<PAGE>
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                  FOR THE TRANSITION PERIOD FROM _____ TO _____

                        COMMISSION FILE NUMBER 000-28473

                                 TRUETIME, INC.


           DELAWARE                                     94-3343279
          (STATE OF                                  (I.R.S. EMPLOYER
        INCORPORATION)                              IDENTIFICATION NO.)

                               3750 WESTWIND BLVD.

                          SANTA ROSA, CALIFORNIA 95403

                                 (707) 528-1230

                    (ADDRESS OF PRINCIPLE EXECUTIVE OFFICES)

                  --------------------------------------------



   Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X ] No [ ]

   There were 5,950,000 shares of the Registrant's Common Stock outstanding as
of the close of business on May 8, 2002.

================================================================================



                                       1
<PAGE>

                                 TRUETIME, INC.

<TABLE>
<CAPTION>
                                                                                      PAGE
                                                                                     NUMBER
                                                                                     ------
<S>                                                                                  <C>
PART I.  FINANCIAL INFORMATION

   Item 1.  Financial Statements and Notes                                               3

   Item 2.  Management's Discussion and Analysis of Financial Condition and
            Results of Operations                                                        9

   Item 3.  Quantitative and Qualitative Disclosure about Market Risk                   19


PART II.  OTHER INFORMATION

   Item 1.  Legal Proceedings                                                           20

   Item 2.  Changes in Securities and Use of Proceeds                                   20

   Item 3.  Defaults Upon Senior Securities                                             20

   Item 4.  Submission of Matters to a Vote of Security Holders                         20

   Item 5.  Other Information                                                           20

   Item 6.  Exhibits and Reports on Form 8-K                                            20
</TABLE>



                                       2
<PAGE>

                          PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS AND NOTES

                                 TrueTime, Inc.
                                 BALANCE SHEETS
                (in thousands except share and per share amounts)
<Table>
<Caption>

                                                                                 September 30, 2001   March 31, 2002
                                                                                                         (unaudited)
<S>                                                                                     <C>               <C>
ASSETS
        Current assets:
                   Cash and cash equivalents.....................................       $ 7,809           $ 6,854
                   Trade accounts receivable, net of allowance of $49 and $40 ...         3,450             3,216
                   Inventories ..................................................         5,396             4,733
                   Prepaid expenses and other assets ............................           569               638
                   Income taxes receivable ......................................           635               438
                   Deferred income tax...........................................         1,252             1,765
                                                                                        -------           -------
                     Total current assets........................................        19,111            17,644

        Property and equipment, net..............................................         4,094             3,851
        Prepaid expenses, non-current............................................            53                --
        Goodwill, net of accumulated amortization of $266 and $279...............           765               752
                                                                                        -------           -------
                             Total assets........................................       $24,023           $22,247
                                                                                        =======           =======

LIABILITIES AND STOCKHOLDERS' EQUITY
          Current liabilities:
                    Trade accounts payable.......................................       $   724           $   616
                    Accrued expenses.............................................         1,165               948
                    Capital lease, current.......................................           172               179
                    Deferred revenue.............................................           122                84
                    Lease loss accrual...........................................           578               693
                                                                                        -------           -------
                      Total current liabilities..................................         2,761             2,520

          Non-Current liabilities:
                    Deferred income taxes........................................           105                 2
                    Capital lease................................................           512               421
                    Deferred revenue.............................................            66               126
                    Lease loss accrual...........................................           421                98
                                                                                        -------           -------
                      Total liabilities..........................................         3,865             3,167
                                                                                        -------           -------

          Commitments and contingencies

          Stockholders' equity:
                    Preferred stock, $.01 par value, 1,000,000 shares
                    authorized, no shares issued and outstanding.................            --                --
                    Common stock, $.01 par value, 20,000,000 authorized;
                    5,950,000 shares issued and outstanding......................            60                60
                    Additional paid-in capital...................................        12,907            12,912
                    Additional paid-in capital - warrants........................           455               455
                    Retained earnings............................................         6,736             5,653
                                                                                        -------           -------
                      Total stockholders' equity.................................        20,158            19,230
                                                                                        -------           -------
                             Total liabilities and stockholders' equity..........       $24,023           $22,247
                                                                                        =======           =======
</Table>

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



                                       3
<PAGE>

                                 TrueTime, Inc.
                            STATEMENTS OF OPERATIONS
                (in thousands except share and per share amounts)
                                   (unaudited)


<Table>
<Caption>
                                                                       Three months ended              Six months ended
                                                                March 31, 2001   March 31, 2002   March 31, 2001   March 31, 2002
<S>                                                               <C>              <C>             <C>              <C>

Net sales ...................................................     $     4,561      $     4,406     $     9,504      $     8,302

Cost of sales ...............................................           2,440            2,613           4,840            4,910
                                                                  -----------      -----------     -----------      -----------

Gross profit ................................................           2,121            1,793           4,664            3,392

Selling, general and administrative expenses ................           2,088            1,725           3,918            3,263
Research & development ......................................             909              841           1,704            1,706
Acquisition expenses ........................................              --              150              --              150
                                                                  -----------      -----------     -----------      -----------

Loss from operations .........................................           (876)            (923)           (958)          (1,727)

Interest income ..............................................             82               33             190               74

Interest expense..............................................             --               12              --               25
                                                                  -----------      -----------     -----------      -----------

Loss before taxes ............................................           (794)            (902)           (768)          (1,678)

Income taxes .................................................           (318)            (295)           (307)            (595)
                                                                  -----------      -----------     -----------      -----------

Net loss .....................................................    $      (476)     $      (607)    $      (461)     $    (1,083)
                                                                  ===========      ===========     ===========      ===========

Weighted average shares outstanding - Basic ..................      5,950,000        5,950,000        5,950,000        5,950,000

Basic loss per share .........................................         ($0.08)          ($0.10)          ($0.08)          ($0.18)

Diluted loss per share .......................................         ($0.08)          ($0.10)          ($0.08)          ($0.18)
</Table>

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



                                       4




<PAGE>

                                 TrueTime, Inc.
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)


<Table>
<Caption>
                                                                 Six months ended     Six months ended
                                                                   March 31, 2001      March 31, 2002
<S>                                                                   <C>                <C>
Cash flows from operating activities:
         Net loss...................................................  $   (461)           $ (1,083)
         Adjustments to reconcile net loss to net cash
         provided by (used in) operating activities:
                  Deferred income taxes.............................      (183)               (616)
                  Depreciation and amortization.....................       319                 458
                  Loss (gain) on disposal of property and
                  equipment.........................................         6                  (5)
                  Compensation expense related to options
                  granted...........................................         6                   5
                  Effects of changes in operating assets and
                  liabilities
                        Trade accounts receivables, net.............       649                 234
                        Inventories.................................        93                 663
                        Prepaid expenses and Other assets...........      (382)                (16)
                        Income taxes................................        --                 197
                        Trade accounts payable......................       (62)               (108)
                        Accrued expenses............................       (21)               (217)
                        Lease loss accrual..........................        --                (208)
                        Deferred revenue............................        72                  22
                                                                      --------            --------

         Net cash provided by (used in) operating activities........        36                (674)
                                                                      --------            --------
Cash flows from investing activities:

         Capital expenditures.......................................    (1,578)               (197)
                                                                      --------            --------

            Net cash used in investing activities...................    (1,578)               (197)
                                                                      --------            --------

Cash flows from financing activities:
         Principal payments on capital lease........................        --                 (84)
                                                                      --------            --------

            Net cash used in financing activities...................        --                 (84)
                                                                      --------            --------

Decrease in cash and cash equivalents................................   (1,542)               (955)

Cash and cash equivalents, beginning of period.......................    7,884               7,809
                                                                      --------            --------
Cash and cash equivalents, end of period............................. $  6,342            $  6,854
                                                                      ========            ========
</TABLE>


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



                                       5
<PAGE>

TRUETIME, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)


1. BASIS OF PRESENTATION

The balance sheet of TrueTime, Inc. at September 30, 2001 has been derived from
the Company's audited financial statements at that date. The balance sheet at
March 31, 2002, the statements of operations for the three months and six months
ended March 31, 2001 and 2002, and the statements of cash flows for the six
months ended March 31, 2001 and 2002 have been prepared by the Company,
unaudited. In the opinion of management, all adjustments consisting of normal
recurring adjustments, necessary to present fairly the financial position,
results of operations and cash flows have been made. The results of operations
for the three months and six months ended March 31, 2001 and 2002 are not
necessarily indicative of the operating results for a full year or for future
operations.

Certain information and footnote disclosures normally included in financial
statements presented in accordance with accounting principles generally accepted
in the United States of America have been omitted. The accompanying financial
statements should be read in conjunction with the financial statements and notes
thereto contained in the Company's Annual Report on Form 10-K for the year ended
September 30, 2001.

Certain prior year amounts have been reclassified to conform to the 2002
financial statement presentation. The reclassifications have no impact on
previously reported 2001 net loss, total cash flows or stockholders' equity.


2. LOSS PER COMMON SHARE

The following table summarizes the calculation of net loss and weighted average
common shares and common equivalent shares outstanding for purposes of the
computation of losses per share:


                                 TrueTime, Inc.
                              LOSS PER COMMON SHARE

<Table>
<Caption>
                                                              Three months                       Six months
                                                      March 31, 2001   March 31, 2002   March 31, 2001   March 31, 2002

<S>                                                     <C>               <C>             <C>              <C>
    Net loss available to common stockholders (in
    thousands).......................................   $    (476)        $    (607)      $    (461)       $  (1,083)
                                                        =========         =========       =========        =========

    Weighted average common shares outstanding.......   5,950,000         5,950,000       5,950,000        5,950,000
    Weighted average common share equivalents
    Outstanding*.....................................         281               250             255               84
                                                        ---------         ---------       ---------        ---------
    Weighted average common shares and common
    share equivalents outstanding....................   5,950,281         5,950,250       5,950,255        5,950,084
                                                        =========         =========       =========        =========

    Basic loss per common share......................   $   (0.08)        $   (0.10)      $   (0.08)       $   (0.18)
                                                        =========         =========       =========        =========

    Diluted loss per common share....................   $   (0.08)        $   (0.10)      $   (0.08)       $   (0.18)
                                                        =========         =========       =========        =========
</Table>

* Due to their anti-dilutive effect, additional warrants and options totaling
1,037,150 and 1,121,400 shares equivalent for the three and six months ended
March 31, 2001 and 2002, respectively, are excluded from the calculation above.



                                       6
<PAGE>

3. INVENTORIES

Inventories consisted of the following (in thousands), net of reserves of $805
at September 30, 2001 and $307 at March 31, 2002:

<Table>
<Caption>
                                           September 30, 2001    March 31, 2002
<S>                                        <C>                   <C>
Finished goods..........................               $  820           $   707
Work in process.........................                  737               594
Raw material............................                3,839             3,432
                                                       ------            ------
                                                       $5,396           $ 4,733
                                                       ======           =======
</Table>

4. RECENT ACCOUNTING PRONOUNCEMENTS

Business Combinations and Goodwill and Other Intangible Assets

On June 29, 2001, the Financial Accounting Standards Board (FASB) announced the
issuance of Statement of Financial Accounting Standards SFAS 142, "Goodwill and
Other Intangible Assets." The Company has goodwill for which amortization has
been recorded against in prior periods. Amortization of goodwill per quarter is
$6,444; amortization of goodwill for the year would be $25,776. Under the
current guidelines, the Company will adopt the provisions of SFAS on October 1,
2002. Currently, the Company is evaluating the impact of adopting SFAS 142.
Goodwill is carried at $752,112, the net book value.

Accounting for the Impairment or Disposal of Long-Lived Assets

On October 3, 2001, the FASB issued SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS 144 is effective for financial statements
issued for fiscal years beginning after December 15, 2001 and interim periods
within those fiscal years. Early application is encouraged.

This statement supercedes:

     -  SFAS 121 - "Accounting for the Impairment of Long-Lived Assets and for
        Long-Lived Assets to be Disposed of"; and

     -  APB 30 - "Reporting the Results of Operations - Reporting the Effects of
        Disposal of a Segment of a Business".


SFAS 144 sets forth that if the expected undiscounted cash flows from an asset
are insufficient to recover its carrying cost and if the carrying cost exceeds
its estimated market value, then an impairment must be recognized.

SFAS 144 also develops one accounting model for long-lived assets that are to be
disposed of by sale, as well as addressing the principal implementation issues.

SFAS 144 requires that long-lived assets that are to be disposed of by sale be
measured at the lower of book value or fair value less cost to sell.
Additionally, SFAS 144 expands the scope of discontinued operations that can be
distinguished from the rest of the entity and will be eliminated from the
ongoing operations of the entity in a disposal transaction.

The Company is in the process of evaluating the effect of SFAS 142 and 144 on
its financial statements. The impact of adopting these standards is not known at
this time.



                                       7
<PAGE>
5. RESTRUCTURING COSTS

In July 2001, the Company adopted a restructuring plan which included the
abandonment and physical move from approximately 34,500 square feet of its
existing leased facility at Westwind Blvd. and as a result the Company recorded
a $998K lease loss accrual on September 30, 2001. The accrual represents costs
recognized pursuant to EITF 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring) and SAB 100, Restructuring and Impairment
Charges. The Company committed to a sufficiently detailed plan that identified
significant actions to be taken and the activities that would not be continued
(including the method of disposition and location of such activities). The
expected date of completion of the plan was December 15, 2001; the Company
completed the plan on December 13, 2001. During the three months ended March 31,
2002, leasehold expenses in the amount of $173,382, which were associated with
the abandoned facility space were charged against the lease loss accrual.
Approximately $93,765 and $112,994 of this charge would have been recognized in
cost of goods sold and $79,617 and $93,946 would have been recognized in
operating expenses for the three months and six months ended March 31, 2002,
respectively.

The following table summarizes the activity in the lease loss accrual (in
thousands):

<Table>
<S>                                                                                                 <C>
         Lease loss accrual at September 30, 2001..............................................     $ 998
         Less:
               Lease payments .................................................................       186
               Building utilities, maintenance ................................................        21
                                                                                                    -----
         Lease loss accrual at March 31, 2002..................................................     $ 791
                                                                                                    =====
</Table>

6. ACCOUNTING FOR INCOME TAXES

The difference between the effective tax rate reflected in the total provision
for income taxes and the statutory federal rate of 34% relate primarily to
permanent differences, limitations on state net operating loss carryforwards,
tax credits and other adjustments.

Deferred income taxes under the liability method reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred income tax liabilities and
assets were as follows:

<TABLE>
<CAPTION>

                                                                             (IN '000's)
                                                                             -----------
                                                                       3/31/02       9/30/01
                                                                       -------       -------
<S>                                                                     <C>           <C>
Deferred income tax assets (current liabilities):
  Allowance for doubtful accounts..............................         $   18        $   21
  Accrued product warranty.....................................             15            16
  Inventories..................................................            151           381
  Accrued compensated absences.................................             99           102
  NOL carryforward.............................................          1,369           439
  Lease loss accrual...........................................            339           428
  Other........................................................           (226)         (135)
                                                                        ------        ------
                                                                         1,765         1,252
Deferred income tax liability:
    Other......................................................             (2)         (105)
                                                                        ------        ------
          Net deferred income tax asset........................         $1,763        $1,147
                                                                        ======        ======
</TABLE>



                                       8
<PAGE>

At March 31, 2002, the Company had available net operating loss (NOL)
carryforwards of approximately $3.4 million and $2.6 million for federal and
state income tax purposes, respectively, expiring beginning in 2020 (federal)
and 2010 (state). Under the liability method, a valuation allowance is provided
when it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Realization is dependent on generating sufficient
taxable income prior to expiration of the loss carryforwards or the possibility
of carrying back current Federal losses to prior profitable years, if such
carryback is available under our tax separation agreement with our then parent,
OYO Corporation U.S.A. Although realization is not assured, management believes
it is more likely than not that all of the net deferred tax asset will be
realized. The amount of the net deferred tax asset considered realizable,
however, could be reduced in the near term if estimates of future taxable income
during the carryforward period are reduced, and such reductions could be
material.

7. OTHER EVENTS

On March 27, 2002, the Company publicly announced that it had entered into a
definitive merger agreement with Symmetricom, Inc. ("Symmetricom") pursuant to
which Symmetricom will exchange 2.6 million shares of Symmetricom common stock
and $5 million in cash, subject to certain possible downward adjustments
relating to costs associated with the transaction, for all the outstanding
shares of TrueTime. The Company will become a wholly owned subsidiary of
Symmetricom. The consummation of the merger is subject to customary conditions,
including approval of the stockholders of the Company. The proposed merger will
be a taxable transaction. Fees in the amount of $.15 million related to the
merger were expensed during the three months ended March 31, 2002.

ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

The following analysis of the financial condition and results of operations of
TrueTime, Inc. should be read in conjunction with the Financial Statements and
Notes related thereto included elsewhere in this Form 10-Q.

GENERAL

     TrueTime designs, develops, manufactures, markets, sells and services
precision time and precision frequency products that are essential components
used in telecommunications, computer networking, e-commerce, aerospace and
various other commercial markets. Our products use a variety of external timing
references, including most importantly the Global Positioning System, or GPS,
together with advanced electronic circuitry and software to provide high quality
signals and precise time. We offer a wide variety of products, which can be
divided into the following broad categories:

- precise time and frequency products

- computer plug-in cards with precise timing capabilities

- computer network time servers

- time code products

- time displays

     TrueTime, Inc. began trading on the Nasdaq National Market on December 17,
1999, under the symbol "TRUE".



                                       9
<PAGE>
CRITICAL ACCOUNTING POLICIES

     TrueTime's discussion and analysis of its financial condition and results
of operations are based upon TrueTime's financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires the use of
estimates that affect the reported amounts of assets, liabilities, revenues and
expenses. TrueTime evaluates its estimates on an on-going basis, including
estimates for bad debts, inventories and warranties. TrueTime bases its
estimates on historical experience and on various other actual information and
assumptions that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates under different assumptions or
conditions. TrueTime believes the following critical accounting policies affect
its more significant estimates used in the preparations of its financial
statements.

     Inventory. TrueTime writes down its inventory for obsolete or unmarketable
inventory equal to the difference between the cost of inventory and its
estimated market value. These write-downs are based on assumptions about future
demand and market conditions. If actual market conditions change from those
projected by management, additional inventory write-downs may be required

     Lease Related Impairment Loss. As discussed in Note 5 of TrueTime's
condensed financial statements, in the fourth quarter of 2001 we recorded a
significant restructuring charge in connection with our abandonment of an
operating lease as part of a program to restructure our operations and related
facilities. Lease abandonment costs were estimated to include the impairment of
leasehold improvements and remaining lease liabilities and brokerage fees,
offset by estimated sublease income. Estimates related to sublease costs and
income are based on assumptions about the time period required to locate and
contract with suitable sub-lessees as well as the sublease rates that can be
achieved, as determined by using market trend information provided by a
commercial real estate brokerage we retained. We review these estimates each
reporting period; to the extent that these assumptions change due to market
conditions, the ultimate restructuring expenses for abandonment of this facility
could vary by material amounts.

     Bad Debts. TrueTime records allowances for doubtful accounts for estimated
losses resulting from the inability to collect on certain customer accounts. We
analyze specific accounts receivable, historical bad debts, customer
concentrations, customer credit-worthiness, current economic trends and changes
in our customer payment history when evaluating the adequacy of the allowance
for doubtful accounts. Changes in the above factors can have a material impact
on actual bad debts incurred. If the financial condition of TrueTime's customers
deteriorated, resulting in their inability to make further payments on their
accounts, additional allowances may be required.

     Accounting for Income Taxes. In conjunction with preparing our condensed
financial statements, we must estimate our income taxes in each of the
jurisdictions in which we operate. This process involves estimating our actual
current tax expense together with assessing temporary differences resulting from
differing treatment of items for tax and accounting purposes. These differences
result in deferred tax assets and liabilities, which are included in our
condensed balance sheets. We must then assess the likelihood that our deferred
tax assets will be recovered from future taxable income and to the extent we
believe that recovery is not likely, we must establish a valuation allowance. To
the extent we establish a valuation allowance or increase this allowance in a
period, we must include an expense within the tax provision in the statement of
operations. Significant management judgment is required in determining our
provision for income taxes, our deferred tax assets and liabilities and any
valuation allowance recorded against our net deferred tax assets. On March 31,
2002, we had deferred tax assets of $1.8 million and deferred tax liabilities of
$.002 million. A discussion of our income tax provision and the components of
our deferred tax assets and liabilities can be found in Note 6 to our condensed
financial statements.

     Warranties. TrueTime records a provision for the estimated cost of product
warranties at the time the revenue is recognized. Although TrueTime engages in
product quality programs and processes and is ISO Certified, TrueTime's product
warranty obligation can be affected by failure rates, material usage and service
delivery costs incurred in correcting a product failure. Should product failure
rates change, revisions to the estimated warranty liability would be required.

     Long lived Assets. TrueTime is required to regularly review all of it's
long-lived assets, including goodwill and other intangible assets, for
impairment whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Factors we consider important which could
trigger an impairment review include, but are not limited to, significant
under-performance relative to historical or projected future operating results,
significant changes in the manner of use of the acquired assets or the strategy
for our overall business, significant negative industry or economic trends, a
significant decline in our stock price for a sustained period, and our market
capitalization relative to net book value. When we determine that an impairment
review is necessary based upon the existence of one or more of the above
indicators of impairment, we measure any impairment based on a projected
undiscounted cash flow method. Significant judgment is



                                       10
<PAGE>

required in the development of projected cash flows for these purposes including
assumptions regarding the appropriate level of aggregation of cash flows, their
term as well as the underlying forecasts of expected future revenue and expense.
We have not recorded significant impairment charges for goodwill and intangible
assets in the past. However, to the extent that events or circumstances cause
our assumptions to change, we may be required to record a charge which could be
material.

RESULTS OF OPERATIONS

   The following table sets forth for the three months and six months ended
March 31, 2001 and 2002, the percentage of income statement items to total
sales:

<Table>
<Caption>
                                       Three Months Ended         Six Months Ended
                                            March 31,                 March 31,
                                       2001          2002         2001         2002
                                       ----          ----         ----         ----
<S>                                   <C>           <C>          <C>          <C>
  Sales............................   100.0%        100.0%       100.0%       100.0%
  Cost of sales....................    53.5          59.3         50.9         59.1
  Gross profit.....................    46.5          40.7         49.1         40.9
  Operating expenses:
      Selling, general and
        administrative.............    45.8          39.1         41.3         39.3
      Research and development.....    19.9          19.1         17.9         20.5
      Acquisition expenses.........      --           3.4           --          1.8
        Total operating expenses...    65.7          61.6         59.2         61.7
  Loss from operations.............   (19.2)        (20.9)       (10.1)       (20.8)
  Interest income .................     1.8           0.7          2.0          0.9
  Interest expense.................      --           0.3           --          0.3
  Loss before income taxes.........   (17.4)        (20.5)        (8.1)       (20.2)
  Income taxes.....................    (7.0)         (6.7)        (3.2)        (7.2)
  Net loss.........................   (10.4)%       (13.8)%       (4.9)%      (13.0)%
</Table>


Three Months and Six Months Ended March 31, 2002 compared to Three Months and
Six Months Ended March 31, 2001

     Sales. Sales for the quarter ended March 31, 2002 were $4.4 million, a
decrease of $0.2 million, or 4.3%, from $4.6 million for the quarter ended March
31, 2001. The decrease in sales from the comparable period of the prior year is
attributed to the timing of our government orders as evidenced by our increased
backlog during the quarter. Sales to government and indirect government
customers totaled 43.5% of total sales for the quarter ended March 31, 2002
compared with 47% for the comparable period in 2001. International shipments for
the three months ended March 31, 2002, represented 20% of total sales compared
with 19.9% for the comparable period in 2001.

For the six months ended March 31, 2002, sales were $8.3 million, a decrease of
$1.2 million, or 12.6%, from $9.5 million for the six months ended March 31,
2001. Lower sales were the result of the timing of shipments. Actual backlog
increased by $1.2 million from the period ending March 31, 2001. Sales to
government and indirect government customers totaled 49% of total sales for the
six months ended March 31, 2002 compared with 44.4% for the comparable period in
2001. International shipments for the six months ended March 31, 2002
represented 18.6% of total sales compared with 17.3% for the comparable period
in 2001.

     Cost of Sales. Cost of sales for the three months ended March 31, 2002 was
$2.6 million, an increase of $0.2 million from $2.4 million for the three months
ended March 31, 2001. Cost of sales increased as a percentage of total sales to
59.3% in the three months ended March 31, 2002 from 53.5% in the three months
ended March 31, 2001. This increase is primarily related to the following:

      - decreasing inventories and lower than planned sales resulted in lower
        production volumes and hence labor and overhead were applied to
        inventory at a rate lower than planned resulting in an increase in
        unabsorbed manufacturing overhead expense ($0.3 million or 111% of the
        total increase)



                                       11
<PAGE>

      - lower facility costs in manufacturing due to the abandonment of the
        building in December 2001 and recognition of the lease loss accrual
        ($0.05 million or 18% decrease) partly offset the above unfavorable
        impact.

Cost of sales for the six months ended March 31, 2002 was $4.9 million, an
increase of $0.1 million or 2.0% from $4.8 million in the six months ended March
31, 2001. Cost of sales as a percentage of total sales increased to 59.1% of
sales in the six months ended March 31, 2002 from 50.9% in the six months ended
March 31, 2001. This increase is primarily related to the following:

      - decreasing inventories and lower than planned sales resulted in lower
        production volumes and hence labor and overhead were applied to
        inventory at a rate lower than planned resulting in an increase in
        unabsorbed manufacturing overhead expense ($0.55 million or 83% of the
        total increase)

      - net increase in facility costs for the six month period due to the move
        to a larger facility in January 2001 ($0.1 million or 25% of total
        increase)

     Operating Expenses. Operating expenses for the three months ended March 31,
2002 were $2.7 million, a decrease of $0.3 million, or 10.0%, from $3.0 million
for the three months ended March 31, 2001. Operating expenses decreased as a
percentage of total sales to 61.6% in the three months ended March 31, 2002 from
65.7% in the three months ended March 31, 2001. Decreases in operating expenses
compared to the prior year are primarily related to the following:

      - lower wages and benefits due to a planned reduction in workforce ($0.18
        million)

      - decreased facility costs due to the abandonment of a portion of the
        building in December, 2001 ($0.12 million)

      - lower administrative costs of being a public company due to increased
        in-house efficiencies ($.08 million)

      - Off setting these decreases were costs associated with our pending
        merger with a subsidiary of Symmetricom Inc. ($0.15 million)

Operating expenses for the six months ended March 31, 2002 were $5.1 million, a
decrease of $0.5 million, or 8.9% from $5.6 million for the six months ended
March 31, 2001. Operating expenses increased to 61.7% of sales in the six months
ended March 31, 2002 from 59.2% in the six months ended March 31, 2001 due to
the decrease in sales. Decreases in operating expenses compared to the same
six-month period last year are primarily related to the following:

      - lower wages and benefits due to a planned reduction in workforce ($0.3
        million)

      - lower sales commission due to decreased sales ($0.18 million)

      - lower administrative costs of being a public company due to increased
        in-house efficiencies ($0.1 million)

      - decreased facility costs due to the abandonment of a portion of the
        building in December, 2001 and reallocation of floor space ($0.06
        million)

      - Off setting these decreases were costs associated with our pending
        merger with a subsidiary of Symmetricom Inc. ($0.15 million)

     Interest Income. Interest income for the three months ended March 31, 2002
was $0.03 million, a decrease of $0.05 million, or 63%, from $0.08 million for
the three months ended March 31, 2001. Interest income for the six months ended
March 31, 2002 was $0.07 million, a decrease of $0.12 million, or 63%, from
$0.19 million for the six months ended March 31, 2001. Such decreases are the
result of lower interest rates and a decrease in cash from the same periods in
the prior year.



                                       12
<PAGE>
     Interest Expense. Interest expense for the three months and six months
ended March 31, 2002 was $0.01 million and $0.02 million, respectively. There
was no interest expense in the three months and six months ended March 31, 2001.
Interest expense was the result of the Company entering into a $0.75 million
sale leaseback transaction in April 2001.

     Income Taxes. Income taxes for the three months ended March 31, 2002 were
32.7% of the loss before tax compared to 40% of the loss before tax for the
three months ended March 31, 2001. Income taxes for the six months ended March
31, 2002 were 35.5% of the loss before tax compared to 40% of the loss before
tax for the six months ended March 31, 2001. The taxes include federal and state
income taxes and are included on an estimated basis for the current year. The
decrease in the tax benefit for the quarter ended March 31, 2002 is a result of
the estimated impact of tax credits, limitation on state net operating loss
carryforwards, permanent differences, and other adjustments.

On March 31, 2002, TrueTime has a net deferred tax asset of $1.7 million. The
ultimate realization of this net deferred tax asset depends on our ability to
generate sufficient taxable income in the future. We continue to review the
recoverability of the net tax deferred asset in light of our recent unprofitable
quarters. Prior to the second quarter of fiscal 2001, TrueTime had consistently
generated profits on both a quarterly and annual basis for a number of years.
Losses incurred in recent quarters were due in part to approximately $1.1
million of costs related primarily to a facility lease impairment charge
recorded in fiscal 2001 which we do not expect to occur in the future. Based on
our current outlook, we believe that TrueTime will return to profitability in
the second half of fiscal 2002 and going forward into fiscal 2003 and beyond
and, accordingly, that it is more likely than not that future operations will
generate sufficient taxable income to realize the net deferred tax asset. No
valuation allowance has been recorded against the net deferred tax asset at
March 31, 2002. If at the end of our third quarter of fiscal 2002, our outlook
for profitability does not continue to be as favorable as it now is, it is
likely that we will reduce our net deferred tax asset through a charge to income
tax expense (reducing our stockholders' equity), and such charge could be
material.

Currently, future pretax net income required to realize our net deferred tax
asset approximates $4.2 million in total during the net operating loss
carryforward period. Historically, our pretax net income has not materially
differed from our taxable income. Our effective tax rate has historically
approximated 40%, with reductions in recent quarters due to limitations in
utilization of state net operating losses and permanent differences. The
components of our net deferred tax asset are included in note 6 to the condensed
financial statements.

The future increase in profitability necessary to realize the net deferred tax
asset will be generated through a combination of increased sales and gross
margin, and a reduction of other operating costs. We have been investing in a
broad program to replace approximately 50% of our exiting products, which serve
our existing markets, with products that are significantly less expensive to
produce as evidenced by current quotations from our contract manufacturers.
These new products account for 80% of our anticipated near term revenue. We
believe these new products will favorably impact our gross margins. To effect
these changes, we have made key changes and investments in senior management in
the production, engineering and sales departments. In addition, we are
introducing new products into market sub-sectors that are new to TrueTime. These
new market sub-segments are growing faster then our traditional market segments.
We also concentrated on significantly reducing our overhead structure including
three separate reductions in our work force and a restructuring of our leased
facilities. As a result of these changes, our current annualized cost structure
reflects a sizable decrease over last year's overhead. These factors combine to
give us confidence in our ability to generate future profitability at levels
sufficient to realize our net deferred tax asset.

TrueTime management is also currently reviewing any possible opportunities to
carry our Federal net operating losses back to profitable years as a result of
recent changes in the tax law. Prior to December 1999, TrueTime was included as
a part of the consolidated tax return of our then parent, OYO Corporation
U.S.A.("OYO"). We have exhausted all carrybacks available to TrueTime subsequent
to its separation for tax reporting purposes from OYO. We are reviewing the tax
separation agreement with OYO management with regard to whether we can extend
carrybacks to tax periods prior to December 1999; our ability to carryback
further amounts and to recover some of our current Federal net operating losses
through this means is not determinable at this time.

At March 31, 2002, TrueTime had available net operating loss (NOL) carryforwards
of approximately $3.4 million and $2.6 million for federal and state income tax
purposes, respectively, expiring as follows:




                                       13
<PAGE>

<Table>
<Caption>
               Federal          State
<S>            <C>             <C>
2010                           $1.3 m

2011                            1.3 m

2020           $1.3 m

2021           $2.1 m
</Table>

LIQUIDITY AND SOURCES OF CAPITAL

     At March 31, 2002, our cash and cash equivalents were $6.9 million compared
to $7.8 million on September 30, 2001.

     For the six month period ended March 31, 2002, operating activities used
$0.7 million. Net loss for the six month period was $1.1 million. Cash used by
operating activities include $0.22 million in decreased accrued expenses which
included lower accrued sales commissions and lower payroll accruals due to
timing of payments, $0.21 million in decreased lease loss accrual, and $0.62
million in decreased federal and state deferred taxes. The largest contributors
of cash include $0.66 million provided by a reduction in inventories and $0.23
million provided by the reduction of trade receivables.

     For the six month period ended March 31, 2002, investing activities used
$0.20 million, all for capital expenditures. Of this amount, $0.11 million was
used for the purchase of electronic equipment and $0.09 million was used for new
computer equipment and software. Anticipated capital expenditures for the next
three months are $0.3 million, primarily in the area of electronic test.

     For the six month period ended March 31, 2002, financing activities used
$0.08 million. The decrease was the result of the principal payments on the sale
leaseback transaction made in fiscal 2001.

MERGERS AND ACQUISITIONS

     On March 27, 2002, TrueTime, Inc. ("TrueTime") publicly announced that it
had entered into a definitive merger agreement with Symmetricom, Inc.
("Symmetricom") pursuant to which Symmetricom will exchange 2.6 million shares
of Symmetricom common stock and $5 million in cash, subject to certain possible
downward adjustments relating to costs associated with the transaction, for all
the outstanding shares of the TrueTime. TrueTime will become a wholly owned
subsidiary of Symmetricom. The consummation of the merger is subject to
customary conditions, including approval of the stockholders of both companies.
The proposed merger will be a taxable transaction. Consummation of the merger is
expected to take place in the fourth quarter of fiscal year 2002.

RECENT ACCOUNTING PRONOUNCEMENTS

     On June 29, 2001, the Financial Accounting Standards Board (FASB or the
"Board") unanimously voted in favor of issuing Statement No. 142 (SFAS 142),
Goodwill and Other Intangible Assets.

     SFAS 142 primarily addresses the accounting for goodwill and intangible
assets subsequent to their acquisition (i.e., the post-acquisition accounting).
FAS 142 supercedes APB 17, Intangible Assets.


     The most significant changes made by SFAS 142 are:

          - Goodwill and indefinite lived intangible assets will no longer be
            amortized and will be tested for impairment at least annually.



                                       14
<PAGE>
          - Goodwill will be tested at least annually at the reporting unit
            level.

          - The amortization period of intangible assets with finite lives is no
            longer limited to forty years

     SFAS 142 is effective for fiscal years beginning after December 15, 2001 to
all goodwill and other intangible assets recognized in an entity's statement of
financial position at that date, regardless of when those assets were initially
recognized. Early application is permitted for entities with fiscal years
beginning after March 15, 2001 provided that the first interim period financial
statements have not been issued previously. In all cases, the provisions of SFAS
142 should be applied at the beginning of a fiscal year. Retroactive application
is not permitted.

     The Company has goodwill for which amortization has been recorded against
in prior periods. Amortization of goodwill per quarter is $6,444; amortization
of goodwill for the year would be $25,776. Under the current guidelines, the
Company will adopt the provisions of SFAS on October 1, 2002. At this time the
Company's management is evaluating the impact of adopting SFAS 142. The impact
of adopting this standard is not known at this time. Currently, goodwill is
carried at $752,112, the net book value.

     On October 3, 2001, the FASB issued SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS 144 is effective for
financial statements issued for fiscal years beginning after December 15, 2001
and interim periods within those fiscal years. Early application is encouraged.

This statement supercedes:

     - SFAS 121 - "Accounting for the Impairment of Long-Lived Assets and for
       Long-Lived Assets to be Disposed of"; and

     - APB 30 - "Reporting the Results of Operations - Reporting the Effects of
       Disposal of a Segment of a Business".

     SFAS 144 sets forth that if the expected undiscounted cash flows from an
asset are insufficient to recover its carrying cost and if the carrying cost
exceeds its estimated market value, then an impairment must be recognized.

     SFAS 144 also develops one accounting model for long-lived assets that are
to be disposed of by sale, as well as addressing the principal implementation
issues.

     SFAS 144 requires that long-lived assets that are to be disposed of by sale
be measured at the lower of book value or fair value less cost to sell.
Additionally, SFAS 144 expands the scope of discontinued operations that can be
distinguished from the rest of the entity and will be eliminated from the
ongoing operations of the entity in a disposal transaction. At this time the
Company's management is evaluating the impact of adopting SFAS 144. The impact
of adopting this standard is not known at this time.

FORWARD LOOKING STATEMENTS

     Certain of the statements contained in this document and in documents
incorporated by reference herein, including those made under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," are "forward-looking" statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. All statements other than statements of historical fact included herein,
including statements regarding potential future products and markets, the
Company's future financial position, business strategy and other plans,
objectives for future operations, and assessments of our ability to realize in
the future our tax deferred assets are forward-looking statements. We can give
no assurance that such expectations will prove to have been correct. These
statements are subject to known and unknown risks, uncertainties and other
factors that may cause our actual results, performance or achievements to differ
materially from the future results, performance or achievements expressed or
implied by such forward-looking statements. Important factors that could cause
actual results performance or achievements to differ materially from the
Company's expectations are disclosed below and in our Annual Report on Form 10-K
for the fiscal year ended September 30, 2001 filed with the Securities and
Exchange Commission, under the headings "Forward Looking Statements" and "Risk
Factors" and elsewhere. Further, all written and verbal forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by such factors.



                                       15
<PAGE>

RISK FACTORS

     The following risks could impact our business and operations and should be
considered by investors.

     OUR BUSINESS WILL SUFFER IF WE CONTINUE TO EXPERIENCE A GENERAL ECONOMIC
SLOWDOWN IN THE U.S., PARTICULARLY AS THAT SLOWDOWN AFFECTS TECHNOLOGY MARKETS.

     Our commercial operations are cyclical and dependent for success on the
general economic well-being of the United States and certain other world
markets. If the United States or world economies were to continue to decline or
the demand for technology continues its recent downward trends, we may continue
to experience adverse impacts on our revenues and income. Further, other general
market conditions such as increased inflation and higher interest rates, were
they to occur, could also adversely impact our revenue, profitability,
cash-flow, and appropriate levels of inventory.

     OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO KEEP UP WITH RAPID
TECHNOLOGICAL CHANGE AND PRODUCT OBSOLESCENCE.

     If we fail to maintain our technological leadership and good reputation
with our customers in the areas of GPS, real-time operating systems and network
technologies, the value of your investment in TrueTime will decrease. The
markets for timing and frequency products are characterized by continual and
rapid technological developments that have resulted in, and will likely continue
to result in, substantial improvements in product function and performance. Our
success will depend on our ability to anticipate changes in technology and
industry requirements and to respond to technological developments on a timely
basis, either internally or through strategic alliances.

     We will likely be constantly threatened by current competitors or new
market entrants who may develop new technologies or products or establish new
standards that could render our products obsolete and unmarketable. Thus, we can
offer no assurances that we will be successful in developing and marketing, on a
timely and cost effective basis, product enhancements or new products that
respond to technological developments, that are accepted in the marketplace or
that comply with industry standards.

     WE RELY ON A LIMITED NUMBER OF SUPPLIERS FOR CERTAIN CRITICAL COMPONENTS,
AND WE USE A SINGLE SUPPLIER FOR MOST OF OUR GPS-BASED COMPONENTS, MAKING US
SUBJECT TO SUPPLY AND QUALITY CONTROL PROBLEMS.

     Most of our products incorporate certain components or technology supplied
in part by third parties. From time to time, we experience delays and
disruptions in our supply chain. To date, these delays and disruptions have not
materially adversely affected our business, but they could do so in the future.
Wherever possible, we try to develop multiple sources of supply, but we do not
always succeed. To the extent that we experience significant supply or quality
control problems with our vendors, these problems can cause us to have
difficulty in controlling our quality and can have a significant adverse effect
on our ability to meet future production and delivery commitments to our
customers.

     Currently, Trimble Navigation Limited provides most of our GPS receivers, a
key component for our older GPS-based products. In addition, Trimble has begun
competing in markets similar to our own. While there can be no assurances that
we can ensure continuous supply of these components, we have partially mitigated
this risk by developing and integrating our own proprietary GPS receiver
technology that is based upon widely available GPS chip sets. Further, this
technology has been integrated into several of our newer products. If we are
unable to obtain adequate supplies of Trimble's component for any reason or to
successfully integrate our own substitute technology, we will likely experience
delays or reductions in production and increased expenses. Our operations will
be negatively affected if we experience inadequate supplies of any key
components.



                                       16
<PAGE>
     OUR TRADE SECRETS, TRADEMARKS AND PATENTS MAY NOT BE ADEQUATE OR
ENFORCEABLE AND OTHERS MAY USE OUR PROPRIETARY TECHNOLOGY.

     Historically, we have not generally filed patents to protect our
intellectual property. While we believe our intellectual property is adequately
protected by our confidential trade-secret protection plans and programs, we
cannot be sure that our competitors will be prevented from gaining access to our
proprietary and confidential technologies. Furthermore, although we have applied
for a patent related to a computer network timing product, we can offer no
assurances that a patent will be issued for this patent application or other
future applications and, if issued, that any patent will be enforceable. If the
protection of our intellectual property proves to be inadequate or
unenforceable, others may use our proprietary developments without compensation
to us and in competition against us.

     WE FACE THE RISK OF LITIGATION ALLEGING OUR INFRINGEMENT OF OTHER PEOPLE'S
INTELLECTUAL PROPERTY RIGHTS.

     We do not know of any instances where our products violate the intellectual
property rights of others or inappropriately use their technology. However,
technology-based companies are often very litigious. Therefore, we face the risk
of adverse claims and litigation alleging infringement of other people's
intellectual property rights. These claims could result in costly litigation and
divert management's attention from other matters. Alternatively, these claims
could practically require us to obtain licenses in order to use, manufacture,
and sell certain of our products, regardless of the merits of the infringement
claims, in order to maintain business levels, or we could otherwise be excluded
from participation in certain markets. We cannot be certain that any necessary
licenses will be available or that, if available, they can be obtained on
reasonable terms acceptable to us.

     OUR COMPETITORS MAY USE THEIR GREATER RESOURCES AND BROADER PRODUCT
OFFERINGS TO INCREASE COMPETITION AND REDUCE OUR SALES AND PROFITABILITY.

     Many of our existing and potential competitors have substantially greater
marketing, financial and technical resources than we have. In addition, some of
our competitors have broader product offerings and manufacture internally
certain critical components of time and frequency products. Currently, we do not
have a complete offering of precise time and frequency products nor do we
manufacture internally certain critical components, placing us at a disadvantage
to some of our competitors. In addition, we believe that some of our competitors
have obtained and maintained business that loses money - "loss leading" - in
order to maintain a competitive advantage with regard to specific customers or
products. If our competitors were to use such tactics in the future, we would be
unable to maintain our market position without incurring a negative impact on
our profitability.

     The race for a leading position in new technological advances is always
very competitive. Advances in technology may reduce the cost for potential
competitors to gain market entry, particularly for less expensive time and
frequency products. We cannot assure you that sales of our products will
continue at current volumes or prices in any event, but especially if our
current competitors or new market entrants introduce new products with better
features, better performance or lower prices or having other characteristics
that are more attractive than our own. Competitive pressures or other factors
also may result in significant price competition that could have a material
adverse effect on our results of operations.

     OUR INDUSTRY MAY NOT GROW AS FORECASTED AND OUR REVENUES AND OPERATING
RESULTS MAY BE DIMINISHED.

     Our future successful performance is inextricably tied to the growth of our
industry. However, even if our industry grows, there can be no assurance that we
will be able to grow consistently with our industry.

     OUR RELATIONSHIPS WITH OUR SALES REPRESENTATIVES COULD BE IMPAIRED AND
CAUSE US TO LOSE ORDERS.

     More than 95% of our orders come through our 31 domestic and worldwide
sales representative offices. Many of these representatives act as relationship
brokers and the loss of any key representatives could have a negative effect on
our revenue.

     WE MAY BE UNABLE TO ATTRACT AND RETAIN KEY EMPLOYEES, DELAYING PRODUCT
DEVELOPMENT AND MANUFACTURING.

     Our success depends upon attracting and retaining highly skilled
professionals. A number of our employees are highly skilled engineers and other
technical professionals, and our failure to continue to attract and retain such
individuals could adversely affect our ability to compete in the industry. In
addition, our success will depend to a significant extent upon the abilities and
efforts of several members of our senior management.



                                       17
<PAGE>
     MANY OF OUR KEY CUSTOMERS ARE UNITS OF THE U.S. GOVERNMENT AND ENTITIES
THAT ARE DEPENDENT UPON U.S. GOVERNMENT FUNDING FOR PURCHASES, THEREFORE,
DECREASED GOVERNMENT SPENDING COULD ADVERSELY AFFECT OUR BUSINESS.

     Our defense, military and aerospace based business depends largely on U.S.
government expenditures, whether directly with us or indirectly with our
customers who contract with the U.S. government. Sales to U.S. government units
and indirect government customers have accounted for approximately 28%, 36% and
53% of our annual revenues for fiscal years ended 1999, 2000 and 2001,
respectively. There can be no assurances as to whether future governmental
spending will adequately support our business in those areas, and substantial
decreases in government spending or loss of U.S. governmental customers could
materially and adversely affect our operations.

     OUR MARKET IS SEGMENTED INTO A LIMITED NUMBER OF CUSTOMER GROUPS, THE LOSS
OR CHANGE OF WHICH COULD SIGNIFICANTLY DECREASE OUR SALES.

     While we sell our products to a large number of individual customers, the
number of customer groups is limited. These groups include telecommunications,
computer networking, aerospace, military, satellite, U.S. government and power
utility customers. The loss, or changes in the purchasing behavior, of one or
more of these groups of customers could cause a material decrease in the sale of
our products.

     THE FAILURE OF GPS AND OTHER TIME AND FREQUENCY REFERENCES WOULD CAUSE OUR
PRODUCTS TO FAIL TO PERFORM TO SPECIFICATION.

     The time and frequency products that we manufacture rely upon the
availability of highly accurate timing references, primarily GPS operated by the
U.S. Department of Defense, and to a lesser degree, other timing references
operated by the U.S. National Institute of Science and Technology and other
outside signal sources. The failure of these timing references, particularly
GPS, would create many problems for our products and our customers and seriously
disrupt the sale of our products.

     OUR PRODUCTS COULD FAIL TO PERFORM ACCORDING TO SPECIFICATION OR PROVE TO
BE UNRELIABLE, CAUSING DAMAGE TO OUR CUSTOMER RELATIONSHIPS AND INDUSTRY
REPUTATION AND RESULTING IN LOSS OF SALES.

     Our customers require demanding specifications for product performance and
reliability. Because our precision time and frequency products are complex and
often use state-of-the-art components, processes and techniques, undetected
errors and design flaws may occur. Product defects result in higher product
service and warranty and replacement costs and may cause serious damage to our
customer relationships and industry reputation, all of which will negatively
impact our sales and business.

     FLUCTUATIONS IN QUARTERLY PERFORMANCE CAN RESULT IN INCREASES IN OUR
INVENTORY AND RELATED CARRYING COSTS, CAN DIMINISH OUR OPERATING RESULTS AND
CASH FLOW AND CAN RESULT IN A LOWER TRUETIME STOCK PRICE.

     Historically, the rate of incoming orders for our products has varied
substantially from quarter to quarter. In past fiscal years, our highest sales
quarter has been as much as 250% of our lowest sales quarter. This quarter to
quarter variation is not seasonal or predictable. We attempt to accurately
forecast orders for our products and commence purchasing and manufacturing prior
to the receipt of such orders. However, it is highly unlikely that we will
consistently accurately forecast the timing and rate of orders. The flow of
orders (or lack thereof) from governmental agencies has been particularly
difficult to forecast in recent periods. This aspect of our business makes our
planning inexact and, in turn, affects our shipments, costs, inventories,
operating results and cash flow for any given quarter. In addition, our
quarterly operating results are affected by competitive pricing, announcements
regarding new product developments and cyclical conditions in the industry.
Accordingly, we may experience wide quarterly fluctuations in our operating
performance and profitability, which may adversely affect our stock price even
if our year to year performance is more stable, which it also may not be. In
addition, many of our products require significant manufacturing time, making it
difficult to increase production on short notice. If we are unable to satisfy
unexpected customer orders, our business and customer relationships could
suffer.

     CARRYING VALUES OF INVENTORIES OF OUR PRODUCTS AND COMPONENTS THEREFORE MAY
BE SUBJECT TO PERIODIC WRITE-DOWN, ADVERSELY AFFECTING OUR OPERATIONS.

     To be competitive in some of our markets, particularly our commercial
markets, we will be required to build up inventories of certain products and
services in anticipation of future orders. There can be no assurance that we
will not experience problems of obsolete, excess or slow-moving inventory if we
are not able to properly balance inventories against



                                       18
<PAGE>
the prospect of future orders, and our operations may be adversely affected by
inventory write-downs.

     CARRYING VALUES OF INTANGIBLE ASSETS MAY BE SUBJECT TO PERIODIC WRITE-DOWN,
ADVERSELY AFFECTING OUR OPERATIONS.

     Goodwill and other intangible assets are reviewed for impairment whenever
an event or change in circumstances indicates that the carrying amount may not
be recoverable. If the carrying value of our intangible assets exceeds the
expected undiscounted future cash flows, a loss would be recognized to the
extent the carrying amount of assets exceeds their fair values. This loss may
negatively impact our results of operation. While the Company would not
experience a loss under current accounting standards, the Company may experience
an impairment write down upon the adoption of SFAS 142.

     CARRYING OF DEFERRED TAX ASSETS MAY BE SUBJECT TO WRITE DOWN ADVERSELY
AFFECTING OUR NET PROFITS.

     TrueTime carries net deferred tax assets on its books, including net
operating loss carryforwards. Realization of these assets is dependent upon
TrueTime's ability to generate future taxable income. If in the future, we were
to conclude that we will not likely be able to generate such income or any
portion thereof, we will be required to record a valuation allowance against the
net deferred tax asset. Any such charge could have a significant negative impact
on TrueTime's net income.

     FAILURE TO CONSUMMATE THIS PENDING MERGER WITH A SUBSIDIARY OF SYMMETRICOM
INC. COULD HAVE AN ADVERSE EFFECT ON OUR STOCK PRICE.

     In the event that our pending merger is not consummated, TrueTime's stock
would uncouple from the exchange ratio established in the definitive agreement.
This uncoupling would most likely negatively impact the Company's current market
valuation.

ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     We are exposed to market risks related to changes in interest rates in the
future. Our cash is invested in short-term financial instruments, the value of
which is subject to interest rate risk and could fall if interest rates rise.
These short-term instruments are in low-yield, high quality investments. The
decline in interest rates during the past year resulted in a decrease in
interest income on these investments of approximately $20,000 and $40,000 for
the three months and six months ended March 31, 2002, respectively.
Additionally, while we have no plans for future borrowings, any future
borrowings will likely have a variable rate component that will fluctuate as
interest rates change. If market interest rates were to increase immediately and
uniformly by 10%, there would not be a material effect on the results of
operations or on our balance sheet.



                                       19
<PAGE>

                           PART II: OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

     From time to time, the Company is a party to legal proceedings arising in
the ordinary course of business. The Company is not currently a party to any
litigation that it believes could have a material adverse effect on the results
of operations, financial condition, or cash flows of the Company.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

     The Company commenced the Initial Public Offering (the "Offering") of its
common stock on December 16, 1999 pursuant to a Registration Statement on Form
S-1 (Registration No. 333-90269), which was declared effective by the Securities
and Exchange Commission on December 16, 1999. The Offering was terminated upon
the sale of all of the securities covered by such Registration Statement. As of
March 31, 2002, the Company had used all of the initial net proceeds of
$8,642,667 from the offering for day to day working capital requirements and
capital improvements.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

     None.

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

     On March 1, 2002, we held our Annual Meeting of Stockholders (the
"Meeting"). At the Meeting, our stockholders approved the election of Elizabeth
A. Withers and Charles H. Still as directors, each holding office until the 2005
Annual Meeting of stockholders or until his successor is duly elected and
qualified. The directors whose term of office continued after the Meeting are
Satoru Ohya, Katsuhiko Kobayashi, Charles J. Abbe and Haresh C. Shah.

The directors were so elected with the following votes:

<Table>
<Caption>
                                   For               Withheld
                                   ---               --------
<S>                             <C>                  <C>
      Elizabeth A. Withers      5,293,415             134,635
      Charles H. Still          5,293,415             134,635
</Table>

The total voted shares represented in person or by proxy was 5,428,050.


ITEM 5.  OTHER INFORMATION.

     None.

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

(a) Exhibits filed with this Quarterly Report.

<Table>
<Caption>
  EXHIBIT
  NUMBER                       DESCRIPTION OF DOCUMENTS
  -------                      ------------------------
<S>          <C>
      2.1    Agreement and Plan of Merger (incorporated by reference to
             Exhibit 2.1 of the Registrant's Current Report on Form 8-K
             (Reg. No. 000-28473).

     99.1    Press Release (incorporated by reference to Exhibit 99.1 of the
             Registrant's Current Report on Form 8-K (Reg. No. 000-28473).
</Table>



                                       20
<PAGE>
(b)  Reports on Form 8-K.

     On April 1, 2002, a Current Report on Form 8-K was filed reporting under
Item 5, Other Events, that the Company had entered into a definitive merger
agreement with Symmetricom, Inc. ("Symmetricom") pursuant to which Symmetricom
will exchange 2.6 million shares of Symmetricom common stock and $5 million in
cash, subject to certain possible downward adjustments relating to costs
associated with the transaction, for all of the outstanding shares of TrueTime.
The merger agreement and the press release dated March 27, 2002 related to the
announcement of the merger were filed as Exhibits under Item 7 of this Form 8-K.


                                   SIGNATURES

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

                                        TRUETIME, INC.


                                        By:      /s/ Elizabeth A. Withers
                                           -------------------------------------
                                                   Elizabeth A. Withers
                                           President and Chief Executive Officer
                                               (Principal Executive Officer)


                                        By:          /s/ John E. Dutil
                                           -------------------------------------
                                                       John E. Dutil
                                                  Chief Financial Officer
                                                 (Principal Financial and
                                                    Accounting Officer)

Date: May 16, 2002



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