##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
 Commission File No. 1-14771
 MICROFINANCIAL INCORPORATED
  Massachusetts
    
    04-2962824(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 
 
 þ o
  o o þ
 o þ




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##### 



MICROFINANCIAL INCORPORATED
TABLE OF CONTENTS
  
 PagePart I- FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited):Condensed Consolidated Balance Sheets  December 31, 2006 and September 30, 2007
    
    
    3Condensed Consolidated Statements of Income  Three and nine months ended September 30, 2006 and 2007
    
    
    4Condensed
Consolidated Statements of Stockholders Equity- December 31.
2006 and September 30, 2007
    
    
    5Condensed Consolidated Statements of Cash Flows  Nine months ended September 30, 2006 and 2007
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    21Part II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 6. Exhibits
    
    
    22Signatures
    
    
    24EX-31.1 CERTIFICATION OF CEO PURSUANT TO SECTION 302EX-31.2 CERTIFICATION OF CFO PURSUANT TO SECTION 302EX-32.1 CERTIFICATION OF CEO PURSUANT TO SECTION 906EX-32.2 CERTIFICATION OF CFO PURSUANT TO SECTION 906




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MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share and per share data)
  December 31,
    
    
    September 30,2006
    
    
    2007ASSETSCash and cash equivalents
    
    $
    28,737
    
    
    $
    9,437Net investment in leases:Receivables due in installments
    
    
    40,455
    
    
    
    76,660Estimated residual value
    
    
    3,859
    
    
    
    7,987Initial direct costs
    
    
    302
    
    
    
    605Less:Advance lease payments and deposits
    
    
    (50
    )
    
    
    (93
    )Unearned income
    
    
    (13,682
    )
    
    
    (29,033
    )Allowance for credit losses
    
    
    (5,223
    )
    
    
    (5,306
    )Net investment in leases
    
    
    25,661
    
    
    
    50,820Investment in service contracts, net
    
    
    613
    
    
    
    282Investment in rental contracts, net
    
    
    313
    
    
    
    122Property and equipment, net
    
    
    655
    
    
    
    749Other assets
    
    
    652
    
    
    
    838Deferred income taxes, net
    
    
    3,090
    
    
    
    649Total assets
    
    $
    59,721
    
    
    $
    62,897LIABILITIES AND STOCKHOLDERS EQUITYNotes payable
    
    $
    5
    
    
    $
    Accounts payable
    
    
    1,038
    
    
    
    945Dividends payable
    
    
    691
    
    
    
    698Other liabilities
    
    
    1,110
    
    
    
    734Income taxes payable
    
    
    741
    
    
    
    618Total liabilities
    
    
    3,585
    
    
    
    2,995Stockholders equity:Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued at December 31, 2006 and September 30, 2007
    
    
    
    
    
    
    Common stock, $.01 par value; 25,000,000 shares authorized;
13,811,442 and 13,958,278 shares issued at December 31, 2006
and September 30, 2007, respectively
    
    
    138
    
    
    
    140Additional paid-in capital
    
    
    44,136
    
    
    
    45,520Retained earnings
    
    
    11,862
    
    
    
    14,242Total stockholders equity
    
    
    56,136
    
    
    
    59,902Total liabilities and stockholders equity
    
    $
    59,721
    
    
    $
    62,897
  3




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MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (In thousands, except share and per share data)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenues:Income on financing leases
    
    $
    1,007
    
    
    $
    3,406
    
    
    $
    2,403
    
    
    $
    8,092Rental income
    
    
    5,121
    
    
    
    3,268
    
    
    
    16,436
    
    
    
    10,706Income on service contracts
    
    
    435
    
    
    
    303
    
    
    
    1,478
    
    
    
    993Loss and damage waiver fees
    
    
    431
    
    
    
    524
    
    
    
    1,475
    
    
    
    1,442Service fees and other
    
    
    437
    
    
    
    415
    
    
    
    2,075
    
    
    
    1,131Interest income
    
    
    411
    
    
    
    182
    
    
    
    1,049
    
    
    
    752Total revenues
    
    
    7,842
    
    
    
    8,098
    
    
    
    24,916
    
    
    
    23,116Expenses:Selling, general and administrative
    
    
    3,312
    
    
    
    3,134
    
    
    
    11,445
    
    
    
    9,861Provision for credit losses
    
    
    1,887
    
    
    
    1,919
    
    
    
    5,124
    
    
    
    5,119Depreciation and amortization
    
    
    1,195
    
    
    
    288
    
    
    
    4,634
    
    
    
    1,098Interest
    
    
    23
    
    
    
    13
    
    
    
    135
    
    
    
    39Total expenses
    
    
    6,417
    
    
    
    5,354
    
    
    
    21,338
    
    
    
    16,117Income before provision for income taxes
    
    
    1,425
    
    
    
    2,744
    
    
    
    3,578
    
    
    
    6,999Provision for income taxes
    
    
    573
    
    
    
    941
    
    
    
    1,424
    
    
    
    2,530Net income
    
    $
    852
    
    
    $
    1,803
    
    
    $
    2,154
    
    
    $
    4,469Net income per common share  basic
    
    $
    0.06
    
    
    $
    0.13
    
    
    $
    0.16
    
    
    $
    0.32Net income per common share  diluted
    
    $
    0.06
    
    
    $
    0.13
    
    
    $
    0.15
    
    
    $
    0.32Weighted-average shares:Basic
    
    
    13,803,996
    
    
    
    13,956,881
    
    
    
    13,784,650
    
    
    
    13,910,234Diluted
    
    
    13,942,572
    
    
    
    14,180,213
    
    
    
    13,928,399
    
    
    
    14,146,696
  4




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MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 December 31, 2006
and September 30, 2007
 (In thousands, except share and per share data)
  Additional
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    EquityBalance at December 31, 2006
    
    
    13,811,442
    
    
    $
    138
    
    
    $
    44,136
    
    
    $
    11,862
    
    
    $
    56,136Warrant exercises
    
    
    50,000
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    41Stock issued for accrued compensation
    
    
    77,654
    
    
    
    2
    
    
    
    307
    
    
    
    
    
    
    
    309Restricted stock granted
    
    
    11,682
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    72Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    9Conversion of share-based liability awards
to equity awards
    
    
    
    
    
    
    
    
    
    
    932
    
    
    
    
    
    
    
    932Amortization of unearned compensation
    
    
    7,500
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    24Common stock dividends ($0.15 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,090
    )
    
    
    (2,090
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,469
    
    
    
    4,469Balance at September 30, 2007
    
    
    13,958,278
    
    
    $
    140
    
    
    $
    45,521
    
    
    $
    14,241
    
    
    $
    59,902
  5




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MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
  Nine Months EndedSeptember 30,2006
    
    
    2007Cash flows from operating activities:Cash received from customers
    
    $
    30,840
    
    
    $
    30,143Cash paid to suppliers and employees
    
    
    (10,905
    )
    
    
    (9,892
    )Income taxes paid
    
    
    (456
    )
    
    
    (212
    )Interest paid
    
    
    (105
    )
    
    
    (3
    )Interest received
    
    
    1,049
    
    
    
    752Net cash provided by operating activities
    
    
    20,423
    
    
    
    20,788Cash flows from investing activities:Investment in lease and rental contracts
    
    
    (12,426
    )
    
    
    (37,219
    )Investment in direct costs
    
    
    (206
    )
    
    
    (527
    )Investment in property and equipment
    
    
    (216
    )
    
    
    (297
    )Net cash used in investing activities
    
    
    (12,848
    )
    
    
    (38,043
    )Cash flows from financing activities:Proceeds from secured debt
    
    
    83
    
    
    
    46Repayment of secured debt
    
    
    (205
    )
    
    
    (50
    )Repayment of subordinated debt
    
    
    (2,302
    )
    
    
    Proceeds from exercise of common stock warrants
    
    
    
    
    
    
    41Payment of dividends
    
    
    (5,497
    )
    
    
    (2,083
    )Net cash used in financing activities
    
    
    (7,921
    )
    
    
    (2,046
    )Net change in cash and cash equivalents
    
    
    (346
    )
    
    
    (19,301
    )Cash and cash equivalents, beginning of period
    
    
    32,926
    
    
    
    28,738Cash and cash equivalents, end of period
    
    $
    32,580
    
    
    $
    9,437Reconciliation of net income to net cash provided by operating activities:Net income
    
    $
    2,154
    
    
    $
    4,397Adjustments to reconcile net income to net
cash provided by operating activities:Amortization of unearned income, net of initial direct costs
    
    
    (2,403
    )
    
    
    (8,092
    )Depreciation and amortization
    
    
    4,634
    
    
    
    1,098Provision for credit losses
    
    
    5,124
    
    
    
    5,119Recovery of equipment cost and residual value
    
    
    9,497
    
    
    
    15,187Stock-based compensation expense
    
    
    207
    
    
    
    537Non-cash interest expense (amortization of debt discount)
    
    
    34
    
    
    
    37Changes in assets and liabilities:Current taxes payable
    
    
    (431
    )
    
    
    835Deferred income taxes
    
    
    1,424
    
    
    
    1,554Other assets
    
    
    551
    
    
    
    (223
    )Accounts payable
    
    
    (277
    )
    
    
    287Other liabilities
    
    
    (91
    )
    
    
    52Net cash provided by operating activities
    
    $
    20,423
    
    
    $
    20,788Supplemental disclosure of non-cash activities:Fair value of stock issued for compensation
    
    $
    251
    
    
    $
    381Conversion of share-based liability awards to equity awards
    
    
    
    
    
    
    932
  6




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MICROFINANCIAL INCORPORATED
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Tables in thousands, except share and per share data)
 A. Nature of Business
  B. Summary of Significant Accounting Policies
 Basis of Presentation
   Allowance for Credit Losses
   7




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MICROFINANCIAL INCORPORATED
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Tables in thousands, except share and per share data)
  Nine Months EndedSeptember 30,2006
    
    
    2007Allowance for credit losses, beginning
    
    $
    8,714
    
    
    $
    5,223Provision for credit losses
    
    
    5,124
    
    
    
    5,119Charge-offs
    
    
    (12,683
    )
    
    
    (8,733
    )Recoveries
    
    
    4,432
    
    
    
    3,697Allowance for credit losses, ending
    
    $
    5,587
    
    
    $
    5,306
 Net Income per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Net income
    
    $
    852
    
    
    $
    1,803
    
    
    $
    2,154
    
    
    $
    4,469Weighted average common shares outstanding
    
    
    13,803,996
    
    
    
    13,956,881
    
    
    
    13,784,650
    
    
    
    13,910,234Dilutive effect of common stock
options, warrants and restricted stock
    
    
    138,576
    
    
    
    223,332
    
    
    
    143,749
    
    
    
    236,462Shares used in computation of net income
per common share  diluted
    
    
    13,942,572
    
    
    
    14,180,213
    
    
    
    13,928,399
    
    
    
    14,146,696Net income per common share  basic
    
    $
    0.06
    
    
    $
    0.13
    
    
    $
    0.16
    
    
    $
    0.32Net income per common share  diluted
    
    $
    0.06
    
    
    $
    0.13
    
    
    $
    0.15
    
    
    $
    0.32
 Stock-Based Employee Compensation
  8




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MICROFINANCIAL INCORPORATED
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Tables in thousands, except share and per share data)
    Outstanding
    
    
    ExercisableWeighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    Intrinsic
    
    
    Average
    
    
    
    
    
    
    IntrinsicExercise Price
    
    
    Shares
    
    
    Life (Years)
    
    
    Value
    
    
    Exercise Price
    
    
    Shares
    
    
    Value$
    12.31
    
    
    
    359,391
    
    
    
    1.41
    
    
    $
    
    
    
    $
    12.31
    
    
    
    359,391
    
    
    $
    13.54
    
    
    
    40,609
    
    
    
    1.41
    
    
    
    
    
    
    
    13.54
    
    
    
    40,609
    
    
    
    9.78
    
    
    
    350,000
    
    
    
    2.41
    
    
    
    
    
    
    
    9.78
    
    
    
    350,000
    
    
    
    13.10
    
    
    
    90,000
    
    
    
    3.40
    
    
    
    
    
    
    
    13.10
    
    
    
    90,000
    
    
    
    6.70
    
    
    
    235,000
    
    
    
    4.42
    
    
    
    
    
    
    
    6.70
    
    
    
    235,000
    
    
    
    1.59
    
    
    
    167,500
    
    
    
    5.16
    
    
    
    734
    
    
    
    1.59
    
    
    
    167,500
    
    
    
    7345.77
    
    
    
    40,188
    
    
    
    9.42
    
    
    
    8
    
    
    
    5.77
    
    
    
    
    
    
    
    1,282,688
    
    
    
    3.36
    
    
    $
    742
    
    
    $
    9.19
    
    
    
    1,242,500
    
    
    $
    734
      9




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MICROFINANCIAL INCORPORATED
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Tables in thousands, except share and per share data)
  C. Notes Payable
   D. Commitments and Contingencies
 Legal Matters
  Lease Commitments
  E. Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109.
  10




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MICROFINANCIAL INCORPORATED
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Tables in thousands, except share and per share data)
   11




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
  Forward-Looking Information
  Overview
   Critical Accounting Policies
  12




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Accounting for Uncertainty in
Income Taxes  An Interpretation of FASB Statement No. 109.
 Results of Operations  Three months ended September 30, 2007 compared to the three months ended
September 30, 2006
 Revenue
 Three Months EndedSeptember 30,2006
    
    
    Change
    
    
    2007(Dollars in thousands)Income on financing leases
    
    $
    1,007
    
    
    
    238.2
    %
    
    $
    3,406Rental income
    
    
    5,121
    
    
    
    (36.2
    )%
    
    
    3,268Income on service contracts
    
    
    435
    
    
    
    (30.3
    )%
    
    
    303Loss and damage waiver fees
    
    
    431
    
    
    
    21.6
    %
    
    
    524Service fees and other income
    
    
    437
    
    
    
    (5.0
    )%
    
    
    415Interest income
    
    
    411
    
    
    
    (55.7
    )%
    
    
    182Total revenues
    
    $
    7,842
    
    
    
    3.3
    %
    
    $
    8,098
   Selling, General and Administrative
 Three Months EndedSeptember 30,2006
    
    Change
    
    2007(Dollars in thousands)Selling, general and administrative
    
    $
    3,312
    
    
    
    (5.4
    )%
    
    $
    3,134As a percent of revenue
    
    
    42.2
    %
    
    
    
    
    
    
    38.7
    %
 13




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Provision for Credit Losses
 Three Months EndedSeptember 30,2006
    
    Change
    
    2007(Dollars in thousands)Provision for credit losses
    
    $
    1,887
    
    
    
    1.7
    %
    
    $
    1,919As a percent of revenue
    
    
    24.1
    %
    
    
    
    
    
    
    23.7
    %
  Depreciation and Amortization
 Three Months EndedSeptember 30,2006
    
    
    Change
    
    
    2007(Dollars in thousands)Depreciation  fixed assets
    
    $
    48
    
    
    
    58.3
    %
    
    $
    76Depreciation  rental equipment
    
    
    936
    
    
    
    (87.2
    )%
    
    
    120Amortization  service contracts
    
    
    211
    
    
    
    (56.4
    )%
    
    
    92Total depreciation and amortization
    
    $
    1,195
    
    
    
    (75.9
    )%
    
    $
    288As a percent of revenue
    
    
    15.2
    %
    
    
    
    
    
    
    3.6
    %
    14




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Interest Expense
 Three Months EndedSeptember 30,2006
    
    Change
    
    2007(Dollars in thousands)Interest
    
    $
    23
    
    
    
    (43.5
    )%
    
    $
    13As a percent of revenue
    
    
    0.3
    %
    
    
    
    
    
    
    0.2
    %
  Provision for Income Taxes
 Three Months EndedSeptember 30,2006
    
    2007(Dollars in thousands)Provision for income taxes
    
    $
    573
    
    
    $
    941As a percent of revenue
    
    
    7.3
    %
    
    
    11.6
    %As a percent of income before taxes
    
    
    40.2
    %
    
    
    34.3
    %
  Other Operating Data
  15




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Results of Operations  Nine months ended September 30, 2007 compared to the nine months ended
September 30, 2006
 Revenue
 Nine Months EndedSeptember 30,2006
    
    
    Change
    
    
    2007(Dollars in thousands)Income on financing leases
    
    $
    2,403
    
    
    
    236.7
    %
    
    $
    8,092Rental income
    
    
    16,436
    
    
    
    (34.9
    )%
    
    
    10,706Income on service contracts
    
    
    1,478
    
    
    
    (32.8
    )%
    
    
    993Loss and damage waiver fees
    
    
    1,475
    
    
    
    (2.2
    )%
    
    
    1,442Service fees and other income
    
    
    2,075
    
    
    
    (45.5
    )%
    
    
    1,131Interest income
    
    
    1,049
    
    
    
    (28.3
    )%
    
    
    752Total revenues
    
    $
    24,916
    
    
    
    (7.2
    )%
    
    $
    23,116
   Selling, General and Administrative
 Nine Months EndedSeptember 30,2006
    
    Change
    
    2007(Dollars in thousands)Selling, general and administrative
    
    $
    11,445
    
    
    
    (13.8
    )%
    
    $
    9,861As a percent of revenue
    
    
    45.9
    %
    
    
    
    
    
    
    42.7
    %
  16




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##### Table of Contents



Provision for Credit Losses
 Nine Months EndedSeptember 30,2006
    
    Change
    
    2007(Dollars in thousands)Provision for credit losses
    
    $
    5,124
    
    
    
    (.0)
    %
    
    $
    5,119As a percent of revenue
    
    
    20.6
    %
    
    
    
    
    
    
    22.1
    %
  Depreciation and Amortization
 Nine Months EndedSeptember 30,2006
    
    
    Change
    
    
    2007(Dollars in thousands)Depreciation  fixed assets
    
    $
    153
    
    
    
    32.0
    %
    
    $
    203Depreciation  rental equipment
    
    
    3,623
    
    
    
    (84.5
    )
    
    
    563Amortization  service contracts
    
    
    858
    
    
    
    (61.3
    )
    
    
    332Total depreciation and amortization
    
    $
    4,634
    
    
    
    (76.3)
    %
    
    $
    1,098As a percent of revenue
    
    
    18.6
    %
    
    
    
    
    
    
    4.8
    %
     17




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##### Table of Contents



Interest Expense
 Nine Months EndedSeptember 30,2006
    
    Change
    
    2007(Dollars in thousands)Interest
    
    $
    135
    
    
    
    (71.1
    )%
    
    $
    39As a percent of revenue
    
    
    0.5
    %
    
    
    
    
    
    
    0.2
    %
  Provision for Income Taxes
 Nine Months EndedSeptember 30,2006
    
    2007(Dollars in thousands)Provision for income taxes
    
    $
    1,424
    
    
    $
    2,530As a percent of revenue
    
    
    5.7
    %
    
    
    10.9
    %As a percent of income before taxes
    
    
    39.8
    %
    
    
    36.1
    %
  Other Operating Data
  Exposure to Credit Losses
  18




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##### Table of Contents



(dollars in thousands)
    
    December 31, 2006
    
    
    September 30, 2007Current
    
    $
    29,027
    
    
    
    71.8
    %
    
    $
    63,298
    
    
    
    82.6
    %31-60 days past due
    
    
    1,607
    
    
    
    4.0
    
    
    
    3,466
    
    
    
    4.561-90 days past due
    
    
    825
    
    
    
    2.0
    
    
    
    2,388
    
    
    
    3.1Over 90 days past due
    
    
    8,996
    
    
    
    22.2
    
    
    
    7,508
    
    
    
    9.8Gross receivables due in installments
    
    $
    40,455
    
    
    
    100.0
    %
    
    $
    76,660
    
    
    
    100.0
    %
 Liquidity and Capital Resources
 General
      Borrowings
  December 31, 2006
    
    
    September 30, 2007Amount
    
    
    Interest
    
    
    Amount
    
    
    Interest
    
    
    Unused
    
    
    Maximum(dollars in thousands)
    
    Outstanding
    
    
    Rate
    
    
    Outstanding
    
    
    Rate
    
    
    Capacity
    
    
    AvailableNotes payable
    
    $
    5
    
    
    
    9.75
    %
    
    $
    
    
    
    
    7.75
    %
    
    $
    30,000
    
    
    $
    30,000
  19




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##### Table of Contents



Dividends
     Contractual Obligations and Lease Commitments
 Contractual Obligations
  Commitments
  Recent Accounting Pronouncements
  20




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##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
     
 ITEM 4. Controls and Procedures
   21




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##### Table of Contents



Part II  Other Information
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
  
 ITEM 6. Exhibits
 10.1
    
    Credit Agreement dated August 2, 2007 (incorporated by reference to Exhibit 10.1 of the
Registrants Form 8-K filed on August 8, 2007)10.2
    
    Unlimited Guaranty of Registrant dated August 2, 2007 (incorporated by reference to
Exhibit 10.2 of the Registrants Form 8-K filed on August 8, 2007)10.3
    
    Unlimited Guaranty of Leasecomm dated August 2, 2007 (incorporated by reference to
Exhibit 10.3 of the Registrants Form 8-K filed on August 8, 2007)10.4
    
    Security Agreement between Borrower and Agent dated August 2, 2007 (incorporated by
reference to Exhibit 10.4 of the Registrants Form 8-K filed on August 8, 2007)10.5
    
    Security Agreement between Registrant and Agent dated August 2, 2007 (incorporated by
reference to Exhibit 10.5 of the Registrants Form 8-K filed on August 8, 2007)10.6
    
    Security Agreement between Leasecomm and Agent dated August 2, 2007 (incorporated by
reference to Exhibit 10.6 of the Registrants Form 8-K filed on August 8, 2007)10.7
    
    Trademark Security Agreement and License dated August 2, 2007 by Borrower (incorporated
by reference to Exhibit 10.7 of the Registrants Form 8-K filed on August 8, 2007)10.8
    
    Trademark Security Agreement and License dated August 2, 2007 by Registrant
(incorporated by reference to Exhibit 10.8 of the Registrants Form 8-K filed on August 8,
2007)10.9
    
    Trademark Security Agreement and License dated August 2, 2007 by Leasecomm
(incorporated by reference to Exhibit 10.9 of the Registrants Form 8-K filed on August 8,
2007)10.10
    
    Pledge Agreement of Registrant dated August 2, 2007 (incorporated by reference to
Exhibit 10.10 of the Registrants Form 8-K filed on August 8, 2007)10.11
    
    Sovereign Note dated August 2, 2007 (incorporated by reference to Exhibit 10.11 of the
Registrants Form 8-K filed on August 8, 2007)10.12
    
    TD Banknorth Note dated August 2, 2007 (incorporated by reference to Exhibit 10.12 of
the Registrants Form 8-K filed on August 8, 2007)31.1*
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1**
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 22




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##### Table of Contents



32.2**
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Filed herewith**
    
    Indicates that the exhibit is being furnished with this report and is not filed as a part of it. 23




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##### Table of Contents



SIGNATURES
  MicroFinancial IncorporatedBy: /s/ Richard F. LatourPresident and Chief Executive OfficerBy: /s/ James R. Jackson Jr.Vice President and Chief Financial Officer
  24