares issued and outstanding at June 30, 2010 and September 30, 2009, respectively		—		—
Common stock, $0.0001 par value; 100,000,000 and 100,000,000 shares authorized at June 30, 2010 and September 30, 2009, respectively; 25,227,935 and 25,175,976 shares issued and outstanding at June 30, 2010 and September 30, 2009, respectively		2		2
Additional paid-in capital		113,587		116,740
Retained earnings		244,691		221,054
Accumulated other comprehensive income		22,448		21,192
Total stockholders’ equity		380,728		358,988
Total liabilities and stockholders’ equity	$	539,190	$	525,930

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

MULTI-FINELINE ELECTRONIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Share and Per Share Data)

(unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2010			2009			2010			2009
Net sales	$	181,049		$	174,533		$	564,623		$	565,259
Cost of sales		158,808			149,538			483,606			482,524
Gross profit		22,241			24,995			81,017			82,735
Operating expenses:
Research and development		4,442			1,478			10,738			3,890
Sales and marketing		5,088			5,176			17,627			16,581
General and administrative		4,834			6,053			15,610			19,371
Impairment and restructuring		3,328			—			5,265			127
Total operating expenses		17,692			12,707			49,240			39,969
Operating income		4,549			12,288			31,777			42,766
Other income (expense), net:
Interest income		168			114			370			751
Interest expense		(121	)		(282	)		(667	)		(498	)
Other income (expense), net		242			(155	)		739			(1,467	)
Income before income taxes		4,838			11,965			32,219			41,552
Provision for income taxes		(2,456	)		(289	)		(8,582	)		(7,040	)
Net income	$	2,382		$	11,676		$	23,637		$	34,512
Net income per share:
Basic	$	0.09		$	0.47		$	0.93		$	1.38
Diluted	$	0.09		$	0.46		$	0.92		$	1.36
Shares used in computing net income per share:
Basic		25,417,674			24,926,606			25,379,381			25,002,300
Diluted		25,762,862			25,391,536			25,794,568			25,369,850

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

MULTI-FINELINE ELECTRONIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(unaudited)

	Nine Months Ended June 30,
	2010			2009
Cash flows from operating activities
Net income	$	23,637		$	34,512
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		34,259			30,351
Provision for doubtful accounts and returns		3,656			230
Deferred taxes		141			115
Stock-based compensation expense		4,294			2,592
Asset impairments		3,475			1,378
Gain on disposal of equipment		(289	)		(192	)
Changes in operating assets and liabilities:
Accounts receivable		11,544			45,113
Inventories		(3,411	)		28,393
Due from affiliates, net		(326	)		(2,330	)
Other current assets		(778	)		(550	)
Other assets		(1,364	)		(793	)
Accounts payable		(16,749	)		(42,447	)
Accrued liabilities		3,869			(4,072	)
Income taxes payable		1,185			(3,576	)
Other current liabilities		292			38
Other liabilities		2,039			(3,543	)
Net cash provided by operating activities		65,474			85,219
Cash flows from investing activities
Sales of investments		6,196			50
Purchases of investments		(4,996	)		—
Purchases of property and equipment		(39,092	)		(13,847	)
Proceeds from sale of equipment		1,453			784
Change in restricted cash, net		—			148
Acquisition of business, net of cash acquired		—			(872	)
Net cash used in investing activities		(36,439	)		(13,737	)
Cash flows from financing activities
Proceeds from exercise of stock options		1,969			1,869
Repayments of long-term debt		(11,144	)		—
Repurchase of common stock		(8,277	)		(8,410	)
Tax withholdings for net share settlement of equity awards		(1,248	)		—
Net cash used in financing activities		(18,700	)		(6,541	)
Effect of exchange rate changes on cash		201			(25	)
Net increase in cash		10,536			64,916
Cash and cash equivalents at the beginning of the period		139,721			62,090
Cash and cash equivalents at the end of the period	$	150,257		$	127,006
Non-cash investing activities
Purchases of property and equipment	$	13,786		$	4,151
Non-cash financing activities
Issuance of notes payable in connection with acquisition	$	—		$	10,377

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

1. Description of Business

Multi-Fineline Electronix, Inc. (“MFLEX” or the “Company”) was incorporated in 1984 in the State of California and reincorporated in the State of Delaware in June 2004. The Company is primarily engaged in the engineering, design and manufacture of flexible printed circuit boards along with related component assemblies.

Affiliates and subsidiaries of WBL Corporation Limited (collectively “WBL”), a Singapore company, beneficially owned approximately 59% of the Company’s outstanding common stock as of June 30, 2010 and September 30, 2009, which provides WBL with control over the outcome of stockholder votes.

2. Basis of Presentation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company has two wholly owned subsidiaries located in China: MFLEX Suzhou Co., Ltd., (“MFC”) formerly known as Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. (“MFC2”) and into which Multi-Fineline Electronix (Suzhou) Co., Ltd (“MFC1”) was recently merged and MFLEX Chengdu Co., Ltd. (“MFLEX Chengdu”); one located in the Cayman Islands: M-Flex Cayman Islands, Inc. (“MFCI”); one located in Singapore: Multi-Fineline Electronix Singapore Pte. Ltd. (“MFLEX Singapore”); one located in Malaysia: Multi-Fineline Electronix Malaysia Sdn. Bhd. (“MFM”); one located in Arizona: Aurora Optical, Inc. (“Aurora Optical”); and one located in Cambridge, England: MFLEX UK Limited, formerly known as Pelikon Limited (“MFE”). All significant intercompany transactions and balances have been eliminated in consolidation.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S.”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s 2009 Annual Report on Form 10-K. The financial information presented in the accompanying statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the periods indicated. All such adjustments are of a normal recurring nature. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the U.S.

Investments

As of June 30, 2010, the Company’s short-term investments included United States treasury bills with an original maturity of more than three months and auction rate securities (“ARS”). As of September 30, 2009, the Company’s short-term investments included certificates of deposit and ARS.

On September 24, 2009, the Company accepted an offer from UBS AG (“UBS”), the fund manager with whom the Company holds its ARS, pursuant to which UBS issued the Company Series C-2 Auction Rate Securities Rights (the “Rights”), which allowed MFLEX to sell its ARS to UBS at par value during the period beginning June 30, 2010 and ending July 2, 2012. Of the $13,300 of the ARS originally purchased, $6,100 were redeemed at par prior to the initiation of the sale pursuant to the Rights. The Company initiated the sale of the remaining ARS on June 30, 2010 at par, and the sale was completed on July 1, 2010 in the amount of $7,200, leaving a balance of $0 related to ARS in July 2010.

4

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments as of the most recent balance sheet date, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short maturities.

Inventories

Inventories, net of related allowances, are comprised of the following:

	June 30,      2010		September 30, 2009
Raw materials and supplies	$	20,373	$	25,623
Work-in-progress		18,201		18,244
Finished goods		15,762		6,418
	$	54,336	$	50,285

Property, Plant and Equipment

Property, plant and equipment, net, are comprised of the following:

	June 30,     2010			September 30, 2009
Land	$	3,730		$	3,730
Building		34,939			32,452
Machinery and equipment		201,320			192,815
Computers		11,977			7,335
Leasehold improvements		16,514			19,020
Construction-in-progress		37,894			14,506
	$	306,374		$	269,858
Accumulated depreciation		(142,240	)		(119,759	)
	$	164,134		$	150,099

Depreciation expense for the three and nine months ended June 30, 2010 was $9,956 and $32,391, and was $9,739 and $28,824 for the three and nine months ended June 30, 2009, respectively.

Included in other current assets as of June 30, 2010 and September 30, 2009 are prepaid software licenses that are short-term in nature. Amortization of software licenses for the three and nine months ended June 30, 2010 was $204 and $794, and was $340 and $755 for the three and nine months ended June 30, 2009, respectively.

5

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Product Warranty Accrual

The Company warrants its products from two to 36 months. The standard warranty requires the Company to replace defective products returned to the Company at no cost to the customer. The Company records an estimate for warranty related costs at the time revenue is recognized based on historical costs incurred for warranty expense and historical return rates. The warranty accrual is included in accrued liabilities in the accompanying condensed consolidated balance sheets.

Changes in the product warranty accrual for the three months ended June 30, 2010 and 2009, respectively, were as follows:

	Balance at April 1		Warranty Expenditures			(Benefit from) Provision for Estimated Warranty Cost			Balance at June 30
Fiscal 2010	$	609	$	(198	)	$	(62	)	$	349
Fiscal 2009	$	1,581	$	(1,063	)	$	955		$	1,473
Changes in the product warranty accrual for the nine months ended June 30, 2010 and 2009, respectively, were as follows:
	Balance at October 1		Warranty Expenditures			Provision for  Estimated Warranty Cost			Balance at June 30
Fiscal 2010	$	541	$	(1,647	)	$	1,455		$	349
Fiscal 2009	$	2,601	$	(3,898	)	$	2,770		$	1,473

Comprehensive Income (Loss)

Total comprehensive income was $3,556 and $24,893 for the three and nine months ended June 30, 2010, and was $12,296 and $34,684 for the three and nine months ended June 30, 2009, respectively. The difference between net income and comprehensive income (loss) is summarized in the following table:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2010		2009		2010		2009
Net income	$	2,382	$	11,676	$	23,637	$	34,512
Other comprehensive income (loss):
Translation adjustment		1,174		109		1,256		(339	)
Unrealized gain on auction rate securities		—		511		—		511
Other comprehensive income		1,174		620		1,256		172
Total comprehensive income	$	3,556	$	12,296	$	24,893	$	34,684

Net Income Per Share—Basic and Diluted

Basic earnings per share are computed by dividing net income by the weighted-average number of common shares outstanding. In computing diluted earnings per share, the weighted-average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities. The impact of potentially dilutive securities is determined using the treasury stock method.

6

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

The following table presents a reconciliation of basic and diluted shares:

	Three Months Ended June 30,		Nine Months Ended June 30,
	2010	2009	2010	2009
Basic weighted-average number of common shares outstanding	25,417,674	24,926,606	25,379,381	25,002,300
Dilutive effect of potential common shares	345,188	464,930	415,187	367,550
Diluted weighted-average number of common and potential common shares outstanding	25,762,862	25,391,536	25,794,568	25,369,850
Potential common shares excluded from the per share computations as their inclusion would be anti-dilutive	174,400	83,129	148,293	294,921

Commitments and Contingencies

Litigation

The Company is involved in litigation from time to time in the ordinary course of business. Management does not believe the outcome of any currently pending matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Other Commitments

As of June 30, 2010 and September 30, 2009, the Company had outstanding purchase and other commitments, primarily related to capital projects at its various facilities, which totaled $52,638 and $49,495, respectively.

Pursuant to the laws applicable to the Peoples’ Republic of China’s Foreign Investment Enterprises, the Company’s two wholly owned subsidiaries in China, MFC and MFLEX Chengdu, are restricted from paying cash dividends on 10% of after-tax profit, subject to certain cumulative limits. These restrictions on net income as of June 30, 2010 and September 30, 2009 were $13,209 and $11,056, respectively.

Significant Concentrations

Net sales to original equipment manufacturer (“OEM”) customers that constitute greater than 10% of the Company’s net sales, inclusive of net sales made to their designated sub-contractors, as a percentage of total Company sales, are presented below:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2010		2009		2010		2009
OEM C	46	%	35	%	47	%	34	%
OEM D	38	%	50	%	39	%	43	%

During the three and nine months ended June 30, 2010 and 2009, neither OEM A, OEM B, nor OEM E constituted 10% or more of total Company sales, and thus were omitted from the table above.

During the three months ended June 30, 2010 and 2009, 70% and 77% of net sales, respectively, were derived from sales for products or services into the wireless industry and 28% and 20% of net sales, respectively, were derived from sales for products into the consumer electronics industry. During the nine months ended June 30, 2010 and 2009, 67% and 72% of net sales, respectively, were derived from sales for products or services into the wireless industry and 30% and 24% of net sales, respectively, were derived from sales for products into the consumer electronics industry. Both of these industries are subject to economic cycles and have experienced periods of slowdown in the past.

3. Related Party Transactions

During the three and nine months ended June 30, 2010 and 2009, the Company has recognized revenue and recorded purchases from the following affiliated companies: (a) MFS Technology Pte. Ltd. (“MFS”); and (b) MFS Technologies

7

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

(Hunan) Co. Ltd., a subsidiary of MFS. As discussed in Note 1, WBL owns 59% of the Company’s common stock as of June 30, 2010 and September 30, 2009. MFS is an indirect subsidiary of WBL.

Sales to and purchases from affiliates comprise the following:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2010		2009		2010		2009
Sales to affiliates:
MFS Technologies (Hunan) Co. Ltd.	$	—	$	231	$	23	$	335
Purchases from affiliates:
MFS	$	—	$	883	$	257	$	4,576

Rent expense for the three and nine months ended June 30, 2010 and 2009 included related-party payments to various WBL subsidiaries. These amounts were $91 and $347 for the three and nine months ended June 30, 2010, and $126 and $380 for the three and nine months ended June 30, 2009, respectively.

4. Goodwill and Intangible Assets

Goodwill

The Company records the excess of an acquisition’s purchase price over the fair value of the identified assets and liabilities as goodwill. As of June 30, 2010 and September 30, 2009, the carrying amount of goodwill was $7,537.

Intangible Assets

Amortization of intangible assets was $340 and $1,020 for the three and nine months ended June 30, 2010 and was $340 and $755 for the three and nine months ended June 30, 2009, respectively. Estimated future annual pre-tax amortization expense of intangible assets as of June 30, 2010, over the estimated useful life of five years is as follows:

Fiscal Years
2010	$	340
2011		1,360
2012		1,360
2013		1,360
2014		265
Total	$	4,685

5. Notes Payable

On December 10, 2008, and in connection with the acquisition of Pelikon Limited, the Company issued unsecured promissory notes to the Sellers (the “Sellers Promissory Notes”) totaling $5,520 and to the Lenders (the “Lender Promissory Notes”) totaling $4,857. The Sellers Promissory Notes and Lender Promissory Notes accrued interest at the rate of six percent per year, and the aggregate principal amount and any accrued interest was to be due and payable on December 9, 2010. The Sellers Promissory Notes were subject to further reduction in the event that MFLEX Singapore or any of its affiliates is entitled to recover damages from the Sellers pursuant to the terms of the Share Purchase Agreement between the parties. In March 2010, the Company repaid the entire balance of the Sellers Promissory Notes and Lender Promissory Notes, plus the accrued interest thereon.

Notes payable consisted of the following:

Balance at September 30, 2009	$	10,852
Accrued interest		292
Repayments		(11,144	)
Balance at June 30, 2010	$	—

8

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

6. Lines of Credit

In February 2009, the Company and MFLEX Singapore (each, a “Borrower,” and collectively, the “Borrowers”) entered into a Loan and Security Agreement (the “Agreement”) with Bank of America, N.A., as a lender and agent (“BOA”), for a senior revolving credit facility (the “Facility”) in an amount up to $30,000. Amounts outstanding under the Facility will bear interest at a rate equal to LIBOR or SIBOR/Singapore Swap Rate, as Borrower may elect from time to time, plus the Applicable Margin (as defined in the Agreement).

In July 2009, MFC1 and MFC2 entered into credit line agreements with Shanghai Pudong Development Bank (“SPDB”), which provide for two borrowing facilities, for 75,000 Chinese Renminbi (“RMB”) each ($11,044 each at June 30, 2010). These lines of credit terminated in July 2010.

In January 2010, MFC1 and MFC2 entered into credit line agreements with Bank of China (“BC”) providing for two lines of credit for 100,000 RMB each ($14,726 each at June 30, 2010). These lines of credit terminated in July 2010.

In March, 2010, MFC1 and MFC2 entered into credit line agreements with China Construction Bank, Suzhou Industry Park Sub-Branch (“CCB”), which provide for two borrowing facilities, for 150,000 RMB each ($22,088 each at June 30, 2010). The lines of credit will mature in March 2013. Interest on the credit line agreements for U.S. dollar lending will be calculated as LIBOR plus a mutually determined number of basis points, and may be adjusted once per quarter for changes in LIBOR. The basis points will be determined according to the U.S. dollar lending cost in the China interbank borrowing market. For RMB lending, the interest rate is 90% of the basic rate issued by the People’s Bank of China (“PBOC”) on the loan start date, and the basic rate may be adjusted once per year if the PBOC adjusts the basic rate.

See Note 13 for information related to the Company’s new credit line entered into with Agricultural Bank of China subsequent to the balance sheet date.

A summary of the lines of credit is as follows:

	Amounts Available at				Amounts Outstanding at
	June 30,      2010		September 30, 2009		June 30,      2010		September  30, 2009
Line of credit (BOA)	$	27,192	$	24,415	$	—	$	—
Lines of credit (BC)		29,452		29,283		—		—
Lines of credit (SPDB)		22,088		21,962		—		—
Lines of credit (CCB)		44,176		—		—		—
	$	122,908	$	75,660	$	—	$	—

As of June 30, 2010, the Company is in compliance with all covenants under the lines of credit.

7. Segment information

Based on the evaluation of the Company’s internal financial information, management believes that the Company operates in one reportable segment which is primarily engaged in the engineering, design and manufacture of flexible circuit boards and component assemblies. The Company operates in four geographical areas: United States, China, Singapore and Other (which includes Malaysia and the United Kingdom). Net sales for the three and nine months ended June 30, 2010 and 2009 reflect the restructuring of certain business functions to better align these activities with the Company’s Asia operations. Net sales are presented based on the country in which the sales originate, which is where the legal entity is domiciled. The financial results of the Company’s geographic segments are presented on a basis consistent with the consolidated financial statements. Segment net sales and assets amounts include intra-company product sales transactions and subsidiary investment amounts, respectively, which are offset in the elimination line.

9

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Financial information by geographic segment is as follows:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2010			2009			2010			2009
Net sales
United States	$	10,718		$	24,672		$	56,582		$	235,136
China		182,104			115,439			474,476			381,769
Singapore		181,072			146,923			531,755			320,413
Other		121			973			574			1,122
Eliminations		(192,966	)		(113,474	)		(498,764	)		(373,181	)
Total	$	181,049		$	174,533		$	564,623		$	565,259
Operating income (loss)
United States	$	(3,125	)	$	(4,859	)	$	(10,425	)	$	5,635
China		10,659			7,317			21,045			20,159
Singapore		2,074			12,168			32,158			21,563
Other		(4,536	)		(1,794	)		(10,505	)		(4,268	)
Eliminations		(523	)		(544	)		(496	)		(323	)
Total	$	4,549		$	12,288		$	31,777		$	42,766
				June 30, 2010			September 30, 2009
Total assets
United States				$	248,105		$	281,834
China					244,510			174,114
Singapore					225,400			235,634
Other					11,375			14,283
Eliminations					(190,200	)		(179,935	)
Total				$	539,190		$	525,930

8. Equity Incentive Plans

Stock Options

Stock option activity for the nine months ended June 30, 2010 under the Company’s 2004 Stock Incentive Plan (the “2004 Plan”) is summarized as follows:

	Number of Shares		Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Remaining Contractual Life
Options outstanding at September 30, 2009	546,213		$	10.97
Granted	—			—
Exercised	(212,937	)		10.08
Forfeited	—			—
Options outstanding and exercisable at June 30, 2010	333,276		$	11.55	$	4,470	3.9
Vested and expected to vest at June 30, 2010	333,276		$	11.55	$	4,470	3.9

The Company recognized no compensation costs related to stock options during the three and nine months ended June 30, 2010 and $25 and $288 during the three and nine months ended June 30, 2009, respectively. The aggregate intrinsic value of stock options exercised was $887 and $3,218 during the three and nine months ended June 30, 2010, and was $2,835 and $5,176 during the three and nine months ended June 30, 2009, respectively. No unearned compensation existed as of June 30, 2010 related to nonvested stock options.

10

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Service and Performance-Based Restricted Stock Units

During the three and nine months ended June 30, 2010, the Company granted service-based restricted stock units (“RSU” or “RSUs”) equal to 3,600 and 153,991 shares, respectively, of the Company’s common stock. These grants were made under the 2004 Plan to certain employees (including executive officers) and directors at no cost to such individual. Each RSU represents one hypothetical share of the Company’s common stock, without voting or dividend rights. The RSUs granted to employees vest over a period of three years with one-third vesting on each of the anniversary dates of the grant date. Unearned compensation related to the RSUs is determined based on the fair value of the Company’s common stock on the date of grant and is amortized to expense over the vesting period using the straight-line method.

The Company also grants performance-based RSUs to certain employees (including executive officers) from time to time, under the 2004 Plan. For such performance-based RSUs, the Company records share-based compensation cost based on the grant-date fair value and the probability that the performance metrics will be achieved. At the end of each reporting period, the Company evaluates the probability that the performance-based RSUs will vest. If the Company determines that the vesting of any of the outstanding performance-based RSUs is not probable, the compensation expense related to those performance-based RSUs is reversed in the period in which this determination is made.

On November 16, 2009, the Company’s board of directors (the “Board”) or a committee thereof (in either event, the “Administrator”) approved the grant of 117,826 performance-based RSUs. These performance-based RSUs vest upon the achievement of defined performance objectives pertaining to each grant, with vesting to occur on or about November 30, 2012. As of June 30, 2010, the Company considers the vesting of these performance-based RSUs to be probable.

On June 11, 2008, the Board approved the grant of 22,000 performance-based RSUs. These performance-based RSUs vest upon the achievement of defined performance objectives pertaining to each grant, with vesting to occur between the date of grant and June 30, 2011. During fiscal 2009, 12,000 of these performance-based RSUs were deemed not probable of meeting the defined performance objectives. During the three months ended December 31, 2009, the Company determined that the vesting of the remaining 10,000 performance-based RSUs was not probable and reversed $148 of compensation expense. No changes in the probability of achievement of the performance objectives were noted during the three months ended June 30, 2010.

11

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

RSU activity for the nine months ended June 30, 2010 under the 2004 Plan is summarized as follows:

	Number of Shares		Weighted- Average Grant- Date Fair Value
Nonvested shares outstanding at September 30, 2009	473,824		$	17.18
Granted	271,817			25.94
Vested	(221,214	)		17.68
Forfeited	(21,334	)		22.53
Nonvested shares outstanding at June 30, 2010	503,093		$	21.48

The Company recognized compensation costs related to RSUs of $1,246 and $3,693 during the three and nine months ended June 30, 2010 and $701 and $2,288 during the three and nine months ended June 30, 2009, respectively. The weighted-average grant-date fair value of nonvested RSUs granted during the nine months ended June 30, 2010 and 2009 was $25.94 and $12.63, respectively. The weighted-average fair value of RSUs vested during the nine months ended June 30, 2010 and 2009 was $17.68 and $20.95, respectively. Unearned compensation of $7,593 existed as of June 30, 2010 related to nonvested RSUs, which will be recognized into expense over the weighted-average remaining contractual life of the nonvested RSUs of 1.4 years.

Stock Appreciation Rights

On November 16, 2009, the Administrator granted 154,940 stock appreciation rights (“SSAR” or “SSARs”) to be settled in the Company’s common stock (the “November Awards”), for certain employees (including executive officers) under the 2004 Plan. These November Awards will vest and be exercisable on November 16, 2012, and will expire on November 15, 2019. Each SSAR has a base appreciation amount that is equal to the closing price of a share of the Company’s common stock on each applicable grant date as reported on the NASDAQ Global Select Market. The Company’s SSARs are treated as equity awards and are measured using the initial compensation element of the award at the time of grant and the expense is recognized over the requisite service period (the vesting period). The grant date-fair value of the November Awards was estimated at $12.44 using the Black-Scholes valuation pricing model assuming a risk-free interest rate of 2.18%, zero expected dividends, expected volatility of 71.05% and an expected term of 3.0 years.

SSARs activity for the nine months ended June 30, 2010 under the 2004 Plan is summarized as follows:

	Number of Shares	Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Remaining Contractual Life
SSARs outstanding at September 30, 2009	140,342	$	15.85
Granted	154,940		25.96
Exercised	—		—
Forfeited	—		—
SSARs outstanding at June 30, 2010	295,282	$	21.16	$	1,349	9.1
Expected to vest at June 30, 2010	272,977	$	21.06	$	1,272	9.1

The Company recognized compensation costs related to SSARs of $320 and $712 during the three and nine months ended June 30, 2010 and $50 and $83 during the three and nine months ended June 30, 2009, respectively. No SSARs were exercised or were exercisable during the nine months ended June 30, 2010 and 2009. Unearned compensation as of June 30, 2010 was $1,850 related to nonvested SSARs, which will be recognized into expense over a weighted-average period of 1.9 years.

12

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

9. Share Repurchase Program

On December 5, 2008, the Board approved the establishment of a share repurchase program for up to 2,250,000 shares in the aggregate of the Company’s common stock on the open market. This amount represented approximately nine percent of the Company’s common stock outstanding as of June 30, 2010. Stock repurchases may be made from time to time, based on market conditions and other factors, including price, regulatory requirement and capital availability.

During fiscal 2010, the Company repurchased a total of 322,798 shares at a weighted-average purchase price of $25.64 per share, for a total value of $8,277 pursuant to established 10b5-1 plans. In June 2010, the Company retired all 322,798 common shares repurchased during fiscal 2010. The excess of the repurchase price over par value was booked as an adjustment to additional paid-in capital.

During fiscal 2009, the Company repurchased a total of 562,500 shares at a weighted-average purchase price of $14.95 per share, for a total value of $8,410 pursuant to an established 10b5-1 plan. In September 2009, the Company retired all 562,500 common shares in treasury repurchased during fiscal 2009. The excess of the repurchase price over par value was booked as an adjustment to additional paid-in capital.

As of June 30, 2010, 1,364,702 shares remained available to be repurchased under the Board approved share repurchase program.

10. Income Taxes

As of June 30, 2010 and September 30, 2009, the liability for income taxes associated with uncertain tax positions was $11,013 and $9,106, respectively. As of June 30, 2010 and September 30, 2009, these liabilities can be reduced by $4,821 and $4,715, respectively, from offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, state income taxes and timing adjustments. The net amount of $6,192 at June 30, 2010 and $4,391 at September 30, 2009, if recognized, would favorably affect the Company’s effective tax rate. The Company anticipates that there will be changes to the unrecognized tax benefit associated with uncertain tax positions due to the expiration of statutes of limitation, payment of tax on amended returns, audit settlements and other changes in reserves. However, due to the uncertainty regarding the timing of these events, a current estimate of the range of changes that may occur within the next twelve months cannot be made.

In June 2010, the Company committed to close its facility in Malaysia in order to move the related functions to China as part of its continuing cost reduction efforts. In connection with this restructuring, the Company recorded a non-cash charge to establish a valuation allowance of $303 against its Malaysian deferred tax assets. Based on an assessment of both positive and negative evidence when measuring the need for a valuation allowance, the Company determined that it is more likely than not that these deferred tax assets will not be realizable. Evidence such as the closure of facility in Malaysia represented sufficient negative evidence to require a valuation allowance. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support its reversal.

The Company currently enjoys tax incentives for certain of its Asian operations. One of the tax holidays was eliminated by taxing authorities due to a change in law. Certain Asian operations are subject to taxes at a rate of 10% of their profits and for the nine months ended June 30, 2010, the Company realized tax savings of $1,315 for these operations. However, the tax incentive may be challenged, modified or even eliminated by taxing authorities or changes in law.

11. Impairment and Restructuring

Malaysia

In June 2010, the Company committed to close its facility in Malaysia in order to move the related functions to China as part of its continuing cost reduction efforts. Based on the Company’s evaluation of the recoverability of impacted long-lived assets, a pre-tax asset impairment charge of $1,558 was recorded during the three months ended June 30, 2010, including $1,115 of machinery and equipment and $443 of leasehold improvements. The fair value of the long-lived assets was determined based on quoted market prices for similar assets. In addition, pre-tax one-time termination benefits of $304 and other restructuring-related charges of $36 were recorded during the three months ended June 30, 2010. The total amount expected to be incurred in connection with the closure of the facility in Malaysia was $2,400 as of June 30, 2010. See Note 13.

13

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

	Accruals		Non-Cash Charges		Total Charges
Malaysia:
Write-down of equipment to fair value	$	—	$	1,558	$	1,558
One-time termination benefits		304		—		304
Other		—		36		36
Total Malaysia charges	$	304	$	1,594	$	1,898

Anaheim

In February 2010, the Company committed to close one of its facilities in Anaheim as part of a strategic effort to move more functions, specifically low volume production and process research and development associated with the Company’s flex and flex assembly processes, to Asia. Based on the Company’s evaluation of the recoverability of impacted long-lived assets, pre-tax asset impairment charges of $180 and $2,117 were recorded during the three and nine months ended June 30, 2010, respectively, including $1,481 of machinery and equipment and $636 of leasehold improvements. The fair value of the long-lived assets was determined based on quoted market prices for similar assets. In addition, a gain on sale of assets of $200, pre-tax one-time termination benefits charges of $1,077 and other restructuring-related charges of $373 were recorded during the three months ended June 30, 2010. The total amount expected to be incurred in connection with the closure of the facility in Anaheim was $3,900 as of June 30, 2010.

	Accruals		Non-Cash Charges			Total Charges
Anaheim:
Write-down of long-lived assets to fair value	$	—	$	2,117		$	2,117
Gain on sale of assets		—		(200	)		(200	)
One-time termination benefits		1,077		—			1,077
Other		—		373			373
Total Anaheim charges	$	1,077	$	2,290		$	3,367

The following table reflects the movement activity of the restructuring reserve for the nine months ended June 30, 2010.

	One-Time Termination Benefits and Other Charges
Accrual Balance as of September 30, 2009	$	27
Restructuring charges related to one-time termination benefits		1,381
Utilization		(698	)
Adjustments		(27	)
Accrual balance as of June 30, 2010	$	683

12. Fair Value Measurements

Per FASB authoritative guidance, the Company classified and disclosed the fair value of assets and liabilities in one of the following three categories:

Level 1: quoted market prices in active markets for identical assets and liabilities

Level 2: observable market based inputs or unobservable inputs that are corroborated by market data

Level 3: unobservable inputs that are not corroborated by market data

14

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Auction rate securities

For recognition purposes, on a recurring basis, the Company measures its ARS as short-term investments at fair value. The ARS had a realized gain of $1,595 and $1,647 recorded during the three and nine months ended June 30, 2010, respectively, that was entirely offset by the recording of a realized loss of $1,595 and $1,647 during the three and nine months ended June 30, 2010, respectively, related to the put option right provided by the fund manager.

Pursuant to the authoritative guidance issued by the FASB, the fair value of the Company’s marketable securities is determined based on Level 3 inputs, which consist of unobservable inputs that are not corroborated by market data. The fair value of these investments was determined to be par due to the exercise of the put option right by the Company on June 30, 2010.

The Company’s assets measured at fair value on a recurring basis subject to the disclosure requirements as defined under the FASB authoritative guidance, were as follows:

	Fair Value Measurements as  of June 30, 2010
	Level 1			Level 2			Level 3
ARS	$	—		$	—		$	7,200
Put option		—			—			—
	$	—		$	—		$	7,200
	Fair Value Measurements as  of September 30, 2009
	Level 1			Level 2			Level 3
ARS	$	—		$	—		$	11,603
Put option		—			—			1,647
	$	—		$	—		$	13,250
The following table presents the Company’s assets, consisting of ARS and the put option related to the ARS, measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as defined under the FASB authoritative guidance.
	Fair Value Measurements of  Assets Using Level 3 Inputs as of June 30, 2010
	Auction  Rate Securities			Put Option			Total
Beginning balance at September 30, 2009	$	11,603		$	1,647		$	13,250
Sales of ARS		(6,050	)		—			(6,050	)
Total realized gains (losses) included in earnings		1,647			(1,647	)		—
Ending balance at June 30, 2010	$	7,200		$	—		$	7,200

13. Subsequent Events

On July 30, 2010, in connection with the closure of its Malaysia facility, the Company notified 86 employees of their eventual termination, which the Company expects will result in additional charges for severance and other costs of $100 during the Company’s fourth fiscal quarter of 2010 and an additional $400 during the first fiscal quarter of 2011.

On July 31, 2010, MFC entered into a credit line agreement with Agricultural Bank of China, Suzhou Wuzhong Sub-branch (“ABC”), which provides for a borrowing facility for 200,000 RMB. The line of credit will mature in July 2013 and interest on the credit line agreement for U.S. dollar lending will be calculated as LIBOR plus a mutually determined number of basis points. The basis points will be determined according to the U.S. dollar lending cost in the Chinese domestic market. For RMB lending, the interest rate is 90% of the basic rate issued by the PBOC on the loan start date, and the basic interest rate may be adjusted once per year if the PBOC adjusts the basic rate.

15

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

As part of the Board approved share repurchase program, the Company repurchased a total of 378,870 shares from July 1, 2010 through the date of this report, at a weighted-average purchase price of $24.91 per share, for a total value of $9,438 pursuant to established 10b5-1 plans. Through the date of this report, the Company retired 318,870 common shares repurchased during the period subsequent to the date of the financial statements. The excess of the repurchase price over par value was booked as an adjustment to additional paid-in capital.

16

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements that involve a number of risks and uncertainties. These forward-looking statements include, but are not limited to, statements and predictions as to our expectations regarding our revenues, net sales, sales, full year net sales growth, net income, operating expenses, research and development expenses, earnings, operations, gross margins, including without limitation, our targeted gross margin range, achievement of margins within or outside of such range and factors that could affect gross margins, yields, anticipated cash needs and uses of cash, capital requirements and capital expenditures, payment terms, expected tax rates, results of audits of us in China and the U.S., needs for additional financing, use of working capital, the benefits and risks of our China operations, anticipated growth strategies, ability to attract customers and diversify our customer base, including without limitation the relative size of each customer to us, sources of net sales, anticipated trends and challenges in our business and the markets in which we operate, trends regarding the use of flex in smartphones and other consumer electronic devices the adequacy and expansion of our facilities, capability, capacity and equipment, the impact of economic and industry conditions on our customers and our business, efficiencies and effectiveness of location strategy for our workforce and operations, current and upcoming programs and product mix and the learning curves associated with our programs, market opportunities and the utilizations of flex and flex assemblies, customer demand, our competitive position, critical accounting policies and the impact of recent accounting pronouncements. Additional forward-looking statements include, but are not limited to, statements pertaining to other financial items, plans, strategies or objectives of management for future operations, our financial condition or prospects, and any other statement that is not historical fact, including any statement which is preceded by the word “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “scheduled,” “expect,” “believe,” “estimate,” “predict,” “aim,” “potential,” “plan,” or similar words. For all of the foregoing forward-looking statements, we claim the protection of the Private Securities Litigation Reform Act of 1995. Actual events or results may differ materially from our expectations. Important factors that could cause actual results to differ materially from those stated or implied by our forward-looking statements include, but are not limited to, the impact of changes in demand for our products, our success with new and current customers, our ability to develop and deliver new technologies, our ability to diversify our customer base, our effectiveness in managing manufacturing processes and costs and expansion of our operations, the efficiency and effectiveness of our workforce and other resource allocation in support of our operations, the degree to which we are able to utilize available manufacturing capacity, achieve expected yields and obtain expected gross margins, the impact of competition, the economy and technological advances, and the risks set forth below under “Item 1A. – Risk Factors.” These forward-looking statements represent our judgment as of the date hereof. We disclaim any intent or obligation to update these forward-looking statements.

Overview

We are a global provider of high-quality, technologically advanced flexible printed circuits and value-added component assembly solutions to the electronics industry. We believe that we are one of a limited number of manufacturers that provide a seamless, integrated flexible printed circuit and assembly solution from design and application engineering and prototyping through high-volume fabrication, component assembly and testing. We target our solutions within the electronics market and, in particular, we focus on applications where flexible printed circuits are the enabling technology in achieving a desired size, shape, weight or functionality of the device. Current applications for our products include mobile phones, smart mobile devices, consumer products, portable bar code scanners, personal digital assistants, computer/storage devices and medical devices. We provide our solutions to original equipment manufacturers (“OEMs”) such as Apple, Inc. and Research In Motion Limited and to electronic manufacturing services (“EMS”) providers such as Foxconn Electronics, Inc., Tech Full, and Flextronics International Ltd. Our business model, and the way we approach the markets which we serve, is based on value added engineering and providing technology solutions to our customers facilitating the miniaturization of portable electronics. Through early supplier involvement with customers, we look to assist in the development of new designs and processes for the manufacturing of their products and, through value added component assembly of components on flex, seek to provide a higher level of product within their supply chain structure. This approach is relatively unique and may or may not always fit with the operating practices of all OEMs. Our ability to add to our customer base may have a direct impact on the relative percentage of each customer’s revenue to total revenues during any reporting period.

17

We typically have numerous programs in production at any particular time. The programs’ prices are subject to intense negotiation and are determined on a program by program basis, dependent on a wide variety of factors, including without limitation, expected volumes, assumed yields, material costs, and the amount of third party components within the program. Our profitability is dependent upon how we perform against our targets and the assumptions on which we base our prices for each particular program. Our volumes, margins and yields also vary from program to program and, given various factors and assumptions on which we base our prices, are not necessarily indicative of our profitability. In fact, some lower-priced programs have higher margins while other higher-priced programs have lower margins. Given that the programs in production vary from period to period and the pricing and margins between programs vary widely, volumes are not necessarily indicative of our performance. For example, we could experience an increase in volumes for a particular program during a particular period, but depending on that program’s margins and yields and the other programs in production during that period, those higher volumes may or may not result in an increase in overall profitability.

Critical Accounting Policies

Information with respect to our critical accounting policies which we believe have the most significant effect on our reported results and require subjective or complex judgments of management are contained on pages 32-34 in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended September 30, 2009.

Comparison of the Three Months Ended June 30, 2010 and 2009

The following table sets forth our Statement of Operations data expressed as a percentage of net sales for the periods indicated:

	Three Months  Ended June 30,
	2010		2009
Net sales	100.0	%	100.0	%
Cost of sales	87.7		85.7
Gross profit	12.3		14.3
Operating expenses:
Research and development	2.5		0.8
Sales and marketing	2.8		3.0
General and administrative	2.7		3.5
Impairment and restructuring	1.8		—
Total operating expenses	9.8		7.3
Operating income	2.5		7.0
Interest income	0.1		0.1
Interest expense	(0.1	)	(0.1	)
Other income (expense), net	0.1		(0.1	)
Income before income taxes	2.6		6.9
Provision for income taxes	(1.3	)	(0.2	)
Net income	1.3	%	6.7	%

18

Net Sales. Net sales increased to $181.0 million for the three months ended June 30, 2010, from $174.5 million for the three months ended June 30, 2009. The increase of $6.5 million, or 3.7%, was driven primarily by an increased number of new programs in fiscal 2010.

Net sales into the wireless sector decreased to $126.2 million for the three months ended June 30, 2010, from $134.3 million for the three months ended June 30, 2009. The decrease of $8.1 million, or 6.0%, was primarily caused by a change in product mix resulting in an increased volume of shipments of one program with lower flex content. For the three months ended June 30, 2010, the wireless sector was comprised of both smart phones and feature phones, which accounted for approximately 98% and 2% of total sales into the wireless sector, and for the three months ended June 30, 2009, accounted for approximately 87% and 13% of total sales into the wireless sector, respectively. Sales into the wireless sector comprised approximately 70% and 77% of total net sales for the three months ended June 30, 2010 and 2009, respectively.

Net sales into the consumer electronics sector were $49.9 million for the three months ended June 30, 2010, versus $35.3 million for the three months ended June 30, 2009. The increase in sales into the consumer electronics sector was driven primarily by increases in unit volume shipments to a key customer due to increased demand. Shipments into the consumer electronics sector accounted for approximately 28% and 20% of total net sales for the three months ended June 30, 2010 and 2009, respectively.

For the fourth quarter of fiscal 2010, we expect net sales to be in the range of $220 to $240 million, due to increased demand as a result of new programs in both the wireless and consumer electronics sectors and positive changes in the projected product mix.

Cost of Sales and Gross Profit. Cost of sales as a percentage of net sales increased to 87.7% for the three months ended June 30, 2010 compared to 85.7% for the three months ended June 30, 2009. The increase in cost of sales as a percentage of net sales of 2.0% was primarily attributable to the ramp up on a new program being more difficult than anticipated, resulting in lower yields and higher scrap, along with a more competitive pricing environment. Gross profit decreased to $22.2 million for the three months ended June 30, 2010 versus $25.0 million for the three months ended June 30, 2009, or 11.2%. As a percentage of net sales, gross profit decreased to 12.3% for the three months ended June 30, 2010 from 14.3% for the three months ended June 30, 2009. We expect quarterly gross margins to be in the 13% to 15% range in the fourth fiscal quarter of 2010 due to a higher projected sales volume resulting in increased cost absorption and gradual improvement in yields.

Research and Development. Research and development expense increased to $4.4 million for the three months ended June 30, 2010, from $1.5 million in the comparable period of the prior year, an increase of 193.3%. The increase is primarily attributable to investments in both traditional and non-traditional technologies related to our core business of flexible printed circuits (“FPC”) and flexible printed circuit assemblies (“FPCA”). Examples of traditional FPC and FPCA related technology investments are fabrication of fine lines and spaces, high density interconnect, and ultra-high density component assembly. Examples of non-traditional FPC and FPCA technology investments are printed electronics in FPCs and embedding printed electronics components in FPCAs. Furthermore, we have made these investments in order to increase our intellectual property and know-how, to strengthen our technological advantages and to secure our competitive strength as compared to the mainstream competition in the FPC and FPCA markets. As a percentage of net sales, research and development expense increased to 2.5% versus 0.8% in the comparable period of the prior year.

Sales and Marketing. Sales and marketing expense decreased by $0.1 million to $5.1 million for the three months ended June 30, 2010, from $5.2 million in the comparable period in the prior year, a decrease of 1.9%. The decrease is primarily attributable to a decrease for sales commissions expenses as a result of different program mix. As a percentage of net sales, sales and marketing expense decreased to 2.8% versus 3.0% in the comparable period of the prior year.

General and Administrative. General and administrative expense decreased by $1.3 million to $4.8 million for the three months ended June 30, 2010, from $6.1 million for the three months ended June 30, 2009, a decrease of 21.3%. The decrease was primarily attributable to decreases in professional fees, reduced travel expenses, reduced training expenses and other reduced discretionary spending. As a percentage of net sales, general and administrative expense decreased to 2.7% of net sales for the three months ended June 30, 2010 from 3.5% in for the comparable period of the prior year, primarily attributable to our cost reduction activities during the quarter. We expect general and administrative expense to fluctuate modestly throughout the fiscal year.

Impairment and Restructuring. Impairment and restructuring costs increased to $3.3 million for the three months ended June 30, 2010, from zero for the three months ended June 30, 2009. The increase was primarily attributable to asset impairments relating to our plan to close one of our facilities in Anaheim as part of a strategic effort to move more functions, specifically low volume production and process research and development associated with our flex and flex assembly processes, to Asia. In addition, we incurred asset impairments relating to our plan to close our facility in Malaysia in order to move the related functions to China as part of our continuing cost reduction efforts and one-time termination benefits charges related

19

to our plan to close our facility in Malaysia. The total remaining restructuring costs, which we expect to be recognized through the first fiscal quarter of 2011, are estimated to be approximately $1.0 million pre-tax, which we anticipate will result in an estimated $9.3 million in annual cost savings beginning in fiscal 2011 on a pre-tax basis.

Interest Income. Interest income increased to $0.2 million for the three months ended June 30, 2010 from $0.1 million for the three months ended June 30, 2009. The increase is primarily attributable to a minor increase in interest rates from our investment holdings.

Interest Expense. Interest expense decreased to $0.1 million for the three months ended June 30, 2010, from $0.3 for the three months ended June 30, 2009. Interest expense incurred was primarily related to amortization of deferred financing costs and unused line fees on our bank loan facilities.

Other Income (Expense), Net. Other income (expense), net increased to income of $0.2 million for the three months ended June 30, 2010, from expenses of $0.2 million for the three months ended June 30, 2009. The increase is the result of reduced net losses from foreign exchange due to the movement of the U.S. dollar versus the RMB and other foreign currencies.

Income Taxes. The effective tax rate for the three months ended June 30, 2010 and 2009 was 50.8% and 2.4%, respectively. The increase is primarily due to the write-off of a deferred tax asset related to the closure of our Malaysia facility of $0.9 million as well as the recognition of discrete tax benefits in the third fiscal quarter of 2009 due to the expiration of a statute of limitation related to an international tax position. We expect our tax rate to be in the low 20% range, however, it could vary if current tax regulations, particularly those in the U.S., are changed.

Comparison of the Nine months Ended June 30, 2010 and 2009

The following table sets forth our Statement of Operations data expressed as a percentage of net sales for the periods indicated:

	Nine Months  Ended June 30,
	2010		2009
Net sales	100.0	%	100.0	%
Cost of sales	85.7		85.4
Gross profit	14.3		14.6
Operating expenses:
Research and development	1.9		0.7
Sales and marketing	3.1		2.9
General and administrative	2.8		3.4
Impairment and restructuring	0.9		—
Total operating expenses	8.7		7.0
Operating income	5.6		7.6
Interest income	0.1		0.1
Interest expense	(0.1	)	(0.1	)
Other income (expense), net	0.1		(0.2	)
Income before income taxes	5.7		7.4
Provision for income taxes	(1.5	)	(1.3	)
Net income	4.2	%	6.1	%

Net Sales. Net sales decreased to $564.6 million for the nine months ended June 30, 2010, from $565.3 million for the nine months ended June 30, 2009. The decrease of $0.7 million, or 0.1%, was driven primarily by a temporary shift in product mix to a program with lower flex content.

Net sales into the wireless sector decreased to $379.5 million for the nine months ended June 30, 2010, from $408.0 million for the nine months ended June 30, 2009. The decrease of $28.5 million, or 7.0%, was primarily caused by a change in product mix resulting in an increased volume of shipments of one program with lower flex content. For the nine months ended June 30, 2010, the wireless sector was comprised of both smart phones and feature phones, which accounted for

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approximately 95% and 5% of total sales into the wireless sector, and for the nine months ended June 30, 2009, accounted for approximately 76% and 24% of total sales into the wireless sector, respectively. Sales into the wireless sector comprised approximately 67% and 72% of total net sales for the nine months ended June 30, 2010 and 2009, respectively.

Net sales into the consumer electronics sector were $169.5 million for the nine months ended June 30, 2010, versus $136.0 million for the nine months ended June 30, 2009. The increase in sales into the consumer electronics sector was driven primarily by increases in unit volume shipments to a key customer due to increased consumer demand. Shipments into the consumer electronics sector accounted for approximately 30% and 24% of total net sales for the nine months ended June 30, 2010 and 2009, respectively.

Cost of Sales and Gross Profit. Cost of sales as a percentage of net sales increased to 85.7% for the nine months ended June 30, 2010 compared to 85.4% for the nine months ended June 30, 2009. The increase in cost of sales as a percentage of net sales of 0.3% was primarily attributable to the ramp up on a new program being more difficult than anticipated, resulting in lower yields and higher scrap, along with a more competitive pricing environment. As a result, gross profit decreased to $81.0 million for the nine months ended June 30, 2010 versus $82.7 million for the nine months ended June 30, 2009, or 2.1%. As a percentage of net sales, gross profit decreased to 14.3% for the nine months ended June 30, 2010 from 14.6% for the nine months ended June 30, 2009.

Research and Development. Research and development expense increased to $10.7 million for the nine months ended June 30, 2010, from $3.9 million in the comparable period of the prior year, an increase of 174.4%. The increase is primarily attributable to investments in both traditional and non-traditional technologies related to our core business of FPC and FPCA. As a percentage of net sales, research and development expense increased to 1.9% versus 0.7% in the comparable period of the prior year.

Sales and Marketing. Sales and marketing expense increased by $1.0 million to $17.6 million for the nine months ended June 30, 2010, from $16.6 million in the comparable period in the prior year, an increase of 6.0%. The increase is primarily attributable to increases for compensation and benefits expense as a result of headcount growth to expand our customer base and geographic coverage. As a percentage of net sales, sales and marketing expense increased to 3.1% versus 2.9% in the comparable period of the prior year.

General and Administrative. General and administrative expense decreased by $3.8 million to $15.6 million for the nine months ended June 30, 2010, from $19.4 million for the nine months ended June 30, 2009, a decrease of 19.6%. The decrease was primarily attributable to decreases in professional fees, reduced travel expenses and other reduced discretionary spending. As a percentage of net sales, general and administrative expense decreased to 2.8% of net sales for the nine months ended June 30, 2010 from 3.4% in for the comparable period of the prior year.

Impairment and Restructuring. Impairment and restructuring costs increased by $5.2 million to $5.3 million for the nine months ended June 30, 2010, from $0.1 million for the nine months ended June 30, 2009. The increase was primarily attributable to asset impairments relating to our plan to close one of our facilities in Anaheim as part of a strategic effort to move more functions, specifically low volume production and process research and development associated with our flex and flex assembly processes, to Asia. In addition, we incurred asset impairments and one-time termination benefits charges relating to our plan to close our facility in Malaysia in order to move the related functions to China as part of our continuing cost reduction efforts.

Interest Income. Interest income decreased to $0.4 million for the nine months ended June 30, 2010 from $0.8 million for the nine months ended June 30, 2009. The decrease is primarily attributable to a significant decline in interest rates.

Interest Expense. Interest expense increased to $0.7 million for the nine months ended June 30, 2010, from $0.5 for the nine months ended June 30, 2009. Interest expense incurred was primarily related to interest accrued against the notes payable issued as part of our acquisition of Pelikon Limited, amortization of deferred financing costs and unused line fees on our bank loan facilities.

Other Income (Expense), Net. Other income (expense), net increased to income of $0.7 million for the nine months ended June 30, 2010, from a net expense of $1.5 million for the nine months ended June 30, 2009. The change to other income from other expense was primarily attributable to decreased expenses of $1.1 million due to an impairment associated with the decline in value of our auction rate securities during the nine months ended June 30, 2009, partially offset by reduced net losses from foreign exchange due to the movement of the U.S. dollar versus the RMB and other foreign currencies.

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Income Taxes. The effective tax rate for the nine months ended June 30, 2010 and 2009 was 26.6% and 16.9%, respectively.

Liquidity and Capital Resources

Our principal sources of liquidity have been cash provided by operations and our ability to borrow under our various credit facilities. Our principal uses of cash have been to finance working capital, facility expansions and other capital expenditures. We anticipate these uses will continue to be our principal uses of cash in the future. Global financial and credit markets recently have been, and continue to be, extremely unstable and unpredictable. Worldwide economic conditions have been weak and may be further deteriorating. Continued, and potentially increased, volatility, instability and weakness in the financial and credit markets could affect our ability to sell our investment securities and other financial assets, which in turn could adversely affect our liquidity and financial position. This instability also could affect the prices at which we could make any such sales, which could also adversely affect our earnings and financial condition. These conditions could also negatively affect our ability to secure funds or raise capital at a reasonable cost, if needed.

It is our policy to carefully monitor the state of our business, cash requirements and capital structure. We believe that funds generated from our operations and available from our borrowing facilities will be sufficient to fund current business operations as well as anticipated growth over at least the next 12 months.

During the nine months ended June 30, 2010, net cash provided by operating activities was $65.5 million. Net income adjusted for depreciation and amortization, asset impairments, gain on equipment disposal, stock-based compensation expense and related tax benefit, deferred taxes, and provision for doubtful accounts, generated $69.2 million of operating cash. This amount was partially offset by cash used in working capital of $3.7 million.

Changes in the principal components of operating cash flows during our nine months ended June 30, 2010 were as follows:

• Our net accounts receivable decreased to $114.0 million as of June 30, 2010 from $129.3 million as of September 30, 2009, or 11.8%, due to lower sales volumes in the most recent fiscal quarter combined with better collections. Our net inventory balances increased to $54.3 million as of June 30, 2010 from $50.3 million as of September 30, 2009, an increase of 8.0%. Inventory increased as a result of higher purchases to meet increased forecasted demand. Our accounts payable decreased to $121.3 million as of June 30, 2010 from $122.5 million as of September 30, 2009, a decrease of 1.0%, as a result of decreased production volume previously mentioned.

• Depreciation and amortization expense was $34.3 million for the nine months ended June 30, 2010 versus $30.4 million for the comparable period of the prior year due to the increased fixed asset base in manufacturing operations, mainly at MFC.

Our principal investing and financing activities during our nine months ended June 30, 2010 were as follows:

• Net cash used in investing activities was $36.4 million for the nine months ended June 30, 2010. Capital expenditures included cash purchases of $39.1 million of capital equipment and other fixed assets, which were primarily related to the construction of our new facility in Suzhou, China (“MFC3”), and manufacturing capacity expansion at MFC. As of June 30, 2010, we had outstanding purchase commitments totaling $52.6 million primarily related to capital projects at our various facilities.

• Net cash used in financing activities was $18.7 million for the nine months ended June 30, 2010 and consisted of repayments of long-term debt of $11.1 million, tax withholdings for net share settlement of equity awards of $1.3 million and repurchases of common stock of $8.3 million, partially offset by proceeds from exercises of stock options and income tax benefits related to stock option exercises of $2.0 million. Our loans payable and borrowings outstanding against credit facilities were zero as of June 30, 2010 and September 30, 2009.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

Market risk represents the risk of loss arising from adverse changes in liquidity, market rates and foreign exchange rates. As of June 30, 2010, no amounts were outstanding under our loan agreements with Bank of America, N.A., Shanghai Pudong Development Bank, China Construction Bank or Bank of China. The amounts outstanding under these loan agreements at any time may fluctuate and we may from time to time be subject to refinancing risk. We do not believe that a change of 100 basis points in interest would have a material effect on our results of operations or financial condition based on our current borrowing level.

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Foreign Currency Risk

We derive a substantial portion of our sales outside of the U.S. Approximately $545.2 million, or 97%, of total shipments to these foreign manufacturers during the nine months ended June 30, 2010, were made in U.S. dollars with the remaining balance of our net sales denominated in RMB. The exchange rate for the RMB to the U.S. dollar has been an average of 6.82 RMB per U.S. dollar for the nine months ended June 30, 2010. To date, we attempt to manage our working capital in a manner to minimize foreign currency exposure. However, we continue to be vulnerable to appreciation or depreciation of foreign currencies against the U.S. dollar.

Liquidity Risk

We believe our anticipated cash flows from operations are sufficient to fund our operations, including capital expenditure requirements, through at least the remainder of the fiscal year. If there was a need for additional cash to fund our operations, we would access our global credit lines.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on an evaluation carried out as of the end of the period covered by this Quarterly Report, under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, our CEO and CFO have concluded that, as of the end of such period, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation described above that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1A. Risk Factors

FACTORS THAT MAY AFFECT OUR OPERATING RESULTS

Our business, financial condition, operating results and cash flows can be impacted by a number of factors, including but not limited to those set forth below, any of which could cause our results to be adversely impacted and could result in a decline in the value or loss of an investment in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business.

Risks Related to Our Business

We are heavily dependent upon the wireless and consumer electronics industries, and any downturn in these sectors may reduce our net sales.

For the nine months ended June 30, 2010 and 2009, 67% and 72%, respectively, of our net sales were derived from sales to companies that provide products or services to the wireless industry, including wireless handsets, and approximately 30% and 24%, respectively, of our net sales were derived from sales to companies that provide products to the consumer electronics industry during those same periods. In general, the wireless and consumer electronics industries are subject to economic cycles and periods of slowdown. Intense competition, relatively short product life cycles and significant fluctuations in product demand characterize these industries, and both industries are also generally subject to rapid technological change and product obsolescence. Fluctuations in demand for our products as a result of periods of slowdown in these markets (including the current economic downturn) or discontinuation of products or modifications developed in connection with next generation products could reduce our net sales.

We depend on a limited number of key customers, and a limited number of programs from those customers, for significant portions of our net sales and if we lose business with any of these customers, our net sales could decline substantially.

For the past several years, a substantial portion of our net sales has been derived from products that are incorporated into products manufactured by or on behalf of a limited number of key customers and their subcontractors, including Apple Inc., Motorola, Inc. and Research in Motion Limited. In addition, a substantial portion of our sales to each customer is often tied to only one, or a small number, of programs. In the fiscal years ended September 30, 2009, 2008 and 2007 approximately 96%, 95% and 93% respectively, of our net sales were to only four customers in the aggregate. Approximately 43%, 45% and 57% of our net sales in each of the fiscal years ended September 30, 2009, 2008 and 2007, respectively, were to one customer (not the same customer in each of the three years) and approximately 80%, 65% and 82% of our net sales were to two of our customers in each of the three years, respectively. In addition, two customers constituted approximately 86% of our net sales in the nine months ended June 30, 2010. The loss of a major customer or a significant reduction in sales to a major customer, including due to the lack of commercial success or a product failure of a customer’s program upon which we were relying, would seriously harm our business. Although we are continuing our efforts to reduce dependence on a limited number of customers, net sales attributable to a limited number of customers and their subcontractors are expected to continue to represent a substantial portion of our business for the foreseeable future.

We will have difficulty selling our products if customers do not design flexible printed circuit products into their product offerings or our customers’ product offerings are not commercially successful.

We sell our flexible printed circuit products directly or indirectly to OEMs, who include our products and component assemblies in their product offerings. We must continue to design our products into our customers’ product offerings in order to remain competitive. However, our OEM customers may decide not to design either our products, or flexible printed circuits, into their product offerings. If an OEM selects one of our competitors to provide a product instead of us or switches to alternative technologies developed or manufactured by one or more of our competitors, it becomes significantly more difficult for us to sell our products to that OEM because changing component providers after the initial production runs begin involves significant cost, time, effort and risk for the OEM. Even if an OEM designs one of our products into its product offering, the product may not be commercially successful or may experience product failures, we may not receive any orders from that manufacturer, the OEM may qualify additional vendors for the product or we could be undercut by a competitor’s pricing. Additionally, if an OEM selects one or more of our competitors, they may rely upon such competitors for the life of specific offering and subsequent generations of similar offerings. Any of these events would result in fewer sales and reduced profits for us, and could adversely affect the accuracy of any forward-looking guidance we may give.

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Our customers have in the past and likely will continue to cancel their orders, change production quantities, delay production or qualify additional vendors, any of which could reduce our net sales and/or increase our expenses.

Substantially all of our sales are made on a purchase order basis, and we are not always able to predict with certainty the number of orders we will receive or the timing or magnitude of the orders. Our customers may cancel, change or delay product purchase orders with little or no advance notice to us, and we believe customers are doing so with increased frequency. These changes may be for a variety of reasons, including changes in their prospects, the success of their products in the market, reliance on a new vendor and the overall economic forecast. In general, we do not have long-term contractual relationships with our customers that require them to order minimum quantities of our products, and our customers may decide to use another manufacturer or discontinue ordering from us in their discretion. In addition, many of our products are shipped to hubs, and we often have little visibility or control as to when our customers pull the inventory from the hub. We also have increased risks with respect to inventory control and potential inventory loss, and must rely on third parties for recordkeeping when our products are shipped to a hub. As a result of these factors, we are not always able to forecast accurately the net sales that we will make in a given period. Changes in orders can also result in layoffs and associated severance costs, which in any given financial period could materially adversely affect our financial results.

In addition, we are increasingly being required to purchase materials, components and equipment before a customer becomes contractually committed to an order so that we may timely deliver the expected order to the customer. We may increase our production capacity, working capital and overhead in expectation of orders that may never be placed, or, if placed, may be delayed, reduced or canceled. As a result, we may be unable to recover costs that we incur in anticipation of orders that are never placed, such as costs associated with purchased raw materials, components or equipment. Delayed, reduced or canceled orders could also result in write-offs of obsolete inventory and the underutilization of our manufacturing capacity if we decline other potential orders because we expect to use our capacity to produce orders that are later delayed, reduced or canceled.

Our industry is extremely competitive, and if we are unable to respond to competitive pressures we may lose sales and our market share could decline.

We compete primarily with large flexible printed circuit board manufacturers located throughout Asia, including Taiwan, China, Korea, Japan and Singapore. We believe that the number of companies producing flexible printed circuit boards has increased materially in recent years and may continue to increase. Certain EMS providers have developed or acquired their own flexible printed circuit manufacturing capabilities or have extensive experience in electronics assembly, and in the future may cease ordering products from us or even compete with us on OEM programs. In addition, the number of customers in the market has been decreasing through consolidation and otherwise. Furthermore, many companies in our target customer base may move the design and manufacturing of their products to original design manufacturers in Asia. These factors, among others, make our industry extremely competitive. We believe that one of our principal competitive advantages is our ability to interact closely with our customers throughout the design and engineering process. If we are not successful in addressing these competitive aspects of our business, including maintaining or establishing close relationships with customers in markets in which we compete, we may not be able to grow or maintain our market share or net sales.

Our products and their terms of sale are subject to various pressures from our customers and competitors, any of which could harm our gross profits.

Our selling prices are affected by changes in overall demand for our products, changes in the specific products our customers buy, pricing of competitors’ products, our products’ life cycles and general economic conditions. In addition, from time to time we may elect to reduce the price of certain programs we produce in order to gain additional orders on those programs. A typical life cycle for one of our products begins with higher prices when the product is introduced and decreasing prices as it matures. To offset price decreases during a product’s life cycle, we rely primarily on higher sales volume and improving our manufacturing yield and productivity to reduce a product’s cost. If we cannot reduce our manufacturing costs as prices decline during a product’s life cycle, or if we are required to pay damages to a customer due to a breach of contract or other claim, including due to quality or delivery issues, our cost of sales may increase, which would harm our profitability.

In addition, our key customers and their subcontractors are able to exert significant pricing pressure on us and often require us to renegotiate the terms of our arrangements with them, including liability and indemnification thresholds and payment terms, among other terms. Changes in contract terms, the extension of payment terms and regular price reductions may result in lower gross margins for us. Furthermore, our competitive position is dependent upon the yields and quality we are able to achieve on our products, and our level of automation as compared to our competitors. These trends and factors make it more difficult to compete effectively.

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Significant product failures or safety concerns about our or our customers’ products could harm our reputation and our business.

Continued improvement in manufacturing capabilities, quality control, material costs and successful product testing capabilities are critical to our growth. Our efforts to monitor, develop, modify and implement stringent testing and manufacturing processes for our products may not be sufficient. If any flaw in the design, production, assembly or testing of our or our customers’ products were to occur or if our, or our customers’, products were believed to be unsafe, it could result in significant delays in product shipments by, or cancellation of orders or, substantial penalties from, our customers and their customers, substantial repair or replacement costs, an increased return rate for our products, potential damage to our reputation, or potential lawsuits which could prove to be time consuming and costly.

Problems with manufacturing yields and/or our inability to ramp up production could impair our ability to meet customer demand for our products.

We could experience low manufacturing yields due to, among other things, design errors, manufacturing failures in new or existing products, the inexperience of new employees, component defects, or the learning curve experienced during the initial and ramp up stages of new product introduction. If we cannot achieve expected yields in the manufacture of our products, this could result in higher operating costs, which could result in higher per unit costs, reduced product availability and may be subject to substantial penalties by our customers. Reduced yields or an inability to successfully ramp up products can significantly harm our gross margins, resulting in lower profitability or even losses. In addition, if we were unable to ramp up our production in order to meet customer demand, whether due to yield or other issues, it would impair our ability to meet customer demand for our products, and our net sales and profitability would be negatively affected.

We must develop and adopt new technology and manufacture new products and product features in order to remain competitive, and we may not be able to do so successfully.

Our long-term strategy relies in part on timely adopting, developing and manufacturing technological advances and new products and product features to meet our customers’ needs, including advanced technologies such as rigid flex and high density interconnect. However, any new technology and products adopted or developed by us may not be selected by existing or potential customers. Our customers could decide to switch to alternative technologies or materials, adopt new or competing industry standards with which our products are incompatible or fail to adopt standards with which our products are compatible. If we choose to focus on new technology or a standard that is ultimately not accepted by the industry and/or does not become the industry standard, we may be unable to sell those products. If we are unable to obtain customer qualifications for new products or product features, cannot qualify our products for high-volume production quantities or do not execute our operational and strategic plans for new products or advanced technologies in a timely manner, our net sales may decrease. In addition, we may incur higher manufacturing costs in connection with new technology, materials, products or product features, as we may be required to replace, modify, design, build and install equipment, all of which would require additional capital expenditures.

We must continue to be able to procure raw materials and components on commercially reasonable terms to manufacture our products profitably.

Generally we do not maintain a large surplus stock of raw materials or components for our products because the specific assemblies are uniquely applicable to the products we produce for our customers; therefore, we rely on third-party suppliers to provide these raw materials and components in a timely fashion and on commercially reasonable terms. In addition, we are often required by our customers to seek components from a limited number of suppliers that have been pre-qualified by the customer and, from time to time we have experienced shortages of the components and raw materials used in the fabrication of our products. For example, certain of our suppliers reduced their capacity in connection with the economic slowdown, and we have experienced shortages in flexible printed circuit materials due to such reduction in capacity. In addition, we have recently experienced component shortages, which resulted in delayed shipments to customers. We expect that these delays are likely to occur in the current or future periods. Furthermore, our suppliers could lose their export or import licenses on materials we require, which could limit or halt our ability to manufacture our products. We may not be successful in managing any shortage of raw materials or components that we may experience in the future, which could adversely affect our relationships with our customers and result in a decrease in our net sales. Component shortages could also increase our cost of goods sold because we may be required to pay higher prices for components in short supply. In addition, suppliers could go out of business, discontinue the supply of key materials, or consider us too small of a customer to sell to directly, and could require us to buy through distributors, increasing the cost of such components to us.

Our manufacturing and shipping costs may also be impacted by fluctuations in the cost of oil and gas. Any fluctuations in the supply or prices of these commodities could have an adverse effect on our profit margins and financial condition.

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If we are unable to attract or retain personnel necessary to operate our business, our ability to develop and market our products successfully could be harmed.

We believe that our success is highly dependent on our current executive officers and management team. We do not have an employment contract with Reza Meshgin, our president and chief executive officer, or any of our other key personnel, and their knowledge of our business and industry would be extremely difficult to replace. The loss of any key employee or the inability to attract or retain qualified personnel, including engineers, sales and marketing personnel, management or finance personnel could delay the development and introduction of our products, harm our reputation or otherwise damage our business.

Furthermore, we have experienced very high employee turnover in our facilities in China, and are experiencing increased difficulty in recruiting employees for these facilities. In addition, we are noting the early signs of wage inflation, labor unrest and increased unionization in China. A large number of our employees work in our facilities in China, and our costs associated with hiring and retaining these employees have increased over the past several years. The high turnover rate, our difficulty in recruiting and retaining qualified employees and the labor trends we are noting in China have resulted in an increase in our employee expenses and a continuation of any of these trends could result in even higher costs or production disruptions or delays, resulting in order cancellation, imposition of customer penalties if we were unable to timely deliver product or a negative impact on net sales and profits for us.

Our manufacturing capacity may be interrupted, limited or delayed if we cannot maintain sufficient sources of electricity in China.

The flexible printed circuit fabrication process requires a stable source of electricity. As our production capabilities increase in China and our business grows, our requirements for a stable source of electricity in China will grow substantially. We have experienced a lack of sufficient electricity supply in China and expect that we may continue to experience insufficient power supplies in the foreseeable future, particularly while the World Expo is held in Shanghai, China in the coming months. Although we have purchased several generators, such generators may not produce sufficient electricity supply in the event of a disruption in power. Power interruptions, electricity shortages, the cost of diesel fuel to run our back-up generators or government intervention, particularly in the form of rationing, are factors that could restrict our access to electricity in Suzhou, China, the location of our Chinese manufacturing facilities, and affect our ability to manufacture and related costs. Any such shortages could result in delays in our shipments to our customers and, potentially, the loss of customer orders and penalties from such customers for the delay.

Our global operations expose us to additional risk and uncertainties.

We have operations in a number of countries, including the United States, China, the United Kingdom, the Netherlands, Malaysia and Singapore. Our global operations may be subject to risks that may limit our ability to operate our business. We manufacture the bulk of our products in China and sell our products globally, which exposes us to a number of risks that can arise from international trade transactions, local business practices and cultural considerations, including:

• political unrest, terrorism and economic or financial instability;

• restrictions on our ability to repatriate earnings;

• unexpected changes in regulatory requirements and uncertainty related to developing legal and regulatory systems related to economic and business activities, real property ownership and application of contract rights;

• nationalization programs that may be implemented by foreign governments;

• import-export regulations;

• difficulties in enforcing agreements and collecting receivables;

• difficulties in ensuring compliance with the laws and regulations of multiple jurisdictions;

• difficulties in ensuring that health, safety, environmental and other working conditions are properly implemented and/or maintained by the local office;

• changes in labor practices, including wage inflation, labor unrest and unionization policies;

• limited intellectual property protection;

• longer payment cycles;

• currency exchange fluctuations;

• inadequate local infrastructure and disruptions of service from utilities or telecommunications providers, including electricity shortages;

• transportation delays and difficulties in managing international distribution channels;

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• difficulties in staffing foreign subsidiaries and in managing an expatriate workforce;

• potentially adverse tax consequences;

• differing employment practices and labor issues;

• the occurrence of natural disasters or other acts of force majeure; and

• public health emergencies such as SARS, avian flu and Swine flu.

We also face risks associated with currency exchange and convertibility, inflation and repatriation of earnings as a result of our foreign operations. In some countries, economic, monetary and regulatory factors could affect our ability to convert funds to U.S. dollars or move funds from accounts in these countries. We are also vulnerable to appreciation or depreciation of foreign currencies against the U.S. dollar. Although we have significant operations in Asia, a substantial portion of transactions are denominated in U.S. dollars, including approximately 90% of the total shipments made to foreign manufacturers during the fiscal year 2009. The balance of our net sales is denominated in RMB. As a result, if appreciation against the U.S. dollar were to increase, it would result in an increase in the cost of our business expenses in China. Further, downward fluctuations in the value of foreign currencies relative to the U.S. dollar may make our products less price competitive than local solutions. We do not currently engage in currency hedging activities to limit the risks of currency fluctuations.

In addition, our activities in China are subject to administrative review and approval by various national and local agencies of China’s government. Given the changes occurring in China’s legal and regulatory structure, we may not be able to secure required governmental approval for our activities or facilities or the government may not apply real property or contract rights in the same manner as one may expect in other jurisdictions. For example, in 2007 we were informed that one of our facilities in China no longer meets the current fire department regulations. If we were required to take immediate corrective action, it could adversely affect our ability to maintain or expand our operations at that facility and/or increase our costs. In addition, certain of our insurance policies may be deemed to be ineffective without a current fire certificate.

We are in the process of increasing our manufacturing capacity, and we may have difficulty managing these changes.

We are engaged in a number of manufacturing expansion projects, including new manufacturing facilities in both Suzhou and Chengdu, China. In addition, we have been engaged in an international restructuring effort to transition various business functions to our offices in Singapore, in order to better align these activities with our international operations and to transition certain production and process research and development to China in continuation of our cost reduction efforts. Although we intend to manage development of these expansion activities and requisite capital expenditures in discrete phases, these efforts require significant investment by us, and have in the past and could continue to result in increased expenses and inefficiencies and reduced gross margins.

Our management team may have difficulty managing our manufacturing expansion and transition projects or otherwise managing any growth in our business that we may experience. Risks associated with managing expansion and growth may include those related to:

• managing multiple, concurrent major manufacturing expansion projects;

• hiring and retaining employees, particularly in China;

• accurately predicting any increases or decreases in demand for our products and managing our manufacturing capacity appropriately;

• under-utilized capacity, particularly during the start-up phase of a new manufacturing facility and the effects on our gross margin of under-utilization;

• managing increased employment costs and scrap rates often associated with periods of growth;

• implementing, integrating and improving operational and financial systems, procedures and controls, including our computer systems;

• construction delays, equipment delays or shortages, labor shortages and disputes and production start-up problems;

• cost overruns and charges related to our expansion activities; and

• managing expanding operations in multiple locations and multiple time zones.

Our management team may not be effective in expanding our manufacturing facilities and operations, and our systems, procedures and controls may not be adequate to support such expansion. Any inability to manage our growth may harm our profitability and growth.

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If we encounter problems during the merging of our operation management and information systems, we could experience a disruption of our operations and unanticipated increases in our costs.

We are in the process of merging our information systems for certain of our China facilities. Any problems encountered in the merger of these systems could result in material adverse consequences, including disruption of operations, loss of information and unanticipated increases in costs.

WBL Corporation Limited beneficially owns approximately 59% of our outstanding common stock and is able to exert influence over us and our major corporate decisions.

WBL Corporation Limited, together with its affiliates and subsidiaries (“WBL”) beneficially owns approximately 59% of our outstanding common stock, and we expect to be a principal subsidiary of WBL for the foreseeable future. As a result of this ownership interest and the resulting influence over the composition of our board of directors, WBL has influence over our management, operations and potential significant corporate actions. For example, so long as WBL continues to control more than a majority of our outstanding common stock, it will have the ability to control who is elected to our board of directors each year. In addition, for so long as WBL effectively owns at least one-third of our voting stock, it has the ability, through a stockholders’ agreement with us, to approve the appointment of any new chief executive officer or the issuance of securities that would reduce WBL’s effective ownership of us to a level that is below a majority of our outstanding shares of common stock, as determined on a fully diluted basis. As a result, WBL could preclude us from engaging in an acquisition or other strategic opportunity that we may want to pursue if such acquisition or opportunity required the issuance of our common stock. This concentration of ownership may also discourage, delay or prevent a change of control of our company, which could deprive our other stockholders of an opportunity to receive a premium for their stock as part of a sale of our company, could harm the market price of our common stock and could impede the growth of our company. WBL could also sell a controlling interest in us to a third party, including a participant in our industry, or buy additional shares of our stock.

WBL and its designees on our board of directors may have interests that conflict with, or are different from, the interests of our other stockholders. These conflicts of interest could include potential competitive business activities, corporate opportunities, indemnity arrangements, sales or distributions by WBL of our common stock and the exercise by WBL of its ability to influence our management and affairs. In general, our certificate of incorporation does not contain any provision that is designed to facilitate resolution of actual or potential conflicts of interest. If any conflict of interest is not resolved in a manner favorable to our stockholders, our stockholders’ interests may be substantially harmed.

WBL is currently unable to vote its shares on specified matters that require stockholder approval without obtaining its own stockholders’ and regulatory approval and it is possible that WBL’s stockholders or the relevant regulators may not approve the proposed corporate action.

WBL’s ordinary shares are listed on the Singapore Securities Exchange Trading Limited (the “Singapore Exchange”). Under the rules of the Singapore Exchange, to the extent that we constitute a principal subsidiary of WBL as defined by the rules of the Singapore Exchange at any time that we submit a matter for the approval of our stockholders, WBL may be required to obtain the approval of its own stockholders for such action before it can vote its shares with respect to our proposal or dispose of our shares of common stock. Examples of corporate actions we may seek to take that may require WBL to obtain its stockholders’ approval include an amendment of our certificate of incorporation, a sale of all or substantially all of our assets, a merger or reorganization transaction, and certain issuances of our capital stock.

To obtain stockholder approval, WBL must prepare a circular describing the proposal, obtain approval from the Singapore Exchange and send the circular to its stockholders, which may take several weeks or longer. In addition, WBL is required under its corporate rules to give its stockholders advance notice of the meeting. Consequently, if we need to obtain the approval of WBL at a time in which we qualify as a principal subsidiary (including this year), the process of seeking WBL’s stockholder approval may delay our proposed action and it is possible that WBL’s stockholders may not approve our proposed corporate action. It is also possible that we might not be able to establish a quorum at our stockholder meeting if WBL was unable to vote at the meeting as a result of the Singapore Exchange rules. The rules of the Singapore Exchange that govern WBL are subject to revision from time to time, and policy considerations may affect rule interpretation and application. It is possible that any change to or interpretation of existing or future rules may be more restrictive and complex than the existing rules and interpretations.

Our business requires significant investments in capital equipment, facilities and technological improvements, and we may not be able to obtain sufficient funds to make such capital expenditures.

To remain competitive we must continue to make significant investments in capital equipment, facilities and technological improvements. We expect that substantial capital will be required to expand our manufacturing capacity and fund working capital requirements for our anticipated growth. In addition, we expect that new technology requirements may

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increase the capital intensity of our business. We may need to raise additional funds through further debt or equity financings in order to fund our anticipated growth and capital expenditures, and we may not be able to raise additional capital on reasonable terms, or at all, particularly given the current turmoil in global credit markets. If we are unable to obtain sufficient capital in the future, we may have to curtail our capital expenditures. Any curtailment of our capital expenditures could result in a reduction in net sales, reduced quality of our products, increased manufacturing costs for our products, harm to our reputation, reduced manufacturing efficiencies or other harm to our business.

In addition, WBL’s approval is required for the issuance of securities that would reduce its effective ownership of us to below a majority of the outstanding shares of our common stock as determined on a fully diluted basis. If WBL’s approval is required for a proposed financing, it is possible that it may not approve the financing and we may not be able to complete the transaction, which could make it more difficult to obtain sufficient funds to operate and expand our business.

The global credit market crisis and economic weakness may adversely affect our earnings, liquidity and financial condition.

Global financial and credit markets recently have been, and continue to be, unstable and unpredictable. Worldwide economic conditions have been weak. The instability of the markets and weakness of the economy could affect the demand for our customers’ products, the amount, timing and stability of their orders to us, the financial strength of our customers and suppliers, their ability or willingness to do business with us, our willingness to do business with them, and/or our suppliers’ and customers’ ability to fulfill their obligations to us. These factors could adversely affect our operations, earnings and financial condition.

We are subject to the risk of increased and changing income tax rates and other taxes.

A number of countries in which we are located allow for tax holidays or provide other tax incentives to attract and retain business. We currently enjoy tax incentives for our facility in Singapore and, in the recent past, we enjoyed tax holidays for certain of our facilities in China. However, any tax holiday we may have received could be challenged, modified or even eliminated by taxing authorities or changes in law. In addition, the tax laws and rates in certain jurisdictions in which we operate (China, for example) can change with little or no notice, and any such change may even apply retroactively. Furthermore, our taxes could increase if incentives are not renewed upon expiration, or if tax rates applicable to us are otherwise increased. For example, in March 2007, the Chinese government passed a new unified enterprise income tax law which became effective on January 1, 2008. Among other things, this law cancelled certain income tax incentives and increased the standard withholding rate on earnings distributions. The effect of these and other changes in Chinese tax laws on our overall tax rate will be affected by, among other things, our income, the manner in which China interprets, implements and applies the new tax provisions and our ability to qualify for any exceptions or new incentives. In addition, from time to time we may be subject to various types of tax audits and in light of recent proposed tax law changes in the United States, it is possible our tax rates in future periods may increase.

If we fail to secure or protect our intellectual property rights, competitors may be able to use our technologies, which could weaken our competitive position and harm our business.

We rely primarily on trade secrets and confidentiality procedures relating to our manufacturing processes to protect our proprietary rights. Despite our efforts, these measures can only provide limited protection. Unauthorized third parties may try to copy or reverse engineer portions of our products or otherwise obtain and use our intellectual property. If we fail to protect our proprietary rights adequately, our competitors could offer similar products using processes or technologies developed by us, potentially harming our competitive position. In addition, other parties may independently develop similar or competing technologies.

We also rely on patent protection for some of our intellectual property. Our patents may be expensive to obtain and there is no guarantee that either our current or future patents will provide us with any competitive advantages. A third party may challenge the validity of our patents, or circumvent our patents by developing competing products based on technology that does not infringe our patents. Further, patent protection is not available at all in certain countries and some countries that do allow registration of patents do not provide meaningful redress for patent violations. As a result, protecting intellectual property in those countries is difficult, and competitors could sell products in those countries that have functions and features that would otherwise infringe on our intellectual property. If we fail to protect our intellectual property rights adequately, our competitors may gain access to our technology and our business may be harmed.

We may be sued by third parties for alleged infringement of their proprietary rights.

From time to time, we have received, and expect to continue to receive, notices of claims of infringement, misappropriation or misuse of other parties’ proprietary rights. We could also be subject to claims arising from the allocation

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of intellectual property rights among us and our customers. Any claims brought against us or our customers, with or without merit, could be time-consuming and expensive to litigate or settle, and could divert management attention away from our business plan. Adverse determinations in litigation could subject us to significant liability and could result in the loss of our proprietary rights. A successful lawsuit against us could also force us to cease selling or require us to redesign any products or marks that incorporate the infringed intellectual property. In addition, we could be required to seek a license from the holder of the intellectual property to use the infringed technology, and it is possible that we may not be able to obtain a license on reasonable terms, or at all. If we fail to develop a non-infringing technology on a timely basis or to license the infringed technology on acceptable terms, our business, financial condition and results of operations could be harmed.

Complying with environmental laws and regulations or the environmental policies of our customers may increase our costs and reduce our profitability.

We are subject to a variety of environmental laws and regulations relating to the storage, discharge, handling, emission, generation, manufacture, use and disposal of chemicals, solid and hazardous waste and other toxic and hazardous materials used in the manufacture of flexible printed circuits and component assemblies in our operations in the United States, Europe and Asia. In addition, certain of our customers have, or may in the future have, environmental policies with which we are required to comply that are more stringent than applicable laws and regulations. A significant portion of our manufacturing operations are located in China, where we are subject to constantly evolving environmental regulation. The costs of complying with any change in such regulations or customer policies and the costs of remedying potential violations or resolving enforcement actions that might be initiated by governmental entities could be substantial.

In the event of a violation, we may be required to halt one or more segments of our operations until such violation is cured or we may be fined by a customer. The costs of remedying violations or resolving enforcement actions that might be initiated by governmental authorities could be substantial. Any remediation of environmental contamination would involve substantial expense that could harm our results of operations. In addition, we cannot predict the nature, scope or effect of future regulatory or customer requirements to which our operations may be subject or the manner in which existing or future laws or customer policies will be administered or interpreted. Future regulations may be applied to materials, products or activities that have not been subject to regulation previously. The costs of complying with new or more stringent regulations or policies could be significant.

Potential future acquisitions or strategic partnerships could be difficult to integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and adversely affect our financial results.

As part of our business strategy, we intend to continue to consider acquisitions of, or partnerships with, companies, technologies and products that we feel could enhance our capabilities, complement our current products or expand the breadth of our markets or customer base. We have limited experience in acquiring or partnering with other businesses and technologies. Potential and completed acquisitions and strategic partnerships involve numerous risks, including:

• difficulties in integrating operations, technologies, accounting and personnel;

• problems maintaining uniform standards, procedures, controls and policies;

• difficulties in supporting and transitioning customers of our acquired companies;

• diversion of financial and management resources from existing operations;

• risks associated with entering new markets in which we have no or limited prior experience;

• potential loss of key employees; and

• inability to generate sufficient revenues to offset acquisition or start-up costs.

Acquisitions also frequently result in the recording of goodwill and other intangible assets which are subject to potential impairments in the future that could harm our financial results. In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted, which could affect the market price of our stock. As a result, if we fail to properly evaluate acquisitions or partnerships, we may not achieve the anticipated benefits of any such acquisitions or partnerships, and we may incur costs in excess of what we anticipate.

We face potential risks associated with loss, theft or damage of our property or property of our customers.

Some of our customers have entrusted us with proprietary equipment or intellectual property to be used in the design, manufacture and testing of the products we make for them. In some instances, we face potentially millions of dollars in financial exposure to those customers if such equipment or intellectual property is lost, damaged or stolen. Although we take precautions against such loss, theft or damage and we may insure against a portion of these risks, such insurance is expensive, may not be applicable to any loss we may experience and, even if applicable, may not be sufficient to cover any such loss. Further, deductibles for such insurance may be substantial and may adversely affect our operations if we were to experience a loss, even if insured.

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Litigation may distract us from operating our business.

Litigation that may be brought by or against us could cause us to incur significant expenditures and distract our management from the operations and conduct of our business. Furthermore, there can be no assurance that we would prevail in such litigation or resolve such litigation on terms favorable to us, which may adversely affect our operations.

The trading price of our common stock is volatile.

The trading prices of the securities of technology companies, including the trading price of our common stock, have historically been highly volatile. During the 12 month period from July 1, 2009 through June 30, 2010, our common stock traded between $19.81 and $30.56 per share. Factors that could affect the trading price of our common stock include, but are not limited to:

• fluctuations in our financial results;

• announcements of technological innovations or events affecting other companies in our industry;

• changes in the estimates of our financial results;

• changes in the recommendations of any securities analysts that elect to follow our common stock; and

• market conditions in our industry, the industries of our customers and the economy as a whole.

In addition, although we have approximately 25.2 million shares of common stock outstanding as of June 30, 2010, approximately 14.8 million of those shares are held by a few investors. As a result, there is a limited public float in our common stock. If any of our significant stockholders were to decide to sell a substantial portion of its shares the trading price of our common stock could decline.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results.

Effective internal controls are necessary for us to provide reliable financial reports. This effort is made more challenging by our significant overseas operations. If we cannot provide reliable financial reports, our operating results could be misstated, current and potential stockholders could lose confidence in our financial reporting and the trading price of our stock could be negatively affected. There can be no assurance that our internal controls over financial processes and reporting will be effective in the future.

Delaware law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable.

Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management including, among other things, provisions providing for a classified board of directors, authorizing the board of directors to issue preferred stock and the elimination of stockholder voting by written consent. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may discourage, delay or prevent certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These provisions in our charter, bylaws and under Delaware law could discourage delay or prevent potential takeover attempts that stockholders may consider favorable.

Because we do not intend to pay dividends, our stockholders will benefit from an investment in our common stock only if our stock price appreciates in value.

We have never declared or paid any cash dividends on our common stock. We currently intend to retain our future earnings, if any, to finance the expansion of our business and do not expect to pay any cash dividends in the foreseeable future. As a result, the success of an investment in our common stock will depend entirely upon any future appreciation in its value. There is no guarantee that our common stock will appreciate in value or even maintain the price at which it was purchased.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents stock repurchases by month during the third quarter of fiscal 2010:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs(1)
04/01/2010 – 04/30/2010	—	$	—	—	1,687,500
05/01/2010 – 05/31/2010	124,632		24.58	124,632	1,562,868
06/01/2010 – 06/30/2010	198,166		26.17	322,798	1,364,702
Total	322,798	$	25.64	322,798

⁽¹⁾ On December 5, 2008, our Board of Directors approved the establishment of a share repurchase program for up to 2,250,000 shares in the aggregate of our common stock on the open market; this amount represented nine percent of our common stock outstanding as of November 30, 2008, as reported on our most recent Form 10-K filed with the SEC on December 9, 2008. Stock repurchases may be made from time to time, based on market conditions and other factors, including price, regulatory requirement and capital availability. As of June 30, 2010, we had repurchased a total of 885,298 shares for a total value of $16.7 million pursuant to 10b5-1 plans.

Item 5. Other Information

(a) Costs Associated with Exit or Disposal Activities

On June 7, 2010, the Company committed to close its facility in Malaysia in order to move the related functions to China as part of its continuing cost reduction efforts. The Company expects this restructuring to be complete by the end of the first fiscal quarter of 2011, and expects to incur approximately $2.4 million in total restructuring related charges. Based on the Company’s evaluation of the recoverability of impacted long-lived assets, a pre-tax asset impairment charge of $1.6 million was recorded during the three months ended June 30, 2010, including $1.1 million of machinery and equipment and $0.5 million of leasehold improvements. Further, in connection with this restructuring, on July 30, 2010 the Company notified 86 employees of their planned termination, which resulted in $0.3 million of charges for severance during the Company’s third fiscal quarter of 2010. The Company anticipates that the planned termination will result in additional charges for severance and other restructuring-related costs of $0.1 million during the Company’s fourth fiscal quarter of 2010 and $0.4 million during the Company’s first fiscal quarter of 2011.

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Item 6. Exhibits

3.2(1)	Restated Certificate of Incorporation of the Company.
3.4(2)	Amended and Restated Bylaws of the Company.
4.1(1)	Form of Common Stock Certificate.
10.1(1)(14)	Form of Indemnification Agreement between the Company and its officers, directors and agents.
10.2(1)(14)	1994 Stock Plan of the Company, as amended.
10.3(4)(14)	2004 Stock Incentive Plan of the Company, as amended and restated.
10.20(3)	Amended and Restated Stockholders Agreement dated October 25, 2005 between Multi-Fineline Electronix, Inc., Wearnes Technology Pte. Ltd, United Wearnes Technology Pte. Ltd., and WBL Corporation Limited.
10.38(5)	Master Purchase Agreement between Multi-Fineline Electronix, Inc., Multi-Fineline Electronix (Suzhou) Co., Ltd., and Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Sony Ericsson Mobile Communications (USA) Inc. dated April 19, 2006.
10.45(8) (14)	Form of Stock Appreciation Right Agreement.
10.46(8)	Share Purchase Agreement by and among Multi-Fineline Electronix Singapore Pte. Ltd., Pelikon Limited, Multi-Fineline Electronix, Inc., the members of the Company set forth on the signatures pages thereto, and Michael Powell, as the Shareholders’ Representative, dated November 18, 2008.
10.47(9)	Master Development and Supply Agreement by and between Apple Computer, Inc. and Multi-Fineline Electronix, Inc. dated June 22, 2006.
10.50(10)	Engineering, Procurement and Construction/Turn Key Project Agreement by and among Multi-Fineline Electronix (Suzhou) Co., Ltd., Beijing Shiyuan Xida Construction and Technology Company, and China Electronics Engineering Design Institute dated April 24, 2009.
10.51(11)	Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated February 12, 2009.
10.52(7)	Comprehensive Credit Line Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2009.
10.53(7)	Collaboration Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2009.
10.54(7)	Comprehensive Credit Line Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2009.
10.55(7)	Collaboration Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2009.
10.56(12 )	Amendment No. 1 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated August 27, 2009.
10.57(13)(14)	Form of Restricted Stock Unit Agreement.
10.58(6)	Line of Credit Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd., and Bank of China Co., Ltd., Wuzhong Branch dated January 25, 2010.
10.59(6)	Line of Credit Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd., and Bank of China Co., Ltd., Wuzhong Branch dated January 25, 2010.
10.60(15)	Line of Credit Agreement between Multi-Fineline Electronix (Suzhou) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.

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10.61(15)	Facility Offer Letter between Multi-Fineline Electronix (Suzhou) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.62(15)	Line of Credit Agreement between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.63(15)	Facility Offer Letter between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.64(16)	Engineering, Procurement and Construction/Turn Key Project Agreement by and among MFLEX (Chengdu) Co., Ltd., Beijing Shiyuan Xida Construction and Technology Company, and China Electronics Engineering Design Institute, dated April 15, 2010.
10.65(17)	Amendment No. 2 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated February 15, 2010.
10.66(17)	Amendment No. 3 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated March 17, 2010.
10.67*	Line of General Credit Agreement between MFLEX Suzhou Co., Ltd. And Agricultural Bank of China, Suzhou Wuzhong Sub-branch dated July 31, 2010.
10.68*	Facility Offer Letter between MFLEX Suzhou Co., Ltd., and Agricultural Bank of China, Suzhou Wuzhong Sub-branch dated July 31, 2010.
31.1*	Section 302 Certification by the Company’s chief executive officer.
31.2*	Section 302 Certification by the Company’s chief financial officer.
32.1*	Section 906 Certification by the Company’s chief executive officer and chief financial officer.

* Filed herewith

⁽¹⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Registration Statement on Form S-1, as amended (File No. 333-114510) declared effective by the Securities and Exchange Commission (“SEC”), on June 24, 2004.

⁽²⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on December 8, 2009.

⁽³⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on October 25, 2005.

⁽⁴⁾ Incorporated by reference to exhibit (as Exhibit A) to the Company’s Proxy Statement for its 2010 Annual Meeting of Stockholders on Form DEF 14A filed with the SEC on January 20, 2010.

⁽⁵⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2007. Confidential treatment has been granted for certain portions of this agreement.

⁽⁶⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Current Report on Form 8-K filed with the SEC on January 28, 2010.

⁽⁷⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Current Report on Form 8-K filed with the SEC on August 6, 2009.

⁽⁸⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2008.

⁽⁹⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2008. Confidential treatment has been granted for certain portions of this agreement.

⁽¹⁰⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on April 29, 2009.

⁽¹¹⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2009. Confidential treatment has been granted for certain portions of this agreement.

⁽¹²⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2009. Confidential treatment has been granted for certain portions of this agreement.

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⁽¹³⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2009.

⁽¹⁴⁾ Indicates management contract or compensatory plan.

⁽¹⁵⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2010.

⁽¹⁶⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on April 21, 2010.

⁽¹⁷⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2010.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Multi-Fineline Electronix, Inc., a Delaware corporation
Date: August 5, 2010	By:	/s/    Thomas Liguori
		Thomas Liguori Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer of the Registrant)

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EXHIBIT INDEX

3.2(1)	Restated Certificate of Incorporation of the Company.
3.4(2)	Amended and Restated Bylaws of the Company.
4.1(1)	Form of Common Stock Certificate.
10.1(1)(14)	Form of Indemnification Agreement between the Company and its officers, directors and agents.
10.2(1)(14)	1994 Stock Plan of the Company, as amended.
10.3(4)(14)	2004 Stock Incentive Plan of the Company, as amended and restated.
10.20(3)	Amended and Restated Stockholders Agreement dated October 25, 2005 between Multi-Fineline Electronix, Inc., Wearnes Technology Pte. Ltd, United Wearnes Technology Pte. Ltd., and WBL Corporation Limited.
10.38(5)	Master Purchase Agreement between Multi-Fineline Electronix, Inc., Multi-Fineline Electronix (Suzhou) Co., Ltd., and Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Sony Ericsson Mobile Communications (USA) Inc. dated April 19, 2006.
10.45(8) (14)	Form of Stock Appreciation Right Agreement.
10.46(8)	Share Purchase Agreement by and among Multi-Fineline Electronix Singapore Pte. Ltd., Pelikon Limited, Multi-Fineline Electronix, Inc., the members of the Company set forth on the signatures pages thereto, and Michael Powell, as the Shareholders’ Representative, dated November 18, 2008.
10.47(9)	Master Development and Supply Agreement by and between Apple Computer, Inc. and Multi-Fineline Electronix, Inc. dated June 22, 2006.
10.50(10)	Engineering, Procurement and Construction/Turn Key Project Agreement by and among Multi-Fineline Electronix (Suzhou) Co., Ltd., Beijing Shiyuan Xida Construction and Technology Company, and China Electronics Engineering Design Institute dated April 24, 2009.
10.51(11)	Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated February 12, 2009.
10.52(7)	Comprehensive Credit Line Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2009.
10.53(7)	Collaboration Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2009.
10.54(7)	Comprehensive Credit Line Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2009.
10.55(7)	Collaboration Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2009.
10.56(12 )	Amendment No. 1 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated August 27, 2009.
10.57(13)(14)	Form of Restricted Stock Unit Agreement.
10.58(6)	Line of Credit Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd., and Bank of China Co., Ltd., Wuzhong Branch dated January 25, 2010.
10.59(6)	Line of Credit Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd., and Bank of China Co., Ltd., Wuzhong Branch dated January 25, 2010.
10.60(15)	Line of Credit Agreement between Multi-Fineline Electronix (Suzhou) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.61(15)	Facility Offer Letter between Multi-Fineline Electronix (Suzhou) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.62(15)	Line of Credit Agreement between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.

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10.63(15)	Facility Offer Letter between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.64(16)	Engineering, Procurement and Construction/Turn Key Project Agreement by and among MFLEX (Chengdu) Co., Ltd., Beijing Shiyuan Xida Construction and Technology Company, and China Electronics Engineering Design Institute, dated April 15, 2010.
10.65(17)	Amendment No. 2 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated February 15, 2010.
10.66(17)	Amendment No. 3 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated March 17, 2010.
10.67*	Line of General Credit Agreement between MFLEX Suzhou Co., Ltd. And Agricultural Bank of China, Suzhou Wuzhong Sub-branch dated July 31, 2010.
10.68*	Facility Offer Letter between MFLEX Suzhou Co., Ltd., and Agricultural Bank of China, Suzhou Wuzhong Sub-branch dated July 31, 2010.
31.1*	Section 302 Certification by the Company’s chief executive officer.
31.2*	Section 302 Certification by the Company’s chief financial officer.
32.1*	Section 906 Certification by the Company’s chief executive officer and chief financial officer.

* Filed herewith

⁽¹⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Registration Statement on Form S-1, as amended (File No. 333-114510) declared effective by the Securities and Exchange Commission (“SEC”), on June 24, 2004.

⁽²⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on December 8, 2009.

⁽³⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on October 25, 2005.

⁽⁴⁾ Incorporated by reference to exhibit (as Exhibit A) to the Company’s Proxy Statement for its 2010 Annual Meeting of Stockholders on Form DEF 14A filed with the SEC on January 20, 2010.

⁽⁵⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2007. Confidential treatment has been granted for certain portions of this agreement.

⁽⁶⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Current Report on Form 8-K filed with the SEC on January 28, 2010.

⁽⁷⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Current Report on Form 8-K filed with the SEC on August 6, 2009.

⁽⁸⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2008.

⁽⁹⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2008. Confidential treatment has been granted for certain portions of this agreement.

⁽¹⁰⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on April 29, 2009.

⁽¹¹⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2009. Confidential treatment has been granted for certain portions of this agreement.

⁽¹²⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2009. Confidential treatment has been granted for certain portions of this agreement.

⁽¹³⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2009.

⁽¹⁴⁾ Indicates management contract or compensatory plan.

⁽¹⁵⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2010.

⁽¹⁶⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on April 21, 2010.

⁽¹⁷⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2010.

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