<PAGE>
 
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB
                                        
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the quarterly period ended:  June 30, 1998 or

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

For the transition period from _____________ to ____________

Commission File Number:    0-27252

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

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

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


                                 (805) 388-1345
                         ----------------------------
                (Issuer's telephone number including area code)

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

                                Yes X    No ___
                                   ---    

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

Common Stock Outstanding as of  July 31, 1998:    6,297,414

Transitional Small Business Disclosure Format: Yes       No  X
                                                   ---      ---
Number of pages in this Form 10-QSB     14
                                        --
<PAGE>
 
                            AML COMMUNICATIONS, INC.

                                     INDEX
<TABLE>
<CAPTION>

                                                                           PAGE
<S>          <C>                                                           <C>  
PART I       FINANCIAL INFORMATION                                        

Item 1.      Financial Statements (unaudited)
 
             Statements of Income for the three month periods ended          3
             June 30, 1998 and June 30, 1997
 
             Balance Sheets at June 30, 1998 and March 31, 1998              4
 
             Statements of Cash Flows for the three month periods ended      5
             June 30, 1998 and June 30, 1997
 
             Notes to the Financial Statements                               6
 
Item 2.      Management's Discussion and Analysis of                         9
             Financial Condition and Results of Operations
 
PART II      OTHER INFORMATION
 
Item 1.      Legal Proceedings                                              14
 
Item 6.      Exhibits and Reports on Form 8-K                               14
 
             SIGNATURES                                                     15
</TABLE>

                                       2
<PAGE>
 
                         PART I - FINANCIAL INFORMATION
                                        
Item 1.  FINANCIAL STATEMENTS

                            AML COMMUNICATIONS, INC.
                              STATEMENTS OF INCOME
                                  (UNAUDITED)
                                        
<TABLE>
<CAPTION>
                                                                                    THREE MONTHS ENDED
                                                                    -----------------------------------------------
                                                                         JUNE 30, 1998              JUNE 30, 1997
                                                                    --------------------       --------------------
 
<S>                                                                    <C>                        <C>
Net sales                                                                     $3,058,000                 $2,515,000
Cost of goods sold                                                             1,779,000                  1,270,000
                                                                              ----------                 ----------
     Gross profit                                                              1,279,000                  1,245,000
                                                                              ----------                 ----------
Operating expenses:
     Selling, general and administrative                                         695,000                    663,000
     Research and development                                                    512,000                    483,000
                                                                              ----------                 ----------
                                                                               1,207,000                  1,146,000
                                                                              ----------                 ----------
Operating income                                                                  72,000                     99,000
     Other income, net                                                          (108,000)                   (80,000
Income before provision for                                                   ----------                 ----------
      income taxes                                                               180,000                    179,000
Provision for income taxes                                                        65,000                     66,000
                                                                              ----------                 ----------
 
Net income                                                                    $  115,000                 $  113,000
                                                                              ==========                 ==========
 
Basic earnings per common share                                                    $0.02                      $0.02
                                                                              ==========                 ==========
Basic weighted average number of shares of
    common stock outstanding                                                   6,297,000                  6,112,000
                                                                              ==========                 ==========
 
 
Diluted earnings per common share                                             $     0.02                 $     0.02
                                                                              ==========                 ==========
Diluted weighted average number of shares of
    common stock outstanding                                                   6,355,000                  6,419,000
                                                                              ==========                 ==========
</TABLE>

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

                                       3
<PAGE>
 
                            AML COMMUNICATIONS, INC.
                                BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                            JUNE 30,                  MARCH 31,
                                                                                              1998                       1998
                                                                                    --------------------       --------------------
                                                                                          (UNAUDITED)                 (AUDITED)
<S>                                                                                    <C>                        <C>
ASSETS
------
Current Assets:
  Cash and cash equivalents                                                                  $ 8,392,000                $ 8,608,000
  Accounts receivable, net of allowance for doubtful accounts of
       $61,000 at June 30, 1998 and  March 31, 1998                                            1,781,000                  1,628,000
  Inventories                                                                                  2,615,000                  2,726,000
  Other current assets                                                                           176,000                    152,000
                                                                                             -----------                -----------
     Total current assets                                                                     12,964,000                 13,114,000
                                                                                             -----------                -----------
Property and Equipment:
  Machinery and equipment                                                                      3,299,000                  2,967,000
  Furniture and fixtures                                                                         127,000                    127,000
  Leasehold improvements                                                                         565,000                    564,000
                                                                                             -----------                -----------
                                                                                               3,991,000                  3,658,000
  Less - Accumulated depreciation and amortization                                            (1,758,000)                (1,562,000)
                                                                                             -----------                -----------
                                                                                               2,233,000                  2,096,000
 
Deferred Taxes                                                                                   349,000                    349,000
Other Assets                                                                                     120,000                    120,000
                                                                                             -----------                -----------
                                                                                             $15,666,000                $15,679,000
                                                                                             ===========                ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
  Accounts payable                                                                           $   917,000                $   766,000
  Accrued expenses                                                                               842,000                    953,000
  Income taxes payable                                                                            30,000                    195,000
  Current portion of capital lease obligations                                                    19,000                     19,000
                                                                                             -----------                -----------
       Total current liabilities                                                               1,808,000                  1,933,000
                                                                                             -----------                -----------
 
 
Capital Lease Obligations, net of current portion                                                 32,000                     38,000
                                                                                             -----------                -----------
 
Stockholders' Equity:
  Preferred stock, $.01 par value:
     1,000,000 shares authorized; no shares issued or outstanding                                      -                          -
  Common stock, $.01 par value:
     15,000,000 shares authorized; 6,297,414 shares issued
       and outstanding at June 30, 1998 and 6,291,930 shares issued and
        outstanding at March 31, 1998                                                             63,000                     63,000
  Capital in excess of par value                                                               9,334,000                  9,331,000
  Retained earnings                                                                            4,429,000                  4,314,000
                                                                                             -----------                -----------
                                                                                              13,826,000                 13,708,000
                                                                                             -----------                -----------
                                                                                             $15,666,000                $15,679,000
                                                                                             ===========                ===========
</TABLE>
      The accompanying notes are an integral part of these balance sheets.

                                       4
<PAGE>
 
                            AML COMMUNICATIONS, INC.
                            STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                               THREE MONTHS ENDED
                                                              -------------------------------------------------
                                                                      JUNE 30,                     JUNE 30,
                                                                        1998                         1997
                                                              ---------------------        --------------------
<S>                                                              <C>                          <C>
Cash Flows from Operating Activities:
  Net income                                                             $  115,000                  $  113,000
  Adjustments to reconcile net income
     to net cash provided by (used in) operating activities:
       Depreciation and amortization                                        196,000                     143,000
       Provision for losses on accounts receivable                                -                     197,000
       Changes in assets and liabilities:
          Decrease (increase) in:
            Marketable securities                                                 -                    (193,000)
            Accounts receivable                                            (153,000)                   (251,000)
            Inventories                                                     111,000                     118,000
            Other assets                                                    (24,000)                     55,000
          Increase (decrease) in:
            Accounts payable                                                151,000                    (213,000)
            Accrued expenses                                               (111,000)                   (187,000)
            Income taxes payable                                           (165,000)                     66,000
                                                                         ----------                  ----------
Net cash provided by (used in) operating activities                         120,000                    (152,000)
                                                                         ----------                  ----------
Cash Flows from Investing Activities:
  Purchases of property and equipment                                      (333,000)                    (70,000)
                                                                         ----------                  ----------
Net cash used in investing activities                                      (333,000)                    (70,000)
                                                                         ----------                  ----------
Cash Flows from Financing Activities:
  Exercise of stock options                                                   3,000                      34,000
  Principal payments on noncurrent capital lease obligations                 (6,000)                    (10,000)
                                                                         ----------                  ----------
Net cash provided by (used in) financing activities                          (3,000)                     24,000
                                                                         ----------                  ----------
Net Increase (Decrease) in Cash and Cash Equivalents                       (216,000)                   (198,000)
Cash and Cash Equivalents, beginning of period                            8,608,000                   4,766,000
                                                                         ----------                  ----------
Cash and Cash Equivalents, end of period                                 $8,392,000                  $4,568,000
                                                                         ==========                  ========== 
 
Supplemental disclosures of cash flow information:
  Cash paid during the period for:
     Interest                                                            $    2,000                  $    2,000
                                                                         ==========                  ==========
     Income taxes                                                        $  190,000                  $        -
                                                                         ==========                  ==========
</TABLE>

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

                                       5
<PAGE>
 
                            AML COMMUNICATIONS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                                 JUNE 30, 1998
                                  (UNAUDITED)
                                        
1.   BASIS OF PRESENTATION

     AML Communications, Inc. (the "Company") designs and manufactures
multi-carrier amplifiers, and related products for the cellular, personal
communication services ("PCS"), paging and other communication markets.

     The accompanying unaudited financial statements have been prepared in
conformity with generally accepted accounting principles.  However, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted or condensed pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC").  In the opinion of management all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
have been included.  The results of operations and cash flows for the three
month periods presented are not necessarily indicative of the results of
operations for a full year.  These financial statements should be read in
conjunction with the Company's March 31, 1998 audited financial statements and
notes thereto included in the Company's Annual Report on Form 10-KSB.

2.   EARNINGS PER SHARE

     Earnings per share calculations are in accordance with Statement of
Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS No. 128").
Accordingly, "basic" earnings per share is computed by dividing net income by
the weighted average number of shares outstanding for the year.  "Diluted"
earnings per share is computed by dividing net income by the total of the
weighted average number of shares outstanding plus the dilutive effect of
outstanding stock options (applying the treasury stock method). Earnings per
share for the first quarter of fiscal 1998 has been restated to reflect the
adoption of SFAS No. 128 .

3.   NEW AUTHORITATIVE PRONOUNCEMENTS

     In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130, "Reporting Comprehensive Income" ("SFAS 130").  SFAS 130
establishes new standards for the reporting and display of comprehensive income
and its components in a full set of general purpose financial statements.  These
new standards require that all items recognized as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. SFAS 130 is effective for fiscal years
beginning after December 15, 1997. For the first quarter ended June 30, 1998 the
Company has no reportable differences between net income and comprehensive
income. Therefore, no statement of comprehensive income has been presented.

     In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131").  SFAS 131 changes the way public companies report segment
information in annual financial statements and also requires those companies to
report selected segment information in interim financial 

                                       6
<PAGE>
 
reports. SFAS 131 is effective for fiscal years beginning after December 15,
1997. The adoption of SFAS 131 does not have a material impact on the
presentation of the Company's financial statements.



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:

 
<TABLE>
<CAPTION>
                                June 30, 1998            March 31, 1998
                               ----------------        ------------------
                                 (Unaudited)               (Audited)
<S>                            <C>                     <C>
Raw materials                       $1,656,000                $1,719,000
Work-in-process                        676,000                   592,000
Finished goods                         283,000                   415,000
                                    ----------                ----------
                                    $2,615,000                $2,726,000
                                    ==========                ==========
</TABLE>
 

5.   LEGAL PROCEEDINGS

     As described in the Company's Form 10-KSB dated June 30, 1998, two
essentially identical, purported securities class action lawsuits have been
filed against the Company and certain of its current and former officers and
directors.  The complaints allege that during the purported class period of
April 10, 1996 to March 25, 1997, defendants made overly optimistic estimates
regarding the Company's anticipated financial performance for fiscal 1997 and
1998, and overly optimistic statements regarding the Company's ability to
develop and to sell new products for the PCS market, all allegedly in order to
profit from insider trading at artificially inflated prices.

     In the action pending in federal court, entitled Ronny Sussman v. AML
                                                      --------------------
Communications, Inc., et al., U.S.D.C. Case No. 98-2010 CAS (Ex) (C.D. Cal.),
----------------------------                                                 
four lead plaintiffs and co-lead counsel were appointed on June 29, 1998
pursuant to The Private Securities Litigation Reform Act of 1995.  Plaintiffs
have informed defendants and the court that they intend to file an amended
complaint in that action on or before September 3, 1998.  Pursuant to
stipulation, the Company's response to the amended complaint will be due within
forty-five (45) days after its filing.  The Company intends to respond by filing
a motion to dismiss the case.  All discovery is stayed in the federal action
unless and until it is determined that plaintiffs have stated an actionable
claim.

     With respect to the action pending in state court, entitled Ronny Sussman
                                                                 -------------
v. AML Communications, Inc. et al., Case No. CIV 179776 (Ventura County), all
----------------------------------                                           
proceedings have been stayed until the stay of discovery is lifted in the
federal action.  Plaintiffs also intend to file an amended complaint in the
state action once the case proceeds.  The Company's response will be due forty-
five (45) days after the filing of the amended complaint.  The Company intends
to respond by filing a demurrer, which is the California equivalent of a motion
to dismiss for failure to state a claim.

                                       7
<PAGE>
 
     The Company currently is not party to any other legal proceedings, the
adverse outcome of which, individually or in the aggregate, management believes
would have a material adverse effect on the business, financial condition or
results of operations of the Company.

                                       8
<PAGE>
 
Item 2.  MANAGMEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS.

This filing contains forward-looking statements which involve risks and
uncertainties.  The Company's actual future may differ significantly from the
results discussed in the forward-looking statements.  Factors that might cause a
difference include, but are not limited to, product demand and the rate of
market acceptance, the effect of economic conditions, the impact of competitive
products and pricing, delays in product development, capacity and supply
constraints or difficulties, general business and economic conditions, factors
set forth in "Additional Factors That May Affect Future Results" and other risks
detailed in the Company's Securities and Exchange Commission filings.


RESULTS OF OPERATIONS
---------------------

THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997

     Net sales. Net sales for the first quarter of fiscal 1999 were $3.1 million
compared to net sales of $2.5 million in the first quarter of fiscal 1998, a
24.0% increase. The increase in net sales is largely attributable to an increase
in sales of the Company's PCS/Paging products, which contributed $864,000, or
28.3% of net sales, for the first quarter of fiscal 1999, compared to $104,000,
or 4.1% of net sales, for the first quarter of fiscal 1998. Sales of cellular
products were $1.7 million, or 56.1% of net sales, for the first quarter of
fiscal 1999, compared to $1.4 million, or 57.2% of net sales, for the first
quarter of fiscal 1998. Sales of Wireless Local Loop ("WLL") products
contributed $220,000, or 7.1% of net sales, during the first quarter of fiscal
1999, compared to $144,000, or 5.8% of net sales, during the first quarter of
fiscal 1998. Sales of Custom products for the first quarter of fiscal 1999 was
$258,000, or 8.3% of net sales, compared to $320,000, or 12.8% of net sales, in
the first quarter of fiscal 1998. Sales of Custom products is expected to
continue to decline as a result of management's ongoing effort to focus its
attention and resources on other wireless application opportunities and reduce
its sales and marketing efforts in the Custom sales segment of the Company's
business.

     During the first quarter of fiscal 1998, the Company reported revenue of
$508,000, or 20.3% of net sales, from sales of amplifiers used in the Low Earth
Orbit ("LEO") satellite network.  The LEO satellite network is designed to
provide high-speed digital communication worldwide through earth gateways.  The
Company has not reported revenue from this market since the first quarter of
fiscal 1998, although the Company recently announced that it has received an
order for approximately $600,000 of satellite gateway amplifiers to be shipped
during the latter half of fiscal 1999.

     Gross profit. Gross profit for the first quarter of fiscal 1999 was $1.3
million, or 41.9% of net sales, compared to $1.2 million, or 48.0% of net sales,
for the first quarter of fiscal 1998. Cellular production costs increased to
$1.6 million, or 51.6% of net sales, for the first quarter of fiscal 1999
compared to $1.1 million, or 44.0% of net sales, for the first quarter of fiscal
1998. The Company believes the average selling prices of and gross margins for
its current products has declined as a result of the highly competitive OEM

                                       9
<PAGE>
 
market, intense competition among suppliers of equipment to service providers
and pressures on cellular service providers from their customers to reduce
costs, as well as changes in the Company's product mix. The Company expects that
this pressure on selling prices for its current products will continue in fiscal
1999.

     Selling, general and administrative costs.  Selling, general and
administrative costs for the first quarter of fiscal 1999 were $695,000, or
22.4% of net sales, compared to $663,000, or 26.5% of net sales, for the first
quarter of fiscal 1998.  The increase is primarily due to additional marketing
and administrative headcount and its related expenses, higher commission rates
for outside sales representatives and enhanced information system costs.  The
Company believes continued investment in sales and marketing is necessary to
promote the Company's products due to the intensely competitive nature of the
industry.

     Research and development costs.  Research and development costs for the
first quarter of fiscal 1999 were $512,000, or 16.5% of net sales, compared to
$483,000, or 19.3% of net sales, for the first quarter of fiscal 1998.  The
increase is primarily due to employment of additional technical staff, outside
engineering consulting and increased material costs required to design and
develop new products for the cellular, PCS and paging communications markets.
The Company announced in concept its M150 amplifier at the CTIA trade show in
February, 1998, and continues to expend research and development resources on
the final development of the product.  The Company expects to begin shipping
this product in the latter half of fiscal 1999.

     Other income, net.  Other income for the first quarter of fiscal 1999 was
$108,000 compared to $80,000 for the first quarter of fiscal 1998.  The increase
is due mainly to an increase in interest income as a result of higher interest
rates and higher average invested funds.

     Provision for taxes.  For the first quarter of fiscal 1999, the Company's
provision for income taxes was $65,000, an effective tax rate of approximately
36%, compared to $66,000, an effective tax rate of approximately 37%, for the
first quarter of fiscal 1998.  The difference between the rate used and the
statutory rate of approximately 40% is due to research and development tax
credits available to the Company which reduce taxes payable and tax benefits
associated with the exercise of employee stock options.

     Net income.  For the reasons set forth above, the Company generated net
income in the first quarter of fiscal 1999 of $115,000, or 3.7% of net sales,
compared to $113,000, or 4.5% of net sales, in the first quarter of fiscal 1998.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     Historically, the Company has financed its operations primarily from
internally generated funds and, to a lesser extent, loans from stockholders and
capital lease obligations.  In December 1995, the Company completed its initial
public offering of 1,725,000 shares of common stock (including the exercise of
the underwriters' over allotment option), raising net proceeds of approximately
$7.7 million.  Of such net proceeds, $425,000 was used to repay loans from
certain stockholders and the remainder has been used to expand manufacturing
capability through the leasing and outfitting of substantially larger
facilities, the acquisition of equipment sufficient to produce higher product
quantities and the employment and training of additional employees capable of
expanding production and sales.  The net proceeds of the initial public 

                                       10
<PAGE>
 
offering also continue to be used to maintain increased inventory and working
capital balances to support higher operating levels.


     In September 1997 the Company renegotiated its existing revolving bank line
of credit.  The amended agreement is comprised of two separate credit
facilities.  The initial facility is a $1,250,000 revolving line of credit,
which bears interest at the bank's reference rate (8.5% at June 30, 1998) plus
0.50%.  The second facility is a $500,000 non-revolving line of credit with term
repayment options which may be used to finance up to 80% of the purchase price
of equipment used in the Company's business.  Repayment of borrowings under this
facility are in 47 equal monthly installments beginning October 1, 1998, with
interest at the bank's reference rate plus 0.75%.  Both facilities are secured
by substantially all of the Company's assets and expire on September 1, 1998.
As of June 30, 1998, there were no borrowings outstanding under either facility.
The Company was in compliance with the terms and covenants of the loan agreement
as of June 30, 1998.

     At June 30, 1998 the Company had $8.4 million in cash and cash equivalents.
The Company's operating activities  provided cash of approximately $120,000 for
the three months ended June 30, 1998 primarily as a result of income from
operations, decreases in inventories  and increases in accounts payable offset
by increases in accounts receivable and decreases in  accrued expenses and
income taxes payable.  The Company's capital expenditures of $333,000 for the
three months ended June 30, 1998 were primarily for manufacturing test equipment
and information system improvements.

     On August 10, 1998, the Company announced that its board of directors
authorized a stock buyback program of up to 400,000 shares of the Company's
outstanding common stock.  Shares repurchased pursuant to the buyback will be
purchased from time to time in the open market or in negotiated transactions and
will be held for issuance in connection with the future exercise of employee
stock options.  Had the stock buyback program been implemented in the first the
quarter of fiscal 1999, there would have been no material change in earnings per
share.

     The Company believes that the net proceeds from the initial public
offering, together with cash provided by operations and available under the bank
line of credit, will be sufficient to finance the Company for at least the next
12 months.  Inflation has not had a significant effect to date on the Company's
results of operations.

YEAR 2000 COMPLIANCE ISSUE
--------------------------

     The Company uses computer software programs purchased from various
independent vendors who may have written their programs using a two digit date
field rather than a four digit date field to define the applicable year.  Such
computer programs which utilize a two digit date field may recognize a date
using "00" as the year 1900 rather than the year 2000 (the "Year 2000 Issue").
The Year 2000 Issue could potentially result in a system failure or in
miscalculations causing disruptions of operations, including among other things,
a temporary inability to process transactions, send invoices or engage in other
similar normal business activities.  The Company has identified Year 2000 Issues
in certain of its software applications and is in the process of upgrading or
replacing such applications with software which recognizes dates beyond December
31, 1999, thus addressing a substantial portion of the Year 2000 Issue that may
impact the Company.  The Company is also in the process of contacting its key
customers, suppliers and other third parties for any impact the Year 2000 Issue
may have on their information systems 

                                       11
<PAGE>
 
which could then impact the Company. Failure of key customers or suppliers to be
Year 2000 compliant could have a material adverse effect on the Company's
operations. The cost of this project is not expected to have a material effect
on the operations of the Company and will be funded through operating cash
flows.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
-------------------------------------------------  

     Future operating results may be impacted by a number of factors that could
cause actual results to differ materially from those stated herein, which
reflect management's current expectations.  These factors include industry
specific factors (including the reliance upon continued growth of the wireless
communications market, significant competition in the communications
infrastructure equipment industry characterized by rapid technological change,
new product development, product obsolescence, and significant price erosion
over the life of a product), the Company's ability to timely develop and produce
commercially viable products at competitive prices, the ability of the Company's
products to operate and be compatible with various OEM base station equipment,
the Company's ability to produce products which meet the quality standards of
both existing and potential new customers, the Company's ability to accurately
anticipate customer demand, the Company's ability to manage expense levels, the
availability and cost of components, the Company's ability to finance its
activities and maintain its financial liquidity and worldwide economic and
political conditions.

     The Company believes that international sales may account for a significant
percentage of future sales.  To the extent that foreign sales are recognized,
the Company may face increased risk associated with political and economic
instability, compliance with foreign regulatory rules governing export
requirements, tariffs and other trade barriers, differences in intellectual
property protections, longer accounts receivable cycles, currency fluctuations
and general trade restrictions.  If any of these risks materialize, they could
have a material adverse effect on the Company's business, results of operations
and financial condition.  The Company has identified potential new customers
serving new markets in developing countries.  The Company's WLL products offer a
viable alternative to the construction of a wireline infrastructure in such
areas.  To the extent that the Company's customers delay development of wireless
communications networks and technology continues to evolve, the Company may face
a material adverse effect on business, results of operations and financial
condition.

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

     Sales to foreign customers are invoiced in U.S. dollars.  Accordingly, the
Company currently does not engage in foreign currency hedging transactions.
However, as the Company further expands into foreign markets, greater risk can
be anticipated associated with general business, political and economic
conditions in those markets, and foreign currency transactions may be
anticipated.  At such time, the Company may seek to lessen its exposure through
currency hedging transactions.  No assurance can be made 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 

                                       12
<PAGE>
 
effective price increase of the Company's products to such foreign customers
could result in decreased sales which could have a material adverse impact on
the Company's business, results of operations and financial condition.

     The Company experiences significant price competition and expects price
competition in the sale of its products to remain intense.  No assurance can be
given that the Company's competitors will not develop new technologies or
enhancements to existing products or introduce new products that will offer
superior price or performance features. The Company expects its competitors to
offer new and existing products at prices necessary to gain or retain market
share. Several of the Company's 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
the Company's competitors have, and potential future competitors could have,
substantially greater technical, marketing, distribution and other resources
than the Company and have, or could have, greater name recognition and market
acceptance of their products and technologies.

     The Company currently sells a majority of its product into the operator
channel to market.  As a result, the Company receives periodic order forecasts
from its major customers who have no obligation to purchase the forecasted
amounts.  Nevertheless, the Company maintains significant work in process and
raw materials inventory as well as increased levels of technical production
staff to meet order forecasts and/or management's projections.  To the extent
its major customers purchase less than the forecasted amounts, the Company will
have higher levels of inventory than otherwise needed, increasing the risk of
obsolescence and the Company will have increased levels of production staff to
support such forecasted orders.  Such higher levels of inventory and increased
employee levels could reduce the Company's liquidity and could have a material
adverse effect on the Company's business, results of operations and financial
condition.

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

                                       13
<PAGE>
 
                          PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     As described in the Company's Form 10-KSB dated June 30, 1998, two
essentially identical, purported securities class action lawsuits have been
filed against the Company and certain of its current and former officers and
directors.  The complaints allege that during the purported class period of
April 10, 1996 to March 25, 1997, defendants made overly optimistic estimates
regarding the Company's anticipated financial performance for fiscal 1997 and
1998, and overly optimistic statements regarding the Company's ability to
develop and to sell new products for the PCS market, all allegedly in order to
profit from insider trading at artificially inflated prices.

     In the action pending in federal court, entitled Ronny Sussman v. AML
                                                      --------------------
Communications, Inc., et al., U.S.D.C. Case No. 98-2010 CAS (Ex) (C.D. Cal.),
----------------------------                                                 
four lead plaintiffs and co-lead counsel were appointed on June 29, 1998
pursuant to The Private Securities Litigation Reform Act of 1995.  Plaintiffs
have informed defendants and the court that they intend to file an amended
complaint in that action on or before September 3, 1998.  Pursuant to
stipulation, the Company's response to the amended complaint will be due within
forty-five (45) days after its filing.  The Company intends to respond by filing
a motion to dismiss the case.  All discovery is stayed in the federal action
unless and until it is determined that plaintiffs have stated an actionable
claim.

     With respect to the action pending in state court, entitled Ronny Sussman
                                                                 -------------
v. AML Communications, Inc. et al., Case No. CIV 179776 (Ventura County), all
----------------------------------                                           
proceedings have been stayed until the stay of discovery is lifted in the
federal action.  Plaintiffs also intend to file an amended complaint in the
state action once the case proceeds.  The Company's response will be due forty-
five (45) days after the filing of the amended complaint.  The Company intends
to respond by filing a demurrer, which is the California equivalent of a motion
to dismiss for failure to state a claim.

     The Company currently is not party to any other legal proceedings, the
adverse outcome of which, individually or in the aggregate, management believes
would have a material adverse effect on the business, financial condition or
results of operations of the Company.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.


(a)       Exhibits
 
               27      Financial Data Schedule

(b)       Reports on Form 8-K

               The Company filed no current Reports on Form 8-K during the
               quarter ended June 30, 1998.

               Subsequent to the end of the first quarter of fiscal 1999, the
               Company announced that its board of directors authorized a stock
               buyback program of up to 400,000 shares of the Company's
               outstanding common stock. Shares repurchased pursuant to the
               buyback will be purchased from time to time in the open market
               or in negotiated transactions and will be held for issuance in
               connection with the future exercise of employee stock options.
               Had the stock buyback program been implemented in the first 
               quarter of fiscal 1999, there would have been no material change
               in earnings per share.
                                       14
<PAGE>
 
                                   SIGNATURES

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



Date:  August 14, 1998             /s/Kirk A. Waldron
                                   ------------------
                                   Kirk A. Waldron
                                   Vice President, Finance,
                                   Chief Financial Officer and
                                   Chief Operating Officer
                                   (Principal Accounting Officer)

                                       15