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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 FORM 10-QSB

|    |                                                                                        
|--- | ---------------------------------------------------------------------------------------
|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:      September 30, 2001

or

|      |                                                                                         
|----- | ----------------------------------------------------------------------------------------
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 0R 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to

Commission File Number:            0-27252

AML COMMUNICATIONS, INC.
(Exact name of small business issuer as specified in its charter)

|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 77-0130894                       
|                                                               |  |                                  
|(State or Other jurisdiction of
incorporation or organization) |  | (IRS Employer
Identification No.)

|                                         |  |           
|---------------------------------------- |  | ----------
|1000 Avenida Acaso
Camarillo, California |  | 93012     
|                                         |  |           
|(Address of principal executive offices) |  | (Zip Code)

(805) 388-1345

---

(Issuers telephone number including area code)


Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.

Yes [X]   No   [   ]

State the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.

Common Stock Outstanding as of October 31, 2001: 7,244,909

Transitional Small Business Disclosure
Format: Yes [   ]   No [X]

Number of pages in this
Form 10-QSB 16



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TABLE OF CONTENTS



|                               |                                                                                                |                               |  |  |  |  |  | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | ----------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1. Financial Statements                                                                  
|                               |                                                                                                | BALANCE SHEETS               
|                               |                                                                                                | STATEMENTS OF OPERATIONS     
|                               |                                                                                                | STATEMENTS OF CASH FLOWS     
|                               |                                                                                                | NOTES TO FINANCIAL STATEMENTS
|                               | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|PART II  OTHER INFORMATION   
|                               | Item 2 Changes in Securities and Use of Proceeds                                              
|                               | Item 4. Submission of matters to a vote of Security Holders                                   
|                               | Item 6. Exhibits and Reports on Form 8-K.                                                     
|SIGNATURES                    
|EXHIBIT 10.33                 
|EXHIBIT 10.34                 
|EXHIBIT 10.35                 
|EXHIBIT 10.36                 
|EXHIBIT 10.37                 
|EXHIBIT 10.38                 



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AML COMMUNICATIONS, INC.
 INDEX

|        |                                                                                                                                |  |      |    | 
|------- | ------------------------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|PART I  | FINANCIAL INFORMATION                                                                                                          |  | PAGE
|       
|Item 1. | Financial Statements                                                                                                           | 
|       
|        | Balance Sheets (unaudited) at September 30, 2001 and March 31, 2001                                                            |  |      | 3  | 
|       
|        | Statements of Operations (unaudited) for the three month and six month
periods ended September 20, 2001 and September 30, 2000 |  |      | 4  | 
|       
|        | Statements of Cash Flows (unaudited) for the six month periods ended
        September 30, 2001 and September 30, 2000         |  |      | 5  | 
|       
|        | Notes to the Financial Statements                                                                                              |  |      | 6  | 
|       
|Item 2. | Managements Discussion and Analysis of
Financial Condition and Results of Operations                                          |  |      | 8  | 
|       
|PART II | OTHER INFORMATION                                                                                                              | 
|       
|Item 2. | Changes in Securities and Use of Proceeds                                                                                      |  |      | 14 | 
|       
|Item 4. | Submission of matters to a vote of Security Holders                                                                            |  |      | 14 | 
|       
|Item 6. | Exhibits and Reports on Form 8-K                                                                                               |  |      | 14 | 
|       
|        | SIGNATURES                                                                                                                     |  |      | 16 | 



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PART I  FINANCIAL INFORMATION




Item 1. Financial Statements




AML COMMUNICATIONS, INC.
BALANCE SHEETS
(unaudited)

|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |            |         |           |           | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ------- | ------------- | --------- | ---------- | ------- | --------- | --------- | 
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         | September 30, |           | March 31, 
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         | 2001          |           | 2001      
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         | (Unaudited)   |           | (Audited) 
|ASSETS                                            |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|Current Assets:                                   |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|                                                  | Cash and cash equivalents                                                                                                   |                                              | $                                                                                                                                                                                           | 266,000                   |         |               | $         | 860,000    |        
|                                                  | Accounts receivable, net of allowance for doubtful accounts of
$152,150 at September 30, 2001 and $57,150 at March 31, 2001 |                                              |                                                                                                                                                                                             | 1,012,000                 |         |               |           | 740,000    |        
|                                                  | Inventories, net                                                                                                            |                                              |                                                                                                                                                                                             | 1,047,000                 |         |               |           | 1,138,000  |        
|                                                  | Other current assets                                                                                                        |                                              |                                                                                                                                                                                             | 244,000                   |         |               |           | 345,000    |        
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|                                                  |                                                                                                                             |                                              | Total current assets                                                                                                                                                                        |                           |         | 2,569,000     |           |            |         | 3,083,000 |          
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|Property and Equipment, at cost:                  |                                                                                                                             |                                              | 5,261,000                                                                                                                                                                                   |                           |         |               | 5,697,000 |           
|                                                  | Less  Accumulated depreciation and amortization                                                                            |                                              |                                                                                                                                                                                             | (3,696,000                | )       |               |           | (3,828,000 | )      
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|                                                  |                                                                                                                             |                                              | 1,565,000                                                                                                                                                                                   |                           |         |               | 1,869,000 |           
|Other Assets                                      |                                                                                                                             |                                              | 108,000                                                                                                                                                                                     |                           |         |               | 118,000   |           
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|                                                  |                                                                                                                             | $                                            | 4,242,000                                                                                                                                                                                   |                           |         | $             | 5,070,000 |           
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|LIABILITIES AND STOCKHOLDERS EQUITY              |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|Current Liabilities:                              |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|                                                  | Accounts payable                                                                                                            |                                              | $                                                                                                                                                                                           | 573,000                   |         |               | $         | 1,438,000  |        
|                                                  | Line of credit                                                                                                              |                                              |                                                                                                                                                                                             | 390,000                   |         |               |           | 143,000    |        
|                                                  | Current portion of capital lease obligations                                                                                |                                              |                                                                                                                                                                                             | 216,000                   |         |               |           | 185,000    |        
|                                                  | Accrued expenses:                                                                                                           |                                              |                                                                                                                                                                                             |                           |         |               |           |            |        
|                                                  |                                                                                                                             | Accrued payroll and payroll related expenses |                                                                                                                                                                                             |                           | 160,000 |               |           |            | 285,000 |          
|                                                  |                                                                                                                             | Other accrued liabilities                    |                                                                                                                                                                                             |                           | 245,000 |               |           |            | 318,000 |          
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             | Total current liabilities |         |               | 1,584,000 |            |         |           | 2,369,000 | 
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|Capital Lease Obligations, net of current portion |                                                                                                                             |                                              | 388,000                                                                                                                                                                                     |                           |         |               | 412,000   |           
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|Stockholders Equity:                             |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|                                                  | Preferred stock, $.01 par value:                                                                                            |                                              |                                                                                                                                                                                             |                           |         |               |           |            |        
|                                                  |                                                                                                                             |                                              | 1,000,000 shares authorized; no shares issued or outstanding                                                                                                                                |                           |         |              |           |            |         |          |          
|                                                  | Common stock, $.01 par value:                                                                                               |                                              |                                                                                                                                                                                             |                           |         |               |           |            |        
|                                                  |                                                                                                                             |                                              | 15,000,000 shares authorized; 7,244,909 shares issued and 7,130,409
shares outstanding at September 30, 2001 and 7,046,889
shares issued and 6,932,389 shares outstanding at March 31,
2001 |                           |         | 70,000        |           |            |         | 69,000    |          
|                                                  | Capital in excess of par value                                                                                              |                                              |                                                                                                                                                                                             | 10,136,000                |         |               |           | 10,036,000 |        
|                                                  | Treasury stock-114,500 shares, at cost                                                                                      |                                              |                                                                                                                                                                                             | (223,000                  | )       |               |           | (223,000   | )      
|                                                  | Accumulated deficit                                                                                                         |                                              |                                                                                                                                                                                             | (7,713,000                | )       |               |           | (7,593,000 | )      
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|                                                  |                                                                                                                             |                                              | 2,270,000                                                                                                                                                                                   |                           |         |               | 2,289,000 |           
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           
|                                                  |                                                                                                                             | $                                            | 4,242,000                                                                                                                                                                                   |                           |         | $             | 5,070,000 |           
|                                                  |                                                                                                                             |                                              |                                                                                                                                                                                             |                           |         |               |           |           

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



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AML COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)

|                                                                                |                                   |   |                    |         |                  |   |               |          |               |   |           |           |  |   |            |           | 
|------------------------------------------------------------------------------- | --------------------------------- | - | ------------------ | ------- | ---------------- | - | ------------- | -------- | ------------- | - | --------- | --------- |  | - | ---------- | --------- | 
|                                                                                |                                   |   | Three Months Ended |         | Six Months Ended
|                                                                                |                                   |   |                    |         |                 
|                                                                                |                                   |   | September 30,      |         | September 30,    |   | September 30, |          | September 30,
|                                                                                |                                   |   | 2001               |         | 2000             |   | 2001          |          | 2000         
|                                                                                |                                   |   |                    |         |                  |   |               |          |              
|Net sales                                                                       |                                   | $ | 1,391,000          |         |                  | $ | 1,180,000     |          |               | $ | 3,245,000 |           |  | $ | 2,727,000  |          
|Cost of goods sold                                                              |                                   |   | 869,000            |         |                  |   | 1,462,000     |          |               |   | 2,005,000 |           |  |   | 2,528,000  |          
|                                                                                |                                   |   |                    |         |                  |   |               |          |               |   |           |           |  |   |            |          
|                                                                                | Gross profit (loss)               |   |                    | 522,000 |                  |   |               | (282,000 | )             |   |           | 1,240,000 |  |   |            | 199,000   | 
|Operating expenses:                                                             |                                   |   |                    |         |                  |   |               |          |               |   |           |           |  |   |            |          
|                                                                                | Selling, general & administrative |   |                    | 384,000 |                  |   |               | 618,000  |               |   |           | 660,000   |  |   |            | 1,236,000 | 
|                                                                                | Research and development          |   |                    | 365,000 |                  |   |               | 711,000  |               |   |           | 733,000   |  |   |            | 1,376,000 | 
|                                                                                |                                   |   |                    |         |                  |   |               |          |               |   |           |           |  |   |            |          
|                                                                                |                                   |   | 749,000            |         |                  |   | 1,329,000     |          |               |   | 1,393,000 |           |  |   | 2,612,000  |          
|                                                                                |                                   |   |                    |         |                  |   |               |          |               |   |           |           |  |   |            |          
|Loss from operations                                                            |                                   |   | (227,000           | )       |                  |   | (1,611,000    | )        |               |   | (153,000  | )         |  |   | (2,413,000 | )        
|                                                                                | Other income, net                 |   |                    | 57,000  |                  |   |               | 42,000   |               |   |           | 34,000    |  |   |            | 65,000    | 
|                                                                                |                                   |   |                    |         |                  |   |               |          |               |   |           |           |  |   |            |          
|Loss before provision for income taxes                                          |                                   |   | (170,000           | )       |                  |   | (1,569,000    | )        |               |   | (119,000  | )         |  |   | (2,348,000 | )        
|Provision for income taxes                                                      |                                   |   |                   |         |                  |   |              |          |               |   |          |           |  |   |           |          
|                                                                                |                                   |   |                    |         |                  |   |               |          |               |   |           |           |  |   |            |          
|Net loss                                                                        |                                   | $ | (170,000           | )       |                  | $ | (1,569,000    | )        |               | $ | (119,000  | )         |  | $ | (2,348,000 | )        
|                                                                                |                                   |   |                    |         |                  |   |               |          |               |   |           |           |  |   |            |          
|Basic and diluted loss per common share                                         |                                   | $ | (0.02              | )       |                  | $ | (0.25         | )        |               | $ | (0.02     | )         |  | $ | (0.37      | )        
|                                                                                |                                   |   |                    |         |                  |   |               |          |               |   |           |           |  |   |            |          
|Basic and diluted weighted average
number of shares of common stock
outstanding |                                   |   | 7,130,000          |         |                  |   | 6,317,000     |          |               |   | 7,130,000 |           |  |   | 6,317,000  |          
|                                                                                |                                   |   |                    |         |                  |   |               |          |               |   |           |           |  |   |            |          

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



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AML COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                   |                                                                             |                                                   |                         |                      |         |                  |            |               |         |  |          |  
|-------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------- | ----------------------- | -------------------- | ------- | ---------------- | ---------- | ------------- | ------- |  | -------- | -
|                                                   |                                                                             |                                                   |                         |                      |         | Six Months Ended
|                                                   |                                                                             |                                                   |                         |                      |         |                 
|                                                   |                                                                             |                                                   |                         |                      |         | September 30,    |            | September 30,
|                                                   |                                                                             |                                                   |                         |                      |         | 2001             |            | 2000         
|                                                   |                                                                             |                                                   |                         |                      |         |                  |            |              
|Cash Flows from Operating Activities:              |                                                                             |                                                   |                         |                      |         |                  |            |              
|                                                   | Net profit (loss)                                                           |                                                   | $                       | (119,000             | )       |                  | $          | (2,348,000    | )      
|                                                   | Adjustments to reconcile net loss
to net cash used in operating activities: |                                                   |                         |                      |         |                  |            |               |        
|                                                   |                                                                             | Depreciation and amortization                     |                         |                      | 406,000 |                  |            |               | 447,000 | 
|                                                   |                                                                             | Changes in assets and liabilities:                |                         |                      |         |                  |            |               |         | 
|                                                   |                                                                             |                                                   | Decrease (increase) in: |                      |         |                  |            |               |         |  |         
|                                                   |                                                                             |                                                   |                         | Accounts receivable  |         |                  | (272,000   | )             |         |  | 287,000  |  
|                                                   |                                                                             |                                                   |                         | Inventories          |         |                  | 91,000     |               |         |  | (790,000 | )
|                                                   |                                                                             |                                                   |                         | Other current assets |         |                  | 101,000    |               |         |  | 48,000   |  
|                                                   |                                                                             |                                                   |                         | Other assets         |         |                  | 10,000     |               |         |  | (4,000   | )
|                                                   |                                                                             |                                                   | Increase (decrease) in: |                      |         |                  |            |               |         |  |         
|                                                   |                                                                             |                                                   |                         | Accounts payable     |         |                  | (728,000   | )             |         |  | 115,000  |  
|                                                   |                                                                             |                                                   |                         | Accrued expenses     |         |                  | (198,000   | )             |         |  | 48,000   |  
|                                                   |                                                                             |                                                   |                         |                      |         |                  |            |              
|Net cash used in operating activities              |                                                                             |                                                   | (709,000                | )                    |         |                  | (682,000   | )            
|                                                   |                                                                             |                                                   |                         |                      |         |                  |            |              
|Cash Flows from Investing Activities:              |                                                                             |                                                   |                         |                      |         |                  |            |              
|                                                   | Purchases of property and equipment                                         |                                                   |                         | (102,000             | )       |                  |            | (215,000      | )      
|                                                   |                                                                             |                                                   |                         |                      |         |                  |            |              
|Net cash used in investing activities              |                                                                             |                                                   | (102,000                | )                    |         |                  | (215,000   | )            
|                                                   |                                                                             |                                                   |                         |                      |         |                  |            |              
|Cash Flows from Financing Activities:              |                                                                             |                                                   |                         |                      |         |                  |            |              
|                                                   | Exercise of stock options                                                   |                                                   |                         |                     |         |                  |            | 2,000         |        
|                                                   | Proceeds from private placement                                             |                                                   |                         | 100,000              |         |                  |            |              |        
|                                                   | Proceeds from line of credit                                                |                                                   |                         | 246,000              |         |                  |            |              |        
|                                                   | Principal payments on capital lease obligations                             |                                                   |                         | (129,000             | )       |                  |            | (67,000       | )      
|                                                   |                                                                             |                                                   |                         |                      |         |                  |            |              
|Net cash from (used in) financing activities       |                                                                             |                                                   | 217,000                 |                      |         |                  | (65,000    | )            
|                                                   |                                                                             |                                                   |                         |                      |         |                  |            |              
|Net Decrease in Cash and Cash Equivalents          |                                                                             |                                                   | (594,000                | )                    |         |                  | (2,358,000 | )            
|Cash and Cash Equivalents, beginning of period     |                                                                             |                                                   | 860,000                 |                      |         |                  | 4,659,000  |              
|                                                   |                                                                             |                                                   |                         |                      |         |                  |            |              
|Cash and Cash Equivalents, end of period           |                                                                             | $                                                 | 266,000                 |                      |         | $                | 2,301,000  |              
|                                                   |                                                                             |                                                   |                         |                      |         |                  |            |              
|Supplemental disclosures of cash flow information: |                                                                             |                                                   |                         |                      |         |                  |            |              
|                                                   | Cash paid during the period for:                                            |                                                   |                         |                      |         |                  |            |               |        
|                                                   |                                                                             | Interest                                          |                         | $                    | 74,000  |                  |            | $             | 5,000   | 
|                                                   |                                                                             |                                                   |                         |                      |         |                  |            |              
|                                                   |                                                                             | Income taxes                                      |                         |                      |        |                  |            | $             | 190,000 | 
|                                                   |                                                                             |                                                   |                         |                      |         |                  |            |              
|Non-cash transactions:                             |                                                                             |                                                   |                         |                      |         |                  |            |              
|                                                   |                                                                             | Debt incurred to purchased property and equipment |                         | $                    | 137,000 |                  |            | $             | 389,000 | 
|                                                   |                                                                             |                                                   |                         |                      |         |                  |            |              

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



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AML COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001

1. Basis of Presentation

AML Communications, Inc. (the Company) is a designer, manufacturer, and
marketer of amplifiers and related products that address the wireless, defense
microwave and optical communications markets.

The accompanying unaudited financial statements have been prepared in
conformity with accounting principles generally accepted in the United States.
However, certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States have been omitted or condensed pursuant
to the rules and regulations of the Securities and Exchange Commission (SEC).
In the opinion of management all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation have been included. The results
of operations and cash flows for the three-month periods presented are not
necessarily indicative of the results of operations for a full year. These
financial statements should be read in conjunction with the Companys March 31,
2001 audited financial statements and notes thereto included in the Companys
Annual Report on Form 10-KSB.

Going Concern Issues

In connection with the audit for the year ended March 31, 2001, we
received a report from our independent certified public accountants that
includes an explanatory paragraph describing uncertainty in our ability to
continue as a going concern. Our financial statements included herein
contemplate our ability to continue and as such do not include any adjustments
that might result from this uncertainty. These financial statements should be
read in conjunction with the Companys March 31, 2001 audited financial
statements and notes thereto included in the Companys Annual Report on Form
10-KSB.

2. Earnings Per Share

Basic earnings per share is computed by dividing net income or loss by the
weighted average number of shares outstanding for the year. Diluted earnings
per share is computed by dividing net income or loss by the total of the
weighted average number of shares outstanding plus, if applicable, the dilutive
effect of outstanding stock options (applying the treasury stock method).

3. Inventories

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

|                |  |                    |           |                |  |   |           | 
|--------------- |  | ------------------ | --------- | -------------- |  | - | --------- | 
|                |  | September 30, 2001 |           | March 31, 2001
|                |  |                    |           |               
|                |  | (Unaudited)        |           | (Audited)     
|Raw materials   |  | $                  | 822,000   |                |  | $ | 865,000   | 
|Work-in-process |  |                    | 90,000    |                |  |   | 186,000   | 
|Finished goods  |  |                    | 135,000   |                |  |   | 87,000    | 
|                |  |                    |           |                |  |   |           | 
|                |  | $                  | 1,047,000 |                |  | $ | 1,138,000 | 
|                |  |                    |           |                |  |   |           | 



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4. Capital Leases

In April 2001, the Company entered into three non-cancelable capital
leases to acquire test equipment valued in aggregate at $137,000. The terms of
the leases are identical and call for 36 equal monthly aggregate payments of
$4,396 commencing in April 2001 and at an annual interest rate of 9.4%.

5. Recently Issued Accounting Pronouncements

In July 2001, the FASB issued SFAS No. 141, Business Combinations. This
statement addresses financial accounting and reporting for business
combinations and supersedes Accounting Principles Bulletin (APB) Opinion No.
16, Business Combinations, and SFAS No. 38, Accounting for Pre-Acquisition
Contingencies of Purchased Enterprises. All business combinations in the scope
of this statement are to be accounted for using one method, the purchase
method. The provisions of this statement apply to all business combinations
initiated after June 30, 2001. Use of the pooling-of-interests method for
those business combinations is prohibited. This statement also applies to all
business combinations accounted for using the purchase method for which the
date of acquisition is July 1, 2001 or later. This statement is not applicable
to the Company.

In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. This statement addresses financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes APB Opinion No.
17, Intangible Assets. It addresses how intangible assets that are acquired
individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial statements upon
their acquisition. This statement also addresses how goodwill and other
intangible assets should be accounted for after they have been initially
recognized in the financial statements. It is effective for fiscal years
beginning after December 15, 2001. Early application is permitted for entities
with fiscal years beginning after March 15, 2001, provided that the first
interim financial statements have not been issued previously. This statement is
not applicable to the Company.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. This statement applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development, and/or the normal operation of
long-lived assets, except for certain obligations of lessees. This statement
is not applicable to the Company.

6. Subsequent Events

On October 4, 2001, the Nasdaq Listing Qualifications Panel granted our
request for transfer to the NASDAQ SmallCap Market, conditioned upon our filing
of this Form 10-Q for the period ended September 30, 2001 evidencing either net
tangible assets of $2 million or shareholders equity of $2.5 million no later
than November 15, 2001. As calculated from the financial statements above, our
net tangible assets as of September 30, 2001 were $2,270,000. Continued listing
was further conditioned on our compliance with all the requirements for
continued listing on the Nasdaq SmallCap Market, including maintaining a
minimum bid price of $1.00. However, on September 27, 2001, Nasdaq implemented
a moratorium on the minimum bid price and minimum market value of public float
requirements for continued listing on The Nasdaq Stock Market (encompassing
both the Nasdaq National Market and the Nasdaq SmallCap Market). Under the
moratorium, those requirements will be suspended until January 2, 2002, at
which time, the 30- and 90- day periods provided for by Nasdaq Marketplace
Rules will start anew. This moratorium essentially allows us 30 consecutive
trading days from January 2, 2002 with which to comply to the minimum $1.00 bid
price. If we are unable to attain and maintain the minimum $1.00 bid price, we
would then be afforded a 90 calendar day grace period in which to regain
compliance. Our common stock began trading on the Nasdaq SmallCap Market
effective October 8, 2001.



7



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|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial Condition and
Results of Operations

This filing contains forward-looking statements which involve risks and
uncertainties. The Companys actual future results may differ materially from
the results discussed in the forward-looking statements. When used in this
report, the words expects anticipates and estimates and similar
expressions are intended to identify forward-looking statements. Factors that
could cause actual results to differ materially from those expressed in any
forward-looking statement made by the Company include, but are not limited to:



| |  |  | our ability to finance our activities and maintain our financial liquidity;                           
| | - |  | ------------------------------------------------------------------------------------------------------
|
| |  |  | our ability to attract and retain qualified, knowledgeable employees;                                 
|
| |  |  | the impact of general economic conditions on our business;                                            
|
| |  |  | reductions or cancellations in orders from new or existing customers;                                 
|
| |  |  | the limited number of potential customers for our products;                                           
|
| |  |  | the variability in gross margins on our new products;                                                 
|
| |  |  | our ability to design new products successfully;                                                      
|
| |  |  | our failure to acquire new customers in the future;                                                   
|
| |  |  | the continued or new deterioration of business and economic conditions in our customers marketplaces;
|
| |  |  | intensely competitive industry conditions with increasing price competition; and                      
|
| |  |  | the rate of growth in the wireless and MIC communications market.                                     

Please read the factors set forth in Additional Factors That May Affect Future
Results and other risks detailed in the Companys Securities and Exchange
Commission filings. AML Communications, Inc. undertakes no obligation to
publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date this report is filed with the Securities
and Exchange Commission or to reflect the occurrence of unanticipated events.

Results of Operations

Three Months Ended September 30, 2001 Compared to Three Months Ended September
30, 2000

Net sales.Net sales for the three months ended September 30, 2001 were
$1.4 million compared to net sales of $1.2 million in the three months ended
September 30, 2000, an increase of 16.6%. The increase in net sales is largely
attributable to greater shipments of our MIC amplifier products (defense
microwave and optical) which contributed $975,000, or 70.0% of net sales for
the three months ended September 30, 2001, compared to $86,000, or 7.3% of net
sales for the three months ended September 30, 2000. The increase in sales of
MIC products is the result of our aggressive penetration of the fractured MIC
market and continued deliveries of products to customers in the electro-optical
market. Overall, net sales for PCS and wireless messaging in the three months
ended September 30, 2001 were $195,000, or 14.0% of net sales, compared to
$811,000, or 68.7% of net sales, for the three months ended September 30, 2000.
Sales of our PCS and wireless messaging products decreased due the economic
slow down in the wireless, PCS and two-way messaging markets. Sales of our
cellular products contributed $221,000, or 15.9% of net sales, for the three
months ended September 30, 2001, compared to $278,000, or 23.6% of net sales
for the three months ended June 30, 2000. This decrease can be attributed to
our decision to focus future product development in other, non-cellular
markets, such as PCS/wireless messaging, MIC and electro-optical. Net sales
from other products were $1,000 and $5,000 for the three-month periods ending
September 30, 2001 and September 30, 2000, respectively.

Gross profit (loss).Gross profit for the three months ended September 30,
2001 was $523,000 or 37.6% of net sales, compared to a gross loss of
($282,000), or (23.9%) of net sales, for the three months ended September 30,
2000. Gross profit increased as a result of higher shipment levels, increased
margins within our MIC product lines (which account for 70% of sales for the
quarter), and the effects of managements cost cutting policies. We expect
pressure on selling prices in all markets to continue in fiscal 2002.

Selling, general and administrative costs.Selling, general and
administrative costs for the three months ended September 30, 2001, were
$384,000, or 27.6% of net sales, compared to $618,000, or 52.4% of net sales,
for the three months ended September 30, 2000. The decrease is attributable to
lower labor and benefit related costs resulting



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from the reduction in workforce in these departments, lower advertising costs
and reduced travel costs related to the aforementioned reduction in workforce.
These decreases were offset by an increase in bad debt expense related to an
additional reserve for doubtful accounts receivable related to a specific
wireless customer.

Research and development costs.Research and development costs for the
three months ended September 30, 2001 were $365,000, or 26.3% of net sales,
compared to $711,000, or 60.3% of net sales, for the three months ended
September 30, 2000. The decrease is primarily due to lower material and labor
costs on fewer research and development projects in the current quarter ended
September 30, 2001. Expenses attributable to research and development projects
were reduced by the completion of the development of products, by the
termination of programs seen unprofitable during the previous quarter, and by
the reduction in new, customer-driven product research resulting from the
current economic conditions in the wireless market. During the quarter ended
September 30, 2001 the Company invested approximately $45,000 in the
development of broad-based product lines for the MIC and electro-optical
markets, and we anticipate that research and development costs may increase in
future quarters.

Other income, net.Other income for the three months ended September 30,
2001 was $57,000, compared to other income of $42,000 for the three months
ended September 30, 2000. The increase is due mainly to determinations from a
State of California Franchise Tax Board tax audit and a California State Board
of Equalization sales tax audit resulting in a net refund of approximately
$60,000.

Provision for income taxes.For both the three months ended September 30,
2001 and September 30, 2000, we recorded no provision for or benefit from
income taxes. Although we recorded a net loss for the three months ended
September 30, 2001 and September 30,2000, we recorded no benefit from income
taxes since we have utilized all net operating loss carry-back benefits.

Net loss.For the reasons set forth above, we generated a net loss in the
second quarter of fiscal 2002 of $170,000, compared to a net loss of $1.6
million in the second quarter of fiscal 2001.

Six Months Ended September 30, 2001 Compared to Six Months Ended September 30, 2000

Net sales.Net sales for the six months ended September 30, 2001 were
$3.2 million, compared to net sales of $2.7 million in the six months ended
September 30, 2000, an increase of 19%. The increase in net sales is largely
attributable to greater shipments of our MIC amplifier products (defense
microwave and optical) which contributed $1.7 million, or 53.8% of net sales
for the six months ended September 30, 2001, compared to $335,000, or 12.3% of
net sales for the six months ended September 30, 2000. The increase in sales of
MIC products is the result of our aggressive penetration of the MIC market, an
increase in quotation activity for defense related MIC products prior the
events of September 11, 2001, and the continued deliveries of products to
customers in the electro-optical market. As a result of increased defense
spending in the wake of the events of September 11, 2001, the Company
anticipates that MIC sales will continue to be a significant portion of the
Companys revenue. Net sales for PCS and wireless messaging in the six months
ended September 30, 2001 were $1.1 million or, or 32.8% of net sales, compared
to $1.5 million, or 56.3% of net sales, for the six months ended September 30,
2000. Sales of PCS and wireless messaging products decreased due to the current
economic slow down in the wireless, PCS and two-way messaging markets. Sales of
the Companys cellular products, which contributed $431,000, or 13.3% of net
sales, for the six months ended September 30, 2001, compared to $817,000, or
30.0% of net sales for the six months ended September 30, 2000. This decrease
can be attributed to our decision to focus future product development in other,
non-cellular markets, such as PCS/wireless messaging, MIC and electro-optical
and the continued decrease in demand for our legacy cellular products as
wireless services providers replace their cellular equipment with newer
non-cellular based equipment such as PCS. Net sales from other products were
$6,000 and $39,000 for the six-month periods ending September 30, 2001 and
September 30, 2000, respectively.

Gross profit.Gross profit for the six months ended September 30, 2001
was $1.2 million, or 38.2% of net sales, compared to $199,000, or 7.3% of net
sales, for the six months ended September 30, 2000. Gross profit increased as a
result of higher shipment levels, increased margins within our MIC product
lines, and the effects of managements cost cutting policies. We expect
pressure on selling prices in all markets to continue in fiscal 2002.

Selling, general and administrative costs.Selling, general and
administrative costs for the six months ended September 30, 2001, were
$660,000, or 20.4% of net sales, compared to $1.2 million, or 45.3% of net
sales,



9



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for the six months ended September 30, 2000. The decrease is attributable to
lower labor and benefit related costs resulting from the reduction in workforce
in these departments, lower advertising, travel, legal, and investor relations
fees, and reduced commission expense due to the restructuring of commission
rates we pay to third-party sales representatives.

Research and development costs.Research and development costs for the
six months ended September 30, 2001 were $733,000, or 22.6% of net sales,
compared to $1.4 million, or 50.5% of net sales, for the six months ended
September 30, 2000. The decrease is primarily due to lower material and labor
costs on fewer research and development projects in the current fiscal year.
Expenses attributable to research and development projects were reduced by the
completion of the development of products, by the termination of programs seen
unprofitable during the first quarter of fiscal 2002, and by the reduction in
new, customer-driven product research resulting from the current economic
conditions in the wireless market. We believe investment in the development of
a broad-based product line will increase research and development costs in
future quarters.

Other income, net.Other income for the six months ended September 30,
2001 was $34,000, compared to other income of $65,000 for the six months ended
September 30, 2000. The decrease is due mainly to an increase in interest
expense related to the addition of capital leases during fiscal 2001 and to a
decrease in interest income on lower average invested funds.

Provision for income taxes.For both the six months ended September 30,
2001 and September 30, 2000, although the Company incurred losses, we recorded
no benefit from income taxes since the Company has utilized all net operating
loss carry-back benefits.

Net loss.For the reasons set forth above, we generated a net loss in the
six months ended September 30, 2001 of $119,000, compared to a net loss of $2.3
million for the six months ended September 30, 2001.

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. In December, 1995, we completed an initial public offering
of 1,725,000 shares of common stock (including the exercise of the
underwriters over allotment option), raising net proceeds of approximately
$7.7 million. Of such net proceeds, $425,000 was used to repay loans from
certain stockholders and the remainder has been used to expand manufacturing
capability through the leasing and outfitting of substantially larger
facilities, the acquisition of equipment sufficient to produce higher product
quantities and the employment and training of additional employees capable of
expanding production, new product development and sales. The net proceeds of
the initial public offering have also been used to maintain inventory and
working capital balances.

On August 10, 1998, we announced that our board of directors had
authorized a stock buyback program of up to 400,000 shares of the Companys
outstanding common stock. Shares repurchased pursuant to the buyback will be
purchased from time to time in the open market or in negotiated transactions
and will be held for issuance in connection with the future exercise of
employee stock options. We repurchased 114,500 shares at an aggregate cost of
$224,000 during fiscal 1999. We have not repurchased any additional shares
subsequent to fiscal 1999.

In November 2000, we renewed our $1,000,000 line of credit with Silicon Valley
Bank. This revolving line of credit bears interest at the banks reference
rate (prime rate) plus 1.00 percent (7.0 % at September 30, 2001). This line
of credit is secured by substantially all of the Companys assets and expires
on November 9, 2001. As of September 30, 2001, there was $390,000 in
outstanding borrowings under the line of credit. Borrowings under the line of
credit are subject to a borrowing base of accounts receivable and there are no
financial covenants. In connection with the renewal of the line of credit, we
issued the bank a warrant to purchase 27,429 shares of our common stock at a
price of $2.1875 per share and we have recorded a corresponding charge of
$59,000 in the statement of stockholders equity in the financial statements.
This warrant expires on November 9, 2007. We are currently negotiating the
renewal of the line of credit and anticipate having an agreement with
Silicon Valley Bank with
comparable terms in place prior the November 9, 2001 expiration of the current
agreement, however, we cannot guarantee that a definitive agreement will be
reached prior to the expiration of the current agreement. If we are
unable to renew our existing line of credit, any outstanding balances
under our existing line could become immediately due and payable.



10



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In April 2001, we entered into three non-cancelable capital leases to
acquire test equipment valued in aggregate at $137,000. The terms of the
leases are identical and call for 36 equal monthly aggregate payments of
$4,396, commencing in April 2001, and at an annual interest rate of 9.4%.

At September 30, 2001, we had $266,000 in cash and cash equivalents. Our
operating activities used cash of approximately $709,000 in six months ended
September 30, 2001, primarily as a result of the reduction of accounts payable
balances. Our capital expenditures of $102,000 for the six months ended
September 30, 2001 were primarily for manufacturing test equipment and
leasehold improvements related to the expansion of our MIC manufacturing floor.

Our auditors have included an explanatory paragraph in their Report of
Certified Public Accountants included in our audited financial statements
contained in our Form 10-KSB relating to our ability to continue as a going
concern as of our fiscal year ended March 31, 2001. For the year ended March
31, 2001, we incurred a net loss of $7.1 million, negative cash flows from
operations of approximately $3.0 million and an accumulated deficit of $7.6
million. The auditors considered that these factors raise substantial doubt
about our ability to continue as a going concern.

Recovery of our assets is dependent upon future events, the outcome of
which is indeterminable. Successful completion of our development programs 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.

In March, 2001, the Company closed a private placement in the form of an
equity investment worth $500,000 to a group of investors led by Mr. Jacob
Inbar, the Companys President and Chief Executive Officer. Under the terms of
the agreement, the common stock was priced at $0.812 per share, which
represents a discount of twenty-five percent of the average closing share price
for the previous three days prior to the closing of the private placement. In
consideration for receiving unregistered shares of common stock, the
non-management members of the investor group received warrants to purchase
40,000 shares at an exercise price of $1.125 per share, which represents the
closing price of our common stock on March 13, 2001. The Company has not
recorded a charge in connection to these warrants as the charge is considered
to be immaterial to our financial statements. These warrants expire in March,
2006

In September, 2001, the Company closed a private placement in the form of
an equity investment worth $100,000 to a group of investors led by Mr. Jacob
Inbar, the Companys President and Chief Executive Officer. Under the terms of
the agreement, the common stock was priced at $0.505 per share, which
represents a discount of twenty-five percent of the average closing share price
for the previous three days prior to the closing of the private placement. In
consideration for receiving unregistered shares of common stock, the
non-management members of the investor group received warrants to purchase
8,000 shares of our common stock at an exercise price of $0.65 per share, which
represents the closing price of our common stock on September 25, 2001. The
Company has not recorded a charge in connection to these warrants as the charge
is considered to be immaterial to the financial statements. These warrants
expire in September, 2006.

We believe that funds provided from the private placements and the
borrowing capacity from our line of credit may not be sufficient to finance us
for the next 12 months. We are attempting to procure additional sources of
financing in the event that the capital available as of September 30, 2001 is
insufficient. Other sources may include, but not be limited to, an equity
investment in the Company by a third party. There are, however, no assurances
that we will be able successfully obtain additional financing at terms
acceptable to us.



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Additional Factors That May Affect Future Results

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



| |  |  | industry-specific factors (including the reliance upon continued
growth of the wireless, MIC and optical communications markets,
significant competition in the communications infrastructure equipment
industry characterized by rapid technological change, new product
development, product obsolescence, and significant price erosion over
the life of a product);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our ability to timely develop and produce commercially viable products at competitive prices;                                                                                                                                                                                                                                                                          
|
| |  |  | the ability of our products to operate and be compatible with base station equipment of various OEMs;                                                                                                                                                                                                                                                                  
|
| |  |  | our ability to produce products which meet the quality standards of
both existing and potential new customers;                                                                                                                                                                                                                                                         
|
| |  |  | our ability to accurately anticipate customer demand;                                                                                                                                                                                                                                                                                                                  
|
| |  |  | our ability to manage expense levels, the availability and cost of components;                                                                                                                                                                                                                                                                                         
|
| |  |  | our ability to finance our activities, maintain our financial liquidity; and                                                                                                                                                                                                                                                                                           
|
| |  |  | the impact of worldwide economic and political conditions on our business.                                                                                                                                                                                                                                                                                             

On July 17, 2001, we received notification of a Nasdaq Staff Determination
indicating that we had failed to comply with the minimum market value of public
float requirement for continued listing as required by Marketplace Rule
4450(a)(2), and that our securities were therefore subject to delisting from
The Nasdaq National Market. At that time, the Nasdaq Listing Qualifications
Staff also requested that we address two other Nasdaq Marketplace Rules that we
were not in compliance with, specifically, the minimum net tangible assets and
minimum bid price of $1.00 requirements of Nasdaq Marketplace Rules 4450(a)(3)
and 4450 (a)(5), respectively. As permitted by Nasdaq rules, we requested a
hearing before the Nasdaq Listings Qualifications Panel to review the Staffs
determination and a date for the hearing was set for Friday, August 31, 2001. At
the hearing, we requested that our common stock be transferred to the NASDAQ
SmallCap Market. On October 4, 2001, the Nasdaq Listing Qualifications Panel
granted our request for transfer to the NASDAQ SmallCap Market, conditioned
upon our filing of this Form 10-Q for the period ended September 30, 2001
evidencing either net tangible assets of $2 million or shareholders equity of
$2.5 million no later than November 15, 2001. As calculated from the financial
statements above, our net tangible assets as of September 30, 2001 were
$2,270,000. Continued listing was further conditioned on our compliance with
all the requirements for continued listing on the Nasdaq SmallCap Market,
including maintaining a minimum bid price of $1.00. However, on September 27,
2001, Nasdaq implemented a moratorium on the minimum bid price and minimum
market value of public float requirements for continued listing on The Nasdaq
Stock Market (encompassing both the Nasdaq National Market and the Nasdaq
SmallCap Market). Under the moratorium, those requirements will be suspended
until January 2, 2002, at which time, the 30- and 90- day periods provided for
by Nasdaq Marketplace Rules will start anew. This moratorium essentially
allows us 30 consecutive trading days from January 2, 2002 with which to comply
to the minimum $1.00 bid price. If we are unable to attain and maintain the
minimum $1.00 bid price, we would then be afforded a 90 calendar day grace
period in which to regain compliance. Our common stock began trading on the
Nasdaq SmallCap Market effective October 8, 2001.

For the year ended March 31, 2001, we incurred a net loss of $7.1 million,
negative cash flows from operations of approximately $3.0 million and an
accumulated deficit of $7.6 million. Our auditors considered these factors to
raise substantial doubt about our ability to continue as a going concern.
Recovery of our assets is dependent upon future events, the outcome of which is
indeterminable. 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.

We believe that funds provided from the private placements and the
borrowing capacity from our line of credit may not be sufficient to finance us
for the next 12 months. We are attempting to procure additional sources of
financing in the event that the capital available as of September 30, 2001 is
insufficient. Other sources may include,



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but not be limited to, an equity investment in the Company by a third party. We
cannot assure you that we will be able successfully obtain additional financing
at terms acceptable to us. Failure to maintain or secure adequate financing
could have a material impact on our liquidity and results from operations.

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

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

Sales to foreign customers are invoiced in U.S. dollars. Accordingly, we
currently do not engage in foreign currency hedging transactions. However, as
we expand further into foreign markets, 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 the Companys
products to foreign customers could result in decreased sales which could have
a material adverse impact on our business, results of operations and financial
condition.

We experience significant price competition and expect price competition
in the sale of our products to remain intense. 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 to offer new and existing
products at prices necessary to gain or retain market share. Several of our
competitors have substantial financial resources, which may enable them to
withstand sustained price competition or a downturn in the pricing of their
products in the future. Substantially all of our competitors have, and
potential future competitors could have, substantially greater technical,
marketing, distribution and other resources than we do and have, or could have,
greater name recognition and market acceptance of their products and
technologies.

We receive periodic order forecasts from our major customers who have no
obligation to purchase the forecasted amounts. Nevertheless, we maintain
significant work in process and raw materials inventory, as well as increased
levels of technical production staff to meet order forecasts and/or
managements projections. To the extent our major customers purchase less than
the forecasted amounts, we will have higher levels of inventory than otherwise
needed, increasing the risk of obsolescence, and we will have increased levels
of production staff to support such forecasted orders. Such higher levels of
inventory and increased employee levels could reduce our liquidity and could
have a material adverse effect on our business, results of operations and
financial condition.

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



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PART II  OTHER INFORMATION




Item 2. Changes in Securities and Use of Proceeds

On September 25, 2001, the Company sold 198,020 shares of its common stock
to a group of investors led by Mr. Jacob Inbar, the Companys President and
Chief Executive Officer, at a purchase price of $0.505 per share, for an
aggregate offering price of $100,000. In addition, the non-management members
of the investor group received warrants to purchase an aggregate 8,000 shares of common
stock at an exercise price of $0.65 per share. No additional
consideration was paid for these warrants. These warrants are exercisable
any time prior to September 25, 2006. Both the common stock and the warrants
were issued pursuant to exemptions from the registration requirements of the
Securities Act of 1933, as amended, as provided by Section 4(2) of the
Securities Act and by Rule 506 of Regulation D.




Item 4. Submission of matters to a vote of Security Holders

The Annual Meeting of Stockholders was held on September 12, 2001. The
following matters were submitted to a vote of the Companys stockholders:

Proposal No. 1  Election of two (2) Class III Directors

To elect Jacob Inbar and Gerald Starek as directors for the ensuing term. Mr.
Inbar and Mr. Starek were Company directors immediately prior to the vote and
were elected as a result of the following vote:

|              |  |           |           |               |  |                |         |  |  |  |   | 
|------------- |  | --------- | --------- | ------------- |  | -------------- | ------- |  |  |  | - | 
|              |  | Votes For |           | Votes Against |  | Votes Withheld
|              |  |           |           |               |  |               
|Jacob Inbar   |  |           | 6,261,388 |               |  |                | 234,075 |  |  |  | 0 | 
|Gerald Starek |  |           | 6,261,388 |               |  |                | 234,075 |  |  |  | 0 | 

Proposal No. 2  Adoption of the Companys Third Amended and Restated 1995
Stock Incentive Plan

To adopt the Third Amended and Restated 1995 Stock Incentive Plan reflecting an
amendment to the Companys 1995 Amended and Restated Stock Incentive Plan to
increase the number of shares of common stock authorized for issuance under the
plan from 2,000,000 to 2,500,000. This Plan was adopted, as set forth in the
Companys proxy statement dated July 31, 2001, as a result of the following
vote:

|          |  |               |         |                |  |         |         |  |  |  |           | 
|--------- |  | ------------- | ------- | -------------- |  | ------- | ------- |  |  |  | --------- | 
|Votes For |  | Votes Against |         | Votes Withheld |  | Unvoted
|          |  |               |         |                |  |        
|3,375,871 |  |               | 320,015 |                |  |         | 321,640 |  |  |  | 2,971,532 | 

There were no other matters submitted to a vote of the Companys stockholders
at the Annual Meeting of Stockholders.




Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits

|      |  |                                                                                                             
|----- |  | ------------------------------------------------------------------------------------------------------------
|10.33 |  | Termination and Change in Control Agreement dated September
12, 2001 between the Company and Jacob Inbar.   
|     
|10.34 |  | Termination and Change in Control Agreement dated September
12, 2001 between the Company and Tiberiu Mazilu.
|     
|10.35 |  | Termination and Change in Control Agreement dated September
12, 2001 between the Company and Edwin McAvoy.  
|     
|10.36 |  | Change in Control Agreement dated September 12, 2001 between
the Company and Gary Rogers.                   



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|      |  |                                                                                           
|----- |  | ------------------------------------------------------------------------------------------
|10.37 |  | Change in Control Agreement dated September 12, 2001 between
the Company and Si Le.       
|     
|10.38 |  | Change in Control Agreement dated September 12, 2001 between
the Company and David Swoish.

(b)  Reports on Form 8-K

The Company filed no current Reports on Form 8-K during the quarter ended
September 30, 2001.



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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.



|Date: November 8, 2001 | AML Communications, Inc.
 
 
/s/ David A. Swoish
David A. Swoish
Director of Finance
|---------------------- | ------------------------------------------------------------------------------------



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