UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-KSB

|ý                                                                | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|---------------------------------------------------------------- | ----------------------------------------------------------------------------------
|For the fiscal year ended March 31, 2008                        
|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


Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý    No o

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, 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-KSB or any amendment to
this Form 10-KSB. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    No ý

Issuer's revenues for its most recent fiscal year: $12,711,501

The
aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant on June 13, 2008 was approximately
$10,333,365. The per share stock price for computational purposes was $1.31, based on the closing sale price per share for the Registrant's common stock on the OTC Bulletin Board on June 13,
2008. This value is not intended to be a representation as to the value or worth of the Registrant's common stock. The number of non-affiliates of the Registrant has been calculated by
subtracting the number of shares held by persons affiliated with the Registrant from the number of outstanding shares.

The
number of shares of the Registrant's common stock outstanding on June 13, 2008 was 10,422,166.

DOCUMENTS
INCORPORATED BY REFERENCE: Portions of the Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on September 11, 2008, are
incorporated by reference into Part III of this Form 10-KSB. The Proxy Statement will be filed within 120 days after the end of the fiscal year covered by this report.

Transitional
Business Disclosure Format (Check One). Yes o    No ý



---





AML Communications, Inc.        Index to Form 10KSB

|           |  |                                                                                      |  | Page
|---------- |  | ------------------------------------------------------------------------------------ |  | ----
|Part I     |  |                                                                                      |  |     
|Item 1.    |  | Description of Business                                                              |  | 3   
|Item 2.    |  | Description of Property                                                              |  | 11  
|Item 3.    |  | Legal Proceedings                                                                    |  | 11  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                  |  | 11  
|Part II    |  |                                                                                      |  |     
|Item 5.    |  | Market for Common Equity and Related Stockholder Matters                             |  | 12  
|Item 6.    |  | Management's Discussion and Analysis or Plan of Operations                           |  | 14  
|Item 7.    |  | Financial Statements                                                                 |  | 26  
|Item 8.    |  | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure |  | 55  
|Item 8A.   |  | Controls and Procedures                                                              |  | 55  
|Item 8B    |  | Other Information                                                                    |  | 56  
|Part III   |  |                                                                                      |  |     
|Item 9.    |  | Directors, Executive Officers of Registrant                                          |  | 57  
|Item 10.   |  | Executive Compensation                                                               |  | 57  
|Item 11.   |  | Security Ownership of Certain Beneficial Owners and Management                       |  | 57  
|Item 12.   |  | Certain Relationships and Related Transactions                                       |  | 57  
|Item 13.   |  | Exhibits and Reports on Form 8-K                                                     |  | 57  
|Item 14.   |  | Principal Accountant Fees and Services                                               |  | 60  
|SIGNATURES |  | 61                                                                                  

1

---





INTRODUCTORY NOTESFORWARD LOOKING STATEMENTS AND CERTAIN TERMINOLOGY

Some of the statements made by us in this Annual Report on Form 10-KSB 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 sections titled "Additional Factors That May Affect Future
Results" and "Factors Affecting Business, Operating Results and Financial Condition", both of which are included in the section titled "Management's Discussion and Analysis of Plan of Operation".
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:



In
this document, the words "we," "our," "ours," "Company," and "us" refer to AML Communications, Inc. and our two divisions, Microwave Power, Inc. and
Mica-Tech, Inc.

2

---





PART I

ITEM 1.    DESCRIPTION OF BUSINESS

Introduction

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 three reportable segments. AML Communications, Inc. (AML) designs, manufactures, and markets amplifiers and related products for
the defense microwave. Our division Microwave Power, Inc. (MPI) designs, manufactures, and markets high power microwave amplifiers for the defense market. 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. 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 (MPI) for the twelve month period ended March 31, 2007 and three reportable segments (AML), (MPI), and (Mica-Tech) for the
twelve month period ended March 31, 2008.

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 fiscal 1997, 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 fiscal 1997, 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 fiscal 1998, 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
fiscal 1999, 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.

3

---



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. We believe this substantially increased our capacity and production efficiency to support growth.

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 good gross margins. While we continually attempt to expand our customer base, we cannot give any assurance that a major customer will not reduce, delay, or eliminate its purchases
from us. Such a reduction 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).

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 co-founders in February 2001 resulted in our re-direction 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 results of this strategy have
been an increase in revenues for defense-related products from $3.7 million in fiscal 2003 to $11.7 million in fiscal 2008.

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.

The
Company seeks and has been 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.

Utilizing
MPI's proprietary Microwave Monolithic Ceramic Circuits (MMCC) technology, the Company intends to expand production of such amplifiers and subsystems at the AML Camarillo
facility. This technology offers cost savings, by reducing hand-mounted operations while increasing yields and reliability.

On
May 25, 2004, we signed a definitive agreement for the acquisition of Microwave Power, Inc. which was completed on June 18, 2004. MPI was merged into our wholly
owned subsidiary, with the subsidiary as the surviving entity. The total consideration for the acquisition was $3,028,000. Pursuant to the acquisition agreement, 2,117,108 shares as consideration for
the acquisition and 21,174 shares to be issued to the broker were committed, or authorized for issuance by our board of directors, as of

4

---



June 18,
2004. MPI will continue to operate as our division from its facility in Santa Clara. On February 3, 2006, the Company 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 the Company paying the loan in 83 regular payments of $4,425.88 each and one irregular last payment of $556,594.48. The Company's final payment is due on February 10, 2013 and will be for
all principle and interest not yet paid. Payments include principle and interest.

The
MPI acquisition was driven by a number of key factors, including:



On
April 11, 2007, the Company 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 shares of Mica-Tech's outstanding common stock for an aggregate price of $800,000. On February 19, 2008, the Company
subsequently acquired the remaining interest in Mica-Tech or 49% of the outstanding common stock of Mica-Tech. Under the terms of the agreement, a wholly-owned subsidiary of
the Company would merge with Mica-Tech. Following the merger, Mica-Tech would become wholly-owned by the Company. The Mica-Tech shareholders in the aggregate
received $1,000 for their Mica-Tech common stock. In addition, the Company granted approximately 1,310,000 shares of options and warrants to purchase Company common stock to 49%
shareholders and other current employees. These options and warrants are performance based.

In
February 2008 we acquired the balance of Mica-Tech shares and are operating the company as a wholly owned subsidiary. Following the acquisition, the company has focused on
the Demand Response market. Mica-Tech's Demand Response Program is an intelligent energy management program that allows businesses to lower their energy costs and earn cash incentives.
Mica-Tech's customers realize savings on their energy costs and additionally earn cash by simply agreeing to reduce peak period electricity consumption a few times during the year to help
stabilize the electric grid. Our customers are paid regardless of whether the reduction in peak electricity consumption is called for.

Markets

AML Communications, Inc. and Microwave Power, Inc. Segments

We sell our RF/Microwave amplifier products and subsystems primarily into various segments of the Defense Electronic Warfare Market. In fiscal 2008, the AML
segment accounted for 77.7% of the Company's total revenues. We derived more than 99.9% of the revenues from the defense microwave market and less than 0.10% from cellular coverage enhancement
products. In comparison, in fiscal 2007, we derived approximately 96.1% of our revenues from the defense microwave market, 3.5% from the PCS and two-way messaging market, and 0.4% from
cellular coverage enhancement products. The MPI segment accounted for 14.5% of the Company's total revenues, which were mainly derived from the defense microwave market.

Defense Microwave Amplifiers.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

5

---



frequencies
to be designed and manufactured. Moderate volume requirements and custom design requirements characterize this market.

Mica-Tech, Inc. Segment

The Mica-Tech segment accounted for 7.8% of the Company's total revenues. 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. The Federal Energy Regulatory Commission (FERC) has mandated the power utility
companies to electronically control substations for purposes of monitoring power quality and increase power grid reliability. Mica-Tech's satellite system provides an immediate and low
cost solution for substation control. Mica-Tech has successfully deployed its products with a major Southern California utility company. Penetration into the countrywide utility companies
market is in the initial phase.

In
February 2008 we acquired the balance of Mica-Tech shares and are operating the company as a wholly owned subsidiary. Following the acquisition, the company has focused on
the Demand Response market. Mica-Tech's Demand Response Program is an intelligent energy management program that allows businesses to lower their energy costs and earn cash incentives.
Mica-Tech's customers realize savings on their energy costs and additionally earn cash by simply agreeing to reduce peak period electricity consumption a few times during the year to help
stabilize the electric grid. Our customers are paid regardless of whether the reduction in peak electricity consumption is called for.

California's
growing power demand requires new generators to meet demand. Burning more fossil fuels and generating more greenhouse gases is unacceptable to society. The environmental
impact of generators and associated transmission systems is undesirable. Demand Response makes economic sense and enables grid stability with no negative impact on the environment. The program is a
result of a joint effort between the Federal Energy Regulatory Commission (FERC), state utility commissions, and various state agencies to meet peak demand and avoid power outages.

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.
During the first quarter of fiscal 2007, AML delivered the first product utilizing the MMCC technology processed by MPI. It is expected that increasingly new AML product development would use MMCC as
an implementation technology due to its cost savings advantages.

Defense Microwave.We 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 50kHz to 26GHz. 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.

Our
power amplifiers range in price from $500 up to $10,000 per amplifier, depending upon technology, complexity, quantity, and implementation.

Microwave Power, Inc. Segment

Defense Microwave and Test Instrumentation.MPI manufactures solid state microwave amplifiers operating in the frequency
range from to 1 to 40 GHz with output power from 100 mW to 500 W. MPI proprietary technology Microwave Monolithic Ceramic Circuits (MMCC) is especially designed for broadband and high power. Some
typical applications include telecommunications, radar, simulators,

6

---



transmitters
and test instrumentation. Most of the units are available either rack mounted or as connectorized modules.

The
MPI transmit power amplifiers 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. Mica-Tech's Demand Response program is built on a unique non-public communication network that is free from cyber
security threats. The technology offers highly reliable operation. Existing and potential customers are electric utilities serving large service area. UltraSatNet system also provides the backbone to
Mica-Tech's Demand Response program. Mica-Tech's Demand Response customers are commercial and industrial loads.

Customers

AML sells products to defense OEM manufacturers worldwide, including Raytheon, BAE, Northrop Grumman, Rockwell, and Lockheed Martin. Additionally we export our
products to major OEM'S in the France, Israel, Spain, Turkey, Singapore, Italy, 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.

MPI
sells products to system integrators primarily in the defense sector and particularly to specialized test equipment manufacturers. The list of customers includes BAE, HD
Communications, System Planning Corporation, and SOGO Electronics. In addition, MPI exports products to the customers in France, Germany, Canada, and Japan.

For
the fiscal year ended March 31, 2008, our largest customer for our AML Communications and MPI segments was Raytheon; which accounted for approximately 26.5% of net sales.
Versys was our second largest customer accounting for approximately 5.8% of net sales. For the fiscal year ended March 31, 2007, our largest customer was Raytheon, which accounted for
approximately 12.6% of net sales. Northrop Grumman was our second largest customer accounting for approximately 8.7% of net sales. The loss of either of these customers, 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 6.6% of net sales.

We
rely heavily on acquiring new customers. The acquisition rate for new defense microwave customers during fiscal 2008 was approximately 10 new customers per quarter for the AML segment
and approximately 5 new customers per quarter for the MPI segment, compared to approximately 11 new customers per quarter for the AML segment and approximately 5 new customers per quarter for the MPI
segment for the fiscal year ended March 31, 2007.

Mica-Tech
sells 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.

Demand
Response customers are expected to address large electric power users.

Marketing and Distribution; International Sales

We sell our AML Communications, Inc. products and Microwave Power, Inc. products through a combination of a technically proficient internal sales
and marketing resources and a network of

7

---



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, 2008, international sales were $3.1 million or 24.1% of net sales as compared to international sales of $2.4 million or 27.3%
of net sales for the fiscal year ended
March 31, 2007. During the fiscal year, we exported our products to major OEM's in the France, Israel, Spain, Turkey, Singapore, Italy, UK, and Japan.

The
following table summarizes the international sales by segment for the fiscal year ended March 31, 2008:

|(Dollars in thousands) |  | AML |       |  |      | MPI |   |       |  | Mica-Tech |   |   |     | Total |     |   |  
|---------------------- |  | --- | ----- |  | ---- | --- | - | ----- |  | --------- | - | - | --- | ----- | --- | - | -
|International Sales    |  | $   | 2,210 |  | 17.4 | %   | $ | 854   |  | 6.7       | % | $ |    |       |    |   | $
|Domestic sales         |  |     | 7,663 |  | 60.3 |     |   | 992   |  | 7.8       |   |   | 992 |       | 7.8 |   |  
|                       |  |     |       |  |      |     |   |       |  |           |   |   |     |       |     |   |  
|Total Sales            |  | $   | 9,873 |  | 77.7 | %   | $ | 1,846 |  | 14.5      | % | $ | 992 |       | 7.8 | % | $
|                       |  |     |       |  |      |     |   |       |  |           |   |   |     |       |     |   |  

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 and MPI 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.

Our
combined research and development staff consisted of 14 people as of March 31, 2008. Expenditures for research and development amounted to approximately $2,289,000 in fiscal
2008 and $1,405,000 in fiscal 2007.

8

---



Competition

AML Communications, Inc. and Microwave Power, Inc. Segments

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 price to compete effectively. We intend to apply the know-how and technology of MPI towards gaining a technological advantage over our competitors.

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.

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.

In
the field of Demand Response, the company is competing against organizations that are much larger in size and resources. These include Enernoc (ENOC) and Comverge (COMV). The Company
believes its UltraSatNet system offer an advantage since it is better suited toward switching of high loads and therefore it is concentrating toward such potential customers.

Manufacturing and Suppliers

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 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.

MPI's
manufacturing facility is located in Santa Clara, California. Depending on the specific requirements, we use a combination of three basic technologies: Integration of internally
matched GaAs FETs using MICs (Microwave Integrated Circuits), Integration of GaAs Monolithics (MMIC's) using various techniques, including Multi-Chip Modules, and our own proprietary MMIC
(Microwave Monolithic Integrated Circuits) technology. We manufacture in house all the ceramic integrated circuits, both MIC's and MMIC's.

9

---



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 NEC and Fujitsu for their semiconductors.
Although we did not experience shortages during fiscal year 2008, 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.

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.

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 MPI segment and Mica-Tech segment are primarily protected through patent and trade secret protection. As of March 31, 2008, we
owned three U.S. issued patents and one foreign patent, and we had no patent applications pending. The four patents expire at various dates from May 2007 to September 2009. 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 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.

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

10

---



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, 2008, we had 95 full-time employees, including 14 in research and development; 67 in manufacturing, production engineering, and
quality assurance; 8 in administration; and 6 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.

Environmental 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.

ITEM 2.    DESCRIPTION OF PROPERTY

Our AML administrative, engineering, and manufacturing facility is located in a 25,017 square foot leased building in Camarillo, California. The lease for this
space expired in April 2008 and we entered into a new lease, which will be expiring in April 2015. Our MPI division operates in a 3,868 square foot industrial/office condominium located at 3350 Scott
Boulevard in Santa Clara, California. The building was purchased on February 3, 2006. We had relocated the Mica-Tech operation 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. 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.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

11

---





PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock currently trades on NASDAQ's OTC Bulletin Board under the symbol "AMLJ.OB". Our common stock traded on the Nasdaq Small Cap Market from
October 8, 2001 to August 13, 2002 and on the Nasdaq National Market prior to that time. 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 traded 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, 2007First quarter

$
1.27

$
0.90Second quarter

$
1.01

$
0.75Third quarter

$
0.90

$
0.68Fourth quarter

$
1.50

$
0.82Fiscal year ended March 31, 2008First quarter

$
1.65

$
1.30Second quarter

$
1.40

$
0.87Third quarter

$
1.22

$
0.81Fourth quarter

$
1.50

$
0.89


At
June 13, 2008, there were approximately 86 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.

Unregistered Sales of Securities

On February 19, 2008, we issued warrants to purchase 816 shares of common stock at an exercise price of $1.20 per share, exercisable until
February 19, 2013, to a shareholder of Mica-Tech in connection with our acquisition of the company. We relied upon the exemption from registration as set
forth in Section 4(2) of the Securities Act for the issuance of these securities. The holder took the securities for investment purposes without a view to distribution and had access to
information concerning AML and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the securities. The holder
was permitted access to our management for the purpose of acquiring investment information.

On
February 26, 2008, we issued warrants to purchase 25,000 shares of common stock at an exercise price of $1.50 per share, exercisable until February 26, 2013, to an
outside consultant in connection with our acquisition of the Mica-Tech. We relied upon the exemption from registration as set forth in Section 4(2) of the Securities Act for the
issuance of these securities. The holder took the securities for investment purposes without a view to distribution and had access to information concerning AML and our business prospects, as required
by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the securities. The holder was permitted access to our management for the purpose of acquiring
investment information.

12

---



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, 2008:

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)
|-------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------- | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------
|1995 Equity compensation plans approved by security holders    |  | None                                                                                  |  |                                                                       | None |                                                                                                                                               
|2005 Equity compensation plans approved by security holders(1) |  | 4,016,305                                                                             |  | $                                                                     | 1.12 |                                                                                                                                               
|                                                               |  |                                                                                       |  |                                                                       |      |                                                                                                                                               
|Total                                                          |  | 4,016,305                                                                             |  | $                                                                     | 1.12 |                                                                                                                                               
|                                                               |  |                                                                                       |  |                                                                       |      |                                                                                                                                               

---

13

---





ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Overview

Our business is comprised of three reportable segments, AML Communications, Inc. ("AML"), Microwave Power, Inc. ("MPI"), and
Mica-Tech, Inc ("Mica-Tech"). AML and MPI design, manufacture, and market RF and microwave amplifiers and subsystems serving, primarily, the Defense Electronic Warfare Market.
AML represented 77.7% of our 2008 product revenue and MPI represented 14.5% of our 2008 product revenue. On April 11, 2007, we acquired a controlling interest of 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. Mica-Tech represented 7.8% of our 2008 revenues.

Our
AML segment includes low noise, power amplifiers and integrated sub assemblies with frequencies that range from 50 kHz to 26 GHz. 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. The results of this strategy have been an increase in revenues for defense related products, from $3.7 million in fiscal 2003 to $9.9 million in fiscal
2008.

We
consider the AML segment to be our core business since it has a larger revenue base, and investments have been made in this segment that address long term growth. We devote most of
our management time and other resources to improving the prospects for this segment. Most of our sales and marketing expenses are from the AML segment. The majority of our research and development
spending is dedicated to this segment as well.

Our
MPI segment includes solid state microwave amplifiers operating in the frequency range from 1 to 40 GHz with output power from 10mW to 500 W. In June 2004, we acquired
MPI and have since operated it as a division of AML. The MPI division operates independently, with its own marketing, production, and general management team. We continue to expand MPI's managerial
and technical capabilities to address the potential for growth of this division.

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 the completion of acquisition of the remaining interest of
Mica-Tech in February 2008, steps are being taken to bolster Mica-Tech's financial and management structure while the company pursues the Demand Response market.

14

---



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, 2008 and
2007.

For the fiscal year ended March 31, 2008:

|(Dollars in thousands)                                |                                     | AML          |        |       |       | MPI  |      |       |     | Mica-Tech |     |     |      | Total |      |     |    
|----------------------------------------------------- | ----------------------------------- | ------------ | ------ | ----- | ----- | ---- | ---- | ----- | --- | --------- | --- | --- | ---- | ----- | ---- | --- | ---
|Revenues                                              |                                     |              |        |       |       |      |      |       |     |           |     |     |      |       |      |     |    
|Defense Microwave and other                           |                                     | $            | 9,871  |       | 77.7  | %    | $    | 1,846 |     | 14.5      | %   | $   |     |       |     |     | $  
|Cellular, wireless telephony and other                |                                     |              | 2      |       | 0.0   |      |      |      |     |          |     |     |     |       |     |     |    
|Satellite communication systems                       |                                     |              |       |       |      |      |      |      |     |          |     |     | 992  |       | 7.8  | %   |    
|                                                      |                                     |              |        |       |       |      |      |       |     |           |     |     |      |       |      |     |    
|Total net sales                                       |                                     |              | 9,873  |       | 77.7  | %    |      | 1,846 |     | 14.5      | %   |     | 992  |       | 7.8  | %   |    
|Cost of goods sold                                    |                                     |              | 5,882  |       | 46.3  |      |      | 751   |     | 5.9       |     |     | 562  |       | 4.4  |     |    
|                                                      |                                     |              |        |       |       |      |      |       |     |           |     |     |      |       |      |     |    
|                                                      |                                     | Gross profit |        | $     | 3,991 |      | 31.4 | %     | $   | 1,095     |     | 8.6 | %    | $     | 430  |     | 3.4
|Operating expenses:                                   |                                     |              |        |       |       |      |      |       |     |           |     |     |      |       |      |     |    
|                                                      | Selling, general and administrative |              |        | 1,658 |       | 13.0 |      |       | 637 |           | 5.0 |     |      | 796   |      | 6.3 |    
|                                                      | Research and development            |              |        | 1,624 |       | 12.8 |      |       | 170 |           | 1.3 |     |      | 495   |      | 3.9 |    
|                                                      |                                     |              |        |       |       |      |      |       |     |           |     |     |      |       |      |     |    
|Income (loss) from operations                         |                                     |              | 709    |       | 5.6   |      |      | 288   |     | 2.3       |     |     | (861 | )     | (6.8 | )   |    
|Other income/(Interest & other expense), net          |                                     |              | (125   | )     | (1.0  | )    |      | 6     |     | 0.0       |     |     | (64  | )     | (0.5 | )   |    
|                                                      |                                     |              |        |       |       |      |      |       |     |           |     |     |      |       |      |     |    
|Income (loss) before income tax and minority interest |                                     |              | 584    |       | 4.6   |      |      | 294   |     | 2.3       |     |     | (925 | )     | (7.3 | )   |    
|Income tax expense (credit)                           |                                     |              | (1,757 | )     | (13.8 | )    |      |      |     | 0.0       |     |     | 2    |       | 0.0  |     |    
|Minority interest                                     |                                     |              |       |       |      |      |      |      |     |          |     |     |     |       |     |     |    
|                                                      |                                     |              |        |       |       |      |      |       |     |           |     |     |      |       |      |     |    
|Net Income (loss)                                     |                                     | $            | 2,341  |       | 18.4  | %    | $    | 294   |     | 2.3       | %   | $   | (927 | )     | (7.3 | )%  | $  
|                                                      |                                     |              |        |       |       |      |      |       |     |           |     |     |      |       |      |     |    

For the fiscal year ended March 31, 2007:

|(Dollars in thousands)                       |                                     | AML          |        |       |       | MPI  |      |       |     | Mica-Tech |     |      |   | Total |   |   |       
|-------------------------------------------- | ----------------------------------- | ------------ | ------ | ----- | ----- | ---- | ---- | ----- | --- | --------- | --- | ---- | - | ----- | - | - | ------
|Revenues                                     |                                     |              |        |       |       |      |      |       |     |           |     |      |   |       |   |   |       
|Defense Microwave and other                  |                                     | $            | 6,785  |       | 76.6  | %    | $    | 1,794 |     | 20.3      | %   |     |   |      |   | $ | 8,579 
|Cellular, wireless telephony and other       |                                     |              | 275    |       | 3.1   |      |      |      |     |          |     |     |   |      |   |   | 275   
|                                             |                                     |              |        |       |       |      |      |       |     |           |     |      |   |       |   |   |       
|Total net sales                              |                                     |              | 7,060  |       | 79.7  | %    |      | 1,794 |     | 20.3      | %   |     |   |      |   |   | 8,854 
|Cost of goods sold                           |                                     |              | 4,452  |       | 50.3  |      |      | 719   |     | 8.1       |     |     |   |      |   |   | 5,171 
|                                             |                                     |              |        |       |       |      |      |       |     |           |     |      |   |       |   |   |       
|                                             |                                     | Gross profit |        | $     | 2,608 |      | 29.4 | %     | $   | 1,075     |     | 12.2 | % |      |   |  |       
|Operating expenses:                          |                                     |              |        |       |       |      |      |       |     |           |     |      |   |       |   |   |       
|                                             | Selling, general and administrative |              |        | 1,690 |       | 19.1 |      |       | 666 |           | 7.5 |      |  |       |  |   |       
|                                             | Research and development            |              |        | 1,244 |       | 14.0 |      |       | 161 |           | 1.9 |      |  |       |  |   |       
|                                             |                                     |              |        |       |       |      |      |       |     |           |     |      |   |       |   |   |       
|Income (loss) from operations                |                                     |              | (326   | )     | (3.7  | )    |      | 248   |     | 2.8       |     |     |   |      |   |   | (78   
|Other income/(Interest & other expense), net |                                     |              | (33    | )     | (.4   | )    |      | 8     |     | 0.1       |     |     |   |      |   |   | (25   
|                                             |                                     |              |        |       |       |      |      |       |     |           |     |      |   |       |   |   |       
|Income (loss) before income tax              |                                     |              | (359   | )     | (4.1  | )    |      | 256   |     | 2.9       |     |     |   |      |   |   | (103  
|Income tax expense (credit)                  |                                     |              | (1,662 | )     | 18.8  |      |      |      |     | 0.0       |     |     |   |      |   |   | (1,662
|                                             |                                     |              |        |       |       |      |      |       |     |           |     |      |   |       |   |   |       
|Net income                                   |                                     | $            | 1,303  |       | 14.7  | %    | $    | 256   |     | 2.9       | %   |     |   |      |   | $ | 1,559 
|                                             |                                     |              |        |       |       |      |      |       |     |           |     |      |   |       |   |   |       

15

---



Fiscal Years Ended March 31, 2008 and 2007

Net sales.Net sales for fiscal 2008 were $12.7 million, compared to $8.9 million in fiscal 2007.
AML's revenues increased by $2.8 million due to commencement of production for the large program orders received during the previous year and the addition of new customers.
Revenues from our MPI division increased by $52,000 compared to the same period last year. Mica-Tech contributed $992,000 to the total sales for 356 days during the twelve months
ended March 31, 2008.

AML
and, to a lesser extent, MPI have devoted significant resources during the last three fiscal years towards the development of products that address long term contracts to reduce our
reliance on spot-market and incidental orders. These investments and associated strategy have, in management's opinion, reached maturity. Starting this fiscal year, the Company started to
benefit from the investments made as these programs entered their production phases.

Domestic
and international net sales were approximately 75.9% and 24.1% of our net sales, respectively, for the year ended March 31, 2008. For the year ended March 31,
2007, domestic and international net sales were approximately 72.7% and 27.3% 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 France, Singapore, Canada, Germany, and Israel. 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 for fiscal 2008 was $5.5 million, or 43.4% of net sales, compared to a gross profit in
fiscal 2007, of $3.7 million, or 41.6% of net sales. The increase in margin was due to the higher volume of sales, economies of scale, and higher value added products.

Selling, general, and administrative costs.Selling, general and administrative costs for fiscal 2008 were
$3.1 million, or 24.3% of net sales, compared to $2.4 million, or 26.6% of net sales, for fiscal 2007. The dollar amount increase is mainly attributed to administrative cost in
connection with maintaining our Mica-Tech segment, which we acquired on April 11, 2007. Mica-Tech incurred $796,000 for 356 days during the twelve months ended
March 31, 2008. Selling, general and administrative costs for AML decreased, compared to the same period of the prior year, due to decreased spending in salary and related benefits,
advertising, and commission expenses.

Research and development costs.Research and development costs for fiscal 2008 were $2.3 million, or 18.0% of net
sales, compared to $1.4 million, or 15.9% of net sales, for the corresponding period in fiscal 2007. We incurred a $252,000 increase in salaries and related benefits due to hiring new engineers
for developmental programs and $122,000 increase in R&D supplies and small equipment, a result of continuing investment in R&D projects. The increase reflects our commitment to invest in long term,
large size projects. Additionally, $495,000 is attributable to Mica-Tech's research and development expenses for 356 days during the twelve months ended March 31, 2008.

Other expense, net.Other expense for fiscal 2008 was $183,000, as compared to $25,000 for fiscal 2007. The increase is
attributable to interest expenses on the note payable connected to MPI's building purchase, the outstanding line of credit with Bridge Bank, and Mica-Tech's two note payables.

In
2009, 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.

Provision for income taxes.We recorded tax credits of $1,755,000 in fiscal 2008 and identified tax credits on the balance
sheet as a Deferred Tax Allowance. This represents both tax credits and net operating losses carried forward.

16

---



The
Company's management decided to recognize the additional tax allowance of $1,755,000 this year based on the following assumptions and circumstances:

In
addition to large program orders we received during the last quarter of fiscal 2007, the Company booked $11.9 million of orders from our existing and new customers during
twelve months ended March 31, 2008. These new and follow up orders from a number of prominent customers such as Raytheon, Northrop Grumman, and Lockheed Martin, will contribute to a strong
growth on both the top and bottom line. The automatic test equipment and automatic assembly equipment we purchased during the last quarter of fiscal 2007 were fully utilized in production and
contributed largely to expediting the production and meeting the customers' expectations during fiscal 2008. The Company spent an additional $243,000 in March 2008 to add new automatic equipment to
our assembly line. This new equipment along with other recently acquired equipment is expected to facilitate our production during fiscal 2009.

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, 2008, AML had a line of credit agreement with Bridge Bank. On August 15, 2006, we signed a Business Financing Modification Agreement with Bridge Bank to renew
our line of credit, with a credit facility of $2.0 million. Of this $2.0 million, $1.0 million may be used for cash advances against accounts receivables and $1.0 million
may be used for equipment advances. On April 5, 2007, we modified this agreement to add a new $600,000 equipment term loan to our existing line of credit and then increased this term loan by an
additional $300,000 for a total of $900,000 on June 22, 2007. 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 5.50% plus 0.25% with respect to cash advances and a rate of such prime rate
plus 3.0% with respect to equipment advances and the additional equipment term loans. We are obligated to pay a facility fee of $5,000 (0.50% of the facility amount) for the first year of the
agreement and $2,500 the second year. We must maintain certain financial requirements, including a minimum Asset Coverage Ratio of 1.50 to 1.00 beginning with the month ending October 31, 2007
and monthly thereafter. We are also required to stay within 80% of our planned quarterly revenue. We were in compliance with these requirements at March 31, 2008; 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, 2008 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. If the agreement was terminated within the first 12 months following its
execution on July 17, 2006, we would have been required to pay an early termination fee of 1.0% of the credit facility amount under the terms of the agreement. At March 31, 2008, we had
an outstanding balance of $0 under the accounts receivable agreement and $813,000 under the equipment financing agreement. The three equipment term loans mature on November 30, 2008,
July 31, 2009, and March 31, 2010. 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 loans has expired as of October 7, 2007.

At
March 31, 2008, we had $1,205,000 in cash and cash equivalents. Our operating activities used cash of approximately $420,000 in fiscal 2008, compared to providing cash of
$584,000 in 2007. Net cash used in investing activities amounted to $294,000 in 2008, primarily due to capital equipment expenditures, as compared to net cash used in investing activities of
$1.1 million in 2007. Net cash used in financing activities was $159,000 in 2008, due to payments on outstanding notes payable and line of credit, as compared to net cash provided by financing
activities of $215,000 in 2007.

17

---



We
anticipate capital expenditures of approximately $800,000 in fiscal year 2009. 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, 2008, our remaining borrowing capacity under this agreement was $1,000,000.

In
addition to the funds raised in July 2003, we may attempt to procure additional sources of financing in the event that the capital available as of March 31, 2008 is
insufficient for our operating needs and capital expenditures. These sources may include, but are not limited to, additional sales of our
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.

Contractual Obligations

The following table summarizes our contractual obligations, including purchase commitments at March 31, 2008, and the effect that such obligations are
expected to have on our liquidity and cash flow in future periods.

|                 |                                    | Payment due by period
|---------------- | ---------------------------------- | ---------------------
|
|
|Operating leases |                                    |                      
|                 |                                    |                      
|                 | Total contractual cash obligations |                      
|                 |                                    |                      

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.

18

---



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:



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 collectibility 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 collectibility 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.

Inventory.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

19

---



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.

Additional Factors That May Affect Future Results

Future operating results may be impacted by a number of factors that could cause actual results to differ materially from those stated herein, which reflect
management's current expectations. These factors include:



We
believe that, to the extent that foreign sales are recognized, we may face increased risks associated with political and economic instability, compliance with foreign regulatory rules
governing export requirements, tariffs and other trade barriers, differences in intellectual property protections, longer accounts receivable cycles, currency fluctuations and general trade
restrictions. If any of these risks materialize, they could have a material adverse effect on our business, results of operations, and financial condition.

We
have evaluated the credit exposure associated with conducting business with foreign customers and have concluded that such risk is acceptable. Nevertheless, any significant change in
the economy or deterioration in United States trade relations or the economic or political stability of foreign markets could have a material adverse effect on our business, results of operations, and
financial condition.

Sales
to foreign customers are invoiced in U.S. dollars. Accordingly, we currently do not engage in foreign currency hedging transactions. However, as we expand further into
foreign markets, we may experience greater risk associated with general business, political and economic conditions in those markets. At such time, we may seek to lessen our exposure through currency
hedging transactions. We cannot assure you that a currency hedging strategy would be successful in avoiding currency exchange related losses. In addition, should the relative value of the
U.S. dollar in comparison to foreign currencies increase, the resulting increase in the price of our products to foreign customers could result

20

---



in
decreased sales which could have a material adverse impact on our business, results of operations, and financial condition.

We
experience significant price competition and expect price competition in the sale of our products to remain intense. We cannot assure you 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. Several of our competitors have substantial financial resources, which may enable them to withstand sustained price competition or a downturn in the
pricing of their products in the future. Substantially all of our competitors have, and potential future competitors could have, substantially greater technical, marketing, distribution and other
resources than we do and have, or could have, greater name recognition and market acceptance of their products and technologies.

The
markets in which we compete are characterized by rapidly changing technology and continuous improvements in products and services. Our future success depends on our ability to
enhance our current products and to develop and introduce, in a timely manner, new products that keep pace with technological developments that meet or exceed industry standards, which compete
effectively on the basis of price, performance and quality, that adequately address OEM customer and end-user customer requirements, and that achieve market acceptance. We believe that to
remain competitive in the future we will need to continue to develop new products, which will require the investment of significant financial resources in new product development. In the event our
newly developed products are not timely developed or do not gain market acceptance, our business, results of operations and financial condition could be materially adversely affected.

Our
quarterly and annual results have in the past been, and will continue to be, subject to significant fluctuations due to a number of factors, any of which could have a material
adverse effect on our business, financial condition and results of operations. There can be no assurance that we will not experience such fluctuations in the future. We establish our expenditure
levels for product development and other operating expenses based on expected revenues, and expenses are relatively fixed in the short term. As a result, variations in timing of revenues can cause
significant variations in quarterly results of operations. There can be no assurances that we will be profitable on a quarter-to-quarter basis in the future. We believe that
period-to-period comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of future performance. Due to these factors,
it is likely that in some future quarter or quarters our revenues or operating results will not meet the
expectations of public stock market analysts or investors. In such event, the market price of our common stock would be materially adversely affected.

21

---





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.

Factors Affecting Business, Operating Results and Financial Condition

An investment in our securities is very speculative and involves a high degree of risk. You should carefully consider the following risk
factors, along with the other matters referred to in this Annual Report, before you decide to buy our securities. If you decide to buy our securities, you should be able to afford a complete loss of
your investment.

Risks Associated With Our Business

Most of our sales are made to the defense industry. 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, Raytheon and Versys, during the fiscal year ended March 31, 2008 totaled
approximately 32.3%, accounting for $4.1 million of our revenues in fiscal 2008. 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:



22

---





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:



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.

23

---



Our future revenues are inherently unpredictable, our operating results are likely to fluctuate from period to period, and if we fail to meet the
expectations of securities analysts or investors, our stock price could decline significantly.

Our quarterly and annual operating results have fluctuated in the past and are likely to fluctuate significantly in the future due to a variety of factors, some
of which are outside our control. Accordingly, we believe that period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as
indications of future performance. Some of the factors that could cause our quarterly or annual operating results to fluctuate include conditions inherent in government contracting and our business
such as the timing of cost and expense recognition for contracts, the United States Government contracting and budget cycles, and contract closeouts. Because we base our operating expenses on
anticipated revenue trends and a high percentage of our expenses are fixed in the short term, any delay in generating or recognizing forecasted revenues could significantly harm our business.
Fluctuations in quarterly results, competition, or announcements of extraordinary events such as acquisitions or litigation may cause revenues to fall below the expectations of securities analysts and
investors. In this event, the trading price of our common stock would significantly decline. In addition, there can be no assurance that an active trading market will be sustained for our common
stock. The stock market in recent years has experienced extreme price and volume fluctuations that have particularly affected the market prices of many technology companies. These fluctuations, as
well as general economic and market conditions may adversely affect the future market price of our common stock.

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 and 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:



These
purchases also involve numerous risks, including:



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.

24

---



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.

Quantitative and Qualitative Disclosures about Market Risk

We have some risk exposure from interest rates being unfavorable. At March 31, 2008, our line of credit facilities were the only debt facilities subject to
variable interest rates. We will monitor the level of risk by keeping variable rate exposures at acceptable levels.

25

---





ITEM 7.    FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

|Report of Independent Registered Public Accounting Firm                                               |  | 27
|----------------------------------------------------------------------------------------------------- |  | --
|Consolidated Balance Sheet as of March 31, 2008                                                       |  | 28
|Consolidated Statements of Income for the years ended March 31, 2008 and March 31, 2007               |  | 29
|Consolidated Statements of Stockholders' Equity for the years ended March 31, 2008 and March 31, 2007 |  | 30
|Consolidated Statements of Cash Flows for the years ended March 31, 2008 and March 31, 2007           |  | 31
|Notes to Consolidated Financial Statements                                                            |  | 32

26

---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board
of Directors and Shareholders

AML
Communications, Inc.
Camarillo, CA

We
have audited the accompanying consolidated balance sheet of AML Communications, Inc. and subsidiaries as of March 31, 2008, 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, 2008. These consolidated financial statements are the responsibility of the
Company's management. 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes 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, 2008, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2008 in conformity with accounting
principles generally accepted in the United States of America.

|/s/ KABANI & COMPANY, INC.            |  |  | 
|------------------------------------- |  |  | 
|CERTIFIED PUBLIC ACCOUNTANTS          |  |  | 
|Los Angeles, California
June 22, 2008 |  |  | 

27

---





AML COMMUNICATIONS, INC. & SUBSIDIARIES        CONSOLIDATED BALANCE SHEET        AS OF MARCH 31, 2008

|ASSETS                               |                                                                                                      |                                              |            |           
|------------------------------------ | ---------------------------------------------------------------------------------------------------- | -------------------------------------------- | ---------- | ----------
|Current Assets:                      |                                                                                                      |                                              |            |           
|                                     | Cash and cash equivalents                                                                            |                                              | $          | 1,205,000 
|                                     | Accounts receivable, net                                                                             |                                              |            | 2,303,000 
|                                     | Inventories, net                                                                                     |                                              |            | 2,873,000 
|                                     | Note receivable                                                                                      |                                              |            | 5,000     
|                                     | Prepaid expenses                                                                                     |                                              |            | 164,000   
|                                     | Deferred tax assetcurrent                                                                           |                                              |            | 831,000   
|                                     |                                                                                                      |                                              |           
|                                     | Total current assets                                                                                 |                                              |            | 7,381,000 
|                                     | Property and equipment, at cost                                                                      |                                              |            | 7,244,000 
|                                     | Less: Accumulated depreciation                                                                       |                                              |            | (4,566,000
|                                     |                                                                                                      |                                              |           
|                                     | Property and equipment, net                                                                          |                                              |            | 2,678,000 
|                                     | Deferred tax asset                                                                                   |                                              |            | 3,633,000 
|Intangible Assets:                   |                                                                                                      |                                              |            |           
|                                     | Technologies, net                                                                                    |                                              |            | 2,695,000 
|                                     | Patents, net                                                                                         |                                              |            | 99,000    
|                                     | Customer relationship, net                                                                           |                                              |            | 82,000    
|                                     | Trademarks and brand names                                                                           |                                              |            | 220,000   
|                                     |                                                                                                      |                                              |           
|                                     |                                                                                                      |                                              | 3,096,000  |           
|                                     | Deposits                                                                                             |                                              |            | 43,000    
|                                     |                                                                                                      |                                              |           
|                                     |                                                                                                      | $                                            | 16,831,000 |           
|                                     |                                                                                                      |                                              |           
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                                                                      |                                              |            |           
|Current Liabilities:                 |                                                                                                      |                                              |            |           
|                                     | Line of credit                                                                                       |                                              | $          | 874,000   
|                                     | Accounts payable                                                                                     |                                              |            | 1,312,000 
|                                     | Current portion of long term debt                                                                    |                                              |            | 57,000    
|                                     | Accrued expenses:                                                                                    |                                              |            |           
|                                     |                                                                                                      | Accrued payroll and payroll related expenses |            |           
|                                     |                                                                                                      | Accrued income taxes                         |            |           
|                                     |                                                                                                      | Other accrued liabilities                    |            |           
|                                     |                                                                                                      |                                              |           
|                                     | Total current liabilities                                                                            |                                              |            | 3,329,000 
|                                     |                                                                                                      |                                              |           
|                                     | Long term notes payable                                                                              |                                              |            | 606,000   
|                                     | Due to related party                                                                                 |                                              |            | 532,000   
|                                     | Commitments                                                                                          |                                              |            |          
|Stockholders' Equity:                |                                                                                                      |                                              |            |           
|                                     | Common stock, $0.01 par value:15,000,000 shares authorized; shares issued and outstanding 10,422,166 |                                              |            | 104,000   
|                                     | Capital in excess of par value                                                                       |                                              |            | 13,831,000
|                                     | Accumulated deficit                                                                                  |                                              |            | (1,571,000
|                                     |                                                                                                      |                                              |           
|                                     | Total stockholders' equity                                                                           |                                              |            | 12,364,000
|                                     |                                                                                                      |                                              |           
|                                     |                                                                                                      | $                                            | 16,831,000 |           
|                                     |                                                                                                      |                                              |           

The
accompanying notes are an integral part to these consolidated financial statements

28

---





AML COMMUNICATIONS, INC.        CONSOLIDATED STATEMENTS OF INCOME

|                                                                      |                                     | For the Years Ended      |           
|--------------------------------------------------------------------- | ----------------------------------- | ------------------------ | ----------
|
|Net sales                                                             |                                     | $                        | 12,711,000
|Cost of goods sold                                                    |                                     |                          | 7,195,000 
|                                                                      |                                     |                          |           
|                                                                      | Gross profit                        |                          |           
|Operating Expenses:                                                   |                                     |                          |           
|                                                                      | Selling, general and administrative |                          |           
|                                                                      | Research and development            |                          |           
|                                                                      |                                     |                          |           
|                                                                      |                                     | Total operating expenses |           
|                                                                      |                                     |                          |           
|Income (loss) from operations                                         |                                     |                          | 136,000   
|Other income (expense), net                                           |                                     |                          | (183,000  
|                                                                      |                                     |                          |           
|Income (loss) before provision for income taxes and minority interest |                                     |                          | (47,000   
|Provision for income taxes                                            |                                     |                          | 1,755,000 
|Minority interest                                                     |                                     |                          | 464,000   
|                                                                      |                                     |                          |           
|                                                                      | Net income                          |                          | $         
|                                                                      |                                     |                          |           
|Basic earnings per common share                                       |                                     | $                        | 0.21      
|                                                                      |                                     |                          |           
|Basic weighted average number of shares of common stock outstanding   |                                     |                          | 10,271,000
|                                                                      |                                     |                          |           
|Diluted earnings per common share                                     |                                     | $                        | 0.20      
|                                                                      |                                     |                          |           
|Diluted weighted average number of shares of common stock outstanding |                                     |                          | 10,807,000
|                                                                      |                                     |                          |           

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

29

---





AML COMMUNICATIONS, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        FOR THE YEARS ENDED MARCH 31, 2008 AND 2007

|                                       |  | Common Stock |  |   |         |  |   |           
|-------------------------------------- |  | ------------ |  | - | ------- |  | - | ----------
|
|
|Balance, March 31, 2006                |  | 10,234,166   |  | $ | 102,000 |  | $ | 13,494,000
|Options Exercised                      |  | 22,500       |  |   | 1,000   |  |   | 3,000     
|Stock Options Granted for Compensation |  |             |  |   |        |  |   | 119,000   
|Net Income                             |  |             |  |   |        |  |   |          
|                                       |  |              |  |   |         |  |   |           
|Balance, March 31, 2007                |  | 10,256,666   |  |   | 103,000 |  |   | 13,616,000
|Options Exercised                      |  | 165,500      |  |   | 1,000   |  |   | 63,000    
|Stock Options Granted for Compensation |  |             |  |   |        |  |   | 152,000   
|Net Income                             |  |             |  |   |        |  |   |          
|                                       |  |              |  |   |         |  |   |           
|Balance, March 31, 2008                |  | 10,422,166   |  | $ | 104,000 |  | $ | 13,831,000
|                                       |  |              |  |   |         |  |   |           

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

30

---





AML COMMUNICATIONS, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                            |                                                 | For the Years Ended |          
|------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------------------- | ---------
|
|Cash Flows from Operating Activities:                                                       |                                                 |                     |          
|Net Income                                                                                  |                                                 | $                   | 2,172,000
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |                                                 |                     |          
|                                                                                            | Depreciation                                    |                     |          
|                                                                                            | Bad debt expense                                |                     |          
|                                                                                            | Inventory reserves                              |                     |          
|                                                                                            | Stock options granted for compensation          |                     |          
|                                                                                            | Amortization                                    |                     |          
|                                                                                            | Minority interest                               |                     |          
|Changes in assets and liabilities:                                                          |                                                 |                     |          
|                                                                                            | Decrease (increase) in:                         |                     |          
|                                                                                            | Accounts receivable                             |                     |          
|                                                                                            | Inventories                                     |                     |          
|                                                                                            | Other current assets                            |                     |          
|                                                                                            | Other assetsDeferred Tax Asset                 |                     |          
|Increase (decrease) in:                                                                     |                                                 |                     |          
|                                                                                            | Accounts payable                                |                     |          
|                                                                                            | Accrued income taxes                            |                     |          
|                                                                                            | Accrued expenses                                |                     |          
|                                                                                            |                                                 |                     |          
|Net cash provided by (used in) operating activities                                         |                                                 |                     | (420,000 
|                                                                                            |                                                 |                     |          
|Cash Flows from Investing Activities:                                                       |                                                 |                     |          
|                                                                                            | Purchases of property and equipment             |                     |          
|                                                                                            | Cash used in Mica-Tech acquisition              |                     |          
|                                                                                            |                                                 |                     |          
|Net cash used in investing activities                                                       |                                                 |                     | (294,000 
|                                                                                            |                                                 |                     |          
|Cash Flows from Financing Activities:                                                       |                                                 |                     |          
|                                                                                            | Proceeds from exercise of stock options         |                     |          
|                                                                                            | Proceeds from (payments to) line of credit      |                     |          
|                                                                                            | Payments on notes payable                       |                     |          
|                                                                                            | Principal payments on capital lease obligations |                     |          
|                                                                                            |                                                 |                     |          
|Net cash provided by (used in) financing activities                                         |                                                 |                     | (159,000 
|                                                                                            |                                                 |                     |          
|                                                                                            | Net decrease in Cash and Cash Equivalents       |                     |          
|Cash and Cash Equivalents, beginning of period                                              |                                                 |                     | 2,078,000
|                                                                                            |                                                 |                     |          
|Cash and Cash Equivalents, end of period                                                    |                                                 | $                   | 1,205,000
|                                                                                            |                                                 |                     |          

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

31

---





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Line of Business

AML Communications is a designer, manufacturer, and marketer of amplifiers, subsystems, and related products that address the Defense Electronic Warfare Market.
The Company currently conducts its operations through three reportable segments: (1) amplifiers and related products that are designed, manufactured, and marketed by the Company,
(2) high power microwave amplifiers that are designed, manufactured, and marketed through its division, Microwave Power, Inc., and (3) 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 division, Mica-Tech, Inc.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of AML Communications, Inc. ("AML") and its wholly owned
subsidiaries, Microwave Power, Inc. ("MPI") and Mica-Tech, Inc. ("Mica-Tech"), (collectively, the "Company"). All significant inter-company accounts and
transactions have been eliminated in consolidation.

The
accompanying consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for the presentation of
financial information, and include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included.

Concentration of Cash

The Company considers all liquid investments with an original maturity of three months or less to be cash equivalents. As of March 31, 2008, the Company
had cash and cash equivalent balances totaling $915,000 in financial institutions, which were in excess of federally insured amounts.

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 fiscal 2008, the Company had sales to two customers that represented 26.5% and 6.6% of net sales,
respectively, as compared to fiscal 2007, in which the Company had sales to two customers, which represented 12.6% and 8.7% of net sales, respectively. As of March 31, 2008, these two customers
comprised 35.2% and 3.1%, 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, 2008, international sales were $3.1 million, or 24.1% of net sales, as compared to
$2.4 million, or 27.3% of net sales in fiscal year ended March 31, 2007.

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:



32

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)



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 collectibility is reasonably assured is ultimately a judgment decision that must be made by management.

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, 2008Raw materials, net

$
2,147,000Work in process


591,000Finished goods, net


135,000$
2,873,000


The
reserve for inventory at March 31, 2008 was $409,000.

Depreciation and Amortization

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

Machinery and equipment

3 to 5 yearsFurniture and fixtures

5 yearsLeasehold improvements

Life of leaseBuilding

30 years


33

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Depreciation
expense for the years ended March 31, 2008 and March 31, 2007 was $642,000 and $420,000 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.

Property
and equipment consist of the following:

March 31, 2008Building

$
800,000Machinery and equipment


5,578,000Furniture and fixtures


176,000Leasehold improvements


690,000Accumulated depreciation


(4,566,000
)$
2,678,000


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 principle and interest, and one irregular last payment of $556,594.48. The Company's final payment is due on February 10, 2013 and will be for all principle and interest not yet
paid. The note payable is secured by the deed of trust on the building. As of March 31, 2008, the outstanding note amounted to $618,000 with $12,000 in current portion.

Intangible Assets

The Company accounts for its intangible assets under the applicable guidelines of SFAS 142 "goodwill and other intangible assets" and 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 SFAS 144, 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 SFAS 142 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, 2008, the Company recognized no impairment.

34

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

At
March 31, 2008, intangibles consisted of the following:

Intangibles

Gross Carrying
Amount

Accumulated
Amortization

NetAmortized intangibles:Patents

$
464,000

$
(365,000
)
$
99,000Existing Technology


3,166,000


(471,000
)

2,695,000Customer Lists


339,000


(339,000
)

Customer Relationship


131,000


(49,000
)

82,000Trademarks and Brand Name


43,000


(4,000
)

39,000Backlog


18,000


(18,000
)

Unamortized intangibles:Trademarks


181,000





181,000$
4,342,000

$
(1,248,000
)
$
3,096,000


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. For the intangible assets we acquired from 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. 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. The new fair
market values of Mica-Tech's intangible assets, after any associated tax adjustments, are reflected on the financial statement.

Amortization
expense from continuing operation for the year ended March 31, 2008 was $358,000. The Company expects the amortization expenses for the next five years to be as
follows:

Year Ending March 31,

Annual Amount2009

$
273,0002010

$
273,0002011

$
273,0002012

$
273,0002013

$
253,000


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

35

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

support
is recorded when products are shipped. To date, warranty and customer support costs have not been material.

Earnings Per Share

Statement of Financial Accounting Standards No. 128, "Earnings per share" 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.

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 1,826,000 of granted stock options and warrants that were exercisable as of March 31, 2008 and 1,865,000 of granted stock options and warrants exercisable at
March 31, 2007.

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

Year ended March 31, 2008

Net Income

Shares

Per ShareBasic earnings per shares:Net income available to common stockholders

$
2,172,000

10,271,000

$
0.21Effect of dilutive securities:Stock options




386,000Warrants




150,000Diluted earnings per share:

$
2,172,000

10,807,000

$
0.20


|
|

Year ended March 31, 2007

Net Income

Shares

Per ShareBasic earnings per shares:Net income available to common stockholders

$
1,559,000

10,243,000

$
0.15Effect of dilutive securities:Stock options




284,000Warrants




142,000Diluted earnings per share:

$
1,559,000

10,669,000

$
0.15


Segments

The Company has three reportable segments consisting of (1) AML, (2) MPI and (3) Mica-Tech. Our AML segment includes low noise
and high power amplifiers with frequencies that range from 50KHz to 26GHz. These products are manufactured and sold through operations in Camarillo, California. MPI is a designer, manufacturer and
marketer of high power microwave amplifiers. Our MPI segment includes solid state microwave amplifiers operating in the frequency range from 1 to 40 GHz with output power from 10mW to 500W.
These products are manufactured and sold through operations in Santa Clara, California. Our Mica-Tech segment designs, manufactures and markets an intelligent satellite communication
system that provides a highly reliable and secure communications

36

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

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.

The
following is information for the Company's reportable segments for the years ended March 31, 2008 and March 31, 2007:

For the year ended March 31, 2008:

|(Dollars in Thousands)                                                    |  | AML |       | MPI |   | Mica-Tech |  | Unallocated |       | Total |  
|------------------------------------------------------------------------- |  | --- | ----- | --- | - | --------- |  | ----------- | ----- | ----- | -
|Revenue                                                                   |  | $   | 9,873 |     | $ | 1,846     |  | $           | 992   |       | 
|Gross Profit                                                              |  |     | 3,991 |     |   | 1,095     |  |             | 430   |       | 
|Depreciation & amortization (includes intangibles)                        |  |     | 552   |     |   | 237       |  |             | 212   |       | 
|Interest expense                                                          |  |     | 131   |     |   |          |  |             | 66    |       | 
|Income/(Loss) from continuing Operations before tax and minority interest |  |     | 584   |     |   | 294       |  |             | (925  | )     | 
|Net Income                                                                |  |     | 2,341 |     |   | 294       |  |             | (463  | )     | 
|Identifiable assets                                                       |  |     | 9,783 |     |   | 5,008     |  |             | 2,037 |       | 
|Capital Expenditures*                                                     |  | $   | 158   |     |   | 87        |  |             | 8     |       | 

---

For the year ended March 31, 2007:

|(Dollars in Thousands)                                                    |  | AML |       | MPI |   | *Mica-Tech |  | Unallocated |  | Total | 
|------------------------------------------------------------------------- |  | --- | ----- | --- | - | ---------- |  | ----------- |  | ----- | 
|Revenue                                                                   |  | $   | 7,060 |     | $ | 1,794      |  |            |  |      | 
|Gross Profit                                                              |  |     | 2,608 |     |   | 1,075      |  |            |  |      | 
|Depreciation & amortization (includes intangibles)                        |  |     | 341   |     |   | 295        |  |            |  |      | 
|Interest expense                                                          |  |     | 75    |     |   |           |  |            |  |      | 
|Income/(Loss) from continuing Operations before tax and minority interest |  |     | (359  | )   |   | 256        |  |            |  |      | 
|Net Income                                                                |  |     | 1,303 |     |   | 256        |  |            |  |      | 
|Identifiable assets                                                       |  |     | 7,488 |     |   | 4,687      |  |            |  |      | 
|Capital Expenditures                                                      |  | $   | 942   |     |   | 146        |  |            |  |      | 

---

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.

37

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Product Lines

The Company operates as three 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. The MPI segment manufactures 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, 2008:

|(Dollars in thousands)          |                 | AML |       |       |      | MPI  |   |       |       | Mica-Tech |      |   |     | Total |     |     |  
|------------------------------- | --------------- | --- | ----- | ----- | ---- | ---- | - | ----- | ----- | --------- | ---- | - | --- | ----- | --- | --- | -
|Revenues                        |                 |     |       |       |      |      |   |       |       |           |      |   |     |       |     |     |  
|Defense microwave and other     |                 | $   | 9,871 |       | 77.7 | %    | $ | 1,846 |       | 14.5      | %    | $ |    |       |    |     | $
|Cellular and other              |                 |     | 2     |       | 0.0  |      |   |      |       |          |      |   |    |       |    |     |  
|Satellite communication systems |                 |     |      |       |     |      |   |      |       |          |      |   | 992 |       | 7.8 | %   |  
|                                |                 |     |       |       |      |      |   |       |       |           |      |   |     |       |     |     |  
|                                | Total net sales |     | $     | 9,873 |      | 77.7 | % | $     | 1,846 |           | 14.5 | % | $   | 992   |     | 7.8 | %
|                                |                 |     |       |       |      |      |   |       |       |           |      |   |     |       |     |     |  

For the Fiscal Year Ended March 31, 2007:

|(Dollars in thousands)      |                 | AML |       |       |      | MPI  |   |       |       | Mica-Tech |      |   |   | Total |   |   |      
|--------------------------- | --------------- | --- | ----- | ----- | ---- | ---- | - | ----- | ----- | --------- | ---- | - | - | ----- | - | - | -----
|Revenues                    |                 |     |       |       |      |      |   |       |       |           |      |   |   |       |   |   |      
|Defense microwave and other |                 | $   | 6,785 |       | 76.6 | %    | $ | 1,794 |       | 20.3      | %    |  |   |      |   | $ | 8,579
|PCS and two-way messaging   |                 |     | 252   |       | 2.8  |      |   |      |       |          |      |  |   |      |   |   | 252  
|Cellular and other          |                 |     | 23    |       | 0.3  |      |   |      |       |          |      |  |   |      |   |   | 23   
|                            |                 |     |       |       |      |      |   |       |       |           |      |   |   |       |   |   |      
|                            | Total net sales |     | $     | 7,060 |      | 79.7 | % | $     | 1,794 |           | 20.3 | % |  |       |  |   | $    
|                            |                 |     |       |       |      |      |   |       |       |           |      |   |   |       |   |   |      

The
following table summarizes the international sales by segment for the fiscal year ended March 31, 2008:

|(Dollars in thousands) |  | AML |       |  |      | MPI |   |       |  | Mica-Tech |   |   |     | Total |     |   |  
|---------------------- |  | --- | ----- |  | ---- | --- | - | ----- |  | --------- | - | - | --- | ----- | --- | - | -
|International Sales    |  | $   | 2,210 |  | 17.4 | %   | $ | 854   |  | 6.7       | % |   |    |       |    |   | $
|Domestic sales         |  |     | 7,663 |  | 60.3 |     |   | 992   |  | 7.8       |   |   | 992 |       | 7.8 |   |  
|                       |  |     |       |  |      |     |   |       |  |           |   |   |     |       |     |   |  
|Total Sales            |  | $   | 9,873 |  | 77.7 | %   | $ | 1,846 |  | 14.5      | % | $ | 992 |       | 7.8 | % | $
|                       |  |     |       |  |      |     |   |       |  |           |   |   |     |       |     |   |  

The
following table summarizes the international sales by segment for the fiscal year ended March 31, 2007:

|(Dollars in thousands) |  | AML |       |  |      | MPI |   |       |  | Mica-Tech |   |   |  | Total |  |   |      
|---------------------- |  | --- | ----- |  | ---- | --- | - | ----- |  | --------- | - | - |  | ----- |  | - | -----
|International Sales    |  | $   | 1,570 |  | 17.7 | %   | $ | 845   |  | 9.6       | % |  |  |      |  | $ | 2,415
|Domestic sales         |  |     | 5,490 |  | 62.0 |     |   | 949   |  | 10.7      |   |  |  |      |  |   | 6,439
|                       |  |     |       |  |      |     |   |       |  |           |   |   |  |       |  |   |      
|Total Sales            |  | $   | 7,060 |  | 79.7 | %   | $ | 1,794 |  | 20.3      | % |  |  |      |  | $ | 8,854
|                       |  |     |       |  |      |     |   |       |  |           |   |   |  |       |  |   |      

38

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Research and Development Costs

Research and development costs for fiscal 2008 were $2,289,000, or 18.0% of net sales, compared to $1,405,000, or 15.9% of net sales, for the corresponding period
in fiscal 2007. The increase reflects the hiring of additional R&D employees for developmental programs and continued investment in R&D projects. Additionally, $495,000 is attributable to
Mica-Tech's research and development expenses for 356 days during the twelve months ended March 31, 2008.

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 adopted SFAS No. 123 (Revised 2004),Share Based Payment("SFAS No. 123R"), under the
modified-prospective transition method on April 1, 2006. SFAS No. 123R 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. Share-based compensation recognized under the modified-prospective transition method of SFAS
No. 123R includes share-based compensation based on the grant-date fair value determined in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation,for all share-based payments granted prior to and not yet vested as of April 1,
2006 and share-based compensation based on the grant-date fair-value determined in accordance with SFAS No. 123R for all share-based payments
granted after April 1, 2006. SFAS No. 123R eliminates the ability to account for the award of these instruments under the intrinsic value method proscribed by Accounting Principles Board
("APB") Opinion No. 25,Accounting for Stock Issued to Employees, and allowed under the original provisions of SFAS No. 123. Prior to the
adoption of SFAS No. 123R, the Company accounted for our stock option plans using the intrinsic value method in accordance with the provisions of APB Opinion No. 25 and related
interpretations.

Primarily
as a result of adopting SFAS No. 123R, the Company recognized $152,000 or $0.01 per basic and diluted earnings per share in share-based compensation expense
for the year ended March 31, 2008. 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

4.20
%Expected life of the options

6.72 yearsExpected volatility

50.1
%Expected dividend yield




The
weighted average fair value of options granted as of March 31, 2008 was $0.59 per share.

39

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs for the years ended March 31, 2008 and 2007 were $89,000 and $83,000, respectively.

Recently Issued Accounting Pronouncements

In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," ("FIN 48"), an interpretation of FASB
Statement No. 109, "Accounting for Income Taxes," ("FASB 109"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements
in accordance with FASB 109. This Interpretation prescribes 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. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
FIN 48 is effective for fiscal years beginning after December 15, 2006. The cumulative effect of applying FIN 48 is to be reported as an adjustment to the opening balance of
retained earning in the year of adoption. As of March 31, 2008, the Company does not have any unrecognized tax benefits and no corresponding interest or penalties.

In
September 2006, FASB issued SFAS 157 'Fair Value Measurements'. This Statement defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair
value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. Management is currently evaluating the effect of this pronouncement on financial statements.

In
September 2006, the FASB issued SFAS 158 ("SFAS 158"), "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of
FASB Statements No. 87, 88, 106, and 132(R)". This statement requires an employer to recognize the over funded or under funded status of a defined benefit postretirement plan as an asset
or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity. This
statement also requires an employer to measure the funded status of a plan as of the date of its year end statement of financial position, with limited exceptions. The Company will be required to
initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. The
requirement to measure plan assets and benefit obligations as of the date of the employer's fiscal year end statement of financial position is effective for fiscal years ending after
December 15, 2008, or fiscal 2009 for the Company. Management is currently evaluating the effect of this pronouncement on financial statements.

In
February 2007, the FASB issued SFAS No. 159 ("SFAS 159"), "The Fair Value Option for Financial Assets and Financial
LiabilitiesIncluding an amendment of FASB Statement No. 115". SFAS 159 permits entities to choose to measure many financial instruments and certain other items at
fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS 159 will be effective
for the Company

40

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

on
January 1, 2008. Management is currently evaluating the effect of this pronouncement on financial statements.

In
December 2007, FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51. This Statement
applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding
non-controlling interest in one or more subsidiaries or that deconsolidate a subsidiary. Not-for-profit organizations should continue to apply the guidance in
Accounting Research Bulletin No. 51, Consolidated Financial Statements, before the amendments made by this Statement, and any other applicable standards, until the Board issues interpretative
guidance. This Statement is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The effective date of
this Statement is the same as that of the related Statement 141(R). This Statement shall be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied,
except for the presentation and disclosure requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods presented. Management is currently evaluating the
effect of this pronouncement on financial statements.

In
March 19, 2008, FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities. The new standard is intended to improve financial reporting
about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance,
and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. Currently the Company
does not carry any derivative instruments and the adoption of this statement may not have any effect on the financial statements.

In
December 2007, the FASB issued SFAS No. 141(R), "Business Combinations". This Statement replaces SFAS No. 141, Business Combinations. This Statement retains the
fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be
identified for each business combination. This Statement also establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain
from a bargain purchase and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS
No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after Company's fiscal year beginning October 1, 2009. While the Company has not yet
evaluated this statement for the impact, if any, that SFAS No. 141(R) will have on its consolidated financial statements, the Company will be required to expense costs related to any
acquisitions after September 30, 2009.

In
May 2008, FSAB issued SFASB No.162, The Hierarchy of Generally Accepted Accounting Principles. The pronouncement mandates the GAAP hierarchy reside in the accounting literature as
opposed to the audit literature. This has the practical impact of elevating FASB Statements of Financial Accounting Concepts in the GAAP hierarchy. This pronouncement will become effective
60 days following SEC approval. The company does not believe this pronouncement will impact its financial statements.

41

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

In
May of 2008, FASB issued SFASB No. 163, Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60. The scope of the
statement is
limited to financial guarantee insurance (and reinsurance) contracts. The pronouncement is effective for fiscal years beginning after December 31, 2008. The company does not believe this
pronouncement will impact its financial statements.

3. Debt and Lease Commitments

Line of Credit

At March 31, 2008, AML had a line of credit agreement with Bridge Bank. On August 15, 2006, we signed a Business Financing Modification Agreement
with Bridge Bank to renew our line of credit, with a credit facility of $2.0 million. Of this $2.0 million, $1.0 million may be used for cash advances against accounts receivables
and $1.0 million may be used for equipment advances. On April 5, 2007, we modified this agreement to add a new $600,000 equipment term loan to our existing line of credit and then
increased this term loan by an additional $300,000 for a total of $900,000 on June 22, 2007. 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 5.50% plus 0.25% with respect to cash
advances and a rate of such prime rate plus 3.0% with respect to equipment advances and the additional equipment term loans. We are obligated to pay a facility fee of $5,000 (0.50% of the facility
amount) for the first year of the agreement and $2,500 the second year. We must maintain certain financial requirements, including a minimum Asset Coverage Ratio of 1.50 to 1.00 beginning with the
month ending October 31, 2007 and monthly thereafter. We are also required to stay within 80% of our planned quarterly revenue. We were in compliance with these requirements at March 31,
2008; 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, 2008 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. If the agreement was terminated within the first
12 months following its execution on July 17, 2006, we would have been required to pay an early termination fee of 1.0% of the credit facility amount under the terms of the agreement. At
March 31, 2008, we had an outstanding balance of $0 under the accounts receivable agreement and $813,000 under the equipment financing agreement. The three equipment term loans mature on
November 30, 2008, July 31, 2009, and March 31, 2010. 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 loans has expired as of October 7, 2007.

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 principle 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 principle and
interest not yet paid. The note payable is secured by the deed of trust on the building. As of March 31, 2008, the outstanding note amounted to $618,000 with $12,000 in current portion.

42

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Debt and Lease Commitments (Continued)

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. The
promissory note bears interest at the rate of 10%. Mica-Tech makes equal monthly payments of $25,000, which includes a principal and an accrued interest on the remaining principal balance.
Mica-Tech defaulted on its monthly payments due to a cash deficiency. The default was waived by the lender at no cost. The total amount remaining on the note at March 31, 2008 was
$45,000. The Company was not able to make April and May payment s as well. Currently the note is due on demand.

Mica-Tech
was advanced working capital from its founder and employee, Steven Ow, 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 to 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. As of March 31, 2008, the outstanding note amounted to $532,000 including $5,000 in accrued interest. 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 will be paid by three equal payments of $40,000 and one last payment of $30,000. The first payment was made upon the execution of the agreement and the remaining three payments would
be made over next three month period.

The
future aggregate payments arising from these loans are as follows:

Annual AmountDue during the fiscal year ended March 31,2009

$
752,0002010


362,0002011


53,0002012


53,0002013


601,000Thereafter


$
1,821,000


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. As of March 31, 2008, Mica-Tech was leasing its office space and manufacturing facility under an operating lease expiring October 2008. In
April 2008, Mica-Tech moved into the AML facility. Total rent expense under these operating leases was approximately $257,000 and $188,000 during the years ended March 31,
2008 and 2007, respectively.

43

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Debt and Lease Commitments (Continued)

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

Operating LeasesYear ending March 31,2009

$
243,0002010


207,0002011


207,0002012


207,0002013


207,000Thereafter


414,000$
1,485,000


4. Income Taxes

The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109 ("SFAS 109"). Under
SFAS 109, deferred income tax assets or liabilities are computed based on the temporary difference between the financial statement and income tax bases of assets and liabilities using the
currently enacted marginal income tax rate. Deferred income tax expenses or credits are based on the changes in the deferred income tax assets or liabilities from period to period.

The
components of the income tax provision for the years ended March 31, 2007 and 2008, were as follows:

March 31, 2007

March 31, 2008Current

$


$
64,000Deferred

$
(1,662,000
)
$
(1,819,000
)$
(1,662,000
)
$
(1,755,000
)


Differences
between the benefit from income taxes and income taxes at the statutory federal income tax rate for years ended March 31, 2007 and 2008 are as follows:

|                                                       |  | March 31, 2007 |            | March 31, 2008 |        
|------------------------------------------------------ |  | -------------- | ---------- | -------------- | -------
|
|Income tax expense/(benefit) at statutory federal rate |  | $              | (35,000    | )              | 34.0   
|State income taxes, net of federal income tax          |  |                | (50,000    | )              | 48.8   
|Effect of permanent differences                        |  |                | 112,000    |                | (109.2 
|Tax credits                                            |  |                | (45,000    | )              | 43.9   
|Change in valuation allowance                          |  |                | (1,651,000 | )              | 1,610.2
|Other                                                  |  |                | 7,000      |                | (6.8   
|                                                       |  |                |            |                |        
|                                                       |  | $              | (1,662,000 | )              | 1,620.9
|                                                       |  |                |            |                |        

Under
SFAS 109, 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

44

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Income Taxes (Continued)

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, 2008 follows:

Inventory reserves

$
175,000Allowance for doubtful accounts


41,000Accrued vacation


94,000Non-cash employee compensation


12,000Accrued warranty and customer support


13,000Other


(295,000
)General tax credit carry-forwards


2,366,000Net operating loss carry-forwards


3,419,000Depreciation


(33,000
)Intangible Assets


(1,328,000
)4,464,000Valuation allowance


$
4,464,000


As
of March 31, 2008, the Company had federal net operating loss carry-forwards of approximately $8.7 million, expiring at various dates through 2024.

In
July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," ("FIN 48"), an interpretation of FASB Statement No. 109,
"Accounting for Income Taxes," ("FASB 109"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with
FASB 109. This Interpretation prescribes 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. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The cumulative effect of applying FIN 48 is to be reported as an adjustment to the opening balance of retained earning in
the year of adoption. As of March 31, 2008, 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 2003 through 2006 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 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 typically vest 20% after one year from the date of grant with remaining options vesting at a rate of 20% per year thereafter. Options may be
granted to employees, officers, directors and consultants.

45

---





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Stockholders' Equity (Continued)

Plan Duration

In 1995, the board of directors approved the creation of the 1995 Stock Option Plan. In November 2005, the board established the 2005 Equity Incentive Plan ("2005
Plan") with 150,000 shares initially approved. 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(1):

|                              |  | Number of
Shares |   | Weighted Average
Exercise Price |      | Aggregate
Intrinsic Value
|----------------------------- |  | ---------------- | - | ------------------------------- | ---- | -------------------------
|2005 Equity Incentive Plan    |  |                  |   |                                 |      |                          
|Outstanding at March 31, 2007 |  | 2,232,750        |   | $                               | 0.97 |                          
|Granted                       |  | 1,997,355        |   |                                 | 1.27 |                          
|Exercised                     |  | (165,500         | ) |                                 | 0.18 |                          
|Canceled                      |  | (48,300          | ) |                                 | 3.21 |                          
|                              |  |                  |   |                                 |      |                          
|Outstanding at March 31, 2008 |  | 4,016,305        |   | $                               | 1.12 |                          
|Exercisable at March 31, 2008 |  | 1,638,332        |   | $                               | 0.97 |                          

The
weighted average fair value for options granted during each year was $0.57 and $0.50 for fiscal 2008 and fiscal 2007, respectively.

The
number of common stock options available for grant as of each year was 662,145 for fiscal 2008 and 310,574 for fiscal 2007.

Options
outstanding at March 31, 2008 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            |  | 86,200                    |  | 4.94                                    |  | $                                     | 0.16 |                     | 86,200    |                                
|$0.51 - $1.00            |  | 1,605,250                 |  | 5.45                                    |  | $                                     | 0.92 |                     | 1,314,332 |                                
|$1.01 - $2.00            |  | 2,293,855                 |  | 7.94                                    |  | $                                     | 1.27 |                     | 206,800   |                                
|$2.01 - $5.00            |  | 31,000                    |  | 1.95                                    |  | $                                     | 3.19 |                     | 31,000    |                                
|                         |  |                           |  |                                         |  |                                       |      |                     |           |                                
|$0.11 - $5.00            |  | 4,016,305                 |  | 6.48                                    |  | $                                     | 1.12 |                     | 1,638,332 |                                
|                         |  |                           |  |                                         |  |                                       |      |                     |           |                                

GRANTED

Pursuant to the 2005 Plan, during the year ended March 31, 2008, the Company granted 1,997,355 stock options to the Company's employees and its two
external directors.

46

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Stockholders' Equity (Continued)

On
April 5, 2007, the Company granted 28,000 stock options to three employees as employee compensation. All of the 28,000 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. These options are vested at the
rate of twenty (20) percent per year over a five year period. The option exercise price is $1.42, which is the fair market value of our common stock at the time these options were granted.

On
May 1, 2007, the Company granted 5,000 non qualified stock options to Mica-Tech's external director. All of the 5,000 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. The options are
vested at the rate of twenty-five (25) percent per year over a four year period. The option exercise price is $1.45, which is the fair market value of our common stock at the time
these options were granted.

On
June 8, 2007, the Company granted 7,000 stock options to two employees as employee compensation. All of the 7,000 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. The options are vested at the rate of
twenty (20) percent per year over a five year period. The option exercise price is $1.43, which is the fair market value of our common stock at the time these options were granted.

On
June 27, 2007, the Company granted 28,000 stock options to fifty employees as employee compensation. All of the 28,000 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. Of the 28,000 shares granted, 4,000 shares are vested at
the rate of twenty (20) percent per year over a five year period. The remaining 24,000 shares are vested as follows: fifty (50) percent after one month from the grant date and the
remaining fifty (50) percent after one year from the grant date. The option exercise price is $1.36 for all of the 28,000 stock options granted, which is the fair market value of our common
stock at the time these options were granted.

On
August 6, 2007, the Company granted 5,000 stock options to an employee as employee compensation. All of the 5,000 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. The options are vested at the rate of
twenty (20) percent per year over a five year period. The option exercise price is $1.25, which is the fair market value of our common stock at the time these options were granted.

On
September 13, 2007, the Company granted a total of 95,000 stock options to three employees and two external directors as follows: 80,000 stock options to three
AML's officers as employee compensations and 15,000 non qualified stock options to two external directors.

Of
the first 80,000 stock options granted, 55,000 stock options have a term of five (5) years and 25,000 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 80,000 stock options are vested at the
rate of thirty three (33) percent per year over a three year period.

The
second 15,000 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

47

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Stockholders' Equity (Continued)

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 $1.02 for all of the 95,000 stock options granted on September 13, 2007, which is the fair market value of our common stock at the time these options
were granted.

On
January 31, 2008, the Company granted 25,000 stock options to an employee as employee compensation. All of the 25,000 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. The options are vested at the rate
of twenty (20) percent per year over a five year period. The option exercise price is $0.89, which is the fair market value of our common stock at the time these options were granted.

On
February 19, 2008, in connection with Mica-Tech merger, the Company granted 1,309,355 stock options to two Mica-Tech shareholders and other employees of
Mica-Tech. All these Options shall become exercisable in full, upon receipt of a first monthly payment by Mica-Tech of a minimum of $160,000 from a customer not later than
October 1, 2008 for management of a minimum of 20 MW of power. The deadline for satisfying the conditions for option exerciseability may be extended for 60 days by mutual agreement of
the Company and the Optionee. All of the 1,309,355 stock options have a term of five (5) 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 option exercise price is $1.20, which is the fair market value of our common stock at the time these options were
granted.

On
February 26, 2008, the Company granted 435,000 stock options to five employees.

Of
the first 400,000 stock options granted, 250,000 stock options have a term of five (5) years and 150,000 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. For all of the 400,000 stock options, 50% will vest
upon receipt of a first monthly payment by Mica-Tech of a minimum of $160,000 from a Demand Response program not later than December 31, 2009 for management of a minimum of 20 MW of
power and the remaining 50% will vest on reaching the second target as defined in the Mica-Tech documents no later than December 31, 2010.

The
remaining 35,000 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. The options are vested at the rate of twenty-five (25) percent per year over a four year period.

The
option exercise price is $1.50 for all of the 435,000 stock options granted on February 26, 2008, which is the fair market value of our common stock at the time these options
were granted.

On
March 5, 2008, the Company granted 60,000 non qualified stock options to two external directors. All of the 60,000 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. For all of the 60,000 stock options, 50%
will vest upon receipt of a first monthly payment by Mica-Tech of a minimum of $160,000 from a Demand Response program not later than December 31, 2009 for management of a minimum
of 20 MW of power and the remaining 50% will vest on reaching the second target as defined in the Mica-Tech documents no later than

48

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Stockholders' Equity (Continued)

December 31,
2010. The option exercise price is $1.40, which is 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 April 5, 2007:

Risk-free interest rate

4.68
%Expected life of the options

6.50 yearsExpected volatility

38.52
%Expected dividend yield

0


Stock
Options Granted on May 1, 2007:

Risk-free interest rate

4.62
%Expected life of the options

6.25 yearsExpected volatility

38.28
%Expected dividend yield

0


Stock
Options Granted on June 8, 2007:

Risk-free interest rate

4.95
%Expected life of the options

6.50 yearsExpected volatility

39.08
%Expected dividend yield

0


Stock
Options Granted on June 27, 2007:

24,000 stock options with one year vesting periods:Risk-free interest rate

5.07
%Expected life of the options

5.50 yearsExpected volatility

39.13
%Expected dividend yield

0


4,000 stock options with five year vesting periods:Risk-free interest rate

5.07
%Expected life of the options

6.50 yearsExpected volatility

39.13
%Expected dividend yield

0


49

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Stockholders' Equity (Continued)

Stock
Options Granted on August 6, 2007:

Risk-free interest rate

4.79
%Expected life of the options

6.50 yearsExpected volatility

33.29
%Expected dividend yield

0


Stock
Options Granted on September 13, 2007:

55,000 stock options with a term of 5 years and three year vesting periods:Risk-free interest rate

4.47
%Expected life of the options

3.50 yearsExpected volatility

42.58
%Expected dividend yield

0


25,000 stock options with a term of 10 years and three year vesting periods:Risk-free interest rate

4.47
%Expected life of the options

6.00 yearsExpected volatility

42.58
%Expected dividend yield

0


15,000 stock options with a term of 10 years and four year vesting periods:Risk-free interest rate

4.47
%Expected life of the options

6.25 yearsExpected volatility

42.58
%Expected dividend yield

0


Stock
Options Granted on January 31, 2008:

Risk-free interest rate

3.56
%Expected life of the options

6.50 yearsExpected volatility

44.37
%Expected dividend yield

0


Stock
Options Granted on February 19, 2008:

Risk-free interest rate

3.74
%Expected life of the options

5.00 yearsExpected volatility

42.18
%Expected dividend yield

0


50

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Stockholders' Equity (Continued)

Stock
Options Granted on February 26, 2008:

250,000 stock options with a term of 5 years and performance-based vesting schedule:Risk-free interest rate

3.86
%Expected life of the options

5.00 yearsExpected volatility

42.18
%Expected dividend yield

0


150,000 stock options with a term of 10 years and performance-based vesting schedule:Risk-free interest rate

3.86
%Expected life of the options

10.00 yearsExpected volatility

42.18
%Expected dividend yield

0


35,000 stock options with a term of 10 years and four year vesting periods:Risk-free interest rate

3.86
%Expected life of the options

6.25 yearsExpected volatility

42.18
%Expected dividend yield

0


Stock
Options Granted on March 5, 2008:

Risk-free interest rate

3.47
%Expected life of the options

10.00 yearsExpected volatility

51.71
%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 Value
|------------------------- |  | ------------------ | - | ------------------------------- | ---- | ------------------------------- | ---------- | ---------------------
|Non-vestedMarch 31, 2007 |  | 582,700            |   | $                               | 1.01 |                                 |            |                      
|Granted                   |  | 1,997,355          |   |                                 | 1.27 |                                 |            |                      
|Forfeited                 |  | (6,500             | ) |                                 | 0.99 |                                 |            |                      
|Vested                    |  | (190,582           | ) |                                 | 1.02 |                                 |            |                      
|                          |  |                    |   |                                 |      |                                 |            |                      
|Exercised                 |  | (5,000             | ) |                                 | 0.99 |                                 |            |                      
|                          |  |                    |   |                                 |      |                                 |            |                      
|Non-vestedMarch 31, 2008 |  | 2,377,973          |   |                                 | 1.22 |                                 | 1.44 Years |                      

The
total compensation cost not yet recognized related to non-vested stock options is $260,000, which is expected to be recognized over a period of 2.03 years.

51

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Stockholders' Equity (Continued)

Warrants

In connection with Mica-Tech merger, the Company granted 816 shares of warrant to a Mica-Tech's shareholder on February 19, 2008
and 25,000 shares of warrant to an outside consultant on February 26, 2008. All these Warrants shall become exercisable in full, upon receipt of a first monthly payment by Mica-Tech
of a minimum of $160,000 from a customer not later than October 1, 2008 for management of a minimum of 20 MW of power. The deadline for satisfying the conditions for option exerciseability may
be extended for 60 days by mutual agreement of the Company and the Optionee. All of the 25,816 warrants have a term of five (5) 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 warrant agreement. The warrant exercise prices are $1.20 for the first 816 shares and $1.50 for
the other 25,000 shares, which are the fair market value of our common stock at the time these warrants were granted.

Following
is a summary of the warrants activity:

Warrants
outstanding

Weighted
Average
Exercise Price

Aggregate
Intrinsic
ValueOutstanding, March 31, 2007

214,928

$
0.49

$
187,000Granted

25,816


1.50Forfeited

(27,429
)

2.19Exercised

Outstanding, March 31, 2008

213,315


0.39

$
236,000


Following
is a summary of the status of warrants outstanding at March 31, 2008:

|Range of Exercise Prices |  | Total
Warrants
Outstanding |  | Weighted
Average
Remaining
Life
(Years) |  | Total
Weighted
Average
Exercise
Price |      | Warrants
Exercisable |         | Weighted
Average
Exercise Price
|------------------------ |  | -------------------------- |  | --------------------------------------- |  | ------------------------------------- | ---- | -------------------- | ------- | -------------------------------
|$0.24 - $1.00            |  | 187,499                    |  | 0.29                                    |  | $                                     | 0.24 |                      | 187,499 |                                
|$1.01 - $5.00            |  | 25,816                     |  | 4.90                                    |  | $                                     | 0.04 |                      |        |                                
|                         |  |                            |  |                                         |  |                                       |      |                      |         |                                
|$0.24 - $5.00            |  | 213,315                    |  | 2.13                                    |  | $                                     | 0.39 |                      | 187,499 |                                
|                         |  |                            |  |                                         |  |                                       |      |                      |         |                                

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 4/1/07 to
3/31/08) 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, 2008. 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 fiscal year 2008 and 2007 were $122,000 and $110,000 respectively.

52

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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. 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.

8. Supplemental Disclosure of Cash Flows

The Company prepares its statements of cash flows using the indirect method as defined under the Financial Accounting Standard 95.

The
Company paid $0 and $0 income tax and $198,000 and $74,000 interest during the years ended March 31, 2008 and 2007, respectively.

Non-Cash
Investing and Financing Activities: During the year ended March 31, 2008 the Company acquired equipments through line of credit, amounting to $398,000, and
purchased capital equipments on credit, amounting to $243,000.

9. Acquisition of Mica-Tech's Remaining Interest

On April 11, 2007, the Company acquired a controlling position in Mica-Tech, in a cash-for-stock transaction. Under the
terms of the agreement, AML purchased 51% or 4,146,400 shares of Mica-Tech's outstanding common stock for an aggregate price of $800,000. The Company capitalized $70,000 in acquisition
cost.

On
February 19, 2008, the Company entered into an agreement and plan of merger to acquire the remaining interest in Mica-Tech or 49% of the outstanding common stock of
Mica-Tech. Under the terms of the agreement, a wholly-owned subsidiary of the Company would merge with Mica-Tech. Following the merger, Mica-Tech would become
wholly-owned by the Company. Mica-Tech and its major shareholders
provided customary representations and warranties regarding due authority, good standing, operations, and financial conditions.

The
Mica-Tech shareholders in the aggregate received $1,000 for their Mica-Tech common stock. In addition, the Company granted approximately 109,000 options to
purchase Company common stock to Larry Janssen, and other current employees of Mica-Tech at the Company common stock trading price on February 19, 2008. The Company granted
1,200,000 options to purchase Company common stock to Steven Ow at the Company common stock trading price on February 19, 2008. Another shareholder, Jeff Romney was granted a warrant to
purchase 816 shares of Company common stock. None of the options and warrant exercisable until certain revenue conditions of Mica-Tech are satisfied.

53

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. Acquisition of Mica-Tech's Remaining Interest (Continued)

A
summary of the assets acquired and liabilities assumed in the acquisition follows:

February 19, 2008Cash

$
40,000Receivables, net


121,000Inventory


286,000Property and equipment, net


48,000Prepaid assets


23,000Intangible assets


3,158,000Total assets acquired

$
3,676,000Current liabilities


(1,089,000
)Notes payable


(583,000
)Net assets acquired

$
2,004,000Consideration paid in:Cash


801,000Capitalization of acquisition cost


70,000Loss from operations from April 11, 2007February 19, 2008


(484,000
)Negative Goodwill


(1,617,000
)


The acquisition of Mica Tech by the Company resulted in negative goodwill of $1,617,000, which was allocated against the
intangible assets of the Company.

Of the $1,540,000 in acquired intangible assets from the Mica-Tech acquisition, $84,000 was assigned to Customer Relationship
(6-year useful life), $1,416,000 to Existing Technology (15-year useful life), and $40,000 to Trademarks and Brand Name (15-year useful life). All items stated are
subject to amortization.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION DISCLOSURE  FOR THE TWELVE MONTH PERIODS ENDED MARCH 31, 2008 AND 2007

The following un-audited pro forma consolidated financial information for the twelve month periods ended March 31, 2008 and
2007, as presented below, reflects the results of operations of the Company assuming the Mica-Tech acquisition occurred on April 1, 2007 and 2006 respectively. These pro forma
results have been prepared for information purposes only and do not purport to be indicative of what operating results would have been had the acquisition actually taken place on April 1, 2007
and 2006 respectively, and may not be indicative of future operating results.

Twelve month periods ended March 312008

2007(un-audited and in thousands of dollars)Net Revenues

$
12,711

$
9,296Operating loss

$
(16
)
$
(1,676
)Net Income/(loss)

$
1,551

$
(73
)Earnings/(loss) per sharebasic

$
0.15

$
(0.01
)Earnings/(loss) per sharediluted

$
0.14

$
(0.01
)


10. Subsequent Events

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 will be paid by three equal payments of $40,000 and one last payment of $30,000. The
first payment was made upon the execution of the agreement and the remaining three payments would be made over the next three month period.

54

---





ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable.

ITEM 8A.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Director of Finance, 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, 2008). Based on such evaluation, our Chief Executive Officer and Director of Finance 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 Director of Finance, as appropriate to allow timely decisions regarding required
disclosure.

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, 2008. In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") inInternal ControlIntegrated Framework. Based on
that assessment under those criteria, management has determined that, at March 31, 2008, 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

55

---



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 fiscal year 2008 that have materially affected, or are reasonably likely to materially affect, the Company's internal control
over financial reporting.

ITEM 8B.    OTHER INFORMATION

On April 5, 2007, we modified our line of credit agreement with Bridge Bank to add a new $600,000 equipment term loan to our existing line of credit and
increase the term loan by an additional $300,000.

56

---





PART III

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS OF REGISTRANT

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 for the 2008 Annual Meeting of Stockholders to be held on September 11, 2008.

ITEM 10.    EXECUTIVE 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 for the 2008 Annual Meeting of Stockholders to be held on September 11, 2008.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this item is incorporated by reference to the information under the caption "Principal Stockholders" in the Company's definitive proxy
statement for the 2008 Annual Meeting of the Stockholders to be held on September 11, 2008.

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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 for the 2008 Annual Meeting of Stockholders to be held on September 11, 2008.

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K



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)10.4

Loan and Security Agreement dated November 10, 2000 between the Company and Silicon Valley Bank(4)10.5

Intellectual Property Security Agreement dated November 10, 2000 between the Company and Silicon Valley Bank(4)10.6

Warrant to purchase stock dated November 9, 2000 between the Company and Silicon Valley Bank(4)10.7

Accounts Receivable Purchase Agreement dated November 20, 2001 between AML Communications, Inc. and Silicon Valley Bank(5)


57

---



10.8

Promissory Note dated December 30, 2001 between Tiberiu, Mazilu, and AML Communications Inc.(5)10.9

Accounts Receivable Purchase Modifications Agreement dated September 24, 2003 between Silicon Valley Bank and AML Communications(6)10.10

Form of Promissory Note date July 16, 2003 between the Company and the following: Jacob Inbar, Tiberiu Mazilu, Edwin McAvoy, Gerald Starek, Bob M. Hawkins, and The Oliver Family Trust(6)10.11

Form of Warrant dated July 16, 2003 between the Company and the following: Jacob Inbar, Tiberiu Mazilu, Edwin McAvoy, Gerald Starek, Bob M. Hawkins, and The Oliver Family Trust(6)10.12

Fourth Amended and Restated 1995 Stock Option Agreement at June 10, 2002(7)10.13

Parr-Bohn Properties First Amendment to lease of 1000 Avenida Acaso, Camarillo, CA.(7)10.14

Employment Agreement with Dr. Marina Bujatti, of MPI, dated June 18, 2004(7)10.15

Employment Agreement with Dr. Franco Sechi, of MPI, dated June 18, 2004(7)10.16

Interim Lease and Proposed Lease Terms(8)10.17

Financing Agreement dated July 8, 2004 with Bridge Bank(9)10.18

Enterprise Agreement Number 4627 dated August 26, 2004(10)10.19

Business Financing Modification with Bridge Bank, dated December 23, 2005(11)10.20

Business Financing Modification with Bridge Bank dated January 19,2006(11)10.21

Fifth Amended and Restated 1995 Stock Option Agreement at July 12, 2005(12)10.22

Loan Agreement with Bank of America for purchase of MPI building(11)10.23

2005 Equity Incentive Plan(13)10.24

Business Financing Agreement with Bridge Bank dated July 17, 2006(14)10.25

Stock Purchase Agreement with Mica-Tech, dated April 11, 2007(15)10.26

Option Agreement with shareholders and optionholders of Mica-Tech, dated April 11, 2007(15)10.27

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(16)10.28

Option AgreementSteven Ow, dated February 19, 2008(16)


58

---



10.29

Parr-Bohn Properties Second Amendment to lease of 1000 Avenida Acaso, Camarillo, CA, dated February 20, 2008(17).10.30

Business Financing Modification with Bridge Bank, dated April 5, 2007(17)31.1

Certification by the Chief Executive Officer(17)31.2

Certification by the Director of Finance(17)32.0

Certification pursuant to Section 906 of the Sarbanes Oxley Act(17)




59

---





ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth fees billed to us by our auditors during the fiscal years ended March 31, 2008 and March 31, 2007 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, 2008 and fees related to fiscal year
ended March 31, 2007.

For the period endingMarch 31, 2008

March 31, 2007(i)

Audit fees

$
71,000

$
59,000(ii)

Audit related fees





(iii)

Tax fees





(iv)

All other fees





$
71,000

$
59,000


60

---





SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

| |  | AML Communications, Inc.
| |  | ------------------------
| |  | By:                     

KNOW
ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jacob Inbar and Heera Lee, and each of them, jointly and severally, his
attorneys in fact, each with full power of substitution, for him in any and all capacities, to sign any and all amendments to this Report on Form 10-KSB, and to file the same, with
exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each said attorneys-in-fact
or his substitute or substitutes, may do or cause to be done by virtue hereof.

In
accordance with the Exchange Act, 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 INBARJacob Inbar             |  | President, Chief Executive Officer and Chairman of the Board |  | June 30, 2008
|/s/TIBERIU MAZILUTiberiu Mazilu       |  | Vice President-Engineering and Director                      |  | June 30, 2008
|/s/EDWIN J. MCAVOYEdwin J. McAvoy     |  | Secretary, Vice President-Sales, and Director                |  | June 30, 2008
|/s/HEERA LEEHeera Lee                 |  | Director of Finance and Principal Accounting Officer         |  | June 30, 2008
|/s/RICHARD W. FLATOWRichard W. Flatow |  | Director                                                     |  | June 30, 2008
|/s/GERALD M. STAREKGerald M. Starek   |  | Director                                                     |  | June 30, 2008

61

---



QuickLinks