-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WkRALojDpGShF7uHHdzrIgV5g3TuVLN50+E1UR17U+giCj5NOMYWWlXGcfk2S97O lD4vfuR3NBzoVOKtZ+e6+A== 0001157523-07-011124.txt : 20071113 0001157523-07-011124.hdr.sgml : 20071112 20071113060142 ACCESSION NUMBER: 0001157523-07-011124 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20070930 FILED AS OF DATE: 20071113 DATE AS OF CHANGE: 20071113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALPEY FISHER CORP CENTRAL INDEX KEY: 0000085608 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES & ROLLING & FINISHING MILLS [3310] IRS NUMBER: 060737363 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04184 FILM NUMBER: 071233822 BUSINESS ADDRESS: STREET 1: 75 SOUTH ST CITY: HOPKINTON STATE: MA ZIP: 01748 BUSINESS PHONE: 5084359039 MAIL ADDRESS: STREET 1: 75 SOUTH STREET CITY: HOPKINTON STATE: MA ZIP: 01748 FORMER COMPANY: FORMER CONFORMED NAME: MATEC CORP/DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: RSC INDUSTRIES INC DATE OF NAME CHANGE: 19840515 FORMER COMPANY: FORMER CONFORMED NAME: REEVES INDUSTRIES INC DATE OF NAME CHANGE: 19710520 10-Q 1 a5542427.txt VALPEY-FISHER CORPORATION 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2007 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 1-4184 Valpey-Fisher Corporation (Exact name of registrant as specified in its charter) Maryland 06-0737363 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 75 South St., Hopkinton, Massachusetts 01748 (Address of principal executive offices) (Zip Code) (508) 435-6831 (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 is large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act): (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] As of November 8, 2007, the number of shares outstanding of Registrant's Common Stock, par value $.05 was 4,282,503. - 1 -
Valpey-Fisher Corporation INDEX PAGE ----- ---- PART I. FINANCIAL INFORMATION ITEM 1. - Financial Statements - Consolidated Condensed Balance Sheets - September 30, 2007 (Unaudited) and December 31, 2006 (Audited) 3 Consolidated Statements of Operations - (Unaudited) Three Months and Nine Months Ended September 30, 2007 and October 1, 2006 4 Consolidated Condensed Statements of Cash Flows - (Unaudited) Nine Months Ended September 30, 2007 and October 1, 2006 5 Notes to Consolidated Condensed Financial Statements - (Unaudited) 6-9 ITEM 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations 10-12 ITEM 3. - Quantitative and Qualitative Disclosures About Market Risk 13 ITEM 4. - Controls and Procedures 13 PART II. OTHER INFORMATION ITEM 1A.- Risk Factors 14 ITEM 6. - Exhibits 14 SIGNATURES 15
- 2 - PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Valpey-Fisher Corporation and Subsidiaries Consolidated Condensed Balance Sheets (In thousands, except share data) 9/30/07 12/31/06 (Unaudited) (Audited) ---------------------------- ASSETS Current assets: Cash and cash equivalents $ 9,558 $ 9,184 Accounts receivable, net of allowances of $104 in 2007 and $115 in 2006 1,823 1,614 Inventories, net 1,206 810 Deferred income taxes 1,020 798 Other current assets 200 69 - --------------------------------------------------------------------------------------------------------- Total current assets 13,807 12,475 Property, plant and equipment, at cost 10,999 10,719 Less accumulated depreciation 9,213 8,826 - --------------------------------------------------------------------------------------------------------- 1,786 1,893 Other assets 175 161 - --------------------------------------------------------------------------------------------------------- Total assets $ 15,768 $ 14,529 ========================================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 675 $ 649 Accrued liabilities 1,756 1,674 - --------------------------------------------------------------------------------------------------------- Total current liabilities 2,431 2,323 Deferred income taxes 273 343 Stockholders' equity: Preferred stock, $1.00 par value- Authorized 1,000,000 shares; issued none - - Common stock, $.05 par value- Authorized 10,000,000 shares; Issued and outstanding: 4,282,503 in 2007 and 4,256,503 shares in 2006 214 213 Capital surplus 5,476 5,276 Retained earnings 7,374 6,415 Less unearned compensation - (41) - --------------------------------------------------------------------------------------------------------- Total stockholders' equity 13,064 11,863 - --------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 15,768 $ 14,529 ========================================================================================================= See notes to consolidated condensed financial statements.
- 3 -
Valpey-Fisher Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended ----------------------------- --------------------------- 9/30/07 10/1/06 9/30/07 10/1/06 -------------- -------------- ------------ -------------- Net sales $ 3,386 $ 2,875 $ 10,053 $ 8,674 Cost of sales 1,988 1,813 5,962 5,529 - ------------------------------------------------------------------------------------------------------------- Gross profit 1,398 1,062 4,091 3,145 Operating expenses: Selling and advertising 436 391 1,360 1,223 General and administrative 464 418 1,382 1,348 Research and development 115 137 349 380 - ------------------------------------------------------------------------------------------------------------- 1,015 946 3,091 2,951 Operating profit 383 116 1,000 194 Other income (expense): Interest income 105 63 303 186 (Loss) on sale of asset - - - (6) - ------------------------------------------------------------------------------------------------------------- 105 63 303 180 Earnings before income taxes 488 179 1,303 374 Income tax (expense) (145) (81) (344) (181) - ------------------------------------------------------------------------------------------------------------- Net earnings $ 343 $ 98 $ 959 $ 193 ============================================================================================================= - ------------------------------------------------------------------------------------------------------------- Basic earnings per share $ .08 $ .02 $ .23 $ .05 - ------------------------------------------------------------------------------------------------------------- Diluted earnings per share $ .08 $ .02 $ .22 $ .05 - ------------------------------------------------------------------------------------------------------------- Basic weighted average shares 4,259 4,217 4,247 4,212 Diluted weighted average shares 4,431 4,264 4,394 4,257 See notes to consolidated condensed financial statements.
- 4 -
Valpey-Fisher Corporation and Subsidiaries Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended ------------------------- 9/30/07 10/1/06 ------------------------- Cash flows from operating activities: Net earnings $ 959 $ 193 Adjustments to reconcile net earnings to net cash provided (used) by operating activities of continuing operations: Depreciation 387 504 Deferred income taxes (138) (85) Stock based compensation 125 127 Restricted stock compensation, net of taxes 29 26 Stock option income tax benefit 18 - Loss on sale of asset - 6 Changes in operating assets and liabilities: Accounts receivable, net (209) (288) Inventories, net (396) 241 Other current assets (131) (26) Accounts payable and accrued expenses (36) (198) - --------------------------------------------------------------------------------------------------------- Net cash provided by operating activities of continuing operations 608 500 Cash flows from operating activities: - Discontinued Operations Change in accrued expenses (10) (48) - --------------------------------------------------------------------------------------------------------- Net cash (used) in operating activities of discontinued operations (10) (48) - --------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 598 452 - --------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (280) (279) Proceeds from sale of assets - 27 Other, net (14) (8) - --------------------------------------------------------------------------------------------------------- Net cash (used) in investing activities (294) (260) - --------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Stock options exercised 70 27 - --------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 70 27 - --------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 374 219 Cash and cash equivalents: Beginning of period 9,184 7,920 ------------------------- End of period $ 9,558 $ 8,139 ========================= Supplemental Cash Flow Information: Income taxes paid $ 571 $ 495 See notes to consolidated condensed financial statements.
- 5 - Valpey-Fisher Corporation and Subsidiaries Notes to Consolidated Condensed Financial Statements (Unaudited) 1. Financial Presentation: The unaudited interim financial statements, in the opinion of management, reflect all adjustments necessary for fair presentation of results for such periods. The results of operations for any interim period are not necessarily indicative of results for the full year. These unaudited interim financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company's 2006 Annual Report on Form 10-K as filed with the Securities and Exchange Commission. 2. Stock Compensation Plans: Effective January 1, 2006, the Company began recording compensation expense associated with stock options in accordance with Statement of Financial Accounting Standards ("SFAS") No. 123R, "Share-Based Payment" using the modified prospective method. Under this method, compensation expense associated with stock options recognized in the 2007 and 2006 includes: (a) expense related to the remaining unvested portion of all stock option awards granted prior to December 31, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123, and (b) expense related to all stock option awards granted subsequent to December 31, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123R. As a result of the adoption of SFAS No. 123R, the Company recorded the following stock-based compensation expense in the Consolidated Statement of Operations (in thousands):
Three Months Ended Nine Months Ended ------------------------------------------------------ 9/30/07 10/1/06 9/30/07 10/1/06 ------------------------------------------------------ Cost of sales $ 7 $ 8 $ 20 $ 25 Selling and advertising 8 7 22 21 General and administrative 25 25 75 74 Research and development 2 3 8 7 ------------------------------------------------------ Pre-tax stock-based compensation expense 42 43 125 127 Income tax (benefit) (1) (1) (3) (3) ------------------------------------------------------ Net stock-based compensation expense $ 41 $ 42 $ 122 $ 124 ======================================================
At September 30, 2007, the Company has four Stock Option Plans that allow for the granting of options to officers, key employees, non-employee director, and other individuals to purchase a maximum of 1,000,000 shares of the Company's common stock. At September 30, 2007, options for 172,666 shares remain available for future grants under the Plans. The option price and terms are recommended by the Company's Compensation Committee to the Company's Board of Directors for approval. The maximum contractual term of an option is ten years. The options granted may qualify as incentive stock options ("ISO's"). Options granted prior to December 31, 2005 generally vested 20% per year on each of the first, second, third, fourth, and fifth anniversaries of the date of grant with a contractual life of ten years. The options granted in 2006, vest 33% on each of the first, second and third anniversaries of the date of grant and have a contractual life of five years. Compensation expense related to stock options granted is recognized ratably over the vesting period of the option. The Company issues new shares upon the exercise of stock options. - 6 - There were no stock option grants in the quarter ended or nine months ended September 30, 2007 or in the quarter ended October 1, 2006. Stock options for 10,000 shares were granted in the nine months ended October 1, 2006. The estimated fair value of each option grant is determined on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for stock option grants during the nine months ended October 1, 2006: Stock options granted 10,000 Weighted-average exercise price $ 3.25 Weighted-average grant date fair value $ 1.06 Assumptions: Risk-free interest rate 4.6% Expected volatility 36% Expected term in years 3.5 Expected dividend yield 0% The risk-free interest rate is based on the yield on zero-coupon U.S. treasury securities at the time of grant for a period commensurate with the expected term. The expected volatility is calculated using the Black-Scholes model based on the historic prices for a period commensurate with the expected term. The expected term of the option is determined by using the "simplified method" as provided for in Staff Accounting Bulletin No. 107. A summary of the activity under all the Company's stock option plans as of September 30, 2007 and the changes during the nine month period then ended are as follows:
Weighted- Average Weighted- Remaining Average Contractual Aggregate Number of Exercise Price Life Intrinsic Shares Per Share In Years Value -------------- -------------- ----------- ----------- Outstanding at December 31, 2006 486,250 $ 3.39 Options granted 0 Options exercised (26,000) 2.69 -------------- ----------- ----------- Outstanding at September 30, 2007 460,250 $ 3.43 5.8 $ 1,202,500 -------------- ----------- ----------- Exercisable at September 30, 2007 343,650 $ 3.59 5.4 $ 868,800 -------------- ----------- -----------
- 7 - A summary of the status of the Company's nonvested stock options as of September 30, 2007 and the changes during the nine month period then ended is as follows: Weighted-Average Grant-Date Shares Fair Value ---------------- --------------------- Nonvested at December 31, 2006 205,246 $ 1.76 Granted 0 0 Vested (88,646) 1.75 ---------------- --------------------- Nonvested at September 30, 2007 116,600 $ 1.77 ================ ===================== At September 30, 2007, there was approximately $172,400 of total unrecognized compensation cost related to nonvested stock options granted. That cost is expected to be recognized over a weighted-average period of 1.8 years. The total grant-date fair value of stock options that vested during the nine months ended September 30, 2007 was approximately $155,400. At September 30, 2007 and December 31, 2006 there were 20,000 shares of nonvested restricted stock with a weighted-average grant-date fair value of $2.95 per share. 3. Comprehensive Income (Loss): During the three and nine months ended September 30, 2007 and October 1, 2006, there were no differences between comprehensive income (loss) and net income (loss). 4. Inventories, net: Inventories, net of reserves, consist of the following: (in thousands) 9/30/07 12/31/06 ---------------------------------------------------------------------- (unaudited) Raw materials $ 716 $ 481 Work in process 165 106 Finished goods 325 223 ---------------------------- $ 1,206 $ 810 ============================ 5. Earnings Per Share: Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares outstanding during the period, plus the net incremental shares that would be issued if dilutive outstanding stock options were exercised using the treasury stock method and vesting of restricted stock. The assumed proceeds under the treasury stock method include: o the amount paid to the Company upon exercise of the option; o compensation expense for future services that the Company has not yet recognized; and o the amount of excess tax benefits, if any, that would be credited to additional paid-in capital upon exercise of the options. The computation of diluted earnings per share excludes stock options with an exercise price in excess of the average market price as they are antidilutive. In calculating diluted earnings per share, the dilutive effect of stock options is computed using the average market price for the respective period. - 8 - The following table shows a reconciliation of weighted average shares (in thousands):
Three Months Ended Nine Months Ended -------------------- -------------------- 9/30/07 10/1/06 9/30/07 10/1/06 -------------------- -------------------- Weighted average shares outstanding 4,259 4,217 4,247 4,212 Dilutive effect of stock options outstanding, using the treasury stock method 152 7 127 5 Restricted stock 20 40 20 40 -------------------- -------------------- Diluted weighted average shares outstanding 4,431 4,264 4,394 4,257 ==================== ==================== The following table shows the potentially dilutive securities which have been excluded from the dilutive earnings per share calculation (in thousands): Three Months Ended Nine Months Ended -------------------- -------------------- 9/30/07 10/1/06 9/30/07 10/1/06 --------------------------------------------- Stock options where the exercise price was greater than the average market price 19 29 19 29 Stock options where the assumed proceeds exceed the average market price during the period - 396 - 391
6. Income Taxes: Effective January 1, 2007, the Company adopted Financial Accounting Standards Board ("FASB") Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 prescribes how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return. Adoption of FIN 48 on January 1, 2007 did not result in a cumulative effect adjustment to retained earnings. At January 1, 2007 and September 30, 2007, the Company had no reserves for unrecognized tax benefits on the balance sheet. The Company's federal income tax return for 2004 has been examined by the IRS. The Company's state of Massachusetts tax returns for 2003 through 2006 are open tax years. The Company's policy is to include interest expense on underpayments of income taxes in the Company's income tax provision whereas penalties are included in general and administrative expense. At December 31, 2006, the Company had state tax loss benefit carryforwards of $575,500 that began to expire in 2007. Due to the uncertainty of the realization of this state tax benefit and management's estimate that operating income and the reversal of future taxable temporary differences would more likely than not be sufficient to recognize all of the other deferred tax assets, the Company established a valuation allowance of $471,000 at December 31, 2006. During the quarter and nine months ended September 30, 2007, the Company reduced the valuation allowance for deferred income taxes and income tax expense by $33,000 and $136,000, respectively. The reduction reflects the Company's expectation that it is more likely than not that it will generate future taxable income to utilize this ammount of deferred tax assets. 7. Recent Accounting Pronouncements: In September 2006, the FASB issued SFAS No. 157 "Fair Value Measurements" ("SFAS No. 157"), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007. The Company has not yet determined the impact of adopting SFAS No. 157 on our consolidated financial statements. -9- In February 2007, the FASB issued SFAS No. 159 "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115 ("SFAS No. 159") which permits an entity to elect to measure certain assets and liabilities at fair value at specified election dates. The provisions of SFAS No. 159 are effective for fiscal years beginning after November 15, 2007. The Company has not yet determined the impact of adopting SFAS No. 159 on our consolidated financial statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Management believes that judgments and estimates related to our critical accounting policies could materially affect its consolidated financial statements. Our most critical accounting policies, which were discussed in our Annual Report on Form 10-K for the year ended December 31, 2006, pertain to accounts receivable, inventories and income taxes. These policies continue to be our most critical accounting policies for the period covered by this report and there were no significant changes in the application of those policies during this reporting period. Liquidity and Capital Resources Cash and cash equivalents amounted to $9,558,000 at September 30, 2007, an increase of $374,000 from the December 31, 2006 balance. During this period, our operations provided cash of $598,000, investing activities used cash of $294,000 and financing activities provided cash of $70,000. Cash provided by operations of $598,000 resulted mainly from the net earnings of $959,000 and net adjustments of $421,000 for the non-cash effects of depreciation, deferred income taxes and stock compensation expense offset by a $782,000 increase in working capital. The inventory increase of $396,000 is mainly due to a combination of the lead times for certain raw material items and the necessary inventory to support the current level of shipments and backlog and to meet customer delivery requirements. The $209,000 increase in accounts receivable is mainly due to the increase in the current quarter's sales over the 4th quarter sales in 2006. Capital expenditures during the nine months ended September 30, 2007 amounted to $280,000. We believe that based on our current working capital and the expected cash flow from operations, our resources are sufficient to meet our financial needs and to fund our capital expenditures for at least the next twelve months. Off-Balance Sheet Arrangements We do not maintain any off-balance sheet financing arrangements. Contractual Obligations During the normal course of business, we incur certain commitments to make future payments for the purchase of inventory, equipment, and production supplies based on projected requirements. At September 30, 2007, we had outstanding purchase commitments totaling approximately $882,000, all of which are expected to be fulfilled within the next twelve months. -10- Results of Operations for the Three and Nine Months Ended September 30, 2007 Compared to the Three and Nine Months Ended October 1, 2006 During the quarter ended September 30, 2007, net sales increased $511,000 or 18% over the comparable period in 2006. The sales increase is mainly attributable to a $433,000 or 48% sales increase in our high precision oscillator and high reliability product lines as unit sales increased 92% over the comparable 2006 quarter. Total bookings during the current quarter amounted to $3,333,000 versus $3,190,000 in the 2006 comparable quarter. Our backlog amounted to $2,244,000 at September 30, 2007 compared to $2,161,000 at October 1, 2006. For the nine months ended September 30, 2007, net sales increased $1,379,000 or 16% over the comparable period in 2006. This sales increase is mainly attributable to a $1,492,000 or 52% sales increase in our high precision oscillator, timing module, and high reliability product lines as unit sales increased 60% over the 2006 period. This increase was partially offset by a $209,000 or 4% sales decrease in our standard oscillator product line as unit sales decreased 16% from the 2006 level. Year-to-date bookings during 2007 amounted to $10,195,000 versus $9,220,000 in 2006. The sales increases in both the quarter and nine months ended periods is mainly attributable to the higher beginning backlog and the increased levels of bookings during both periods. We continue to pursue sales of our more value-added, high reliability and higher average selling price products. We reported a $1,398,000 gross profit (41% of net sales) in the current quarter versus a $1,062,000 gross profit (37% of net sales) in the 2006 quarter. During the nine months ended September 30, 2007, the gross profit amounted to $4,091,000 (41% of net sales) compared to a gross profit of $3,145,000 (36% of net sales) in the 2006 period. During both periods ended September 30, 2007, the higher margin percentages were mainly due to the increased percentage of sales of our high precision oscillator, timing module, and high reliability product lines compared to sales of our standard oscillator product line. All product lines during both periods also benefited from the favorable effect of spreading the fixed overhead costs over the increased sales volume. Direct labor and raw material costs as a percentage of overall sales in the 2007 periods increased slightly over comparable 2006 periods due to changes in product mix. As a percentage of sales, selling and advertising expense amounted to 12.9% during the current quarter versus 13.6% in the same quarter of 2006. Total selling and advertising expenses increased $45,000 or 12% over the comparable quarter in 2006 mainly due to higher personnel costs ($42,000) and commission expense to outside sales representatives ($20,000), partially offset by lower advertising ($10,000) and travel and entertainment ($8,000) expenses. During the nine months ended September 30, 2007, selling and advertising expenses amounted to $1,360,000 (13.5% of sales) compared to $1,223,000 (14.1% of sales) in the same period last year. This overall expense increase of $137,000 or 11% over the comparable nine month period in 2006 is mainly due to higher personnel costs ($99,000) and increased commission expense to outside sales representatives ($46,000). For the quarter ended September 30, 2007, general and administrative expenses amounted to $464,000 (13.7% of sales) compared to $418,000 (14.5% of sales) in the 2006 period. The $46,000 expense increase over the 2006 period is mainly due to increases of $29,000 in personnel costs, resulting primarily from a higher provision for the key employee bonus plan and $14,000 in professional fees. During the nine months ended September 30, 2007, general and administrative expenses amounted to $1,382,000 (13.7% of sales) versus $1,348,000 (15.5% of sales) in the comparable 2006 period. The $34,000 expense increase over last year is mainly due to increases of $39,000 in personnel costs, resulting primarily from a higher provision for the key employee bonus plan and $36,000 in professional fees, partially offset by a reduction of $20,000 in insurance expense and a net $21,000 reduction in the remaining overall expenses. -11- During the quarter and nine months ended September 30, 2007, research and development expenses decreased $22,000 and $31,000, respectively, from the comparable periods in 2006 primarily as a result of decreased personnel costs. The 2007 increases in interest income over both 2006 periods were due to a combination of higher average cash balances and higher interest rates during the current year. The estimated annual combined federal and state income tax rate for 2007 is 26% compared to 48% in 2006. The 2007 projected rate includes a reduction in the valuation allowance for deferred income taxes which amounts to approximately a 10% point reduction in the 2007 rate. The effect of this valuation adjustment was to reduce income tax expense by $33,000 and $136,000 during the quarter and nine months ended September 30, 2007, respectively. The 2007 and 2006 projected rates were increased by approximately 3% points and 14% points, respectively, as a result of the effect of nondeductible stock option expense resulting from the adoption of SFAS No. 123R. The majority of the stock option expense results from incentive stock options and under SFAS No. 123R, the expense does not generate a tax deduction and related tax benefit. As we have state income tax NOL carryforwards available, there is no estimated state income tax provision for 2007 and 2006. For the quarter ended September 30, 2007, we reported an operating profit of $383,000 compared to an operating profit of $116,000 in comparable quarter of 2006. The operating profit in 2007 and 2006 was net of $42,000 and $43,000, respectively, for stock option expense resulting from the effect of SFAS No. 123R. Interest income amounted to $105,000 in 2007 compared to $63,000 in 2006. We reported a pre-tax profit of $488,000 during the quarter ended September 30, 2007 compared to a pre-tax profit of $179,000 in comparable 2006 period. For the quarter ended September 30, 2007, we reported net earnings of $343,000 versus net earnings of $98,000 in 2006. We reported an operating profit of $1,000,000 for the nine months ended September 30, 2007 compared to an operating profit of $194,000 for the comparable period of 2006. The operating profit in 2007 and 2006 was net of $125,000 and $127,000, respectively, for stock option expense resulting from the effect of SFAS No. 123R. Interest income amounted to $303,000 in 2007 compared to $186,000 in 2006. We reported a pre-tax profit of $1,303,000 during the nine months ended September 30, 2007 compared to a pre-tax profit $374,000 in comparable 2006 period. For the nine months ended September 30, 2007, we reported net earnings of $959,000 versus net earnings of $193,000 in 2006. Forward-Looking Statements Certain statements made herein contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Words such as "expects", "believes", "estimates", "plans" or similar expressions are intended to identify such forward-looking statements. The forward-looking statements are based on our current views and assumptions and involve risks and uncertainties that include, but not limited to: our ability to continue to achieve profitability, the current production over-capacity within the suppliers of frequency control devices, the ability to develop, market and manufacture new innovative products competitively, the fluctuations in product demand of the telecommunications industry, the ability of us and our suppliers to produce and deliver materials and products competitively, the ability to limit the amount of the negative effect on operating results caused by pricing pressure and our ability to comply with Section 404 of the Sarbanes-Oxley Act. -12- Item 3. Quantitative and Qualitative Disclosures About Market Risk Our cash balances in excess of operating requirements are currently invested in money market accounts. These money market accounts are subject to interest rate risk and interest income will fluctuate in relation to general money market rates. Based on the cash and cash equivalent balance at September 30, 2007, and assuming the balance was totally invested in money market instruments for the full year, a hypothetical 1% point increase or decrease in interest rates would result in an approximate $95,600 increase or decrease in interest income. We purchase certain inventory from and sell product in foreign countries. As these activities are currently transacted in U.S. dollars, they are not subject to foreign currency exchange risk. However, significant fluctuation in the currencies where we purchase inventory or sell product could make the U.S. dollar equivalent of such transactions more or less favorable to us and the other involved parties. Item 4. Controls and Procedures Evaluation of disclosure controls and procedures. At the end of the period covered by this report, we carried out an evaluation, under the supervision and with our management, including the Company's President and Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded, except as noted below, that the Company's disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Company's periodic SEC filings and that information required to be disclosed by the Company in these periodic filings is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. As stated in the Company's 2006 Form 10-K, the Company's independent registered accounting firm advised management and the audit committee, that the following identified internal control deficiency constituted a significant deficiency in the Company's internal control. Reliance on the Chief Financial Officer for period end financial reporting functions, accounting estimates and income taxes. We believe that this deficiency did not affect the accuracy of our financial statements in this report. Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Management will continue to evaluate the employees involved and the control procedures in place, the risks associated with such lack of segregation of duties and whether the potential benefits of adding employees to clearly segregate duties or other alternatives justifies the expense associated with the changes. In addition, management will be reviewing this matter with its outside consultants to examine other available alternative solutions. Changes in internal control. During the third quarter of 2007, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. -13- PART II - OTHER INFORMATION Item1A. Risk Factors Information regarding risk factors are set forth under the caption "Forward-Looking Statements" in Part 1, Item 2 of this Form 10-Q and in Part 1, Item 1A. of the Company's Annual Report on Form 10-K for the Year Ended December 31, 2006. There have been no material changes from the risk factors previously disclosed in the Company's 2006 Annual Report on Form 10-K. Item 6. Exhibits 3.3 By-Laws effective October 24, 2007. Filed herewith. 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 32.1 Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. -14- SIGNATURES 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. Valpey-Fisher Corporation Date: November 12, 2007 /s/ Michael J. Ferrantino ------------------------- Michael J. Ferrantino, President and Chief Executive Officer Date: November 12, 2007 /s/ Michael J. Kroll --------------------- Michael J. Kroll Vice President, Treasurer and Chief Financial Officer -15- EX-3.3 2 a5542427ex3_3.txt EXHIBIT 3.3 Exhibit 3.3 Valpey-Fisher Corporation By-Laws - effective October 24, 2007 ARTICLE I OFFICES Section 1. Offices. The Corporation shall maintain a registered office in Maryland. The Corporation may maintain such other offices and keep its books, documents and records at such other places both within and without the State of Maryland as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDERS Section 2. Annual Meetings. An annual meeting of stockholders for the election of directors and the transaction of such other business as may properly come before the meeting shall be held in May on such date and at such time as the Board of Directors each year shall fix. Section 3. Notice of Annual Meeting. Written or printed notice of the annual meeting stating the place, date and hour of the meeting shall be delivered not less than ten nor more than ninety days before the date of the meeting, by mail, by or at the direction of the chief executive officer, the Secretary, or the officer or persons calling the meeting, to each stockholder of record entitled to vote at such meeting. Section 4. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Articles of Incorporation, may be called by the chief executive officer or the Board of Directors. The business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice of the meeting. Section 5. Notice of Special Meetings. Written or printed notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than ninety days before the date of the meeting, by mail, by or at the direction of the chief executive officer, the Secretary, or the officer or persons calling the meeting, to each stockholder of record entitled to vote at such meeting. The notice shall also indicate that it is being issued by, or at the direction of, the person calling the meeting. Section 6. Quorum. The holders of a majority of the shares issued and outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Articles of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed. -16- Section 7. Voting. At any meeting of stockholders each outstanding share having voting power shall be entitled to one vote on each matter submitted to a vote. A stockholder may vote either in person or by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. All elections shall be determined by plurality vote, and except as otherwise provided by statute or in the Articles of Incorporation, all other matters shall be determined by vote of a majority of the shares present or represented at such meeting and voting on such matters. Section 8. Inspectors of Election. The Board of Directors in advance of any meeting of stockholders may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at a meeting of stockholders may, and, on the request of any stockholder entitled to vote thereat, shall appoint one or more inspectors. In case any person appointed as inspector fails to appear or act, the vacancy may be filled by the Board of Directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. Section 9. List of Stockholders. A list of stockholders as of the record date, certified by the officer of the Corporation responsible for its preparation or by the transfer agent, shall be produced at any meeting of stockholders upon the request thereat or prior thereto of any stockholder. If the right to vote at any meeting is challenged, the inspectors of election, or person presiding thereat shall require such list of stockholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be stockholders entitled to vote thereat may vote at such meeting. ARTICLE III DIRECTORS Section 1. Number, Qualification and Term. The property and business of the Corporation shall be managed by its Board of Directors consisting of not less than Five (5) nor more than Thirteen (13) persons. The number of directors constituting the entire Board shall be Seven (7); provided, however, that from time to time, such number may be decreased to not less than Five (5) or increased to not more than Thirteen (13) persons by amendment of this section of the By-laws by a majority of the entire Board of Directors. Directors need not be stockholders. They shall be elected at the Annual Meeting of Stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify. Section 2. Removal. Any or all of the directors may be removed for cause at any time by the vote of the stockholders. Section 3. Any vacancy occurring in the Board of Directors for any cause other than by reason of an increase in the number of directors may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum. Any vacancy occurring by reason of an increase in the number of directors may be filled by action of a majority of the entire Board of Directors. A director elected by the Board of Directors to fill a vacancy shall be elected to hold office until the next annual meeting of stockholders or until his successor is elected and qualifies. Section 4. Additional Powers. In addition to the powers and authorities by these By-Laws expressly conferred upon it, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. -17- ARTICLE IV MEETINGS OF THE BOARD OF DIRECTORS Section 1. Place. Meetings of the Board of Directors, regular or special, may be held either within or without the State of Maryland. Section 2. First Meeting. The first meeting of each newly elected Board of Directors shall be held immediately after the annual meeting of stockholders at the same place as such meeting is held and no notice of such meeting to the newly elected directors shall be necessary in order legally to constitute the meeting provided a quorum shall be present, or it may convene at such place and time as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a duly executed waiver of notice thereof. Section 3. Regular Meetings. Regular meetings of the Board of Directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the Board. Section 4. Special Meetings. Special meetings of the Board of Directors may be called by the chief executive officer on written notice to each director, deposited in the United States mail no later than the third calendar day preceding the meeting date or delivered by hand or to the telegraph company no later than the first calendar day preceding the meeting date; special meetings shall be called by the chief executive officer or Secretary in like manner and on like notice on the written request of two directors. Section 5. Quorum. A majority of the entire Board of Directors shall constitute a quorum for the transaction of business unless a greater or lesser number is required by law or by the Articles of Incorporation. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors, unless the vote of a greater number is required by law or by the Articles of Incorporation. If a quorum shall not be present at any meeting of directors, the directors present may adjourn the meeting from time to time. Notice of any such adjournment shall be given to any director who was not present at the time of such adjournment and unless announced at the meeting to the other directors. Section 6. Consent in Lieu of Meeting. Any action required or permitted to be taken by the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the Board or committee shall be filed with the minutes of the proceedings of the Board or committee. Section 7. Telephone Participation at Meetings. Any one or more of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or of such committee by means of conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation in a meeting by such means shall constitute presence in person at a meeting. -18- ARTICLE V COMMITTEES Section 1. Committees. The Board of Directors, by resolution adopted by a majority of the entire board, may designate, from among its members, an executive committee and other committees consisting of three or more directors, which, to the extent provided in the resolution, shall have all the authority of the Board, except as otherwise required by law. Vacancies in the membership of such committees shall be filled by the Board of Directors at a regular or special meeting. Such committees shall keep regular minutes of its proceedings and report the same to the Board when required. Subject to the provisions of these By-Laws, the executive committee and each other committee shall fix its own rules of procedure and shall meet as provided by such rules or by resolution of the Board of Directors and it shall also meet at the call of the Chairman of the Board or President of the Corporation or any two members of such committee. A majority of the executive committee and of each other committee shall constitute a quorum for the transaction of business and the vote of a majority of the members of such committee present at any meeting at which there is a quorum shall be the act of such committee. ARTICLE VI NOTICES Section 1. Form; Delivery. Whenever, under the provisions of the statutes or of the Articles of Incorporation or of these By-Laws, notice is required to be given to any director or stockholder, such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by hand delivery, effective upon such delivery, or by telegram which notice shall be deemed to have been given when delivered to the telegraph company. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Section 2. Waiver of Notice. Whenever any notice is required to be given under the provisions of any statute or under the provisions of the Articles of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. In addition, any stockholder attending a meeting of stockholders in person or by proxy without protesting prior to the conclusion of the meeting, the lack of notice thereof to him, and any director attending a meeting of the Board of Directors without protesting prior to the meeting or at its commencement such lack of notice shall be conclusively deemed to have waived notice of such meeting. ARTICLE VII OFFICERS AND AGENTS Section 1. Officers. The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board, a President, a Vice-President, a Secretary and a Treasurer. The Board of Directors may also choose additional Vice-Presidents, and one or more Assistant Secretaries and Assistant Treasurers. Section 2. Election. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a Chairman of the Board, a President, one or more Vice-Presidents, a Secretary and a Treasurer. Any two or more offices may be held by the same person. -19- Section 3. Additional Officers and Agents. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Section 4. Compensation. The salaries of all officers of the Corporation shall be fixed by the Board of Directors and the compensation of employees and agents shall be so fixed or shall be fixed by officers thereunto duly authorized. Section 5. Term of Office; Removal. The officers of the Corporation shall hold office until their successors are chosen and qualify. Any officer or agent elected or appointed by the Board of Directors may be removed at any time with or without cause by the Board. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors. Section 6. Powers and Duties of the Chairman of the Board. The Chairman of the Board of Directors shall preside at all meetings of the Board and all meetings of the stockholders at which he shall be present and shall have such other powers and duties as may from time to time be assigned to him by the Board of Directors. Section 7. Powers and Duties of the President. The President shall be the Chief Executive Officer of the Corporation, and shall have the general management and superintendence of the affairs of the Corporation, subject, however, to the control of the Board of Directors; and in all cases where, and to the extent that, the duties of the other officers of the Corporation are not specifically prescribed by By-Laws or rules or regulations of the Board of Directors, the President may prescribe such duties. He shall have general and active supervision over the property, business and affairs of the Corporation and may sign, execute, and deliver in the name of the Corporation deeds, mortgages, bonds, contracts, powers of attorney, and other instruments, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or these By-Laws to some other officer or agent of the Corporation or shall be required by law or otherwise to be signed or executed, and may exercise any and all powers and perform any and all duties relating to such supervision, or which are imposed upon him by the By-Laws, or by the Board of Directors. Subject to such limitations as the Board of Directors may from time to time prescribe, the Chief Executive Officer shall have power to appoint and to dismiss all such agents and employees of the Corporation who are not officers thereof (including any appointed by the Board) as he may deem proper, and to prescribe their duties, and subject to like limitations, delegate to other officers of the Corporation any other of the powers and duties conferred upon him by the By-Laws or by the Board of Directors. Section 8. Powers and Duties of the Vice President. The Vice-President shall perform the duties as may be prescribed by the Board of Directors and subject to the chief executive officer. Section 9. Powers and Duties of the Secretary. The Secretary shall attend all sessions of the Board and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform like duties for any committee of the Board when required. He shall cause to be given notice of all meetings of stockholders and directors and shall perform such other duties as pertain to his office. He shall keep in safe custody the seal of the Corporation and when authorized by the Board of Directors, affix it when required to any instrument. Section 10. Powers and Duties of the Treasurer. The Treasurer shall have the custody of all the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the chief executive officer and directors at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as treasurer and of the financial condition of the Corporation. -20- Section 11. Powers and Duties of Other Officers. All other officers shall have such duties and exercise such powers as generally pertain to their respective offices and all officers shall have such other duties and exercise such other powers as from time to time may be prescribed by the chief executive officer or the Board of Directors. ARTICLE VIII SHARES Section 1. Certificates for Stock. The shares of the Corporation's stock may be certified or uncertified, as provided under Maryland law, and shall be entered in the books of the Corporation and registered as they are issued. Any certificate for stock shall be signed by the President or Vice-President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Corporation and may be sealed with the seal of the Corporation or a facsimile thereof. Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice that shall set forth the name of the Corporation, that the Corporation is organized under the laws of the State of Maryland, the name of the shareholder, the number and class (and the designation of the series, if any) of the shares represented, any restrictions on the transfer or registration of such shares of stock and any other information required by the General Corporation Law of Maryland. Section 2. Replacement of Certificates. Any person claiming a share certificate to be lost, stolen or destroyed shall make an affidavit or affirmation of the fact in such manner as the Board of Directors may require and shall, if the Board of Directors so requires, give the Corporation a bond of indemnity in form and amount, and with one or more sureties satisfactory to the Board of Directors, as the Board of Directors may require, whereupon the Corporation may issue (i) a new certificate or certificates of stock or (ii) uncertificated shares in place of any certificates previously issued by the Corporation alleged to have been lost, stolen or destroyed. Section 3. Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate or evidence of the issuance of uncertificated shares to the shareholder entitled thereto, cancel the old certificate and record the transaction upon the Corporation's books. Upon the surrender of any certificate for transfer of stock, such certificate shall at once be conspicuously marked on its face "Cancelled" and filed with the permanent stock records of the Corporation. Upon receipt of proper transfer instructions from the registered owner of uncertificated shares, such uncertificated shares shall be cancelled, issuance of new equivalent uncertificated shares or certificated shares shall be made to the shareholder entitled thereto and the transaction shall be recorded upon the books of Corporation. If the Corporation has a transfer agent or registrar acting on its behalf, the signature of any officer or representative thereof may be in facsimile. -21- The Board of Directors may appoint a transfer agent and registrar and may make or authorize such agent to make all such rules and regulations deemed expedient concerning the issue, transfer and registration of shares of stock. Section 4. Fixing Record Date. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining stockholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the Board of Directors may fix, in advance, a date at the record date for any such determination of stockholders. Such date shall not be more than sixty nor less than ten days before the date of any meeting nor more than sixty days prior to any other action. When a determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, unless the Board fixes a new record date for the adjourned meeting. Section 5. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Maryland. ARTICLE IX GENERAL PROVISIONS Section 1. Dividends. Subject to the provisions of law and of the Articles of Incorporation relating thereto, dividends may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, the Corporation's bonds or its property, including the shares or bonds of other corporations, subject to any provisions of law and of the Articles of Incorporation. Section 2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purposes as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 3. Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 4. Fiscal Year. The fiscal year of the Corporation shall begin on January 1st and end on December 31st of each year, unless otherwise provided by the Board of Directors. Section 5. Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "CORPORATE SEAL, MARYLAND". This seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. -22- ARTICLE X AMENDMENTS Section 1. Amendments. The Board of Directors shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws. -23- EX-31.1 3 a5542427ex31_1.txt EXHIBIT 31.1 Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Michael J. Ferrantino, certify that: 1. I have reviewed this report on Form 10-Q of Valpey-Fisher Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) (Intentionally omitted) c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2007 /s/ Michael J. Ferrantino ------------------------- Michael J. Ferrantino President and Chief Executive Officer -24- EX-31.2 4 a5542427ex31_2.txt EXHIBIT 31.2 Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Michael J. Kroll, certify that: 1. I have reviewed this report on Form 10-Q of Valpey-Fisher Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) (Intentionally omitted) c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2007 /s/ Michael J. Kroll -------------------- Michael J. Kroll Vice President, Treasurer and Chief Financial Officer -25- EX-32.1 5 a5542427ex32_1.txt EXHIBIT 32.1 Exhibit 32.1 Certification Pursuant to 18 U.S.C Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Valpey-Fisher Corporation (the "Company"), does hereby certify, to such officer's knowledge, that: 1. The Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 ("Report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 12, 2007 /s/ Michael J. Ferrantino ------------------------- Michael J. Ferrantino, President and Chief Executive Officer Date: November 12, 2007 /s/ Michael J. Kroll -------------------- Michael J. Kroll Vice President, Treasurer and Chief Financial Officer The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -26- -----END PRIVACY-ENHANCED MESSAGE-----