<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1996 or
- --- TRANSITION REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File Number: 0-27252
AML COMMUNICATIONS, INC.
(Exact name of registrant's specified in its charter)
Delaware 77-0130894
--------------------------- ----------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1000 Avenida Acaso
Camarillo, California 93012
--------------------------- -------
(Address of principal executive offices) (Zip Code)
(805) 388-1345
------------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock Outstanding as of August 5, 1996: 5,885,632
Number of pages in this Form 10-Q 11
--
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AML COMMUNICATIONS, INC.
INDEX
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<CAPTION>
PART I FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Statements of Operations for the three
month periods ended June 30, 1996
and June 30, 1995 3
Balance Sheets at June 30, 1996
and March 31, 1996 4
Statements of Cash Flows for the
three month periods ended
June 30, 1996 and June 30, 1995 5
Notes to the Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8
PART II OTHER INFORMATION 10
SIGNATURES 11
</TABLE>
2
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AML COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
JUNE 30, JUNE 30,
1996 1995
----------- ----------
(UNAUDITED)
<S> <C> <C>
Net Sales $3,676,000 $1,133,000
Cost of goods sold 1,708,000 501,000
---------- ----------
Gross profit 1,968,000 632,000
---------- ----------
Operating expenses:
Selling, general and administrative 707,000 152,000
Research and development 308,000 162,000
---------- ----------
1,015,000 314,000
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Operating income 953,000 318,000
Interest expense (income), net (43,000) 7,000
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Income before provision for
income taxes 996,000 311,000
Provisions for income taxes 368,000 124,000
---------- ----------
Net income $ 628,000 $ 187,000
========== ==========
Earnings per common share $ .10 $ .04
========== ==========
Weighted average number of shares of
common stock outstanding 6,499,000 4,631,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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AML COMMUNICATIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1996
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(UNAUDITED)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash $ 6,500,000 $ 6,312,000
Accounts receivable, net of
allowance for doubtful accounts
of $159,000 and $102,000, as of
June 30, and March 31, 1996
respectively 2,066,000 1,549,000
Inventories 1,609,000 1,304,000
Facilities held for resale -- 1,300,000
Other current assets 39,000 41,000
----------- -----------
Total current assets 10,214,000 10,506,000
----------- -----------
Property and Equipment, at cost:
Machinery and equipment 1,788,000 1,141,000
Furniture and fixtures 118,000 1,000
Leasehold improvements 505,000 220,000
----------- -----------
2,411,000 1,362,000
Less-Accumulated depreciation
and amortization (516,000) (413,000)
----------- -----------
1,895,000 949,000
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Deferred Taxes 112,000 107,000
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Other Assets 220,000 83,000
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$12,441,000 $11,645,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Current portion of capital
lease obligations $ 37,000 $ 118,000
Accounts payable 878,000 600,000
Accrued expenses:
Payroll and payroll related 209,000 103,000
Bonus 70,000 142,000
401(k) contribution 18,000 30,000
Warranty and customer support 50,000 35,000
Other 193,000 138,000
Income taxes payable 697,000 710,000
----------- -----------
Total current liabilities 2,152,000 1,876,000
----------- -----------
Capital Lease Obligations, net of
current portion 92,000 360,000
----------- -----------
Stockholders' Equity:
Preferred stock, $.01 par value:
Authorized--1,000,000 shares, no
shares issued or outstanding -- --
Common stock, $.01 par value:
Authorized--15,000,000 shares
authorized--5,885,632 and
5,641,450 shares issued and
outstanding as of June 30, and
March 31, 1996, respectively 59,000 57,000
Capital in excess of par value 8,008,000 7,850,000
Retained earnings 2,130,000 1,502,000
------------ ------------
10,197,000 9,409,000
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$12,441,000 $11,645,000
=========== ===========
</TABLE>
The accompanying notes are integral part of these balance sheets
4
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AML COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
JUNE 30, JUNE 30,
1996 1995
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(UNAUDITED)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 628,000 $ 187,000
Adjustments to reconcile net income
to net cash provided by (used
in) operating activities:
Depreciation and amortization 103,000 23,000
Provision for losses on
accounts receivable 121,000 5,000
Changes in assets and
liabilities:
Decrease (increase) in:
Accounts receivable (638,000) (277,000)
Inventories (305,000) (98,000)
Deferred tax asset (5,000) 19,000
Other assets (135,000) --
Increase (decrease) in:
Accounts payable 278,000 21,000
Accrued expenses 92,000 (68,000)
Income taxes payable (13,000) 104,000
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Net cash provided by (used in)
operating activities 126,000 (84,000)
---------- --------
Cash Flows from Investing Activities:
Facilities held for resale 1,300,000 --
Purchases of property and equipment (1,049,000) --
---------- --------
Net cash provided by in 251,000 --
investing activities ---------- --------
Cash Flows from Financing Activities:
Exercise of stock options 160,000 --
Principal payments on capital
lease obligations (349,000) (31,000)
---------- ---------
Net cash used in financing
activities (189,000) (31,000)
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Net increase (Decrease) in Cash 188,000 (115,000)
Cash, beginning of period 6,312,000 257,000
---------- ---------
Cash, end of period $6,500,000 $ 142,000
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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AML COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION -
The accompanying unaudited financial statements have been prepared in
conformity with generally accepted accounting principles. However, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted or condensed pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). In the opinion of management all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
have been included. The results of operations and cash flows for the three
month periods presented are not necessarily indicative of the results of
operations for a full year. These financial statements should be read in
conjunction with the Company's March 31, 1996 audited financial statements and
notes thereto included in the Company's Form 10-KSB.
The Company declared a three-for-two stock split, effected by means of
a 50% share dividend, paid to owners of record as of the close of trading June
5, 1996, payable on June 28, 1996. All share and per share information in the
accompanying financial statements have been adjusted to give retroactive effect
to the stock split.
2. EARNING PER SHARE -
Earnings per share is based upon the weighted average number of common
shares outstanding plus the dilutive effect of common stock equivalents. For
the periods ended June 30, 1996 and 1995, per share information was computed
pursuant to the rules of the SEC, which require that common stock issued by the
Company during the twelve months immediately preceding the Company's initial
public offering plus the number of common shares issuable pursuant to the grant
of options issued during the same period, be included in the calculation of
shares outstanding using the treasury stock method from the beginning of the
period presented.
Primary and fully diluted earning per share were the same for all periods
presented.
6
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3. INVENTORIES -
Inventories include costs of material, labor and manufacturing overhead
and are stated at the lower of cost (first-in, first-out) or market and consist
of the following:
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
---------- ----------
<S> <C> <C>
Raw materials $ 904,000 $ 792,000
Work - in - process 705,000 512,000
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$1,609,000 $1,304,000
========== ==========
</TABLE>
4. FACILITY HELD FOR RESALE -
The $1.3 million facility held for resale relates to the purchase of
the Company's new manufacturing and administrative facility on February 25,
1996. The second phase of the transaction, which was consummated on May 1,
1996, after the Company completed the renovations required to accommodate the
intended use of the facility, involved the sale and leaseback of the building.
The terms of sale included payment by the purchaser of the full $1.3 million
original purchase price and the Company agreeing to a seven year lease with a
five year option to extend.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
NET SALES. Net sales for the three months ended June 30, 1996, increased
approximately $2.543 million, or 224.4% from the three months ended June 30,
1995. This was due to approximately $3.038 million of sales of the Microcell
product line, or 82.6% of net sales, in the quarter ended June 30, 1996 compared
to approximately $114,000, or 10.1% of net sales for the quarter ended June 30,
1995. Sales of the Company's cellular products will represent an increasing
percentage of net sales in the future, if the Company's ongoing strategy is
successful.
GROSS PROFIT. Gross profit for the three months ended June 30, 1996, increased
approximately $1.336 million or 211% from the three months ended June 30, 1995.
Gross profit as a percentage of net sales decreased to 53.5% from 55.8% for the
comparable period. The higher gross margin during the quarter ended June 30,
1995 is primarily due to much lower than anticipated costs incurred in
connection with a contract which generated approximately 30% of the quarter's
net sales.
SELLING, GENERAL AND ADMINISTRATIVE COSTS. Selling, general and administrative
costs for the three months ended June 30, 1996, increased approximately $555,000
or 365% from the three months ended June 30, 1995. This increase was caused
primarily by increased personnel and advertising costs incurred to increase
sales in the cellular communications market, increased commissions caused by
substantially increased sales and increased costs associated with the Company's
stock being publicly traded such as accounting, legal and investor relations
costs not required to be incurred in the quarter ended June 30, 1995.
Additionally, due to increasing levels of sales, increased administrative
personnel and costs were necessary to support a rapidly growing company.
RESEARCH AND DEVELOPMENT COSTS. Research and development costs for the three
months ended June 30, 1996, increased $146,000 or 90% from the three months
ended June 30, 1995. This increase was due primarily to the employment of
additional technical staff required to develop new products for the cellular
communications, PCS and paging markets. However, research and development cost
expressed as a percentage of net sales decreased to 8.4% from 14.3% for the
comparable period due to the substantial increase in net sales.
PROVISION FOR INCOME TAXES. The provision for income taxes for the quarter ended
June 30, 1996, was 37% of pre-tax income. The difference between the rate used
and the statutory rate of approximately 40% was due to research and development
tax credits available to the Company which reduce taxes payable and tax free
income generated from certain investments. For the quarter ended June 30, 1995,
the statutory 40% rate was used.
8
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LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Historically, the Company financed its operations primarily from internally
generated funds and, to a lesser extent loans from stockholders and capital
lease obligations. In December 1995 and January 1996, the Company completed its
initial public offering of 1,725,000 shares of common stock (including the
exercise of the underwriters' over allotment option). Of the net proceeds of
approximately $7.7 million at June 30, 1996, $425,000 was used to repay loans
from certain stockholders and the remainder is being used to expand
manufacturing capability through the leasing and outfitting of substantially
larger facilities, the acquisition of sufficient equipment to produce higher
product quantities, and the employment and training of additional employees
capable of expanding production and sales. The net proceeds of the offering are
also being used to increase inventory levels and expand working capital
sufficiently to support anticipated higher operating levels.
In October, 1995, the Company entered into a loan agreement with a bank for a
$500,000 line of credit, which is secured by substantially all the Company's
assets. This line is available for one year, unless renewed, and provides for
draws to bear interest at the bank's reference rate plus 0.75%. The loan
agreement requires, among other things, that the Company maintain certain
minimum balances in a noninterest-bearing account at the bank. As of June 30,
1996, the Company has not utilized the line of credit.
The Company believes that the net proceeds from the public offering, together
with cash provided by operations and available under the bank line of credit,
will be sufficient to finance the Company for at least the next 12 months. It
is possible, however, that the Company will require additional financing if its
business strategy is successful.
Inflation has not had a significant effect to date on the Company's results of
operations.
9
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) There were no Reports on Form 8-K filed by the Company during the quarter
ended June 30, 1996
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AML Communications, Inc.
Date: August 8, 1996 /s/ William E. Sheridan, III
----------------------------
William E. Sheridan, III
Vice President, Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,500,000
<SECURITIES> 0
<RECEIVABLES> 2,225,000
<ALLOWANCES> 159,000
<INVENTORY> 1,609,000
<CURRENT-ASSETS> 10,214,000
<PP&E> 2,411,000
<DEPRECIATION> 516,000
<TOTAL-ASSETS> 12,441,000
<CURRENT-LIABILITIES> 2,152,000
<BONDS> 92,000
0
0
<COMMON> 8,067,000
<OTHER-SE> 2,130,000
<TOTAL-LIABILITY-AND-EQUITY> 12,441,000
<SALES> 3,676,000
<TOTAL-REVENUES> 3,676,000
<CGS> 1,708,000
<TOTAL-COSTS> 1,708,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 121,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 996,000
<INCOME-TAX> 368,000
<INCOME-CONTINUING> 628,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 628,000
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
