UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  FORM
10-K
  x
              ANNUAL REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934
  For
the fiscal year ended March 31, 2010
  o
              TRANSITION REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934
  For
the transition period
from              to
  Commission
File Number 0-27250
  AML
COMMUNICATIONS, INC.
 (Exact
name of Registrant as specified in its charter)
  DELAWARE
                (State
      or other jurisdiction of
                incorporation
      or organization)
              77-0130894
                (I.R.S.
      Employer Identification No.)1000
      AVENIDA ACASO, CAMARILLO, CALIFORNIA
                (Address
      of principal executive offices)
              93012
                (Zip
      Code)(805) 388-1345
                (Issuer’s
      telephone number, including area
code)
  Securities
registered pursuant to Section 12(b) of the Act:
  Title
      of each class
              
              Name
      of each exchange on which registeredNone
              
              None
  Securities
registered pursuant to Section 12(g) of the Act:
  Title
      of ClassCommon
      Stock, $.01 par value
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. o Yes  x No
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. o Yes  x No
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirement for
the past 90 days. x
Yes  o
No
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). oYesoNo
 
 Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act).
 
 Large
      accelerated filer   o
                Accelerated
      filer   oNon-accelerated
      filer  o
                Smaller
      reporting company x
 
 The
aggregate market value of the registrant's common stock, par value $0.01 per
share, held by non-affiliates of the registrant on September 30, 2009, the
last business day of the registrant's most recently completed second fiscal
quarter, was approximately $7,083,509 (based on the closing sales price of
the registrant's common stock on that date).
 
 As of
June 9, 2010, 10,735,915shares
of the registrant's common stock, par value $0.01 per share, were issued and
outstanding.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 None


AML
Communications, Inc.
  Index
to Form 10-K
 For
the Fiscal Year Ended March 31, 2010
 PagePart I
              
              2Item 1.
              Business
              2Item
      1A.
              Risk
      Factors
              10Item 2.
              Properties
              14Item 3.
              Legal
      Proceedings
              14Part II
              
              14Item 5.
              Market
      for Common Equity and Related Stockholder Matters
              14Item 6.
              Selected
      Financial Data
              15Item 7.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              16Item 8.
              Financial
      Statements and Supplementary Data
              22Item 9.
              Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
              42Item 9A.
              Controls
      and Procedures
              42Item 9B.
              Other
      Information
              43Part III
              
              43Item 10.
              Directors,
      Executive Officers and Corporate Governance
              43Item 11.
              Executive
      Compensation
              43Item 12.
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              44Item 13.
              Certain
      Relationships and Related Transactions, and Director
      Independence
              44Item 14.
              Principal
      Accounting Fees and Services
              44Part IV
              
              45Item 15.
              Exhibits,
      Financial Statement Schedules
              45SIGNATURES
              47
 
 1
 
 INTRODUCTORY
NOTES—FORWARD LOOKING STATEMENTS AND CERTAIN TERMINOLOGY
  Some of
the statements made by us in this Annual Report on Form 10-K are
forward-looking in nature, including but not limited to, statements relating to
our future revenue, product development, demand, acceptance and market share,
gross margins, levels of research and development, our management’s plans and
objectives for our current and future operations, and other statements that are
not historical facts. Forward-looking statements include, but are not limited
to, statements that are not historical facts, and statements including forms of
the words “intend”, “believe”, “will”, “may”, “could”, “expect”, “anticipate”,
“plan”, “possible”, and similar terms. Actual results could differ materially
from the results implied by the forward looking statements due to a variety of
factors, many of which are discussed throughout this Annual Report and
particularly in the section entitled “Risk Factors”. Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date hereof. We undertake no obligation to publicly release any revisions
to these forward-looking statements that may reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Factors that could cause actual results to differ materially from those
expressed in any forward looking statement made by us include, but are not
limited to:
  •
              our
      ability to finance our activities and maintain our financial
      liquidity;
  •
              our
      ability to attract and retain qualified, knowledgeable
      employees;
  •
              the
      impact of general economic conditions on our
  business;
  •
              postponements,
      reductions, or cancellations in orders from new or existing
      customers;
  •
              the
      limited number of potential customers for our
  products;
  •
              the
      variability in gross margins on our
products;
  •
              our
      ability to design and market new products
  successfully;
  •
              our
      failure to acquire new customers in the
future;
  •
              deterioration
      of business and economic conditions in our
  markets;
  •
              intensely
      competitive industry conditions with increasing price competition;
      and
  •
              the
      rate of growth in the defense
markets.
  In this
document, the words “we,” “our,” “ours,” “Company,” and “us” refer to AML
Communications, Inc. and its wholly owned subsidiary,
Mica-Tech, Inc.
  PART
I
  ITEM
1.  BUSINESS
  Introduction
  AML
Communications (the “Company” or “we”) currently design, manufacture, and market
radio frequency (RF) and microwave, low noise, medium and high power amplifiers
and subsystems serving primarily the Defense Electronic Warfare Market. Our
business is comprised of two reportable segments, AML Communications, Inc.
(AML) and Mica-Tech, Inc. (Mica-Tech).
  AML
Communications, Inc. (AML) designs, manufactures, and markets amplifiers
and related products for the defense microwave. AML also includes Microwave
Power, Inc. (“MPI”), which previously was a separately reported segment. Our
defense industry products are used primarily in electronic systems for tactical
aircraft, ships, ground systems, and missile systems. These products are sold
directly by us as well as through independent sales representatives. Our key
customers include Raytheon, Lockheed Martin, Northrop Grumman, L-3
Communications, BAE, and others. The Company’s extensive range of microwave low
noise amplifiers and power amplifiers can be found in leading defense projects,
such as the United States Air Force’s Miniature Air Launched Decoy (MALDTM and
MALDTM -J), a lightweight, unmanned aerial vehicle decoy with jamming capability
developed by the Raytheon Company.
  2
 
 On
April 11, 2007, we acquired a controlling interest of Mica-Tech, Inc.
(Mica-Tech) and subsequently acquired the remaining interest on
February 19, 2008. Our wholly owned subsidiary Mica-Tech designs,
manufactures, and markets an intelligent communication system to provide
Supervisory Control And Data Acquisition (SCADA) of the electric power grid. We
had two reportable segments – AML and Mica-Tech – for the twelve month periods
ended March 31, 2010 and March 31, 2009.
  We were
incorporated in California in 1986 as Advanced Milliwave Laboratories,
Incorporated. Early in 1994, we changed our name to AML
Communications, Inc. In December 1995, in conjunction with the initial
public offering of our common stock, we changed our state of incorporation from
California to Delaware. In May 1996, we moved our principal office and
manufacturing facility to our current location, 1000 Avenida Acaso, Camarillo,
California, 93012.
  Background
  We were
founded to develop and manufacture hybrid microcircuit microwave and RF
amplifiers to support the communications market.  In 1994, we became
active in the wireless market and developed a multicarrier linear power
amplifier supporting this market in the 300-450 MHz range. In late 1994, we
developed a multicarrier linear RF power amplifier specifically for boosting
signal strengths in the cellular communications market and marketed this
multicarrier product directly to the domestic cellular service providers. During
1995 and 1996, we developed derivative multicarrier cellular products at
alternative power levels to support differing needs in the service provider
market.
  In the
fourth quarter of our 1997 fiscal year, we experienced a significant decrease in
our revenue, attributable to several factors. Original equipment manufacturers
(OEMs) offered significantly reduced prices on their improved base station
products, and the service providers began to outsource the infrastructure build
out and maintenance to their OEM equipment providers who used their own
equipment in the cell site. Also, the mobile communications industry focused
substantial financial and human resources on the build out of the nascent PCS
services, and competitors began to offer similar or improved products within the
domestic U.S. market.
  As a
result, we decided to change our market focus and concentrate on selling to the
OEM customer base. Late in our 1997 fiscal year, we entered the satellite
communications gateway market by offering a high power linear amplifier for data
transmission applications in a Low Earth Orbit (LEO) network. In our 1998 fiscal
year, we received significant revenue from an OEM in the South American market
and introduced products for the PCS markets and the two-way messaging market. We
also invested heavily in wireless products for the Korean and European
OEMs.
  During
our 1999 fiscal year, we developed a new generation of our original cellular
multicarrier products and continued to develop and diversify our customer base.
We experienced significant negative impacts to our revenue because of the delay
and cancellation of programs.
  In August
1999, we received our ISO 9001 certification, a uniform worldwide quality
management system standard and undertook the transition of our production
technology from traditional batch assembly to a flexible, self-balancing,
one-piece flow process.
  In
January 2000, to expand our defense microwave product line, we purchased a
product line and certain assets of a company serving the military small signal
amplifier market. This purchase was intended to bolster our defense microwave
product line and position that segment of our business for future growth in the
market.
  Since
March 2001, we have concentrated our research and development on defense
customers and have expanded our Microwave Integrated Circuits (MIC)
facilities.
  We
believe our future success depends upon our ability to broaden our product
offerings, continue to increase our defense microwave customer base, and capture
volume product delivery opportunities with high gross margins. While we
continually attempt to expand our customer base, we cannot give any assurance
that our customers, including one or more major customers, will not reduce,
delay, or eliminate their purchases from us. Such a reduction, including one
from a major customer, would have a material adverse effect on our business,
results of operations, and financial condition. Additionally, our future depends
on our ability to generate new products, mostly as part of a standard line of
products (i.e., products we developed that are intended to be sold to many
customers).
  3
 
 We
believe that in order to maintain or improve our existing gross margins in the
near term, we must achieve manufacturing cost reductions, and in the long term
develop new products that incorporate advanced features that generate higher
gross margins. There is no assurance that we will be able to develop products
that will generate higher gross margins, or that we will be able to reduce
manufacturing costs.
  Business
Strategy
  The
return of Jacob Inbar and the other AML co-founders in February 2001 resulted in
the re-direction of our business focus toward the defense markets. As such, we
moved rapidly to utilize our knowledge base in defense microwave related design
and manufacturing to offer new products, as well as variations of existing
products. The result of this strategy is an increase in revenues for
defense-related products from $3.7 million in our 2003 fiscal year to
$15.8 million in our 2010 fiscal year.
  Utilizing
our extensive knowledge in Microwave Integrated Circuits (MIC) design
capabilities, we have expanded the products we offer as part of our full line
catalog. Such products are designed for and marketed to the Defense Electronic
Warfare Market. We also utilize our MIC design capabilities toward the design of
subsystems, an area that we continue to invest in for long term defense
projects. Investments in new subsystem products remain at the center of our
strategy because they offer product differentiation, opportunities for sole
source positions and higher added value.
  We seek
and have been successful in securing contracts with our major customers that
span over a number of years. These program-based contracts remain the focus of
our marketing strategy.
  On
May 25, 2004, we signed a definitive agreement for the acquisition of
Microwave Power, Inc. which was completed on June 18, 2004. The total
consideration for the acquisition was $3,028,000. Pursuant to the acquisition
agreement, we issued 2,117,108 shares of our common stock as consideration for
the acquisition and 21,174 shares to a broker. MPI operates as our division from
its facility in Santa Clara. On February 3, 2006, we purchased the building
that houses MPI, which is located at 3350 Scott Blvd. Bldg. 25 in Santa Clara,
California, for a purchase price of $800,000. The building is being financed by
the Bank of America in the form of a promissory note in the amount of $640,000
and we are paying the loan in 83 regular payments of $4,425.88 each and one
irregular last payment of $556,594.48. Our final payment is due on
February 10, 2013 and will be for all principal and interest not yet paid.
Payments include principal and interest.
  The MPI
acquisition was driven by a number of key factors, including:
  1)
              Technologically,
      MPI’s semi-monolithic, gold filled vertical interconnect accesses (VIAs),
      air bridge and microwave-monolithic-ceramic (MMCC) technology provide
      access to processes that we believe are complementary and additive to
      those available to AML prior to the
acquisition.
  2)
              MPI’s
      product base addresses higher power and higher frequency sectors of the
      microwave market. This acquisition was intended to strengthen our product
      offerings to this market by adding higher power microwave
      amplifiers.
  MPI has
been fully integrated into our Defense segment and now is being reported as part
of the AML segment which is one of the Company’s two reporting business
segments.
  On
April 11, 2007, we completed the acquisition of a controlling position in
Mica-Tech, Inc., in a cash-for-stock transaction. Under the terms of the
agreement, AML purchased 51% or 4,146,400 newly-issued shares of Mica-Tech’s
outstanding common stock for an aggregate price of $800,000. On
February 19, 2008, we subsequently acquired the remaining interest in
Mica-Tech or 49% of the outstanding common stock of Mica-Tech. Following the
acquisition, Mica-Tech became a wholly-owned subsidiary of our Company. The
Mica-Tech shareholders in the aggregate received $1,000 for their Mica-Tech
common stock. In addition, we granted approximately 1,310,000 shares of options
and warrants to purchase our common stock to 49% shareholders and other current
employees. These options and warrants were exercisable upon achievement of
certain performance based targets.
  Mica-Tech
is a wholly-owned subsidiary company representing 3.1% of the Company’s revenue
which, in addition to AML, is the second of its two reporting business
segments.
  4
 
 Markets
  AML
Communications, Inc. Segment
  We sell
our RF/Microwave amplifier products and subsystems primarily into various
segments of the Defense Electronic Warfare Market. In our 2010 fiscal year, the
AML segment accounted for 96.9% of the Company’s total revenues, which were
mainly derived from the defense microwave market.
  We serve
the defense electronic warfare industry with micro-electronic components for
communications, surveillance, jamming, radar and electronic countermeasures
which are used in systems. Our large, highly diversified customer base includes
U.S. blue chip defense contractors Raytheon, Lockheed Martin, Northrop Grumman,
L-3 Communications, BAE, and others.
  Modern
warfare now requires unconventional tactics, technology, weaponry and counter
measures. It is a sector offering long-term growth that includes Unmanned Aerial
Vehicle (UAV), or drones, used for operations, and decoys. AML also produces
micro-electronic components for radars in missile systems, and fighter aircraft.
The Company is a major supplier to the U.S. Air Force’s Miniature Air Launched
Decoy (MALD) program, and AML recently announced it delivered upgrade prototype
components for the U.S. Patriot Anti-Missile System and earlier announced it is
a supplier Northrop Grumman’s Extended Range/Multiple Purpose UAV
Program.
  The
Company’s sales within the Defense Market are identified as Defense Programs and
Catalog Sales.
  Defense
Programs
  Defense
Programs include specialized micro electronic systems and subsystems the Company
develops for various defense electronic warfare systems as part of a long term
program. Customers are large “prime” defense contractors, and AML often designs,
develops and produces prototype components initially, for new or upgraded
defense systems in electronic communications, surveillance, jamming, radar and
electronic countermeasures.
  As part
of the defense program project process, the delivery of those prototypes leads
to the Company producing production samples, which if accepted and integrated
into the large project system, leads to larger, multi-year program production
contracts.
  The
Program process gestation period from concept to design to prototype to mass
production can take from 1 to 5 years, and may lead to a 3 to 20-year program
production life. This work is highly specialized and customized, and gross
margins are in the range of 45 – 50%. AML is the sole source provider for 70% of
its Program sales.
  Catalog
Sales
  Catalog
Sales represent the biggest source of new customers. Catalog Sales may lead to
Program business and unlike Program business, is a steady source of bookings.
The catalog contains over 2,000 products and is growing. The Company issued its
latest catalog edition in May 2010. Catalog Sales are booked from a large
customer’s base, varying from 50 to 100 customers quarterly.
  Sales are
handled by an inside applications engineer group and by third-party
manufacturer’s representatives, approximately twenty in the U.S. and twelve
in foreign markets including France, Germany, UK, Spain, Italy and
others.  AML typically averages a 60-day turnaround on
orders.
  Contrasted
with the relatively much larger Defense Programs sales, Catalog sales are a
source of stable cash flow.
  Mica-Tech, Inc.
Segment
  The
Mica-Tech segment accounted for 3.1% of the Company’s total revenues in our
fiscal 2010 year. Mica-Tech designs, manufactures, and markets an intelligent
satellite communication system to provide Supervisory Control And Data
Acquisition (SCADA) of the electric power grid. The satellite system is marketed
to power utility companies and enables remote control of substations for
reducing black-outs and enhancing power/load regulation during peak demand
hours.
  5
 
 Products
  AML
Communications, Inc. Segment
  During
the year, we designed and/or manufactured low noise, power amplifiers and
subsystems that were sold primarily into the Defense Electronic Warfare
Market.
  Defense Microwave
Amplifiers.  Our Camarillo operations produce standard catalog
and custom hybrid microwave amplifiers and subsystems. We also produce
derivative products that are based upon minor modifications of catalog items.
The frequencies for these products range from 10 MHz to 40 GHz. Power levels
range from less than one milliwatt to several hundred watts. Integration of a
number of amplifiers and other microwave components built by AML address the
subsystem markets.
  These
hybrid microwave circuits utilizing MIC technology are sold to defense OEM
customers with broadband, microwave frequency, component requirements. These
parts typically support applications including surveillance, signal detection,
satellite communication, radar, and telemetry. They are used in both the
transmission and reception signal paths. The technology permits accurate,
reproducible, volume products supporting broad bandwidths and higher frequencies
to be designed and manufactured. Moderate volume requirements and custom design
requirements characterize this market.
  Our Santa
Clara operationsmanufacture solid state
microwave amplifiers operating in the frequency range from to 1 to 40 GHz with
output power from 0.5W to 300W. Its proprietary technology Microwave Monolithic
Ceramic Circuits (MMCC) is especially designed for broadband and high power.
Some typical applications include telecommunications, radar, simulators,
transmitters and test instrumentation. Most of the units are available either
rack mounted or as connectorized modules.
  Our power
amplifiers manufactured in Camarillo range in price from $500 up to $10,000 per
amplifier and the transmit power amplifiers manufactured in Santa Clara range in
price from $2,000 to over $45,000 per amplifier, depending upon the technology,
complexity, quantity, and implementation.
  Mica-Tech, Inc.
Segment
  Satellite Communication System for
Electric Grid Control and Demand Response Solutions.  The
Mica-Tech UltraSatNet system allows for efficient and secure electric grid
control. The technology is designed to offer highly reliable operations.
Existing and potential customers are electric utilities serving large service
areas.
  Customers
  AML
Communications, Inc. Segment
  AML sells
products to defense OEM manufacturers worldwide and system integrators primarily
in the defense sector including specialized test equipment manufacturers. The
list of customers includes Raytheon, Celestica Aerospace
Technologies Corporation, Lockheed Martin,L3 Communications,
BAE, and Northrop Grumman. Additionally we export our products to major
OEM’s in the France, Israel, Germany, Spain, Turkey, Singapore, Italy, Japan,
and UK. The Company seeks and was successful in securing contracts with its
major customers that span over a number of years. These program-based contracts
remain the focus of our marketing strategy.
  For the
fiscal year ended March 31, 2010, our largest customer for the AML segment
was Celestica
Aerospace Technologies Corporation; which accounted for approximately
16.8% of net sales. Selex Sistemi Integrati S.p.A in Italy was our second
largest customer accounting for approximately 7.9% of net sales. For the fiscal
year ended March 31, 2009, our largest customer was Raytheon, which
accounted for approximately 22.6% of net sales. Versys was our second largest
customer accounting for approximately 5.5% of net sales. The loss of either of
the top two AML customers in the 2010 fiscal year, or a significant loss,
reduction, or rescheduling of orders from any of our customers could have a
material adverse effect on our business, results of operations and financial
condition. The largest customer for our Mica-Tech segment was Tri-State
Generation and Transmission Association, which accounted for approximately 2.1%
of net sales.
  We rely
heavily on obtaining new customers. The rate for new defense microwave customers
during our 2010 fiscal year was approximately 10 new customers per quarter for
the AML segment, compared to approximately 12 new customers per quarter for the
fiscal year ended March 31, 2009.
  6
 
 Mica-Tech, Inc.
Segment
  Mica-Tech
sells and markets its products to domestic electric utilities. Utilities serving
Southern California, New Mexico, Colorado, Wyoming, Nebraska, and Arizona are
currently the major customers. Mica-Tech has demonstrated its system to
utilities serving Nevada, Texas, Georgia and Florida and continues to market its
products to other US based utilities. The largest customer for our Mica-Tech
segment was Tri-State Generation and Transmission Association, which accounted
for approximately 2.1% of all AML net sales.
  Marketing
and Distribution; International Sales
  We sell
our AML products through a combination of a technically proficient internal
sales and marketing resources and a network of independent sales representatives
selected for their familiarity with our potential customers and their knowledge
of the defense microwave markets. Both the internal sales and marketing
personnel and the independent sales representatives generate product sales,
provide product and customer service, and provide customer feedback for product
development. In addition, the independent sales representatives receive support
from our internal sales and marketing personnel, which currently consists of
four people.
  Our
marketing efforts are focused on establishing and developing long-term
relationships with potential customers. Sales cycles for certain of our products
are lengthy, typically ranging from six months to two years. Our customers
typically conduct significant technical evaluations of our products before
making purchase commitments. In addition, as is customary in the industry, sales
are made through standard purchase orders, which can be subject to cancellation,
postponement, or other types of delays. While certain customers provide us with
forecasted needs, they are not bound by such forecasts.
  During
the fiscal year ended March 31, 2010, international sales were
$4.9 million or 30.2% of net sales as compared to international sales of
$2.9 million or 21.9% of net sales for the fiscal year ended March 31,
2009. During the fiscal year, we exported our products to major OEM’s in the
France, Israel, Germany, Spain, Turkey, Singapore, Italy, Japan, and
UK.
  The
following table summarizes the international sales by segment for the fiscal
year ended March 31, 2010:
  (Dollars
      in thousands)
                
                AML
                
                
                
                
                
                Mica-Tech
                
                
                
                
                
                TotalInternational
      Sales
                
                $
                4,923
                
                
                
                30.2
                %
                
                $
                —
                
                
                
                —
                
                
                $
                4,923
                
                
                
                30.2
                %Domestic
      sales
                
                
                10,881
                
                
                
                66.7
                
                
                
                513
                
                
                
                3.1
                %
                
                
                11,394
                
                
                
                69.8Total
      Sales
                
                $
                15,804
                
                
                
                96.9
                %
                
                $
                513
                
                
                
                3.1
                %
                
                $
                16,317
                
                
                
                100.0
                %
  The
following table summarizes the international sales by segment for the fiscal
year ended March 31, 2009:
  (Dollars
      in thousands)
                        
                        AML
                        
                        
                        
                        
                        
                        Mica-Tech
                        
                        
                        
                        
                        
                        TotalInternational
      Sales
                        
                        $
                        2,907
                        
                        
                        
                        21.9
                        %
                        
                        $
                        —
                        
                        
                        
                        —
                        
                        
                        $
                        2,907
                        
                        
                        
                        21.9
                        %Domestic
      sales
                        
                        
                        9,794
                        
                        
                        
                        73.7
                        
                        
                        
                        587
                        
                        
                        
                        4.4
                        
                        
                        
                        10,381
                        
                        
                        
                        78.1Total
      Sales
                        
                        $
                        12,701
                        
                        
                        
                        95.6
                        %
                        
                        $
                        587
                        
                        
                        
                        4.4
                        %
                        
                        $
                        13,288
                        
                        
                        
                        100.0
                        %
  Warranty
  Our
warranty varies by product type and typically covers defects in material and
workmanship for one year from the date of delivery. We perform warranty
obligations and other maintenance services at our facility in Southern
California and our facility in Northern California.
  Product
Development
  Our AML
segment invest significant resources in the research and development of new
methods to improve amplifier performance, including reduced noise and increased
efficiency in the RF amplification process as well as seeking to reduce the cost
and increase the manufacturing efficiency of our new and existing products. The
acquisition of MPI has added to our existing technology, with their
semi-monolithic, gold filled via’s, dielectric bridge and
microwave-monolithic-ceramic (MMCC) technology processes.
  The
Mica-Tech segment of the company has invested in development of the next
generation UltraSatNet system that allows enhanced capabilities including higher
data rate, voice channel, GPS synchronization and advanced Subsystem
Automation System (SAS) functions.
  7
 
 Our
combined research and development staff consisted of 16 people as of
March 31, 2010. Expenditures for research and development amounted to
approximately $2,152,000 in our 2010 fiscal year and $1,932,000 in our 2009
fiscal year.
  Competition
  AML
Communications, Inc. Segment
  The
defense microwave industry is highly competitive. Our main competitors include
Teledyne Defense, Miteq, Endwave Defense Systems and CTT. Although most of the
competitors have significantly more resources than we have, we believe that our
technical abilities in implementing MIC amplifiers do not differ to any great
degree. We utilize our technological knowledge as well as design our pricing to
compete effectively.
  We
believe AML is well positioned competitively, with extensive knowledge of
microwave integrated circuits (IC’s) and our proprietary Microwave Monolithic
Ceramic Circuits (MMCC) technology. Additionally, we are vertically integrated,
from product definition, design, manufacture and marketing, which ensures supply
chain efficiency and quality control enhancing on-time product delivery that
meets customer specifications.
  We have
long standing relationships with customers, and as a niche supplier both in the
U.S. and overseas markets, have an established reputation for quality and
reliability. AML is led by a senior management of veteran industry executives
that have served the Company since 1986.
  We have
experienced significant price competition and expect price competition in the
sale of RF/Microwave amplifiers to increase. 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 will offer new and existing products at
prices necessary to gain or retain market share. Some of our competitors have
substantial financial resources, which may enable them to better withstand
sustained price competition or a market downturn. There can be no assurance that
we will be able to compete successfully in the pricing of our products, or
otherwise. To mitigate these risks, the Company chose to diversify across
products, customers and geography.
  Mica-Tech, Inc.
Segment
  The
Mica-Tech principal product, namely the UltraSatNet was developed specifically
to address the control of electric grid. To the best of our knowledge there is
no product on the market that was designed specifically for this
task.
  Mica-Tech’s
competition includes alternative methods of setting secured communication links
for SCADA function. These include 900 MHz radios, fiber links, microwave links
and VSAT. While none of these competitive technologies have the unique
combination of security, remote coverage and cost-effectiveness these
technologies still present competition.
  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 will offer new
and existing products at prices necessary to gain or retain market share. Some
of our competitors have substantial financial resources, which may enable them
to better withstand sustained price competition or a market downturn. There can
be no assurance that we will be able to compete successfully in the pricing of
our products, or otherwise.
  Manufacturing
  Our
headquarters and our AML manufacturing facility are located in Camarillo,
California. Our manufacturing process involves the assembly of numerous
individual components and precise fine-tuning by production technicians. The
parts and materials we use consist primarily of specialized printed circuit
boards, specialized subassemblies, fabricated housings, and small electric
circuit components, such as integrated circuits, semiconductors, resistors and
capacitors.
  ISO 9001
is a uniform worldwide Quality Management System (QMS) standard. Numerous
customers and potential customers throughout the world, particularly in Europe,
require their suppliers be ISO certified. In addition, many customers require
their suppliers to purchase components only from subcontractors that are ISO
certified. We are currently certified to the ISO 9001
standard.
  8
 
 AS9100 is
a Quality Management System (QMS) standard specific to the aerospace industry.
The current version, AS9100 Rev. B published in 2004, includes ISO 9001:2000
standard verbatim and adds supplementary requirements that apply to the
aerospace industry. These supplementary requirements emphasize areas that impact
process and service safety, quality and reliability for aerospace products. It
is designed to meet the complex and unique demands of the aerospace industry,
from commercial aviation to defense and include several additional requirements
to ISO 9001 that participating aerospace OEM companies felt were necessary to
clearly define their expectations for aerospace suppliers. The aircraft and
aerospace industries have recognized AS9100 as a means for continually improving
quality and on-time delivery within their supply chain.
  In May
2010, AML was certified to the AS9100 Quality Management System standard
specific to the aerospace industry which includes the ISO 9001:2000 standard
requirements.
  Our
other manufacturing facility is located in Santa Clara, California. Depending on
the specific requirements, the Santa Clara operations use a combination of three
basic technologies: (1) Integration of internally matched GaAs FETs using MICs
(Microwave Integrated Circuits), (2) Integration of GaAs Monolithics (MMIC’s)
using various techniques, including Multi-Chip Modules, and (3) our own
proprietary MMIC (Microwave Monolithic Integrated Circuits) technology. We
manufacture in house all the ceramic integrated circuits, both MIC’s and
MMIC’s.
  Mica-Tech
manufactures the UltraSatNet system from purchased components. Mica-Tech’s
manufacturing facility was moved into the AML Camarillo headquarters in May
2008. The manufacturing process involves in house assembly capabilities and
outside specialized printed circuit board/printed wire board
assemblies.
  Suppliers
  We
currently procure, and expect to continue to procure, certain components from
single source manufacturers due to unique component designs as well as certain
quality and performance requirements. In addition, in order to take advantage of
volume pricing discounts, we purchase certain customized components from single
sources. These single source suppliers consist of Spectrum Control for their
filters, Mimix for MMIC parts, Johanson Technologies for their ceramic
capacitors, Sandvik Osprey LTD for their osprey materials, and Excelics
Semiconductor Inc. and Fujitsu for their semiconductors. Although we did not
experience shortages during our 2010 fiscal year, we have experienced this in
the past, and may again in the future, experience shortages of single-source
components. In such event, we may have to make adjustments to both product
designs and production schedules, which could result in delays in production and
delivery of products. Such delays could have an adverse effect on our operating
results and financial condition.
  Intellectual
Property
  We rely
on trade secrets and execute confidentiality and non-disclosure agreements with
our employees and limit access to and distribution of our proprietary
information. These efforts allow us to rely upon the knowledge and experience of
our management and technical personnel and our ability to market our existing
products and to develop new products. The departure of any of our management and
technical personnel, the breach of their confidentiality and non-disclosure
obligations with us, or the failure to achieve our intellectual property
objectives may have a material adverse effect on our business, financial
condition and results of operations.
  The
proprietary technologies of our Santa Clara operations and Mica-Tech segment are
primarily protected through patent and trade secret protection. We owned three
U.S. issued patents and one foreign patent, and these four patents expired at
various dates from May 2007 to September 2009. We had no patent applications
pending at March 31, 2010. Additionally, MPI has two registered trademarks: the
MPI Company logo, and the term “MMCC” (monolithic microwave ceramic
circuits).
  We
believe our success depends upon the knowledge and experience of our management
and technical personnel and our ability to market our existing products and to
develop new products. We do not have non-compete agreements with our employees
who are employed on an “at-will” basis. Therefore, employees may, and have, left
us to go to work for a competitor. While we believe that we have adequately
protected our proprietary technology, and we will take all appropriate and
reasonable legal measures to protect it, the use of our processes by a
competitor in spite of such protections could have a material adverse effect on
our business, financial condition and results of operations.
  Our
ability to compete successfully and achieve future revenue growth will depend,
in part, on our ability to protect our proprietary technology and operate
without infringing upon the rights of others. We may not be able to successfully
protect our intellectual property and our intellectual property or proprietary
technology may otherwise become known or be independently developed by
competitors. In addition, the laws of certain countries in which our products
have been or may be sold may not protect our products and intellectual property
rights to the same extent as the laws of the United States.
  9
 
 The
inability to protect our intellectual property and proprietary technology could
have a material adverse effect on our business, financial condition and results
of operations. As the number of patents, copyrights and other intellectual
property rights in our industry increases, and as the coverage of these rights
and the functionality of the products in the market further overlap, we believe
that companies in our industry may face more frequent infringement claims. We
may in the future be notified that we are infringing upon certain patent or
other intellectual property rights of others. Although we are not aware of any
pending or threatened intellectual property lawsuits against us, we cannot
guarantee that such litigation or infringement claims will not occur in the
future. Such litigation or claims could result in substantial costs and
diversion of resources and could have a material adverse effect on our business,
results of operations and financial condition. A third party claiming
infringement may also be able to obtain an injunction or other equitable relief,
which could effectively block our ability or our customer’s ability to
distribute, sell, or import allegedly infringing products. If it appears
necessary or desirable, we may seek licenses from third parties covering
intellectual property that we are allegedly infringing. No assurance can be
given, however, that any such licenses could be obtained on terms acceptable to
us, if at all. The failure to obtain the necessary licenses or other rights
could have a material adverse effect on our business, financial condition and
results of operations.
  Employees
  As of
March 31, 2010, we had 88 full-time employees, including 16 in research and
development; 51 in manufacturing, production engineering, and quality assurance;
16 in administration; and 5 in sales, marketing, order entry, and customer
support. We believe the success of our business depends, in part, on our ability
to attract and retain qualified personnel, particularly qualified scientific,
technical and key management personnel. Our employees are not governed by
collective bargaining agreements. We believe our relationships with our
employees are good.
  Governmental
Regulations
  We are
subject to federal, state and local governmental regulations relating to the
storage, discharge, handling, emission, generation, manufacture, and disposal of
toxic or other hazardous substances used to manufacture our products. We believe
we are currently in compliance in all material respects with such regulations.
Failure to comply with current or future regulations could result in the
imposition of substantial fines on us, suspension of production, alteration of
our manufacturing processes, cessation of our operations, or other actions which
could materially and adversely affect our business, financial condition, and
results of operations.
  We are
subject to and comply with federal regulations pertaining to health and safety,
employment, privacy, and related regulations pertinent to all
businesses.  While we are not directly subject to regulation by the
Federal Energy Regulatory Commission (FERC) or any state public utility
commissions, these commissions have oversight of regional grids and electric
utilities. The FERC must approve all wholesale products purchased by regional
grids, and state commissions may be involved in approval of transactions with
electric utilities.
  ITEM
1A.  RISK FACTORS
  RISK
FACTORS
  You
should carefully consider the risks described below together with all of the
other information included in this report before making an investment decision
with regard to our securities. The statements contained in or incorporated into
this offering that are not historic facts are forward-looking statements that
are subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements. If
any of the following risks actually occurs, our business, financial condition or
results of operations could be harmed. In that case, the trading price of our
common stock could decline, and you may lose all or part of your
investment.
  10
 Risks
Associated With Our Business
  Most
of our sales are made to the defense industries, both domestic and foreign. Our
business and financial results could be adversely affected if defense spending
is curtailed, which would cause the value of your investment to
decline.
  As a
percentage of total revenues, our net sales to our two largest customers, Celestica Aerospace
Technologies Corporation and Selex Sistemi Integrati  S.p.A.,
during the fiscal year ended March 31, 2010 totaled approximately 24.7%,
accounting for $4.0 million of our revenues in our 2010 fiscal year. These
customers rely on the defense industry for orders and the defense industry
relies upon the United States and foreign governments for funding. Changes in
funding may occur if there is a change in the current administration or the
government reduces defense spending. A decrease in business from the defense
industry to our customers would have a material adverse effect on our results of
operations and financial condition and the value of your
investment.
  Our
market is subject to rapid technological change, and to compete effectively, we
must continually introduce new products or enhancements that achieve market
acceptance.
  The
market for our products is characterized by rapidly changing technology,
frequent new product introductions, changes in customer requirements, and
evolving industry standards. We believe that we have been successful to date in
investing in research and development to meet these needs and delivering
products before our competitors. We believe that our future success will depend
upon continued development and timely introduction of products capable of
collecting or processing new types of telecommunications signals. However, we
expect that new technologies will continue to emerge. Our future performance
will depend on the successful development, introduction, and market acceptance
of new and enhanced products that address these changes as well as current and
potential customer requirements. The introduction of new and enhanced products
may cause our customers to defer or cancel orders for existing products. There
can be no assurance that we will be able to develop and market new products
successfully in the future or respond effectively to technological changes, or
that new products introduced by others will not render our products or
technologies noncompetitive or obsolete.
  We also
may not be able to develop the underlying core technologies necessary to create
new products and enhancements or to license these technologies from third
parties. Product development delays may result from numerous factors,
including:
  •
              changing
      product specifications and customer
  requirements;
  •
              difficulties
      in hiring and retaining necessary technical
  personnel;
  •
              difficulties
      in reallocating engineering resources and overcoming resource
      limitations;
  •
              difficulties
      with contract manufacturers;
  •
              changing
      market or competitive product requirements;
and
  •
              unanticipated
      engineering complexities.
  The
development of new, technologically advanced products is a complex and uncertain
process requiring high levels of innovation and highly skilled engineering and
development personnel, as well as the accurate anticipation of technological and
market trends. We may not be able to identify, develop, manufacture, market, or
support new or enhanced products successfully, if at all, or on a timely basis.
Further, our new products may not gain market acceptance or we may not be able
to respond effectively to product announcements by competitors, technological
changes, or emerging industry standards. Any failure to respond to technological
change would significantly harm our business.
  Our
business, operating results and financial condition could be negatively impacted
if demand for our products is less than we anticipate or if we fail to hire
qualified employees. As a result, the value of your securities may
decline.
  Our
growth depends on our ability to successfully develop and market our products.
The development and marketing of our products is dependent on a number of
factors, including our ability to:
  •
              recruit
      and maintain a base of qualified
engineers;
  •
              initiate,
      develop and sustain corporate and government
  relationships;
  •
              attract,
      hire, integrate and retain qualified sales and sales support employees;
      and
  •
              accurately
      assess the demands of the market.
  11
 
 Demand
for our products might be less than we anticipate, or we may not be successful
in recruiting and maintaining the personnel we need to develop and sell our
products. In either case, our business, operating results and financial
condition could be negatively impacted and the value of your securities may
decline.
  Our
primary competitors are Teledyne Defense, Miteq, Endwave Defense Systems and
CTT. These competitors are much larger than we are and have more in the way of
financial and other resources than we have. We have tried to create a niche
market in the manufacturing of microwave integrated circuits for use by the
defense industry. However, we have no contractual agreements with contractors
with whom we do business that requires them to purchase minimum quantities and
we cannot assure you that these contractors will continue ordering parts from us
or that they will order at the same or greater levels than they have done in the
past. If our customers severely reduced their orders or ceased ordering from us
altogether, our business, results of operations and financial condition, as well
as the value of your securities, could be materially adversely
affected.
  Unexpected
increases in the cost to develop or manufacture our products under fixed-price
contracts may cause us to experience unreimbursed cost overruns.
  A
significant portion of our revenue is derived from fixed-price contracts. Under
fixed-price contracts, unexpected increases in the cost to develop or
manufacture a product, whether due to inaccurate estimates in the bidding
process, unanticipated increases in materials costs, inefficiencies, or other
factors, are borne by us. We have experienced cost overruns in the past that
have resulted in losses on certain contracts, and may experience additional cost
overruns in the future. Such cost overruns would increase our operating
expenses, reduce our net income and earnings per share, and have a materially
adverse effect on our future results of operations and financial
condition.
  We
may engage in future acquisitions that dilute our stockholders equity and cause
us to use cash, incur debt, or assume contingent liabilities.
  We
completed our acquisition of Microwave Power, Inc. on June 18,
2004.  We acquired a controlling interest of Mica-Tech, Inc. on
April 11, 2007 and subsequently the remaining interest on February 19,
2008. As part of our business strategy, we expect to continue to review
opportunities to buy other businesses or technologies that would complement our
current products, expand the breadth of our markets, or enhance our technical
capabilities, or that may otherwise offer growth opportunities. If we buy other
businesses, products or technologies in the future, we could:
  •
              incur
      significant unplanned expenses and personnel
  costs;
  •
              issue
      stock, or assume stock option plans that would dilute our current
      stockholders’ percentage ownership;
  •
              use
      cash, which may result in a reduction of our
  liquidity;
  •
              incur
      debt; or
  •
              assume
      liabilities.
  These
purchases also involve numerous risks, including:
  •
              problems
      integrating the purchased operations, technologies, personnel or
      products;
  •
              unanticipated
      costs, litigation and other contingent
  liabilities;
  •
              diversion
      of management’s attention from our core
  business;
  •
              adverse
      effects on existing business relationships with suppliers and
      customers;
  •
              risks
      associated with entering into markets in which we have no, or limited,
      prior experience;
  •
              unconsummated
      transactions; and
  •
              potential
      loss of our key employees or the key employees of an acquired
      organization.
  12
 
 We may
not be able to successfully integrate any businesses, products, technologies or
personnel that we might acquire, or to realize expected benefits of acquisitions
that may occur in the future. If this occurs, our business and financial results
may be adversely affected.
  Adverse
changes in the political and economic policies of the governments of foreign
countries in which we have sales could have a material adverse effect on the
overall economic growth of such countries, which could reduce the demand for our
products and materially and adversely affect our competitive
position.
  We
conduct international sales in France, Israel, Spain, Turkey, Singapore, Italy,
the United Kingdom, and Japan.  A significant change in the economy or
deterioration in United States trade relations or the economic or political
stability of those foreign markets could have a material adverse effect on our
business, results of operations, and financial condition.
  Fluctuation
in the value of the U.S. dollar as compared to the currencies of non U.S.
countries in which we have sales may result in decreased international sales,
which could have a material adverse affect on our business.
  Sales to
foreign customers are invoiced in U.S. dollars.  Should the
relative value of the U.S. dollar in comparison to foreign currencies
increase, the resulting increase in the price of our 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.
  Risks
Associated With Ownership of Our Securities
  We
have not paid cash dividends and it is unlikely that we will pay cash dividends
in the foreseeable future.
  We plan
to use all of our earnings, to the extent we have earnings, to fund our
operations. We do not plan to pay any cash dividends in the foreseeable future.
We cannot guarantee that we will, at any time, generate sufficient surplus cash
that would be available for distribution as a dividend to the holders of our
common stock. You should not expect to receive cash dividends on our common
stock.
  We
have the ability to issue additional shares of our common stock without asking
for shareholder approval, which could cause your investment to be
diluted.
  Our
Articles of Incorporation currently authorize the Board of Directors to issue up
to 15,000,000 shares of common stock. The power of the Board of Directors to
issue shares of common stock or warrants or options to purchase shares of common
stock is generally not subject to shareholder approval. Accordingly, any
additional issuance of our common stock may have the effect of further diluting
your investment.
  We
may raise additional capital through a securities offering that could dilute
your ownership interest.
  We
require substantial working capital to fund our business. If we raise additional
funds through the issuance of equity, equity-related or convertible debt
securities, these securities may have rights, preferences or privileges senior
to those of the holders of our common stock. The issuance of additional common
stock or securities convertible into common stock by our management will also
have the effect of further diluting the proportionate equity interest and voting
power of holders of our common stock.
  There
is no active public market for our securities, so you may not be able to
liquidate your securities if you need money.
  Trading
of our common stock is sporadic. It is not likely that an active market for our
common stock will develop or be sustained soon. You may not be able to liquidate
our securities if you need money.
  We
are subject to the Penny Stock Rules and these rules may adversely affect
trading in our common stock.
  Our
common stock is a “low-priced” security under rules promulgated under the
Securities Exchange Act of 1934. In accordance with these rules, broker-dealers
participating in transactions in low-priced securities must first deliver a risk
disclosure document which describes the risks associated with such stocks, the
broker-dealer’s duties in selling the stock, the customer’s rights and remedies
and certain market and other information. Furthermore, the broker-dealer must
make a suitability determination approving the customer for low-priced stock
transactions based on the customer’s financial situation, investment experience
and objectives. Broker-dealers must also disclose these restrictions in writing
to the customer, obtain specific written consent from the customer, and provide
monthly account statements to the customer. The effect of these restrictions
probably decreases the willingness of broker-dealers to make a market in our
common stock, decreases liquidity of our common stock and increases transaction
costs for sales and purchases of our common stock as compared to other
securities.
  13
 
 ITEM
2.  PROPERTIES
  Our AML
administrative, engineering, and manufacturing facility is located in a 25,017
square foot leased building in Camarillo, California. The current lease for this
property expires in April 2015. Our Santa Clara operations operate in a 3,868
square foot industrial/office condominium located at 3350 Scott Boulevard in
Santa Clara, California. We purchased this building on February 3, 2006. We
relocated the Mica-Tech operations to the AML facility in May 2008. We believe
that our current facilities are in reasonable condition and provide adequate
expansion capabilities.
  ITEM
3.  LEGAL PROCEEDINGS
  We may be
subject to, from time to time, various legal proceedings relating to claims
arising out of our operations in the ordinary course of our business. Other than
the proceeding described below, we are not currently a party to any legal
proceedings, the adverse outcome of which, individually or in the aggregate,
would have a material adverse effect on the business, financial condition, or
results of operations of the Company.
  Mistral
Solutions PVT, LTD. v. Mica-Tech, Inc. and AML Communications, Inc. (Ventura
County Superior Court Case No. 56-2010-00368443-CU-BC-VTA).  On
February 25, 2010, Mistral Solutions PVT, LTD. (“Mistral”) filed a Complaint in
Ventura County Superior Court against Mica-Tech, Inc. (“Mica-Tech”) and AML
Communications, Inc. (“AML”).  On February 26, 2010, Mistral filed a
First Amended Complaint against Mica-Tech and AML, alleging causes of action for
(1) breach of written contract, (2) breach of oral contract, (3) open book
account, (4) account stated, (5) for goods sold and delivered, (6) reasonable
value, (7) conversion, (8) intentional misrepresentation, and (9)
misappropriation of trade secrets.  The Complaint arises out of a
purchase order entered into between Mistral and Mica-Tech for the use of
Mistral’s engineers and support staff to develop software to be used in
satellite-based systems.  Mistral is claiming special damages,
including $303,413.30 on the purchase order, consequential damages, punitive
damages, possession of personal property, preliminary and permanent injunctions
as to Mistral’s trade secrets, attorneys’ fees, prejudgment interest and
costs.  Mica-Tech and AML deny the claims and intend to vigorously
defend against them.  On May 3, 2010, Mica-Tech and AML filed their
Answer to the First Amended Complaint.  In addition, Mica-Tech filed a
Cross-Complaint against Mistral, alleging causes of action for (1) breach of
contract, (2) fraud, (3) intentional misrepresentation, (4) negligent
misrepresentation, (5) breach of implied covenant of good faith and fair
dealing, (6) intentional interference with contract, (7) intentional
interference with prospective economic advantage, (8) negligent interference
with prospective economic advantage, and (9) conversion.  The
Cross-Complaint arises out of false and fraudulent representations made by
Mistral concerning the purchase order and Mistral’s breach of the terms of the
purchase order.  Mica-Tech is seeking compensatory damages of at least
$549,587.50, exemplary damages, attorneys’ fees, interest and
costs.  Mistral has not filed its response to the
Cross-Complaint.  A Case Management Conference is set for August 30,
2010, and no trial date has been set.
  PART
II
  ITEM
5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
  Market
Information
  Our
common stock is currently quoted on the OTC Bulletin Board under the symbol
“AMLJ.OB”.  The table below sets forth for the periods indicated the
high and low bid prices for the Company’s common stock for the periods it was
quoted on the OTC Bulletin Board. The bid prices represent inter-dealer
quotations, without adjustments for retail mark-ups, markdowns or commissions
and may not necessarily represent actual transactions. The source of the
information for the high and low bid prices is the OTC Bulletin
Board.
  Price Range of
                      Common StockHigh
                  
                  
                  LowFiscal
      year ended March 31, 2009First
      quarter
                  
                  $
                  1.64
                  
                  
                  $
                  1.18Second
      quarter
                  
                  $
                  1.18
                  
                  
                  $
                  0.87Third
      quarter
                  
                  $
                  0.98
                  
                  
                  $
                  0.37Fourth
      quarter
                  
                  $
                  0.64
                  
                  
                  $
                  0.33Fiscal
      year ended March 31, 2010First
      quarter
                  
                  $
                  0.75
                  
                  
                  $
                  0.35Second
      quarter
                  
                  $
                  0.95
                  
                  
                  $
                  0.66Third
      quarter
                  
                  $
                  1.49
                  
                  
                  $
                  0.90Fourth
      quarter
                  
                  $
                  1.55
                  
                  
                  $
                  1.23
 
 14
 
  At June 9,
2010,there were approximately 82 holders of record of our common stock.
This number does not include the number of persons whose stock is in nominee or
in “street name” accounts through brokers.
  Dividends
  We have
not paid cash dividends and do not anticipate paying cash dividends in the
foreseeable future. We expect to utilize future earnings to finance future
growth. The actual amount of any dividends paid would be subject to the
discretion of our Board of Directors and would depend on operations, financial
and business requirements, compliance with bank covenants, and other
factors.
  Equity
Compensation Plans
  The
following table gives information about our common stock that may be issued
under our existing equity compensation plans as of March 31,
2010:
  Equity
Compensation Plan Information
  Plan Category
                    
                    Number of Securities to
                        be Issued Upon Exercise
                        of Outstanding Options
                        and Rights (a)
                    
                    
                    Weighted Average
                        Exercise Price of
                        Outstanding Options
                        and Rights (b)
                    
                    
                    Number of Securities Remaining
                        Available for Future Issuance
                        Under Equity Compensation Plans
                        (Excluding Securities Reflected in
                        Column (a))(c)2005
      Equity compensation plans approved by
      security holders(1)
                    
                    
                    2,517,950
                    
                    
                    $
                    0.97
                    
                    
                    
                    2,098,945Total
                    
                    
                    2,517,950
                    
                    
                    $
                    0.97
                    
                    
                    
                    2,098,945
 
 (1)
              In
      November 2005, we established the 2005 Equity Incentive Plan
      (“2005 Plan”) with 150,000 shares initially approved and subject to
      the 2005 Plan. Incentive stock option awards may be granted under the
      2005 Plan only to employees (including officers and directors who are
      also employees) of the Company or of a Parent or subsidiary of the
      Company. All other awards (including nonqualified stock options,
      restricted stock or stock awards) under the 2005 Plan may be granted
      to employees, officers, directors, consultants, independent contractors
      and advisors of the Company or any Parent or Subsidiary of the Company,
      provided such consultants, contractors and advisors render bona fide
      services not in connection with the offer and sale of securities in a
      capital-raising transaction. The Board of Directors has full authority to
      administer the 2005 Plan, including but not limited to, the authority
      to designate eligible persons, grant awards, interpret the 2005 Plan,
      prescribe, rescind or amend the rules and regulations of the
      2005 Plan, make all other determinations necessary or advisable for
      the administration of the 2005 Plan, and also delegate to one or more
      executive officers of the Company the authority to grant an Award under
      the 2005 Plan to plan participants who are not insiders of the
      Company. The number of shares reserved and available for grant and
      issuance shall be increased on the first day of January of each year so
      that the total of all Common Stock available for Awards shall be the
      maximum amount allowable under Regulation 260.140.45 of Title 10
      of the California Code of Regulations. The total of all Common Stock
      available for grant and issuance under the 2005 Plan was
      3,191,195 shares as of March 31, 2010. The Company filed a
      registration statement on Form S-8 with SEC to register the
      unregistered shares under the Plan or 2,927,000 shares on May 20,
      2008. Unless earlier terminated as provided in the plan, the
      2005 Plan will terminate on October 31,
  2015.
  ITEM
6.  SELECTED FINANCIAL DATA
  We are currently not required to
provide the information required by Item 301 of Regulation S-K.
  15
 
 ITEM
7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
  Overview
  Our
business is comprised of two reportable segments, AML Communications, Inc.
(“AML”) and Mica-Tech, Inc (“Mica-Tech”).  AML designs, manufactures,
and markets specialized RF and microwave amplifiers and subsystems serving,
primarily, the Defense Electronic Warfare Market.  AML represented
96.9% of our 2010 net revenue.  Mica-Tech designs, manufactures, and
markets an intelligent communication system to provide Supervisory Control and
Data Acquisition (SCADA) of the electric power grid. Mica-Tech represented 3.1%
of our 2010 net revenue.
  AML
includes our Camarillo operations, which produce low noise amplifiers and
integrated sub assemblies with frequencies that range from 10 MHz to 40 GHz, and
our Santa Clara operations, which produce microwave high power amplifiers with
frequencies that range from 1 to 40 GHz with output power from 0.5W to 300
W.  In February 2001, we made a strategic decision to focus our
resources on the defense markets.  As such, we moved rapidly to
utilize our knowledge base in defense microwave related design and manufacturing
to offer new products, as well as variations of existing
products.  This strategy has driven an increase in revenues for
defense related products from $3.7 million in fiscal 2003 to $15.8 million in
fiscal 2010.
  We
consider the AML segment to be our core business since it has a much larger
revenue base, and we have and expect to continue to invest in this business and
opportunities that offer long term growth.  In line with its revenue
and earnings contribution to the Company, we devote most of our management time
and other resources to building the growth and profitability of this
segment.
  AML
addresses the defense electronic warfare marketplace with components for UAVs
drones; electronic surveillance, targeting and delivery systems; radar and
electronic countermeasures. Such unconventional tactics also protect the lives
of U.S. and allied service men and women, and this is widely regarded as a long
term growth industry.
  The
increase in AML sales revenue and net income is primarily attributable to our
successful track record in Defense Programs for designing and producing
specialized micro-electronic components for an increasing range and number of
mission-critical battlefield electronic warfare systems. These systems range
from the Patriot Anti-Missile System and the U.S. Air Force MALD (aerial decoy)
program on which AML is a major supplier to radar, targeting and electronic
countermeasure system components. Many of AML’s customers and the specific
programs are subject to broad confidentiality or U.S. Classified Material
agreements or controls.
  Catalog Sales are a diversified and
important division of our business, and that revenue in fiscal year 2010 grew as
we added to the number of products and increased our market penetration and
number of customers in the U.S. and overseas. Catalog Sales have proven an
excellent source of new Defense Programs customers.
  In fiscal 2010, we announced key
corporate developments including:
 
 ·
              Authorization
      by the Board of Directors to purchase up to one million shares of our
      common stock on the open market
 ·
              A
      $1.5 million order for power amplifiers utilized in a radar
      system
 ·
              A
      $2.2 million order for integrated microwave assemblies and components to
      be deployed in unmanned aerial vehicles
(UAV)
 ·
              A
      $220,000 pre-production order for the STARLite TM Synthetic Aperture Radar,
      part of Northrop Grumman’s Extended Range/Multiple Purpose UAV
      Program
 
 Subsequent to the close of fiscal 2010,
the Company announced:
 
 ·
              Recent
      delivery of components on the MALD Program, and the outlook for a Program
      increase
 ·
              Completed
      delivery of prototype components for the upgrade of the Patriot
      Anti-Missile System
 
 Our strategy for growth in fiscal 2011
includes capturing an increasing share of high-growth U.S. and overseas defense
micro-electronics component markets. We are in various phases of contracted
development on a number of potentially large defense programs. Should these
component design, development and prototype programs be selected for long-term
AML mass production, it would likely have a materially positive impact on our
sales and profitability.
  We also target growing catalog sales to
drive custom catalog orders and new defense program contracts. We regularly
analyze our manufacturing processes for opportunities to cost effectively and to
increase capacity or efficiency.
  16
 
 Our
Mica-Tech segment designs and manufactures the UltraSatNet, an Intelligent
Satellite Utility Communication Solution for the monitoring and control of power
grid distribution. The operating software and hardware are designed in-house
with support from outside consultants. Since completion of the acquisition of
the remaining interest in Mica-Tech in February 2008, we have moved this
subsidiary into our Camarillo facility and taken other steps improve Mica-Tech’s
financial structure while the company pursues the utility SCADA
market.
  Results
of Operations
  The
following table summarizes our results of operations both in dollars and as a
percentage of net sales for the fiscal years ended March 31, 2010 and
2009.
  For
the fiscal year ended March 31, 2010:
  (Dollars
      in thousands)
                              
                              AML
                              
                              
                              
                              
                              
                              Mica-Tech
                              
                              
                              
                              
                              
                              TotalRevenuesDefense
      Microwave and other
                              
                              $
                              15,804
                              
                              
                              
                              96.9
                              %
                              
                              $
                              —
                              
                              
                              
                              —
                              
                              
                              $
                              15,804
                              
                              
                              
                              96.9
                              %Satellite
      communication systems
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              513
                              
                              
                              
                              3.1
                              %
                              
                              
                              513
                              
                              
                              
                              3.1Total
      net sales
                              
                              
                              15,804
                              
                              
                              
                              96.9
                              %
                              
                              
                              513
                              
                              
                              
                              3.1
                              %
                              
                              
                              16,317
                              
                              
                              
                              100.0
                              %Cost
      of goods sold
                              
                              
                              8,234
                              
                              
                              
                              50.5
                              
                              
                              
                              251
                              
                              
                              
                              1.5
                              
                              
                              
                              8,485
                              
                              
                              
                              52.0Gross
      profit
                              
                              $
                              7,570
                              
                              
                              
                              46.4
                              %
                              
                              $
                              262
                              
                              
                              
                              1.6
                              %
                              
                              $
                              7,832
                              
                              
                              
                              48.0
                              %Operating
      expenses:Selling,
      general and administrative
                              
                              
                              3,280
                              
                              
                              
                              20.1
                              
                              
                              
                              127
                              
                              
                              
                              0.8
                              
                              
                              
                              3,407
                              
                              
                              
                              20.9Research
      and development
                              
                              
                              2,019
                              
                              
                              
                              12.4
                              
                              
                              
                              133
                              
                              
                              
                              0.8
                              
                              
                              
                              2,152
                              
                              
                              
                              13.2Income
      from operations
                              
                              
                              2,271
                              
                              
                              
                              13.9
                              
                              
                              
                              2
                              
                              
                              
                              0.0
                              
                              
                              
                              2,273
                              
                              
                              
                              13.9Other
      income/(Interest & other expense), net
                              
                              
                              (49
                              )
                              
                              
                              (0.3
                              )
                              
                              
                              (9
                              )
                              
                              
                              (0.0
                              )
                              
                              
                              (58
                              )
                              
                              
                              (0.3
                              )Income
      (loss) before income tax
                              
                              
                              2,222
                              
                              
                              
                              13.6
                              
                              
                              
                              (7
                              )
                              
                              
                              (0.0
                              )
                              
                              
                              2,215
                              
                              
                              
                              13.6Income
      tax expense (credit)
                              
                              
                              739
                              
                              
                              
                              4.5
                              
                              
                              
                              (2
                              )
                              
                              
                              (0.0
                              )
                              
                              
                              737
                              
                              
                              
                              4.5Net
      Income (loss)
                              
                              $
                              1,483
                              
                              
                              
                              9.1
                              %
                              
                              $
                              (5
                              )
                              
                              
                              (0.0
                              )%
                              
                              $
                              1,478
                              
                              
                              
                              9.1
                              %
  For
the fiscal year ended March 31, 2009:
  (Dollars
      in thousands)
                            
                            AML
                            
                            
                            
                            
                            
                            Mica-Tech
                            
                            
                            
                            
                            
                            TotalRevenuesDefense
      Microwave and other
                            
                            $
                            12,701
                            
                            
                            
                            95.6
                            %
                            
                            $
                            —
                            
                            
                            
                            —
                            
                            
                            $
                            12,701
                            
                            
                            
                            95.6
                            %Satellite
      communication systems
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            587
                            
                            
                            
                            4.4
                            %
                            
                            
                            587
                            
                            
                            
                            4.4Total
      net sales
                            
                            
                            12,701
                            
                            
                            
                            95.6
                            %
                            
                            
                            587
                            
                            
                            
                            4.4
                            %
                            
                            
                            13,288
                            
                            
                            
                            100.0
                            %Cost
      of goods sold
                            
                            
                            7,163
                            
                            
                            
                            53.9
                            
                            
                            
                            386
                            
                            
                            
                            2.9
                            
                            
                            
                            7,549
                            
                            
                            
                            56.8Gross
      profit
                            
                            $
                            5,538
                            
                            
                            
                            41.7
                            %
                            
                            $
                            201
                            
                            
                            
                            1.5
                            %
                            
                            $
                            5,739
                            
                            
                            
                            43.2
                            %Operating
      expenses:Selling,
      general and administrative
                            
                            
                            2,664
                            
                            
                            
                            20.0
                            
                            
                            
                            261
                            
                            
                            
                            2.0
                            
                            
                            
                            2,925
                            
                            
                            
                            22.0Research
      and development
                            
                            
                            1,777
                            
                            
                            
                            13.4
                            
                            
                            
                            155
                            
                            
                            
                            1.2
                            
                            
                            
                            1,932
                            
                            
                            
                            14.5Income
      (loss) from operations
                            
                            
                            1,097
                            
                            
                            
                            8.3
                            
                            
                            
                            (215
                            )
                            
                            
                            (1.6
                            )
                            
                            
                            882
                            
                            
                            
                            6.7Other
      income/(Interest & other expense), net
                            
                            
                            (83
                            )
                            
                            
                            (0.6
                            )
                            
                            
                            550
                            
                            
                            
                            4.1
                            
                            
                            
                            467
                            
                            
                            
                            3.5Income
      before income tax
                            
                            
                            1,014
                            
                            
                            
                            7.6
                            
                            
                            
                            335
                            
                            
                            
                            2.5
                            
                            
                            
                            1,349
                            
                            
                            
                            10.2Income
      tax expense
                            
                            
                            293
                            
                            
                            
                            2.2
                            
                            
                            
                            97
                            
                            
                            
                            0.7
                            
                            
                            
                            390
                            
                            
                            
                            2.9Net
      Income
                            
                            $
                            721
                            
                            
                            
                            5.4
                            %
                            
                            $
                            238
                            
                            
                            
                            1.8
                            %
                            
                            $
                            959
                            
                            
                            
                            7.2
                            %
 
 17
  Fiscal
Years Ended March 31, 2010 and 2009
  Net sales.  Net
sales in our 2010 fiscal year were approximately $16.3 million, as compared
to $13.3 million in our 2009 fiscal year, an increase of $3.0 million or
22.8%. AML’s revenues increased by $3.1 million or 24.7% mainly due to products
delivered to the Unmanned Aerial Vehicles (UAV) market during this year and a
commencement of high level production for the $1.5 million order we previously
received from an Italian company. Growth took place in both short and long term
programs as well as through the addition of new customers. The Company has
invested significant resources in diversifying the composition of orders by
developing products that target large, multi-year programs. Large program orders
we have previously announced have reached manufacturing maturity and are
positively impacting our revenues. Mica-Tech’s revenues decreased by $74,000 as
a result of a reduction in hardware sales. Sales of the UltraSatNet, Mica-Tech’s
satellite based control and communication system that addresses efficient
utilization of the electric power grid, currently has encountered slow
penetration in the traditional utilities market, primarily due to the
conservative nature of utilities, and Mica-Tech received less orders for
hardware sales from current and new customer compared to the same period last
year.
  Domestic
and international net sales were approximately 69.8% and 30.2% of our net sales,
respectively, for the year ended March 31, 2010. For the year ended
March 31, 2009, domestic and international net sales were approximately
78.1% and 21.9% of our net sales, respectively. Net sales are attributed to
geographic areas based on the location of the customer to which our products are
shipped. International net sales primarily consist of sales to customers in
Israel, Germany, Spain, Turkey, Singapore, Italy, Japan, and UK. However,
certain OEM customers take possession of our products domestically and then
distribute these products to their international customers. Because we account
for all of those net sales as domestic revenues, we cannot be certain of the
extent to which our domestic and international net sales is impacted by the
practices of our customers.
  Gross
profit.  Gross profit in our 2010 fiscal year was
$7.8 million, or 48.0% of net sales, compared to a gross profit in our 2009
fiscal year, of $5.7 million, or 43.2% of net sales. Change in gross
profit, as a percentage of net sales, is insignificant.  Utilization
of automated equipment, coupled with the reduction in manual operations, has
enhanced our ability to increase shipments with reduced costs and improved
manufacturing efficiencies.
  Selling, general, and administrative
costs.  Selling, general and administrative costs for our 2010
fiscal year were $3.4 million, or 20.9% of net sales, compared to
$2.9 million, or 22.0% of net sales, for our 2009 fiscal year. Selling,
general and administrative costs for AML increased by $616,000, compared to the
same period of the prior year, mainly due to increased spending in investor
relations, salary and related benefits and commission expenses. Mica-Tech’s
administrative cost has been reduced by $134,000, as compared to the same period
of the last year, due to decrease in payroll related expenses, and other
operating expenses. To reduce operating costs, we relocated the Mica-Tech
operations to the AML facility in May 2008.
  Research and development
costs.  Research and development costs for our 2010 fiscal year
were $2.2 million, or 13.2% of net sales, compared to $1.9 million, or
14.5% of net sales, for the corresponding period in our 2009 fiscal year. AML’s
R&D expenses increased by $242,000 due to increased payroll related expenses
and R&D supplies. Mica-Tech’s R&D expenses are reduced by $22,000,
mainly due to a reduction in payroll related expenses and outside consulting
expenses.
  Other net
income.  We recorded a net other expense of $58,000 for our
2010 fiscal year and a net other income of $467,000 for our 2009 fiscal year.
During our 2010 fiscal year, we incurred $78,000 in interest expenses that were
associated with notes payable and lines of credit and realized a gain on sale of
fixed assets of $20,000. During our 2009 fiscal year, Mica-Tech realized a gain
of $521,000 from the settlement of a promissory note and a gain of $45,000 from
the settlement of royalties due to Southern California Edison. These are
considered a one-time event.
  Income before income
tax.  Income before income tax was $2.2 million in our 2010
fiscal year, compared to income before income tax of $1.3 million in our 2009
fiscal year. The increase in income before income tax, as compared to the same
period of prior year, is mainly due to increased revenues and improved gross
margins due to investments in automation.
  Income
before income tax in the AML segment was $2.2 million in our 2010 fiscal year,
compared to $1.0 million in our 2009 fiscal year. This increase is mainly
attributable to increased revenues and increased gross profit.
  Loss
before income tax benefit in the Mica-Tech segment was $7,000 in our 2010 fiscal
year, compared to income before income tax of $335,000 in our 2009 fiscal year.
The significant reduction in income before income tax, as compared to the same
period of prior year, is mainly due to the gains of $566,000 recognized during
our 2009 fiscal year. No special gain was recognized during the 2010 fiscal
year.
  Provision for income taxes.
During our 2010 fiscal year, the company utilized its deferred tax assets
reserve to record income tax expenses of $737,000. The company has no tax
liability as of March 31, 2010 due to the deferred tax benefits accounted for in
the prior years. The company utilized its deferred tax assets reserve to record
income tax expenses of $390,000 in our 2009 fiscal year.
  18
 
 Net income.Net
income was $1.5 million or $0.14 per share in our 2010 fiscal year, compared to
net income of $959,000 or $0.09 per share in our 2009 fiscal year.
  Net income from the AML segment was
$1.5 million in our 2010 fiscal year and $721,000 in our 2009 fiscal
year.
  Net loss from the Mica-Tech segment was
$5,000 in our 2010 fiscal year, compared to net income of $238,000 in our 2009
fiscal year.
  In 2011,
we expect total operating expenses to increase as we continue to invest in
infrastructure and new product development. We expect operating expenses
generally will increase more slowly than increases in revenue.
  Liquidity
and Capital Resources
  Historically,
we have financed our operations primarily from internally generated funds and,
to a lesser extent, loans from stockholders and capital lease
obligations.
  At March
31, 2010, AML had a line of credit agreement with Bridge Bank. On September 16,
2008, we signed a Business Financing Modification Agreement (the “Modification
Agreement”) with Bridge Bank to renew our line of credit, with a credit facility
of $1.3 million. Of this $1.3 million, $1.0 million may be used for
cash advances against accounts receivables and $0.3 million may be used for
equipment advances. Our ability to borrow under this agreement varies based upon
eligible accounts receivable and eligible equipment purchases. We are obligated
to pay the bank a finance charge at a rate per year equal to the prime rate,
which in no event shall be less than 5.00%, plus 0.25% with respect to cash
advances, and a rate of such prime rate plus 1.0% with respect to equipment
advances. We were obligated to pay a facility fee of $2,500 upon execution of
the Modification Agreement and annually thereafter. We were also obligated to
pay a one-time equipment loan facility fee of $2,500 upon execution of the
Modification Agreement.  We must maintain certain financial
requirements, including a minimum Asset Coverage Ratio of 1.50 to 1.00. We are
also required to stay within 80% of our planned quarterly revenue. We were in
compliance with these requirements at March 31, 2010; however, there is no
assurance that we will be in compliance at future dates. This agreement to
provide cash advances against accounts receivables terminates on August 15, 2010
or upon a date that the bank or AML chooses to terminate the agreement. Any
unpaid balance is due and payable pursuant to the agreement on the termination
date. At March 31, 2010, we had an outstanding balance of $0 under the accounts
receivable agreement and $116,000 under the equipment financing agreement, which
includes amounts owed under prior lines of credit with Bridge Bank. Our
remaining borrowing capacity is approximately $1,000,000 under the accounts
receivable agreement and $0 under the equipment financing agreement as the
availability period for the equipment term loan expired as of December 31,
2008.
  At
March 31, 2010, we had $3,327,000 in cash and cash equivalents. Our
operating activities provided cash of approximately $2,361,000 in our 2010
fiscal year, compared to $806,000 cash provided in 2009. Net cash used in
investing activities amounted to $186,000 in 2010, primarily due to capital
equipment expenditures, as compared to net cash used in investing activities of
$105,000 in 2009. Net cash used in financing activities was $429,000 in 2010 and
$325,000 in 2009, due to payments on outstanding notes payable and line of
credit.
  We
anticipate capital expenditures of approximately $350,000 in our 2011 fiscal
year. We believe that funds for these expenditures will be provided by our
operating activities. However, we may choose to finance some of these
expenditures through our financing agreement with Bridge Bank. At March 31,
2010, our remaining borrowing capacity under this agreement was
$1,000,000.
  We may
attempt to procure additional sources of financing in the event that the capital
available as of March 31, 2010 is insufficient for our operating needs and
capital expenditures. These sources may include, but are not limited to,
additional sales of our equity and debt securities. There are, however, no
assurances that we will be able to successfully obtain additional financing at
terms acceptable to us. Failure to obtain such financing could have a material
adverse effect on our ability to operate as a going concern.
  Successful
completion of our development program and attaining profitable operations are
dependent upon our maintaining a level of sales adequate to support our cost
structure. In addition, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon our ability to meet our financing
requirements and the success of our plans to sell our products. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and classifications of
liabilities that might be necessary should we be unable to continue in
existence.
  19
 
 Contractual
Obligations
  The
following table summarizes our contractual obligations, including purchase
commitments at March 31, 2010, and the effect that such obligations are
expected to have on our liquidity and cash flow in future periods.
  Payment
      due by periodContractual
      Cash Obligations
                      (in
      thousands)
                    
                    Total
                    
                    
                    Less
      than 1 year
                    
                    
                    1-3
      years
                    
                    
                    3-5
      years
                    
                    
                    ThereafterOperating
      leases
                    
                    $
                    1,133
                    
                    
                    $
                    210
                    
                    
                    $
                    443
                    
                    
                    $
                    461
                    
                    
                    $
                    19Line
      of credit
                    
                    
                    161
                    
                    
                    
                    132
                    
                    
                    
                    29
                    
                    
                    
                    -
                    
                    
                    
                    -Notes
      payable
                    
                    
                    618
                    
                    
                    
                    38
                    
                    
                    
                    14
                    
                    
                    
                    566
                    
                    
                    
                    -Capital
      lease
                    
                    
                    168
                    
                    
                    
                    72
                    
                    
                    
                    78
                    
                    
                    
                    18
                    
                    
                    
                    -Balance
      due on the settlement
                    
                    
                    20
                    
                    
                    
                    20
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Total
      contractual cash obligations
                    
                    $
                    2,100
                    
                    
                    $
                    472
                    
                    
                    $
                    564
                    
                    
                    $
                    1,045
                    
                    
                    $
                    19
  Critical
Accounting Policies
  Our
discussion and analysis of our financial conditions and results of operations
are based upon our financial statements, which have been prepared in accordance
with generally accepted accounting principles in the United States. The
preparation of financial statements requires managers to make estimates and
disclosures on the date of the financial statements. On an on-going basis, we
evaluate our estimates, including, but not limited to, those related to revenue
recognition. We use authoritative pronouncements, historical experience, and
other assumptions as the basis for making judgments. Actual results could differ
from those estimates. We believe that the following critical accounting policies
affect our more significant judgments and estimates in the preparation of our
financial statements.
  Revenue
recognition.  We generate our revenue through the sale of
products. Our policy is to recognize revenue when the applicable revenue
recognition criteria have been met, which generally include the
following:
  •
              Persuasive evidence of an
      arrangement exists;
  •
              Delivery has occurred or
      services have been rendered;
  •
              Price is fixed or
      determinable; and
  •
              Collectability is reasonably
      assured
  Revenue
from the sale of products is generally recognized after both the goods are
shipped to the customer and acceptance has been received, if required. Our
products are custom made for our customers, who primarily consist of original
engineer manufacturers (OEMs), and we do not accept returns. Our products are
shipped complete and ready to be incorporated into higher level assemblies by
our customers. The terms of the customer arrangements generally pass title and
risk of ownership to the customer at the time of shipment.
  Recording
revenue from the sale of products involves the use of estimates and management
judgment. We must make a determination at the time of sale whether the customer
has the ability to make payments in accordance with arrangements. While we do
utilize past payment history, and, to the extent available for new customers,
public credit information in making our assessment, the determination of whether
collectability is reasonably assured is ultimately a judgment decision that must
be made by management.
  Allowance for Doubtful
Accounts.  We maintain an allowance for doubtful accounts
receivable based on customer-specific allowances, as well as a general
allowance. Specific allowances are maintained for customers which are determined
to have a high degree of collectability risk based on such factors, among
others, as: (i) the aging of the accounts receivable balance; (ii) the
customer’s past payment experience; or (iii) a deterioration in the
customer’s financial condition, evidenced by weak financial condition and/or
continued poor operating results, reduced credit ratings, and/or a bankruptcy
filing. In addition to the specific allowance, we maintain a general allowance
for all of our accounts receivables that are not covered by a specific
allowance. The general allowance is established based on such factors, among
others, as: (i) the total balance of the outstanding accounts receivable,
including considerations of the aging categories of those accounts receivable;
(ii) past history of uncollectible accounts receivable write-offs; and
(iii) the overall creditworthiness of the customer base. A considerable
amount of judgment is required in assessing the realizability of accounts
receivables. Should any of the factors considered in determining the adequacy of
the overall allowance change, an adjustment to the provision for doubtful
accounts receivable may be necessary.
  20
 
 Inventories.  Inventories
are stated at the lower of cost or market, cost being determined on the
first-in, first-out method. Inventories are written down if the estimated net
realizable value is less than the recorded value. We review the carrying cost of
our inventories by product each quarter to determine the adequacy of our
reserves for obsolescence. In accounting for inventories we must make estimates
regarding the estimated net realizable value of our inventory. This estimate is
based, in part, on our forecasts of future sales and age of the
inventory.
  Intangible
Assets.  We test intangible assets with indefinite lives for
impairment on an annual basis or more frequently if certain events occur. If the
assets are considered to be impaired, the impairment to be recognized will be
measured by the amount in which the carrying amount exceeds the fair value of
the assets. For our intangible assets with finite lives, including our customer
lists, existing technology, customer relationship, trademarks and brand names,
and patents, we amortize the costs of the assets over their useful lives and
assess impairment at least annually or whenever events and circumstances suggest
the carrying value of an asset may not be recoverable. Determining the life of
the assets with finite lives is judgmental in nature and involves the use of
estimates and assumptions. These estimates and assumptions involve a variety of
factors, including future market growth and conditions, forecasted revenues and
costs and a strategic review of our business and operations. We base our fair
value estimates on assumptions we believe to be reasonable but that are
unpredictable and inherently uncertain. Actual future results may differ from
those estimates. In the event we determine that an intangible asset is impaired
in the future, an adjustment to the value of the asset would be charged to
earnings in the period such determination is made.
  Existing
Technology.  MPI’s existing technology is based on a patent
issued in 1990, which continues to be the main technology of MPI. It is a
substrate deposition technology that is mature and with no replacement
technology forecasted.
 
 21
 
 ITEM
8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  INDEX
TO FINANCIAL STATEMENTS
  Report
      of Independent Registered Public Accounting Firm
                23Consolidated
      Balance Sheets as of March 31, 2010 and March 31,
2009
                24Consolidated
      Statements of Income for the years ended March 31, 2010 and March 31,
      2009
                25Consolidated
      Statements of Stockholders’ Equity for the years ended March 31, 2010
      and March 31, 2009
                26Consolidated
      Statements of Cash Flows for the years ended March 31, 2010 and March
      31, 2009
                27Notes
      to Consolidated Financial Statements
                28
 
 22
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Board of
Directors and Shareholders
  AML
Communications, Inc.
 Camarillo,
CA
  We have
audited the accompanying consolidated balance sheets of AML
Communications, Inc. and subsidiary as of March 31, 2010 and 2009, and
the related consolidated statements of income, stockholders’ equity, and cash
flows for each of the years in the two-year period ended March 31, 2010.
AML Communications, Inc. and subsidiary’s management is responsible for these
consolidated financial statements. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
  We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting.  Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting.  Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of AML
Communications, Inc. and subsidiary as of March 31, 2010 and 2009, and
the results of its operations and its cash flows for each of the years in the
two-year period ended March 31, 2010 in conformity with accounting
principles generally accepted in the United States of America.
  /s/
      KABANI & COMPANY, INC.CERTIFIED
      PUBLIC ACCOUNTANTSLos
      Angeles, California
                    June 25,
      2010
  23
 
 AML
COMMUNICATIONS, INC. & SUBSIDIARY
  CONSOLIDATED
BALANCE SHEETS
  March
      31,
                        2010
                      
                      
                      March
      31, 2009ASSETSCurrent
      Assets:Cash
      and cash equivalents
                      
                      $
                      3,327,000
                      
                      
                      $
                      1,581,000Accounts
      receivable, net
                      
                      
                      3,148,000
                      
                      
                      
                      2,367,000Inventories,
      net
                      
                      
                      3,498,000
                      
                      
                      
                      3,290,000Note
      receivable
                      
                      
                      4,000
                      
                      
                      
                      7,000Prepaid
      expenses
                      
                      
                      218,000
                      
                      
                      
                      189,000Deferred
      tax asset—current
                      
                      
                      1,277,000
                      
                      
                      
                      867,000Total
      current assets
                      
                      
                      11,472,000
                      
                      
                      
                      8,301,000Property
      and equipment, at cost
                      
                      
                      7,417,000
                      
                      
                      
                      7,313,000Less:
      Accumulated depreciation
                      
                      
                      (5,534,000
                      )
                      
                      
                      (5,229,000
                      )Property
      and equipment, net
                      
                      
                      1,883,000
                      
                      
                      
                      2,084,000Deferred
      tax asset – Non current
                      
                      
                      2,931,000
                      
                      
                      
                      3,916,000Intangible
      Assets:Technologies,
      net
                      
                      
                      1,583,000
                      
                      
                      
                      1,778,000Patents,
      net
                      
                      
                      51,000
                      
                      
                      
                      75,000Customer
      relationship, net
                      
                      
                      32,000
                      
                      
                      
                      41,000Trademarks
      and brand names
                      
                      
                      202,000
                      
                      
                      
                      203,000Total
      intangible assets
                      
                      
                      1,868,000
                      
                      
                      
                      2,097,000Deposits
                      
                      
                      42,000
                      
                      
                      
                      33,000$
                      18,196,000
                      
                      
                      $
                      16,431,000LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      Liabilities:Line
      of credit
                      
                      $
                      132,000
                      
                      
                      $
                      496,000Accounts
      payable
                      
                      
                      832,000
                      
                      
                      
                      854,000Current
      portion of notes payable and capital lease obligation
                      
                      
                      110,000
                      
                      
                      
                      58,000Accrued
      expenses:Accrued
      payroll and payroll related expenses
                      
                      
                      993,000
                      
                      
                      
                      659,000Other
      accrued liabilities
                      
                      
                      273,000
                      
                      
                      
                      242,000Total
      current liabilities
                      
                      
                      2,340,000
                      
                      
                      
                      2,309,000Long
      term notes payable
                      
                      
                      581,000
                      
                      
                      
                      594,000Capital
      lease obligations, net of current portion
                      
                      
                      97,000
                      
                      
                      
                      —Line
      of credit, net of current portion
                      
                      
                      29,000
                      
                      
                      
                      —Commitments
      and contingencies
                      
                      
                      —
                      
                      
                      
                      —Stockholders’
      Equity:Common
      stock, $0.01 par value: 15,000,000 shares authorized; 10,680,915 and
      10,654,665 shares issued and outstanding at March 31, 2010 and March 31,
      2009, respectively. 38,600 shares held in treasury as of March 31,
      2010
                      
                      
                      107,000
                      
                      
                      
                      106,000Capital
      in excess of par value
                      
                      
                      14,203,000
                      
                      
                      
                      14,034,000Retained
      earnings (Accumulated deficit)
                      
                      
                      866,000
                      
                      
                      
                      (612,000
                      )Treasury
      stock - 38,600 shares of treasury stock held as of March 31,
      2010
                      
                      
                      (27,000
                      )
                      
                      
                      —Total
      stockholders’ equity
                      
                      
                      15,149,000
                      
                      
                      
                      13,528,000$
                      18,196,000
                      
                      
                      $
                      16,431,000
  The
accompanying notes are an integral part to these consolidated financial
statements
  24
 
 AML
COMMUNICATIONS, INC. & SUBSIDIARY
  CONSOLIDATED
STATEMENTS OF INCOME
  For the Years EndedMarch 31, 2010
                
                
                March 31, 2009Net
      sales
                
                $
                16,317,000
                
                
                $
                13,288,000Cost
      of goods sold
                
                
                8,485,000
                
                
                
                7,549,000Gross
      profit
                
                
                7,832,000
                
                
                
                5,739,000Operating
      Expenses:Selling,
      general and administrative
                
                
                3,407,000
                
                
                
                2,925,000Research
      and development
                
                
                2,152,000
                
                
                
                1,932,000Total
      operating expenses
                
                
                5,559,000
                
                
                
                4,857,000Income
      from operations
                
                
                2,273,000
                
                
                
                882,000Other
      Income (Expense)Gain
      on settlement of debt
                
                
                -
                
                
                
                567,000Gain
      on sale of property & equipment
                
                
                20,000
                
                
                
                -Interest
      & other expense
                
                
                (78,000
                )
                
                
                (100,000
                )Total
      other income (expense)
                
                
                (58,000
                )
                
                
                467,000Income
      before provision for income taxes
                
                
                2,215,000
                
                
                
                1,349,000Provision
      for income taxes
                
                
                (737,000
                )
                
                
                (390,000
                )Net
      income
                
                $
                1,478,000
                
                
                $
                959,000Basic
      earnings per common share
                
                $
                0.14
                
                
                $
                0.09Basic
      weighted average number of shares of common stock
    outstanding
                
                
                10,631,000
                
                
                
                10,575,000Diluted
      earnings per common share
                
                $
                0.14
                
                
                $
                0.09Diluted
      weighted average number of shares of common stock
    outstanding
                
                
                10,824,000
                
                
                
                10,688,000
  The
accompanying notes are an integral part of these consolidated financial
statements.
  25




AML
COMMUNICATIONS, INC.  & SUBSIDIARY




CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY




FOR
THE YEARS ENDED MARCH 31, 2010 AND 2009




Common
      Stock
                
                
                Capital in
                    Excess of
                
                
                Retained
                    earnings
                    (Accumulated
                
                
                TreasuryShares
                
                
                Amount
                
                
                Par Value
                
                
                deficit)
                
                
                stock
                
                
                TotalsBalance,
      March 31, 2008
                
                
                10,422,166
                
                
                $
                104,000
                
                
                $
                13,831,000
                
                
                $
                (1,571,000
                )
                
                
                —
                
                
                $
                12,364,000Options
      & Warrants Exercised
                
                
                232,499
                
                
                
                2,000
                
                
                
                73,000
                
                
                
                —
                
                
                
                —
                
                
                
                75,000Stock
      Options Compensation
                
                
                —
                
                
                
                —
                
                
                
                130,000
                
                
                
                —
                
                
                
                —
                
                
                
                130,000Net
      Income
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                959,000
                
                
                
                —
                
                
                
                959,000Balance,
      March 31, 2009
                
                
                10,654,665
                
                
                
                106,000
                
                
                
                14,034,000
                
                
                
                (612,000
                )
                
                
                —
                
                
                
                13,528,000Options
      & Warrants Exercised
                
                
                26,250
                
                
                
                1,000
                
                
                
                16,000
                
                
                
                —
                
                
                
                —
                
                
                
                17,000Stock
      Options Compensation
                
                
                —
                
                
                
                —
                
                
                
                153,000
                
                
                
                —
                
                
                
                —
                
                
                
                153,000Net
      Income
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,478,000
                
                
                
                —
                
                
                
                1,478,000Less:
      Treasury stock at cost
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (27,000
                )
                
                
                (27,000
                )Balance,
      March 31, 2010
                
                
                10,680,915
                
                
                $
                107,000
                
                
                $
                14,203,000
                
                
                $
                866,000
                
                
                $
                (27,000
                )
                
                $
                15,149,000




The
accompanying notes are an integral part of these consolidated financial
statements.


26


AML
COMMUNICATIONS, INC.  & SUBSIDIARY




CONSOLIDATED
STATEMENTS OF CASH FLOWS




For
      the Years EndedMarch 31, 2010
              
              
              March 31, 2009Cash
      Flows from Operating Activities:Net
      Income
              
              $
              1,478,000
              
              
              $
              959,000Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
              
              
              627,000
              
              
              
              699,000Provision
      for bad debts
              
              
              (2,000
              )
              
              
              3,000Inventory
      reserves
              
              
              91,000
              
              
              
              (85,000
              )Stock
      options compensation
              
              
              153,000
              
              
              
              130,000Amortization
              
              
              228,000
              
              
              
              385,000Gain
      on settlement of debt
              
              
              -
              
              
              
              (567,000
              )Gain
      on sale of property & equipment
              
              
              (20,000
              )
              
              
              -Changes
      in current assets and liabilities:Decrease
      (increase) in:Accounts
      receivable
              
              
              (777,000
              )
              
              
              (67,000
              )Inventories
              
              
              (298,000
              )
              
              
              (331,000
              )Other
      current assets
              
              
              (37,000
              )
              
              
              (18,000
              )Deferred
      tax asset
              
              
              574,000
              
              
              
              295,000Increase
      (decrease) in:Accounts
      payable
              
              
              (22,000
              )
              
              
              (413,000
              )Accrued
      income taxes
              
              
              -
              
              
              
              (27,000
              )Accrued
      expenses
              
              
              366,000
              
              
              
              (157,000
              )Net
      cash provided by operating activities
              
              
              2,361,000
              
              
              
              806,000Cash
      Flows from Investing Activities:Purchases
      of property and equipment
              
              
              (186,000
              )
              
              
              (105,000
              )Net
      cash used in investing activities
              
              
              (186,000
              )
              
              
              (105,000
              )Cash
      Flows from Financing Activities:Acquisition
      of treasury stock
              
              
              (27,000
              )
              
              
              -Proceeds
      from exercise of stock options
              
              
              17,000
              
              
              
              75,000Payments
      on line of credit
              
              
              (335,000
              )
              
              
              (378,000
              )Payments
      on notes payable
              
              
              (33,000
              )
              
              
              (22,000
              )Principal
      payments on capital lease obligations
              
              
              (51,000
              )
              
              
              -Net
      cash used in financing activities
              
              
              (429,000
              )
              
              
              (325,000
              )Net
      increase in Cash and Cash Equivalents
              
              
              1,746,000
              
              
              
              376,000Cash
      and Cash Equivalents, beginning of period
              
              
              1,581,000
              
              
              
              1,205,000Cash
      and Cash Equivalents, end of period
              
              $
              3,327,000
              
              
              $
              1,581,000




The
accompanying notes are an integral part of these consolidated financial
statements.




27


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




1.
Line of Business




AML
Communications is a producer and marketer of specialized amplifiers and
integrated assemblies for the defense electronic warfare industry. The Company
currently conducts its operations through two reportable segments:
(1) microwave amplifiers and related products that are designed,
manufactured, and marketed by the Company, and (2) the UltraSatNet, an
Intelligent Satellite Utility Communication Solution for the monitoring and
control of power grid distribution, that are designed, manufactured, and
marketed through its wholly owned subsidiary, Mica-Tech, Inc.




2.
Summary of Significant Accounting Policies




Principles
of Consolidation




The
accompanying consolidated financial statements include the accounts of AML
Communications, Inc. (“AML”), including its MPI division, and its wholly
owned subsidiary, Mica-Tech, Inc. (“Mica-Tech”), (collectively, the
“Company”, “We” or “us”). All significant inter-company accounts and
transactions have been eliminated in consolidation.




Cash
and Cash Equivalents:




Equivalents





For
purposes of the statement of cash flows, cash equivalents include all highly
liquid debt instruments with original maturities of three months or
less.





Concentration


As of
March 31, 2010, the Company had cash and cash equivalent balances totaling
$3,327,000 in financial institutions, which were fully insured by Federal
Deposit Insurance Corporation (FDIC).




Credit
Risk




The
Company performs ongoing credit evaluations of its customers’ financial
conditions and generally does not require collateral on accounts receivable,
therefore, the accounts receivable are unsecured and the Company is at risk to
the extent that such amounts become non-collectable. During our 2010 fiscal
year, the Company had sales to two customers that represented 16.8% and 7.9% of
net sales, respectively, as compared to our 2009 fiscal year, in which the
Company had sales to two customers, which represented 22.6% and 5.5% of net
sales, respectively. As of March 31, 2010, these two customers comprised
16.3% and 23.1% of accounts receivable, respectively.




The
Company’s customers are comprised primarily of defense subcontractors and
original equipment manufacturers (“OEMs”). Customers are located primarily
throughout the United States. However, the Company also sells to customers
worldwide. During the fiscal year ended March 31, 2010, international sales
were $4.9 million, or 30.2% of net sales, as compared to $2.9 million,
or 21.9% of net sales in fiscal year ended March 31, 2009.




Revenue
Recognition




We
generate our revenue through the sale of products. Our policy is to recognize
revenue when the applicable revenue recognition criteria have been met, which
generally include the following:




•
            Persuasive evidence of an
      arrangement exists;




•
            Delivery has occurred or
      services have been rendered;




•
            Price is fixed or
      determinable; and




•
            Collectability is reasonably
      assured




28


Revenue
from the sale of products is generally recognized after both the goods are
shipped to the customer and acceptance has been received, if required. Our
products are custom made for our customers, who primarily consist of original
equipment manufacturers (OEMs), and we do not accept returns. Our products are
shipped complete and ready to be incorporated into higher level assemblies by
our customers. The terms of the customer arrangements generally pass title and
risk of ownership to the customer at the time of shipment.




Recording
revenue from the sale of products involves the use of estimates and management
judgment. We must make a determination at the time of sale whether the customer
has the ability to make payments in accordance with arrangements. While we do
utilize past payment history, and, to the extent available for new customers,
public credit information in making our assessment, the determination of whether
collectability is reasonably assured is ultimately a judgment decision that must
be made by management.




Allowance for Doubtful
Accounts.




We
maintain an allowance for doubtful accounts receivable based on
customer-specific allowances, as well as a general allowance. Specific
allowances are maintained for customers which are determined to have a high
degree of collectability risk based on such factors, among others, as:
(i) the aging of the accounts receivable balance; (ii) the customer’s
past payment experience; or (iii) a deterioration in the customer’s
financial condition, evidenced by weak financial condition and/or continued poor
operating results, reduced credit ratings, and/or a bankruptcy filing. In
addition to the specific allowance, we maintain a general allowance for all of
our accounts receivables that are not covered by a specific allowance. The
general allowance is established based on such factors, among others, as:
(i) the total balance of the outstanding accounts receivable, including
considerations of the aging categories of those accounts receivable;
(ii) past history of uncollectible accounts receivable write-offs; and
(iii) the overall creditworthiness of the customer base.




The
Company recorded $98,000 and $99,000 of allowance for doubtful accounts
receivable at the end of March 31, 2010 and March 31, 2009,
respectively.




Inventories




Inventories
are stated at the lower of cost or market, cost being determined on the
first-in, first-out method. Inventories are written down if the estimated net
realizable value is less than the recorded value. We review the carrying cost of
our inventories by product each quarter to determine the adequacy of our
reserves for obsolescence. In accounting for inventories we must make estimates
regarding the estimated net realizable value of our inventory. This estimate is
based, in part, on our forecasts of future sales and age of the
inventory.




Inventories
include costs of material, and manufacturing overhead on work-in-process and
finished goods, and are stated at the lower of cost (first-in, first-out) or
market and consist of the following:




March 31,
      2010
                  
                  
                  March 31,
      2009Raw
      materials, net
                  
                  $
                  2,576,000
                  
                  
                  $
                  2,280,000Work
      in process
                  
                  
                  678,000
                  
                  
                  
                  873,000Finished
      goods
                  
                  
                  244,000
                  
                  
                  
                  137,000$
                  3,498,000
                  
                  
                  $
                  3,290,000




The
reserve for inventory was $414,000 at March 31, 2010 and $324,000 at
March 31, 2009.




Depreciation
and Amortization




Property
and equipment are being depreciated on the straight-line basis over the
following estimated useful lives:




Machinery
      and equipment
                  3
      to 5 yearsFurniture
      and fixtures
                  5 yearsLeasehold
      improvements
                  Shorter
      of life of lease or life of improvementBuilding
                  30 years




Depreciation
expense for the years ended March 31, 2010 and March 31, 2009 was
$627,000 and $699,000 respectively.




The
Company capitalizes expenditures that materially increase asset lives and
charges ordinary repairs and maintenance to operations as incurred. When assets
are sold or otherwise disposed of, the cost and related depreciation or
amortization is removed from the accounts and any resulting gain or loss is
included in other income (expense) in the accompanying statements of
operations.




29




Property
and equipment consist of the following:




March 31,
      2010
                  
                  
                  March 31,
      2009Building
                  
                  $
                  800,000
                  
                  
                  $
                  800,000Machinery
      and equipment
                  
                  
                  5,467,000
                  
                  
                  
                  5,631,000Furniture
      and fixtures
                  
                  
                  209,000
                  
                  
                  
                  192,000Leasehold
      improvements
                  
                  
                  696,000
                  
                  
                  
                  690,000Leased
      assets
                  
                  
                  245,000
                  
                  
                  
                  -Accumulated
      depreciation
                  
                  
                  (5,534,000
                  )
                  
                  
                  (5,229,000
                  )$
                  1,883,000
                  
                  
                  $
                  2,084,000




Intangible
Assets




The
Company accounts for its intangible assets under the applicable guidelines of
Financial Accounting Standards Board Accounting Standards Codification (FASB
ASC) 350, “Intangibles – Goodwill and Other” (formerly SFAS 142 “Goodwill
and other intangible assets”) and FASB ASC 360, “Property, Plant, and Equipment”
(formerly SFAS 144 “accounting for the impairment or disposal of long lived
assets”). Where intangible assets have finite lives, they are amortized over
their useful life unless factors exist to indicate that the asset has been
impaired. The Company evaluates if the assets are impaired annually or on an
interim basis if an event occurs or circumstances change to suggest that the
assets value has diminished. Under FASB ASC 360, when deemed necessary, the
Company completes the evaluation of the recoverability of its long-lived assets
by comparing the carrying amount of the assets against the estimated
undiscounted future cash flows associated with them. If such evaluations
indicate that the future undiscounted cash flows of long-lived assets are not
sufficient to recover the carrying value of such assets, the assets are adjusted
to their estimated fair values. Under FASB ASC 360 intangible assets with
indefinite useful lives are required to be tested annually for impairment or
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If the assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying
amount exceeds the fair value of the assets. During the year ended
March 31, 2010, the Company recognized no impairment.




At
March 31, 2010, intangibles consisted of the following:




Intangibles
                  
                  Gross
      Carrying
                      Amount
                  
                  
                  Accumulated
                      Amortization
                  
                  
                  NetAmortized
      intangibles:Patents
                  
                  $
                  189,000
                  
                  
                  $
                  (138,000
                  )
                  
                  $
                  51,000Existing
      Technology
                  
                  
                  2,504,000
                  
                  
                  
                  (921,000
                  )
                  
                  
                  1,583,000Customer
      Lists
                  
                  
                  339,000
                  
                  
                  
                  (339,000
                  )
                  
                  
                  —Customer
      Relationship
                  
                  
                  50,000
                  
                  
                  
                  (18,000
                  )
                  
                  
                  32,000Trademarks
      and Brand Name
                  
                  
                  24,000
                  
                  
                  
                  (3,000
                  )
                  
                  
                  21,000Unamortized
      intangibles:Trademarks
                  
                  
                  181,000
                  
                  
                  
                  —
                  
                  
                  
                  181,000$
                  3,287,000
                  
                  
                  $
                  (1,419,000
                  )
                  
                  $
                  1,868,000




At
March 31, 2009, intangibles consisted of the following:




Intangibles
                
                Gross
      Carrying
                    Amount
                
                
                Accumulated
                    Amortization
                
                
                NetAmortized
      intangibles:Patents
                
                $
                189,000
                
                
                $
                (114,000
                )
                
                $
                75,000Existing
      Technology
                
                
                2,504,000
                
                
                
                (726,000
                )
                
                
                1,778,000Customer
      Lists
                
                
                339,000
                
                
                
                (339,000
                )
                
                
                —Customer
      Relationship
                
                
                50,000
                
                
                
                (9,000
                )
                
                
                41,000Trademarks
      and Brand Name
                
                
                24,000
                
                
                
                (2,000
                )
                
                
                22,000Unamortized
      intangibles:Trademarks
                
                
                181,000
                
                
                
                —
                
                
                
                181,000$
                3,287,000
                
                
                $
                (1,190,000
                )
                
                $
                2,097,000




Due to
the acquisition of MPI in the quarter ended June 30, 2004 and the
acquisition of Mica-Tech on April 11, 2007 (51%) and February 19, 2008
(100%), we recorded the intangible assets above.




30




For the
intangible assets we acquired from the MPI acquisition, we assigned an 8-year
life to Patents, a 12-year life to Existing Technology, and a 3-year life to
Customer Lists. All items are subject to amortization. The value assigned to
Trademarks, which have an indefinite life, should not be amortized and is
subject to an annual impairment testing. Since AML acquired the stock of MPI,
the amortization of separately identified intangibles is not deductible for tax
purposes.  FASB ASC 740, “Income Taxes” (formerly FAS 109), requires
the Company to set up a deferred tax liability for its separately identified
intangibles and book the offset to goodwill.  When the Company was
reviewing the purchase price allocation related to the Mica Tech acquisition
during our 2008 fiscal year, it realized that it should have recorded a goodwill
adjustment related to the separately identified intangibles that were
established at the MPI acquisition. As a result, we recorded a proper adjustment
to increase the value of subject intangible asset by $697,000 and associated
amortization expense of $58,000 for the twelve months ended March 31, 2008
during our 2008 fiscal year. Furthermore, as per the comments the Company
received from the Staff of Securities and Exchange Commission in March 2009, MPI
recorded a one time catch-up entry of $162,000 to book amortization expense
associated with the subject intangible assets for the period of June 19, 2004
through March 31, 2007. This entry was recorded in March 2009.




For
the intangible assets we acquired from the Mica-Tech acquisition, we initially
assigned a 12-year life to Existing Technology, a 3-year life to Customer
Relationship, a 1-year life to Backlog and an indefinite life to Trademarks and
Brand Names. During the quarter ended September 30, 2007, Mica-Tech’s
management thoroughly reevaluated the life span of Mica-Tech’s intangible asset
and assigned a new life span to these intangible assets: a 15-year life to
Existing Technology, a 6-year life to Customer Relationship, and a 15-year life
to Trademarks and Brand Names. All items stated are subject to amortization.
Backlog was amortized on fulfillment of orders.




Upon the
acquisition of Mica-Tech’s remaining interest on February 19, 2008,
Mica-Tech’s intangible assets were revalued by an appraiser to find out the fair
value of minority interest on the date of 100% acquisition of Mica Tech. The new
fair market values of Mica-Tech’s intangible assets, after any associated tax
adjustments, are reflected on the financial statement. As per the comments the
Company received from the Staff of the Securities and Exchange Commission in
March 2009, the balance of Mica-Tech’s intangibles and  associated
accumulated amortizations as of March 31, 2008 was reduced by $440,000 to
reflect the true acquisition cost of Mica-Tech’s assets on February 19,
2008.




During
the preparation of a Federal Income Tax return for the year ended March 31,
2008, the Company determined that Mica Tech had more attributes to be carried
over into the Company’s tax return than were estimated in the FASB ASC 740
calculation for the year ended March 31, 2008.  As such, this change in
estimation increased the Company’s deferred taxes for the additional attributes,
such as R&D credits and NOL credits, reflected on the Company’s Federal
Income Tax return filed for the year ended March 31, 2008. This tax adjustment
resulted in a reduction in Mica-Tech’s intangibles by $615,000.




Amortization
expense from continuing operation for the year ended March 31, 2010 was
$228,000, compared to $385,000 for the year ended March 31, 2009. The Company
expects the amortization expenses for the next five years to be as
follows:




Year
      Ending March 31,
                
                Annual
      Amount2011
                
                $
                228,0002012
                
                $
                228,0002013
                
                $
                208,0002014
                
                $
                204,0002015
                
                $
                196,000




Warranty
and Customer Support




The
Company typically warrants its products against defects in materials and
workmanship for a period of one year from the date of shipment. A provision for
estimated future warranty and customer support is recorded when products are
shipped. To date, warranty and customer support costs have not been
material.




Earnings
Per Share




FASB ASC
260, “Earnings Per Share”, (formerly SFAS No. 128) requires the
presentation of basic earnings per share and diluted earnings per share. Basic
and diluted earnings per share computations are presented by the Company conform
to the standard and are based on the weighted average number of shares of Common
Stock outstanding during the year.




31




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, and the dilutive effect of outstanding stock
options (applying the treasury stock method).




The
Company had 1,938,000 of granted stock options that were exercisable as of
March 31, 2010 and 1,781,000 of granted stock options and warrants
exercisable at March 31, 2009.




The
following is a reconciliation of the numerators and denominators of the basic
and diluted earnings per share computations:




Year
      ended March 31, 2010
                
                Net
      Income
                
                
                Shares
                
                
                Per
      ShareBasic
      earnings per shares:Net
      income available to common stockholders
                
                $
                1,478,000
                
                
                
                10,631,000
                
                
                $
                0.14Effect
      of dilutive securities:Stock
      options
                
                
                
                
                
                
                193,000Diluted
      earnings per share:
                
                $
                1,478,000
                
                
                
                10,824,000
                
                
                $
                0.14





Year
      ended March 31, 2009
                
                Net
      Income
                
                
                Shares
                
                
                Per
      ShareBasic
      earnings per shares:Net
      income available to common stockholders
                
                $
                959,000
                
                
                
                10,575,000
                
                
                $
                0.09Effect
      of dilutive securities:Stock
      options
                
                
                
                
                
                
                113,000Diluted
      earnings per share:
                
                $
                959,000
                
                
                
                10,688,000
                
                
                $
                0.09




Segments




The
Company has two reportable segments consisting of (1) AML and (2) Mica-Tech. Our
AML segment includes the Camarillo operations which manufactures and sells low
noise and high power amplifiers with frequencies that range from 10MHz to 40GHz
and the Santa Clara operations which manufactures and sells solid state
microwave amplifiers operating in the frequency range from 1 to 40 GHz with
output power from 0.5W to 300W. Our Mica-Tech segment designs, manufactures and
markets an intelligent satellite communication system that provides a highly
reliable and secure communications link between remote sites and control
centers, utilizing Supervisory Control And Data Acquisition (SCADA) technology.
The Company evaluates performance based on sales, gross profit margins, and
operating profit before income taxes.




32


The
following is information for the Company’s two reportable segments for the years
ended March 31, 2010 and March 31, 2009.





Twelve
      Month Periods Ended(In
      thousands)
                                  
                                  March 31, 2010
                                  
                                  
                                  March 31, 2009Revenue
      from unrelated entitiesAML
                                  
                                  $
                                  15,804
                                  
                                  
                                  $
                                  12,701Mica-tech
                                  
                                  
                                  513
                                  
                                  
                                  
                                  587$
                                  16,317
                                  
                                  
                                  $
                                  13,288Income
      (loss) from operationsAML
                                  
                                  $
                                  2,271
                                  
                                  
                                  $
                                  1,097Mica-tech
                                  
                                  
                                  2
                                  
                                  
                                  
                                  (215
                                  )$
                                  2,273
                                  
                                  
                                  $
                                  882Income
      tax benefit (expense)AML
                                  
                                  $
                                  (739
                                  )
                                  
                                  $
                                  (293
                                  )Mica-tech
                                  
                                  
                                  2
                                  
                                  
                                  
                                  (97
                                  )$
                                  (737
                                  )
                                  
                                  $
                                  (390
                                  )Net
      income (loss)AML
                                  
                                  $
                                  1,483
                                  
                                  
                                  $
                                  721Mica-tech
                                  
                                  
                                  (5
                                  )
                                  
                                  
                                  238$
                                  1,478
                                  
                                  
                                  $
                                  959Provision
      for depreciation and amortizationAML
                                  
                                  $
                                  771
                                  
                                  
                                  $
                                  994Mica-tech
                                  
                                  
                                  84
                                  
                                  
                                  
                                  90$
                                  855
                                  
                                  
                                  $
                                  1,084Capital
      expendituresAML
                                  
                                  $
                                  186
                                  
                                  
                                  $
                                  105Mica-tech
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -$
                                  186
                                  
                                  
                                  $
                                  105As of March 31, 2010
                                  
                                  
                                  As of March 31, 2009Total
      AssetsAML
                                  
                                  $
                                  16,913
                                  
                                  
                                  $
                                  15,008Mica-tech
                                  
                                  
                                  1,283
                                  
                                  
                                  
                                  1,423$
                                  18,196
                                  
                                  
                                  $
                                  16,431




Use
of Estimate in Preparation of Financial Statements




The
preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.




Product
Lines




The
Company operates as two reportable business segments. The AML segment designs
and manufactures RF and microwave, power and low noise, medium and high power
amplifiers for a variety of frequency ranges and transmission protocols serving
the defense microwave and commercial microwave markets. Its Santa Clara
operations manufacture solid state microwave amplifiers. This proprietary
technology is especially designed for broadband and high power. Some typical
applications include telecommunications, radar, simulators, transmitters, and
test instrumentation. Mica-Tech designs and manufactures an intelligent
satellite communication system to provide Supervisory Control And Data
Acquisition (SCADA) of the electric power grid. The revenues earned by each
product line are as follows:




For the
Fiscal Year Ended March 31, 2010:




(Dollars
      in thousands)
                      
                      AML
                      
                      
                      
                      
                      
                      Mica-Tech
                      
                      
                      
                      
                      
                      TotalRevenuesDefense
      microwave and other
                      
                      $
                      15,804
                      
                      
                      
                      96.9
                      %
                      
                      $
                      —
                      
                      
                      
                      —
                      
                      
                      $
                      15,804
                      
                      
                      
                      96.9
                      %Satellite
      communication systems
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      513
                      
                      
                      
                      3.1
                      %
                      
                      
                      513
                      
                      
                      
                      3.1Total
      net sales
                      
                      $
                      15,804
                      
                      
                      
                      96.9
                      %
                      
                      $
                      513
                      
                      
                      
                      3.1
                      %
                      
                      $
                      16,317
                      
                      
                      
                      100.0
                      %




For the
Fiscal Year Ended March 31, 2009:




(Dollars
      in thousands)
                
                AML
                
                
                
                
                
                Mica-Tech
                
                
                
                
                
                TotalRevenuesDefense
      microwave and other
                
                $
                12,701
                
                
                
                95.6
                %
                
                $
                —
                
                
                
                —
                
                
                $
                12,701
                
                
                
                95.6
                %Satellite
      communication systems
                
                
                —
                
                
                
                —
                
                
                
                587
                
                
                
                4.4
                %
                
                
                587
                
                
                
                4.4Total
      net sales
                
                $
                12,701
                
                
                
                95.6
                %
                
                $
                587
                
                
                
                4.4
                %
                
                $
                13,288
                
                
                
                100.0
                %




33




The
following table summarizes the international sales by segment for the fiscal
year ended March 31, 2010:




(Dollars
      in thousands)
                
                AML
                
                
                
                
                
                Mica-Tech
                
                
                
                
                
                TotalInternational
      Sales
                
                $
                4,923
                
                
                
                30.2
                %
                
                
                —
                
                
                
                —
                
                
                $
                4,923
                
                
                
                30.2
                %Domestic
      sales
                
                
                10,881
                
                
                
                66.7
                
                
                
                513
                
                
                
                3.1
                
                
                
                11,394
                
                
                
                69.8Total
      Sales
                
                $
                15,804
                
                
                
                96.9
                %
                
                $
                513
                
                
                
                3.1
                %
                
                $
                16,317
                
                
                
                100.0
                %




The
following table summarizes the international sales by segment for the fiscal
year ended March 31, 2009:




(Dollars
      in thousands)
                
                AML
                
                
                
                
                
                Mica-Tech
                
                
                
                
                
                TotalInternational
      Sales
                
                $
                2,907
                
                
                
                21.9
                %
                
                
                —
                
                
                
                —
                
                
                $
                2,907
                
                
                
                21.9
                %Domestic
      sales
                
                
                9,794
                
                
                
                73.7
                
                
                
                587
                
                
                
                4.4
                
                
                
                10,381
                
                
                
                78.1Total
      Sales
                
                $
                12,701
                
                
                
                95.6
                %
                
                $
                587
                
                
                
                4.4
                %
                
                $
                13,288
                
                
                
                100.0
                %





Research
and Development Costs




Costs
incurred in research and development activities are expensed as
incurred.




Fair
Value of Financial Instruments




The
Company measures its financial assets and liabilities in accordance with
generally accepted accounting principles. For certain of the Company’s financial
instruments, including cash and cash equivalents, accounts receivable, notes
payable—related parties, accounts payable, and accrued expenses, the carrying
amounts approximate fair value due to their short maturities. The amount shown
for short-term loans also approximates fair value because current interest rates
offered to the Company for short-term loans of similar maturities are
substantially the same or the difference is immaterial.




Stock-Based
Compensation




The
Company accounts for stock-based compensation in accordance with FASB ASC 718,
“Compensation – Stock Compensation” (formerly SFAS No. 123 (Revised 2004),
Share Based Payment
(“SFAS No. 123R”)). FASB ASC 718 requires companies to measure and
recognize the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value.




The
Company recognized $153,000 or $0.01 per basic and diluted earnings per share in
share-based compensation expense for the year ended March 31, 2010 and
$130,000 or $0.01 per basic and diluted earnings per share in share-based
compensation expense for the year ended March 31, 2009. The fair value of
our stock options was estimated using the Black-Scholes option pricing
model.




The
weighted average assumptions used in calculating the fair value of options
granted using the Black-Scholes option-pricing model are as
follows:




Risk-free
      interest rate
                  
                  
                  4.4
                  %Expected
      life of the options
                  
                  7.27 yearsExpected
      volatility
                  
                  
                  64.5
                  %Expected
      dividend yield
                  
                  
                  —




The
weighted average fair value of options granted as of March 31, 2010 was
$0.66 per share.




Advertising
Costs




The
Company expenses advertising costs as incurred. Advertising costs for the years
ended March 31, 2010 and 2009 were $76,000 and $70,000,
respectively.




34


Recently
Issued Accounting Pronouncements




In June
2009, the FASB issued ASC 855 (previously SFAS No. 165, Subsequent Events), which
establishes general standards of accounting for and disclosures of events that
occur after the balance sheet date but before the financial statements are
issued or available to be issued. It is effective for interim and annual periods
ending after June 15, 2009. There was no material impact upon the adoption of
this standard on the Company’s consolidated financial statements.





In
June 2009, the FASB issued ASC 860 (previously SFAS No. 166,
“Accounting for Transfers of Financial Assets”) , which requires additional
information regarding transfers of financial assets, including securitization
transactions, and where companies have continuing exposure to the risks related
to transferred financial assets. SFAS 166 eliminates the concept of a
“qualifying special-purpose entity,” changes the requirements for derecognizing
financial assets, and requires additional disclosures. SFAS 166 is effective for
fiscal years beginning after November 15, 2009. The Company does not
believe this pronouncement will impact its financial statements.





In
June 2009, the FASB issued ASC 810 (previously SFAS No. 167) for
determining whether to consolidate a variable interest entity. These amended
standards eliminate a mandatory quantitative approach to determine whether a
variable interest gives the entity a controlling financial interest in a
variable interest entity in favor of a qualitatively focused analysis, and
require an ongoing reassessment of whether an entity is the primary beneficiary.
This Statement shall be effective for reporting period that begins after
November 15, 2009. The Company does not believe this pronouncement will impact
its financial statements.





In June
2009, the FASB issued new guidance which is now part of ASC 105-10, “The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles” (ASC 105-10) (formerly Statement of Financial Accounting
Standards No. 168),  establishes the FASB Accounting Standards
Codification as the source of authoritative accounting principles recognized by
the FASB to be applied by nongovernmental entities in the preparation of
financial statements in conformity with generally accepted accounting
principles. ASC 105-10 is effective for interim and annual periods ending after
September 15, 2009. The adoption of ASC 105-10 did not have a material impact on
the Company’s consolidated financial statements.





In August
2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends
ASC Topic 820, Measuring
Liabilities at Fair Value, which provides additional guidance on the
measurement of liabilities at fair value. These amended standards clarify that
in circumstances in which a quoted price in an active market for the identical
liability is not available, we are required to use the quoted price of the
identical liability when traded as an asset, quoted prices for similar
liabilities, or quoted prices for similar liabilities when traded as assets. If
these quoted prices are not available, we are required to use another valuation
technique, such as an income approach or a market approach. These amended
standards are effective from October 1, 2009, and do not have a significant
impact on our consolidated financial statements.





In
January 2010, the FASB issued ASU No. 2010-06 Fair Value Measurements and
Disclosures Topic 820 “Improving Disclosures about Fair Value
Measurements”.  This ASU requires some new disclosures and clarifies
some existing disclosure requirements about fair value measurement as set forth
in Codification Subtopic 820-10. The FASB’s objective is to improve these
disclosures and, thus, increase the transparency in financial
reporting. This pronouncement is effective for interim and annual reporting
periods beginning after December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measurements.  Those disclosures are effective for
fiscal years beginning after December 15, 2010, and for interim periods within
those fiscal years. The adoption of this ASU will not have a material
impact on the Company’s consolidated financial statements.





In
October 2009, the FASB issued guidance on revenue recognition that will become
effective for the Company beginning July 1, 2010, with earlier adoption
permitted. Under the new guidance on arrangements that include software
elements, tangible products that have software components that are essential to
the functionality of the tangible product will no longer be within the scope of
the software revenue recognition guidance, and software-enabled products will
now be subject to other relevant revenue recognition guidance. Additionally, the
FASB issued guidance on revenue arrangements with multiple deliverables that are
outside the scope of the software revenue recognition guidance. Under the new
guidance, when vendor specific objective evidence or third party evidence for
deliverables in an arrangement cannot be determined, a best estimate of the
selling price is required to separate deliverables and allocate arrangement
consideration using the relative selling price method. The new guidance includes
new disclosure requirements on how the application of the relative selling price
method affects the timing and amount of revenue recognition. We believe adoption
of this new guidance will not have a material impact on our financial
statements.




35


3.
Debt and Lease Commitments




Line
of Credit




At March
31, 2010, AML had a line of credit agreement with Bridge Bank. On September 16,
2008, we signed a Business Financing Modification Agreement (the “Modification
Agreement”) with Bridge Bank to renew our line of credit, with a credit facility
of $1.3 million. Of this $1.3 million, $1.0 million may be used for
cash advances against accounts receivables and $0.3 million may be used for
equipment advances. Our ability to borrow under this agreement varies based upon
eligible accounts receivable and eligible equipment purchases. We are obligated
to pay the bank a finance charge at a rate per year equal to the prime rate,
which in no event shall be less than 5.00%, plus 0.25% with respect to cash
advances, and a rate of such prime rate plus 1.0% with respect to equipment
advances. We were obligated to pay a facility fee of $2,500 upon execution of
the Modification Agreement and annually thereafter. We were also obligated to
pay a one-time equipment loan facility fee of $2,500 upon execution of the
Modification Agreement.  We must maintain certain financial
requirements, including a minimum Asset Coverage Ratio of 1.50 to 1.00. We are
also required to stay within 80% of our planned quarterly revenue. We were in
compliance with these requirements at March 31, 2010; however, there is no
assurance that we will be in compliance at future dates. This agreement to
provide cash advances against accounts receivables terminates on August 15, 2010
or upon a date that the bank or AML chooses to terminate the agreement. Any
unpaid balance is due and payable pursuant to the agreement on the termination
date. Bridge Bank maintains a perfected first priority security interest in all
of our assets, including intellectual property and general intangibles currently
owned or later acquired. At March 31, 2010, we had an outstanding balance of $0
under the accounts receivable agreement and $116,000 under the equipment
financing agreement, which includes amounts owed under prior lines of credit
with Bridge Bank. These lines of credit mature in July 2011. Our remaining
borrowing capacity is approximately $1,000,000 under the accounts receivable
agreement and $0 under the equipment financing agreement as the availability
period for the equipment term loan expired as of December 31,
2008.  Interest expense for the year ended March 31, 2010 and 2009 was
$18,000 and $47,000, respectively for the Bridge bank line of
credit




As of
March 31, 2010, Mica-Tech had a line of credit with Santa Barbara Bank and Trust
and Wells Fargo. At March 31, 2010, the outstanding balance was $37,000 for the
Santa Barbara Bank and Trust line and $8,000 for the Wells Fargo line. Our
remaining borrowing capacity was $0 under the Santa Barbara Bank and Trust line
and $0 under the Wells Fargo line as of March 31, 2010. Interest expense for the
year ended March 31, 2010 and 2009 was $5,000 and $6,000, respectively for the
above line of credit.




Note
Payable




On
February 3, 2006 the company purchased the building that houses MPI, which
is located at 3350 Scott Blvd. 25 Santa Clara, California, for a purchase price
of $800,000. The Company made a down payment of $160,000. The building is being
financed by the bank promissory note in the amount of $640,000 with 6.760%
interest payable in 83 regular payments of $4,425.88, each which includes
principal and interest, and one irregular last payment of $556,594.48. The
Company’s final payment is due February 10, 2013 and will be for all
principal and interest not yet paid. The note payable is secured by the deed of
trust on the building. As of March 31, 2010, the outstanding note amounted
to $580,000 with $13,000 in current portion. Interest expense for the year ended
March 31, 2010 and 2009 was $40,000 and $41,000, respectively for the above note
payable.




On
December 20, 2006, Mica-Tech raised $200,000 from an outside investor in
the form of short term note payable. The funds were used for working capital.
Mica-Tech agreed to repay the loan in four consecutive monthly payments of
$50,000 plus interest accrued at 7% per annum. The short term note payable is
unsecured. In April 2007, Mica-Tech amended the terms of the note and revised
the interest rate from 7% to 10% and the payment schedule from $50,000 a month
to $25,000 a month until paid in full. Mica-Tech defaulted on its monthly
payments from November 2007 to December 2009, due to a cash deficiency. The
default was waived by the lender at no cost. In January 2010, Mica-Tech agreed
to pay $25,000 toward the total amount owed and thereafter 12 equal monthly
payments in the amount of $1,994.03. The total amount remaining on the note at
March 31, 2010 was $17,000. Interest expense for the year ended March 31,
2010 and 2009 was $3,000 and $4,000, respectively for the above note
payable.




Mica-Tech
was advanced working capital from its former president and a major shareholder,
over a period of time which totaled to $685,000 as of April 10,
2007.  On April 10, 2007, Mica-Tech converted these advancements in
the form of a single note for the amount of $685,000, with an annual interest
rate of 10%.  Of the $685,000, $200,000 was converted into 200,000
shares of Mica-Tech’s common stock at the closing of the acquisition on April
11, 2007.  In connection with the merger on February 19, 2008,
Mica-Tech and Steven Ow entered into an amended and restated promissory note in
the principal amount of $522,000. The interest rate on the note was reduced to
8% per annum and the maturity date was extended until April 4, 2010. On
May 19, 2008, Mica-Tech and Steven Ow entered into an agreement that
settles the promissory note in the amount of $531,000, including $9,000 in
accrued interest, and deferred compensation of $128,000. The consideration for
this settlement was $150,000 in cash, which would be paid by three equal
payments of $40,000 and one last payment of $30,000. As part of settlement, the
Company recorded gain on settlement of debt amounting to $521,000 during the
period ended June 30, 2008. As of March 31, 2010, Mica-Tech paid $130,000 toward
the settlement amount and the remaining amount due to Steven Ow was $20,000
which was part of the last payment. No interest expense was incurred on the
amount due to Steven Ow.




36




Capital
Lease Obligations




In June
2009, the Company had entered into a non-cancelable capital lease agreement to
acquire test equipment valued in the aggregate at approximately $245,000. The
lease began in June 2009 and requires thirty-six equal monthly payments of
$6,445, plus applicable sales tax.




Future
      minimum lease payments under the lease for the periodended
      March 31, 2010
                  
                  $
                  186,000Less:
      approximate amount representing interest
                  
                  
                  (18,000
                  )Present
      value of minimum lease payments
                  
                  
                  168,000Less:
      current portion
                  
                  
                  (65,000
                  )Non
      current portion
                  
                  $
                  103,000





The
future aggregate payments arising from these loans (line of credit, note payable
and capital lease obligation) are as follows:




Annual
      AmountDue
      during the fiscal year ended March 31,2011
                
                $
                262,0002012
                
                
                122,0002013
                
                
                584,000Thereafter
                
                
                —$
                968,000




Operating
Lease Obligations




The lease
for AML’s office space and manufacturing facility expired in April 2008 and
we entered into a new lease, which will expire in April 2015. Until they
moved into the AML facility in May 2008, Mica-Tech was leasing its office space
and manufacturing facility under an operating lease expired in
October 2008. Total rent expense under these operating leases was
approximately $207,000 and $236,000 during the years ended March 31, 2010
and 2009, respectively.




Total
minimum lease payments under the above lease are as follows:




Operating
      LeasesYear
      ending March 31,2011
                  
                  $
                  210,0002012
                  
                  
                  219,0002013
                  
                  
                  224,0002014
                  
                  
                  228,0002015
                  
                  
                  233,000Thereafter
                  
                  
                  19,000$
                  1,133,000




4.   Income
Taxes




The Company uses the liability method
of accounting for income taxes as set forth in ASC 740 (formerly Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109")).  Under the liability method, deferred taxes are determined
based on differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates.





The
components of the income tax provision for the years ended March 31, 2009 and
2010 were as follows:





March
      31, 2009
                
                
                March
      31, 2010Current
                
                $
                95,000
                
                
                $
                162,000Deferred
                
                $
                296,000
                
                
                $
                575,000$
                391,000
                
                
                $
                737,000




37


Differences
between the benefit from income taxes and income taxes at the statutory federal
income tax rate for years ended March 31, 2009 and 2010 are as
follows:




March
      31,
                    2009
                  
                  
                  March
      31,
                    2010Amount
                  
                  
                  Percent
                  
                  
                  Amount
                  
                  
                  PercentIncome
      tax expense/(benefit) at statutory federal rate
                  
                  $
                  459,000
                  
                  
                  
                  34.0
                  %
                  
                  $
                  753,000
                  
                  
                  
                  34.0
                  %State
      income taxes, net of federal income tax
                  
                  
                  20,000
                  
                  
                  
                  1.5
                  
                  
                  
                  49,000
                  
                  
                  
                  2.2Effect
      of permanent differences
                  
                  
                  41,000
                  
                  
                  
                  3.0
                  
                  
                  
                  49,000
                  
                  
                  
                  2.2Tax
      credits
                  
                  
                  (129,000
                  )
                  
                  
                  -9.6
                  
                  
                  
                  (114,000
                  )
                  
                  
                  -5.1$
                  391,000
                  
                  
                  
                  29.0
                  %
                  
                  $
                  737,000
                  
                  
                  
                  33.3
                  %




Under ASC
740, deferred tax assets may be recognized for temporary differences that will
result in deductible amounts in future periods and for loss carry
forwards.  A valuation allowance is recognized if, based on the weight
of available evidence, it is more likely than not that some portion or all of
the deferred tax asset will not be realized.  In 2008, the Company
reversed its valuation allowance as management believes it is more likely than
not that all deferred tax assets will be realized.




A detail
of the Company's deferred tax assets and liabilities as of March 31, 2010
follows:




Inventory
      reserves
                  
                  $
                  178,000Allowance
      for doubtful accounts
                  
                  
                  42,000Accrued
      vacation
                  
                  
                  98,000Non-cash
      employee compensation
                  
                  
                  28,000Accrued
      warranty and customer support
                  
                  
                  17,000Accrued
      401(k)
                  
                  
                  69,000State
      taxes
                  
                  
                  (506,000
                  )Other
                  
                  
                  11,000General
      tax credit carry-forwards
                  
                  
                  2,899,000Net
      operating loss carry-forwards
                  
                  
                  2,239,000Depreciation
                  
                  
                  (67,000
                  )Intangible
      Assets
                  
                  
                  (800,000
                  )4,208,000Valuation
      allowance
                  
                  
                  -$
                  4,208,000




As of
March 31, 2010, the Company had federal and state net operating loss
carry-forwards of approximately $5.1 million and $5.6 million, expiring at
various dates through 2029 and 2019, respectively.




A detail
of the Company's deferred tax assets and liabilities as of March 31, 2009
follows:




Inventory
      reserves
                      
                      $
                      139,000Allowance
      for doubtful accounts
                      
                      
                      42,000Accrued
      vacation
                      
                      
                      91,000Non-cash
      employee compensation
                      
                      
                      20,000Accrued
      warranty and customer support
                      
                      
                      14,000Accrued
      401(k)
                      
                      
                      62,000State
      taxes
                      
                      
                      (494,000
                      )Other
                      
                      
                      10,000General
      tax credit carry-forwards
                      
                      
                      2,750,000Net
      operating loss carry-forwards
                      
                      
                      3,107,000Depreciation
                      
                      
                      (61,000
                      )Intangible
      Assets
                      
                      
                      (897,000
                      )4,783,000Valuation
      allowance
                      
                      
                      -$
                      4,783,000


38




As of
March 31, 2009, the Company had federal and state net operating loss
carry-forwards of approximately $7.7 million and $5.6 million, expiring at
various dates through 2027 and 2019, respectively.




In
July 2006, the FASB issued guidance which clarified the accounting for
uncertainty in income taxes recognized in an enterprise's financial statements
(formerly FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes”). This guidance prescribed a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. The guidance also
addressed derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition. These provisions were effective for
fiscal years beginning after December 15, 2006. The cumulative effect of
applying these provisions is to be reported as an adjustment to the opening
balance of retained earnings in the year of adoption. The provisions of this
guidance have been incorporated into ASC 740-10.




As of
March 31, 2010, the Company does not have any unrecognized tax benefits and no
corresponding interest or penalties.  The Company’s policy is to
record interest and penalties as income tax expense. The tax years 2005 through
2008 remain open to examination by the major taxing jurisdictions to which the
Company is subject.  The Company does not anticipate any material
amount of unrecognized tax benefits within the next 12 months.




5.
Stockholders’ Equity




Stock
Option Plan




The
Company’s 2005 Stock Incentive Plan provides for the granting of non-qualified
and incentive stock options to purchase up to 3,500,000 shares of common stock
for periods not to exceed 10 years. Options may be granted to employees,
officers, directors and consultants.




Plan
Duration




In
November 2005, the board established the 2005 Equity Incentive Plan (“2005
Plan”) with 150,000 shares initially approved. The number of shares available
for grant and issuance increases on the first day of January of each year so
that the total of all shares of common stock available for grant and issuance
under the 2005 Plan is the maximum allowed under Regulation 260.140.45 of Title
10 of the California Code of Regulations.  Incentive stock option
awards may be granted under the 2005 Plan only to employees (including officers
and directors who are also employees) of the Company or of a Parent or
subsidiary of the Company. All other awards (including nonqualified stock
options, restricted stock or stock awards) under the 2005 Plan may be granted to
employees, officers, directors, consultants, independent contractors and
advisors of the Company or any Parent or Subsidiary of the Company, provided
such consultants, contractors and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction.




Activity
under the 2005 plan is as follows:




Number
      of
                  Shares
              
              
              Weighted
      Average
                  Exercise
      Price
              
              
              Aggregate
                  Intrinsic
      Value2005
      Equity Incentive PlanOutstanding
      at March 31, 2009
              
              
              2,924,450
              
              
              $
              1.07Granted
              
              
              168,500
              
              
              
              0.90Exercised
              
              
              (26,250
              )
              
              
              0.64Canceled
              
              
              (548,750
              )
              
              
              1.52Outstanding
      at March 31, 2010
              
              
              2,517,950
              
              
              $
              0.97
              
              
              $
              731,000Exercisable
      at March 31, 2010
              
              
              1,937,616
              
              
              $
              0.96




39




The
weighted average fair value for options granted during each year was $0.56 and
$0.47 for our 2010 and 2009 fiscal years, respectively.




The
number of common stock options available for grant as of each year was 2,098,945
for our 2010 fiscal year and 1,795,900 for our 2009 fiscal year.




Options
outstanding at March 31, 2010 and related weighted average price and life
information is as follows:




Range
      of Exercise Prices
              
              Total
                  Options
                  Outstanding
              
              
              Weighted
                  Average
                  Remaining
                  Life
                  (Years)
              
              
              Total
                  Weighted
                  Average
                  Exercise
                  Price
              
              
              Options
                  Exercisable
              
              
              Weighted
                  Average
                  Exercise
      Price$0.11
      - $0.50
              
              
              74,950
              
              
              
              3.04
              
              
              $
              0.15
              
              
              
              74,950
              
              
              $
              0.15$0.51
      - $1.00
              
              
              1,766,000
              
              
              
              5.42
              
              
              $
              0.91
              
              
              
              1,446,000
              
              
              $
              0.92$1.01
      - $2.00
              
              
              662,000
              
              
              
              6.65
              
              
              $
              1.16
              
              
              
              401,666
              
              
              $
              1.20$2.01
      - $5.00
              
              
              15,000
              
              
              
              0.32
              
              
              $
              3.06
              
              
              
              15,000
              
              
              $
              3.06$0.11
      - $5.00
              
              
              2,517,950
              
              
              
              5.77
              
              
              $
              0.97
              
              
              
              1,937,616
              
              
              $
              0.96




Granted




Pursuant
to the 2005 Plan, during the year ended March 31, 2010, the Company granted
168,500 stock options to the Company’s employees and two external directors of
AML, as follows:





On
September 10, 2009, the Company granted a total of 168,500 stock options to
nineteen employees and two external directors as follows: 85,000 stock options
to three AML’s officers as employee compensation, 53,500 stock options to
sixteen employees as employee compensation and 30,000 non qualified stock
options to two external directors.





Of the
first 85,000 stock options granted, 35,000 stock options have a term of five (5)
years and 50,000 stock options have a term of ten (10) years, measured from the
grant date and shall accordingly expire at the close of business on the
expiration date, unless sooner terminated in accordance with the 2005
Plan.  All of the 85,000 stock options are vested at the rate of
thirty three (33) percent per year over a three year period.





The
second 53,500 stock options have a term of ten (10) years measured from the
grant date and shall accordingly expire at the close of business on the
expiration date, unless sooner terminated in accordance with the 2005
Plan.  These options are vested at the rate of twenty (20) percent per
year over a five year period.





The last
30,000 non qualified stock options granted have a term of ten (10) years
measured from the grant date and shall accordingly expire at the close of
business on the expiration date, unless sooner terminated in accordance with the
2005 Plan.  The options are vested at the rate of twenty-five (25)
percent per year over a four year period.





The
option exercise price is $0.90 for all of the 168,500 stock options granted on
September 10, 2009, which was the fair market value of our common stock at the
time these options were granted.




The
assumptions used in calculating the fair value of options granted using the
Black-Scholes option-pricing model are as follows:




Stock
Options Granted on September 10, 2009:





35,000
stock options with a term of 5 years and three year vesting
periods:





Risk-free
      interest rate
                  
                  
                  2.28
                  %Expected
      life of the options
                  
                  3.50
      yearsExpected
      volatility
                  
                  
                  73.41
                  %Expected
      dividend yield
                  
                  
                  0





50,000
stock options with a term of 10 years and three year vesting
periods:


40





Risk-free
      interest rate
                  
                  
                  3.35
                  %Expected
      life of the options
                  
                  6.00
      yearsExpected
      volatility
                  
                  
                  63.49
                  %Expected
      dividend yield
                  
                  
                  0





53,500
stock options with a term of 10 years and five year vesting
periods:





Risk-free
      interest rate
                  
                  
                  3.35
                  %Expected
      life of the options
                  
                  6.50
      yearsExpected
      volatility
                  
                  
                  72.59
                  %Expected
      dividend yield
                  
                  
                  0





30,000
stock options with a term of 10 years and four year vesting
periods:





Risk-free
      interest rate
                  
                  
                  3.35
                  %Expected
      life of the options
                  
                  6.25
      yearsExpected
      volatility
                  
                  
                  72.74
                  %Expected
      dividend yield
                  
                  
                  0




Details
of the Company’s non-vested options are as follows:




Non-Vested
                    Options
                
                
                Weighted
                    Average
                    Exercise
      Price
                
                Weighted
                    Average
                    Vesting
      Period
                
                Grant
      Date
                    Fair
      ValueNon-vested—March 31,
      2009
                
                
                1,143,019
                
                
                $
                1.20
                
                1.84
      YearsGranted
                
                
                168,500
                
                
                
                0.90
                
                
                
                
                94,885Forfeited
                
                
                (476,750
                )
                
                
                1.47Vested
                
                
                (254,435
                )
                
                
                1.00Exercised
                
                
                -Non-vested—March 31,
      2010
                
                
                580,334
                
                
                
                0.98
                
                2.06
      Years




The total
compensation cost not yet recognized related to non-vested stock options is
$257,000, which is expected to be recognized over a period of
2.04 years.




Warrants




No
warrants were outstanding as of March 31, 2010.




6.
Employee Benefit Plan




The
Company has a defined contribution 401(k) employee retirement plan (the “Plan”).
Under the terms of this Safe Harbor Plan, (covering the period of 4/1/09 to
3/31/10) the Qualified Matching Contribution is defined as follows: The matching
contribution of 100% of salary deferral contributions up to 3% of pay, plus 50%
of salary deferral contributions from 3% to 5% of pay for the plan year, fiscal
year ended March 31, 2010. The pay may be restricted to the annual pay
limit announced by the IRS*. (* This limit will be adjusted to reflect any
annual cost-of living increases announced by the IRS.) All eligible employees
may participate in this plan. After meeting the three-month minimum of
employment with the Company, employees become eligible and may choose to enroll
at the next quarterly open enrollment. Contributions to the Plan for the 2010
and 2009 fiscal years were $161,000 and $156,000, respectively.




7.
Legal Proceedings




The
Company may be subject, from time to time, to various legal proceedings relating
to claims arising out of its operations in the ordinary course of its business.
Other than the proceeding described below, the Company currently 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.




41




Mistral
Solutions PVT, LTD. v. Mica-Tech, Inc. and AML Communications, Inc. (Ventura
County Superior Court Case No. 56-2010-00368443-CU-BC-VTA).  On
February 25, 2010, Mistral Solutions PVT, LTD. (“Mistral”) filed a Complaint in
Ventura County Superior Court against Mica-Tech, Inc. (“Mica-Tech”) and AML
Communications, Inc. (“AML”).  On February 26, 2010, Mistral filed a
First Amended Complaint against Mica-Tech and AML, alleging causes of action for
(1) breach of written contract, (2) breach of oral contract, (3) open book
account, (4) account stated, (5) for goods sold and delivered, (6) reasonable
value, (7) conversion, (8) intentional misrepresentation, and (9)
misappropriation of trade secrets.  The Complaint arises out of a
purchase order entered into between Mistral and Mica-Tech for the use of
Mistral’s engineers and support staff to develop software to be used in
satellite-based systems.  Mistral is claiming special damages,
including $303,413.30 on the purchase order, consequential damages, punitive
damages, possession of personal property, preliminary and permanent injunctions
as to Mistral’s trade secrets, attorneys’ fees, prejudgment interest and
costs.  Mica-Tech and AML deny the claims and intend to vigorously
defend against them.  On May 3, 2010, Mica-Tech and AML filed their
Answer to the First Amended Complaint.  In addition, Mica-Tech filed a
Cross-Complaint against Mistral, alleging causes of action for (1) breach of
contract, (2) fraud, (3) intentional misrepresentation, (4) negligent
misrepresentation, (5) breach of implied covenant of good faith and fair
dealing, (6) intentional interference with contract, (7) intentional
interference with prospective economic advantage, (8) negligent interference
with prospective economic advantage, and (9) conversion.  The
Cross-Complaint arises out of false and fraudulent representations made by
Mistral concerning the purchase order and Mistral’s breach of the terms of the
purchase order.  Mica-Tech is seeking compensatory damages of at least
$549,587.50, exemplary damages, attorneys’ fees, interest and
costs.  Mistral has not filed its response to the
Cross-Complaint.  A Case Management Conference is set for August 30,
2010, and no Trial date has been set.




8.
Supplemental Disclosure of Cash Flows




The
Company prepares its statements of cash flows using the indirect method as
defined in FASB ASC 230, “Statement of Cash Flows” (formerly SFAS No.
95).




The
Company paid $155,000 and $118,000 for income taxes and $81,000 and $105,000 for
interest during the years ended March 31, 2010 and 2009,
respectively.




Non-Cash
Investing and Financing Activities: During the year ended March 31, 2010
the Company acquired equipments through capital lease, amounting to
$245,000.




9.
Settlement of Debts




During
our 2009 fiscal year, Mica-Tech realized a gain of $521,000 from the settlement
of a promissory note and a gain of $45,000 from the settlement of royalties
payable to Southern California Edison. These are considered a one-time
event.




ITEM
9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE




There are
not and have not been any disagreements between us and our accountants on any
matter of accounting principles, practices, or financial statement disclosure
during our two most recent fiscal years and subsequent interim
period.




ITEM
9A.  CONTROLS AND PROCEDURES




Disclosure
Controls and Procedures




Our
management, with the participation of our Chief Executive Officer and Principal
Financial Officer, has evaluated the effectiveness of the Company’s disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) as of the end of the period covered by this Report (March 31, 2010).
Based on such evaluation, our Chief Executive Officer and Principal Financial
Officer have concluded that, as of the end of such period, the Company’s
disclosure controls and procedures are effective in recording, processing,
summarizing and reporting, on a timely basis, information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act and are effective in ensuring that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company’s management,
including the Company’s Chief Executive Officer and Principal Financial Officer,
as appropriate to allow timely decisions regarding required
disclosure.




42




Management’s
Report on Internal Control over Financial Reporting




Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting. The Company’s internal control over financial
reporting has been designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles generally accepted in the United States of America.




The
Company’s internal control over financial reporting includes policies and
procedures that pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect transactions and dispositions of assets of
the Company; provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America, and
that receipts and expenditures are being made only in accordance with
authorization of management and directors of the Company; and provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company’s assets that could have a material effect on
the Company’s financial statements.




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial
statement preparation and presentation. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.




Management
assessed the effectiveness of the Company’s internal control over financial
reporting at March 31, 2010. In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in Internal Control—Integrated
Framework. Based on that assessment under those criteria, management has
determined that, at March 31, 2010, the Company’s internal control over
financial reporting was effective.




This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the SEC that permit the
Company to provide only management’s report in this annual report.




Changes
in Internal Control Over Financial Reporting




There
have been no changes in the Company’s internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fourth quarter of our 2010 fiscal year that have
materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.




ITEM
9B.  OTHER INFORMATION




None




PART
III




ITEM
10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE




Information
required by this item is incorporated by reference to the information under the
captions “Executive Compensation” and “Election of Directors” in the Company’s
definitive proxy statement that will be delivered to our shareholders in
connection with our 2010 Annual Meeting of Stockholders to be held on
September 9, 2010.




ITEM
11.  EXECUTIVE AND DIRECTORS COMPENSATION




Information
required by this item is incorporated by reference to the information under the
captions “Executive Compensation” and “Election of Directors” in the Company’s
definitive proxy statement that will be delivered to our shareholders in
connection with our 2010 Annual Meeting of Stockholders to be held on
September 9, 2010.




43




ITEM
12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS




Information
required by this item is incorporated by reference to the information under the
caption “Principal Stockholders” in the Company’s definitive proxy statement
that will be delivered to our shareholders in connection with our 2010 Annual
Meeting of Stockholders to be held on September 9, 2010.




ITEM
13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE




Information
required by this item is incorporated by reference to the information under the
caption “Certain Relationships and Related Transactions” in the Company’s
definitive proxy statement that will be delivered to our shareholders in
connection with our 2010 Annual Meeting of Stockholders to be held on
September 9, 2010.




ITEM
14.  PRINCIPAL ACCOUNTING FEES AND SERVICES




The
following table sets forth fees billed to us by our auditors during the fiscal
years ended March 31, 2010 and March 31, 2009 for: (i) services
rendered for the audit of our annual financial statements and the review of our
quarterly financial statements, (ii) services by our auditor that are
reasonably related to the performance of the audit or review of our financial
statements and that are not reported as Audit Fees, (iii) services rendered
in connection with tax compliance, tax advice and tax planning, and
(iv) all other fees for services rendered. “All other fees” include fees
related to (or paid for) in the fiscal year ended March 31, 2010 and fees
related to fiscal year ended March 31, 2009.




For
      the period endedMarch 31, 2010
                
                
                March 31, 2009(i)
                Audit
      fees
                
                $
                71,000
                
                
                $
                66,000(ii)
                Audit
      related fees
                
                
                —
                
                
                
                —(iii)
                Tax
      fees
                
                
                —
                
                
                
                —(iv)
                All
      other fees
                
                
                —
                
                
                
                —$
                71,000
                
                
                $
                66,000




44




PART
IV




ITEM
15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES




(a)           The
financial statements for the fiscal year ended March 31, 2010 are filed with
this report under Item 8.




(b)           The
following are attached as exhibits to this Annual Report:




Exhibit
                Number
            
            Description2.1
            
            
            Merger
      Agreement entered into as of May 25, 2004 by and among AML
      Communications Inc., a Delaware corporation, AML Holdings, LLC,
      a California limited liability company and Microwave Power, Inc., a
      California corporation(1)3.1
            
            
            Certificate
      of Incorporation(2)3.2
            
            
            Bylaws(2)10.1
            
            
            Form
      of Indemnity Agreement(2)10.2
            
            
            Lease,
      dated March 11, 1996, between the Company and Parr-Bohn
      Properties, Ltd. II, a California Limited
    Partnership(3)10.3
            
            
            Fourth
      Amended and Restated 1995 Stock Option Agreement at June 10,
      2002(4)10.4
            
            
            Parr-Bohn
      Properties First Amendment to lease of 1000 Avenida Acaso, Camarillo,
      CA.(4)10.5
            
            
            Employment
      Agreement with Dr. Marina Bujatti, of MPI, dated June 18,
      2004(4)10.6
            
            
            Employment
      Agreement with Dr. Franco Sechi, of MPI, dated June 18,
      2004(4)10.7
            
            
            Interim
      Lease and Proposed Lease Terms(5)10.8
            
            
            Financing
      Agreement dated July 8, 2004 with Bridge Bank(6)10.9
            
            
            Enterprise
      Agreement Number 4627 dated August 26,
2004(7)10.10
            
            
            Business
      Financing Modification with Bridge Bank, dated December 23,
      2005(8)10.11
            
            
            Business
      Financing Modification with Bridge Bank dated
      January 19,2006(8)10.12
            
            
            Fifth
      Amended and Restated 1995 Stock Option Agreement at July 12,
      2005(9)10.13
            
            
            Loan
      Agreement with Bank of America for purchase of MPI
    building(8)10.14
            
            
            2005
      Equity Incentive Plan(10)10.15
            
            
            Business
      Financing Agreement with Bridge Bank dated July 17,
      2006(11)10.16
            
            
            Stock
      Purchase Agreement with Mica-Tech, dated April 11,
      2007(12)10.17
            
            
            Option
      Agreement with shareholders and optionholders of Mica-Tech, dated
      April 11, 2007(12)10.18
            
            
            Agreement
      and Plan of Merger by and among AML Communications, Inc.,
      Mica-Tech, Inc., Mica-Tech Acquisition, Inc. and the
      shareholders of Mica-Tech, Inc. dated as of February 19,
      2008(13)10.19
            
            
            Option
      Agreement—Steven Ow, dated February 19, 2008(13)10.20
            
            
            Parr-Bohn
      Properties Second Amendment to lease of 1000 Avenida Acaso, Camarillo, CA,
      dated February 20, 2008(14)10.21
            
            
            Business
      Financing Modification with Bridge Bank, dated April 5,
      2007(14)10.22
            
            
            Business
      Financing Modification with Bridge Bank, dated September 16,
      2008(15)14.1
            
            
            Code
      of Ethics (16)21.1
            
            
            List
      of Subsidiaries (16)31.1
            
            
            Certification
      by the Chief Executive Officer(17)31.2
            
            
            Certification
      by the Principal Financial Officer(17)32.1
            
            
            Certification
      pursuant to Section 906 of the Sarbanes Oxley
  Act(17)32.2
            
            
            Certification
      pursuant to Section 906 of the Sarbanes Oxley
  Act(17)





(1)
            Previously
      filed with the Securities and Exchange Commission as Exhibit 10.13 to
      the Company’s Form 10-KSB for the fiscal year ended March 31,
      2004.




(2)
            Previously
      filed with the Securities and Exchange Commission as an exhibit to the
      Registration Statement on Form SB-2 (No. 33-99102-LA) and
      incorporated herein by reference.




(3)
            Previously
      filed with the Securities and Exchange Commission as an exhibit to the
      Company’s Form 10-KSB for fiscal year ended March 31, 1996 and
      incorporated herein by reference




45




(4)
            Previously
      filed with the Securities and Exchange Commission as an exhibit to the
      Company’s Form 10-KSB for the fiscal year ended March 31, 2004
      and incorporated herein by
reference.




(5)
            Previously
      filed with the Securities and Exchange Commission as an exhibit to the
      Company’s Form 8-K dated July 6, 2004 and incorporated herein by
      reference.




(6)
            Previously
      filed with the Securities and Exchange Commission as an exhibit to the
      Company’s Form 10-QSB for the quarter ended June 30, 2004 and
      incorporated herein by reference.




(7)
            Previously
      filed with the Securities and Exchange Commission as an exhibit to the
      Company’s Form 8-K/A dated May 4, 2007 (unredacted version) and
      incorporated herein by reference.




(8)
            Previously
      filed with Securities and Exchange Commission as an exhibit to the
      Company’s Form 10-QSB for the quarter ended December 31, 2005
      and incorporated herein by
reference.




(9)
            Previously
      filed with the Securities and Exchange Commission as an attachment to the
      Company’s Proxy Statement dated July 29,
  2005.




(10)
            Previously
      filed with Securities and Exchange Commission as an exhibit to the
      Company’s Form S-8 Registration Statement (no. 333-131588) dated
      February 6, 2006 and incorporated herein by
  reference.




(11)
            Previously
      filed with Securities and Exchange Commission as an exhibit to the
      Company’s Form 10-QSB for the quarter ended June 30, 2006 and
      incorporated herein by reference.




(12)
            Previously
      filed with the Securities and Exchange Commission as an exhibit to the
      Company’s Form 8-K dated April 20, 2007 and incorporated herein
      by reference.




(13)
            Previously
      filed with the Securities and Exchange Commission as an exhibit to the
      Company’s Form 8-K dated March 3, 2008 and incorporated herein
      by reference.




(14)
            Previously
      filed with the Securities and Exchange Commission as an exhibit to the
      Company’s Form 10-KSB for the fiscal year ended March 31, 2008
      and incorporated herein by
reference.




(15)
            Previously
      filed with the Securities and Exchange Commission as an exhibit to the
      Company’s Form 10-Q for the quarter ended September 30, 2008 and
      incorporated herein by reference.




(16)
            Previously
      filed with the Securities and Exchange Commission as an exhibit to the
      Company’s Form 10-K for the fiscal year ended March 31, 2009 and
      incorporated herein by reference.




(17)
            Filed
      herewith




46


SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.




AML
      Communications, Inc.By:
              /s/
      Jacob InbarJacob
      Inbar,President
      and Chief Executive OfficerDated:
      June 25,
      2010




Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.




Signature
                
                Title
                
                Date/s/
      Jacob Inbar
                
                President,
      Chief Executive Officer and
                
                June 25,
      2010Jacob
      Inbar
                
                Chairman
      of the Board (Principal Executive Officer)/s/
      Tiberiu Mazilu
                
                Vice
      President-Engineering and Director
                
                June 25,
      2010Tiberiu
      Mazilu/s/
      Edwin J. McAvoy
                
                Secretary,
      Vice President-Sales, and
                
                June 25,
      2010Edwin
      J. McAvoy
                
                Director/s/
      Heera Lee
                
                Principal
      Financial Officer and Director of Finance
                
                June 25,
      2010Heera
      Lee
                
                (Principal
      Financing and Accounting Officer)/s/
      Richard W. Flatow
                
                Director
                
                June 25,
      2010Richard
      W. Flatow/s/
      Gerald M. Starek
                
                Director
                
                June 25,
      2010Gerald
      M. Starek


47