##### 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 June 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 June 30, 2007
    
    
    3Condensed Consolidated Statements of Income -
Three and six months ended June 30, 2006 and 2007
    
    
    4Condensed Consolidated Statements of Stockholders Equity-
Six months ended June 30, 2006 and 2007
    
    
    5Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 2006 and 2007
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20Part II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 4. Submission of Matters to a Vote of Security Holders
    
    
    21Item 6. Exhibits
    
    
    21Signatures
    
    
    22EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO




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##### Table of Contents



MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share and per share data)
  December 31,
    
    
    June 30,2006
    
    
    2007ASSETSCash and cash equivalents
    
    $
    28,737
    
    
    $
    18,109Net investment in leases:Receivables due in installments
    
    
    40,455
    
    
    
    61,634Estimated residual value
    
    
    3,859
    
    
    
    6,342Initial direct costs
    
    
    302
    
    
    
    488Less:Advance lease payments and deposits
    
    
    (50
    )
    
    
    (65
    )Unearned income
    
    
    (13,682
    )
    
    
    (23,347
    )Allowance for credit losses
    
    
    (5,223
    )
    
    
    (4,884
    )Net investment in leases
    
    
    25,661
    
    
    
    40,168Investment in service contracts, net
    
    
    613
    
    
    
    377Investment in rental contracts, net
    
    
    313
    
    
    
    188Property and equipment, net
    
    
    655
    
    
    
    711Other assets
    
    
    652
    
    
    
    642Deferred income taxes, net
    
    
    3,090
    
    
    
    1,536Total assets
    
    $
    59,721
    
    
    $
    61,731LIABILITIES AND STOCKHOLDERS EQUITYNotes payable
    
    $
    5
    
    
    $
    44Accounts payable
    
    
    1,038
    
    
    
    829Dividends payable
    
    
    691
    
    
    
    697Other liabilities
    
    
    1,110
    
    
    
    803Income taxes payable
    
    
    741
    
    
    
    647Total liabilities
    
    
    3,585
    
    
    
    3,020Stockholders equity:Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued at December 31, 2006 and June 30, 2007
    
    
    
    
    
    
    Common stock, $.01 par value; 25,000,000 shares authorized;
13,811,442 and 13,944,096 shares issued at December 31, 2006
and June 30, 2007, respectively
    
    
    138
    
    
    
    139Additional paid-in capital
    
    
    44,136
    
    
    
    45,436Retained earnings
    
    
    11,862
    
    
    
    13,136Total stockholders equity
    
    
    56,136
    
    
    
    58,711Total liabilities and stockholders equity
    
    $
    59,721
    
    
    $
    61,731
  3




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MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (In thousands, except share and per share data)
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenues:Income on financing leases
    
    $
    724
    
    
    $
    2,653
    
    
    $
    1,396
    
    
    $
    4,686Rental income
    
    
    5,594
    
    
    
    3,514
    
    
    
    11,315
    
    
    
    7,438Income on service contracts
    
    
    488
    
    
    
    329
    
    
    
    1,043
    
    
    
    690Loss and damage waiver fees
    
    
    493
    
    
    
    473
    
    
    
    1,044
    
    
    
    917Service fees and other
    
    
    535
    
    
    
    330
    
    
    
    1,638
    
    
    
    716Interest income
    
    
    323
    
    
    
    247
    
    
    
    638
    
    
    
    570Total revenues
    
    
    8,157
    
    
    
    7,546
    
    
    
    17,074
    
    
    
    15,017Expenses:Selling, general and administrative
    
    
    3,926
    
    
    
    3,158
    
    
    
    8,133
    
    
    
    6,726Provision for credit losses
    
    
    1,627
    
    
    
    1,677
    
    
    
    3,237
    
    
    
    3,200Depreciation and amortization
    
    
    1,674
    
    
    
    347
    
    
    
    3,439
    
    
    
    810Interest
    
    
    31
    
    
    
    13
    
    
    
    112
    
    
    
    26Total expenses
    
    
    7,258
    
    
    
    5,195
    
    
    
    14,921
    
    
    
    10,762Income before provision for income taxes
    
    
    899
    
    
    
    2,351
    
    
    
    2,153
    
    
    
    4,255Provision for income taxes
    
    
    361
    
    
    
    902
    
    
    
    851
    
    
    
    1,589Net income
    
    $
    538
    
    
    $
    1,449
    
    
    $
    1,302
    
    
    $
    2,666Net income per common share  basic
    
    $
    0.04
    
    
    $
    0.10
    
    
    $
    0.09
    
    
    $
    0.19Net income per common share  diluted
    
    $
    0.04
    
    
    $
    0.10
    
    
    $
    0.09
    
    
    $
    0.19Weighted-average shares:Basic
    
    
    13,786,523
    
    
    
    13,912,228
    
    
    
    13,774,816
    
    
    
    13,886,524Diluted
    
    
    13,928,808
    
    
    
    14,129,399
    
    
    
    13,918,788
    
    
    
    14,101,436
  4




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MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Six Months Ended June 30, 2006 and 2007
 (In thousands, except share and per share data)
  Additional
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    EquityBalance at December 31, 2005
    
    
    13,713,899
    
    
    $
    137
    
    
    $
    43,839
    
    
    $
    10,711
    
    
    $
    54,687Warrant exercises
    
    
    13,983
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock issued for accrued compensation
    
    
    56,141
    
    
    
    1
    
    
    
    199
    
    
    
    
    
    
    
    200Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    111
    
    
    
    
    
    
    
    111Amortization of unearned compensation
    
    
    2,500
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8Common stock dividends ($0.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,382
    )
    
    
    (1,382
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,302
    
    
    
    1,302Balance at June 30, 2006
    
    
    13,786,523
    
    
    $
    138
    
    
    $
    44,157
    
    
    $
    10,631
    
    
    $
    54,926Balance 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
    
    
    
    1
    
    
    
    307
    
    
    
    
    
    
    
    308Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Conversion of share-based liability awards
to equity awards
    
    
    
    
    
    
    
    
    
    
    932
    
    
    
    
    
    
    
    932Amortization of unearned compensation
    
    
    5,000
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    16Common stock dividends ($0.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,392
    )
    
    
    (1,392
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,666
    
    
    
    2,666Balance at June 30, 2007
    
    
    13,944,096
    
    
    $
    139
    
    
    $
    45,436
    
    
    $
    13,136
    
    
    $
    58,711
  5




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MICROFINANCIAL INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
  Six Months EndedJune 30,2006
    
    
    2007Cash flows from operating activities:Cash received from customers
    
    $
    21,821
    
    
    $
    19,621Cash paid to suppliers and employees
    
    
    (8,159
    )
    
    
    (6,453
    )Income taxes paid
    
    
    (409
    )
    
    
    (129
    )Interest paid
    
    
    (94
    )
    
    
    (1
    )Interest received
    
    
    638
    
    
    
    570Net cash provided by operating activities
    
    
    13,797
    
    
    
    13,608Cash flows from investing activities:Investment in lease and rental contracts
    
    
    (6,117
    )
    
    
    (22,431
    )Investment in direct costs
    
    
    (109
    )
    
    
    (317
    )Investment in property and equipment
    
    
    (127
    )
    
    
    (183
    )Net cash used in investing activities
    
    
    (6,353
    )
    
    
    (22,931
    )Cash flows from financing activities:Proceeds from secured debt
    
    
    63
    
    
    
    39Repayment of secured debt
    
    
    (205
    )
    
    
    Repayment of subordinated debt
    
    
    (2,302
    )
    
    
    Proceeds from exercise of common stock warrants
    
    
    
    
    
    
    41Payment of dividends
    
    
    (4,807
    )
    
    
    (1,385
    )Net cash used in financing activities
    
    
    (7,251
    )
    
    
    (1,305
    )Net change in cash and cash equivalents
    
    
    193
    
    
    
    (10,628
    )Cash and cash equivalents, beginning of period
    
    
    32,926
    
    
    
    28,737Cash and cash equivalents, end of period
    
    $
    33,119
    
    
    $
    18,109Reconciliation of net income to net cash provided by operating activities:Net income
    
    $
    1,302
    
    
    $
    2,666Adjustments to reconcile net income to net
cash provided by operating activities:Amortization of unearned income, net of initial direct costs
    
    
    (1,396
    )
    
    
    (4,686
    )Depreciation and amortization
    
    
    3,439
    
    
    
    810Provision for credit losses
    
    
    3,237
    
    
    
    3,200Recovery of equipment cost and residual value
    
    
    6,543
    
    
    
    9,405Stock-based compensation expense
    
    
    135
    
    
    
    525Non-cash interest expense (amortization of debt discount)
    
    
    22
    
    
    
    24Changes in assets and liabilities:Current taxes payable
    
    
    (409
    )
    
    
    (94
    )Deferred income taxes
    
    
    851
    
    
    
    1,554Other assets
    
    
    216
    
    
    
    (14
    )Accounts payable
    
    
    (438
    )
    
    
    98Other liabilities
    
    
    295
    
    
    
    120Net cash provided by operating activities
    
    $
    13,797
    
    
    $
    13,608Supplemental disclosure of non-cash activities:Fair value of stock issued for compensation
    
    $
    200
    
    
    $
    308Conversion 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)
  Six Months EndedJune 30,2006
    
    
    2007Allowance for credit losses, beginning
    
    $
    8,714
    
    
    $
    5,223Provision for credit losses
    
    
    3,237
    
    
    
    3,200Charge-offs
    
    
    (8,193
    )
    
    
    (5,986
    )Recoveries
    
    
    3,101
    
    
    
    2,447Allowance for credit losses, ending
    
    $
    6,859
    
    
    $
    4,884
 Net Income per Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Net income
    
    $
    538
    
    
    $
    1,449
    
    
    $
    1,302
    
    
    $
    2,666Weighted average common shares outstanding
    
    
    13,786,523
    
    
    
    13,912,228
    
    
    
    13,774,816
    
    
    
    13,886,524Dilutive effect of common stock
options, warrants and restricted stock
    
    
    142,285
    
    
    
    217,171
    
    
    
    143,972
    
    
    
    214,912Shares used in computation of net income
per common share  diluted
    
    
    13,928,808
    
    
    
    14,129,399
    
    
    
    13,918,788
    
    
    
    14,101,436Net income per common share  basic
    
    $
    0.04
    
    
    $
    0.10
    
    
    $
    0.09
    
    
    $
    0.19Net income per common share  diluted
    
    $
    0.04
    
    
    $
    0.10
    
    
    $
    0.09
    
    
    $
    0.19
 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
    
    
    1.66
    
    
    $
    
    
    
$  12.31
    
    
    
    359,391
    
    
    $
    13.54
    
    
    40,609
    
    
    1.66
    
    
    
    
    
    
    13.54
    
    
    
    40,609
    
    
    
    9.78
    
    
    350,000
    
    
    2.66
    
    
    
    
    
    
    9.78
    
    
    
    350,000
    
    
    
    13.10
    
    
    90,000
    
    
    3.65
    
    
    
    
    
    
    13.10
    
    
    
    90,000
    
    
    
    6.70
    
    
    235,000
    
    
    4.67
    
    
    
    
    
    
    6.70
    
    
    
    235,000
    
    
    
    1.59
    
    
    167,500
    
    
    5.41
    
    
    
    773
    
    
    1.59
    
    
    
    167,500
    
    
    
    7735.77
    
    
    40,188
    
    
    9.67
    
    
    
    17
    
    
    5.77
    
    
    
    
    
    
    
    1,282,688
    
    
    3.36
    
    
    $
    790
    
    
$   9.19
    
    
    
    1,242,500
    
    
    $
    773
       9




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##### Table of Contents



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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##### Table of Contents



ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
  Forward-Looking Information
  Overview
   Critical Accounting Policies
  11




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##### Table of Contents



Results of Operations  Three months ended June 30, 2007 compared to the three months ended June
30, 2006
 Revenue
 Three Months Ended June 30,2006
    
    
    Change
    
    
    2007(Dollars in thousands)Income on financing leases
    
    $
    724
    
    
    
    266.4
    %
    
    $
    2,653Rental income
    
    
    5,594
    
    
    
    (37.2
    )
    
    
    3,514Income on service contracts
    
    
    488
    
    
    
    (32.6
    )
    
    
    329Loss and damage waiver fees
    
    
    493
    
    
    
    (4.1
    )
    
    
    473Service fees and other income
    
    
    535
    
    
    
    (38.3
    )
    
    
    330Interest income
    
    
    323
    
    
    
    (23.5
    )
    
    
    247Total revenues
    
    $
    8,157
    
    
    
    (7.5
    )%
    
    $
    7,546
   Selling, General and Administrative
 Three Months Ended June 30,2006
    
    Change
    
    2007(Dollars in thousands)Selling, general and administrative
    
    $
    3,926
    
    
    
    (19.6
    )%
    
    $
    3,158As a percent of revenue
    
    
    48.1
    %
    
    
    
    
    
    
    41.8
    %
  12




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Provision for Credit Losses
 Three Months Ended June 30,2006
    
    Change
    
    2007(Dollars in thousands)Provision for credit losses
    
    $
    1,627
    
    
    
    3.1
    %
    
    $
    1,677As a percent of revenue
    
    
    19.9
    %
    
    
    
    
    
    
    22.2
    %
  Depreciation and Amortization
 Three Months Ended June 30,2006
    
    
    Change
    
    
    2007(Dollars in thousands)Depreciation  fixed assets
    
    $
    48
    
    
    
    41.7
    %
    
    $
    68Depreciation  rental equipment
    
    
    1,370
    
    
    
    (87.4
    )
    
    
    172Amortization  service contracts
    
    
    256
    
    
    
    (58.2
    )
    
    
    107Total depreciation and amortization
    
    $
    1,674
    
    
    
    (79.3
    )%
    
    $
    347As a percent of revenue
    
    
    20.5
    %
    
    
    
    
    
    
    4.6
    %
     13




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##### Table of Contents



Interest Expense
 Three Months Ended June 30,2006
    
    Change
    
    2007(Dollars in thousands)Interest
    
    $
    31
    
    
    
    (58.1
    )%
    
    $
    13As a percent of revenue
    
    
    0.4
    %
    
    
    
    
    
    
    0.2
    %
  Provision for Income Taxes
 Three Months Ended June 30,2006
    
    2007(Dollars in thousands)Provision for income taxes
    
    $
    361
    
    
    $
    902As a percent of revenue
    
    
    4.4
    %
    
    
    12.0
    %As a percent of income before taxes
    
    
    40.2
    %
    
    
    38.4
    %
  Other Operating Data
  Results of Operations  Six months ended June 30, 2007 compared to the six months ended June 30,
2006
 Revenue
 Six Months Ended June 30,2006
    
    
    Change
    
    
    2007(Dollars in thousands)Income on financing leases
    
    $
    1,396
    
    
    
    235.7
    %
    
    $
    4,686Rental income
    
    
    11,315
    
    
    
    (34.3
    )
    
    
    7,438Income on service contracts
    
    
    1,043
    
    
    
    (33.8
    )
    
    
    690Loss and damage waiver fees
    
    
    1,044
    
    
    
    (12.2
    )
    
    
    917Service fees and other income
    
    
    1,638
    
    
    
    (56.3
    )
    
    
    716Interest income
    
    
    638
    
    
    
    (10.7
    )
    
    
    570Total revenues
    
    $
    17,074
    
    
    
    (12.0
    )%
    
    $
    15,017
 14




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##### Table of Contents



Selling, General and Administrative
 Six Months Ended June 30,2006
    
    Change
    
    2007(Dollars in thousands)Selling, general and administrative
    
    $
    8,133
    
    
    
    (17.3)
    %
    
    $
    6,726As a percent of revenue
    
    
    47.6
    %
    
    
    
    
    
    
    44.8
    %
  Provision for Credit Losses
 Six Months Ended June 30,2006
    
    Change
    
    2007(Dollars in thousands)Provision for credit losses
    
    $
    3,237
    
    
    
    (1.1)
    %
    
    $
    3,200As a percent of revenue
    
    
    19.0
    %
    
    
    
    
    
    
    21.3
    %
  15




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##### Table of Contents



Depreciation and Amortization
 Six Months Ended June 30,2006
    
    
    Change
    
    
    2007(Dollars in thousands)Depreciation  fixed assets
    
    $
    105
    
    
    
    21.0
    %
    
    $
    127Depreciation  rental equipment
    
    
    2,687
    
    
    
    (83.5
    )
    
    
    443Amortization  service contracts
    
    
    647
    
    
    
    (62.9
    )
    
    
    240Total depreciation and amortization
    
    $
    3,439
    
    
    
    (76.4)
    %
    
    $
    810As a percent of revenue
    
    
    20.1
    %
    
    
    
    
    
    
    5.4
    %
     Interest Expense
 Six Months Ended June 30,2006
    
    Change
    
    2007(Dollars in thousands)Interest
    
    $
    112
    
    
    
    (76.8)
    %
    
    $
    26As a percent of revenue
    
    
    0.7
    %
    
    
    
    
    
    
    0.2
    %
  16




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##### Table of Contents



Provision for Income Taxes
 Six Months Ended June 30,2006
    
    2007(Dollars in thousands)Provision for income taxes
    
    $
    851
    
    
    $
    1,589As a percent of revenue
    
    
    5.0
    %
    
    
    10.6
    %As a percent of income before taxes
    
    
    39.5
    %
    
    
    37.3
    %
  Other Operating Data
  Exposure to Credit Losses
  (dollars in thousands)
    
    December 31, 2006
    
    
    June 30, 2007Current
    
    $
    29,027
    
    
    
    71.8
    %
    
    $
    51,109
    
    
    
    82.9
    %31-60 days past due
    
    
    1,607
    
    
    
    4.0
    
    
    
    2,213
    
    
    
    3.661-90 days past due
    
    
    825
    
    
    
    2.0
    
    
    
    1,350
    
    
    
    2.2Over 90 days past due
    
    
    8,996
    
    
    
    22.2
    
    
    
    6,962
    
    
    
    11.3Gross receivables due in
installments
    
    $
    40,455
    
    
    
    100.0
    %
    
    $
    61,634
    
    
    
    100.0
    %
 17




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##### Table of Contents



Liquidity and Capital Resources
 General
      Borrowings
  December 31, 2006
    
    June 30, 2007Amount
    
    Interest
    
    Amount
    
    Interest(dollars in thousands)
    
    Outstanding
    
    Rate
    
    Outstanding
    
    RateRevolving credit
facility
    
    
    $  5
    
    
    
    9.75
    %
    
    
    $  44
    
    
    
    9.75
    %
   18




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##### Table of Contents



Dividends
     Contractual Obligations and Lease Commitments
 Contractual Obligations
  Commitments
  Recent Accounting Pronouncements
  19




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##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
     
 ITEM 4. Controls and Procedures
   20




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##### Table of Contents



Part II  Other Information
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  A.
    
    For the election of nominees for the Board of Directors:
 Name of Director
    
    For
    
    Authority WithheldPeter R. Bleyleben
    
    
    11,835,481
    
    
    
    357,872John W. Everets
    
    
    11,867,476
    
    
    
    325,877Richard F. Latour
    
    
    11,983,252
    
    
    
    210,101
 B.
    
    For the proposal to ratify the appointment of Vitale, Caturano & Co. as our independent
registered public accounting firm for the year ending December 31, 2007:
 For
    
    Against
    
    Abstain12,070,471
    
    84,895
    
    37,988
 
 ITEM 6. Exhibits
 (a)
    
    Exhibits index
 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 200232.2*
    
    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 21




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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
  22