UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





ü
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period
ended:            December 31, 2008





or





_
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
transition period from ______ to _______





Commission
File
Number:              0-27250





AML
COMMUNICATIONS, INC.


(Exact
name of registrant as specified in its charter)






Delaware
              
              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(Registrant’s
      telephone number including area code)





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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definition of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.




Large accelerated
      filer o
            Accelerated filer
      oNon-accelerated
      filer o (Do
      not check if a smaller reporting company)
            Smaller reporting
      company þ




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes  No ü





Indicate
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 February 4, 2009: 10,654,665 shares










AML
      Communications, Inc.Index to Form
      10-QItem
      1.
            Financial
      Statements (Unaudited)Unaudited
      Consolidated Balance Sheet as of December 31, 2008 and Consolidated
      Balance Sheet as of March 31, 2008Unaudited
      Consolidated Statements of Income for the nine month periods ended
      December 31, 2008 and December 31, 2007Unaudited
      Consolidated Statements of Cash flows for the nine month periods ended
      December 31, 2008 and December 31, 2007Notes
      to Unaudited Consolidated Financial StatementsItem
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      OperationItem
      3.
            Quantitative
      and Qualitative Disclosures About Market RiskItem
      4.
            Controls
      and ProceduresPart
      II
            Other
      InformationItem
      1.
            Legal
      ProceedingsItem
      1A.
            Risk
      FactorsItem
      2.
            Unregistered
      Sales of Equity Securities and Use of ProceedsItem
      3.
            Defaults
      Upon Senior SecuritiesItem
      4.
            Submission
      of Matters to a Vote of Security HoldersItem
      5.
            Other
      InformationItem
      6.
            ExhibitsSIGNATURES




2







PART
I - FINANCIAL INFORMATION





Item
      1.
            Financial
      Statements


AML
COMMUNICATIONS, INC.


CONSOLIDATED
BALANCE SHEET


December 31,
              2008
              (Unaudited)
            
            
            March
      31,
              2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
            
            $
            1,366,000
            
            
            $
            1,205,000Accounts
      receivable, net
            
            
            1,912,000
            
            
            
            2,303,000Inventories,
      net
            
            
            3,369,000
            
            
            
            2,873,000Note
      receivable
            
            
            12,000
            
            
            
            5,000Prepaid
      expenses
            
            
            266,000
            
            
            
            164,000Deferred
      tax asset - current
            
            
            341,000
            
            
            
            831,000Total
      current assets
            
            
            7,266,000
            
            
            
            7,381,000Property
      and equipment, at cost
            
            
            7,288,000
            
            
            
            7,244,000Less:
      Accumulated depreciation
            
            
            (5,053,000
            )
            
            
            (4,566,000
            )Property
      and equipment, net
            
            
            2,235,000
            
            
            
            2,678,000Deferred
      tax asset
            
            
            3,633,000
            
            
            
            3,633,000Intangible
      Assets:Technologies,
      net
            
            
            2,521,000
            
            
            
            2,695,000Patents,
      net
            
            
            81,000
            
            
            
            99,000Customer
      relationship, net
            
            
            72,000
            
            
            
            82,000Trademarks
      and brand names
            
            
            218,000
            
            
            
            220,0002,892,000
            
            
            
            3,096,000Deposits
            
            
            33,000
            
            
            
            43,000$
            16,059,000
            
            
            $
            16,831,000LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      Liabilities:Line
      of credit
            
            $
            579,000
            
            
            $
            874,000Accounts
      payable
            
            
            796,000
            
            
            
            1,312,000Current
      portion of long term debt
            
            
            12,000
            
            
            
            57,000Short
      term note payable
            
            
            39,000
            
            
            
            ---Accrued
      expenses:Accrued
      payroll and payroll related expenses
            
            
            490,000
            
            
            
            737,000Accrued income
      taxes
            
            
            ---
            
            
            
            27,000Other
      accrued liabilities
            
            
            253,000
            
            
            
            322,000Total
      current liabilities
            
            
            2,169,000
            
            
            
            3,329,000Long
      term notes payable
            
            
            604,000
            
            
            
            1,138,000Commitments
            
            
            -
            
            
            
            -Stockholders’
      Equity:Common
      stock, $0.01 par value:15,000,000 shares authorized; 10,654,665and
      10,422,166 shares issued and outstanding at December 31, 2008 and March
      31, 2008, respectively
            
            
            107,000
            
            
            
            104,000Capital
      in excess of par value
            
            
            14,001,000
            
            
            
            13,831,000Accumulated
      deficit
            
            
            (822,000
            )
            
            
            (1,571,000
            )Total
      stockholders’ equity
            
            
            13,286,000
            
            
            
            12,364,000$
            16,059,000
            
            
            $
            16,831,000




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




3




AML
COMMUNICATIONS, INC.


CONSOLIDATED
STATEMENTS OF INCOME


(Unaudited)




Three
      Month Periods Ended
            
            
            Nine
      Month Periods EndedDecember
      31,
            
            
            December
      31,
            
            
            December
      31,
            
            
            December
      31,2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      sales
            
            $
            3,332,000
            
            
            $
            3,477,000
            
            
            $
            10,029,000
            
            
            $
            9,384,000Cost
      of goods sold
            
            
            1,949,000
            
            
            
            1,880,000
            
            
            
            5,667,000
            
            
            
            5,247,000Gross
      profit
            
            
            1,383,000
            
            
            
            1,597,000
            
            
            
            4,362,000
            
            
            
            4,137,000Operating
      expenses:Selling,
      general & administrative
            
            
            679,000
            
            
            
            784,000
            
            
            
            2,144,000
            
            
            
            2,305,000Research
      and development
            
            
            484,000
            
            
            
            582,000
            
            
            
            1,465,000
            
            
            
            1,729,000Total
      operating expenses
            
            
            1,163,000
            
            
            
            1,366,000
            
            
            
            3,609,000
            
            
            
            4,034,000Income
      from operations
            
            
            220,000
            
            
            
            231,000
            
            
            
            753,000
            
            
            
            103,000Gain
      on settlement of debt
            
            
            ---
            
            
            
            ---
            
            
            
            567,000
            
            
            
            ---Interest
      & other expense
            
            
            (21,000
            )
            
            
            (53,000
            )
            
            
            (80,000
            )
            
            
            (140,000
            )Total
      other income (expense)
            
            
            (21,000
            )
            
            
            (53,000
            )
            
            
            487,000
            
            
            
            (140,000
            )Income/(loss)
      before provision for income taxes and minority interest
            
            
            199,000
            
            
            
            178,000
            
            
            
            1,240,000
            
            
            
            (37,000
            )Provision
      for income taxes
            
            
            74,000
            
            
            
            8,000
            
            
            
            491,000
            
            
            
            23,000Minority
      Interest
            
            
            ---
            
            
            
            133,000
            
            
            
            ---
            
            
            
            421,000Net
      income
            
            $
            125,000
            
            
            $
            303,000
            
            
            $
            749,000
            
            
            $
            361,000Basic
      earnings per common share
            
            $
            0.01
            
            
            $
            0.03
            
            
            $
            0.07
            
            
            $
            0.04Basic
      weighted average number of shares of common stock
    outstanding
            
            
            10,642,000
            
            
            
            10,257,000
            
            
            
            10,549,000
            
            
            
            10,257,000Diluted
      earnings per common share
            
            $
            0.01
            
            
            $
            0.03
            
            
            $
            0.07
            
            
            $
            0.03Diluted
      weighted average number of shares of common stock
    outstanding
            
            
            10,712,000
            
            
            
            10,835,000
            
            
            
            10,758,000
            
            
            
            10,937,000





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




4


AML COMMUNICATIONS,
INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)





Nine
      Month Periods EndedDecember
      31,
              2008
            
            
            December
      31,
              2007Cash
      Flows from Operating Activities:Net income
            
            $
            749,000
            
            
            $
            361,000Adjustments
      to reconcile net income to net cash provided by (used in) operating
      activities:Depreciation
            
            
            523,000
            
            
            
            479,000Bad
      debt expense
            
            
            4,000
            
            
            
            (4,000
            )Inventory
      reserves
            
            
            (58,000
            )
            
            
            21,000Stock
      options granted for compensation
            
            
            97,000
            
            
            
            115,000Amortization
            
            
            204,000
            
            
            
            238,000Gain
      on settlement of debt
            
            
            (567,000
            )
            
            
            ---Minority
      interest
            
            
            ---
            
            
            
            (421,000
            )Changes
      in assets and liabilities:Decrease
      (increase) in:Accounts
    receivable
            
            
            387,000
            
            
            
            (514,000
            )Inventories
            
            
            (437,000
            )
            
            
            (860,000
            )Other current
    assets
            
            
            (99,000
            )
            
            
            (46,000
            )Deferred
      Tax Assets
            
            
            490,000
            
            
            
            ---Increase
      (decrease) in:Accounts
      payable
            
            
            (471,000
            )
            
            
            (64,000
            )Accrued
      income taxes
            
            
            (27,000
            )
            
            
            23,000Accrued expenses
            
            
            (315,000
            )
            
            
            42,000Net
      cash provided by (used in) operating activities
            
            
            480,000
            
            
            
            (630,000
            )Cash
      Flows from Investing Activities:Purchases
      of property and equipment
            
            
            (80,000
            )
            
            
            (152,000
            )Cash
      used in Mica-Tech acquisition
            
            
            -
            
            
            
            (13,000
            )Net
      cash used in investing activities
            
            
            (80,000
            )
            
            
            (165,000
            )Cash
      Flows from Financing Activities:Proceeds from (payments on) line
      of credit
            
            
            (295,000
            )
            
            
            39,000Payments on notes
      payable
            
            
            (19,000
            )
            
            
            (117,000
            )Proceeds
      from exercise of stock options
            
            
            75,000
            
            
            
            ---Principle
      payments capital lease obligations
            
            
            ---
            
            
            
            (13,000
            )Net
      cash used in financing activities
            
            
            (239,000
            )
            
            
            (91,000
            )Net
      increase (decrease) in Cash and Cash Equivalents
            
            
            161,000
            
            
            
            (886,000
            )Cash
      and Cash Equivalents, beginning of period
            
            
            1,205,000
            
            
            
            2,078,000Cash
      and Cash Equivalents, end of period
            
            $
            1,366,000
            
            
            $
            1,192,000Supplemental
      disclosure of cash flow information:Cash
      paid during the period for:Interest
            
            $
            84,000
            
            
            $
            151,000Income
      Taxes
            
            $
            85,000
            
            
            $
            ---Supplemental
      disclosure of non-cash flow investing and financing activity:
              Debt
      incurred to purchase property and equipment
            
            $
            ---
            
            
            $
            398,000





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




5




AML
COMMUNICATIONS, INC.


NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008





1.  
Basis of Presentation





AML
Communications (the “Company” or “we”) currently design, manufacture, and market
radio frequency (RF) and microwave, low noise, medium and high power amplifiers
and subsystems serving primarily the Defense Electronic Warfare Market. Our
business is comprised of three reportable segments. AML
Communications, Inc. (AML) designs, manufactures, and markets amplifiers
and related products for the defense microwave. Our division Microwave
Power, Inc. (MPI) designs, manufactures, and markets high power microwave
amplifiers for the defense market. Our defense industry products are used
primarily in electronic systems for tactical aircraft, ships, ground systems,
and missile systems. These products are sold directly by us as well as through
independent sales representatives. On April 11, 2007, we acquired a
controlling interest of Mica-Tech, Inc. (Mica-Tech) and subsequently
acquired the remaining interest on February 19, 2008. Our wholly owned
subsidiary Mica-Tech designs, manufactures, and markets an intelligent
communication system to provide Supervisory Control And Data Acquisition (SCADA)
of the electric power grid. We had three reportable segments (AML), (MPI), and
(Mica-Tech) for the nine month periods ended December 31, 2008 and December 31,
2007.




We were
incorporated in California in 1986 as Advanced Milliwave Laboratories,
Inc.  Early in 1994, we changed our name to AML Communications,
Inc.  In December 1995, in conjunction with the initial public
offering of our common stock, we changed our state of incorporation from
California to Delaware.  In May 1996, we moved our principle office
and manufacturing facility to our current location, 1000 Avenida Acaso,
Camarillo, California 93012.





The
accompanying 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
nine-month period 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 audited financial statements and notes thereto
included in the Company’s Annual Report on Form 10-KSB for the fiscal year ended
March 31, 2008.





Principles
of Consolidation





The accompanying consolidated financial
statements include the accounts of AML, its wholly owned division, MPI, and its
wholly owned subsidiary, Mica-Tech.  All significant inter-company
accounts and transactions have been eliminated in consolidation.  The
nine month period ended December 31, 2007 includes 265 days of Mica-Tech’s
results of operations prospectively from the date of the acquisition, or April
11, 2007 through December 31, 2007.





2.  
Earnings Per Share





Statement
of Financial Accounting Standards No. 128, “Earnings per share” requires the
presentation of basic earnings per share and diluted earnings per
share.  Basic and diluted earnings per share computations presented by
the Company conform to the standard and are based on the weighted average number
of shares of Common Stock outstanding during the year.




Basic
earnings per share are computed by dividing net income or loss by the weighted
average number of shares outstanding for the year.  “Diluted” earnings
per share is computed by dividing net income or loss by the total of the
weighted average number of shares outstanding, and the dilutive effect of
outstanding stock options and warrants (applying the treasury stock
method).





The
Company had approximately 1,763,000 of granted stock options that were
exercisable as of December 31, 2008
and approximately 1,989,000 of granted stock options and warrants exercisable at
December 31,
2007.




6




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





Nine months ended
      December 31, 2008
            
            Net
      Income
            
            
            Shares
            
            
            Per
      ShareBasic
      earnings per shares:Net
      income available to common stockholders
            
            $
            749,000
            
            
            
            10,549,000
            
            
            $
            0.07Effect
      of dilutive securities:Stock
      options & warrants
            
            
            
            
            
            
            209,000Diluted
      earnings per share:
            
            $
            749,000
            
            
            
            10,758,000
            
            
            $
            0.07Nine months ended
      December 31, 2007
            
            Net
      Income
            
            
            Shares
            
            
            Per
      ShareBasic
      earnings per shares:Net
      income available to common stockholders
            
            $
            361,000
            
            
            
            10,257,000
            
            
            $
            0.04Effect
      of dilutive securities:Stock
      options & warrants
            
            
            
            
            
            
            680,000Diluted
      earnings per share:
            
            $
            361,000
            
            
            
            10,937,000
            
            
            $
            0.03


3.Accounts
Receivable





Accounts
receivable as of December 31, 2008
and March 31, 2008 are as follows:


December 31, 2008
              (Unaudited)
            
            
            March 31,
      2008Accounts
      receivable
            
            $
            2,013,000
            
            
            $
            2,399,000Allowance
      for bad debts
            
            
            (101,000
            )
            
            
            (96,000
            )$
            1,912,000
            
            
            $
            2,303,000





4.  
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:





December 31, 2008
              (Unaudited)
            
            
            March 31,
      2008Raw
      material, net of reserve
            
            $
            2,505,000
            
            
            $
            2,147,000Work-in-process
            
            
            691,000
            
            
            
            591,000Finished
      goods
            
            
            173,000
            
            
            
            135,000$
            3,369,000
            
            
            $
            2,873,000





5.  
Property & equipment





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





Machinery
      and equipment
            3
      to 5 yearsFurniture
      and fixtures
            5
      yearsLeasehold
      improvements
            5
      yearsBuilding
            30
      years





Depreciation expense was $523,000 and
$479,000 for the nine months ended December 31, 2008 and December 31, 2007,
respectively.





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




7




Property and equipment as of December
31, 2008 and March 31, 2008 consist of the following:





December
      31,2008
      (Unaudited)
            
            
            March
      31,2008Building
            
            $
            800,000
            
            
            $
            800,000Machinery
      and equipment
            
            
            5,606,000
            
            
            
            5,578,000Furniture
      and fixtures
            
            
            192,000
            
            
            
            176,000Leasehold
      improvements
            
            
            690,000
            
            
            
            690,000Accumulated
      depreciation
            
            
            (5,053,000
            )
            
            
            (4,566,000
            )$
            2,235,000
            
            
            $
            2,678,000





6.  
Intangible Assets





The
Company accounts for its intangible assets under the applicable guidelines of
SFAS 142 “goodwill and other intangible assets” and SFAS 144 “accounting for the
impairment or disposal of long lived assets”.  Where intangible assets
have finite lives, they are amortized over their useful life unless factors
exist to indicate that the asset has been impaired.  The Company
evaluates if the assets are impaired annually or on an interim basis if an event
occurs or circumstances change to suggest that the assets value has
diminished.  Under SFAS 142 intangible assets with indefinite useful
lives are required to be tested annually for impairment or whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.  Recoverability of assets is measured by a comparison
of the carrying amount of the assets to future net cash flows expected to be
generated by the assets.  If the assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying
amount exceeds the fair value of the assets.  During the nine months
ended December 31, 2008, the Company recognized no impairment.





At
December 31, 2008, intangibles consist of the following:





Intangibles
            
            Gross
      Carrying
              Amount
            
            
            Accumulated
              Amortization
            
            
            NetAmortized
      intangibles:Patents
            
            $
            464,000
            
            
            $
            (383,000
            )
            
            $
            81,000Existing
      Technology
            
            
            3,166,000
            
            
            
            (645,000
            )
            
            
            2,521,000Customer
      Lists
            
            
            339,000
            
            
            
            (339,000
            )
            
            
            —Customer
      Relationship
            
            
            131,000
            
            
            
            (59,000
            )
            
            
            72,000Trademarks
      and Brand Names
            
            
            43,000
            
            
            
            (6,000
            )
            
            
            37,000Backlog
            
            
            18,000
            
            
            
            (18,000
            )
            
            
            —Unamortized
      intangibles:Trademarks
            
            
            181,000
            
            
            
            —
            
            
            
            181,000$
            4,342,000
            
            
            $
            (1,450,000
            )
            
            $
            2,892,000







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




Intangibles
            
            Gross
      Carrying Amount
            
            
            Accumulated
      Amortization
            
            
            NetAmortized
      intangibles:Patents
            
            $
            464,000
            
            
            $
            (365,000
            )
            
            $
            99,000Existing
      Technology
            
            
            3,166,000
            
            
            
            (471,000
            )
            
            
            2,695,000Customer
      Lists
            
            
            339,000
            
            
            
            (339,000
            )
            
            
            —Customer
      Relationship
            
            
            131,000
            
            
            
            (49,000
            )
            
            
            82,000Trademarks
      and Brand Names
            
            
            43,000
            
            
            
            (4,000
            )
            
            
            39,000Backlog
            
            
            18,000
            
            
            
            (18,000
            )
            
            
            —Unamortized
      intangibles:Trademarks
            
            
            181,000
            
            
            
            —
            
            
            
            181,000$
            4,342,000
            
            
            $
            (1,248,000
            )
            
            $
            3,096,000




8




Due to
the acquisition of MPI in the quarter ended June 30, 2004 and the
acquisition of Mica-Tech on April 11, 2007 (51%) and February 19, 2008
(100%), we recorded the intangible assets above. For the intangible assets we
acquired from MPI acquisition, we assigned an 8-year life to Patents, a 12-year
life to Existing Technology, and a 3-year life to Customer Lists. All items are
subject to amortization. The value assigned to Trademarks, which have an
indefinite life, should not be amortized. For the intangible assets we acquired
from the Mica-Tech acquisition, we initially assigned a 12-year life to Existing
Technology, a 3-year life to Customer Relationship, a 1-year life to Backlog and
an indefinite life to Trademarks and Brand Names. During the quarter ended
September 30, 2007, Mica-Tech’s management thoroughly reevaluated the life
span of Mica-Tech’s intangible asset and assigned a new life span to these
intangible assets: a 15-year life to Existing Technology, a 6-year life to
Customer Relationship, and a 15-year life to Trademarks and Brand Names. All
items stated are subject to amortization. Backlog was amortized on fulfillment
of orders.




Upon the
acquisition of Mica-Tech’s remaining interest on February 19, 2008,
Mica-Tech’s intangible assets were revalued by an appraiser. The new fair market
values of Mica-Tech’s intangible assets, after any associated tax adjustments,
are reflected on the financial statement.




Amortization
expense from continuing operation for the nine months ended December 31, 2008
was $204,000.  We expect amortization expense for the next five years
to be as follows:







Twelve month period
      ending
              December
      31:2009
            $273,0002010
            $273,0002011
            $273,0002012
            $259,0002013
            $249,000




7.  
Debt and lease commitments





Line of
credit





At
December 31, 2008, AML had a line of credit agreement with Bridge Bank. On
September 16, 2008, we signed a Business Financing Modification Agreement (the
“Modification Agreement”) with Bridge Bank to renew our line of credit, with a
credit facility of $1.3 million. Of this $1.3 million, $1.0 million
may be used for cash advances against accounts receivables and $0.3 million
may be used for equipment advances. Our ability to borrow under this agreement
varies based upon eligible accounts receivable and eligible equipment purchases.
We are obligated to pay the bank a finance charge at a rate per year equal to
the prime rate, which in no event shall be less than 5.00%, plus 0.25% with
respect to cash advances, and a rate of such prime rate plus 1.0% with respect
to equipment advances. We were obligated to pay a facility fee of $2,500 upon
execution of the Modification Agreement and annually thereafter. We were also
obligated to pay a one-time equipment loan facility fee of $2,500 upon execution
of the Modification Agreement.  We must maintain certain financial
requirements, including a minimum Asset Coverage Ratio of 1.50 to 1.00. We are
also required to stay within 80% of our planned quarterly revenue. We were in
compliance with these requirements at December 31, 2008; however, there is no
assurance that we will be in compliance at future dates. This agreement to
provide cash advances against accounts receivables terminates on August 15, 2010
or upon a date that the bank or AML chooses to terminate the agreement. Any
unpaid balance is due and payable pursuant to the agreement on the termination
date. At December 31, 2008, we had an outstanding balance of $0 under the
accounts receivable agreement and $524,000 under the equipment financing
agreement. Our remaining borrowing capacity is approximately $1,000,000 under
the accounts receivable agreement and $0 under the equipment financing agreement
as the availability period for the equipment term loan expired as of December
31, 2008.




Notes
Payable





On
February 3, 2006, the Company purchased the building that houses MPI located at
3350 Scott Blvd. Bldg #25, Santa Clara, California for a purchase price of
$800,000.  The Company made a down payment of $160,000.  The
building is being financed by a bank promissory note in the amount of $640,000
with 6.760% interest, payable in 83 regular payments of $4,425.88 each which
includes principal and interest and one final payment of
$556,594.48.  The Company’s final payment is due February 10, 2013 and
will be for all principal and interest not yet paid.  The note payable
is secured by the deed of trust on the building.  As of December 31,
2008 and March 31, 2008, the outstanding note amounted to $609,000 with $12,000
in current portion and $618,000 with $12,000 in
current portion, respectively.




9




On
December 20, 2006, Mica-Tech raised $200,000 from an outside investor in the
form of short term note payable.  The funds were used for working
capital.  The promissory note bears interest at the rate of
10%.  Mica-Tech is required to make equal monthly payments of $25,000,
which includes a principal and an accrued interest on the remaining principal
balance.  Mica-Tech defaulted on its payments for the last nine months
ended December 31, 2008 due to a cash deficiency.  The default was
waived by the lender at no cost. The total amount remaining on the note at
December 31, 2008 was $39,000.  Mica-Tech defaulted on the January
2009 payment as well and the note is currently due on demand.





Mica-Tech
was advanced working capital from its former president and a major shareholder,
over a period of time which totaled to $685,000 as of April 10,
2007.  On April 10, 2007, Mica-Tech converted these advancements in
the form of a single note for the amount of $685,000, with an annual interest
rate of 10%.  Of the $685,000, $200,000 was converted into 200,000
shares of Mica-Tech’s common stock at the closing of the acquisition on April
11, 2007.  In connection with the merger on February 19, 2008,
Mica-Tech and Steven Ow entered into an amended and restated promissory note in
the principal amount of $522,000. The interest rate on the note was reduced to
8% per annum and the maturity date was extended until April 4, 2010. On
May 19, 2008, Mica-Tech and Steven Ow entered into an agreement that
settles the promissory note in the amount of $531,000, including $9,000 in
accrued interest, and deferred compensation of $128,000. The consideration for
this settlement was $150,000 in cash, which would be paid by three equal
payments of $40,000 and one last payment of $30,000. As part of settlement, the
Company recorded gain on settlement of debt amounting to $521,000 during the
period ended June 30, 2008. As of December 31, 2008, Mica-Tech paid $130,000
toward the settlement amount and the remaining amount due to Steven Ow was
$20,000 which was part of the last payment.




Operating
Lease Obligations




The lease for AML’s office space and
manufacturing facility expired in April 2008 and we entered into a new
lease, which will expire in April 2015. Until they moved into the AML
facility in May 2008, Mica-Tech was leasing its office space and manufacturing
facility under an operating lease expired in October 2008. Total rent
expense under these operating leases was approximately $184,000 and $147,000
during the nine months ended December 31, 2008 and 2007,
respectively.





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




Operating
      LeasesTwelve
      month period ending December 31,2009
            
            $
            207,0002010
            
            
            207,0002011
            
            
            207,0002012
            
            
            207,0002013
            
            
            207,000Thereafter
            
            
            276,000$
            1,311,000





8.  
Equity Transactions





Stock
Options





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




10




Primarily
as a result of adopting SFAS No. 123R, the Company recognized $97,000 or
$0.01 per basic and diluted earnings per share in share-based compensation
expense for the nine months ended December 31, 2008 and $115,000 or $0.01 per
basic and diluted earnings per share in share-based compensation expense for the
nine months ended December 31, 2007. The fair value of our stock options was
estimated using the Black-Scholes option pricing model.





In 1995,
the board of directors approved the creation of the 1995 Stock Option
Plan.  In November 2005, the board established the 2005 Equity
Incentive Plan ("2005 Plan").  The number of shares reserved and
available for grant and issuance shall be increased on the first day of January
of each year so that the total of all Common Stock available for Awards shall be
the maximum amount allowable under Regulation 260.140.45 of Title 10
of the California Code of Regulations. The total of all Common Stock available
for grant and issuance under the 2005 Plan was 3,077,000 shares as of
December 31, 2008. The number of shares initially approved for issuance under
the 2005 Plan was 150,000 shares of our common stock. The Company
filed a registration statement on Form S-8 with SEC to register the
unregistered shares under the Plan or 2,927,000 shares on May 20, 2008.
Incentive stock option awards may be granted under the 2005 Plan only to
employees (including officers and directors who are also employees) of the
Company or of a parent or subsidiary of the Company.  All other awards
(including nonqualified stock options, restricted stock or stock awards) under
the 2005 Plan may be granted to employees, officers, directors, consultants,
independent contractors and advisors of the Company or any parent or subsidiary
of the Company, provided such consultants, contractors and advisors render bona
fide services not in connection with the offer and sale of securities in a
capital-raising transaction





Pursuant
to the 2005 Plan, during the nine months ended December 31, 2008, the Company
granted 292,500 stock options to the Company’s employees and two external
directors of AML, as follows:





On July
25, 2008, the Company granted 10,000 stock options to its employee as employee
compensation. All of the 10,000 stock options have a term of ten (10) years
measured from the grant date and shall accordingly expire at the close of
business on the expiration date, unless sooner terminated in accordance with the
2005 Plan.  These options are vested at the rate of twenty (20)
percent per year over a five year period.  The option exercise price
is $1.08, which is the fair market value of our common stock at the time these
options were granted.





On
September 11, 2008, the Company granted a total of 207,500 stock options to
fifteen employees and two external directors as follows: 85,000 stock options to
three AML’s officers as employee compensation, 92,500 stock options to twelve
employees as employee compensation and 30,000 non qualified stock options to two
external directors.




Of the
first 85,000 stock options granted, 60,000 stock options have a term of five (5)
years and 25,000 stock options have a term of ten (10) years, measured from the
grant date and shall accordingly expire at the close of business on the
expiration date, unless sooner terminated in accordance with the 2005
Plan.  All of the 85,000 stock options are vested at the rate of
thirty three (33) percent per year over a three year period.




The
second 92,500 stock options have a term of ten (10) years measured from the
grant date and shall accordingly expire at the close of business on the
expiration date, unless sooner terminated in accordance with the 2005
Plan.  These options are vested at the rate of twenty (20) percent per
year over a five year period.




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




The
option exercise price is $1.01 for all of the 207,500 stock options granted on
September 11, 2008, which is the fair market value of our common stock at the
time these options were granted.





On
October 30, 2008, the Company granted a total of 75,000 stock options to its
four employees as employee compensation.




The first
70,000 stock options granted to Mica-Tech’s three employees have a term of ten
(10) years measured from the grant date and shall accordingly expire at the
close of business on the expiration date, unless sooner terminated in accordance
with the 2005 Plan.  The options are vested at the rate of twenty-five
(25) percent per year over a four year period.




11




The  remaining
5,000 stock options granted to AML’s employee have a term of ten (10) years
measured from the grant date and shall accordingly expire at the close of
business on the expiration date, unless sooner terminated in accordance with the
2005 Plan.  The options are vested at the rate of twenty (20) percent
per year over a five year period.




The
option exercise price is $0.68 for all of the 75,000 stock options granted on
October 30, 2008, which is the fair market value of our common stock at the time
these options were granted.





Following
is a summary of the stock option activity:





Options
              outstanding
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Aggregate
              Intrinsic
              ValueOutstanding,
      March 31, 2008
            
            
            4,016,305
            
            
            $
            1.12
            
            
            $
            925,036Granted
            
            
            292,500
            
            
            
            0.93Forfeited
            
            
            1,312,355
            
            
            
            1.20Exercised
            
            
            45,000
            
            
            
            0.67Outstanding,
      December 31, 2008
            
            
            2,951,450
            
            
            $
            1.07
            
            
            $
            -





Following
is a summary of the status of options outstanding at December 31,
2008:





Range
      of
              Exercise
      Prices
            
            
            Total
              Options
              Outstanding
            
            
            Weighted
              Average
              Remaining
      Life
              (Years)
            
            
            Total
              Weighted
              Average
              Exercise
      Price
            
            
            Options
              Exercisable
            
            
            Weighted
              Average
              Exercise
      Price$0.11
      - $0.50
            
            
            
            86,200
            
            
            
            4.19
            
            
            $0.16
            
            
            
            86,200
            
            
            $0.16$0.51
      - $1.00
            
            
            
            1,635,250
            
            
            
            5.07
            
            
            $0.91
            
            
            
            1,329,415
            
            
            $0.92$1.01
      - $2.00
            
            
            
            1,199,000
            
            
            
            7.70
            
            
            $1.30
            
            
            
            316,316
            
            
            $1.28$2.01
      - $5.00
            
            
            
            31,000
            
            
            
            1.20
            
            
            $3.19
            
            
            
            31,000
            
            
            $3.19$0.11
      - $5.00
            
            
            
            2,951,450
            
            
            
            6.23
            
            
            $1.07
            
            
            
            1,762,931
            
            
            $0.99





For
options granted during the nine months ended December 31, 2008, the
weighted-average fair value of such options was $0.47.





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





Stock Options Granted on July 25,
2008:





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





Risk-free
      interest rate
            4.10%Expected
      life of the options
            6.50
      yearsExpected
      volatility
            58.56%Expected
      dividend yield
            0





Stock Options Granted on
September 11, 2008:





60,000 stock options with a term of 5
years and three year vesting periods:





Risk-free
      interest rate
            2.86%Expected
      life of the options
            3.50
      yearsExpected
      volatility
            51.38%Expected
      dividend yield
            0




12




25,000
stock options with a term of 10 years and three year vesting
periods:





Risk-free
      interest rate
            3.61%Expected
      life of the options
            6.00
      yearsExpected
      volatility
            51.38%Expected
      dividend yield
            0





92,500
stock options with a term of 10 years and five year vesting
periods:





Risk-free
      interest rate
            3.61%Expected
      life of the options
            6.50
      yearsExpected
      volatility
            51.38%Expected
      dividend yield
            0





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





Risk-free
      interest rate
            3.61%Expected
      life of the options
            6.25
      yearsExpected
      volatility
            51.38%Expected
      dividend yield
            0





Stock
Options Granted on October 30, 2008:





70,000 stock options with a term of 10
years and four year vesting periods:





Risk-free
      interest rate
            3.95%Expected
      life of the options
            6.25
      yearsExpected
      volatility
            52.09%Expected
      dividend yield
            0





5,000
stock options with a term of 10 years and five year vesting
periods:





Risk-free
      interest rate
            3.95%Expected
      life of the options
            6.50
      yearsExpected
      volatility
            52.09%Expected
      dividend yield
            0





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





Non-Vested
              Options
            
            
            Weighted
      Average Exercise Price
            
            Weighted
      Average
              Vesting
      Period
            Grant
      Date
              Fair
      ValueNon-vested
      - March 31, 2008
            
            
            2,377,973
            
            
            $
            1.01
            
            1.44
      YearsGranted
            
            
            292,500
            
            
            
            0.93
            
            
            
            $
            138,625Forfeited
            
            
            (1,304,855
            )
            
            
            1.20Vested
            
            
            (177,099
            )
            
            
            1.09Exercised
            
            
            ---
            
            
            
            ---Non-vested
      – December 31,
      2008
            
            
            1,188,519
            
            
            
            1.20
            
            1.62
      Years





The total
compensation cost relating to non-vested stock options that is not yet
recognized is $302,000, which is expected to be recognized over a period of 2.53
years.





Warrants





Following
is a summary of the warrant activity:




13




Warrants
              outstanding
            
            
            Weighted
      Average
              Exercise
      Price
            
            
            Aggregate
      Intrinsic
              ValueOutstanding,
      March 31, 2008
            
            
            213,315
            
            
            $
            0.39
            
            
            $
            236,000Granted
            
            
            -Forfeited
            
            
            25,816Exercised
            
            
            (187,499
            )Outstanding,
      December 31, 2008
            
            
            -
            
            
            
            -
            
            
            $
            -





No
warrants were outstanding as of December 31, 2008.





9.  
Segments





The
Company has three reportable segments consisting of (1) AML, (2) MPI and (3)
Mica-Tech.  Our AML segment includes low noise and high power
amplifiers with frequencies that range from 50KHz to 26GHz.  These
products are manufactured and sold through operations in Camarillo,
California.  MPI is a designer, manufacturer and marketer of high
power microwave amplifiers.  Our MPI segment includes solid state
microwave amplifiers operating in the frequency range from 1 to 40 GHz with
output power from 10mW to 500W.  These products are manufactured and
sold through operations in Santa Clara, California.  Our Mica-Tech
segment designs, manufactures and markets an intelligent satellite communication
system that provides a highly reliable and secure communications link between
remote sites and control centers, utilizing Supervisory Control And Data
Acquisition (SCADA) technology. The Company evaluates performance based on
sales, gross profit margins, and operating profit before income
taxes.





The
following is information for the Company’s three reportable segments for the
nine month periods ended December 31, 2008 and December 31, 2007.





Nine
      Month Periods EndedDecember 31,
      2008
              (Unaudited)
            
            
            December 31,
      2007
              (Unaudited)Revenue
      from unrelated entitiesAML
            
            $
            8,206
            
            
            $
            7,296MPI
            
            
            1,352
            
            
            
            1,372Mica-tech
            
            
            471
            
            
            
            716$
            10,029
            
            
            $
            9,384Income
      (loss) from operationsAML
            
            $
            861
            
            
            $
            655MPI
            
            
            91
            
            
            
            256Mica-tech
            
            
            (199
            )
            
            
            (808
            )$
            753
            
            
            $
            103Income
      tax benefit (expense)AML
            
            $
            (316
            )
            
            $
            (22
            )MPI
            
            
            (38
            )
            
            
            -Mica-tech
            
            
            (136
            )
            
            
            (1
            )$
            (491
            )
            
            $
            (23
            )Net
      income (loss)AML
            
            $
            474
            
            
            $
            540MPI
            
            
            58
            
            
            
            260Mica-tech
            
            
            217
            
            
            
            (439
            )$
            749
            
            
            $
            361




14




Provision
      for depreciation and amortizationAML
            
            $
            452
            
            
            $
            398MPI
            
            
            171
            
            
            
            150Mica-tech
            
            
            104
            
            
            
            169$
            727
            
            
            $
            717Capital
      expendituresAML
            
            $
            50
            
            
            $
            139MPI
            
            
            30
            
            
            
            11Mica-tech
            
            
            -
            
            
            
            2$
            80
            
            
            $
            152December 31, 2008
      (Unaudited)
            
            
            March 31,
      2008Total
      AssetsAML
            
            $
            9,089
            
            
            $
            9,694MPI
            
            
            5,090
            
            
            
            5,008Mica-tech
            
            
            1,880
            
            
            
            2,129$
            16,059
            
            
            $
            16,831





10.  
Long Term Note
Payable





Mica-Tech
was advanced working capital from its former president and a major shareholder,
over a period of time which totaled to $685,000 as of April 10,
2007.  On April 10, 2007, Mica-Tech converted these advancements in
the form of a single note for the amount of $685,000, with an annual interest
rate of 10%.  Of the $685,000, $200,000 was converted into 200,000
shares of Mica-Tech’s common stock at the closing of the acquisition on April
11, 2007.  In connection to the merger on February 19, 2008,
Mica-Tech and Steven Ow entered into an amended and restated promissory note in
the principal amount of $522,000. The interest rate on the note was reduced to
8% per annum and the maturity date was extended until April 4, 2010. On
May 19, 2008, Mica-Tech and Steven Ow entered into an agreement that
settles the promissory note in the amount of $531,000, including $9,000 in
accrued interest, and deferred compensation of $128,000. The consideration for
this settlement was $150,000 in cash, which would be paid by three equal
payments of $40,000 and one last payment of $30,000. As part of settlement, the
Company recorded gain on settlement of debt amounting to $521,000 during the
period ended June 30, 2008. As of December 31, 2008, Mica-Tech paid $130,000
toward the settlement amount and the remaining amount due to Steven Ow was
$20,000 which was part of the last payment. The amount was included under
accounts payable as Steven Owe was not associated with the Company at December
31, 2008.




11.  
Acquisition of Mica-Tech, Inc.




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




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




The
Mica-Tech shareholders in the aggregate received $1,000 for their Mica-Tech
common stock. In addition, the Company granted approximately 109,000 options to
purchase Company common stock to Larry Janssen, and other current employees of
Mica-Tech at the Company common stock trading price on February 19, 2008.
The Company granted 1,200,000 options to purchase Company common stock to Steven
Ow at the Company common stock trading price on February 19, 2008. Another
shareholder, Jeff Romney was granted a warrant to purchase 816 shares of Company
common stock. Vesting of the options and warrants mentioned above was subject to
certain performance criteria.  These criteria were never reached, and,
accordingly, the options and warrants were expired as of December 1,
2008.




15




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




February 19,
      2008Cash
            
            $
            40,000Receivables,
      net
            
            
            121,000Inventory
            
            
            286,000Property
      and equipment, net
            
            
            48,000Prepaid
      assets
            
            
            23,000Intangible
      assets
            
            
            3,158,000Total
      assets acquired
            
            $
            3,676,000Current
      liabilities
            
            
            (1,089,000
            )Notes
      payable
            
            
            (583,000
            )Net
      assets acquired
            
            $
            2,004,000Consideration
      paid in:Cash
            
            
            801,000Capitalization
      of acquisition cost
            
            
            70,000Pre-acquisition
      loss
            
            
            (484,000
            )Negative
      Goodwill
            
            $
            (1,617,000
            )




The
acquisition of Mica Tech by the Company resulted in negative goodwill of
$1,617,000, which was allocated against the intangible assets of the Company. In
accordance with the equity method of accounting, pre-acquisition loss of
$484,000 for the period from April 11, 2007 to February 19, 2008 was allocated
to the fair value of the assets and liabilities on February 19, 2008 and
contributed to negative goodwill.




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




12.  
Major customers and vendors





Three
customers provided 37.7% and 38.9% of net revenue for the nine months ended
December 31, 2008 and 2007, respectively.  Total accounts receivable
due from these customers was approximately $879,000 as of December 31,
2008.





The
Company extends credit to its customers based upon its assessment of their
credit worthiness and generally does not require collateral.  Credit
losses have not been significant.





Three
vendors accounted for 32.6% and 34.6% of the Company’s net purchases for the
nine months ended December 31, 2008 and 2007, respectively.  Total
accounts payable due to these vendors was $158,000 as of December 31,
2008.





13.  
Reclassifications





Certain
comparative amounts have been reclassified to conform to the current period’s
presentation.




16





Item 2.Management’s Discussion and Analysis
of Financial Condition and Results of Operations





Some of
the statements made by us in this Quarterly Report on Form 10-Q are
forward-looking in nature, including but not limited to, statements relating to
our future revenue, product development, demand, acceptance and market share,
gross margins, levels of research and development, our management's plans and
objectives for our current and future operations, and other statements that are
not historical facts.  Forward-looking statements include, but are not
limited to, statements that are not historical facts, and statements including
forms of the words "intend", "believe", "will", "may", "could", "expect",
"anticipate", "plan", "possible", and similar terms. Actual results could differ
materially from the results implied by the forward looking statements due to a
variety of factors, many of which are discussed throughout this Quarterly Report
and particularly in the section titled “Additional Factors That May Affect
Future Results” which is included in the section titled “Management’s Discussion
and Analysis or Plan of Operation”. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof.  We undertake no obligation to publicly release any revisions
to these forward-looking statements that may reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated
events.  Factors that could cause actual results to differ materially
from those expressed in any forward-looking statement made by us include, but
are not limited to:





●                our
ability to finance our activities and maintain our financial
liquidity;


●                our
ability to attract and retain qualified, knowledgeable employees;


●                the
impact of general economic conditions on our business;


●                postponements,
reductions, or cancellations in orders from new or existing
customers;


●                the
limited number of potential customers for our products;


●            
   the variability in gross margins on our products;


●                our
ability to design and market new products successfully;


●                our
failure to acquire new customers in the future;


●                deterioration
of business and economic conditions in our markets;


●                intensely
competitive industry conditions with increasing price competition;
and


●                the
rate of growth in the defense markets.





In this
document, the words "we," "our," "ours," and "us" refer to AML Communications,
Inc. and our sub division, Microwave Power, Inc. and our wholly owned
subsidiary, Mica-Tech, Inc.





Overview





Our
business is comprised of three reportable segments, AML Communications, Inc.
(“AML”), Microwave Power, Inc. (“MPI”), and Mica-Tech, Inc
(“Mica-Tech”).  AML and MPI design, manufacture, and market RF and
microwave amplifiers and subsystems serving, primarily, the Defense Electronic
Warfare Market.  AML and MPI represented 77.7% and 14.5% of our 2008
net revenue, respectively. Mica-Tech designs, manufactures, and markets an
intelligent communication system to provide Supervisory Control and Data
Acquisition (SCADA) of the electric power grid. Mica-Tech represented 7.8% of
our 2008 net revenue.





Our AML
segment includes low noise, power amplifiers and integrated sub assemblies with
frequencies that range from 50 kHz to 26 GHz.  In February 2001, we
made a strategic decision to focus our resources on the defense
markets.  As such, we moved rapidly to utilize our knowledge base in
defense microwave related design and manufacturing to offer new products, as
well as variations of existing products.  The results of this strategy
have been an increase in revenues for defense related products, from $3.7
million in fiscal 2003 to $9.9 million in fiscal 2008.





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





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




17




Our
Mica-Tech segment designs and manufactures the UltraSatNet, an Intelligent
Satellite Utility Communication Solution for the monitoring and control of power
grid distribution.  Following the acquisition in February 2008, the
company has focused on the Demand Response market. Mica-Tech’s Demand Response
Program is an intelligent energy management program that allows businesses to
lower their energy costs and earn cash incentives. Mica-Tech’s customers realize
savings on their energy costs and additionally earn cash by simply agreeing to
reduce peak period electricity consumption a few times during the year to help
stabilize the electric grid. Our customers are paid regardless of whether the
reduction in peak electricity consumption is called for. To facilitate close
contact with developments and to reduce operating costs, we have relocated the
Mica-Tech operation to the AML Camarillo headquarters in May 2008.




Results of
Operations




Three
Months Ended December 31, 2008 Compared to Three Months Ended December 31,
2007




Net sales.Net
sales for the three months ended December 31, 2008 were $3.3 million, as
compared to net sales of $3.5 million for the three months ended December 31,
2007, a decrease of $145,000 or 4.2%. Sales for the AML segment for the three
months ended December 31, 2008 were higher than sales during the same period of
the prior year by $69,000 or 2.5% primarily due to continued production on
orders received from new and existing programs during fiscal year 2008 and the
addition of new customers during this period. Sales for the MPI segment
decreased by $133,000 or 25.9%, as compared to sales during the same period of
the prior year. MPI segment heavily depends on incidental orders and they
experienced a drop in incidental orders during this quarter. Sales for the
Mica-Tech segment decreased by $80,000 or 35.2%, as compared to sales during the
same period of the prior year due to reduced sales of the UltraSatNet, the
company’s satellite based control and communication system.





Gross
profit.Gross profit for the three months ended December 31,
2008 was $1.4 million, or 41.5% of net sales, compared to a gross profit of $1.6
million, or 45.9% of net sales for the three months ended December 31,
2007.  Reduction in gross profit, as a percentage of net sales, is due
to increased direct labor costs along with increased spending on outside
processing and testing expenses associated with new product
development.




Selling, general and administrative
costs.Selling, general, and administrative costs were
$679,000, or 20.4% of net sales, for the three months ended December 31, 2008,
as compared to $784,000, or 22.5% of net sales, for the three months ended
December 31, 2007.  Selling, general and administrative costs for AML
and MPI increased by $47,000, compared to the same period of the prior year,
mainly due to increased spending in salary and related
benefits.  Mica-Tech’s administrative cost has been reduced by
$152,000, as compared to the same period of the last year, mainly due to
reduction in payroll related expenses and consulting expenses. To reduce
operating costs, we have relocated the Mica-Tech operation to the AML facility
in May 2008.




Research and development
costs.Research and development costs were $484,000, or 14.5%
of net sales, for the three months ended December 31, 2008, as compared to
$582,000, or 16.7% of net sales, for the three months ended December 31,
2007.  AML’s R&D expenses decreased by $24,000 compared to the
same period of the last year due to decreased spending in supplies and tools.
Change in MPI’s R&D costs is insignificant compared to the same period of
the last year. Mica-Tech’s R&D expenses decreased by $73,000, mainly due to
a reduction in payroll related expenses and outside consulting
expenses.




Other Income
net.We recorded a net other expense of $21,000 for the three
months ended December 31, 2008 and $53,000 for the three months ended December
31, 2007. $21,000 is attributable to interest costs on the existing line of
credit and notes payable.




Income (loss) before income tax and
minority interest.  Income before income tax and minority
interest was $199,000 for the three months ended December 31, 2008 and $178,000
for the three months ended December 31, 2007.




Minority Interest. Minority
interests for the three months ended December 31, 2007 was $133,000. Minority
interests represented minority ownership interests in Mica-Tech consolidated in
the Company’s consolidated financial statement.




18




Provision for income taxes.
During the three months ended December 31, 2008, the company utilized its
deferred tax assets reserve to record income tax expenses of $74,000. The
company has no tax liability at the end of the quarter due to the deferred tax
benefits accounted for in the prior years. We recorded a provision of $8,000 for
federal and state AMT taxes for the three months ended December 31,
2007.




Net income.Net
income was $125,000, or $0.01 per share, for the three months ended December 31,
2008, compared to net income of $303,000, or $0.03 per share, for the three
months ended December 31, 2007. Net income decreased by $178,000 or 58.7%
compared to the same period of last year mainly due to a reduction in revenues
from MPI and Mica-Tech segments.




Nine
Months Ended December 31, 2008 Compared to Nine Months Ended December 31,
2007




Net sales.Net
sales for the nine months ended December 31, 2008 were approximately $10.0
million, as compared to net sales of $9.4 million for the nine months ended
December 31, 2007, an increase of $645,000 or 6.9%. AML’s revenues increased by
$910,000 or 12.5% due to continued production on orders received from new and
existing programs during fiscal year 2008 and the addition of new customers
during this period. MPI’s revenues decreased by $20,000 or 1.4% due to a
reduction in incidental orders received during this period. Mica-Tech’s revenues
decreased by $246,000 or 34.3% mainly due to reduced sales of the
UltraSatNet.




Gross
profit.  Gross profit for the nine months ended December 31,
2008 was $4.4 million, or 43.5% of net sales, as compared to a gross profit of
$4.1 million, or 44.1% of net sales for the nine months ended December 31,
2007.   Change in Gross Profit as a percentage of net sales is
insignificant.




Selling, general and administrative
costs.Selling, general, and administrative costs were $2.1
million, or 21.4% of net sales, for the nine months ended December 31, 2008, as
compared to $2.3 million, or 24.6% of net sales, for the nine months ended
December 31, 2007.  Selling, general and administrative costs for AML
and MPI increased by $226,000, compared to the same period of the prior year,
mainly due to increased spending in salary and related benefits and commission
expenses. Mica-Tech’s administrative cost has been reduced by $389,000, as
compared to the same period of the last year, due to decrease in payroll related
expenses, amortization expense on its intangible assets, and other operating
expenses. To reduce operating costs, we have relocated the Mica-Tech operation
to the AML facility in May 2008.




Research and development
costs.Research and development costs were $1,465,000 or 14.6%
of net sales, for the nine months ended December 31, 2008, as compared to
$1,729,000, or 18.4% of net sales, for the nine months ended December 31,
2007.  Change in R&D costs for both AML and MPI is insignificant
compared to the same period of the last year. Mica-Tech’s R&D expenses are
reduced by $270,000, mainly due to a reduction in payroll related expenses and
outside consulting expenses.




Other Income
net.We recorded a net other income of $487,000 for the nine
months ended December 31, 2008 and a net other expense of $140,000 for the nine
months ended December 31, 2007. During the nine months ended December 31, 2008,
Mica-Tech realized a special gain of $521,000 from the settlement of a
promissory note and a gain of $45,000 from the settlement of royalties payable
to Southern California Edison. These are considered a one-time
event.




Income (loss) before income tax and
minority interest.  Income before income tax and minority
interest was $1,240,000 for the nine months ended December 31, 2008 and loss
before income tax and minority interest was $37,000 for the nine months ended
December 31, 2007. The significant improvement in income before income tax and
minority interest as compared to the same period of last year is mainly due to
increased revenues in AML segment and special gains recognized during this
period.




Minority Interest. Minority
interests for the nine months ended December 31, 2007 was $421,000. Minority
interests represented minority ownership interests in Mica-Tech consolidated in
the Company’s consolidated financial statement.




Provision for income taxes.
During the nine months ended December 31, 2008, the company utilized its
deferred tax assets reserve to record income tax expenses of $491,000. The
company has no tax liability at the end of the period due to the deferred tax
benefits accounted for in the prior years. We recorded a provision of $23,000
for federal and state AMT taxes for the nine months ended December 31,
2007.




19




Net income.Net
income was $749,000 or $0.07 per share, for the nine months ended December 31,
2008, compared to net income of $361,000, or $0.04 per share, for the nine
months ended December 31, 2007. The increase in net income is attributable to
increased revenues in AML segment and special gains recognized during this
period.




Liquidity and Capital
Resources





Historically,
we have financed our operations primarily from internally generated funds and,
to a lesser extent, loans from stockholders, and capital lease
obligations.





At
December 31, 2008, AML had a line of credit agreement with Bridge Bank. On
September 16, 2008, we signed a Business Financing Modification Agreement (the
“Modification Agreement”) with Bridge Bank to renew our line of credit, with a
credit facility of $1.3 million. Of this $1.3 million, $1.0 million
may be used for cash advances against accounts receivables and $0.3 million
may be used for equipment advances. Our ability to borrow under this agreement
varies based upon eligible accounts receivable and eligible equipment purchases.
We are obligated to pay the bank a finance charge at a rate per year equal to
the prime rate, which in no event shall be less than 5.00%, plus 0.25% with
respect to cash advances, and a rate of such prime rate plus 1.0% with respect
to equipment advances. We were obligated to pay a facility fee of $2,500 upon
execution of the Modification Agreement and annually thereafter. We were also
obligated to pay a one-time equipment loan facility fee of $2,500 upon execution
of the Modification Agreement.  We must maintain certain financial
requirements, including a minimum Asset Coverage Ratio of 1.50 to 1.00. We are
also required to stay within 80% of our planned quarterly revenue. We were in
compliance with these requirements at December 31, 2008; however, there is no
assurance that we will be in compliance at future dates. This agreement to
provide cash advances against accounts receivables terminates on August 15, 2010
or upon a date that the bank or AML chooses to terminate the agreement. Any
unpaid balance is due and payable pursuant to the agreement on the termination
date. At December 31, 2008, we had an outstanding balance of $0 under the
accounts receivable agreement and $524,000 under the equipment financing
agreement. Our remaining borrowing capacity is approximately $1,000,000 under
the accounts receivable agreement and $0 under the equipment financing agreement
as the availability period for the equipment term loan has expired as of
December 31, 2008.




At
December 31, 2008, we had $1.4 million in cash and cash
equivalents.  For the nine months ended December 31, 2008, our
operating activities provided cash of approximately $480,000 as compared to
$630,000 cash used in our operating activities for the nine months ended
December 31, 2007.  Net cash used in investing activities, primarily
for the acquisition of production equipment, amounted to $80,000 for the nine
months ended December 31, 2008 and $165,000 for the nine months ended December
31, 2007.  Net cash used in financing activities was $239,000 for the
nine months ended December 31, 2008 and $91,000 for the nine months ended
December 31, 2007.  During the nine months ended December 31, 2008, we
paid $314,000 toward the outstanding notes payable and existing line of
credit.





We anticipate capital expenditures of
approximately $900,000 in fiscal year 2009.  We believe that funds for
these expenditures will be provided by our operating
activities.  However, we may choose to finance some of these
expenditures through our financing agreement with Bridge Bank.  At
December 31, 2008, our remaining borrowing capacity under this agreement was
$1,000,000.





We may attempt to procure additional
sources of financing in the event that the capital available as of December 31,
2008 is insufficient for our operating needs and capital expenditures. These
sources may include, but are not limited to, additional sales of our
securities.  There are, however, no assurances that we will be able to
successfully obtain additional financing at terms acceptable to
us.  Failure to obtain such financing could have a material adverse
effect on our ability to operate as a going concern.





Successful completion of our
development program and attaining profitable operations are dependent upon our
maintaining a level of sales adequate to support our cost
structure.  In addition, realization of a major portion of the assets
in the accompanying balance sheet is dependent upon our ability to meet our
financing requirements and the success of our plans to sell our
products.  The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
amounts and classifications of liabilities that might be necessary should we be
unable to continue in existence.




20


Critical Accounting
Policies





Our
discussion and analysis of our financial conditions and results of operations
are based upon our financial statements, which have been prepared in accordance
with generally accepted accounting principles in the United States. The
preparation of financial statements requires managers to make estimates and
disclosures on the date of the financial statements.  On an on-going
basis, we evaluate our estimates, including, but not limited to, those related
to revenue recognition.  We use authoritative pronouncements,
historical experience, and other assumptions as the basis for making
judgments.  Actual results could differ from those
estimates.  We believe that the following critical accounting policies
affect our more significant judgments and estimates in the preparation of our
financial statements.





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





·
            Persuasive evidence of an
      arrangement exists;


·
            Delivery has occurred or
      services have been rendered;


·
            Price is fixed or
      determinable; and


·
            Collectibility is reasonably
      assured.





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





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





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




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





Intangible
Assets.  We test intangible assets with indefinite lives for
impairment on an annual basis or more frequently if certain events
occur.  If the assets are considered to be impaired, the impairment to
be recognized will be measured by the amount in which the carrying amount
exceeds the fair value of the assets.  For our intangible assets with
finite lives, including our customer lists, existing technology, and patents, we
amortize the costs of the assets over their useful lives and assess impairment
at least annually or whenever events and circumstances suggest the carrying
value of an asset may not be recoverable.  Determining the life of the
assets with finite lives is judgmental in nature and involves the use of
estimates and assumptions.  These estimates and assumptions involve a
variety of factors, including future market growth and conditions, forecasted
revenues and costs and a strategic review of our business and
operations.  We base our fair value estimates on assumptions we
believe to be reasonable but that are unpredictable and inherently
uncertain.  Actual future results may differ from those
estimates.  In the event we determine that an intangible asset is
impaired in the future, an adjustment to the value of the asset would be charged
to earnings in the period such determination is made.




21




Existing
Technology.Our existing technology is based on a patent
issued in 1990, which continues to be the main technology of MPI.  It
is a substrate deposition technology that is mature and with no replacement
technology forecasted.





Additional Factors That May
Affect Future Results




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




•
            industry-specific
      factors (including the reliance upon growth of the defense microwave
      market, significant competition 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;




•
            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, in light of varying revenue
      streams;




•
            the
      availability and cost of
components;




•
            the
      impact of worldwide economic and political conditions on our business;
      and




•
            the
      ability to integrate potential future acquisitions into our existing
      operations.




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




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




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




We
experience significant price competition and expect price competition in the
sale of our products to remain intense. We cannot assure you that our
competitors will not develop new technologies or enhancements to existing
products or introduce new products that will offer superior price or performance
features. We expect our competitors will offer new and existing products at
prices necessary to gain or retain market share. Several of our competitors have
substantial financial resources, which may enable them to withstand sustained
price competition or a downturn in the pricing of their products in the future.
Substantially all of our competitors have, and potential future competitors
could have, substantially greater technical, marketing, distribution and other
resources than we do and have, or could have, greater name recognition and
market acceptance of their products and technologies.




22




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




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




Item
3.   Quantitative and Qualitative Disclosures About Market
Risk





Not Applicable.





Item
4.   Controls and Procedures





Disclosure
Controls and Procedures




Our
management, with the participation of our Chief Executive Officer (Principal
Executive Officer) and Director of Finance (Principal Financial Officer), has
evaluated the effectiveness of the Company’s disclosure controls and procedures
(as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end
of the period covered by this Report (December 31, 2008). Based on such
evaluation, our Chief Executive Officer and Director of Finance have concluded
that, as of the end of such period, the Company’s disclosure controls and
procedures are effective in recording, processing, summarizing and reporting, on
a timely basis, information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act and are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the Company’s management, including the Company’s Chief Executive Officer and
Director of Finance, as appropriate to allow timely decisions regarding required
disclosure.




Changes
in Internal Control Over Financial Reporting




There
have been no changes in our internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
during the third quarter of fiscal year 2009 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.





23





PART
II – OTHER INFORMATION




Item 1.
              Legal
    ProceedingsNot
      Applicable.Item 1A.
              Risk
    FactorsNot
      Applicable.Item 2.
              Unregistered Sales of Equity
      Securities and Use of ProceedsNot
      Applicable.Item 3.
              Defaults Upon Senior
      SecuritiesNot
      Applicable.Item 4.
              Submission of Matters to a Vote
      of Security HoldersNot
      Applicable.Item 5.
              Other
    InformationNot
      Applicable.Item 6.
              ExhibitsThe exhibits listed
      in the Exhibit Index are filed as part of this
report.




24





SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.





AML
      Communications Inc./s/:
      Jacob InbarBy:
      Jacob Inbar, President and
              Chief
      Executive Officer
              (Principal
      Executive Officer)
            Dated:  February
      13, 2009








/s/:
      Heera LeeBy:
      Heera Lee, Director of Finance
              (Principal
      Financial Officer)
            Dated:  February
      13, 2009








25





EXHIBIT
INDEX





Exhibit
              Number
            
            Description2.1
            
            Merger
      Agreement entered into as of May 25, 2004 by and among AML
      Communications Inc., a Delaware corporation, AML Holdings, LLC, a
      California limited liability company and Microwave Power, Inc., a
      California corporation(1)3.1
            
            Certificate
      of Incorporation(2)3.2
            
            Bylaws(2)10.1
            
            Form of
      Indemnity Agreement(2)10.2
            
            Lease,
      dated March 11, 1996, between the Company and Parr-Bohn Properties,
      Ltd. II, a California Limited Partnership(3)10.4
            
            Loan
      and Security Agreement dated November 10, 2000 between the Company
      and Silicon Valley Bank(4)10.5
            
            Intellectual
      Property Security Agreement dated November 10, 2000 between the
      Company and Silicon Valley Bank(4)10.6
            
            Warrant
      to purchase stock dated November 9, 2000 between the Company and
      Silicon Valley Bank(4)10.7
            
            Accounts
      Receivable Purchase Agreement dated November 20, 2001 between AML
      Communications, Inc. and Silicon Valley Bank(5)10.8
            
            Promissory
      Note dated December 30, 2001 between Tiberiu, Mazilu, and AML
      Communications Inc.(5)10.9
            
            Accounts
      Receivable Purchase Modifications Agreement dated September 24, 2003
      between Silicon Valley Bank and AML Communications(6)10.10
            
            Form of
      Promissory Note date July 16, 2003 between the Company and the
      following: Jacob Inbar, Tiberiu Mazilu, Edwin McAvoy, Gerald Starek, Bob
      M. Hawkins, and The Oliver Family
Trust(6)


10.11
            
            Form of
      Warrant dated July 16, 2003 between the Company and the following:
      Jacob Inbar, Tiberiu Mazilu, Edwin McAvoy, Gerald Starek, Bob M. Hawkins,
      and The Oliver Family Trust(6)10.12
            
            Fourth
      Amended and Restated 1995 Stock Option Agreement at June 10,
      2002(7)10.13
            
            Parr-Bohn
      Properties First Amendment to lease of 1000 Avenida Acaso, Camarillo,
      CA.(7)10.14
            
            Employment
      Agreement with Dr. Marina Bujatti, of MPI, dated June 18,
      2004(7)10.15
            
            Employment
      Agreement with Dr. Franco Sechi, of MPI, dated June 18,
      2004(7)10.16
            
            Interim
      Lease and Proposed Lease Terms(8)10.17
            
            Financing
      Agreement dated July 8, 2004 with Bridge Bank(9)10.18
            
            Enterprise
      Agreement Number 4627 dated August 26, 2004(10)10.19
            
            Business
      Financing Modification with Bridge Bank, dated December 23,
      2005(11)10.20
            
            Business
      Financing Modification with Bridge Bank dated
      January 19,2006(11)10.21
            
            Fifth
      Amended and Restated 1995 Stock Option Agreement at July 12,
      2005(12)10.22
            
            Loan
      Agreement with Bank of America for purchase of MPI
      building(11)10.23
            
            2005
      Equity Incentive Plan(13)10.24
            
            Business
      Financing Agreement with Bridge Bank dated July 17,
      2006(14)10.25
            
            Stock
      Purchase Agreement with Mica-Tech, dated April 11,
      2007(15)10.26
            
            Option
      Agreement with shareholders and optionholders of Mica-Tech, dated
      April 11, 2007(15)10.27
            
            Agreement
      and Plan of Merger by and among AML Communications, Inc.,
      Mica-Tech, Inc., Mica-Tech Acquisition, Inc. and the
      shareholders of Mica-Tech, Inc. dated as of February 19,
      2008(16)10.28
            
            Option
      Agreement—Steven Ow, dated February 19, 2008(16)10.29
            
            Parr-Bohn
      Properties Second Amendment to lease of 1000 Avenida Acaso, Camarillo, CA,
      dated February 20, 2008(17).10.30
            
            Business
      Financing Modification with Bridge Bank, dated April 5,
      2007(17)10.31
            
            Business
      Financing Modification with Bridge Bank, dated September 16,
      2008(18)31.1
            
            Certification
      by the Chief Executive Officer(19)31.2
            
            Certification
      by the Director of Finance(19)32.1
            
            Certification
      pursuant to Section 906 of the Sarbanes Oxley
  Act(19)32.2
            
            Certification
      pursuant to Section 906 of the Sarbanes Oxley
  Act(19)





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




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




26




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




(4) 
Previously filed with the Securities and Exchange Commission as an exhibit to
the Company’s Form 10-QSB for the quarter ended September 30, 2000 and
incorporated herein by reference.




(5) 
Previously filed with the Securities and Exchange Commission as an exhibit to
the Company’s Form 10-QSB for the quarter ended December 31, 2001 and
incorporated herein by reference.




(6) 
Previously filed with the Securities and Exchange Commission as an exhibit to
the Company’s Form 10-QSB for the quarter ended September 30, 2003 and
incorporated herein by reference.




(7) 
Previously filed with the Securities and Exchange Commission as an exhibit to
the Company’s Form 10-KSB for the fiscal year ended March 31, 2004 and
incorporated herein by reference.




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




(9) 
Previously filed with the Securities and Exchange Commission as an exhibit to
the Company’s Form 10-QSB for the quarter ended June 30, 2004 and
incorporated herein by reference.




(10)
Previously filed with the Securities and Exchange Commission as an exhibit to
the Company’s Form 8-K/A dated May 4, 2007 (unredacted version) and
incorporated herein by reference.




(11)
Previously filed with Securities and Exchange Commission as an exhibit to the
Company’s Form 10-QSB for the quarter ended December 31, 2005 and
incorporated herein by reference.




(12)
Previously filed with the Securities and Exchange Commission as an attachment to
the Company’s Proxy Statement dated July 29, 2005.




(13)
Previously filed with Securities and Exchange Commission as an exhibit to the
Company’s Form S-8 Registration Statement (no. 333-131588) dated
February 6, 2006 and incorporated herein by reference.




(14)
Previously filed with Securities and Exchange Commission as an exhibit to the
Company’s Form 10-QSB for the quarter ended June 30, 2006 and
incorporated herein by reference.




(15)
Previously filed with the Securities and Exchange Commission as an exhibit to
the Company’s Form 8-K dated April 20, 2007 and incorporated herein by
reference.




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




(17)
Previously filed with the Securities and Exchange Commission as an exhibit to
the Company’s Form 10-KSB for the fiscal year ended March 31, 2008 and
incorporated herein by reference.




(18)
Previously filed with Securities and Exchange Commission as an exhibit to the
Company’s Form 10-Q for   the quarter ended September 30,
2008 and incorporated herein by reference.




(19)
Filed herewith.
  27