<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: September 30, 1997 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 small business issuer as specified in its charter)
Delaware 77-0130894
- ------------------------------ ----------
(State or Other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1000 Avenida Acaso
Camarillo, California 93012
--------------------- ------
(Address of principal executive offices) (Zip Code)
(805) 388-1345
-----------------------------------------------
(Issuer's telephone number including area code)
Check whether the issuer (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 latest practicable date.
Number of shares of Common Stock Outstanding as of October 31, 1997: 6,246,251
Number of pages in this Form 10-QSB 15
--
<PAGE>
AML COMMUNICATIONS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Statements of Income for the three month and six month periods ended 3
September 30, 1997 and September 30, 1996
Balance Sheets at September 30, 1997 and March 31, 1997 4
Statements of Cash Flows for the six month periods ended 5
September 30, 1997 and September 30, 1996
Notes to the Financial Statements 6
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K 14
SIGNATURES 15
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AML COMMUNICATIONS, INC.
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------------------- ---------------------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
---------------- ------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Net sales $2,805,000 $3,882,000 $5,320,000 $7,558,000
Cost of goods sold 1,594,000 1,799,000 2,864,000 3,507,000
---------------- ------------- ---------------- ------------------
Gross profit 1,211,000 2,083,000 2,456,000 4,051,000
---------------- ------------- ---------------- ------------------
Operating expenses:
Selling, general and administrative 619,000 613,000 1,282,000 1,319,000
Research and development 474,000 391,000 957,000 699,000
---------------- ------------- ---------------- ------------------
1,093,000 1,004,000 2,239,000 2,018,000
---------------- ------------- ---------------- -----------------
Operating income 118,000 1,079,000 217,000 2,033,000
Other income, net (78,000) (60,000) (158,000) (102,000)
---------------- ------------- ---------------- ------------------
Income before provision for
income taxes 196,000 1,139,000 375,000 2,135,000
Provision for income taxes 73,000 421,000 139,000 789,000
---------------- ------------- ---------------- ------------------
Net income $ 123,000 $ 718,000 $ 236,000 $1,346,000
================ ============= ================ ==================
Earnings per common share $ 0.02 $ 0.11 $ 0.04 $ 0.21
================ ============= ================ ==================
Weighted average number of shares of
common stock outstanding 6,401,000 6,499,000 6,381,000 6,499,000
================ ============= ================ ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AML COMMUNICATIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
----------------- -----------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 300,000 $ 4,766,000
Marketable securities 7,715,000 3,259,000
Accounts receivable, net of allowance for doubtful accounts of
$66,000 at September 30, 1997 and $297,000 at March 31, 1997 2,200,000 1,910,000
Inventories 2,149,000 1,961,000
Other current assets 139,000 203,000
----------------- -----------------
Total current assets 12,503,000 12,099,000
----------------- -----------------
Property and Equipment:
Machinery and equipment 2,519,000 2,239,000
Furniture and fixtures 120,000 120,000
Leasehold improvements 530,000 516,000
----------------- -----------------
3,169,000 2,875,000
Less - Accumulated depreciation and amortization (1,212,000) (912,000)
----------------- -----------------
1,957,000 1,963,000
----------------- -----------------
Deferred Taxes 332,000 332,000
----------------- -----------------
Other Assets 152,000 149,000
----------------- -----------------
$14,944,000 $14,543,000
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 1,084,000 $ 857,000
Accrued expenses 366,000 603,000
Income taxes payable 383,000 244,000
Current portion of capital lease obligations 33,000 40,000
----------------- -----------------
Total current liabilities 1,866,000 1,744,000
----------------- -----------------
Capital Lease Obligations, net of current portion 49,000 62,000
----------------- -----------------
Commitments and contigencies
Stockholders' Equity:
Preferred stock, $.01 par value:
1,000,000 shares authorized; no shares issued or outstanding - -
Common stock, $.01 par value:
15,000,000 shares authorized; 6,216,249 shares issued
and outstanding at September 30, 1997 and 6,082,190 shares issued and
outstanding at March 31, 1997 62,000 61,000
Capital in excess of par value 9,103,000 9,048,000
Retained earnings 3,864,000 3,628,000
----------------- -----------------
13,029,000 12,737,000
----------------- -----------------
$14,944,000 $14,543,000
================= =================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
<PAGE>
AML COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------------------------
September 30, September 30,
1997 1996
------------------ ------------------
<S> <C> <C>
(UNAUDITED)
Cash Flows from Operating Activities:
Net income $ 236,000 $ 1,346,000
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 300,000 226,000
Provision for losses on accounts receivable - 20,000
Changes in assets and liabilities:
Decrease (increase) in:
Marketable securities (4,456,000) (1,009,000)
Accounts receivable (290,000) (174,000)
Inventories (188,000) (752,000)
Deferred tax asset - 45,000
Other assets 61,000 (36,000)
Increase (decrease) in:
Accounts payable 227,000 54,000
Accrued expenses (237,000) (24,000)
Income taxes payable 139,000 358,000
--------------- -------------
Net cash provided by (used in) operating activities (4,208,000) 54,000
--------------- -------------
Cash Flows from Investing Activities:
Proceeds from disposition of facility held for resale - 1,300,000
Purchases of property and equipment (294,000) (1,272,000)
--------------- -------------
Net cash provided by (used in) investing activities (249,000) 28,000
--------------- -------------
Cash Flows from Financing Activities:
Proceeds from exercise of stock options 56,000 161,000
Principal payments on capital lease obligations (20,000) (358,000)
--------------- -------------
Net cash provided by (used in) financing activities 36,000 (197,000)
--------------- -------------
Net Decrease in Cash and Cash Equivalents (4,466,000) (115,000)
Cash and Cash Equivalents, beginning of period 4,766,000 6,312,000
--------------- -------------
Cash and Cash Equivalents, end of period $ 300,000 $ 6,197,000
=============== =============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 4,000 $ 12,000
=============== =============
Income taxes $ - $ 135,000
=============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
AML COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. Basis of Presentation
AML Communications, Inc. (the "Company") designs and manufactures
multi-carrier amplifiers, masthead amplifiers and related products for the
cellular, personal communication services ("PCS"), paging and other
communication markets.
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 and six 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, 1997 audited financial
statements and notes thereto included in the Company's Annual Report to
Shareholders on Form 10-KSB.
2. Earnings Per Share
Earnings per share are based upon the weighted average number of common
shares outstanding plus the dilutive effect of common stock equivalents. The
earnings per share calculations reflect a 3:2 stock split paid June 28, 1996 to
holders of record on June 5, 1996. Primary and fully diluted earnings per share
were the same for all periods presented.
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>
September 30, 1997 March 31, 1997
------------------ --------------
<S> <C> <C>
Raw materials $1,685,000 $1,502,000
Work-in-process 359,000 409,000
Finished goods 105,000 50,000
---------- ----------
$2,149,000 $1,961,000
========== ==========
</TABLE>
6
<PAGE>
4. Marketable Securities
Marketable securities reported during fiscal year 1997 and during the
first quarter of fiscal year 1998 are interest bearing tax free investments with
maturities of less than one year but greater than three months when purchased.
These securities are readily convertible into cash and are stated at cost, which
approximates market value. During the second quarter of 1998, the Company began
investing in a money market protfolio of taxable and tax advantaged instruments.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This filing contains forward-looking statements which involve risks and
uncertainties. The Company's actual future may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause a
difference include, but are not limited to, product demand and the rate of
market acceptance, the effect of changes in economic conditions, the impact of
competitive products and pricing, delays in product development, capacity and
supply constraints or difficulties, general business and economic conditions,
and other risks detailed in the Company's Securities and Exchange Commission
filings.
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended September 30, 1997 and 1996
Net sales. Net sales for the three months ended September 30, 1997 were $2.8
million compared to $3.9 million in the corresponding period in 1996, a 27.7%
decrease. The decrease in sales is largely attributable to the decrease in
volume of the Company's cellular amplifiers which contributed $2.1 million, or
76.4% of net sales for the quarter ended September 30, 1997. The Company
believes that the decline in the cellular amplifier product line is primarily a
result of the following factors: 1) Original Equipment Manufacturers ("OEM's")
have improved the amplifiers within their base stations enabling the operator to
achieve cost effective performance without having to upgrade to the Company's
amplifier, 2) Macrocell base stations are being developed and sold at
substantially lower prices than before, thereby slowing the sales of microcell
base stations. The Company's multi-carrier amplifier is designed to perform with
the microcell base station; consequently, sales of the Company's amplifiers have
decreased and 3) The industry focus has shifted to the Personal Communications
Services ("PCS") market, slowing further build-out of the cellular infra-
structure. Sales of the PCS and wireless telephony products totaled $61,000, or
2.2% of total sales for the three months ended September 30, 1997, compared to
$261,000, or 6.7% of sales for the three months ended September 30, 1996.
Sales of the Company's custom products totaled $601,000, or 21.4% of total
sales for the three months ended September 30, 1997 compare to $611,000, or
15.7% for the corresponding period in 1996. The Company expects the custom
product market to be a stable component of the Company's revenue stream, but to
decline in the future as a percent of total sales.
Gross profit. Gross profit for the three months ended September 30, 1997 was
$1.2 million, or 43.2% of net sales, compared to $2.1 million, or 53.7% of net
sales, for the corresponding period in 1996. The Company's average selling
prices and gross margins for its products have declined as cellular operators
continue to face pressures to reduce costs and as competition intensifies among
suppliers of equipment to the cellular operators.
Selling, general and administrative costs. Selling, general and administrative
costs for the three months ended September 30, 1997 were $619,000, or 22.1% of
net sales, compared to $613,000, or 15.8% of net sales, for the corresponding
period in 1996. The percentage increase is the result of relatively comparable
costs for labor, trade show and travel expense between the 1997 and 1996 periods
but applied to lower sales in 1997. The Company believes further investment in
sales and marketing will be necessary to promote the Company's products due to
the intensely competitive nature of the industry.
Research and development costs. Research and development costs for the three
months ended September 30, 1997 were $474,000, or 16.9% of net sales, compared
to $391,000, or 10.1% of net sales, for the corresponding period in 1996. The
increase is due primarily to the
8
<PAGE>
employment of additional technical staff and increased material costs required
to design and develop new products for cellular, PCS and paging communications
markets.
During the second quarter 1997, the Company received an order to supply paging
amplifiers to the domestic PCS market. The contract is the first significant
production order for the Company's new product line serving this market.
Subsequent to the end of the second quarter, the Company announced that it
received Federal Communication Commission approval to market its M30 multi-
carrier amplifier for the U.S. and international cellular marketplace. A multi-
carrier amplifier replaces the functions of several single carrier power
amplifiers and cavity filters, thereby reducing service providers' maintenance
costs and space requirements while providing increased system flexibility and
call capacity. The Company continues to focus its efforts on the development
of products for the PCS infrastructure buildup.
Other income, net. Other income for the three months ended September 30, 1997
increased to $78,000 compared to $60,000 for the corresponding period in 1996.
The increase is due to interest income on a higher level of investments and a
reduction in interest expense associated with the reduction of certain lease
obligations.
Provision for income taxes. For the three months ended September 30, 1997, the
Company's provision for income taxes was $73,000, an effective tax rate of 37.2%
compared to $421,000, an effective tax rate of approximately 37.0% for the
corresponding period in 1996. The difference between the rate used and the
statutory rate of approximately 40% is due to research and development tax
credits available to the Company which reduce taxes payable and tax free
interest income generated from certain investments.
Net income. For the reasons set forth above, the Company generated a net
income for the three months ended September 30, 1997, of $123,000, or 4.4% of
net sales compared to $718,000, or 18.5% of net sales in the corresponding
period in 1996.
9
<PAGE>
SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Net sales. Net sales for the six months ended September 30, 1997 were $5.3
million compared to $7.6 million in the corresponding period in 1996, a 29.6%
decrease. The decrease in sales is largely attributable to the decrease in
volume of the Company's cellular amplifiers which contributed $3.6 million, or
67.3% of net sales for the period ended September 30, 1997 compared to $6.0
million, or 79.9% of net sales for the period ended September 30, 1996. The
decline in the cellular amplifier product line is a result of the following
factors: 1) OEM's have improved the amplifiers within their base stations
enabling the operator to achieve cost effective performance without having to
upgrade to the Company's amplifier, 2) Macrocell base stations are being
developed and sold at substantially lower prices than before, thereby slowing
the sales of microcell base stations. The Company's multi-carrier amplifier is
designed to perform with the microcell base station; consequently, sales of the
Company's amplifiers have decreased and 3) The industry focus has shifted to the
PCS market, slowing further build-out of the cellular infra-structure. Sales of
PCS and wireless telephony products totaled $308,000, or 5.8% of total sales for
the six months ended September 30, 1997, compared to $537,000, or 7.1% of sales
for the six months ended September 30, 1996.
Sales of the Company's Custom products totaled $922,000, or 17.3% of total sales
for the six months ended September 30, 1997 compared to $978,000, or 12.9% for
the corresponding period in 1996. The Company expects the Custom product market
to be a stable component of the Company's revenue stream, but to decline in the
future as a percent of total sales.
During the first quarter of this year the Company reported sales of amplifiers
used in the Low Earth Orbit ("LEO") satellite network of $508,000, which
represents 9.6% of sales for the six months ended September 30, 1997. The LEO
satellite network is designed to provide high-speed digital communication
worldwide through earth gateways. This revenue represents completion of the
Company's contract previously announced in January, 1997 to provide amplifiers
to a customer in the LEO satellite network during the first quarter
of this year. The Company currently has no other contract for the production and
shipment of LEO amplifiers.
Gross profit. Gross profit for the six months ended September 30, 1997 was
$2.5 million, or 46.2% of net sales, compared to $4.1 million, or 53.6% of net
sales, for the corresponding period in 1996. The percentage decrease is a
result of the revenue shortfall that occurred during the year which impeded the
Company's ability to efficiently absorb its labor and overhead expenses. The
Company's average selling prices and gross margins for its products have
declined as cellular operators continue to face pressures to reduce costs and as
competition intensifies among suppliers of equipment to the cellular operators.
Selling, general and administrative costs. Selling, general and
administrative costs for the six months ended September 30, 1997 were $1.3
million, or 24.1% of net sales, compared to $1.3 million, or 17.5% of net sales,
for the corresponding period in 1996. The percentage increase is the result of
relatively comparable costs for labor, trade show and travel expense between the
1997 and 1996 periods but applied to lower sales in 1997. The Company believes
further
10
<PAGE>
investment in sales and marketing will be necessary to promote the Company's
products due to the intensely competitive nature of the industry.
Research and development costs. Research and development costs for the six
months ended September 30, 1997 were $957,000, or 18.0% of net sales, compared
to $699,000, or 9.2% of net sales, for the corresponding period in 1996. The
increase is due primarily to the employment of additional technical staff and
increased material costs required to design and develop new products for
cellular, PCS and paging communications markets.
During the second quarter 1997, the Company received an order to supply paging
amplifiers to the domestic PCS market. The contract is the first significant
production order for the Company's new product line serving this market.
Subsequent to the end of the second quarter, the Company announced that it
received Federal Communication Commission approval to market its M30 multi-
carrier amplifier for the U.S. and international cellular marketplace. A multi-
carrier amplifier replaces the functions of several single carrier power
amplifiers and cavity filters, thereby reducing service providers' maintenance
costs and space requirements while providing increased system flexibility and
call capacity. The Company continues to focus its efforts on the development
of products for the PCS infrastructure buildup.
Other income, net. Other income for the six months ended September 30, 1997
was $158,000 compared to $102,000 for the corresponding period in 1996. The
increase is due to interest income on a higher level of investments and a
reduction in interest expense associated with the reduction of certain lease
obligations.
Provision for income taxes. For the six months ended September 30, 1997, the
Company's provision for income taxes was $139,000, an effective tax rate of
37.1% compared to $789,000, an effective tax rate of approximately 37.0% for the
corresponding period in 1996. The difference between the rate used and the
statutory rate of approximately 40% is due to research and development tax
credits available to the Company which reduce taxes payable and tax free
interest income generated from certain investments.
Net income. For the reasons set forth above, the Company generated a net
income for the six months ended September 30, 1997, of $236,000, or 4.4% of net
sales compared to $1,346,000, or 17.8% of net sales in the corresponding period
in 1996.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Historically, the Company has financed its operations primarily by
internally generated funds and, to a lesser extent, loans from stockholders and
capital lease obligations. In December 1995, the Company completed its initial
public offering of 1,725,000 shares of common stock (including the exercise of
the underwriters' over allotment option), raising net proceeds of approximately
$7.7 million. Of such net proceeds, $425,000 was used to repay loans from
certain stockholders and the remainder has been used to expand manufacturing
capability through the leasing and outfitting of substantially larger
facilities, the acquisition of equipment sufficient to produce higher product
quantities and the employment and training of additional employees capable of
expanding production and sales. The net proceeds of the initial public offering
are also being used to maintain increased inventory and working capital balances
to support higher operating levels.
In September 1997 the Company renegotiated its revolving bank line of credit.
The new agreement is comprised of two separate credit facilities. The initial
facility is a $1,250,000 revolving line of credit, which bears interest at the
bank's reference rate (8.5 % at September 30, 1997) plus 0.50%. The second
facility is a $500,000 non-revolving line of credit with term repayment options
which may be used to finance up to 80% of the purchase price of equipment used
in the Company's business. Repayment of borrowings under this facility are in
47 equal monthly installments beginning October 1, 1998, with interest at the
bank's reference rate plus .75%. Both facilities are secured by substantially
all of the Company's assets and expire on September 1, 1998. As of September
30, 1997, there were no borrowings outstanding under either facility.
At September 30, 1997 the Company had $300,000 in cash, and $7.7 million in
short-term marketable securities. The Company's operating activities used cash
of approximately $4,208,000 for the six months ended September 30, 1997
primarily as a result of increases in marketable securities. The Company's
capital expenditures of $294,000 for the six months ended September 30, 1997
were primarily for manufacturing test equipment and information system
improvements.
The Company believes that the net proceeds from the initial 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. Inflation has not had a significant effect to date on the Company's
results of operations.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
- ---------------------------------------------------
Future operating results may be impacted by a number of factors that could
cause actual results to differ materially from those stated herein, which
reflect management's current expectations. These factors include industry
specific factors (including the reliance upon continued growth of the wireless
communications market, significant competition in the communications
infrastructure equipment industry characterized by rapid technological change,
12
<PAGE>
new product development, product obsolescence, and significant price erosion
over the life of a product), the Company's ability to timely develop and produce
commercially viable products at competitive prices, the ability of the Company's
products to operate and be compatible with various OEM base station equipment,
the Company's ability to produce products which meet the quality standards of
both existing and potential new customers, the Company's ability to accurately
anticipate customer demand, the Company's ability to manage expense levels, the
availability and cost of components, the Company's ability to finance its
activities and maintain its financial liquidity and worldwide economic and
political conditions.
The Company has begun to experience significant price erosion in the sales of
its products and expects price competition in the sale of amplifiers to
increase. No assurance can be given that the Company's competitors will not
develop new technologies or enhancements to existing products or introduce new
products that will offer superior price or performance features. The Company
expects its competitors to offer new and existing products at prices necessary
to gain or retain market share. Several of the Company's competitors have
substantial financial resources, which may enable them to withstand sustained
price competition or a downturn in the pricing of its products, or otherwise, in
the future. Substantially all of the Company's competitors have, and potential
future competitors could have, substantially greater technical, marketing,
distribution and other resources than the Company and have, or could have,
greater name recognition and market acceptance of their products and
technologies.
The Company currently sells a majority of its product into the operator
channel to market. As a result, the Company receives periodic order forecasts
from its major customers who have no obligation to purchase the forecasted
amounts. Nonetheless, the Company maintains significant work in process and raw
materials inventory as well as increased levels of technical production staff to
meet order forecasts and/or management's projections. To the extent its major
customers purchase less than the forecasted amounts, the Company will have
higher levels of inventory than otherwise needed, increasing the risk of
obsolescence and the Company will have increased levels of production staff to
support such forecasted orders. Such higher levels of inventory and increased
employee levels could reduce the Company's liquidity and could have a material
adverse effect on the Company's business, results of operation and financial
condition.
The markets in which the Company and its customers compete are characterized
by rapidly changing technology, evolving industry standards and communications
protocols, and continuous improvements in products and services. The Company's
future success depends on its ability to enhance its current products and to
develop and introduce in a timely manner new products that keep pace with
technological developments, industry standards and communications protocols,
compete effectively on the basis of price, performance and quality, adequately
address OEM customer and end-user customer requirements and achieve market
acceptance. The Company believes that to remain competitive in the future it
will need to continue to develop new products, which will require the investment
of significant financial resources in new product development. In this regard,
in anticipation of the deployment of PCS, the Company has developed a line of
amplifiers for PCS networks. There can be no assurance that the Company's PCS-
based products will achieve market acceptance, or that the Company will
manufacture such products at competitive prices in sufficient volumes. In the
event the Company's PCS-based products are not timely developed or do not gain
market acceptance, the Company's business, results of operations and financial
condition could be materially adversely affected.
13
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.23 Amendment No. 1 dated September 2, 1997 to Business Loan
Agreement dated August 2, 1996 between the Company and
Bank of America National Trust and Savings Association.
27 Financial Data Schedule
(b) There were no current Reports on Form 8-K filed by the Company during
the quarter ended September 30, 1997.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AML Communications, Inc.
Date: November 13, 1997 /s/ Kirk A. Waldron
-------------------
Kirk A. Waldron
Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
15
<PAGE>
EXHIBIT 10.23
- --------------------------------------------------------------------------------
[LOGO OF BANK OF AMERICA] AMENDMENT TO DOCUMENTS
- --------------------------------------------------------------------------------
AMENDMENT NO. 1 TO BUSINESS LOAN AGREEMENT
This Amendment No. 1 (the "Amendment") dated as of September 2, 1997, is
between Bank of America National Trust and Savings Association (the "Bank") and
AML Communications, Inc. (the "Borrower").
RECITALS
--------
A. The Bank and the Borrower entered into a certain Business Loan
Agreement dated as of August 2, 1996 (the "Agreement").
B. The Bank and the Borrower desire to amend the Agreement.
AGREEMENT
---------
1. DEFINITIONS. Capitalized terms used but not defined in this Amendment
-----------
shall have the meaning given to them in the Agreement.
2. AMENDMENTS. The Agreement is hereby amended as follows:
----------
2.1 Paragraph 1.2 of the Agreement is amended in part by substituting
"SEPTEMBER 1, 1998" in lieu of "SEPTEMBER 1, 1997" appearing
therein.
2.2 Subparagraph (a) of Paragraph 1.3 of the Agreement is amended in
part by substituting ".50" in lieu of ".75" appearing therein.
2.3 Paragraph 2.2 of the Agreement is amended in part by substituting
"September 1, 1998" in lieu of "September 1, 1997" appearing
therein.
2.4 Subparagraph (a) of Paragraph 2.3 of the Agreement is amended in
part by substituting ".75" in lieu of "1.00" appearing therein.
2.5 Subparagraph (b) of Paragraph 2.4 of the Agreement is amended in
its entirety as follows:
" (b) The Borrower will repay the principal amount outstanding on
the Expiration Date in 47 successive equal monthly
installments starting October 1, 1998. On September 1,
2002, the Borrower will repay the remaining principal
balance plus any interest then due."
2.6 Paragraph 8.5 of the Agreement is amended in part by substituting
"TWELVE MILLION DOLLARS ($12,000,000)" in lieu of "NINE MILLION
DOLLARS ($9,000,000)" appearing therein.
2.7 Paragraph 8.15 of the Agreement is amended in its entirety as
follows:
"8.15 AUDITS. To allow the Bank and its agents to inspect
(including taking and removing samples for environmental testing)
the Borrower's properties and examine, audit and make copies of
books and records at any reasonable time. If any of the
Borrower's properties, books or records are in the possession of
a third party, the Borrower authorizes that third party to permit
the Bank or its agents to have access to perform inspections or
audits and to respond to the Bank's requests for information
concerning such properties, books and records. The Bank has no
duty to inspect the Borrower's properties or to examine, audit,
appraise or copy books and records and the Bank shall not incur
any obligation or liability by reason of not making any such
inspection or inquiry. In the event that the Bank inspects the
Borrower's properties or examines, audits, appraises, or copies
books and records, the Bank will be acting solely for the
purposes of protecting the Bank's security and preserving the
Bank's rights under this Agreement. Neither the Borrower nor any
other party is entitled to rely on any inspection or other
inquiry by the Bank. The Bank owes no duty of care to protect the
Borrower or any other party against, or to inform the Borrower or
any other party of, any adverse condition that may be observed as
affecting the Borrower's properties or premises, or the
Borrower's business. The Bank may in its discretion disclose to
the Borrower or any other party any findings made as a result of,
or in connection with, any inspection of the Borrower's
properties."
- --------------------------------------------------------------------------------
- 1 -
<PAGE>
2.8 Subparagraph (c) of Paragraph 8.22 of the Agreement is amended in its
entirety as follows:
*(c) enter into any consolidation, merger, or other combination or
become a member of a joint venture, partner in a partnership, or
member of a limited liability company."
2.9 Paragraph 9 of the Agreement is amended in its entirety as follows:
"9. HAZARDOUS WASTE INDEMNIFICATION
The Borrower will indemnify and hold harmless the Bank from any loss
or liability directly or indirectly arising out of the use,
generation, manufacture, production, storage, release, threatened
release, discharge, disposal or presence of a hazardous substance.
This indemnity will apply whether the hazardous substance is on,
under or about the Borrower's property or operations or property
leased to the Borrower. The indemnity includes but is not limited to
attorneys' fees (including the reasonable estimate of the allocated
cost of in-house counsel and staff). The indemnity extends to the
Bank, its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys and assigns. "Hazardous
substances" means any substance, material or waste that is or
becomes designated or regulated as "toxic," "hazardous,"
"pollutant," or "contaminant" or a similar designation or regulation
under any federal, state or local law (whether under common law,
statute, regulation or otherwise) or judicial or administrative
interpretation of such, including without limitation petroleum or
natural gas. This indemnity will survive repayment of the Borrower's
obligations to the Bank."
2.10 Paragraph 11.7 of the Agreement is amended in its entirety as
follows:
"11.7 ATTORNEYS' FEES. The Borrower shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in
connection with the enforcement or preservation of any rights or
remedies under this Agreement and any other documents executed in
connection with this Agreement, and in connection with any amendment,
waiver, "workout" or restructuring under this Agreement. In the
event of a lawsuit or arbitration proceeding, the prevailing party is
entitled to recover costs and reasonable attorneys' fees incurred in
connection with the lawsuit or arbitration proceeding, as determined
by the court or arbitrator. In the event that any case is commenced
by or against the Borrower under the Bankruptcy Code (Title 11,
United States Code) or any similar or successor statute, the Bank is
entitled to recover costs and reasonable attorneys' fees incurred by
the Bank related to the preservation, protection, or enforcement of
any rights of the Bank in such a case. As used in this paragraph,
"attorneys' fees" includes the allocated costs of the Bank's
in-house counsel."
3. Conditions. This Amendment will be effective when the Bank receives the
following items, in form and content acceptable to the Bank:
3.1 Loan Fee (Facility No. 1). A loan fee of One Thousand Five Hundred
Sixty Two and 50/100 Dollars ($1,562.50) due on the date of execution of
this Amendment.
3.2 Loan Fee (Facility No. 2). A loan fee of Six Hundred Twenty Five
Dollars ($625) due on the date of execution of this Amendment.
- --------------------------------------------------------------------------------
-2-
<PAGE>
4. EFFECT OF AMENDMENT. Except as provided in this Amendment, all of the
-------------------
terms and conditions of the Agreement shall remain in full force and effect.
This Amendment is executed as of the date stated at the beginning of
this Amendment.
BANK OF AMERICA
National Trust and Savings Association
AML Communications, Inc.
X /s/ Derek C. Hansen
-------------------
By: Derek C. Hansen, Assistant Vice President X /s/ Kirk A. Waldron
-------------------
By: Kirk A. Waldron,
X /s/ Edward W. Summers Vice President Finance
--------------------- and Chief Financial
By: Edward W. Summers, Vice President Officer
Commercial Banking Manager
- --------------------------------------------------------------------------------
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1998
<PERIOD-START> JUL-01-1997 APR-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 300,000 0
<SECURITIES> 7,715,000 0
<RECEIVABLES> 2,200,000 0
<ALLOWANCES> 66,000 0
<INVENTORY> 2,149,000 0
<CURRENT-ASSETS> 12,503,000 0
<PP&E> 3,169,000 0
<DEPRECIATION> 1,212,000 0
<TOTAL-ASSETS> 14,944,000 0
<CURRENT-LIABILITIES> 1,866,000 0
<BONDS> 0 0
0 0
0 0
<COMMON> 62,000 0
<OTHER-SE> 12,967,000 0
<TOTAL-LIABILITY-AND-EQUITY> 14,944,000 0
<SALES> 2,805,000 5,320,000
<TOTAL-REVENUES> 2,805,000 5,320,000
<CGS> 1,594,000 2,864,000
<TOTAL-COSTS> 1,594,000 2,864,000
<OTHER-EXPENSES> 1,093,000 2,239,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (78,000) (158,000)
<INCOME-PRETAX> 196,000 375,000
<INCOME-TAX> 73,000 139,000
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 123,000 236,000
<EPS-PRIMARY> .02 .04
<EPS-DILUTED> .02 .04
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