<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: June 30, 1999 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
----- -----
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Common Stock Outstanding as of July 31, 1999: 6,380,570
Transitional Small Business Disclosure Format: Yes No X
----- -----
Number of pages in this Form 10-Q SB 14
--
<PAGE>
AML COMMUNICATIONS, INC.
<TABLE>
<CAPTION>
INDEX
<S> <C> <C>
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (unaudited)
Statements of Operations for the three month periods ended 3
June 30, 1999 and June 30, 1998
Balance Sheets at June 30, 1999 and March 31, 1999 4
Statements of Cash Flows for the three month periods ended 5
June 30, 1999 and June 30, 1998
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
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AML COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------
June 30, 1999 June 30, 1998
--------------- ---------------
<S> <C> <C>
Net sales $ 2,277,000 $ 3,058,000
Cost of goods sold 1,454,000 1,779,000
--------------- ---------------
Gross profit 823,000 1,279,000
Operating expenses:
Selling, general and administrative 691,000 695,000
Research and development 382,000 512,000
--------------- ---------------
1,073,000 1,207,000
--------------- ---------------
Operating income (loss) (250,000) 72,000
Other income, net (63,000) (108,000)
--------------- ---------------
Income (loss) before provision (benefit)
for income taxes (187,000) 180,000
Provision (benefit) for income taxes -- 65,000
--------------- ---------------
Net income (loss) $ (187,000) $ 115,000
=============== ===============
Basic earnings (loss) per common share $(0.03) $0.02
=============== ===============
Basic weighted average number of shares of
common stock outstanding 6,266,000 6,297,000
=============== ===============
Diluted earnings (loss) per common share $(0.03) $0.02
=============== ===============
Diluted weighted average number of shares of
common stock outstanding 6,266,000 6,355,000
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AML COMMUNICATIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, March 31,
1999 1999
------------ ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 5,580,000 $ 6,597,000
Accounts receivable, net of allowance for doubtful accounts of
$60,000 at June 30, 1999 and $42,000 at March 31, 1999 1,465,000 427,000
Inventories 2,140,000 1,783,000
Income taxes receivable 482,000 537,000
Other current assets 247,000 118,000
------------ ------------
Total current assets 9,914,000 9,462,000
------------ ------------
Property and Equipment, at cost: 4,411,000 4,370,000
Less - Accumulated depreciation and amortization (2,464,000) (2,288,000)
------------ ------------
1,947,000 2,082,000
Deferred Taxes 288,000 288,000
Other Assets 114,000 114,000
------------ ------------
$ 12,263,000 $ 11,946,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 809,000 $ 558,000
Current portion of capital lease obligations 61,000 60,000
Accrued expenses:
Accrued payroll and payroll related expenses 461,000 349,000
Accrued commissions 150,000 40,000
Other accrued liabilities 406,000 364,000
------------ ------------
Total current liabilities 1,887,000 1,371,000
------------ ------------
Capital Lease Obligations, net of current portion 169,000 185,000
------------ ------------
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; 6,266,070 shares issued
and outstanding at June 30, 1999 and 6,260,129 shares issued and
outstanding at March 31, 1999 63,000 63,000
Capital in excess of par value 9,369,000 9,365,000
Treasury stock-114,500 shares, at cost (223,000) (223,000)
Retained earnings 998,000 1,185,000
------------ ------------
10,207,000 10,390,000
------------ ------------
$ 12,263,000 $ 11,946,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
<PAGE>
AML COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------
June 30, June 30,
1999 1998
------------ -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (187,000) $ 115,000
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 176,000 196,000
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable (1,038,000) (153,000)
Inventories (357,000) 111,000
Other assets (129,000) (24,000)
Income taxes receivable 55,000 --
Increase (decrease) in:
Accounts payable 251,000 151,000
Accrued expenses 264,000 (111,000)
Income taxes payable -- (165,000)
------------ -----------
Net cash provided by (used in) operating activities (965,000) 120,000
------------ -----------
Cash Flows from Investing Activities:
Purchases of property and equipment (41,000) (333,000)
------------ -----------
Net cash used in investing activities (41,000) (333,000)
------------ -----------
Cash Flows from Financing Activities:
Exercise of stock options 4,000 3,000
Principal payments on capital lease obligations (15,000) (6,000)
------------ -----------
Net cash used in financing activities (11,000) (3,000)
------------ -----------
Net Increase (Decrease) in Cash and Cash Equivalents (1,017,000) (216,000)
Cash and Cash Equivalents, beginning of period 6,597,000 8,608,000
------------ -----------
Cash and Cash Equivalents, end of period $ 5,580,000 $ 8,392,000
============ ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 6,000 $ 2,000
============ ===========
Income taxes $ -- $ 190,000
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
AML COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
1. Basis of Presentation
AML Communications, Inc. (the "Company") designs and manufactures multi-
carrier amplifiers, and related products for the cellular, personal
communication services ("PCS"), paging, wireless local loop, satellite, 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
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, 1999 audited financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB.
2. Earnings Per Share
Basic earnings per share is computed by dividing net income or loss by the
weighted average number of shares outstanding for the year. "Diluted" earnings
per share is computed by dividing net income or loss by the total of the
weighted average number of shares outstanding plus, if applicable, the dilutive
effect of outstanding stock options (applying the treasury stock method).
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, 1999 March 31, 1999
------------- --------------
(Unaudited) (Audited)
<S> <C> <C>
Raw materials $1,302,000 $1,217,000
Work-in-process 542,000 343,000
Finished goods 296,000 223,000
---------- ----------
$2,140,000 $1,783,000
========== ==========
</TABLE>
4. Legal Proceedings
As described in the Company's Form 10-KSB for the fiscal years ended March
31, 1998 and March 31, 1999, two essentially identical, purported securities
class action lawsuits have been filed against the Company and certain of its
current and former officers and directors. The complaints allege that during
the purported class period of April 10, 1996 to March 25, 1997, defendants made
overly optimistic estimates regarding the Company's anticipated financial
performance for fiscal 1997 and 1998, and overly optimistic statements regarding
the Company's ability to develop and to sell new products for the PCS market,
all allegedly in order to profit from insider trading at artificially inflated
prices.
6
<PAGE>
In the action pending in federal court, entitled Sussman v. AML
--------------
Communications, Inc., et al., U.S.D.C. Case No. 98-2010 CAS (Ex) (C.D. Cal.),
- ----------------------------
four lead plaintiffs and co-lead counsel were appointed on June 29, 1998
pursuant to The Private Securities Litigation Reform Act of 1995. On September
3, 1998, plaintiffs filed an amended complaint in that action. On October 14,
1998, the Company responded to the amended complaint by filing a motion to
dismiss the case. Plaintiffs' opposition to the motion was filed on December 3,
1998. The motion was heard by the court on February 8, 1999 and the judge has
taken the motion under advisement. All discovery is stayed in the federal
action unless and until it is determined that plaintiffs have stated an
actionable claim.
With respect to the action pending in state court, entitled Sussman v. AML
--------------
Communications, Inc., et al., Case No. CIV 179776 (Ventura County), all
- ----------------------------
proceedings have been stayed until the stay of discovery is lifted in the
federal action. Plaintiffs have informed the Company that they intend to file
an amended complaint in the state action once the case proceeds. The Company's
response will be due forty-five (45) days after the filing of the amended
complaint. The Company intends to respond by filing a demurrer, which is the
California equivalent of a motion to dismiss for failure to state a claim. It
is management's opinion that the lawsuit and subsequent claims are without
merit. Management intends to continue to vigorously defend its position.
The Company currently is not party to any other legal proceedings, the
adverse outcome of which, individually or in the aggregate, management believes
would have a material adverse effect on the business, financial condition or
results of operations of the Company.
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 results may differ materially from
the results discussed in the forward-looking statements. When used in this
report, the words "expects" "anticipates" and "estimates" and similar
expressions are intended to identify 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 economic conditions, the impact of
competitive products and pricing, delays in product development, capacity and
supply constraints or difficulties, general business and economic conditions,
factors set forth in "Additional Factors That May Affect Future Results" and
other risks detailed in the Company's Securities and Exchange Commission
filings. AML Communications Inc., undertakes no obligation to publicly release
any revisions to these forward looking statements to reflect events or
circumstances after the date this report is filed with the Securities and
Exchange Commission or to reflect the occurrence of unanticipated events.
Results of Operations
- ---------------------
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
Net sales. Net sales for the three months ended June 30, 1999 were $2.3
million compared to net sales of $3.1 million in the three months ended June 30,
1998, a 26.0% decrease. The decrease in net sales is largely attributable to a
decrease in sales of the Company's PCS/paging products, which contributed
$89,000, or 3.9% of net sales, for the three months ended June 30, 1999,
compared to $864,000, or 28.3% of net sales, for the three months ended June 30,
1998. The decrease in the PCS/paging product sales can be attributed to the
Company fulfilling a large contract to a single customer during the first
quarter of fiscal 1999. Sales of cellular products were $2.0 million, or 86.4%
of net sales, for the three months ended June 30, 1999, compared to $1.7
million, or 56.1% of net sales, for the three months ended June 30, 1998. Sales
of Wireless Local Loop ("WLL") products contributed $103,000, or 4.5% of net
sales, during the three months ended June 30, 1999, compared to $220,000, or
7.1% of net sales, during the three months ended June 30, 1998. Sales of custom
products for the three months ended June 30, 1999 was $118,000, or 5.2% of net
sales, compared to $258,000, or 8.3% of net sales, in the three months ended
June 30, 1998. Sales of custom products is expected to increase during fiscal
2000 as a result of management's decision to focus on potential market
opportunities in the custom sales segment of the Company's business.
Gross profit. Gross profit for the three months ended June 30, 1999 was
$823,000 or 36.5% of net sales, compared to $1.3 million, or 41.9% of net sales,
for the three months ended June 30, 1998. Production costs decreased to $1.5
million. However, they increased to 63.9% of aggregate net sales, for the three
months ended June 30, 1999 compared to $1.6 million, or 51.6% of net sales, for
the three months ended June 30, 1998. Gross profit declined as a result of
insufficient absorption of overhead fixed costs at lower shipment levels, lower
average selling prices and gross margins for the Company's products in the
highly competitive OEM market. The Company expects that this pressure on selling
prices for its current products will continue in fiscal 2000.
Selling, general and administrative costs. Selling, general and
administrative costs for the three months ended June 30, 1999, were $691,000, or
30.0% of net sales, compared to $695,000, or 22.4% of net sales, for the three
months ended June 30, 1998. The difference is primarily due to the reduction in
marketing and administrative personnel and its related expenses and lower
professional fees. These cost reductions were offset by increases due primarily
to higher commission rates for outside sales representatives and additional
travel costs to promote the Company and its products. The Company believes
continued investment in sales and marketing is 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 June 30, 1999 were $382,000, or 16.8% of net sales, compared
to $512,000, or 16.5% of net sales, for the three months ended June 30, 1998.
The dollar decrease is primarily due to reduced labor costs reflective of the
previously announced work force reduction in March 1999, lower research and
development material costs due to the termination of the certain projects, and
lower equipment rental costs due to the purchase or return of such
8
<PAGE>
equipment. The Company continues to invest both material and labor in design and
development of new products for the cellular, PCS, paging, and WLL
communications markets.
Other income, net. Other income for the three months ended June 30, 1999
was $63,000 compared to $108,000 for the three months ended June 30, 1998. The
decrease is due mainly to a decrease in interest income as a result of lower
interest rates and decreased average invested funds.
Provision/benefit for taxes. For the three months ended June 30, 1999, the
Company recorded no benefit for income taxes, compared to a provision for income
taxes of $65,000, an effective tax rate of approximately 36%, for the three
months ended June 30, 1998. No benefit for income taxes was recorded since the
Company has utilized all carry-back benefits during the 1999 fiscal year. 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 benefits associated with the exercise of employee
stock options.
Net income (loss). For the reasons set forth above, the Company generated
net loss in the first quarter of fiscal 2000 of $187,000, or 8.2% of net sales,
compared to net income of $115,000, or 3.7% of net sales, in the first quarter
of fiscal 1999.
Liquidity and Capital Resources
- -------------------------------
Historically, the Company has financed its operations primarily from
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
have also been used to maintain inventory and working capital balances.
On August 10, 1998, the Company announced that its board of directors
authorized a stock buyback program of up to 400,000 shares of the Company's
outstanding common stock. Shares repurchased pursuant to the buyback will be
purchased from time to time in the open market or in negotiated transactions and
will be held for issuance in connection with the future exercise of employee
stock options. The Company repurchased 114,500 shares at an aggregate cost of
$224,000 during fiscal 1999. The Company did not repurchase any additional
shares during the first quarter of fiscal 2000.
In September 1998 the Company renegotiated its existing revolving bank line
of credit. The amended 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 (prime rate) plus 0.25%. 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. The second facility bears an interest
rate at the bank's reference rate plus 0.75%. Both facilities are secured by
substantially all of the Company's assets and expire on September 1, 1999. As
of June 30, 1999, there were no borrowings outstanding under either facility.
As of June 30, 1999, the Company was not in compliance with two financial
covenants of the loan agreement. The Company failed to meet the net income
covenant and the minimum net worth covenant and, therefore, the Company is
prohibited of borrowings on both facilities. The Company is currently
negotiating with other financial institutions to establish comparable financing
facilities, although there are no assurances the Company will be successful in
its attempt.
At June 30, 1999 the Company had $5.6 million in cash and cash equivalents.
The Company's operating activities used cash of approximately $965,000 for the
three months ended June 30, 1999 primarily as a result of a loss from
operations, an increase in receivables and an increase in inventories. The
Company's capital expenditures of $41,000 for the three months ended June 30,
1999 were primarily for manufacturing test equipment, information system
improvements and leasehold improvements.
9
<PAGE>
The Company believes that the net proceeds from the initial public offering
and the cash provided by operations 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.
Year 2000 Compliance Issue
- --------------------------
The Company uses computer software programs purchased from various
independent vendors who may have written their programs using a two digit date
field rather than a four digit date field to define the applicable year. Such
computer programs which utilize a two digit date field may recognize a date
using "00" as the year 1900 rather than the year 2000 (the "Year 2000 Issue").
The Year 2000 Issue could potentially result in a system failure or in
miscalculations causing disruptions of operations, including among other things,
a temporary inability to process transactions, send invoices or engage in other
similar normal business activities.
The Company has identified the Year 2000 Issue in certain of its computer
software applications and is in the process of upgrading or replacing such
applications with software which, according to representations from the software
providers, recognize two digit date fields "00" as the year 2000. The Company
plans to test all such applications that have been represented by software
providers to be year 2000 compliant. The Company has completed its assessment
of internal information technology systems that will be affected by the Year
2000 Issue. The affected information technology systems will be upgraded or
replaced to be year 2000 compliant during August 1999. The cost of upgrading or
replacing such applications is not expected to have a material effect on the
operations of the Company and has been and will continue to be funded through
operating cash flows.
The Company has contacted its key customers, suppliers, and other third
parties with whom the Company exchanges electronic information to determine the
impact, if any, the Year 2000 Issue may have on their information technology
systems, which in turn, would have an impact on the Company. The Company has
reviewed the initial responses from its key customers, suppliers, and other
third parties and assessed any potential impact to the Company. There can be no
assurance that such customers, suppliers or third parties will not suffer
business disruptions due to the Year 2000 Issue. Such failures could have a
material adverse effect on the Company's business, results of operations and
financial condition.
Because the Company is in the process of upgrading or replacing the
computer software applications which run most of its information technology
systems (which software has been represented by the software providers not to be
affected by the Year 2000 Issue) the Company has not developed Year 2000
specific contingency plans. The Company intends to develop such plans if it
identifies a business function at risk. The Company does not currently
anticipate that the Year 2000 Issue will have a material effect on its business,
results of operations, or financial condition.
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,
new product development, product obsolescence, and significant price erosion
over the life of a product), our ability to timely develop and produce
commercially viable products at competitive prices, the ability of our products
to operate and be compatible with various OEM base station equipment, our
ability to produce products which meet the quality standards of both existing
and potential new customers, our ability to accurately anticipate customer
demand, our ability to manage expense levels, the availability and cost of
components, our ability to finance our activities and maintain our financial
liquidity and worldwide economic and political conditions.
We believe that, to the extent that foreign sales are recognized, we may
face increased risk associated with political and economic instability,
compliance with foreign regulatory rules governing export requirements, tariffs
and other trade barriers, differences in intellectual property protections,
longer accounts receivable cycles, currency fluctuations and general trade
restrictions. If any of these risks materialize, they could have a material
adverse effect on our business, results of operations and financial condition.
We have identified potential new customers
10
<PAGE>
serving new markets in developing countries. Our WLL products offer a viable
alternative to the construction of a wireline infrastructure in such areas.
However, to the extent that our customers delay development or deployment of WLL
communications networks and/or technology continues to evolve, we may experience
a material adverse effect on our business, results of operations and financial
condition.
We have evaluated the credit exposure associated with conducting business
with foreign customers and have concluded that such risk is acceptable.
Nevertheless, any significant change in the economy or a deterioration in United
States trade relations or the economic or political stability of foreign markets
could have a material adverse effect on our business, results of operations and
financial condition.
Sales to foreign customers are invoiced in U.S. dollars. Accordingly, we
currently do not engage in foreign currency hedging transactions. However, as
we expand further into foreign markets, greater risk associated with general
business, political and economic conditions in those markets, may be
experienced. At such time, we may seek to lessen our exposure through currency
hedging transactions. No assurance can be made that a currency hedging strategy
would be successful in avoiding currency exchange related losses. In addition,
should the relative value of the U.S. dollar in comparison to foreign currencies
increase, the resulting increase in the price of the Company's products to
foreign customers could result in decreased sales which could have a material
adverse impact on our business, results of operations and financial condition.
We experience significant price competition and expect price competition in
the sale of our products to remain intense. No assurance can be given that our
competitors will not develop new technologies or enhancements to existing
products or introduce new products that will offer superior price or performance
features. We expect our competitors to offer new and existing products at prices
necessary to gain or retain market share. Several of our competitors have
substantial financial resources, which may enable them to withstand sustained
price competition or a downturn in the pricing of their products in the future.
Substantially all of our competitors have, and potential future competitors
could have, substantially greater technical, marketing, distribution and other
resources than we do and have, or could have, greater name recognition and
market acceptance of their products and technologies.
We receive periodic order forecasts from our major customers who have no
obligation to purchase the forecasted amounts. Nevertheless, we maintain
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 our major customers purchase less than the forecasted
amounts, we will have higher levels of inventory than otherwise needed,
increasing the risk of obsolescence and we will have increased levels of
production staff to support such forecasted orders. Such higher levels of
inventory and increased employee levels could reduce our liquidity and could
have a material adverse effect on our business, results of operations and
financial condition.
The markets in which we and our customers compete are characterized by
rapidly changing technology, evolving industry standards and communications
protocols and continuous improvements in products and services. Our future
success depends on our ability to enhance our 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.
We believe that to remain competitive in the future we will need to continue to
develop new products, which will require the investment of significant financial
resources in new product development. In the event our newly developed products
are not timely developed or do not gain market acceptance, our business, results
of operations and financial condition could be materially adversely affected.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As described in the Company's Form 10-KSB for the fiscal years ended March
31, 1998 and March 31, 1999, two essentially identical, purported securities
class action lawsuits have been filed against the Company and certain of its
current and former officers and directors. The complaints allege that during the
purported class period of April 10, 1996 to March 25, 1997, defendants made
overly optimistic estimates regarding the Company's anticipated financial
performance for fiscal 1997 and 1998, and overly optimistic statements regarding
the Company's ability to develop and to sell new products for the PCS market,
all allegedly in order to profit from insider trading at artificially inflated
prices.
In the action pending in federal court, entitled Sussman v. AML
--------------
Communications, Inc., et al., U.S.D.C. Case No. 98-2010 CAS (Ex) (C.D. Cal.),
- ----------------------------
four lead plaintiffs and co-lead counsel were appointed on June 29, 1998
pursuant to The Private Securities Litigation Reform Act of 1995. On September
3, 1998, plaintiffs filed an amended complaint in that action. On October 14,
1998, the Company responded to the amended complaint by filing a motion to
dismiss the case. Plaintiffs' opposition to the motion was filed on December 3,
1998. The motion was heard by the court on February 8, 1999 and the judge has
taken the motion under advisement. All discovery is stayed in the federal
action unless and until it is determined that plaintiffs have stated an
actionable claim.
With respect to the action pending in state court, entitled Sussman v. AML
--------------
Communications, Inc., et al., Case No. CIV 179776 (Ventura County), all
- ----------------------------
proceedings have been stayed until the stay of discovery is lifted in the
federal action. Plaintiffs have informed the Company that they intend to file
an amended complaint in the state action once the case proceeds. The Company's
response will be due forty-five (45) days after the filing of the amended
complaint. The Company intends to respond by filing a demurrer, which is the
California equivalent of a motion to dismiss for failure to state a claim. It
is management's opinion that the lawsuit and subsequent claims are without
merit. Management intends to continue to vigorously defend its position.
The Company currently is not party to any other legal proceedings, the
adverse outcome of which, individually or in the aggregate, management believes
would have a material adverse effect on the business, financial condition or
results of operations of the Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no current Reports on Form 8-K during the quarter
ended June 30, 1999.
12
<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.
/s/ David A. Swoish
-------------------------
David A. Swoish
Chief Accounting Officer and
Controller
(Principal Accounting Officer)
Date: August 6, 1999
13
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<FISCAL-YEAR-END> MAR-31-2000 MAR-31-1999
<PERIOD-START> APR-01-1999 APR-01-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 5,580,000 8,392,000
<SECURITIES> 0 0
<RECEIVABLES> 1,465,000 1,781,000
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<DEPRECIATION> 2,464,000 1,758,000
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<CURRENT-LIABILITIES> 1,887,000 1,808,000
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0 0
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<INTEREST-EXPENSE> (63,000) (108,000)
<INCOME-PRETAX> (187,000) 180,000
<INCOME-TAX> 0 65,000
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