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, 2000 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 October 31, 2000: 6,317,006
Transitional Small Business Disclosure Format: Yes No x
--- ---
Number of pages in this Form 10-QSB 13
--
1
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AML COMMUNICATIONS, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (unaudited)
Statements of Operations for the three months and six
months ended September 30, 2000 and September 30, 1999 3
Balance Sheets at September 30, 2000 and March 31, 2000 4
Statements of Cash Flows for the six months ended
September 30, 2000 and September 30, 1999 5
Notes to the Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AML COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- ---------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 1,180,000 $ 2,275,000 $ 2,727,000 $ 4,553,000
Cost of goods sold 1,462,000 1,350,000 2,528,000 2,804,000
----------- ----------- ----------- -----------
Gross profit (loss) (282,000) 925,000 199,000 1,749,000
Operating expenses:
Selling, general & administrative 618,000 671,000 1,236,000 1,362,000
Research and development 711,000 411,000 1,376,000 793,000
----------- ----------- ----------- -----------
1,329,000 1,082,000 2,612,000 2,155,000
----------- ----------- ----------- -----------
Loss from operations (1,611,000) (157,000) (2,413,000) (406,000)
Other income, net 42,000 67,000 65,000 130,000
----------- ----------- ----------- -----------
Loss before provision for income taxes (1,569,000) (90,000) (2,348,000) (276,000)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net loss $(1,569,000) $ (90,000) $(2,348,000) $ (276,000)
=========== =========== =========== ===========
Basic loss per share $ (0.25) $ (0.01) $ (0.37) $ (0.04)
=========== =========== =========== ===========
Basic weighted average number of shares of
common stock outstanding 6,317,000 6,266,000 6,317,000 6,266,000
=========== =========== =========== ===========
Diluted loss per share $ (0.25) $ (0.01) $ (0.37) $ (0.04)
=========== =========== =========== ===========
Diluted weighted average number of shares of
common stock outstanding 6,317,000 6,266,000 6,317,000 6,266,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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AML COMMUNICATIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
2000 2000
------------- -------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,301,000 $ 4,659,000
Accounts receivable, net of allowance for doubtful accounts of
$26,000 at September 30, 2000 and $72,000 at March 31, 2000 847,000 1,134,000
Inventories 3,131,000 2,341,000
Other current assets 463,000 512,000
----------- -----------
Total current assets 6,742,000 8,646,000
Property and Equipment, at cost: 5,517,000 4,884,000
Less - Accumulated depreciation and amortization (3,498,000) (3,051,000)
----------- -----------
2,019,000 1,833,000
Deferred Taxes 288,000 288,000
Other Assets 19,000 14,000
----------- -----------
$ 9,068,000 $10,781,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,461,000 $ 844,000
Current portion of capital lease obligations 171,000 65,000
Accrued expenses:
Accrued payroll and payroll related expenses 342,000 359,000
Accrued commissions 32,000 99,000
Income tax payable -- 190,000
Other accrued liabilities 222,000 254,000
----------- -----------
Total current liabilities 2,228,000 1,811,000
Capital Lease Obligations, net of current portion 357,000 141,000
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; 6,317,006 shares issued
and outstanding at September 30, 2000 and
6,315,256 shares issued and outstanding at March 31, 2000 64,000 64,000
Capital in excess of par value 9,482,000 9,480,000
Less treasury stock: 114,500 shares, at cost (223,000) (223,000)
Accumulated deficit (2,840,000) (492,000)
----------- -----------
6,483,000 8,829,000
----------- -----------
$ 9,068,000 $10,781,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
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AML COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
----------------- ------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(2,348,000) $ (276,000)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 447,000 354,000
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable 287,000 (487,000)
Inventories (790,000) (410,000)
Income tax receivable -- 3,000
Other assets 44,000 (29,000)
Increase (decrease) in:
Accounts payable 617,000 115,000
Accrued expenses (116,000) 48,000
Income taxes payable (190,000) --
----------- -----------
Net cash used in operating activities (2,049,000) (682,000)
----------- -----------
Cash Flows from Investing Activities:
Purchases of property and equipment (244,000) (215,000)
----------- -----------
Net cash used in investing activities (244,000) (215,000)
----------- -----------
Cash Flows from Financing Activities:
Treasury stock repurchase -- --
Proceeds from exercise of stock options 2,000 3,000
Principal payments on capital lease obligations (67,000) (6,000)
----------- -----------
Net cash used in financing activities (65,000) (3,000)
----------- -----------
Net decrease in Cash and Cash Equivalents (2,358,000) (900,000)
Cash and Cash Equivalents, beginning of period 4,659,000 6,597,000
----------- -----------
Cash and Cash Equivalents, end of period $ 2,301,000 $ 5,697,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 5,000 $ 13,000
=========== ===========
Income taxes $ -- $ --
=========== ===========
Non-cash transactions
Debt incurred to purchase property and equipment $ 389,000 $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
AML COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
1. BASIS OF PRESENTATION
AML Communications, Inc. (the "Company") is a designer, manufacturer,
and marketer of amplifiers and related products for the global wireless
industry. The Company currently focuses on the following sectors of the wireless
market: cellular telephony, broadband wireless access, personal communication
services, wireless messaging, low earth orbit satellite networks and hybrid
microwave circuits. The accompanying unaudited financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States. However, certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States 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 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, 2000 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>
September 30, 2000 March 31, 2000
(Unaudited) (Audited)
------------------ --------------
<S> <C> <C>
Raw materials $2,382,000 $1,785,000
Work-in-process 491,000 252,000
Finished goods 258,000 304,000
---------- ----------
$3,131,000 $2,341,000
========== ==========
</TABLE>
4. BANK DEBT
In November 2000, the Company renewed its line of credit with Silicon
Valley Bank for $1,000,000. This revolving line of credit bears interest at the
bank's reference rate (prime rate) plus 1.00%. This line of credit is secured by
substantially all of the Company's assets and expires on November 9, 2001.
Borrowings under the line of credit are subject to a borrowing base of accounts
receivable and there are no financial covenants. The Company did not borrow on
its line of credit during both fiscal 2000 and the first six months of fiscal
2001. In connection with the renewal of the line of credit, the Company issued a
warrant to purchase 27,429 shares of common stock that can be exercised at a
price of $2.1875 per share. The warrant expires on November 9, 2007.
6
<PAGE>
5. CAPITAL LEASES
In April 2000, the Company entered into two non-cancelable capital
leases to acquire test equipment valued in aggregate at $47,000. The terms of
the leases are identical and call for 36 equal monthly aggregate payments of
$1,524 commencing in May 2000 and at an annual interest rate of 9.9%.
In August 2000, the Company entered into two non-cancelable capital
leases to acquire manufacturing equipment valued in aggregate at $342,000. The
terms of the lease are identical and call for 60 monthly payments commencing in
August, 2000 with an initial amount of $10,962. The payment amount decreases to
$7,393 in September 2001 and to $4,911 in September 2002. The annual interest
rate is 8.59%.
6. LEGAL PROCEEDINGS
The Company is not party to any 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 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: the ability to attract
and retain qualified, knowledgeable employees; economic conditions; reductions
or cancellations in orders from new or existing customers; limited number of
potential customers; variability in gross margins on new products; success in
the design of new products; failure to acquire new customers; continued or new
deterioration of business and economic conditions in the Company's customers'
marketplaces; intensely competitive industry conditions with increasing price
competition; business conditions; and, growth in the wireless communications
market. Please read the 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 SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
NET SALES. Net sales for the three months ended September 30, 2000 were
$1.2 million compared to net sales of $2.3 million in the three months ended
September 30, 1999, a 48.1% decrease. The decrease in net sales was largely
attributable to decreased sales of the Company's cellular products, which
contributed $278,000, or 23.6% of net sales, for the three months ended
September 30, 2000, compared to $1.0 million, or 45.8% of net sales, for the
three months ended September 30, 1999. The decrease in cellular product sales
can be attributed to the fulfillment of a large order to a certain customer
during the three months ended September 30, 1999 and to a decision by the
Company to focus future product development in other, non-cellular frequencies
such as the PCS and wireless messaging frequencies. Net sales of PCS and
wireless messaging products increased to $811,000, or 68.7% of net sales, during
the three months ended September 30, 2000, compared to $659,000, or 29.0% of net
sales, during the three months ended September 30, 1999. PCS and wireless
messaging sales increased due to the aforementioned emphasis by the Company upon
the PCS and wireless messaging segments. Net sales of Broadband Wireless Access
("BWA") products decreased to $5,000, or 0.4% of net sales, during the three
months ended September 30, 2000, compared to $377,000, or 16.6% of net sales,
during the three months ended September 30, 1999. BWA sales have decreased due
to insufficient market demand. Net sales of hybrid microwave and other
products for the three months ended September 30, 2000 were $86,000, or 7.3% of
net sales, compared to $198,000, or 8.7% of net sales, in the three months ended
September 30, 1999.
7
<PAGE>
GROSS PROFIT (LOSS). Gross loss for the three months ended September
30, 2000 was ($282,000) or (23.9%) of net sales, compared to a gross profit of
$925,000, or 40.7% of net sales, for the three months ended September 30, 1999.
The gross loss resulted from manufacturing inefficiencies related to one
particular product and from a reserve of $200,000 provided for inventory
related to that particular product because the Company was unable to ascertain
as to when or if future shipments of that product will occur. The deferral in
shipments of that product was initiated by a customer who is, at the present
time, the sole customer for that product. Furthermore, another factor
contributing to the gross loss was absorption of fixed costs across a smaller
base of net sales, due to lower net sales during the three months ended
September 30, 2000 compared to the three months ended September 30, 1999.
SELLING, GENERAL AND ADMINISTRATIVE COSTS. Selling, general and
administrative costs for the three months ended September 30, 2000 were
$618,000, or 52.4% of net sales, compared to $671,000, or 29.5% of net sales,
for the three months ended September 30, 1999. This dollar decrease was
attributed to lower commissions that were due to lower net sales and a
restructuring of commission rates earned by third party sales representatives.
The Company believes that investment in sales and marketing is necessary to
promote the Company's products in a very competitive market and therefore it is
expected that expenses for sales and marketing will increase in subsequent
financial periods.
RESEARCH AND DEVELOPMENT COSTS. Research and development costs for the
three months ended September 30, 2000 were $711,000, or 60.3% of net sales,
compared to $411,000, or 18.1% of net sales, for the three months ended
September 30, 1999. The increase is due to higher labor and material costs
required for the design and development of new products. The number of new
products being developed has increased substantially and the Company continues
to invest both material and labor in the design and development of new products
for the cellular, PCS, wireless messaging, and hybrid microwave markets.
OTHER INCOME, NET. Other income for the three months ended September
30, 2000 was $42,000 compared to $67,000 for the three months ended September
30, 1999. The decrease is due mainly to a decrease in interest income as a
result of decreased average invested funds.
PROVISION FOR TAXES. For both the three months ended September 30, 2000
and September 30, 1999, although the Company incurred losses, the company
recorded no benefit from income taxes since the Company has utilized all net
operating loss carry-back benefits.
NET LOSS. For the reasons set forth above, the Company generated net
loss in the second quarter of fiscal 2001 of $1,569,000 compared to a net loss
of $90,000 in the second quarter of fiscal 2000.
SIX MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1999
NET SALES. Net sales for the six months ended September 30, 2000 were
$2.7 million compared to net sales of $4.6 million in the six months ended
September 30, 1999, a 40.1% decrease. The decrease in net sales is largely
attributable to a decrease in sales of the Company's cellular products, which
contributed $817,000, or 30.0% of net sales, for the six months ended September
30, 2000, compared to $3.0 million or 66.2% of net sales, for the six months
ended September 30, 1999. The decrease in cellular product sales can be
attributed to the fulfillment of a large order to a certain customer during the
six months ended September 30, 1999 and to a decision by the Company to focus
future product development in other, non-cellular frequencies such as the PCS
and wireless messaging frequencies. The decrease in cellular products was offset
partially by an increase in PCS and wireless messaging products, which increased
to $1.5 million, or 56.3%, of net sales during the six months ended September
30, 2000, compared to $745,000, or 16.4% of net sales, during the six months
ended September 30, 1999. PCS and wireless messaging sales increased due to the
aforementioned emphasis by the Company upon the PCS and wireless messaging
segments. Sales of BWA products decreased to $34,000, or 1.2% of net sales,
during the six months ended September, 2000, compared to $479,000, or 10.5% of
net sales, during the six months ended September 30, 1999. This decrease was
attributed to the discontinuation of product development for BWA product due to
insufficient market demand. Net sales of hybrid microwave and other products
increase to $340,000 or 12.5% of net sales, during the six months ended
September 30, 2000, compared to $316,000 or 6.9% of net sales, during the six
months ended September 30, 1999.
GROSS PROFIT. Gross profit for the six months ended September 30, 2000
was $199,000 or 7.3% of net sales, compared to $1.7 million, or 38.4% of net
sales, for the six months ended September 30, 1999. The decreased gross profit
resulted from manufacturing inefficiencies related to one particular product and
from a reserve of
8
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$200,000 provided for inventory related to that particular product because the
Company was unable to ascertain as to when or if future shipments of that
product will occur. Furthermore, another factor contributing to the gross loss
was absorption of fixed costs across a smaller base of net sales, due to lower
net sales during the six months ended September 30, 2000 compared to the six
months ended September 30, 1999.
SELLING, GENERAL AND ADMINISTRATIVE COSTS. Selling, general and
administrative costs for the six months ended September 30, 2000, were $1.2
million, or 45.3% of net sales, compared to $1.4 million, or 29.9% of net sales,
for the six months ended September 30, 1999. This dollar decrease was attributed
to lower commissions that were due to lower net sales and a restructuring of
commission rates earned by third party sales representatives and to a reduction
in sales and marketing personnel. The Company believes that investment in sales
and marketing is necessary to promote the Company's products in a very
competitive market and therefore it is expected that expenses for sales and
marketing will increase in subsequent financial periods.
RESEARCH AND DEVELOPMENT COSTS. Research and development costs for the
six months ended September 30, 2000 were $1.4 million, or 50.5% of net sales,
compared to $793,000 million, or 17.4% of net sales, for the six months ended
September 30, 1999. The increase is due to higher labor and material costs
required for the design and development of new products. The number of new
products being developed has increased substantially and the Company continues
to invest both material and labor in the design and development of new products
for the cellular, PCS, wireless messaging, and hybrid microwave markets.
OTHER INCOME, NET. Other income for the six months ended September 30,
2000 was $65,000 compared to $130,000 for the six months ended September 30,
1999. The decrease is due mainly to a decrease in interest income as a result of
decreased average invested funds.
PROVISION FOR TAXES. For both the six months ended September 30, 2000
and September 30, 1999, although the Company incurred losses, the company
recorded no benefit from income taxes since the Company has utilized all net
operating loss carry-back benefits.
NET LOSS. For the reasons set forth above, the Company generated net
loss in the six months ended September 30, 2000 of $2.3 million compared to a
net loss of $276,000 for the six months ended September 30, 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. It is the net proceeds of the initial public offering that has
provided the funds 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 fiscal 2000 or during the first six months of fiscal 2001.
In April 2000, the Company entered into two non-cancelable capital
leases to acquire test equipment valued in aggregate at $47,000. The terms of
the leases are identical and call for 36 equal monthly aggregate payments of
$1,524 commencing in May 2000 and at an annual interest rate of 9.9%.
In August 2000, the Company entered into two non-cancelable capital
leases to acquire manufacturing equipment valued in aggregate at $342,000. The
terms of the lease are identical and call for 60 monthly payments
9
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commencing in August 2000 with an initial amount of $10,962. The payment amount
decreases to $7,393 in September 2001 and to $4,911 in September 2002. The
annual interest rate is 8.59%.
In November 2000, the Company renewed its line of credit with Silicon
Valley Bank for $1,000,000. This revolving line of credit bears interest at the
bank's reference rate (prime rate) plus 1.00%. This line of credit is secured by
substantially all of the Company's assets and expires on November 9, 2001.
Borrowings under the line of credit are subject to a borrowing base of accounts
receivable and there are no financial covenants. The Company did not borrow on
its line of credit during both fiscal 2000 and the first six months of fiscal
2001. In connection with the renewal of the line of credit, the Company issued a
warrant to purchase 27,429 shares of common stock at a price of $2.1875 per
share. This warrant expires on November 9, 2007.
At September 30, 2000 the Company had $2.3 million in cash and cash
equivalents. The Company's operating activities used cash of approximately $2.0
million for the six months ended September 30, 2000 primarily as a result of a
loss from operations, increases in inventories and accounts payable and a
decrease in accounts receivable. The Company's capital expenditures of $244,000
for the six months ended September 30, 2000 were primarily for manufacturing
equipment, manufacturing test equipment, information system improvements and
leasehold improvements.
The Company believes that the remaining net proceeds from its initial
public offering and borrowing capacity from its line of credit will be
sufficient to finance the Company for at least the next 12 months. However, in
the event that the net proceeds from the initial public offering and the
borrowing capacity from the line of credit are not sufficient to finance the
Company, the Company is optimistic that it can procure other sources of
financing. Other sources may include, but not be limited to, an equity
investment in the Company by a third party. If additional financing is
necessary, there are no assurances that the Company will be able to successfully
obtain additional financing at terms acceptable to the Company, if at all.
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,
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 serving new markets in developing
countries. Our BWA products offer a viable alternative to the construction of a
wireline infrastructure in such areas. However, to the extent that our customers
continue to delay development or deployment of BWA 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.
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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 our customers and we 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
The Company is not party to any 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 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders was held on September 14, 2000. The following
matters were submitted to a vote of the Company's stockholders:
Proposal No. 1 -- Election of two (2) Class II Directors
To elect Kirk A. Waldron and David A. Derby as directors for the ensuing term.
Mr. Waldron and Mr. Derby were Company directors immediately prior to the vote
and were elected as a result of the following vote:
<TABLE>
<CAPTION>
Votes For Votes Against Votes Withheld
--------- ------------- --------------
<S> <C> <C> <C>
Kirk A. Waldron 5,815,122 237,510 0
David A. Derby 5,815,122 237,510 0
</TABLE>
Jacob Inbar, Scott Behan, Richard Flatow and Gerald Starek continue to serve as
directors of the Company.
Proposal No. 2 -- Adoption of the Company's Second Amended and Restated 1995
Stock Incentive Plan
To adopt the Second Amended and Restated 1995 Stock Incentive Plan reflecting an
amendment to the Company's 1995 Amended and Restated Stock Incentive Plan to
increase the number of shares of common stock authorized for issuance under the
plan from 1,500,000 to 2,000,000. This Plan was adopted, as set forth in the
Company's proxy statement dated August 1, 2000, as a result of the following
vote:
<TABLE>
<CAPTION>
Votes For Votes Against Votes Withheld Unvoted
--------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
2,891,795 341,075 23,860 2,795,902
</TABLE>
THERE WERE NO OTHER MATTERS SUBMITTED TO A VOTE OF THE COMPANY'S STOCKHOLDERS AT
THE ANNUAL MEETING OF STOCKHOLDERS.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.25 Loan and Security Agreement dated November 10, 2000 between
the AML Communications, Inc. and Silicon Valley Bank.
10.26 Intellectual Property Security Agreement dated November 10,
2000 between AML Communications, Inc. and Silicon Valley Bank.
10.27 Warrant to Purchase Stock dated November 9, 2000 between AML
Communications, Inc. and Silicon Valley Bank.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no current Reports on Form 8-K during the quarter
ended September 30, 2000.
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.
Date: November 14, 2000 /s/ Karl R. Brier
-------------------------------------
Karl R. Brier
Chief Financial Officer and Treasurer
13
