UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 OR 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended June 30, 2008
Commission file number 0-10976
MICROWAVE FILTER COMPANY, INC.
(Exact name of registrant as specified in its charter.)
New York 16-0928443
(State of Incorporation) (I.R.S. Employer Identification Number)
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6743 Kinne Street, East Syracuse, N.Y. 13057
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (315) 438-4700
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES ( X ) NO ( )
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
YES ( ) NO ( X )
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
YES ( ) NO ( X )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common Stock, $.10 Par Value - 2,893,536 shares as of June 30, 2008.
PART I. - FINANCIAL INFORMATION
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
June 30, 2008 September 30, 2007
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 1,357 $ 1,267
Accounts receivable-trade, net 306 371
Inventories 678 661
Prepaid expenses and other
current assets 86 86
------- -------
Total current assets 2,427 2,385
Property, plant and equipment, net 406 441
------- -------
Total assets $ 2,833 $ 2,826
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 186 $ 163
Customer deposits 19 47
Accrued federal and state income
taxes payable 1 1
Accrued payroll and related
expenses 63 58
Accrued compensated absences 208 209
Other current liabilities 27 30
------- -------
Total current liabilities 504 508
------- -------
Total liabilities 504 508
------- -------
Stockholders' Equity:
Common stock,$.10 par value 432 432
Additional paid-in capital 3,249 3,249
Retained earnings 176 163
------- -------
3,857 3,844
Common stock in treasury,
at cost (1,528) (1,526)
------- -------
Total stockholders' equity 2,329 2,318
------- -------
Total liabilities and
stockholders' equity $ 2,833 $ 2,826
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See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS
ENDED JUNE 30, 2008 AND 2007
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended Nine months ended
June 30 June 30
2008 2007 2008 2007
Net sales $1,362 $1,123 $3,922 $3,444
Cost of goods sold 819 767 2,465 2,268
------ ------ ------ ------
Gross profit 543 356 1,457 1,176
Selling, general and
administrative expenses 500 520 1,479 1,480
------ ------ ------ ------
Income (loss) from
operations 43 (164) (22) (304)
Other income (net),
principally interest 11 15 35 49
------ ------ ------ ------
Income (loss) before
income taxes 54 (149) 13 (255)
Provision for income
taxes 0 0 0 0
------ ------ ------ ------
NET INCOME (LOSS) $54 ($149) $13 ($255)
====== ====== ====== ======
Per share data:
Basic and Diluted earnings
(loss) per share $0.02 ($0.05) $0.00 ($0.09)
====== ====== ====== ======
Shares used in computing
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net earnings (loss) per share:
Basic and Diluted 2,894 2,898 2,895 2,901
See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2008 AND 2007
(Unaudited)
(Amounts in thousands)
Nine months ended
June 30
2008 2007
Cash flows from operating
activities:
Net income (loss) $ 13 ($ 255)
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Depreciation and amortization 58 85
Change in assets and liabilities:
Accounts receivable 65 20
Federal and state income
tax recoverable 0 138
Inventories (17) (151)
Prepaid expenses & other
assets 0 14
Accounts payable & accrued
expenses 23 (29)
Customer deposits (28) 1
----- -----
Net cash provided by (used in)
operating activities 114 (177)
----- -----
Cash flows from investing
activities:
Investments 0 20
Capital expenditures (22) (1)
----- -----
Net cash (used in) provided by
investing activities (22) 19
----- -----
Cash flows from financing
activities:
Purchase of treasury stock (2) (6)
----- -----
Net cash used in financing
activities (2) (6)
----- -----
Increase (decrease) in cash
and cash equivalents 90 (164)
Cash and cash equivalents
at beginning of period 1,267 706
----- -----
Cash and cash equivalents
at end of period $1,357 $ 542
====== =====
Supplemental disclosures of cash flows:
Cash paid (refunded) during the year
for (approximately):
Interest $0 $0
Income taxes $0 $0
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See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2008
Note 1. Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. The operating results for the nine month
period ended June 30, 2008 are not necessarily indicative of the results that
may be expected for the year ended September 30, 2008. For further
information, refer to the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10KSB for the year ended
September 30, 2007.
Note 2. Industry Segment Data
The Company's primary business segment involves the operations of Microwave
Filter Company, Inc. (MFC) which designs, develops, manufactures and sells
electronic filters, both for radio and microwave frequencies, to help process
signal distribution and to prevent unwanted signals from disrupting transmit
or receive operations. Markets served include cable television, television and
radio broadcast, satellite broadcast, mobile radio, commercial communications
and defense electronics.
Note 3. Inventories
Inventories are stated at the lower of cost determined on the first-in,
first-out method or market.
Inventories net of reserve for obsolescence consisted of the following:
(thousands of dollars) June 30, 2008 September 30, 2007
Raw materials and stock parts $548 $517
Work-in-process 51 55
Finished goods 79 89
---- ----
$678 $661
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The Company's reserve for obsolescence equaled $389,726 at June 30,
2008 and September 30, 2007.
Note 4. Income Taxes
The Company adopted FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes - An Interpretation of FASB Statement No. 109 (FIN 48) as of
October 1, 2007. FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in an entity's financial statements in accordance with FASB
Statement No. 109, Accounting for Income Taxes, and prescribes a recognition
threshold and measurement attributes for financial statement disclosure of tax
position taken or expected to be taken on a tax return. Additionally, FIN 48
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. No adjustments were
required upon adoption of FIN 48. The Company has provided a full valuation
allowance against its deferred tax assets.
The Company is currently open to audit under the statute of limitations by
the Internal Revenue Service for the fiscal years 2004 through 2007. The
Company's state tax returns are open to audit under the statute of limitations
for the fiscal years 2004 through 2007.
Note 5. Stock Options
On April 9, 1998, the Board of Directors and Shareholders of Microwave
Filter Company, Inc. approved the 1998 Microwave Filter Company, Inc.
Incentive Stock Plan (the "1998 Plan"). Under the 1998 Plan, the Company may
grant incentive stock options ("ISOs"), non-qualified stock options ("NQSOs")
and stock appreciation rights to directors, officers and employees of the
Company and its affiliates. The 1998 Plan reserves 150,000 shares for
issuance. The exercise price of the ISOs and NQSOs will be 100% of the fair
market value of the Common Stock on the date the ISOs and NQSOs are granted.
On June 21, 2004, the Board of Directors granted ISOs totaling 115,000 shares
and NQSOs totaling 35,000 shares at an exercise price of $1.47. All options
were 100% vested. The 1998 Plan terminated on April 10, 2008.
We accounted for our incentive stock plan under the recognition and
measurement principles of Accounting Principles Board Opinion No. 25,
Accounting for stock issued to employees. No compensation expense has been
recognized in the accompanying financial statements relative to our stock
option plan.
The Company has adopted the provisions of SFAS No. 123R, "Share-Based
Payment", for the fiscal year beginning October 1, 2006.
A summary of all stock option activity and information related to all options
outstanding follows:
Nine months ended
June 30, 2008
------------------
ISOs NQSOs
-------- --------
Exercise Shares Exercise Shares
Price Price
-------- -------- -------- --------
Outstanding at
beginning of period $1.47 108,548 $1.47 30,000
Granted - 0 - 0
Exercised - 0 - 0
Cancelled $1.47 108,548 $1.47 30,000
------ -------- ------ --------
Outstanding at
end of period - 0 - 0
------ -------- ------ --------
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MICROWAVE FILTER COMPANY, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Microwave Filter Company, Inc. operates primarily in the United States and
principally in one industry. The Company extends credit to business customers
based upon ongoing credit evaluations. Microwave Filter Company, Inc. (MFC)
designs, develops, manufactures and sells electronic filters, both for radio
and microwave frequencies, to help process signal distribution and to prevent
unwanted signals from disrupting transmit or receive operations. Markets
served include cable television, television and radio broadcast, satellite
broadcast, mobile radio, commercial communications and defense electronics.
Critical Accounting Policies
The Company's consolidated financial statements are based on the application
of generally accepted accounting principles (GAAP). GAAP requires the use of
estimates, assumptions, judgments and subjective interpretations of accounting
principles that have an impact on the assets, liabilities, revenue and expense
amounts reported. The Company believes its use of estimates and underlying
accounting assumptions adhere to GAAP and are consistently applied. Valuations
based on estimates are reviewed for reasonableness and adequacy on a
consistent basis throughout the Company. Primary areas where financial
information of the Company is subject to the use of estimates, assumptions and
the application of judgment include revenues, receivables, inventories, and
taxes. Note 1 to the consolidated financial statements in our Annual Report on
Form 10-KSB for the fiscal year ended September 30, 2007 describes the
significant accounting policies used in preparation of the consolidated
financial statements. The most significant areas involving management
judgments and estimates are described below and are considered by management
to be critical to understanding the financial condition and results of
operations of the Company.
Revenues from product sales are recorded as the products are shipped and
title and risk of loss have passed to the customer, provided that no
significant vendor or post-contract support obligations remain and the
collection of the related receivable is probable. Billings in advance of the
Company's performance of such work are reflected as customer deposits in the
accompanying consolidated balance sheet.
Allowances for doubtful accounts are based on estimates of losses related to
customer receivable balances. The establishment of reserves requires the use
of judgment and assumptions regarding the potential for losses on receivable
balances.
The Company's inventories are stated at the lower of cost determined on the
first-in, first-out method or market. The Company uses certain estimates and
judgments and considers several factors including product demand and changes
in technology to provide for excess and obsolescence reserves to properly
value inventory.
The Company established a warranty reserve which provides for the estimated
cost of product returns based upon historical experience and any known
conditions or circumstances. Our warranty obligation is affected by product
that does not meet specifications and performance requirements and any related
costs of addressing such matters.
The Company accounts for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109. Deferred tax assets and liabilities are
based on the difference between the financial statement and tax basis of
assets and liabilities as measured by the enacted tax rates which are
anticipated to be in effect when these differences reverse. The deferred tax
provision is the result of the net change in the deferred tax assets and
liabilities. A valuation allowance is established when it is necessary to
reduce deferred tax assets to amounts expected to be realized. The Company has
provided a full valuation allowance against its deferred tax assets.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2008 vs. THREE MONTHS ENDED JUNE 30, 2007
The following table sets forth the Company's net sales by major product
group for the three months ended June 30, 2008 and 2007.
Product group (in thousands) Fiscal 2008 Fiscal 2007
Microwave Filter (MFC):
Cable TV $ 524 $ 484
Satellite 461 229
RF/Microwave 353 380
Broadcast TV 23 22
Niagara Scientific (NSI) 1 8
------ ------
Total $1,362 $1,123
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Sales backlog at 6/30 $ 384 $ 495
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Net sales for the three months ended June 30, 2008 equaled $1,362,359, an
increase of $239,399 or 21.3%, when compared to net sales of $1,122,960 for
the three months ended June 30, 2007.
MFC's Cable TV product sales increased $41,179 or 8.5% to $524,655 during
the three months ended June 30, 2008 when compared to Cable TV product sales
of $483,476 during the same period last year. Management continues to project
a decrease in demand for Cable TV products due to the shift from analog to
digital television scheduled for completion by February 17, 2009. Although the
Company has developed filters for digital television, the demand for these
types of filters is unknown at this time.
MFC's Satellite product sales increased $231,571 or 101% to $460,739 during
the three months ended June 30, 2008 when compared to sales of $229,168 during
the same period last year. The increase can be attributed to an increase in
demand for the Company's filters which suppress strong out-of-band
interference caused by military and civilian radar systems and other sources.
Management expects demand for these types of filters to continue with the
proliferation of earth stations world wide and increased sources of
interference.
MFC's RF/Microwave product sales decreased $26,291 or 6.9% to $353,444 for
the three months ended June 30, 2008 when compared to RF/Microwave product
sales of $379,735 during the same period last year. MFC's RF/Microwave
products are sold primarily to original equipment manufacturers (OEMs) that
serve the mobile radio, commercial communications and defense electronics
markets. The Company continues to invest in production engineering and
infrastructure development to penetrate OEM (Original Equipment Manufacturer)
market segments as they become popular. MFC is concentrating its technical
resources and product development efforts toward potential high volume
customers as part of a concentrated effort to provide substantial long-term
growth.
MFC's Broadcast TV/Wireless Cable product sales increased $638 or 2.9% to
$22,867 for the three months ended June 30, 2008 when compared to sales of
$22,229 during the same period last year. The increase can be attributed to an
increase in demand for UHF Broadcast products.
MFC's sales order backlog equaled $384,252 at June 30, 2008 compared to
sales order backlog of $502,760 at September 30, 2007 and $495,409 at June 30,
2007. However, backlog is not necessarily indicative of future sales.
Accordingly, the Company does not believe that its backlog as of any
particular date is representative of actual sales for any succeeding period.
Approximately 85% of the sales order backlog at June 30, 2008 is scheduled to
ship by September 30, 2008.
NSI sales for the three months ended June 30, 2008 equaled $654 compared to
sales of $8,352 for the three months ended June 30, 2007. NSI sales consist
primarily of field service and spare parts.
Gross profit for the three months ended June 30, 2008 equaled $542,854, an
increase of $186,480 or 52.3%, when compared to gross profit of $356,374 for
the three months ended June 30, 2007. As a percentage of sales, gross profit
equaled 39.8% for the three months ended June 30, 2008 compared to 31.7% for
the three months ended June 30, 2007. The increases in gross profit can
primarily be attributed to the higher sales volume this year allowing the
Company to better absorb fixed costs.
Selling, general and administrative (SGA) expenses for the three months
ended June 30, 2008 equaled $499,549, a decrease of $20,635 or 4.0%, when
compared to SG&A expenses of $520,184 for the three months ended June 30,
2007. The decrease can primarily be attributed to lower payroll costs this
year when compared to the same period last year. As a percentage of sales, SGA
expenses decreased to 36.7% for the three months ended June 30, 2008 compared
to 46.3% for the three months ended June 30, 2007 primarily due to the higher
sales volume this year when compared to the same period last year.
The Company recorded income from operations of $43,305 for the third quarter
ended June 30, 2008 compared to a loss from operations of $163,810 for the
three months ended June 30, 2007. The improvement in operating income can
primarily be attributed to the higher sales volume this year when compared to
the same period last year.
Other income for the three months ended June 30, 2008 equaled $10,951, a
decrease of $3,784 when compared to other income of $14,735 for the three
months ended June 30, 2007. Other income is primarily interest income earned
on invested cash balances. The decrease in other income can primarily be
attributed to lower market interest rates when compared to last year. Other
income may fluctuate based on market interest rates and levels of invested
cash balances.
The provision (benefit) for income taxes equaled $0 for the three months
ended June 30, 2008. The Company has provided a full valuation allowance
against its deferred tax assets since the realization of the deferred tax
benefit is not considered more likely than not.
NINE MONTHS ENDED JUNE 30, 2008 vs. NINE MONTHS ENDED JUNE 30, 2007
The following table sets forth the Company's net sales by major product
group for the nine months ended June 30, 2008 and 2007.
Product group (in thousands) Fiscal 2008 Fiscal 2007
Microwave Filter (MFC):
Cable TV $1,510 $1,438
Satellite 1,145 716
RF/Microwave 1,166 1,134
Broadcast TV 96 123
Niagara Scientific (NSI) 5 33
------ ------
Total $3,922 $3,444
====== ======
Sales backlog at 6/30 $ 384 $ 495
====== ======
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Net sales for the nine months ended June 30, 2008 equaled $3,922,334, an
increase of $477,910 or 13.9%, when compared to net sales of $3,444,424 for
the nine months ended June 30, 2007.
MFC's Cable TV product sales increased $72,132 or 5.0% to $1,509,885 during
the nine months ended June 30, 2008 when compared to Cable TV product sales of
$1,437,753 during the nine months ended June 30, 2007. Despite the increase in
Cable TV product sales, management continues to project a decrease in demand
for Cable TV products due to the shift from analog to digital television
scheduled for completion by February 17, 2009. Although the Company has
developed filters for digital television, the demand for these types of
filters is unknown at this time.
MFC's Satellite product sales increased $428,121 OR 59.8% TO $1,144,508
during the nine months ended June 30, 2008 when compared to sales of $716,387
during the same period last year. The increase can be attributed to an
increase in demand for the Company's filters which suppress strong out-of-band
interference caused by military and civilian radar systems and other sources.
Management expects demand for these types of filters to continue with the
proliferation of earth stations world wide and increased sources of
interference.
MFC's RF/Microwave product sales increased $32,396 or 2.9% to $1,166,257
during the nine months ended June 30, 2008 when compared to RF/Microwave
product sales of $1,133,861 during the same period last year. MFC's
RF/Microwave products are sold primarily to original equipment manufacturers
(OEMs) that serve the mobile radio, commercial communications and defense
electronics markets. The Company continues to invest in production engineering
and infrastructure development to penetrate OEM (Original Equipment
Manufacturer) market segments as they become popular. MFC is concentrating its
technical resources and product development efforts toward potential high
volume customers as part of a concentrated effort to provide substantial long-
term growth.
MFC's Broadcast TV/Wireless Cable product sales decreased $26,849 or 21.8%
to $96,390 during the nine months ended June 30, 2008 when compared to sales
of $123,239 during the same period last year. The decrease can be attributed
to a decrease in demand for UHF Broadcast products.
NSI sales for the nine months ended June 30, 2008 equaled $5,294 compared to
sales of $33,184 for the nine months ended June 30, 2007. NSI sales consist
primarily of field service and spare parts.
Gross profit for the nine months ended June 30, 2008 equaled $1,457,697, an
increase of $281,026, or 23.9%, when compared to gross profit of $1,176,671
for the nine months ended June 30, 2007. As a percentage of sales, gross
profit equaled 37.2% for the nine months ended June 30, 2008 compared to 34.2%
for the nine months ended June 30, 2007. The increases in gross profit can
primarily be attributed to the higher sales volume this year allowing the
Company to better absorb fixed costs.
SG&A expenses for the nine months ended June 30, 2008 equaled $1,479,416, a
decrease of $1,211 or 0.1%, when compared to SG&A expenses of $1,480,627 for
the nine months ended June 30, 2007. As a percentage of sales, SGA expenses
decreased to 37.7% for the nine months ended June 30, 2008 compared to 43.0%
for the nine months ended June 30, 2007 due primarily to the higher sales
volume this year.
The Company recorded a loss from operations of $21,719 for the nine months
ended June 30, 2008 compared to a loss from operations of $303,956 for the
nine months ended June 30, 2007. The improvement can primarily be attributed
to the higher sales volume this year when compared to the same period last
year.
Other income for the nine months ended June 30, 2008 equaled $34,603, a
decrease of $14,506, when compared to other income of $49,109 for the nine
months ended June 30, 2007. Other income is primarily interest income earned
on invested cash balances. The decrease in other income can primarily be
attributed to lower market interest rates this year when compared to the same
period last year. Other income may fluctuate based on market interest rates
and levels of invested cash balances.
The provision (benefit) for income taxes equaled $0 for the nine months
ended June 30, 2008. The Company has provided a full valuation allowance
against its deferred tax assets since the realization of the deferred tax
benefit is not considered more likely than not.
Off-Balance Sheet Arrangements
At June 30, 2008 and 2007, the Company did not have any unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities, which might have been
established for the purpose of facilitating off-balance sheet arrangements.
LIQUIDITY and CAPITAL RESOURCES
June 30, 2008 Sep. 30, 2007
Cash & cash equivalents $1,357,097 $1,266,979
Working capital $1,923,211 $1,876,807
Current ratio 4.82 to 1 4.69 to 1
Long-term debt $ 0 $ 0
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Cash and cash equivalents increased $90,118 to $1,357,097 at June 30, 2008
when compared to cash and cash equivalents of $1,266,979 at September 30,
2007. The increase was a result of $114,532 in net cash provided by operating
activities, $22,461 in net cash used in investing activities and $1,953 in net
cash used in financing activities.
The decrease of $64,370 in accounts receivable at June 30, 2008, when
compared to September 30, 2007, can primarily be attributable to an
improvement in accounts receivable collections during the quarter ended June
30, 2008 when compared to the quarter ended September 30, 2007.
Cash used in investing activities during the nine months ended June 30, 2008
consisted of funds used for capital expenditures of $22,461.
Cash used in financing activities during the nine months ended June 30, 2008
consisted of funds used to purchase treasury stock of $1,953.
At June 30, 2008, the Company had unused aggregate lines of credit totaling
$750,000 collateralized by all inventory, equipment and accounts receivable.
Management believes that its working capital requirements for the forseeable
future will be met by its existing cash balances, future cash flows from
operations and its current credit arrangements.
RECENT PRONOUNCEMENTS
In February 2007, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 159, "The Fair Value
Option for Financial Assets and Financial Liabilities, including an amendment
of FASB Statement No. 115". SFAS 159 permits entities to choose to measure
many financial instruments and certain other items at fair value at specified
election dates. This Statement applies to all entities, including not-for-
profit organizations. SFAS 159 is effective as of the beginning of an
entity's first fiscal year that begins after November 15, 2007. As such, the
Company is required to adopt these provisions at the beginning of the fiscal
year ended September 30, 2009. The Company is currently evaluating the impact
of SFAS 159 on its consolidated financial statements.
In December 2007, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard ("SFAS") No. 160, "Noncontrolling Interests
in Consolidated Financial Statements, an amendment of ARB No. 51". SFAS 160
establishes accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. As such, the Company is required to
adopt these provisions at the beginning of the fiscal year ended September 30,
2010. The Company is currently evaluating the impact of SFAS 160 on its
consolidated financial statements.
In March 2008, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 161, "Disclosures
about Derivative Instruments and Hedging Activities-an amendment of FASB
Statement No. 133". SFAS 161 requires enhanced disclosures about an entity's
derivative and hedging activities. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after
November 15, 2008 with early application encouraged. As such, the Company is
required to adopt these provisions at the beginning of the fiscal year ended
September 30, 2010. The Company is currently evaluating the impact of SFAS 161
on its consolidated financial statements but does not expect it to have a
material effect.
In May 2008, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 162, "The Hierarchy of Generally
Accepted Accounting Principles". SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles used in
the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP)
in the United States. SFAS 162 is effective 60 days following the SEC's
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles. The Company is currently evaluating the impact
of SFAS 162 on its consolidated financial statements but does not expect it to
have a material effect.
In May 2008, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 163, "Accounting for
Financial Guarantee Insurance Contracts-an interpretation of FASB Statement
No. 60" ("SFAS 163"). SFAS 163 interprets Statement 60 and amends existing
accounting pronouncements to clarify their application to the financial
guarantee insurance contracts included within the scope of that Statement.
SFAS 163 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and all interim periods within those fiscal
years. As such, the Company is required to adopt these provisions at the
beginning of the fiscal year ended September 30, 2010. The Company is
currently evaluating the impact of SFAS 163 on its consolidated financial
statements but does not expect it to have a material effect.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In an effort to provide investors a balanced view of the Company's current
condition and future growth opportunities, this Quarterly Report on Form 10-
QSB includes comments by the Company's management about future performance.
These statements which are not historical information are "forward-looking
statements" pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These, and other forward-looking statements,
are subject to business and economic risks and uncertainties that could cause
actual results to differ materially from those discussed. These risks and
uncertainties include, but are not limited to: risks associated with demand
for and market acceptance of existing and newly developed products as to which
the Company has made significant investments; general economic and industry
conditions; slower than anticipated penetration into the satellite
communications, mobile radio and commercial and defense electronics markets;
competitive products and pricing pressures; increased pricing pressure from
our customers; risks relating to governmental regulatory actions in broadcast,
communications and defense programs; as well as other risks and uncertainties,
including but not limited to those detailed from time to time in the Company's
Securities and Exchange Commission filings. These forward-looking statements
are made only as of the date hereof, and the Company undertakes no obligation
to update or revise the forward-looking statements, whether as a result of new
information, future events or otherwise. You are encouraged to review
Microwave Filter Company's 2007 Annual Report and Form 10-KSB for the fiscal
year ended September 30, 2007 and other Securities and Exchange Commission
filings. Forward looking statements may be made directly in this document or
"incorporated by reference" from other documents. You can find many of these
statements by looking for words like "believes," "expects," "anticipates,"
"estimates," or similar expressions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no significant change in our exposures to market risk during
the nine months ended June 30, 2008. For a detailed discussion of market risk,
see our Annual Report on Form 10-K for the fiscal year ended September 30,
2007, Part II, Item 7A, Quantitative and Qualitative Disclosures About Market
Risk.
ITEM 4. CONTROLS AND PROCEDURES
1. Evaluation of disclosure controls and procedures. Based on their
evaluation of the Company's disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this
Quarterly Report on Form 10-Q, the Company's chief executive officer
and chief financial officer have concluded that the Company's
disclosure controls and procedures are effective.
2. Changes in internal control over financial reporting. During the period
covered by this Quarterly Report on Form 10-Q, there were no changes in
the Company's internal control over financial reporting (as defined in
Rule 13a-15(f)) that have materially affected, or are reasonably
likely to materially affect, the Company's internal control over
financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is unaware of any material threatened or pending
litigation against the Company.
Item 1A. The Company is exposed to certain risk factors that may effect
operations and/or financial results. The significant factors
known to the Company are described in the Company's most recently
filed annual report on Form 10-KSB. There have been no
material changes from the risk factors as previously disclosed
in the Company's annual report on Form 10-KSB.
Item 2. Changes in Securities
None during this reporting period.
Item 3. Defaults Upon Senior Securities
The Company has no senior securities.
Item 4. Submission of Matters to a Vote of Security Holders
None during this reporting period.
Item 6. Exhibits
a. Exhibits
31.1 Section 13a-14(a)/15d-14(a) Certification of Carl F. Fahrenkrug
31.2 Section 13a-14(a)/15d-14(a) Certification of Richard L. Jones
32.1 Section 1350 Certification of Carl F. Fahrenkrug
32.2 Section 1350 Certification of Richard L. Jones
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MICROWAVE FILTER COMPANY, INC.
August 13, 2008 Carl F. Fahrenkrug
(Date) --------------------------
Carl F. Fahrenkrug
Chief Executive Officer
August 13, 2008 Richard L. Jones
(Date) --------------------------
Richard L. Jones
Chief Financial Officer
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