** **

**UNITED STATES SECURITIES ANDEXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

### **FORM 10-QSB/ A**

 

| **ý**                           | ** **              | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE  ACT OF 1934**  |
|--------------------------------------|-------------------------|----------------------------------------------------------------------------------------------------------|
|                                 |                    |                                                                                                     |
| **For the  quarterly period ended:** | **June 30,  2004** |
| ** **                           | ** **              |
| **or**                               |
|                                 |                    |                                                                                                     |
| **o**                                | ** **              | **TRANSITION  REPORT PURSUANT TO SECTION 13 0R 15(D) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|                                      |                         |                                                                                                          |  |

 

**For the transition period from                 to                  **

 

**Commission FileNumber:           0-27252**

 

**AML COMMUNICATIONS, INC.**

(Exact name of small businessissuer as specified in its charter)

 

| **Delaware**                                                     |       | **77-0130894**                      |
|------------------------------------------------------------------|------------|-------------------------------------|
| (State or  Other jurisdiction of  incorporation or organization) |       | (IRS  Employer  Identification No.) |
|                                                             |       |                                |
| **1000  Avenida Acaso  Camarillo, California**                   | ** ** | **93012**                           |
| (Address of  principal executive offices)                        |       | (Zip Code)                          |

 

**(805) 388-1345**

(Issuer’s telephone numberincluding area code)

 

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

 

Yes ý  No o

 

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

 

Common Stock Outstanding as of July 23, 2004:  9,954,692 shares

 

Transitional Small Business Disclosure Format: Yes o  No ý

 

 

----

 

EXPLANATORY NOTE

 

This quarterly report on Form 10-QSB/A is an amendment to the Form 10-QSB filed by the Registrant on August 13, 2004.

 

This quarterly report on Form 10-QSB/A is being filed to reflect the restatement of the Registrant’s Financial Statements (the “Restatement”). The restatement reflects the following:

 

•                  Additionaldisclosure of Revenue Recognition policies in accordance with SAB 101, asamended by SAB 104

•                  Reclassificationof related notes payable from long term liabilities to current liabilities

•                  Additionaldisclosure relating to the acquisition of MPI, its cost structure, and the keyfactors for the acquisition

•                  Additionaldisclosure on the intangible assets in connection with the MPI acquisition

 

THIS REPORT DOES NOT OTHERWISE ATTEMPT TO UPDATE THE INFORMATION PROVIDED HEREIN BEYOND THE ORIGINAL FILING DATE.

 

----

 

**AMLCOMMUNICATIONS, INC.**

**INDEX TO FORM 10QSB**

 
| **PART I**  | ** ** | **FINANCIAL INFORMATION**                                                                             |
|------------------|------------|-------------------------------------------------------------------------------------------------------|
|             |       |                                                                                                  |
| Item 1.          |       | Financial Statements                                                                                  |
|             |       |                                                                                                  |
|             |       | Balance Sheet at June 30, 2004 (As restated)                                                     |
|             |       |                                                                                                  |
|             |       | Statements of Operations for the three month periods ended June 30,  2004 and June 30, 2003 |
|             |       |                                                                                                  |
|             |       | Statements of Cash Flows for  the three month periods ended June 30, 2004 and June 30, 2003 |
|             |       |                                                                                                  |
|             |       | Notes to Financial Statements                                                                         |
|             |       |                                                                                                  |
| Item  2.         |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations           |
|             |       |                                                                                                  |
| Item 3.          |       | Controls and Procedures                                                                               |
|             |       |                                                                                                  |
| **PART II** | ** ** | **OTHER INFORMATION**                                                                                 |
| ** **       | ** ** | ** **                                                                                            |
| Item 1.          |       | Legal Proceedings                                                                                     |
|             |       |                                                                                                  |
| Item 2.          |       | Changes in Securities and Use of Proceeds                                                             |
|             |       |                                                                                                  |
| Item 3.          |       | Defaults Upon Senior Securities                                                                       |
|             |       |                                                                                                  |
| Item 4.          |       | Submission of Matters to a Vote of Security  Holders                                                  |
|             |       |                                                                                                  |
| Item 5.          |       | Other Information                                                                                     |
|             |       |                                                                                                  |
| Item 6.          |       | Exhibits and Reports on Form 8-K                                                                 |
|             |       |                                                                                                  |
|             |       | SIGNATURES                                                                                            |

 

2

----

 

**PART I - FINANCIAL INFORMATION**

 

**Item 1.  Financial Statements**

 

**AMLCOMMUNICATIONS, INC.CONSOLIDATED CONDENSED BALANCE SHEET(unaudited)**

**(AsRestated – see note 1)**

 
| ** **                                                                                                                  | ** ** | **June 30,  2004** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|
|                                                                                                                        |       |                    |       |
| **ASSETS**                                                                                                                  |       |                    |       |
| Current  Assets:                                                                                                            |       |                    |       |
| Cash and  cash equivalents                                                                                                  |       | $                       | 1,752,000  |   |
| Accounts  receivable, net of allowance for doubtful accounts of $39,000 at June 30,  2004                              |       | 937,000                 |       |
| Inventories,  net                                                                                                           |       | 1,584,000               |       |
| Other  receivables                                                                                                          |       | 184,000                 |       |
| Other current  assets                                                                                                       |       | 148,000                 |       |
| Total  current assets                                                                                                       |       | 4,605,000               |       |
|                                                                                                                        |       |                    |       |
| Property and  Equipment, at cost                                                                                            |       | 4,014,000               |       |
| Less:  Accumulated depreciation and amortization                                                                            |       | (3,523,000              | )          |
| Property and  Equipment, net                                                                                                |       | 491,000                 |       |
| Intangible  Assets:                                                                                                         |       |                    |       |
| Technologies,  net                                                                                                          |       | 950,000                 |       |
| Patents                                                                                                                     |       | 185,000                 |       |
| Customer  lists, net                                                                                                        |       | 330,000                 |       |
| Trademarks                                                                                                                  |       | 181,000                 |       |
| Other Assets                                                                                                                |       | 43,000                  |       |
| Total Assets                                                                                                                |       | $                       | 6,785,000  |   |
|                                                                                                                        |       |                    |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                              |       |                    |       |
|                                                                                                                        |       |                    |       |
| Current  Liabilities:                                                                                                       |       |                    |       |
| Accounts  payable                                                                                                           |       | $                       | 311,000    |   |
| Current  portion of capital lease obligations                                                                               |       | 109,000                 |       |
| Current  portion of notes payable – officers                                                                           |       | 50,000                  |       |
| Accrued  expenses:                                                                                                          |       |                    |       |
| Accrued  payroll and payroll related expenses                                                                               |       | 203,000                 |       |
| Accrued  income taxes                                                                                                       |       | 292,000                 |       |
| Other  accrued liabilities                                                                                                  |       | 180,000                 |       |
| Total  current liabilities                                                                                                  |       | 1,145,000               |       |
|                                                                                                                        |       |                    |       |
| Notes  payable – officers, net of current portion                                                                      |       | 230,000                 |       |
| Notes  payable - investors                                                                                                  |       | 40,000                  |       |
| Deferred  Taxes                                                                                                             |       | 11,000                  |       |
| Capital  Lease Obligations, net of current portion                                                                          |       | 45,000                  |       |
| Total  liabilities                                                                                                          |       | 1,472,000               |       |
| Stockholders’  Equity:                                                                                                 |       |                    |       |
| Common  stock, $.01 par value:15,000,000 shares authorized; 7,837,587 shares issued  and outstanding at June 30, 2004. |       | 73,000                  |       |
| Committed  stock: 2,138,232 shares                                                                                          |       | 3,058,000               |       |
|                                                                                                                        |       |                    |       |
| Capital in  excess of par value                                                                                             |       | 10,338,000              |       |
| Accumulated  deficit                                                                                                        |       | (8,155,000              | )          |
| Total  stockholders’ equity                                                                                            |       | 5,314,000               |       |
| Total  liabilities and stockholder’s equity                                                                            |       | $                       | 6,785,000  |   |
|                                                                                                                             |            |                         |            |  |  |  |

 

The accompanying notes are anintegral part of these financial statements.

 

3

----

 

**AMLCOMMUNICATIONS, INC.**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(unaudited)**

 
| ** **                                                             | ** ** | **Three Months Ended**  | ** ** |
|------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                             | ** ** | **June 30,  2004** | ** ** | **June 30,  2003** | ** ** |
|                                                                   |       |                    |       |   |   |
| Net sales                                                              |       | $                       | 2,174,000  |   | $ | 1,548,000 |   |
| Cost of  goods sold                                                    |       | 1,240,000               |       | 831,000 |   |
| Gross profit                                                           |       | 934,000                 |       | 717,000 |   |
|                                                                   |       |                    |       |   |   |
| Operating  expenses:                                                   |       |                    |       |   |   |
| Selling,  general & administrative                            |       | 409,000                 |       | 265,000 |   |
| Research and  development                                              |       | 183,000                 |       | 199,000 |   |
|                                                                   |       | 592,000                 |       | 464,000 |   |
| Profit from  operations                                                |       | 342,000                 |       | 253,000 |   |
|                                                                   |       |                    |       |   |   |
| Other income  (expense), net                                           |       | (16,000                 | )          | (30,000 | ) |
| Profit  before provision for income taxes                              |       | 326,000                 |       | 223,000 |   |
|                                                                   |       |                    |       |   |   |
| Provision  for income taxes                                            |       | —                  |       | — |   |
|                                                                   |       |                    |       |   |   |
| Net profit                                                             |       | $                       | 326,000    |   | $ | 223,000 |   |
|                                                                   |       |                    |       |   |   |
| Basic  earnings profit per common share                                |       | $                       | 0.04       |   | $ | 0.03 |   |
|                                                                   |       |                    |       |   |   |
| Basic  weighted average number of shares of common stock outstanding   |       | 8,143,000               |       | 7,829,000 |   |
|                                                                   |       |                    |       |   |   |
| Diluted  earnings profit per common share                              |       | $                       | 0.03       |   | $ | 0.02 |   |
|                                                                   |       |                    |       |   |   |
| Diluted  weighted average number of shares of common stock outstanding |       | 9,709,000               |       | 9,393,000 |   |

 

The accompanying notes are anintegral part of these financial statements.

 

4

----

 

**AMLCOMMUNICATIONS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(unaudited)**

 
| ** **                                                                            | ** ** | **Three Months Ended**  | ** ** |
|---------------------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                            | ** ** | **June 30,  2004** | ** ** | **June 30,  2003** | ** ** |
| Cash Flows  from Operating Activities:                                                |       |                    |       |   |   |
| Net Profit                                                                            |       | $                       | 326,000    |   | $ | 223,000 |   |
| Adjustments  to reconcile net profit (loss) to net cash used in operating activities: |       |                    |       |   |   |
| Debt  discount fees                                                                   |       | 4,000                   |       |   |   |
| Depreciation  and amortization                                                        |       | 64,000                  |       | 85,000 |   |
| Bad debt  expense                                                                     |       | 5,000                   |       |   |   |
| (Gain) on  sale of fixed assets                                                       |       |                    |       |   |   |
| Changes in  assets and liabilities:                                                   |       |                    |       |   |   |
| Decrease  (increase) in:                                                              |       |                    |       |   |   |
| Accounts  receivable                                                                  |       | (141,000                | )          | (538,000 | ) |
| Inventories                                                                           |       | (97,000                 | )          | 84,000 |   |
| Inventory Reserves                                                                    |       | 122,000                 |       |   |   |
| Other  current assets                                                                 |       | (24,000                 | )          | 18,000 |   |
| Other assets                                                                          |       | 23,000                  |       |   |   |
| Increase  (decrease) in:                                                              |       |                    |       |   |   |
| Accounts  payable                                                                     |       | (303,000                | )          |   |   |
| Accrued  state income taxes                                                           |       |                    |       | (106,000 | ) |
| Accrued  expenses                                                                     |       | 52,000                  |       | (119,000 | ) |
| Net cash  from operating activities                                                   |       | 31,000                  |       | (353,000 | ) |
|                                                                                  |       |                    |       |   |   |
| Cash Flows  from Investing Activities:                                                |       |                    |       |   |   |
| Purchases of  property and equipment                                                  |       | (84,000                 | )          | (2,000 | ) |
| Cash  received in the MPI acquisition                                                 |       | 1,150,000               |       | — |   |
| Net cash  provided by investing activities                                            |       | 1,066,000               |       | (2,000 | ) |
|                                                                                  |       |                    |       |   |   |
| Cash Flows  from Financing Activities:                                                |       |                    |       |   |   |
| Proceeds  from exercise of stock options                                              |       | —                  |       | — |   |
| Proceeds  from line of credit, net                                                    |       | (265,000                | )          | 179,000 |   |
| Proceeds  from notes payable - related parties                                        |       |                    |       | 100,000 |   |
| Proceeds  from notes payable - investors                                              |       | (22,000                 | )          | — |   |
|                                                                                  |       |                    |       |   |   |
| Principal  payments on capital lease obligations, net                                 |       | (35,000                 | )          | (65,000 | ) |
| Net cash  (used in) provided by financing activities                                  |       | (322,000                | )          | 214,000 |   |
|                                                                                  |       |                    |       |   |   |
| Net increase  (decrease) in Cash and Cash Equivalents                                 |       | 775,000                 |       | (141,000 | ) |
| Cash and  Cash Equivalents, beginning of period                                       |       | 977,000                 |       | 195,000 |   |
| Cash and  Cash Equivalents, end of period                                             |       | $                       | 1,752,000  |   | $ | 54,000 |   |
| Supplemental  disclosures of cash flow information:                                   |       |                    |       |   |   |
| Cash paid  during the period for:                                                     |       |                    |       |   |   |
| Interest                                                                              |       | $                       | 21,000     |   | $ | 30,000 |   |
| Income Taxes                                                                          |       | —                  |       | — |   |
|                                                                                  |       |                    |       |   |   |
| Unamortized  debt discount fees                                                       |       | $                       | 17,542     |   | — |   |

 

The accompanying notes are anintegral part of these financial statements.

 

5

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**AML COMMUNICATIONS,INC.NOTES TO CONSOLIDATEDFINANCIAL STATEMENTSJune 30, 2004**

 

**1.**             **Basis of Presentation (As restated)**

 

###### *Line of Business*

######  

AML Communications, Inc. (the “Company”)is a designer, manufacturer, and marketer of amplifiers and related productsthat address the defense microwave markets.

 

The accompanying unaudited financialstatements have been prepared in conformity with accounting principlesgenerally accepted in the United States. However, certain information and footnote disclosures normally includedin financial statements prepared in accordance with accounting principlesgenerally accepted in the United States have been omitted or condensed pursuantto 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 presentationhave been included.  The results ofoperations and cash flows for the three-month period presented are notnecessarily indicative of the results of operations for a full year.  These financial statements should be read inconjunction with the Company’s March 31, 2004 audited financial statementsand notes thereto included in the Company’s Annual Report on Form 10-KSB.

 

*Restatement*

 

Subsequent to the issuance of our financial statements for the quarter ended June 30, 2004, our management determined that the current portion of the related notes payable should be reclassified from long term liabilities to current liabilities.

 

As a result, the financial statements for the period ended June 30,2004have been restated.  The significanteffect of these restatements is as follows:

 
| ** **                                            | ** ** | **As previously  Reported** | ** ** | **Restatement  Adjustment** | ** ** | **As  Restated** | ** ** | **Reference** | ** ** |
|-------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|------------------|------------|---------------|------------|
|                                                  |       |                        |       |                        |       |             |       |          |       |
| Balance  sheet at June 30, 2004:                 |       |                        |       |                        |       |             |       |          |       |
| Current  portion of notes payable – officers     |       | —                      |       | 50,000                      |       | 50,000           |       | 1             |       |
| Note payable  – officers, net of current portion |       | 276,000                     |       | (50,000                     | )          | 226,000          |       | 1             |       |

 

----

1.) The current portion of the related party note payable was reclassed to current liabilities.

 

***2.***             **Acquisitions (As restated)**

* *

On May 25, 2004, the Company signed adefinitive agreement for the acquisition of Microwave Power, Inc. (“MPI”),which was completed on June 18, 2004. MPI was merged into the Company’swholly owned subsidiary, with the subsidiary as the surviving entity. The totalconsideration for the acquisition was $3,028,000. Pursuant to the acquisitionagreement, 2,117,108 shares as consideration for the acquisition and 21,174shares to be issued to the broker were committed, or authorized for issuance byour board of directors, as of June 18, 2004. The difference between theamount of “net assets acquired” and the purchase price consists ofapproximately $145,000 in transactional costs and approximately $30,000 (21,174shares at $1.43 per share) worth of shares of the common stock issued to thebroker.  Transactional costs includelegal, accounting, and appraisal fees. There was no change in MPI’s managementand the Company entered into employment agreements with two of MPI’s seniorofficers, its past President and Secretary. MPI will continue to operate as theCompany’s division from its facility in Santa Clara, which is owned by MPI’sprior shareholders and leased to the Company.

 

The Microwave Power, Inc. (MPI)acquisition was driven by a number of key factors, including:

 

1)              Technologically, MPI’ssemi-monolithic, gold filled via’s, air bridge and microwave-monolithic-ceramic(MMCC) technology provide access to processes that the Company believes arecomplimentary and additive to those available to AML prior to the acquisition.

 

2)              MPI’s product baseaddresses higher power and higher frequency sectors of the microwavemarket.  This acquisition is intended tostrengthen the Company’s product offerings to this market by adding higherpower microwave amplifiers.

 

6

----

 

 

A summary of the unaudited condensed balancesheet of MPI as of June 18, 2004 is as follows:

 
| ** **                   | ** ** | **June 18, 2004** | ** ** |
|------------------------------|------------|------------------------|------------|
| ** **                   | ** ** | **(Unaudited)**        | ** ** |
|                         |       |                   |       |
| Cash                         |       | $                      | 1,150,000  |   |
| Receivables                  |       | 124,000                |       |
| Inventory                    |       | 494,000                |       |
| Property and  equipment, net |       | 61,000                 |       |
| Intangible  assets           |       | 1,670,000              |       |
| Total assets  acquired       |       | $                      | 3,499,000  |   |
| Current  liabilities         |       | (295,000               | )          |
| Net assets  acquired         |       | $                      | 3,204,000  |   |

 

Of the 1,670,000 of acquired intangibleassets, $189,000 was assigned to patents (8 year useful life), $961,000 wasassigned to Existing Technology (12 year useful life), and $339,000 wasassigned to Customer Lists (3 year useful life).  All are subject to amortization.  The balance of $181,000 was assigned totrademarks, which have an indefinite life and therefore should not beamortized.

 

7

----

 

The accompanying financial statements includethe operations of MPI for the period of June 19, 2004 through June 30,2004. Unaudited pro forma results of operations as if the Company had acquiredMPI as of April 1, 2004 and 2003 are as follows:

 
| **AML & MPI Consolidated Pro forma** | ** ** | **June 30,  2004** | ** ** | **June 30,  2003** | ** ** |
|-----------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
|                                          |       |                    |       |                    |       |
| Revenue                                       |       | $                       | 2,428,000  |                    | $          | 2,067,000 |   |
| Net Income                                    |       | 136,000                 |       | 503,000                 |       |
| Basic  earnings per share                     |       | $                       | 0.01       |                    | $          | 0.05 |   |
| Diluted  earnings per share                   |       | $                       | 0.01       |                    | $          | 0.04 |   |

 

**3.**             **Earnings Per Share**

 

**Statementof Financial Accounting Standards No. 128, “Earnings per share” requiresthe presentation of basic earnings per share and diluted earnings pershare.  Basic and diluted earnings pershare computations are presented by the Company conform to the standard and arebased on the weighted average number of shares of Common Stock outstandingduring the year.**

** **

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

 

**TheCompany had 1,566,000 of granted stock options that were exercisable as of June 30,2004 and 1,564,000 of granted stock options exercisable at June 30, 2003.**

** **

**Thefollowing is a reconciliation of the numerators and denominators of the basicand diluted earnings per share computations:**

** **
| **Three months ended June 30, 2004**    | ** ** | **Net Income** | ** ** | **Shares** | ** ** | **Per Share** | ** ** |
|----------------------------------------------|------------|----------------|------------|------------|------------|---------------|------------|
| Basic  earnings per shares:                  |       |           |       |       |       |          |       |
| Net income  available to common stockholders |       | 326,000        |       | 8,143,000  |       | $             | 0.04       |   |
| Effect of  dilutive securities:              |       |           |       |       |       |          |       |
| Stock  options                               |       |           |       | 1,566,000  |       |          |       |
| Diluted  earnings per share:                 |       | 326,000        |       | 9,709,000  |       | $             | 0.03       |   |

 
| **Three months ended June 30, 2003**    | ** ** | **Net Income** | ** ** | **Shares** | ** ** | **Per Share** | ** ** |
|----------------------------------------------|------------|----------------|------------|------------|------------|---------------|------------|
| Basic  earnings per shares:                  |       |           |       |       |       |          |       |
| Net income  available to common stockholders |       | 233,000        |       | 7,829,000  |       | $             | 0.03       |   |
| Effect of  dilutive securities:              |       |           |       |       |       |          |       |
| Stock  options                               |       |           |       | 1,564,000  |       |          |       |
| Diluted  earnings per share:                 |       | 233,000        |       | 9,393,000  |       | $             | 0.02       |   |

 

8

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**4.**                                      **Inventories**

 

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

 
| ** **      | ** ** | **June 30, 2004** | ** ** |
|-----------------|------------|------------------------|------------|
|            |       |                   |       |
| Raw  materials  |       | $                      | 902,000    |   |
| Work-in-process |       | 449,000                |       |
| Finished  goods |       | 233,000                |       |
|            |       | $                      | 1,584,000  |   |

 

**5.**                                      **Intangible Assets (As restated)**

 

The Company accounts for its intangible assets under the applicable guidelines of SFAS 142 “goodwill and other intangible assets” and SFAS 144 “accounting for the impairment or disposal of long lived assets”. Where intangible assets have finite lives, they are amortized over their useful life unless factors exist to indicate that the asset has been impaired. The Company evaluates if the assets are impaired annually or on an interim basis if an event occurs or circumstances change to suggest that the assets value has diminished. Under SFAS 144, when deemed necessary, the Company completes the evaluation of the recoverability of its long-lived assets by comparing the carrying amount of the assets against the estimated undiscounted future cash flows associated with them. If such evaluations indicate that the future undiscounted cash flows of long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their estimated fair values.  Under SFAS 142 intangible assets with indefinite useful lives are required to be tested annually for impairment or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets.  During the three months ended June 30, 2004, the Company recognized no impairment.

 

At June 30, 2004, intangibles consist of the following:

 
| ** **                | ** ** | **June 30, 2004**    | ** ** |
|---------------------------|------------|---------------------------|------------|
| **Intangibles**           | ** ** | **Gross Carrying Amount** | ** ** | **Accumulated Amortization** | ** ** | **Net** | ** ** |
|                      |       |                      |       |   |   |   |   |
| Amortized intangibles:    |       |                      |       |   |   |   |   |
| Patents                   |       | $                         | 189,000    |   | $ | (4,000 | ) | $ | 185,000 |   |
| Existing  Technology      |       | 961,000                   |       | (11,000 | ) | 950,000 |   |
| Customer  List            |       | 339,000                   |       | (9,000 | ) | 330,000 |   |
|                      |       |                      |       |   |   |   |   |
| Unamortized  intangibles: |       |                      |       |   |   |   |   |
| Trademarks                |       | 181,000                   |       | — |   | 181,000 |   |
|                      |       | $                         | 1,670,000  |   | $ | (24,000 | ) | $ | 1,646,000 |   |

 

During the quarter ended June 30, 2004,due to the acquisition of MPI, we recorded the intangible assets above. Weassigned an 8 year life to patents, a 12 year life to Existing Technology, anda 3 year life to Customer Lists. All are subject to amortization.  The value assigned to trademarks, which haveindefinite life, should not be amortized.

 

Amortization expense from continuingoperation for quarter ended June 30, 2004 was $24,000.  We expect amortization expense for the nextfive years to be as follows:

 
| **Year Ending March 31:** | ** ** | ** ** | ** ** |
|--------------------------------|------------|------------|------------|
| 2005                           |       | $          | 180,026    |   |
| 2006                           |       | $          | 216,305    |   |
| 2007                           |       | $          | 216,305    |   |
| 2008                           |       | $          | 122,200    |   |
| 2009                           |       | $          | 103,379    |   |

 

9

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**6**.                                      **Accounts Receivable Financing**

 

In September 2003, the Company modifiedits agreement with Silicon Valley Bank. Under the modification agreement, theaggregate amount of all receivables purchased by the bank could not exceed$2,000,000. The Company was obligated to pay the bank a monthly finance chargewhich was computed as the greater of $6,500 or 1% above the prime rate, perannum, on the average daily account balance outstanding for each month. TheCompany was also required to pay the bank a monthly collateral handling fee of0.75% per month on the average daily account balance outstanding for the month.The bank refunded any amount remaining from paid accounts after deducting the80% advance, the monthly finance charge, the collateral handling fee and anyother adjustments made or fees due pursuant to the Account Receivable PurchaseAgreement. The bank required the Company to repurchase receivables it hadpurchased if they remained unpaid after 90 days from the invoice date, if theaccount debtor filed (or has filed against it) bankruptcy or other insolvencyproceedings, if the Company breached the Accounts Receivable Purchase Agreementor if the account debtor asserted any claim relating to the receivable.  As of June 30, 2004, there was $184,000of refundable reserves due to the Company under the borrowings agreement.  On July 6, 2004, the Company terminatedits agreement with Silicon Valley Bank and entered into a new financingagreement with Bridge Bank.

 

Under the asset-based financing agreementwith Bridge Bank, the Company is required to pay the bank $7,500 upon executionof the contract and on each anniversary thereafter prior to termination of theagreement. The credit limit under this agreement is $1,500,000, of which$1,000,000 may be used for cash advances against accounts receivables and$500,000 may be used for equipment advances. The Company is obligated to paythe bank a finance charge at a rate per year equal to the prime rate, which inno event shall be less than 4.0%, plus 2.0% with respect to cash advances and arate of such prime rate plus 3.5% with respect to equipment advances.  The Company is required to maintain certainfinancial requirements, including net profit after tax, on a quarterly basis,of at least $0.01, and a debt service coverage ratio of at least 1.25 to 1.00 withrespect to equipment advances. This agreement terminates on July 7, 2005,or upon a date that the bank chooses to terminate the agreement. Any unpaidbalance is due and payable pursuant to the agreement on the termination date.If the agreement is terminated within the first 12 months, the Companygenerally is required to pay a $15,000 fee to the bank.

 

**7.**                                      EquityTransactions (As restated)

** **

The total consideration for the acquisitionwas $3,028,000. Pursuant to the acquisition agreement, 2,117,108 shares asconsideration for the acquisition and 21,174 shares to be issued to the brokerwere committed, or authorized for issuance by our board of directors, as of June 18,2004. The difference between the amount of “net assets acquired” and thepurchase price consists of approximately $145,000 in transactional costs andapproximately $30,000 (21,174 shares at $1.43 per share) worth of shares of thecommon stock issued to the broker. Transactional costs include legal, accounting, and appraisal fees. Thesetransactions were effected under Section 4(2) of the Securities Actof 1933, as amended.

 

*The recipients of securities in the above-describedtransactions represented their intention to acquire the securities forinvestment only and not with a view to or for sale in connection with anydistribution thereof and appropriate legends were affixed to the sharecertificates and other instruments issued in such transactions. The recipientseither received adequate information about the Company or had access, through otherrelationships, to such information.*

 

During quarter, the Board of Directorsgranted stock options of 119,500 shares as employee compensation.  The options prices range from $1.40 to $1.55per share.

 

In December 2002, the FASB issuedStatement of Financial Accounting Standards No. 148 (“SFAS 148”), “Accountingfor Stock-Based Compensation-Transition and Disclosure”. This Statement amendsSFAS 123, “Accounting for Stock-Based Compensation”, to provide alternativemethods of transition for a voluntary change to the fair value based method ofaccounting for stock-based employee compensation. In addition, SFAS 148 amendsthe disclosure requirements of Statement 123 to require prominent disclosuresin both annual and interim financial statements about the method of accountingfor stock-based employee compensation and the effect of the method used onreported results.

 

10

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The following table presents pro formadisclosures required by SFAS No. 148 of net income (loss) and basic anddiluted earnings (loss) per share as if stock-based employee compensation hadbeen recognized during the three months ended June 30, 2004. Thecompensation expense for these periods has been determined under the fair valuemethod using the Black-Scholes pricing model, and assumes graded vesting.

 

 
| ** **                                                        | ** ** | **For the  three months ended** | ** ** |
|-------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                        | ** ** | **June 30, 2004**          | ** ** | **June 30,  2003** | ** ** |
|                                                              |       |                            |       |   |   |
| Net income (loss) as reported                                     |       | 326,000                         |       | 223,000 |   |
| Less: stock-based compensation expense,net of related tax effects |       | (26,000                         | )          | (4,000 | ) |
| Pro forma net loss                                                |       | 300,000                         |       | 219,000 |   |
|                                                              |       |                            |       |   |   |
| Basic earnings per share - as reported                            |       | 0.04                            |       | 0.03 |   |
| Diluted earnings per share - as reported                          |       | 0.03                            |       | 0.02 |   |
| Basic earnings per share - pro forma                              |       | 0.03                            |       | 0.02 |   |
| Diluted earnings per share - pro forma                            |       | 0.03                            |       | 0.02 |   |

 

8.                                       **Related Party**

 

During the quarter ended June 30, 2004,the Company paid $2,000 to the previous stockholders of MPI in connection withthe property rent for the premises located in Santa Clara.

 

9.                                       **Listing History**

 

The Company’s common stock currently tradeson Nasdaq’s OTC Bulletin Board under the symbol “AMLJ.OB”. Its common stocktraded on the Nasdaq Small Cap Market from October 8, 2001 to August 13,2002 and on the Nasdaq National Market prior to that time.  The Company was de-listed from NASDAQ becauseof its failure to meet the $1.00 minimum bid price requirement.

 

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

** **

This filing contains forward-lookingstatements, which involve risks and uncertainties.  Our actual future results may differmaterially from the results discussed in the forward-looking statements.  When used in this report, the words “expects”“anticipates” and “estimates” and similar expressions are intended to identifyforward-looking statements. Factors that could cause actual results to differmaterially from those expressed in any forward-looking statement made by usinclude, but are not limited to:

 

•                  our ability tofinance our activities and maintain our financial liquidity;

•                  our ability toattract and retain qualified, knowledgeable employees;

•                  the impact ofgeneral economic conditions on our business;

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

•                  the limitednumber of potential customers for our products;

•                  the variabilityin gross margins on our products;

•                  our ability todesign and market new products successfully;

•                  our failure toacquire new customers in the future;

•                  deterioration ofbusiness and economic conditions in our markets;

•                  intenselycompetitive industry conditions with increasing price competition; and

•                  the rate ofgrowth in the defense markets.

 

11

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Please read the followinginformation in conjunction with the factors set forth in the section belowtitled “Additional Factors That May Affect Future Results” and other riskfactors detailed in our filings with the Securities and Exchange Commission(the “SEC”), including our Annual Report on Form 10-KSB filed withthe SEC on June 29, 2004.  Weundertake no obligation to publicly release any revisions to theseforward-looking statements to reflect events or circumstances after the datethis report is filed with the SEC or to reflect the occurrence of unanticipatedevents**.**

 

**Overview**

 

We are based in southernCalifornia and design, manufacture and market Radio Frequency (“RF”) andMicrowave power and low noise amplifiers for a variety of frequency ranges andtransmission protocols serving the defense microwave and wirelesscommunications markets. Our defense industry products, which representsapproximately 90% of our sales, are used in communications and radar equipmentintegrated into electronic systems for tactical aircraft, ships, groundsystems, and missile systems. Our wireless products consist of an array of lownoise and power amplifiers serving the wireless, PCS, and two-way messagingmarket, as well as Cellular Coverage Enhancement amplifiers.  These products, representing approximately10% of our sales, are sold to cellular operators and to original equipmentmanufactures. The demand for products manufactured by us and used in thedefense industry has been growing at a fast pace during the last 2 years and isexpected to continue to grow. This growth is attributable to an increase indemand for our products by government prime contractors, as well as to ourstrategy to acquire market share by offering leading edge products.  The demand for wireless products has seen arecent increase due to the competition among cellular operators and originalequipment manufactures to provide improved products and services. Theacquisition of MPI is part of a strategic move to complement the existing AMLproduct line and expand our technology base. We plan to operate MPI from thecurrent facility in Santa Clara, with the current management in place, but planto unify the Web-site of MPI with ours for better market exposure with intentto offer a “one stop shop” for customers seeking low noise and high poweramplifier solutions.

 

**RecentEvent (As restated)**

 

On June 18, 2004, we completed ouracquisition of Microwave Power, Inc., a designer, manufacturer andmarketer of broadband high power microwave amplifiers. The total considerationfor the acquisition was $3,028,000. Pursuant to the acquisition agreement,2,117,108 as consideration for the acquisition and 21,174 shares to be issuedto the broker were committed, or authorized for issuance by our board ofdirectors, as of June 18, 2004. The difference between the amount of “netassets acquired” and the purchase price consists of approximately $145,000 intransactional costs and approximately $30,000 (21,174 shares at $1.43 pershare) worth of shares of the common stock issued to the broker.  Transactional costs include legal,accounting, and appraisal fees. There was no change in MPI’s management and theCompany entered into employment agreements with two of MPI’s senior officers,its past President and Secretary. MPI will continue to operate as the Company’sdivision from its facility in Santa Clara, which is owned by MPI’s priorshareholders and leased to the Company.

**Resultsof Operations**

 

**ThreeMonths Ended June 30, 2004 Compared to Three Months Ended June 30,2004**

 

*Net sales. *Net sales for the threemonths ended June 30, 2004 were $2.17 million, as compared to net sales of$1.54 million for the three months ended June 30, 2003 an increase of$600,000 or 40%.  The increase in netsales is attributable to the higher volume of shipments of the defense relatedMIC products which accounted for $1.7 million, or 79.6% of net sales for thethree months ended June 30, 2004, compared to $1.5 million or 98.6% of netsales for the three months ended June 30, 2003. Additionally, the cellularand wireless messaging market produced $431,000, or 20.5% of net sales for thethree months ended June 30, 2004, as compared to $22,000, or 1.4% of netsales for the three months ended June 30, 2003.

 

12

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*Gross profit. *Gross profit for the threemonths ended June 30, 2004 was $934,000, or 42.9% of net sales, comparedto a gross profit of $717,000, or 46.3% of net sales for the three months endedJune 30, 2003. Gross profit, as a percentage of net sales, decreased dueto price reductions in order to acquire market share, and increased due to theallocation of $18,000 from the Research and Development department.

 

*Selling, general andadministrative costs. *Selling,general, and administrative costs were $409,000, or 18.8% of net sales, for thethree months ended June 30, 2004, compared to $265,000, or 17.1% of netsales, for the three months ended June 30, 2003.  The increase is attributed to higherprofessional fees; salary increases, bonus payments, and 401K contributions forall employees; increased commission expense, and increased spending in the areaof investor relations.

 

*Research and developmentcosts. *Research anddevelopment costs were $183,000, or 8.4% of net sales, for the three monthsended June 30, 2004, as compared to $199,000, or 12.9% of net sales, forthe three months ended June 30, 2003. These costs declined due to thereallocation of $18,000 for certain expenses to manufacturing overhead.

 

*Other expense and income,net. *Other netexpenses were $16,000 for the three months ended June 30, 2004, ascompared to other net expenses of $30,000 for the three months ended June 30,2003.  The decrease is attributed tolower interest and finance charges associated with reduced borrowing, offset bya $4,000 gain on the sale of a fixed asset.

 

*Provision for income taxes.*For the three months ended June 30, 2004, we recorded no provision forstate income taxes, due to the California Franchise Tax Board reversing itssuspension of the utilization of loss carry forwards.

 

*Net profit. *Net profit was $326,000, or$0.04 per share, for the three months ended June 30, 2004, compared to anet profit of $223,000, or $0.03 per share, for the three months ended June 30,2003.

 

**Liquidityand Capital Resources**

 

Historically, we havefinanced our operations primarily from internally generated funds and, to alesser extent, loans from stockholders and capital lease obligations.

 

Between July 1, 2000and December 31, 2001, we entered into capital leases for the purpose ofacquiring production and test equipment valued in aggregate at $740,000.  The terms of the leases range from 36 monthsto 60 months and the interest charges range from 8.6% to 15.6%. The totalamount remaining on the leases at June 30, 2004 is $126,000.

 

In December 2001, we received a loan of$50,000 from Dr. Tiberiu Mazilu, PhD, our officer and director.  The promissory note calls for quarterlyinterest payments to Dr. Mazilu commencing on September 30, 2002,with the interest payment calculated quarterly and based on the prime interestrate plus 1.25%.  The principal amount ofthe note is due on January 2, 2005 but would become due and payable by usimmediately upon the consolidation or merger of us into another entity, thedeath of Dr. Mazilu, or our termination of Dr. Mazilu’s employment withus.

 

In December 2002, we entered into anon-cancelable capital lease to acquire test equipment valued in aggregate atapproximately $50,000. The terms of the lease call for 36 equal monthlypayments of $1,699 commencing in December 2002 and at an annual interestrate of 13.7%.

 

In July 2003, weraised $245,000 ($100,000 of which was a conversion from an advance received inJune 2003) from current officers and directors and $43,000 from otherinvestors in the form of notes payable with warrants attached. The funds wereused for working capital. The promissory notes bear interest at the rate of 8%and have a two-year maturity. Warrants to purchase a total of 240,000 shares ofour common stock were issued in connection with the funding.  The per share exercise price of the warrantsis $0.24.  The warrants expire five yearsfrom the date of issuance.  We havevalued these warrants at $35,000 and are expensing this value over the term ofthe notes payable.  For the three monthsended June 30, 2004, a total of $4,000 was charged to the consolidatedstatement of operations.

 

13

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In September 2003,we modified our agreement with Silicon Valley Bank. Under the modificationagreement, the aggregate amount of all receivables purchased by the bank couldnot exceed $2,000,000. We were obligated to pay the bank a monthly financecharge which was computed as the greater of $6,500 or 1% above the prime rate,per annum, on the average daily account balance outstanding for each month. Wewere also required to pay the bank a monthly collateral handling fee of 0.75%per month on the average daily account balance outstanding for the month. Thebank refunded any amount remaining from paid accounts after deducting the 80%advance, the monthly finance charge, the collateral handling fee and any otheradjustments made or fees due pursuant to the Account Receivable PurchaseAgreement. The bank required us to repurchase receivables it had purchased ifthey remained unpaid after 90 days from the invoice date, if the account debtorfiled (or has filed against it) bankruptcy or other insolvency proceedings, ifwe breached the Accounts Receivable Purchase Agreement or if the account debtorasserted any claim relating to the receivable. As of June 30, 2004, there were $184,000 of refundable reserves dueto the Company under the borrowings agreement. On July 6, 2004, we terminated our agreement with Silicon ValleyBank and entered into a new financing agreement with Bridge Bank.

 

Under the asset-basedfinancing agreement with Bridge Bank, we are required to pay the bank $7,500upon execution of the contract and on each anniversary thereafter prior totermination of the agreement. The credit limit under this agreement is$1,500,000, of which $1,000,000 may be used for cash advances against accountsreceivables and $500,000 may be used for equipment advances. We are obligatedto pay the bank a finance charge at a rate per year equal to the prime rate,which in no event shall be less than 4.00%, plus 2.0% with respect to cashadvances and a rate of such prime rate plus 3.5% with respect to equipmentadvances. We must maintain certain financial requirements, including net profitafter tax, on a quarterly basis, of at least $0.01, and a debt service coverageratio of at least 1.25 to 1.00 with respect to equipment advances. Thisagreement terminates on July 7, 2005 or upon a date that the bank choosesto terminate the agreement.  Any unpaidbalance is due and payable pursuant to the agreement on the terminationdate.  If the agreement is terminatedwithin the first 12 months, we generally are required to pay a $15,000 fee tothe bank.

 

At June 30, 2004, we had $1,752,000 incash and cash equivalents, compared to cash and cash equivalents of $54,000 at June 30,2003. Our operating activities provided cash of approximately $31,000, a resultof increased profits due to higher revenues combined with a decrease inaccounts payable. Cash provided from investing activities amounted to$1,066,000, primarily as a result of the MPI acquisition, offset by $84,000 forthe purchase of property and equipment. Cash used in financing activities was$322,000; $265,000 as a result of paying down our balance on our accountsreceivable financing with Silicon Valley Bank, along with payments on leaseobligations of $35,000 and payments on Notes Payable of $22,000. We anticipatecapital expenditures of approximately $530,000 in fiscal 2005. At June 30,2003, cash used in operating activities was $353,000, a result of increasedreceivables combined with a decrease in inventories and accruedliabilities.  Cash provided by financingactivities was $214,000; $179,000 of which was provided from our accountsreceivable financing agreement and $100,000 was provided by investors.

 

In addition to the funds raised in July 2003,we may attempt to procure additional sources of financing in the event that thecapital available as of June 30, 2004, is insufficient for our operatingneeds.   These sources may include, butare not limited to, additional sales of our securities.  There are, however, no assurances that wewill be able to successfully obtain additional financing at terms acceptable tous.  Failure to obtain such financingcould have a material adverse effect on our ability to operate as a goingconcern.

 

**CriticalAccounting Policies**

 

Our discussion andanalysis of our financial conditions and results of operations are based uponour financial statements, which have been prepared in accordance with generallyaccepted accounting principles in the United States. The preparation offinancial statements requires managers to make estimates and disclosures on thedate of the financial statements. On an on-going basis, we evaluate ourestimates, including, but not limited to, those related to revenue recognition.We use authoritative pronouncements, historical experience and otherassumptions as the basis for making judgments. Actual results could differ fromthose estimates. We believe that the following critical accounting policiesaffect our more significant judgments and estimates in the preparation of ourfinancial statements.

 

14

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*Revenue recognition.*

 

We generate our revenue through the sale of products.  Our policy is to recognize revenue when theapplicable revenue recognition criteria have been met, which generally includethe 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 isgenerally recognized after both the goods are shipped to the customer andacceptance has been received, if required. Our products are custom made for ourcustomers, who primarily consist of original engineer manufacturers (OEMs), andwe do not accept returns. Our products are shipped complete and ready to beincorporated into higher level assemblies by our customers. The terms of thecustomer arrangements generally pass title and risk of ownership to thecustomer at the time of shipment.

 

Recording revenue from the sale of productsinvolves the use of estimates and management judgment. We must make adetermination at the time of sale whether the customer has the ability to makepayments in accordance with arrangements. While we do utilize past paymenthistory, and, to the extent available for new customers, public creditinformation in making our assessment, the determination of whethercollectibility is reasonably assured is ultimately a judgment decision thatmust be made by management.

 

*Inventory.*  We are required to make judgments based onhistorical experience and future expectations as to the essential level ofinventories necessary to maintain the business. We make these assessments basedon existing orders, age of the inventory, and historical experience.

 

*Intangible Assets*

We test intangible assets with indefinite lives for impairment on anannual 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 by which thecarrying amount exceeds the fair value of the assets.

 

For our intangible assets with finite lives, including our customerlists, existing technology, and patents, we amortize the costs of the assetsover their useful lives and assess impairment at least annually or wheneverevents and circumstances suggest the carrying value of an asset may not berecoverable.

 

Determining the life of the assets with finite lives is judgmental innature and involves the use of estimates and assumptions. These estimates andassumptions involve a variety of factors, including future market growth andconditions, forecasted revenues and costs and a strategic review of ourbusiness and operations. We base our fair value estimates on assumptions webelieve to be reasonable but that are unpredictable and inherently uncertain.Actual future results may differ from those estimates. In the event wedetermine that an intangible asset is impaired in the future, an adjustment tothe value of the asset would be charged to earnings in the period suchdetermination is made.

 

# ***Existing Technology***

Our existing technology is based on a patent issued in 1990, whichcontinues to be the main technology of MPI. It is a substrate deposition technology that is mature and with noreplacement technology forecasted. Management believes the current useful life of 12 years is appropriate.

 

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**AdditionalFactors That May Affect Future Results**

** **

Future operating resultsmay be impacted by a number of factors that could cause actual results todiffer materially from those stated herein, which reflect management’s currentexpectations. These factors include:

 

•                                          industry-specificfactors (including the reliance upon growth of the defense microwave market,significant competition characterized by rapid technological change, newproduct development, product obsolescence, and significant price erosion overthe life of a product);

 

•                                          ourability to timely develop and produce commercially viable products atcompetitive prices;

 

•                                          ourability to produce products which meet the quality standards of both existingand potential new customers;

 

•                                          ourability to accurately anticipate customer demand;

 

•                                          ourability to manage expense levels, in light of varying revenue streams;

 

•                                          theavailability and cost of components;

 

•                                          theimpact of worldwide economic and political conditions on our business; and

 

•                                          Theability to integrate MPI into our existing operations.

 

We believe that, to theextent that foreign sales are recognized, we may face increased risk associatedwith political and economic instability, compliance with foreign regulatory rules governingexport requirements, tariffs and other trade barriers, differences inintellectual property protections, longer accounts receivable cycles, currencyfluctuations and general trade restrictions. If any of these risks materialize,they could have a material adverse effect on our business, results ofoperations, and financial condition.

 

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

 

16

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

 

We experience significant price competitionand expect price competition in the sale of our products to remain intense. Wecannot assure you that our competitors will not develop new technologies or enhancementsto existing products or introduce new products that will offer superior priceor performance features. We expect our competitors to offer new and existingproducts at prices necessary to gain or retain market share. Several of ourcompetitors have substantial financial resources, which may enable them towithstand sustained price competition or a downturn in the pricing of theirproducts in the future. Substantially all of our competitors have, andpotential 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 andtechnologies.

 

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

 

Our quarterly and annual results have in thepast been, and will continue to be, subject to significant fluctuations due toa number of factors, any of which could have a material adverse effect on ourbusiness, financial condition and results of operations. There can be noassurance that we will not experience such fluctuations in the future. Weestablish our expenditure levels for product development and other operatingexpenses based on expected revenues, and expenses are relatively fixed in theshort term. As a result, variations in timing of revenues can cause significantvariations in quarterly results of operations. There can be no assurances thatwe will be profitable on a quarter-to-quarter basis in the future. We believethat period-to-period comparisons of our financial results are not necessarilymeaningful and should not be relied upon as an indication of futureperformance. Due to these factors, it is likely that in some future quarter orquarters our revenues or operating results will not meet the expectations ofpublic stock market analysts or investors. In such event, the market price ofour common stock would be materially adversely affected.

 

**Item3.    Controls and Procedures**

** **

*a) *Evaluationof disclosure controls and procedures.  As of the end of the period covered by thisreport, we carried out an evaluation, under the supervision and with theparticipation of the our management, including our Chief Executive Officer andDirector of Finance, of the effectiveness of the design and operation of ourdisclosure controls and procedures, as defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended. Basedupon that evaluation, our Chief Executive Officer and Director of Financeconcluded that our disclosure controls and procedures were effective as of theend of the applicable period to ensure that information required to bedisclosed by the Company in reports that it files or submits under the ExchangeAct (i)  is recorded, processed, summarized and reported within the timeperiods specified in Securities and Exchange Commission rules and formsand (ii)  is accumulated and communicated to our management, including ourChief Executive Officer and Director of Finance, as appropriate to allow timelydecisions regarding required disclosures.

* *

(b)  *Changes in internalcontrols over financial reporting*. There was no change in ourinternal control over financial reporting during our most recent fiscal quarterthat has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

 

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#### **PART II – OTHER INFORMATION**

#### ** **

**Item 1.  Legal Proceedings**

** **

**NotApplicable**

** **

**Item 2. Changes in Securities and Use of Proceeds**

** **

**On August 20,2004, we filed a quarterly report on Form 10-QSB disclosing that wehad issued 2,117,362 shares of our common stock to shareholders of MPI for a totalconsideration of $3,028,000, and 20,090 shares to a business broker inconnection with the acquisition of MPI. In that report, the number of sharesand the date of the issuance of the shares was incorrectly reported. Pursuantto the acquisition agreement, 2,117,108 shares as consideration for theacquisition and 21,174 shares to be issued to the broker were committed, orauthorized for issuance by our board of directors, as of June 18, 2004.The closing of the acquisition of MPI occurred on June 18, 2004. See Note2 to the Financial Statements under Part I, Item 1 for a more detaileddescription of the acquisition.**

** **

Between July 19, 2004 and August 3,2004, we issued 2,117,108 shares of our common stock to shareholders of MPI asconsideration for the acquisition, and 21,174 shares of our common stock toReuven Sadeh as finder’s fees pursuant to the acquisition agreement. Thesetransactions were effected under Section 4(2) of the Securities Actof 1933, as amended.

 

The recipients of securities in the above-describedtransactions represented their intention to acquire the securities forinvestment only and not with a view to or for sale in connection with anydistribution thereof and appropriate legends were affixed to the sharecertificates and other instruments issued in such transaction. The recipientseither received adequate information about us or had access, through otherrelationships, to such information.

 

**Item 3. Defaults Upon Senior Securities**

** **

**NotApplicable**

** **

**Item 4. Submission of Matters to a Vote of Security Holders**

** **

**NotApplicable**

** **

**Item 5.  Other Information**

** **

**Notapplicable**

** **

**Item 6.  Exhibitsand Reports on Form 8-K**

 
| (a)    | Exhibits |
|--------|----------|
|   |
|   | 2.1      |   | Merger Agreement  entered into as of May 25, 2004 by and among AML Communications, Inc.,  a Delaware corporation, AML Holdings, LLC, a California limited liability  company and Microwave Power, Inc., a California corporation. (1) |
|   | 3.1      |   | Certificate of  Incorporation (2) |
|   | 3.2      |   | Bylaws(2) |
|   | 10.1     |   | Form of Indemnity Agreement(2) |
|   | 10.2     |   | Lease, dated March 11, 1996, between  the Company and Parr-Bohn Properties, Ltd. II, a California Limited  Partnership(3) |
|   | 10.3     |   | Intellectual Property Security  Agreement.(4) |
|   | 10.4     |   | Loan and Security Agreement dated November 10,  2000 between the Company and Silicon Valley Bank. (5) |
|   | 10.5     |   | Intellectual Property Security Agreement  dated November 10, 2000 between the Company and Silicon Valley  Bank. (5) |
|   | 10.6     |   | Warrant to purchase stock dated November 9,  2000 between the Company and Silicon Valley Bank. (5) |
|        |          |  |  |  |

 

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|   | 10.7  |   | Accounts Receivable Purchase Agreement  dated November 20, 2001 between AML Communications Inc. and Silicon  Valley Bank. (6)                                                                      |
|--------|-------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10.8  |   | Promissory Note dated December 30,  2001 between Tiberiu, Mazilu, and AML Communications Inc.(6)                                                                                                   |
|   | 10.9  |   | Accounts Receivable Purchase Modifications  Agreement dated September 24, 2003 between Silicon Valley Bank and AML  Communications (7)                                                             |
|   | 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 (7) |
|   | 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 (7)        |
|   | 10.12 |   | Fourth Amended and Restated 1995 Stock  Option Agreement at June 10, 2002 (8)                                                                                                                      |
|   | 10.14 |   | Parr-Bohn Properties First Amendment to  lease of 1000 Avenida Acaso, Camarillo, CA. (8)                                                                                                                |
|   | 10.15 |   | Employment Agreement with Dr. Marina  Bujalti, of MPI, dated June 18, 2004.(8)                                                                                                                |
|   | 10.16 |   | Employment Agreement with Dr. Franco  Sechi, of MPI, dated June 18, 2004.(8)                                                                                                                  |
|   | 10.17 |   | Interim Lease and Proposed Lease Terms (9)                                                                                                                                                              |
|   | 10.18 |   | Financing Agreement dated July 8, 2004  with Bridge Bank.(10)                                                                                                                                      |
|   | 31.1  |   | Certification of Chief Executive Officer  Pursuant to 302 of the Sarbanes-Oxley Act of 2002 (11)                                                                                                        |
|   | 31.2  |   | Certification of  Director of Finance Pursuant to 302 of the Sarbanes-Oxley Act of 2002 (11)                                                                                                            |
|   | 32.1  |   | Certification of Chief Executive Officer  Pursuant to 906 of the Sarbanes-Oxley Act of 2002 (11)                                                                                                        |
|   | 32.2  |   | Certification of Director of Finance  Pursuant to 906 of the Sarbanes-Oxley Act of 2002 (11)                                                                                                            |

 

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

(2)          Previously filed withthe Securities and Exchange Commission as an exhibit to the RegistrationStatement on Form SB-2 No. 33-99102-LA andincorporated herein by reference.

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

(4)          Previously filed withthe Securities and Exchange Commission as an exhibit to the Company’s Form 10-QSBfor the quarter ended December 31, 1999 and incorporated herein byreference.

(5)          Previously filed withthe Securities and Exchange Commission as an exhibit to the Company’s Form 10-QSBfor the quarter ended September 30, 2000 and incorporated herein byreference.

(6)            Previouslyfiled with the Securities and Exchange Commission as an exhibit to the Company’sForm 10-QSB for the quarter ended December 31, 2001 andincorporated herein by reference.

(7)            Previouslyfiled with the Securities and Exchange Commission as an exhibit to the Company’sForm 10-QSB for the quarter ended December 31, 2002 andincorporated herein by reference.

(8)            Previouslyfiled with the Securities and Exchange Commission as an exhibit to the Company’sForm 10-KSB for the fiscal year ended March 31, 2004.

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

(10)    Filed herewith. Previouslyfiled with the Securities Exchange Commission as an exhibit to the Company’s Form 10-QSBfor the quarter ended June 30, 2004.

(11)    Filed herewith

 

(b)                                                         Reportson Form 8-K

 

1.               8K, May 26,2004 AML Signs Definitive Agreement to acquire Microwave Power, Inc.

2.               8K, June 15,2004 Earnings Release for Quarter 4 and fiscal year ended March 31, 2004.

 

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#### **SIGNATURES**

#### ** **

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

 
|   |                | AML Communications, Inc.                                  |
|--------|---------------------|----------------------------------------------------------------|
|   |                |                                                           |
|   |                |                                                           |
| Date:  | April 18, 2005 | /s/ Jacob Inbar                                                |   |
|   |                | Jacob Inbar                                                    |
|   |                | Chairman of  the Board, President  and Chief Executive Officer |
|   |                |                                                           |
|   |                |                                                           |
| Date:  | April 18, 2005 | /s/ Susan J. Kelley                                            |   |
|   |                | Susan J. Kelley, Formerly: Susan J. Fite                       |
|   |                | Director of  Finance and   Chief Accounting Officer            |
|        |                     |                                                                |  |  |

 

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