SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C 20549

                                FORM 10-KSB 

(Mark one) 
_X_  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
     ACT OF 1934 (FEE REQUIRED) 

For the fiscal year ended________September 30, 1998_____________________________
                                    OR
__TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from____________to____________________________________

Commission file number__________________0-10976_________________________________

_______________________________Microwave Filter Company, Inc____________________
           (Exact name of registrant as specified in its charter)

__________New York__________________________16-0928443__________________________
(State or other jurisdiction of incorporation or organization)
                                            (I.R.S. Employer Identification No.)

_____6743 Kinne Street,  East Syracuse, NY________13057_________________________
(Address of principal executive offices)          (Zip code)

Registrant's telephone number including area code____(315) 438-4700_____________

Securities registered pursuant to Section 12(b) of the Act:_____None____________

Securities registered pursuant to Section 12(g) of the Act:
                           
_________________________Common stock, par value $.10 per share_________________
                              Title of class

  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 if disclosure of delinquent filers pursuant to Item 
405 of Regulation S-K is not contained herein, and will not be contained, to 
the best of registrant's knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K.__ 




  The aggregate market value of the voting stock held by non-affiliates of the 
registrant at the close of business on  November 23, 1998 was $2,348,646. 

  Indicate the number of shares outstanding of each of the issuer's classes of 
common stock, as of the latest practicable date. 

  Shares of common stock outstanding at November 23, 1998:   3,304,583   

  Documents incorporated by reference: None.

                                  1       
<PAGE>



                           PART I 
                                
ITEM 1. BUSINESS.

GENERAL DEVELOPMENT OF BUSINESS
-------------------------------
  Microwave Filter Company, Inc. (hereinafter referred to as MFC) was 
incorporated in New York State on September 26, 1967.  MFC is the successor of 
Microwave Filter Company which was founded in April of 1967. 

  On July 1, 1990, MFC acquired Niagara Scientific, Inc. (hereinafter referred 
to as NSI.) 

  MFC and its subsidiaries are sometimes referred to collectively as the 
"Company."

NARRATIVE DESCRIPTION OF BUSINESS
----------------------------------
Microwave Filter Company, Inc. (MFC)

  Since MFC was founded in 1967, the Company's mission has been to provide its 
customers with the highest quality and most economically priced products 
delivered on time. The Company has always worked closely with its customers to 
provide the exact products necessary for their changing needs. As a result, 
the Company has grown to become a state of the art manufacturing facility 
which produces large and small filter orders in frequency ranges up to 50 GHz. 
It is this commitment to the customer that has kept the Company in business 
for over 30 years. 

  MFC manufactures filters for eliminating interference and signal processing 
for such markets as Cable Television, Broadcast, Mobile Communications, 
Avionics, Radar, Navigation and Defense Electronics. The Company designs 
waveguide, stripline/ microstrip, transmission line, miniature/subminiature 
and lumped constant filters in such filter styles as: bandpass, high pass, low 
pass bandstop, multiplexers, tunable notch, tunable bandpass, high power 
filters, filter networks, amplitude equalized and delay equalized. 

  Located in East Syracuse, NY, MFC occupies a 40,000 square foot plant where 
state of the art equipment, engineering, manufacturing and a strong emphasis 
on employee training form the foundation for providing quality products that 
meet or often exceed specifications.     

  The Company actively produces over 1,700 standard products and has designed 
more than 5,000 custom products for specialized applications. 

  When an order for a custom product arrives in-house, members of engineering 
and production develop a quality plan to insure that all resources are in 
place to design and manufacture a robust product for the customer. This 
quality plan allows departments to focus as a team and identify any potential 
design or manufacturing challenges before the project begins. Working as a 
team encourages input from engineers, designers, fabricators and technicians 
to mutually arrive at solutions. By forming a quality plan, the design to 
shipping time for products is reduced because problems that could surface 
later in production are avoided. 

                              2
<PAGE>


  In the design phase, engineering is equipped with Microstripes software to 
perform three dimensional simulations to determine the performance 
characteristics of components. Other software both purchased commercially and 
developed in-house is used to simulate or verify filter performance. Once a 
filter is designed, mechanical designers and drafters, using the latest 
version of autocad complete drawings for production. 

  Facilities are in place to insure that products are manufactured quickly and 
efficiently. CAD/CAM systems transfer prints to fabrication where computerized 
mills and lathes automatically generate parts. Up to date quality assurance 
equipment such as a surface plate with a digital height gauge, optical 
comparators and high power Mantis microscopes are used to check components and 
verify that they meet specification. The QA Department is compliant with MIL-
I-45208, inspection systems and MIL-STD-45662 calibration systems standards. 
There is 100 percent in-process inspection conducted for electrical and 
physical characteristics, workmanship and compliance to specifications. 

  Employee education plays a large part in the production process. All 
technicians are well trained in filter design, the use of test and measuring 
equipment and the most current soldering standards. A certified instructor is 
on staff to train employees in J-STD-001, the ANSI soldering standard for 
electrical and electronic assemblies. 

  Production is divided in two areas. One area handles large volume program 
orders, and the other, custom circuits, designs and builds smaller volume 
special need filters. Both areas are equipped with the design and test equipment
necessary to insure repeatability and quality. One such facility is a soldering
oven which allows a large number of parts to be soldered consistently and
simultaneously. Once products are complete, Hewlett-Packard scalar and vector
network analyzers are used to test any passive filter from DC to 50 GHz.      

  Other product testing facilities include environmental chambers capable of
testing products for temperatures of -70 to 200 degrees celsius and humidity to 
100 percent. Several amps are available for power tests up to 2500 watts and
220 MHz and 100 watts and 1000 MHz. Antenna specifications in the 2 to 18 
GHz range can be measured in an in-house anechoic chamber. Facilities are 
also available for salt spray, sand and dust, shock and vibration, RFI leakage
and altitude testing. 

  MFC is in the final stages of gaining ISO 9001 certification and implementing
total quality management which will formalize the Company's existing commitment
to quality. Its service to customers is already reflected in the many repeat
orders from customers that have depended on the Company from its inception. It 
also has received several awards from its customers. The Company is pleased to
serve any customer large or small from the largest prime government contractor 
to the smallest broadcast facility. MFC will continue the same mission in the
future as is has in the past of continuing to work as a team with the customer 
to deliver the filters the market needs, on time and at the best price.    

                              3
<PAGE>

 

Niagara Scientific, Inc. (NSI) 
------------------------------

  NSI also includes niche markets in its customer base: industrial customers 
not addressed by larger competitors and larger customers having special needs. 

  Schroeder Machine Division (SMD) - A leading activity is custom designing 
case packing machines to automatically pack products into shipping cases.  
Customers are processors of food and other commodity products with a need to 
reduce labor cost with modest investment and quick payback. Operations are 
also characterized by repeat orders as customer production expands.   

  SMD became a systems integrator for Staubli of Switzerland, manufacturer of 
spherical robots used for high speed assembly and packaging operations. The 
Staubli robots offer an additional robotic capabilty to Schroeder Machines. In
1997, SMD became a systems integrator for Adept Technology, Inc., of San Jose,
Ca, manufacturer of the SCARA style of robots. Robotics is becoming more 
prevalent in the handling of food, pharmaceuticals and other large volume 
consumer goods. This new capability will allow SMD to serve its customer base 
with the most up-to-date material handling technology. 

  Schroeder Machines celebrated its 50Th anniversary this year. It marked its 
anniversary with the introduction of several new products: a servo pick-and-
place machine for top loading packaging applications and a case erector/bottom 
taping machine for customers who still hand pack or need to add a case former 
to an existing case packing machine. An economical compact machine capable of 
handling 12 cases per minute was also redesigned and successfully debuted at a 
major trade show this fall.  

  Schroeder Machines is one of the original manufacturers of fully automatic 
and semi-automatic Quadnumatic side or end loading case packing machines. 
Quadnumatic machines perform all the functions of collating, case forming, 
loading and sealing products into their shipping cartons at packing speeds 
ranging from 12 to 30 cases per minute. 


MARKETS 
-------
Microwave Filter Company, Inc. (MFC) 
------------------------------------

  Cable Television (CATV) - MFC serves this industry largely with three product 
groups.  One popular area includes standard and custom filters used at the 
headend to process signals and remove interference.  A very popular 
application involves removing or re-routing channels to organize programming 
line-ups. 

  A family of trap filters, "Fastrap," is used by cable operators to restrict 
or permit the viewing of pay per view or other premium programming.  The traps 
can be ordered in small and large quantities, are 100% inspected and delivered 
overnight.  

                               4
<PAGE>  


  Since all operators initially receive programming via satellite, products 
from our satellite market cross over into cable television.  C-band satellite 
receive systems are prone to various types of terrestrial interference which 
are curable in many cases by applying filters. 

  Cable television will enjoy market growth in the years ahead as a result of 
regulatory and technological changes. Cable television has the infrastructure 
in place to offer the consumer a variety of two-way services such as data, 
video and telephony. New digital compression technology now makes it possible
to transmit six to 10 channels in the space previously used for one. Cable 
television has the ability to offer access to the internet that exceeds ISDN,
a high speed service currently offered by the telephone company, much less
the standard service over the telephone lines that most internet consumers 
commonly use. With changes in federal legislation, both cable and telephone 
companies have been combining resources and now cable television will no 
longer be barred from offering telephone service.

  Direct to home satellite is still a competitor to cable television, but it
cannot offer the consumer telephone or internet access. Hence, it is expected 
that cable television will be a formidable player in the rush to deliver 
consumers two-way service in the 21st century. With market growth, equipment 
purchases will increase and MFC will reap financial benefits.
   
  Broadcast - Several areas of broadcast are served by Microwave Filter 
Company with the most active being Wireless Cable.  

  Wireless Cable is a multichannel subscription television service that is a 
competitor to cable television.  This service delivers programming over-the-
air using microwave frequencies.  Television programming is received at 
customer sites via a small rooftop antenna.  The signals are then 
downconverted for reception at the viewers' television sets. There is no 
discernible difference between cable and wireless with respect to equipment 
installed in subscribers' homes.  This service differs from cable television 
by its delivery method and that it offers fewer channels. Currently, over 33 
channels can be delivered by Wireless Cable.  Digital compression techniques 
can increase these channels eight fold. 

  The most significant product sold to this market is our channel combiner used 
at the broadcast site to reduce tower costs.  By combining channels at the 
transmitter, additional expensive coaxial or waveguide runs up the tower 
become unnecessary. 

  MFC offers the widest selection of channel combiners to meet a variety of 
system specifications.  Combiners in different configurations and constructed 
of different materials offer the operator better or best options depending on 
budget or other system requirements. 

  It was a difficult year for most Wireless Cable Television companies. By 
year's end, the top three systems were facing financial problems. Yet members 
of the industry remain optimistic that the market will rebound when the 
Wireless Cable industry begins to offer two-way services. Wireless Cable has 
the technical ability to provide internet access (downloading) at much higher 
speeds than over phone lines. 

  There is opportunity for Wireless Cable growth internationally particularly
in countries where television service is becoming popular but there is no cable
infrastructure in place.   

                              5
<PAGE>


  Cellular Television - A new wireless service. Most people are familiar with 
cellular phones but here's a new twist - cellular television or (LMDS). This 
system operates like cellular phone in theory. An omni-directional transmitter 
at the center of a six mile cell sends out a video signal carrying 49 channels 
of programming. Subscribers at locations throughout that cell can receive the 
signal with small, square, flat antennas. One system, Cellular Vision USA 
already exists in New York City. Now the FCC is preparing to auction off 
additional frequencies (between 29 and 31 GHz) for similar services to 
establish themselves. Microwave Filter Company sells a notch and bandpass 
filter series to remove interference at the transmitter to this new 
market. 

  LPTV - Low Power Television or LPTV is an option in the U.S. as a 
multichannel subscription television service.  A system similar to Wireless 
Cable can be configured to deliver channels of programming to areas 
where off air signals cannot be received.  The only difference between both 
services is broadcast frequency and the type of antenna located at the 
subscriber's home.  An LPTV receive antenna would look like any other off air 
broadcast antenna in contrast to the microwave antenna used for Wireless 
Cable. LPTV frequencies are easier to obtain and there are more LPTV than 
Wireless channels available. In fact, due to the limited number of Wireless 
Cable frequencies, Wireless Cable operators are using a combination of Wireless 
and LPTV frequencies to increase the number of channels offered to their 
subscribers.  As a broadcaster, LPTV differs from traditional television only 
in broadcast power.  With lower broadcast power, the service has a smaller 
reception area than high power broadcast stations.    

  Microwave Filter Company provides channel combiners and interference filters 
for this industry.  The channel combiners are used to group channels and 
eliminate additional coaxial runs to the broadcast tower.  Filters are also 
used in broadcast equipment to eliminate interference. 

  
  Radio and Television Broadcast - MFC primarily serves these broadcast areas 
with interference filters to reduce equipment harmonics. Other broadcast areas 
served also include AML, telemetry and STL/ENG relays. 

  Similar to cable television, the broadcast industry is also moving towards 
the digital delivery of both audio and video broadcast. 

  Satellite - Filters and traps for removing interference are provided to both 
commercial and home C-band TVRO antennas.  A variety of products are available 
that offer protection and or solutions to interference that affects the 
feedhorn, downconverter, and receiver. A variety of filters are also available 
for satellite services utilizing higher frequency bands such as 12, 13 and 18 
GHz.   

  Direct Broadcast Satellite or DBS is a version of home satellite programming 
delivered direct to the home.  It differs from C-band TVRO by the size of the 
receive antenna. DBS broadcasts at a higher frequency requiring a smaller 
satellite dish than C-band TVRO.  Both satellite dealers and cable television 
systems market the service to offer consumers television options. 

                                   6
<PAGE> 

  Mobile Radio - MFC provides filters to a variety of mobile radio services 
such as cellular telephone, two way radio and paging to eliminate interference 
in transmit or receive equipment. With the number of services increasing and 
our air waves becoming more congested, filters are increasingly important to 
many transmit operations.  Cellular telephone has been the largest mobile 
radio growth market. The Cellular market is beginning to level off and now 
Personal Communications Services (PCS) is an area of mobile radio on the rise.  

  Microwave and RF - This market encompasses both commercial and military 
applications.  Filters in defense applications are used for such purposes as 
air to ground communications, radar and land communications.  In commercial 
areas, filters are used to protect such equipment as receivers, transmitters, 
transceivers and any other electronics used for signal processing. In addition 
to filters, this market is also served with MFC's Ferrosorb product line.  
Ferrosorb is a microwave absorbing material available in sheets, loads and a 
variety of other shapes.  The product is used to offer protection by shielding 
signals or absorbing selective bands. 

  In 1992, MFC's acquisition of certain assets of Chesterfield Products added 
an expanded line of products to enhance the RF filter line.  Many of MFC's 
traditional filters are components added onto a system.  Chesterfield provided 
MFC with the capability to manufacture miniature and subminiature filters 
which are components built into electronic systems.  Another Chesterfield 
capability has provided us with the resources to expand our filter design 
range down to 5 KHz. 

  There has been an increased demand for filters in the OEM (Original Equipment
Manufacturer) market. In response to this demand, MFC has purchased new design,
fabrication and test equipment to design filters up to 50 GHz. OEM orders are
larger than those received for other markets and facilities such as a soldering
oven have been added in the manufacturing area for large volume production. 
 
Niagara Scientific, Inc. (NSI)
------------------------------

  NSI - Like MFC, NSI and its divisions seek niche markets arising from 
certain demographic changes in the industrial work force which promotes 
acceptance of automation in both large and small factories.  NSI's typical 
product is customized to the purchaser's operation and is the result of system 
engineering.  The product makes tactical use of precision mechanical movements 
or sensors of physical characteristics under microprocessor control.  These 
smart machines reduce labor costs through faster operation and increased 
quality. 

  Typical customers for case packing machines are food processors or makers of 
cosmetics, pharmaceuticals, candies or hardware whose product must be cased 
for shipping and storage.  Recent customers for typical machines include 
DuPont, Knorr, Planters-Lifesavers, the Fountainhead Group, Mutek, Ecco D'oro 
Food Coop and CSP Foods. 

                             7
<PAGE>

  Other custom equipment is designed for inspection-rejection, counting, 
analyzing or otherwise monitoring, reporting or controlling a continuous 
manufacturing or industrial process. 

  Typical customers are commodity mass producers in the food, drug and paint 
industries. 

WORLD TRADE 
-----------

  Management believes that world marketing is a route to substantial expansion 
of sales for MFC/NSI. Export opportunities for MFC's communication related 
products are many - especially in areas of the world such as China, the 
Pacific Rim and South America. Marketing research reveals that the Company's 
products are in high demand in these areas of the world. 

  NSI products are less suitable for export for a number of reasons, including 
their large size and complexity, less demand in underdeveloped areas for 
automation and significant local competition.  However, NSI is well qualified 
to produce and or distribute complementary products under license. 

SUPPLIERS 
---------

  The Company depends on outside suppliers for raw materials, components and 
parts, and services. Although items are generally available from a number of 
suppliers, the Company purchases certain raw materials and components from a 
single supplier. If such a supplier should cease to supply an item, the 
Company believes that new sources could be found to provide the raw materials 
and components. However, manufacturing delays and added costs could result. 
The Company has not experienced significant delays of this nature in the past, 
but there can be no assurance that delays in delivery due to supply shortages 
will not occur in the future. Substantial periods of lead time for delivery of 
certain materials are sometimes experienced by the Company, making it 
necessary to inventory varied quantities of materials.   

PATENTS AND LICENSES 
--------------------

 The Company has no patents, trademarks, copyrights, licenses or franchises of 
material importance. 

SEASONAL FLUCTUATIONS 
---------------------

  There are no significant seasonal fluctuations in the Company's business. 

GOVERNMENT CONTRACTS 
--------------------

  The Company is not dependent in any material respect on government contracts. 

                             8
<PAGE>

BACKLOG 
-------

  At September 30, 1998, the Company's total backlog of orders was $746,795 
compared to $1,190,048 at September 30, 1997.  At September 30, 1998, MFC's 
backlog of orders was $647,270 compared to $1,190,048 at September 30, 1997. 
At September 30, 1998, NSI's backlog of orders was $99,525 compared to $0 at 
September 30, 1997. The total Company backlog at September 30, 1998 is 
scheduled to ship during fiscal 1999.  

EMPLOYEES
---------

  At September 30, 1998, the Company employed 73 full-time permanent 
employees, 4 part-time permanent employees, and 10 full-time temporary 
employees. 

RESEARCH AND DEVELOPMENT 
------------------------

  The Company maintains and expects to continue to maintain an active research 
and development program.  The Company believes that such a program is needed 
to maintain its competitive position in existing markets and to provide 
products for emerging markets.  Costs in connection with research and 
development were $490,153, $337,250 and $359,934 for the fiscal years 1998, 
1997 and 1996, respectively. Research and development costs are charged to 
operations as incurred. 

COMPETITION
-----------

  The principal competitive factors facing both MFC and NSI are price, 
technical performance, service and the ability to produce in quantity to 
specific delivery schedules. Based on these factors, the Company believes it 
competes favorably in its markets. 

                             9
<PAGE>

ITEM 2. PROPERTIES. 

  MFC's office and manufacturing facility is located at 6743 Kinne Street, 
East Syracuse, New York.  This facility, which is beneficially owned by MFC, 
consists of 40,000 square feet of office and manufacturing space located on 
3.7 acres.  MFC presently occupies approximately 35,000 square feet with the 
balance (approximately 5,000 square feet) occupied by NSI. 

  MFC's purchase of the facility was financed through the issuance of Onondaga 
County Industrial Revenue Bonds. Because of the manner in which the 
transaction was structured and in order to afford MFC certain sales and real 
property tax abatements, record title to the facility is held by the Onondaga 
County Industrial Development Agency (OCIDA).  MFC leases the facility from 
OCIDA for nominal rent and, upon repayment of the bonds, is required to 
purchase the facility from OCIDA for $1.00. 

ITEM 3. LEGAL PROCEEDINGS. 

  There are currently no material pending legal proceedings against the Company 
or its subsidiaries. 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 

  During the fourth quarter of the fiscal year covered by this Form 10-K, there 
were no matters submitted to a vote of security holders. 

                             10
<PAGE>



                           PART II 
                                 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.

  MFC's common stock is traded on the NASDAQ over-the-counter market under the 
symbol MFCO.  The information set forth was obtained from statements provided 
by the NASD. The following table shows the high and low sales prices for MFC's 
common stock for each full quarterly period within the two most recent fiscal 
years. The quotations represent prices in the over-the-counter market between 
dealers in securities.  They do not include retail mark-ups, mark-downs or 
commissions. 


                                         
Fiscal 1998                        High      Low 

Oct. 1, 1997 to Dec. 31, 1997   $  1.38  $   .88     
Jan. 1, 1998 to Mar. 31, 1998      1.38      .94 
Apr. 1, 1998 to June 30, 1998      1.31     1.00   
July 1, 1998 to Sept. 30, 1998     1.19      .75 


Fiscal 1997                        High      Low 

Oct. 1, 1996 to Dec. 31, 1996   $  1.38   $ 1.00 
Jan. 1, 1997 to Mar. 31, 1997      1.50     1.06 
Apr. 1, 1997 to June 30, 1997      1.75      .94 
July 1, 1997 to Sept. 30, 1997     1.38     1.00 

Adjusted for all stock dividends. 

  The approximate number of stockholders on September 30, 1998 was 1,800. 

  On November 4, 1998, the Board of Directors declared a five cents per share
cash dividend to shareholders of record on February 2, 1999, to be distributed
on February 17, 1999.

  On October 29, 1997, the Board of Directors declared a five cents per share 
cash dividend to shareholders of record on February 3, 1998, to be distributed
on February 18, 1998. 

  On January 15, 1997, the Board of Directors declared a five cents per share
cash dividend to shareholders of record on February 3, 1997, to be distributed
on February 18, 1997.   

 




                             11
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.

  The following selected financial information is derived from and should be 
read in conjunction with the financial statements, including the notes 
thereto, appearing in Item 8. - "Financial Statements and Supplemental Data." 


Five Year Summary Of Financial Data


<TABLE>
<CAPTION>
                                                           September 30
                                     1998         1997         1996          1995         1994
<S>                              <C>          <C>          <C>           <C>           <C>
Net Sales                        $ 6,989,106  $ 6,175,425  $ 7,532,710   $ 7,655,198   $ 8,616,861
Net Income (1)                   $    69,424  $   434,772  $   504,295   $    19,164   $   117,529
Earnings Per Share               $       .02  $       .12  $       .14   $       .01   $       .03
Weighted Average Number of
Common Shares Outstanding*         3,535,522    3,548,240    3,525,362     3,478,451     3,508,923
Stock (%) Dividends                                                 5%            5%            5%
Cash ($) Dividends Paid          $       .05  $       .05          .05                        
Total Assets                     $ 5,059,135  $ 5,173,481  $ 5,410,266   $ 5,273,931   $ 5,597,991
Long Term Debt                   $         0  $    46,065  $   102,774   $   439,545   $   583,354
*Adjusted for all stock dividends.


Net income as a percentage of:          1998         1997         1996          1995           1994
Sales.............................       1.0          7.0          6.7           0.3            1.4
Assets............................       1.4          8.4          9.3           0.4            2.1
Equity............................       1.7         10.2         12.7           0.5            3.3

</TABLE>


(1)  In the fourth quarter of 1997, the Company received life insurance death 
benefits of $350,000 as a result of the death of a former officer.     


  
                                              12
<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS
---------------------

  The following table sets forth the Company's net sales by major product 
groups for each of the fiscal years in the three year period ended September 
30, 1998. 

Product group  (in thousands)  Fiscal 1998    Fiscal 1997   Fiscal 1996

Niagara Scientific                $  211         $  587        $  609
Microwave Filter:
  Cable TV                         3,588          3,592         3,951
  RF/Microwave                     2,119            740         1,074
  Broadcast TV                       940          1,096         1,788
  Satellite Communications           131            160           111
  Total                           $6,989         $6,175        $7,533

Sales backlog at 9/30             $  747         $1,190        $1,262


Fiscal 1998 compared to fiscal 1997
 
  Consolidated net sales for the fiscal year ended September 30, 1998 equalled
$6,989,106, an increase of $813,681 or 13.2% when compared to consolidated net 
sales of $6,175,425 during the fiscal year ended September 30, 1997. 

  Microwave Filter Company, Inc. (MFC) sales increased $1,189,932 or 21.3% to 
$6,777,794 during the fiscal year ended September 30, 1998 when compared to 
sales of $5,587,862 during the fiscal year ended September 30, 1997. 

  The increase in MFC sales can primarily be attributed to an increase in the 
sales of the Company's RF/Microwave products to OEMs (Original Equipment 
Manufacturers). MFC's RF/Microwave product sales increased $1,378,589 or 
186.2% to $2,119,051 during the fiscal year ended September 30, 1998 when 
compared to sales of $740,462 during the the fiscal year ended September 30, 
1997. There has been increased demand for filters in the OEM market. Part of 
the Company's long term strategy has been to invest in product and 
infrastructure development to exploit new markets such as LMDS (Cellular TV), 
PCS and PCN; and, continue to develop OEM relationships. This strategy is 
proving successful and has helped offset the hiatus in demand in Wireless 
Cable; as well as a decrease in sales in the Schroeder Machines Division of 
Niagara Scientific, Inc., a wholly owned subsidiary. 

  MFC's Cable TV product sales were essentially identical to the same period 
last year. Net sales were $ 3,587,908, a decrease of $4,282 or 0.1%, during 
the fiscal year ended September 30, 1998 when compared to net sales of 
$3,592,190 during the fiscal year ended September 30, 1997. Competition in the 
form of Direct Broadcast Satellite (DBS) continues to grow at the expense of 
the Cable TV industry and this has impacted our sales. DBS offers more 
channels and high quality digital reception. However, DBS cannot offer local 
stations and is strictly a one-way service. CATV operators, while facing 
competition, are beginning to expand their operations. Standards and 
technology were introduced by Cable TV operators during 1998 for the 
implementation of two-way services as telephony and internet access. Cable has 
the capacity to offer clear, reliable and fast services in these areas. With 
these new offerings to the marketplace, Cable TV operators will increase their 
equipment purchases which should positively impact our sales to this market. 

                             13
<PAGE> 


  MFC's Broadcast TV product sales, which includes wireless cable products, 
decreased $155,458 or 14.2% to $940,162 during the fiscal year ended September 
30, 1998 when compared to sales of $1,095,620 during the fiscal year ended 
September 30, 1997. The decrease in sales can primarily be attributed to 
market conditions. Demand in the Multichannel Multipoint Distribution Service 
(MMDS) continues to be low as operators have waited for the successful testing 
and implementation of digital compression technology. Wireless Cable has not 
been able to offer services to subscribers that are on a par with Cable 
Television or Direct Broadcast Satellite. In addition, the major Wireless 
Cable operators in the U.S. are having cash flow problems, and it appears that 
industry demand domestically will not improve until additional funding sources 
are found. However, there are still viable markets internationally for this 
technology, particularly in South America. Under developed countries that are 
not wired for Cable Television service are attracted to Wireless Cable which 
does not involve as large an effort for installation of service.    
 
  Niagara Scientific, Inc. (NSI), a wholly owned subsidiary, sales decreased 
$376,251 or 64% to $211,312 for the fiscal year ended September 30, 1998  when 
compared to sales of $587,563 for the twelve months ended September 30, 1997. 
During the past fiscal year, NSI has expanded its effort to develop new 
products by introducing several standard low price products and a new 
capability to integrate "Robotics" into case packing and other material 
handling machines.   

  Gross profit increased $262,211 or 10.6% to $2,745,158 during the fiscal 
year ended September 30, 1998 when compared to gross profit of $2,482,947 
during the fiscal year ended September 30, 1997. The dollar increase in gross 
profit during fiscal 1998 when compared to fiscal 1997 can primarily be 
attributed to the increase in sales. As a percentage of sales, gross profit 
equalled 39.3% during the fiscal year ended September 30, 1998 when compared 
to 40.2% during the fiscal year ended September 30, 1997. The Company did 
incur significant manufacturing (excess scrap and rework) costs associated 
with new product development during the second and primarily the third quarter 
of the fiscal year ended September 30, 1998.   

  Selling, general and administrative (SG&A) expenses increased $288,657 or 
11.7% to $2,761,422 during the fiscal year ended September 30, 1998 when 
compared to SG&A expenses of $2,472,765 during the fiscal year ended September 
30, 1997. As a percentage of sales, SG&A expenses equalled 39.5% during the 
fiscal year ended September 30, 1998 when compared to 40% during the fiscal 
year ended September 30, 1997. Increases were realized primarily in research 
and development expenses, advertising and promotional expenses and sales 
commissions expense during fiscal 1998.   
 
                            14
<PAGE>
 
  Income from operations decreased $26,446 to a loss from operations of $16,264 
during the fiscal year ended September 30, 1998 when compared to income from 
operations of $10,182 during the fiscal year ended September 30, 1997 primarily 
due to the higher SG&A expenses this year when compared to last year. 
 
  On an industry segment basis, MFC's income from operations increased $180,028
to $480,051 for the fiscal year ended September 30, 1998 when compared to 
income from operations of $300,023 for the fiscal year ended September 30, 
1997. The increase can primarily be attributed to the increase in MFC sales. 
NSI recorded a loss from operations of $419,778 for the fiscal year ended 
September 30, 1998 compared to a loss from operations of $183,675 for the 
fiscal year ended September 30, 1997. NSI's loss can primarily be attributed 
to low sales volume, increases in research and development and advertising and 
promotional expenses, and the absorption of fixed overhead expenses during 
fiscal 1998. Corporate expenses decreased $29,629 to $76,537 for the fiscal 
year ended September 30, 1998 when compared to $106,166 for the fiscal year 
ended September 30, 1997. The decrease can be attributed to a decrease in 
legal expenses during fiscal 1998 when compared to fiscal 1997.     

  Other income decreased $354,751 during the fiscal year ended September 30, 
1998 when compared to the fiscal year ended September 30, 1997 primarily due to 
the receipt of life insurance death benefits of $350,000, as a result of the 
death of a former officer, during fiscal 1997. 

  The Company's effective income tax rate equalled 4.0% during fiscal 1998 
primarily due to the low levels of pre-tax income.   


Fiscal 1997 compared to Fiscal 1996

  Consolidated net sales for the fiscal year ended September 30, 1997 equalled 
$6,175,425, a decrease of $1,357,285 or 18% when compared to consolidated net 
sales of $7,532,710 during the fiscal year ended September 30, 1996. 

  Microwave Filter Company, Inc. (MFC) sales decreased $1,335,644 or 19.3% to 
$5,587,862 during the fiscal year ended September 30, 1997 when compared to 
sales of $6,923,506 during the fiscal year ended September 30, 1996. 

                            15
<PAGE> 


  MFC's Cable TV product sales decreased $359,164 or 9.1% to $3,592,190 during 
the fiscal year ended September 30, 1997 when compared to sales of $3,951,534 
during the fiscal year ended September 30, 1996. The decrease in sales can 
primarily be attributed to market conditions. Competition in the form of Direct 
Broadcast Satellite (DBS) has enjoyed rapid growth at the expense of the Cable 
TV industry and this has impacted our sales. DBS offers more channels and high 
quality digital reception. However, DBS cannot offer local stations and is 
strictly a one-way service. In the next few years, Cable TV operators will 
begin to offer additional two-way services such as telephony and high speed 
internet access which will be beyond the technical capabilities of DBS, so 
Cable TV will regain some lost market share. Standards and technology are 
being developed by Cable TV operators for the implementation of these new 
services and once decisions are complete, additional investment in equipment 
to build up physical plant will be made and should again positively impact our 
sales to this market. MFC has also experienced stiffer competition from other 
suppliers. Management has been working diligently to recapture any lost 
business and to increase market share through more competitive pricing and an 
increased marketing effort. 

  MFC's Broadcast TV product sales, which includes Wireless Cable products, 
decreased $692,019 or 38.7% to $1,095,620 during the fiscal year ended 
September 30, 1997 when compared to sales of $1,787,639 during the fiscal year 
ended September 30, 1996. The decrease in sales can also be attributed 
primarily to market conditions. Demand in the Multichannel Multipoint 
Distribution Service (MMDS) has been low. Wireless cable system operators 
continue to wait for the successful testing and installation of digital 
compression technology. Digital compression technology will provide Wireless 
Cable with the ability to offer more channels. Wireless Cable is also a 
technology that shows promise in offering two-way data services such as 
internet access. The industry continues to remain optimistic about its future. 

  MFC's RF/Microwave product sales decreased $332,989 or 31% to $740,662 during 
the fiscal year ended September 30, 1997 when compared to sales of $1,073,651 
during the fiscal year ended September 30, 1996. The decrease in sales can 
primarily be attributed to the completion of a large order during the fiscal 
year ended September 30, 1996. 

  Niagara Scientific, Inc. (NSI), a wholly owned subsidiary, sales for the 
fiscal year ended September 30, 1997 were essentially identical to the same 
period last year. Net sales were $587,563 for the twelve months ended September 
30, 1997, a decrease of $21,641 or 3.6%, when compared to net sales of $609,204 
during the twelve months ended September 30, 1996. 

  Gross profit decreased $728,672 or 22.7% to $2,482,947 during the fiscal year 
ended September 30, 1997 when compared to gross profit of $3,211,619 during the 
fiscal year ended September 30, 1996. The decrease in gross profit during 
fiscal 1997 when compared to fiscal 1996 can primarily be attributed to the 
decrease in sales. As a percentage of sales, gross profit decreased to 40.2% 
during the fiscal year ended September 30, 1997 when compared to 42.6% during 
the fiscal year ended September 30, 1996. The decrease in gross profit as a 
percentage of sales during fiscal 1997 when compared to fiscal 1996 can 
primarily be attributed to higher manufacturing overhead costs per sales 
dollar due to the significant decline in sales during fiscal 1997 when 
compared to fiscal 1996. 

                            16 
<PAGE>


  Selling, general and administrative (SG&A) expenses decreased $87,927 or 3.4% 
to $2,472,765 during the fiscal year ended September 30, 1997 when compared to 
SG&A expenses of $2,560,692 during the fiscal year ended September 30, 1996.
As a percentage of sales, SG&A expenses increased to 40% during the fiscal year 
ended September 30, 1997 when compared to 34% during the fiscal year ended 
September 30, 1996, primarily due to the decrease in sales during fiscal 1997. 
Decreases were realized in salary and salary related expenses, amortization 
expense, bad debt expense, sales commissions and legal costs while increased 
costs were experienced in promotional and advertising expenses. 

  Income from operations decreased $640,745 to $10,182 during the fiscal year 
ended September 30, 1997 when compared to income from operations of $650,927 
during the fiscal year ended September 30, 1996 primarily due to the decrease 
in sales. 

  Other income increased $414,029 during the fiscal year ended September 30, 
1997 when compared to the fiscal year ended September 30, 1996 primarily due to 
the receipt of life insurance death benefits of $350,000 as a result of the 
death of a former officer.  

  The Company's effective income tax rate decreased to 4.1% during fiscal 1997 
primarily due to the lower levels of pre-tax income, the tax-free receipt of 
life insurance death benefits and a research and experimentation tax credit.   



LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

  MFC defines liquidity as the ability to generate adequate funds to meet its 
operating and capital needs.  The Company's primary source of liquidity has 
been funds provided by operations. 

                                            September 30
                                  1998          1997         1996
Cash & cash equivalents        $1,221,108    $1,434,473   $1,280,999
Working capital                $2,566,238    $2,745,211   $2,579,910
Current ratio                   3.79 to 1     4.20 to 1    3.07 to 1
Long-term debt                    $     0       $46,065     $102,774

  Cash and cash equivalents decreased $213,365 to $1,221,108 at September 30, 
1998 when compared to $1,434,473 at September 30, 1997. The decrease was a 
result of $450,331 in net cash provided by operating activities, $345,321 in 
net cash used for capital expenditures and $318,375 in net cash used in 
financing activities. 

  The Company's Board of Directors has authorized the repurchase of up to 
500,000 shares of the Company's outstanding common stock. The repurchases 
will be made from time to time on the open market at prevailing market 
prices or in negotiated transactions off the market. As of September 30, 
1998, 80,000 shares had been repurchased using existing cash balances. 
Management believes the common stock repurchase program, given the 
Company's present cash position as well as the current market price of 
the stock, reflects its belief in the fundamental strength of the business
and also reflects its commitment to enhancing shareholder value.     

  At September 30, 1998, the Company had unused aggregate lines of credit 
totaling $600,000.  Of these lines, $100,000 is for the purchase of equipment 
and is collateralized by equipment and $500,000 is for working capital and is 
collateralized by accounts receivable, inventories and equipment. The equipment 
line of credit provides for interest at the bank's base rate plus one half
percent (1/2%). The working capital line of credit provides for interest at the 
bank's base rate plus one quarter percent (1/4%).        

  Management believes that its working capital requirements for the foreseeable 
future will be met by its existing cash balances, future cash flows from 
operations and its current credit arrangements. 

                           17
<PAGE>


YEAR 2000 READINESS DISCLOSURE
------------------------------

The Year 2000 issue is the result of computer programs being written using two 
digits rather than four to define  the applicable year. Any of the Company's 
computer programs or hardware that have date-sensitive software or embedded 
computer chips may recognize a date using "00" as the year 1900 rather than 
the year 2000. This could result in a system failure or miscalculations  which 
could disrupt the Company's normal business activities. 

The Company has conducted a full inventory of its computer systems to identify 
the programs and systems that could be affected by the year 2000 problem. The 
Company is in the process of evaluating and testing those programs and 
systems.  Although no assurance can be given, the Company believes all 
critical software utilized by the Company is presently year 2000 compliant. 
The total cost to the Company of its own Year 2000 assessment, compliance and 
verification activities has not been and, based on its evaluation to date, is 
not anticipated to be material to the Company's financial position or results 
of operations in any given year. 

The company is presently surveying all major vendors and large customers to 
assess their state of readiness in addressing the year 2000 problem. The 
company depends on outside suppliers for raw materials, components and parts, 
and services. Although items are generally available from a number of 
suppliers, the Company purchases certain raw materials and components from a 
single supplier. If such a supplier should cease to supply an item, the 
Company believes that new sources could be found to provide the raw materials 
and components. However, manufacturing delays and added costs could result and 
adversely affect the business of the Company. The company has not experienced 
significant delays of this nature in the past, but there can be no assurance 
that delays in delivery due to supply shortages will not occur in the future. 

The Company has and will continue to devote the resources necessary to address 
any year 2000 issues.  The Company's contingency plan is to replace or repair 
systems which fail unexpectedly after January 1, 2000. The Company estimates 
that the costs associated with its "year 2000" contingency, if required, to be 
less than $75,000. 

                          18
<PAGE> 


ACCOUNTING STANDARDS NOT YET ADOPTED BY THE COMPANY
---------------------------------------------------
  
  The Financial Accounting Standards Board ("FASB") has issued several new 
pronouncements that are not yet adopted by the Company.

  In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," 
which establishes standards for reporting and display of comprehensive income 
and its components. The components of comprehensive income refer to revenues, 
expenses, gains and losses that are excluded from net income under current 
accounting standards. SFAS 130 requires that all items that are recognized 
under accounting standards as components of comprehensive income be reported 
in a financial statement displayed in equal prominence with other financial 
statements; the total of other comprehensive income for a period is required 
to be transferred to a component of equity that is separately displayed in a 
statement of financial position at the end of an accounting period. It will be 
effective for the Company for the first quarter of fiscal year ending 
September 30, 1999. SFAS 130 is not currently anticipated to have a 
significant impact on the Company's consolidated financial statements based on 
the current financial structure and operations of the Company. 

  In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an 
Enterprise and Related Information." SFAS 131 establishes standards for the way 
public enterprises are to report information about segments in annual financial 
statements and requires the reporting of selected information about operating 
segments in interim financial reports issued to shareholders. SFAS 131 also 
establishes standards for related disclosures about products and services, 
geographic areas and major customers. SFAS 131 is effective for the Company for 
the first quarter of fiscal year ending September 30, 1999. The Company does 
not expect SFAS 131 to have a material effect on its reported results. 


SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
--------------------------------------------------------------------------------

  Any statements contained in this report which are not historical facts are 
forward looking statements; and, many important factors could cause actual 
results to differ materially from those in the forward looking statements. Such 
factors include, but are not limited to, changes (legislative, regulatory and 
otherwise) in the MMDS, LPTV or Cable industry, demand for the Company's 
products (both domestically and internationally), the development of 
competitive products, competitive pricing, market acceptance of new product 
introductions, technological changes, general economic conditions, litigation 
and other factors, risks and uncertainties which may be identified in the 
Company's Securities and Exchange Commission filings. 

                        19
<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

  The Financial Statements and Financial Statement Schedules called for by this 
item are submitted as a separate section of this report. 



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
FINANCIAL DISCLOSURE. 

  None.


                          PART III 
                                 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

  The names of, and certain information with respect to, the directors of MFC 
is set forth below: 

                                                         Common Shares 
                                                          Actually or   Percent 
                                                         Beneficially     of 
Director             Principal occupation               Owned 11/23/98   Class 


TRUDI B. ARTINI       Mrs. Artini is an independent         108,815       3.3%
(a)(b)(d)             investor in MFC and various other
Age 76                business enterprises in Syracuse,
Director since 1974   New York.                         
                                                        
DAVID B. ROBINSON MD  Dr. Robinson is Emeritus Professor    116,332       3.5%
(a)(b)(d)             of Psychiatry at the Health Science   
Age 74                Center, State University of New York  
Director since 1977   at Syracuse. He was a faculty member  
                      from 1958 until his retirement in     
                      1985 and served as Acting Chairman    
                      of the Dept. of Psychiatry for six    
                      of those years. Since 1989, he has    
                      served as a Skaneateles Town          
                      Councilman and in 1980 was a                             
                      founding Board Member of the                         
                      Skaneateles Festival of Chamber 
                      Music.                                 
                                                                               
LOUIS MISENTI         President and Principal               387,362      11.7% 
Age 71                shareholder of SCI Corp.,                                
Director since 1976   Syracuse, New York since 1984.                           
                      SCI manufactures polishing                               
                      compounds for the automobile and                         
                      silverware industries.  Mr.                              
                      Misenti is also the managing 
                      partner of Northern Pines Golf      
                      Course, Cicero, New York which was  
                      founded in 1970.  He was elected                         
                      Chairman of the Board of                                 
                      Directors of MFC on March 27,                            
                      1993.                                                    
                                                                               
CARL F. FAHRENKRUG PE Mr. Fahrenkrug was appointed          384,566      11.6%
(a)(d)                President and Chief Executive                            
Age 56                Officer of MFC on October 7,                             
Director since 1984   1992.  He has also served as                             
                      President and Chief Executive                            
                      Officer of NSI since prior to                            
                      1986.  He served as Vice                                 
                      President of Engineering at                              
                      Microwave Systems, Inc.,                                 
                      Syracuse, N.Y. from 1972-1976.                           
                      Mr. Fahrenkrug has a B.S. and                            
                      M.S. in Engineering and an MBA                           
                      from Syracuse University.                                

                             20
<PAGE>
                                                                               

                                                         Common Shares 
                                                          Actually or   Percent 
                                                         Beneficially     of 
Director             Principal occupation               Owned 11/23/98   Class 

MILO PETERSON         Mr. Peterson has served as            168,570       5.1%  
(a)(d)                Executive Vice President and       
Age 58                Corporate Secretary of NSI since   
Director since 1990   January 1, 1992. Mr. Peterson  
                      graduated from programs at Yale  
                      University and Syracuse          
                      University.  He served as Vice   
                      President of Manufacturing of    
                      Microwave Systems, Inc.,         
                      Syracuse, N.Y. from 1970-1976.   
                      He was elected Corporate         
                      Secretary of MFC on March 27,    
                      1993.                            
                      
FRANK S. MARKOVICH    Mr. Markovich is a consultant in        4,508        *
(c)(d)                the manufacturing operations  
Age 53                and training field. Prior to that 
Director since 1992   he was the Director of the 
                      Manufacturing Extension          
                      Partnership at UNIPEG Binghamton.
                      He held various high level       
                      positions in operations, quality 
                      and product management in a 20   
                      year career with BF Goodrich     
                      Aerospace, Simmonds Precision    
                      Engine Systems of Norwich, New   
                      York.  He completed US Navy      
                      Electronics and Communications   
                      Schools and received an MBA from 
                      Syracuse University.             
                      
ROBERT R. ANDREWS     Mr. Andrews is the President and        1,214        *
(a)(c)                Principal shareholder of Morse   
Age 57                Manufacturing Co., Inc., East    
Director since 1992   Syracuse, N.Y. which produces    
                      specialized material handling    
                      equipment and has served in that 
                      capacity since prior to 1985.  He
                      received a B.A degree from       
                      Arkansas University and has      
                      served as Vice President and a   
                      director of the Manufacturers'   
                      Association of Central New York, 
                      President of the Citizens        
                      Foundation, a Trustee of Dewitt  
                      Community Church, director of the
                      Salvation Army and Chairman of   
                      the Business and Industry        
                      Council of Onondaga Community    
                      College.                         
                      
SIDNEY CHONG          Mr. Chong is Manager of Corporate      10,632        *
(a)(b)(c)             Accounting for Carrols Corp. in 
Age 57                Syracuse. Prior to joining Carrols         
Director since 1995   Corp., he was a Senior Accountant       
                      with Price Waterhouse and Co. in 
                      New York City.  Mr. Chong has a 
                      Bachelor of Science degree in 
                      accounting from California State     
                      University.                      

                              21
<PAGE>


                                                         Common Shares 
                                                          Actually or   Percent 
                                                         Beneficially     of 
Director             Principal occupation               Owned 11/23/98   Class 

Daniel Galbally       Mr. Galbally is an accountant           1,489        * 
(b)(c)                for Auburn Steel Company, Inc. 
Age 51                in Auburn, New York. Prior to 
Director since 1995   joining Auburn Steel, he was
                      the controller of Diamond Card           
                      Exchange, Inc. in Syracuse, New 
                      York. He was the controller of 
                      Evaporated Metal Films (EMF) in 
                      Ithaca, N.Y. Before joining EMF,  
                      he worked as controller and acting 
                      vice president of finance at 
                      Philips Display Components Co.
                      He has a bachelor's degree in    
                      accounting and an MBA from       
                      Syracuse University.             

(a)Member of Executive Committee 
(b)Member of Compensation Committee 
(c)Member of Finance and Audit Committee 
(d)Member of Nominating Committee 

*  Denotes less than one percent of class.

The Directors listed above and executive officers as a group own 1,216,898      
shares or approximately 37% of the outstanding common shares of the Company. 


IDENTIFICATION OF EXECUTIVE OFFICERS 

        Name                   Age      Position 

        Carl F. Fahrenkrug      56      President and Chief Executive Officer 

        Richard L. Jones        50      Vice President and Chief Financial 
                                        Officer 

        Milo J. Peterson        58      Corporate Secretary 

        Paul W. Mears           39      Vice President of Engineering 

        Terry C. Owens          44      Vice President of Sales  

All of the officers serve at the pleasure of the Board of Directors. 

Carl F. Fahrenkrug was elected President and Chief Executive Officer of MFC on 
October 7, 1992.  Prior to that date, he had been Executive Vice President and 
Chief Operating Officer of MFC.  Prior to January 1, 1992, he was President and 
CEO of NSI and Vice President of Corporate Development for MFC. 

Richard L. Jones joined MFC in August 1983 as controller. In February 1985, he 
was appointed Vice President and Treasurer of MFC.  On October 7, 1992, he was 
appointed Vice President and Chief Financial Officer. 

Milo J. Peterson was elected Corporate Secretary of MFC on March 27, 1993.  
Mr. Peterson has served as Executive Vice President and Corporate Secretary of 
NSI. Since January 1, 1992, he has also served as Production Consultant to the 
President.  Prior to January 1, 1992, he served as Executive Vice President of 
NSI. 

Paul W. Mears began his association with MFC as a Co-op while attending RIT in 
1981. He became a full time employee in 1984 when he began his duties as an 
Electrical Engineer in Research and Development. In 1988 he became a Senior 
Design and Quotation Engineer and in 1989, he was promoted to Assistant Chief
Engineer, Manager of Engineering of the Filter Division and in April of 1998,
Was appointed Vice President of Engineering.

Terry C. Owens began his association with MFC in 1982 as an Associate Chief
Engineer. He served as a Project Engineer with Anaren Microwave from 1988
until 1992 when he began employment with Laser Precision Corp., in Utica,
New York, as a Product Specialist. He returned to MFC as Sales Manager, 
Assistant Marketing Manager in February of 1995 and in April 1998, was 
appointed Vice President of Sales. 



                             22
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION.

  The following table sets forth for the fiscal years ended September 30, 1998, 
1997 and 1996, compensation paid by MFC to the named executive officers in all 
capacities in which they served. 

                            SUMMARY COMPENSATION TABLE
                                Annual Compensation
                                            Salary    Bonus
   Name and principal position     Year    ___$___   ___$___

   Carl F. Fahrenkrug              1998    110,966       -
   President and CEO               1997    117,882       -
                                   1996    104,229    10,000


PROFIT SHARING 
--------------

  MFC has a profit sharing plan for all employees over the age of 21 with one 
year of service.  Annual contributions are determined by the Board of 
Directors and are made from current or accumulated net income.  Allocation of 
contributions to plan participants are based upon annual compensation.  
Participants vest on the basis of 20% after 3 years of service, 40% at 4 
years, 60% at 5 years, 80% at 6 years and 100% at 7 years. 
  
  MFC also has a voluntary 401-K plan.  Eligibility is the same as the Profit 
Sharing Plan. Contributions to the 401-K plan are currently matched at a rate 
of 50% of employee contributions limited to 3.0% of compensation. 

  MFC's contributions to the plans for the years ended September 30, 1998, 1997 
and 1996 amounted to $78,211, $68,139 and $81,470, respectively. 

STOCK OPTIONS
-------------

  On April 9, 1998, the Board of Directors and Shareholders of Microwave Filter 
Company, Inc. approved the 1998 Microwave Filter Company, Inc. Incentive Stock 
Plan (the "1998 Plan"). Under the 1998 Plan, the Company may grant incentive 
stock options ("ISOs"), non-qualified stock options ("NQSOs") and stock
appreciation rights to directors, officers and employees of the Company and its
affiliates. The 1998 Plan reserves 150,000 shares for issuance. The exercise 
price of the ISOs and NQSOs will be 100% of the fair market value of the Common 
Stock on the date the ISOs and NQSOs are granted. The 1998 Plan will terminate
on April 10, 2008. There were no stock options or stock appreciation rights 
granted or outstanding at September 30, 1998.   
  

 

                             23
<PAGE>

COMPENSATION OF DIRECTORS 
-------------------------

  Non-officer directors received fees of $400.00 per board meeting and $300.00 
per committee meeting, with the exception of the executive committee which 
received $400.00 per committee meeting, during fiscal 1998. MFC also 
reimburses directors for reasonable expenses incurred in attending meetings.  
The Chairman of the Board and Officer members receive no compensation for 
their attendance at meetings. During fiscal 1998, the Company paid Louis S. 
Misenti $16,500 in compensation (part of which was taken in stock) for his 
services as Chairman of the Board of Directors of Microwave Filter Company, 
Inc. In addition, the Company paid Louis S. Misenti $30,600 during fiscal 
1998 for consulting services. Outside directors have the option of receiving 
their compensation for meetings in the form of restricted shares of the 
Company's common stock. For this purpose, shares are valued at 85% of the 
mean between the bid and ask price of the stock at the beginning of each 
quarter. 

ITEM 12.  SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 
AND MANAGEMENT. 

  The following table sets forth information as to the only persons known by 
the Company to own beneficially more than 5% of the Common Stock of the Company 
on November 23, 1998. 

                                                                       % of
                                                                  Outstanding
                                                                Number of Shares
                                                                     Common
Name of Beneficial Owner   Address           Beneficially Owned  _____Stock_____

Frederick A. Dix &         209 Watson Rd.          244,007             7.4%
Marjorie Dix               N. Syracuse, NY 13212

Carl F. Fahrenkrug &       Indian Hill Rd.         384,566            11.6% 
Rita Fahrenkrug            Manlius, NY 13104

Louis S. Misenti           140 Clearview Rd.       387,362            11.7% 
                           Dewitt, NY 13214

Milo J. Peterson           218 Gulf Road           168,570             5.1% 
                           Camillus, NY 13031     

  The information relating to the ownership of common stock held by the 
directors and executive officers of the corporation is set forth in item 10 of 
this report. 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 

  None 
                             24
<PAGE>

                           PART IV 
                                 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. 

(a)    1. and 2.   Financial Statements and Schedules: 
         
                   Reference is made to the list of Financial Statements and
                   the Financial Statement Schedule submitted as a separate
                   section of this report.

(b)    Reports On Form 8-K:

       There are no reports on Form 8-K for the three months ended 
       September 30, 1998.

(C)    Exhibits:

       Reference is made to the List of Exhibits submitted as a separate 
       section of this report. 

                             25
<PAGE>

SIGNATURES
  Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, Microwave Filter Company, Inc. has duly caused this 
report to be signed on its behalf by the undersigned, thereunto duly 
authorized. 

MICROWAVE FILTER COMPANY, INC.

|S| Carl F. Fahrenkrug 
--------------------------
By:  Carl F. Fahrenkrug   
(President and Chief Executive Officer)

|S| Richard Jones    
---------------------                  
By:  Richard Jones                          
(Vice President and Chief Financial Officer)

Dated:  December 18, 1998

  Pursuant to the requirements Of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
Registrant and in the capacities and on the date indicated: 

|S| Louis S. Misenti          |S| Carl F. Fahrenkrug 
------------------------      --------------------------
Louis S. Misenti              Carl F. Fahrenkrug
(Director)                    (Director)

|S| Milo J. Peterson          |S| Robert R. Andrews  
------------------------      -----------------------
Milo J. Peterson              Robert R. Andrews
(Director)                    (Director)

|S| Sidney Chong
--------------------
Sidney Chong
(Director)

Dated:  December 18, 1998

                             26
<PAGE>

                 ANNUAL REPORT ON FORM 10-KSB

               MICROWAVE FILTER COMPANY, INC.
                      AND SUBSIDIARIES

         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
              AND FINANCIAL STATEMENT SCHEDULE

                 ITEM 8, ITEM 14(a)(1) and (2)

CONSOLIDATED FINANCIAL STATEMENTS:                              Page

Independent Auditors' Report.....................................28
Consolidated Balance Sheets as of September 30, 1998 and 1997....29
Consolidated Statements of Operations for the Years
  Ended September 30, 1998, 1997 and 1996 .......................30
Consolidated Statements of Stockholders' Equity for the Years
  Ended September 30, 1998, 1997 and 1996 .......................31
Consolidated Statements of Cash Flows for the Years
  Ended September 30, 1998, 1997 and 1996 .......................32
Notes to Consolidated Financial Statements.......................33-39



SCHEDULE FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996:

Independent Auditors' Report on Schedules........................41
II-Valuation and Qualifying Accounts.............................42

  All other schedules for which provision is made in the applicable accounting 
regulation of the Securities and Exchange Commission are not required under the 
related instructions or are inapplicable and therefore have been omitted. 


                             27
<PAGE>

INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders of
Microwave Filter Company, Inc.


In our opinion, the accompanying consolidated balance sheets and the related 
consolidated statements of operations, stockholders' equity and of cash flows 
present fairly, in all material respects, the financial position of Microwave 
Filter Company, Inc. and Subsidiaries at September 30, 1998 and 1997, and the 
results of their operations and their cash flows for each of the three 
years in the period ended September 30, 1998, in conformity with generally 
accepted accounting principles. These financial statements are the 
responsibility of the Company's management; our responsibility is to express 
an opinion on these financial statements based on our audits. We conducted our 
audits of these statements in accordance with generally accepted auditing 
standards which require that we plan and perform the audit to obtain reasonable 
assurance about whether the financial statements are free of material 
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements, assessing the 
accounting principles used and significant estimates made by management, and 
evaluating the overall financial statement  presentation.  We believe that our 
audits provide a reasonable basis for the opinion expressed above. 



PricewaterhouseCoopers LLP


Syracuse, New York
November 20, 1998
                 
                  
                                28
<PAGE>

          Microwave Filter Company and Subsidiaries
                 Consolidated Balance Sheets

                                                              September 30
Assets                                                       1998       1997
------                                                       ----       ----
Current assets:
  Cash and cash equivalents                              $1,221,108  $1,434,473
  Accounts receivable-trade, net of allowance for 
    doubtful accounts of $53,000 and $58,000                651,751     544,590
  Federal and state income tax recoverable                   55,813           0
  Inventories                                             1,328,386   1,261,942
  Deferred tax asset - current                              174,835     258,647
  Prepaid expenses and other current assets                  53,286     104,280
                                                          ---------   ---------
      Total current assets                                3,485,179   3,603,932
                                                         

Property, plant and equipment, net                        1,573,956   1,561,920
Deferred tax asset - noncurrent                                   0       7,629
                                                          ---------   ---------

      Total Assets                                       $5,059,135  $5,173,481
                                                         ==========  ==========
    
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
  Current portion of long term debt                         $44,851     $55,620
  Accounts payable                                          355,435     320,166
  Customer deposits                                         111,306      50,036
  Accrued federal and state income taxes                          0      30,108
  Accrued payroll and related expenses                      101,332     102,591
  Accrued compensated absences                              224,775     222,492
  Other current liabilities                                  81,242      77,708
                                                          ---------   ---------
    Total current liabilities                               918,941     858,721
                                                          
                                                                     
Long term debt, less current portion                              0      46,065
Deferred tax liability - noncurrent                          51,388           0
Deferred compensation and other liabilities                  11,994      17,966 
                                                          ---------   ---------

  Total liabilities                                         982,323     922,752
                                                          ---------   ---------
Commitments

Stockholders' equity:
  Common stock, $.10 par value. Authorized 5,000,000 shares
    Issued 4,294,733 in 1998 and 4,275,259 in 1997          429,473     427,526
  Additional paid-in capital                              3,222,613   3,206,360
  Retained earnings                                       1,146,516   1,254,570
                                                          
  Common stock in treasury, at cost,
  810,203 shares in 1998 and 730,202 shares in 1997        (721,790)   (637,727)
                                                          ---------   ---------

  Total stockholders' equity                              4,076,812   4,250,729
                                                          ---------   ---------
  Total Liabilities and Stockholders' Equity             $5,059,135  $5,173,481
                                                         ==========  ==========
                                                      
                                            
The accompanying notes are an integral part of the consolidated financial 
statements. 
                             29
<PAGE>


                   Microwave Filter Company and Subsidiaries
                     Consolidated Statements of Operations

                                         For the Years Ended September 30
                                       1998             1997            1996
                                       ----             ----            ----

Net sales                           $6,989,106       $6,175,425      $7,532,710

Cost of goods sold                   4,243,948        3,692,478       4,321,091
                                     ---------        ---------       ---------

    Gross profit                     2,745,158        2,482,947       3,211,619

Selling, general 
  and administrative expenses        2,761,422        2,472,765       2,560,692
                                     ---------        ---------       ---------

    Income (loss) from operations      (16,264)          10,182         650,927


Non-operating Income (Expense)
    Interest income                     56,869           49,954          44,292
    Interest expense                    (5,838)          (9,529)        (29,143)
    Miscellaneous                       37,567           52,924          14,171
    Life insurance death 
      benefits                               0          350,000               0
                                     ---------        ---------       ---------

    Income before income taxes          72,334          453,531         680,247


Provision for income taxes               2,910           18,759         175,952
                                     ---------        ---------       ---------

NET INCOME                             $69,424         $434,772        $504,295
                                     =========        =========       =========
                                                          
Earnings Per Share                        $.02            $0.12           $0.14
                                     =========        =========       =========

Weighted average number of common
shares outstanding                   3,535,522        3,548,240       3,525,362
                                     =========        =========       =========
                                        
                                                
                                                         
The accompanying notes are an integral part of the consolidated financial 
statements. 
                             30
<PAGE>

                   Microwave Filter Company and Subsidiaries  
                Consolidated Statements of Stockholders' Equity 
            For the Years Ended September 30, 1998, 1997 and 1996 
            -----------------------------------------------------


<TABLE>
<CAPTION>
                                                  Additional                                          Total
                               Common Stock        Paid-in       Retained      Treasury Stock      Stockholders'
                              Shares      Amt      Capital       Earnings      Shares     Amt         Equity
                              ------      ---      -------       --------      ------     ---         ------
<S>                         <C>         <C>        <C>          <C>          <C>      <C>          <C>
Balance,
September 30, 1995          4,003,733   $400,373   $2,880,992     $939,377   680,301  ($637,105)   $3,583,637

Net income                                                         504,295                            504,295
Stock issued to employees
        and officers           37,161      3,716       35,700                                          39,416
Stock issued to directors      16,342      1,635       18,132                                          19,767
Purchase of treasury stock                                                       452       (622)         (622)
Cash dividend paid
     ($.05 per share)                                             (168,195)                          (168,195)    
5% stock dividend             202,210     20,221      257,817     (278,038)   34,015
                            ---------   --------   ----------     --------   -------  ----------   ----------

Balance,
September 30, 1996          4,259,446    425,945    3,192,641      997,439   714,768   (637,727)    3,978,298

Net income                                                         434,772                            434,772
Stock issued to directors      15,813      1,581       13,719                                          15,300
Donated capital                                                               15,434           
Cash dividend paid
        ($.05 per share)                                          (177,641)                          (177,641)
                            ---------   --------   ----------     --------   -------  ----------   ----------

Balance,
September 30, 1997          4,275,259    427,526    3,206,360    1,254,570   730,202   (637,727)    4,250,729   
                            
Net income                                                          69,424                             69,424
Stock issued to directors      19,474      1,947       16,253                                          18,200 
Purchase of treasury stock                                                    80,000    (84,063)      (84,063)
Donated capital                                                                    1  
Cash dividend paid
     ($.05 per share)                                             (177,478)                          (177,478)
                           ----------  ---------   ----------   ----------   -------  ----------   ----------  
Balance 
September 30, 1998          4,294,733   $429,473   $3,222,613   $1,146,516   810,203  ($721,790)   $4,076,812 
                           ==========   ========   ==========   ==========   =======  ==========   ==========   

</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.
                             31
<PAGE>


                   Microwave Filter Company and Subsidiaries
                     Consolidated Statements of Cash Flows
                Increase (Decrease) in Cash and Cash Equivalents
                ------------------------------------------------

                                              For the Years Ended September 30
                                              --------------------------------
                                                   1998      1997       1996
                                                   ----      ----       ----

Cash flows from operating activities:
       Net income                                 $69,424   $434,772   $504,295

Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation                                  333,285    302,087    333,105
    Amortization of intangible assets                   0          0     63,772
    Inventory obsolescence provision                    0     19,763     48,744 
    Bad debt provision                                  0      2,775     53,011 
    Stock compensation                             18,200     15,300     59,183
    Deferred income taxes                         142,829    (67,841)   (95,748)
  Changes in assets and liabilities:
    Accounts receivable-trade, net               (107,161)   176,490    102,294
    Federal and state income taxes                (85,921)  (259,508)   246,808
    Inventories                                   (66,444)   217,273    420,788
    Other assets                                   50,994    (38,327)    17,249
    Accounts payable and customer deposits         96,539   (103,815)  (121,265)
    Accrued payroll, compensated absences and
      related expenses                              1,024       (444)    51,068
    Other current liabilities                       3,534    (27,528)   (26,980)
    Deferred compensation                          (5,972)    (5,406)    (4,894)
                                                ---------   --------   --------
    Net cash provided by operating activities     450,331    665,591  1,651,430
                                                ---------  ---------   --------
Cash flows from investing activities:
  Capital expenditures                           (345,321)  (280,717)  (291,633)
                                                 --------   --------    -------
    Net cash used in investing activities        (345,321)  (280,717)  (291,633)
                                                 --------   --------   --------
Cash flows from financing activities:
  Principal payments on long-term debt            (56,834)   (53,759)  (430,657)
  Purchase of treasury stock                      (84,063)         0       (622)
  Cash dividend paid                             (177,478)  (177,641)  (168,195)
                                                 --------   --------   --------
    Net cash used in financing activities        (318,375)  (231,400)  (599,474)
                                                 --------   --------   --------
    Net increase (decrease) 
         in cash and cash equivalents            (213,365)   153,474    760,323

Cash and cash equivalents at beginning of year  1,434,473  1,280,999    520,676
                                                ---------   --------   --------
CASH AND CASH EQUIVALENTS AT END OF YEAR       $1,221,108 $1,434,473 $1,280,999
                                               ==========  =========  =========
                                                    
                                                                
                                                                
Supplemental disclosures of cash flows:
  Cash paid during the year for (approximately):
    Interest                                       $7,000    $10,000    $29,000
    Income taxes                                  $27,000   $346,000    $32,000

   



  The accompanying notes are an integral part of the consolidated financial 
statements. 
                               32
<PAGE>

                   Microwave Filter Company and Subsidiaries
                   Notes to Consolidated Financial Statements
                   ------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


a. Nature of Business

 Microwave Filter Company, Inc. operates primarily in the United States and 
principally in two industries. The Company extends credit to business 
customers based upon ongoing credit evaluations. Microwave Filter Company, 
Inc. 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 and defense electronics. Niagara 
Scientific, Inc. custom designs case packing machines to automatically pack 
products into shipping cases. Customers are processors of food and other 
commodity products with a need to reduce labor cost with a modest investment 
and quick payback. 

b.  Basis of Consolidation

  The consolidated financial statements include the accounts of Microwave 
Filter Company, Inc. (MFC) and its wholly-owned subsidiaries, Niagara 
Scientific, Inc. (NSI) and Microwave Filter International, LTD. (MFI); located 
in Syracuse, New York. All significant intercompany balances and transactions 
have been eliminated in consolidation. 

c. Cash Equivalents 

 The Company considers all highly liquid investments purchased with an original 
maturity of 90 days or less to be cash equivalents. The carrying value at 
September 30, 1998 and September 30, 1997 approximates fair value. Substantially
all cash balances were invested at one financial institution at September 30, 
1998 and 1997. 

d. Inventories

 Inventories are stated at the lower of cost determined on the first-in, first-
out method or market. 

e.  Research and Development

 Costs in connection with research and development, which amount to $490,153,
$337,250 and $359,934 for the fiscal years 1998, 1997 and 1996, respectively,
are charged to operations as incurred.   

f. Property, Plant and Equipment

 Property, plant and equipment are recorded at cost. Depreciation is provided 
using the straight-line method over the estimated useful lives of the 
respective assets.  At the time of sale or retirement, the cost and 
accumulated depreciation are removed from the respective accounts and the 
resulting gain or loss is recognized in income. 

g. Income Taxes

 The Company accounts for income taxes under Statement of Financial Accounting 
Standards (SFAS) No. 109.  Deferred tax assets and liabilities are based on 
the difference between the financial statement and tax basis of assets and 
liabilities as measured by the enacted tax rates which are anticipated to be 
in effect when these differences reverse. The deferred tax provision is the 
result of the net change in the deferred tax assets and liabilities.  A 
valuation allowance is established when it is necessary to reduce deferred tax 
assets to amounts expected to be realized.   

                             33
<PAGE>

h. Earnings Per Share

 In the first quarter of fiscal 1998, the Company adopted Statement of 
Accounting Standards ("SFAS") No. 128, Earnings per Share. This standard
requires presentation of basic earnings per share ("EPS"), computed based on 
the weighted average number of common shares outstanding for the period, and 
diluted EPS, which gives the effect to all dilutive potential shares 
outstanding (i.e. options) during the period after restatement for any stock 
dividends. The Company had no dilutive potential common shares outstanding for 
the years ended September 30, 1998, 1997 or 1996. Income used in the EPS 
calculation is net income for each year. 

i. Use of Estimates
  
 The preparation of financial statements in conformity with generally accepted 
accounting principles requires management to make estimates and assumptions 
that affect the reported amounts of assets and liabilities and disclosure of 
contingent assets and liabilities at the date of the financial statements. 
Estimates also affect the reported amounts of revenues and expenses during the 
reporting period. Actual results could differ from those estimates.   


2. INVENTORIES

Inventories net of provision for obsolescence          
consisted of the following:                     September 30
                                          1998                 1997
                                          ----                 ----
  Raw materials and stock parts         $950,170             $832,125
  Work-in-process                        233,000              185,291
  Finished goods                         145,216              244,526
                                        --------            ---------
                                      $1,328,386           $1,261,942
                                      ==========           ==========
                                               
                                               
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:

                                                 September 30
                                          1998                 1997
                                          ----                 ----  

  Land                                  $143,000             $143,000
  Building and improvements            1,786,951            1,740,124
  Machinery and equipment              2,466,457            2,243,956
  Office equipment and fixtures        1,302,020            1,226,026
  Other                                   46,753               93,507
                                       ---------            ---------
                                       5,745,181            5,446,613
  Less: Accumulated depreciation       4,171,225            3,884,693
                                       ---------            ---------
                                      $1,573,956           $1,561,920
                                      ==========           ==========
                                    
                                               
                                               
                             34
<PAGE>

4. LONG-TERM DEBT

Long-term debt consisted of the following:                 September 30
                                                      1998             1997
  

 Capitalized lease obligation                         $44,851        $101,685
       

  Less: current portion                                44,851          55,620
                                                      -------         -------
                                                      $     0        $ 46,065
                                                      =======         =======
                                    
                                               
                                               
 

     The capitalized lease obligation represents the Company's obligation 
to the Onondaga County Industrial Agency (OCIDA) which financed the purchase 
of the Company's primary manufacturing facility. The facility serves as 
collateral for the debt.  The Company financed its purchase of the facility 
through an Industrial Development Revenue Bond issued by OCIDA and purchased 
by a bank.  The Company has guaranteed the payment on the bonds to the bank on 
behalf of OCIDA.  Payments are due quarterly, through April 1999, in an amount 
which would fully amortize the unpaid principal of the bonds.  The interest 
rate is adjusted quarterly and is equal to 2.5% plus 65% of the thirteen week 
average rate of interest for Treasury Bills (5.60% and 5.60% at September 30, 
1998 and 1997, respectively). 

 The following is a schedule of remaining principal requirements on long-term 
debt: 

        Year Ended     Principal
       September 30     Payments
       ------------    ---------
           1999        $44,851
                       =======
                              
                             
 The terms of the agreement contains certain covenants which limit both 
capital expenditures and the ability to obtain additional bank debt. In 
addition, the maintenance of certain financial ratios including current ratio 
and debt to net worth, as defined, are also required by the agreement. 

5. CREDIT FACILITIES

 The Company has unused aggregate lines of credit totaling $600,000.  Of these 
lines, $100,000 is for the purchase of equipment and is collateralized by 
equipment and $500,000 is for working capital and is collateralized by 
accounts receivable, inventories and equipment. The equipment line of credit 
provides for interest at the bank's base rate plus one half percent (1/2%). The 
working capital line of credit provides for interest at the bank's base rate 
plus one quarter percent (1/4%).  

6. PROFIT SHARING AND 401-K PLANS

 The Company maintains both a non-contributory profit sharing plan and a 
contributory 401-K plan for all employees over the age of 21 with one year of 
service.  Annual contributions to the profit sharing plan are

                             35
<PAGE>

determined by the Board of Directors and are made from current or accumulated 
earnings, while contributions to the 401-K plan are currently matched at a rate 
of 50% of employee contributions limited to 3.0% of compensation. 

 The Company's matching contributions to the 401-K plan for the years ended 
September 30, 1998, 1997 and 1996 were $58,211, $48,139 and $31,470 , 
respectively. Additionally, the Company may make discretionary contributions 
to the non-contributory profit sharing plan. These contributions were $20,000, 
$20,000 and $50,000 in 1998, 1997 and 1996, respectively.  

7. OBLIGATIONS UNDER OPERATING LEASES

 The Company leases a motor vehicle and equipment under operating lease 
agreements expiring at various dates through September 30, 2003. Rental 
expense under these leases for the years ended September 30, 1998, 1997 and 
1996 amounted to $97,256, $97,948 and $97,739, respectively. 

 Minimum rental commitments at September 30, 1998 for these leases are: 

        Year Ended     Principal
       September 30    Payments
       ------------    --------
           1999        $65,746
           2000         64,780
           2001        105,258
           2002          9,923 
           2003          6,615 
                      --------
                      $252,322   
                      ========       
                             
8. INCOME TAXES

 The provision for income taxes consisted of the following: 

                             Year Ended September 30
                          1998         1997         1996
Currently payable (recoverable):
  Federal              ($142,019)     $78,600     $250,700
  State                    2,100        8,000       21,000
Deferred (credit)        142,829      (67,841)     (95,748) 
                         -------      -------      -------
                          $2,910      $18,759     $175,952
                         =======      =======     ========
                                     
                                                 
                                                 
                             36
<PAGE>

 A reconciliation of the statutory federal income tax rate and the Company's 
effective income tax rate is as follows: 

                                         Year ended September 30
                          ______1998______   ______1997______  ______1996______
                           Amount     %       Amount     %      Amount     %
Statutory tax rate        $24,593    34.0%  $154,201    34.0%  $231,284   34.0%
Surtax exemption          (11,510)  (15.9%)        0       0          0      0
State income tax net of:
 Federal benefit            1,722     2.4%     5,280     1.2%    13,860    2.0%
Foreign sales corp 
 benefit                   (2,792)   (3.9%)   (6,841)   (1.5%)   (6,854)  (1.0%)
Research and experimentation
 tax credits               (8,057)  (11.1%)  (14,014)   (3.1%)  (54,344)  (8.0%)
Life insurance death
 benefits                       0       0   (119,000)  (26.2%)        0      0
Other                      (1,046)   (1.5%)     (867)   (0.3%)   (7,994)  (1.1%)
                         --------   ------   -------    ------  -------- ------
                           $2,910     4.0%   $18,759     4.1%  $175,952   25.9%
                         ========   ======  ========    ====== ========= ======
                        

 The temporary differences which give rise to deferred tax assets and 
liabilities at September 30 are as follows: 

                                            1998          1997
                                            ----          ----

  Inventory                              $116,079       $189,201
  Accrued vacation                         62,912         56,954
  Other                                   (12,213)        (1,522)      
  Research and experimentation
   tax credit carry forward                 8,057         14,014     
                                         --------       --------
                                          
  Net deferred tax assets - current      $174,835       $258,647
                                         ========       ========

  Accelerated depreciation              ($101,232)      ($47,104)
  AMT credit carry forward                 65,315         49,433
  Other                                   (15,471)         5,300
                                          --------      --------
  Net deferred tax assets (liabilities)
   - noncurrent                          ($51,388)        $7,629
                                          =======        =======

                                
 Based on the Company's history of taxable earnings and its expectations for 
the future, management has determined that operating income will more likely 
than not be sufficient to recognize its deferred tax assets. At September 30, 
1998, the Company's federal AMT credit can be carried forward indefinitely.   

                                      
                                      
                             37
<PAGE>

9. INDUSTRY SEGMENT DATA

  The Company's primary business segments involve (1) operations of Microwave 
Filter Company, Inc. (MFC) which manufactures electronic filters used for 
preventing interference or signal processing in cable television, satellite, 
broadcast, aerospace and government markets; and (2) operations of Niagara 
Scientific, Inc. (NSI) which manufactures industrial automation equipment. 

 Information by industry segment is as follows: (thousands of dollars) 
                                     1998          1997       1996
Net Sales (Unaffiliated):
  MFC                               $6,778      $5,588     $6,924
  NSI                                  211         587        609
  Total                             $6,989      $6,175     $7,533

Operating Profit (Loss): (a)
  MFC                                 $480          $300       $987
  NSI                                 (420)         (184)      (222)
  Corporate                            (76)         (106)      (114)
  Total                               ($16)          $10       $651

Identifiable Assets: (b)
  MFC                               $3,559        $3,618     $3,812
  NSI                                  279           121        317
  Subtotal                           3,838         3,739      4,129
  Corporate Assets-Cash and
  Cash Equivalents                   1,221         1,434      1,281
  Total                             $5,059        $5,173     $5,410

Depreciation & Amortization Expense:
  MFC                                 $304          $281       $275
  NSI                                   29            21        122 
  Total                               $333          $302       $397

Capital Expenditures:
  MFC                                 $284          $280       $291
  NSI                                   61             1          1
                                      $345          $281       $292 

Significant Export Sales:
  MFC                                 $546          $602       $558

Sales to Significant Customers:
  MFC:                  
  Motorola Government Systems         $707     


                                                       

                             38
<PAGE>

(a) Operating profit (loss) is total revenue less operating expenses. In 
computing operating profit, none of the following items have been added or 
deducted: general corporate expenses, interest expense, income taxes and 
miscellaneous income. Expenses incurred on behalf of both Companies are 
allocated based upon estimates of their relationship to each entity. 

(b) Identifiable assets by industry are those assets that are used in the 
Company's operations in each industry. 

10. STOCK OPTIONS

  On April 9, 1998, the Board of Directors and Shareholders of Microwave Filter 
Company, Inc. approved the 1998 Microwave Filter Company, Inc. Incentive Stock 
Plan (the "1998 Plan"). Under the 1998 Plan, the Company may grant incentive 
stock options ("ISOs"), non-qualified stock options ("NQSOs") and stock
appreciation rights to directors, officers and employees of the Company and its
affiliates. The 1998 Plan reserves 150,000 shares for issuance. The exercise 
price of the ISOs and NQSOs will be 100% of the fair market value of the Common 
Stock on the date the ISOs and NQSOs are granted. The 1998 Plan will terminate
on April 10, 2008. There were no stock options or stock appreciation rights 
granted or outstanding at September 30, 1998.   

11. LEGAL  MATTERS 

  There are currently no material pending legal proceedings against the 
Company or its subsidiaries. 

12.  FOURTH QUARTER ADJUSTMENTS

  In the fourth quarter of fiscal 1997, the Company received life insurance 
death benefits of $350,000 as a result of the death of a former officer.

  In the fourth quarter of fiscal 1996, management revised certain inventory 
reserve estimates which resulted in approximately $150,000 of pre-tax income.



 
                             39
<PAGE>

                        EXHIBIT INDEX
                                                                           Page
Exhibit No.   Description                                                 Number

3.1      MFC Certificate of Corporation, as amended.                           *

3.2      MFC Amended and Restated Bylaws.                                      *

10.1     Bond Purchase Agreement dated as of February 22,1984                  *
         among MFC, Onondaga County Industrial Development Agency
         ("OCIDA") and Key Bank of Central New York ("Bondholder").

10.2     Lease Agreement dated as of February 22, 1984 between MFC and OCIDA.  *

10.3     Mortgage and Security Agreement dated as of February 22, 1984 from    *
         MFC and OCIDA to the Bondholder.

10.4     Guaranty Agreement dated as of February 22, 1984 from MFC to OCIDA    *
         and the Bondholder.

10.5     Application by Debtor in Possession for Authority to Sell General     *
         Intangible Assets and Order (MFC's acquisition of CT-1000 System).

10.6     Stock Purchase Agreement dated February 8, 1993 between Glyn and      *
         Emily Bostick and MFC.

 * Previously filed
                             40
<PAGE>

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE





To the Board of Directors and Stockholders of
Microwave Filter Company, Inc.

Our audits of the consolidated financial statements referred to in our report 
dated November 20, 1998 included in this 1998 Annual Report on Form 10-K of
Microwave Filter Company, Inc. and Subsidiaries also included an audit of the 
financial statement schedule listed in ITEM 14(a)(2) of this Form 10-K. In our 
opinion, this financial statement schedule presents fairly, in all material 
respects, the information set forth therein when read in conjunction with
the related consolidated financial statements.   



PricewaterhouseCoopers LLP


Syracuse, New York
November 20, 1998
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Microwave Filter Company and Subsidiaries

Schedule II - VALUATION AND QUALIFYING ACCOUNTS

SEPTEMBER 30, 1998, 1997 and 1996



<TABLE>
<CAPTION>



Col. A                                         Col. B               Col. C                    Col. D        Col. E
                                                                           Additions
                                               Balance at           Charged to    Charged to
                                               Beginning            Costs and     Other                     Balance at
Description                                    of Period            Expenses      Accounts    Deductions    End of Period
-----------                                    ---------            -----------------------   ----------    -------------

<S>                                            <C>                  <C>           <C>          <C>            <C>
Year ended September 30, 1998

Allowance for doubtful accounts                 $57,905                                          $5,283        $52,622
Inventory valuation reserves                    613,813                                         241,179       $372,634    
                                               --------             --------      -------       -------       --------
                                               $671,718                   $0           $0      $246,462       $425,256 
                                               ========             ========      =======      ========       ========


Year ended September 30, 1997

Allowance for doubtful accounts                 $75,000               $2,775                    $19,870        $57,905
Inventory valuation reserves                    594,050               19,763                          0        613,813
                                               --------             --------      -------       -------       --------
                                               $669,050              $22,538           $0       $19,870       $671,718
                                               ========             ========      =======       =======       ========


Year ended September 30, 1996

Allowance for doubtful accounts                 $50,000              $53,011                    $28,011        $75,000
Inventory valuation reserves                    545,306               48,744                          0        594,050
                                               --------             --------      -------       -------       --------
                                               $595,306             $101,755           $0       $28,011       $669,050
                                               ========             ========      =======       =======       ========


</TABLE>

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