<PAGE>   1
                       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 JUNE 30, 2001

                                       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 August 9, 2001.
<PAGE>   2
                                 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      7

Item 3.  Quantitative and Qualitative Disclosure about Market Risk                                 15


PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings                                                                         16

Item 2.  Changes in Securities and Use of Proceeds                                                 16

Item 3.  Defaults Upon Senior Securities                                                           16

Item 4.  Submission of Matters to a Vote of Security Holders                                       16

Item 5.  Other Information                                                                         16

Item 6.  Exhibits and Reports on Form 8-K                                                          16
</TABLE>


                                       2
<PAGE>   3
                          PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS AND NOTES

                                 TrueTime, Inc.
                                 BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                          September 30, 2000    June 30, 2001
                                                                                                                 (unaudited)
<S>                                                                                       <C>                   <C>
ASSETS

             Current assets:
                        Cash and cash equivalents ....................................          $ 7,884            $ 6,973
                        Trade accounts receivable, net of allowance of $34 and $41 ...            4,435              2,928
                        Inventories ..................................................            7,428              6,905
                        Prepaid expenses and other assets ............................              365                563
                        Income taxes receivable ......................................               --                681
                        Deferred income tax ..........................................              300                494
                                                                                                -------            -------

                        Total current assets .........................................           20,412             18,544

             Property and equipment, net .............................................            2,903              4,189
             Prepaid expenses, non-current ...........................................              307                117
             Goodwill, net of accumulated amortization of $241 and $260 ..............              791                771
                                                                                                -------            -------

                                       Total assets ..................................          $24,413            $23,621
                                                                                                =======            =======

LIABILITIES AND STOCKHOLDERS' EQUITY
               Current liabilities:
                        Trade accounts payable .......................................          $   810            $   398
                        Accrued expenses .............................................            1,180                935
                        Capital lease, current .......................................               --                169
                        Deferred revenue .............................................               --                 60
                                                                                                -------            -------

                        Total current liabilities ....................................            1,990              1,562

               Non-Current liabilities:
                        Capital lease ................................................               --                556
                        Deferred revenue .............................................               --                 60
                                                                                                -------            -------


                        Total liabilities ............................................            1,990              2,178
                                                                                                -------            -------

               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 ...................................           12,901           12,907
                        Additional paid-in capital - warrants ........................              455              455
                        Retained earnings ............................................            9,007            8,021
                                                                                                -------          -------

                        Total stockholders' equity ...................................           22,423           21,443
                                                                                                -------          -------

                                       Total liabilities and stockholders' equity ....          $24,413          $23,621
                                                                                                =======          =======
</TABLE>

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


                                       3
<PAGE>   4
                                 TrueTime, Inc.
                            STATEMENTS OF OPERATIONS
               (in thousands, except share and per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                           Three months ended                      Nine months ended
                                                    June 30, 2000       June 30, 2001       June 30, 2000      June 30, 2001
<S>                                                 <C>                 <C>                 <C>                <C>
Net sales ...................................        $     4,940         $     4,531         $    15,157        $    14,034

Cost of sales ...............................              2,220               2,760               6,750              7,599
                                                     -----------         -----------         -----------        -----------

Gross profit ................................              2,720               1,771               8,407              6,435

Selling, general and administrative expenses               1,942               1,870               4,921              5,788
Research & development ......................                808                 907               2,633              2,611
                                                     -----------         -----------         -----------        -----------

(Loss) income from operations ...............                (30)             (1,006)                853             (1,964)

Interest income .............................                146                  69                 395                259

Interest expense ............................                 --                  10                  --                 10
                                                     -----------         -----------         -----------        -----------

Income (loss) before taxes ..................                116                (947)              1,248             (1,715)

Income taxes ................................                 50                (422)                512               (729)
                                                     -----------         -----------         -----------        -----------

Net income (loss) ...........................        $        66         $      (525)        $       736        $      (986)
                                                     ===========         ===========         ===========        ===========


Weighted average shares outstanding - Basic .          5,950,000           5,950,000           5,368,000          5,950,000

Weighted average shares outstanding - Diluted          5,950,000           5,950,000           5,550,000          5,950,000

Basic earnings (loss) per share .............        $      0.01         $     (0.09)        $      0.14        $     (0.17)

Diluted earnings (loss) per share ...........        $      0.01         $     (0.09)        $      0.13        $     (0.17)
</TABLE>

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


                                       4
<PAGE>   5
                                 TrueTime, Inc.
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                              Nine months ended   Nine months ended
                                                                                                June 30, 2000       June 30, 2001
<S>                                                                                           <C>                 <C>
Cash flows from operating activities:

                      Net income (loss) ...................................................        $   736             $  (986)
                      Adjustments to reconcile net income (loss) to net cash
                      (used in) provided by operating activities:
                                     Deferred income taxes ................................            (17)               (194)
                                     Depreciation and amortization ........................            368                 504
                                     Loss on disposal of property and
                                     equipment ............................................             --                   5
                                     Compensation expense related to
                                     options granted ......................................             43                   6
                                     Effects of changes in operating
                                     assets and liabilities
                                             Trade accounts receivables,net ...............          1,197               1,507
                                             Inventories ..................................         (2,895)                522
                                             Prepaid expenses and
                                             other assets .................................         (1,062)               (689)
                                             Trade accounts payable .......................            (33)               (412)
                                             Accrued expenses .............................           (928)               (245)
                                             Deferred revenue .............................             --                 120
                                                                                                   -------             -------

                      Net cash (used in) provided by operating activities .................         (2,591)                138
                                                                                                   -------             -------

Cash flows from investing activities:

                      Repayment of related party receivables ..............................            433                  --
                      Proceeds from sale of equipment .....................................             --                 752
                      Capital expenditures ................................................           (903)             (1,774)
                                                                                                   -------             -------

                      Net cash used in investing activities ...............................           (470)             (1,022)
                                                                                                   -------             -------

Cash flows from financing activities:

                      Principal payments on capital lease .................................             --                 (27)
                      Proceeds of Initial Public Offering, net of offering costs...........          8,643                  --
                                                                                                   -------             -------

                      Net cash provided by financing activities ...........................          8,643                 (27)
                                                                                                   -------             -------

Increase (decrease) in cash and cash equivalents ..........................................          5,582                (911)

Cash and cash equivalents, beginning of period ............................................          3,539               7,884
                                                                                                   -------             -------

Cash and cash equivalents, end of period ..................................................        $ 9,121             $ 6,973
                                                                                                   =======             =======

Non-cash financing activities:
                      Assets acquired under capital lease:                                                             $   752
                                                                                                                       =======
</TABLE>

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


                                       5
<PAGE>   6
TRUETIME, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1.   BASIS OF PRESENTATION

The balance sheet of TrueTime, Inc. at September 30, 2000 has been derived from
the Company's audited financial statements at that date. The balance sheet at
June 30, 2001, the statements of operations for the three months and nine months
ended June 30, 2001 and 2000, and the statements of cash flows for the nine
months ended June 30, 2001 and 2000 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 nine months ended June 30, 2001 and 2000 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 Form 10-K, as amended, for the year ended
September 30, 2000.

Some numbers in prior year quarters (franchise tax and gain (loss) on sale of
assets) were reclassified to operating expense to be reflective of current year
presentation.

2.   EARNINGS (LOSS) PER COMMON SHARE

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

                                 TrueTime, Inc.
                        EARNINGS (LOSS) PER COMMON SHARE

<TABLE>
<CAPTION>
                                                                Three months                         Nine months
                                                      June 30, 2000      June 30, 2001      June 30, 2000    June 30, 2001
<S>                                                   <C>                <C>                <C>              <C>
Net earnings (loss) available to common
stockholders (in thousands) .......................    $        66        $      (525)        $     736        $    (986)
                                                       ===========        ===========         =========        =========

Weighted average common shares outstanding ........      5,950,000          5,950,000         5,368,000        5,950,000
Weighted average common share equivalents
outstanding* ......................................             --                 --           182,000               --
                                                       -----------        -----------         ---------        ---------
Weighted average common shares and common share
equivalents outstanding ...........................      5,950,000          5,950,000         5,550,000        5,950,000
                                                       ===========        ===========         =========        =========

Basic earnings (loss) per common share ............    $      0.01        $     (0.09)        $    0.14        $   (0.17)
                                                       ===========        ===========         =========        =========

Diluted earnings per common share .................    $      0.01        $     (0.09)        $    0.13        $   (0.17)
                                                       ===========        ===========         =========        =========
</TABLE>

* Due to their anti-dilutive effect, additional warrants and options of
1,031,800 and 75,000 shares equivalent for the three month and nine month
periods respectively ended June 30, 2000 and 1,034,700 shares equivalent for the
three month and nine month periods ended June 30, 2001 are excluded from the
calculation above.

3.   INVENTORIES

Inventories consisted of the following (in thousands), net of reserves of $220
at September 30, 2000 and $104 at June 30, 2001:

<TABLE>
<CAPTION>
                                              September 30, 2000      June 30, 2001
<S>                                           <C>                     <C>
Finished goods .....................                $1,266                $1,218
Work in process ....................                 2,449                 1,277
Raw material .......................                 3,713                 4,410
                                                    ------                ------
                                                    $7,428                $6,905
                                                    ======                ======
</TABLE>


                                       6
<PAGE>   7
4.   INITIAL PUBLIC OFFERING

On November 1, 1999, the Company was reincorporated in Delaware with 4,000,000
shares of common stock outstanding. On December 16, 1999, the Company completed
its Initial Public Offering in which the Company sold 1,500,000 shares of common
stock at $5.00 per share and the Company's owner, OYO Corporation U.S.A., sold
1,500,000 shares of common stock at $5.00 per share. The Company received
$6,564,118 after commissions of $525,000 and expenses of $410,882.

On January 6, 2000, the Company's underwriters exercised their over-allotment
option and purchased 450,000 shares of the Company's common stock at $5.00 per
share. The Company received $2,078,549 after commissions of $157,500 and
expenses of $13,951.

5.   RECENT ACCOUNTING PRONOUNCEMENTS

Business Combinations and Goodwill and Other Intangible Assets

The Financial Accounting Standards Board (FASB) recently announced the issuance
of No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible
Assets." The company has goodwill for which amortization has been recorded
against in prior periods. The impact of the future adoption of FAS 142 has yet
to be determined.Amortization of goodwill per quarter is $6,444; amortization of
goodwill for the year would be $25,776. The company will need to review the
potential impairment of carrying values of goodwill to determine if there will
be a write-down. Currently, goodwill is valued at $771,444.

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 and markets 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


                                       7
<PAGE>   8
RESULTS OF OPERATIONS

     The following table sets forth for the three months and nine months ended
June 30, 2001 and 2000, the percentage of income statement items to total sales:

<TABLE>
<CAPTION>
                                             Three Months Ended            Nine Months Ended
                                                  June 30,                     June 30,
                                             2000           2001           2000          2001
                                            -----          -----          -----         -----
<S>                                         <C>            <C>            <C>           <C>
Sales ..............................        100.0%         100.0%         100.0%        100.0%
Cost of sales ......................         44.9           60.9           44.5          54.1
Gross profit .......................         55.1           39.1           55.5          45.9
Operating expenses:
 Selling, general and administrative         39.3           41.3           32.5          41.2
 Research and development ..........         16.4           20.0           17.4          18.6
  Total operating expenses .........         55.7           61.3           49.9          59.8
(Loss) income from operations ......          (.6)         (22.2)           5.6         (13.9)
Interest income ....................          2.9            1.5            2.6           1.8
Interest expense ...................           --             .2             --            .1
Income (loss) before income taxes ..          2.3          (20.9)           8.2         (12.2)
Income taxes .......................          1.0           (9.3)           3.4          (5.2)
Net income (loss) ..................          1.3%         (11.6)%          4.8%         (7.0)%
</TABLE>


 Three Months and Nine Months Ended June 30, 2001 compared to Three Months and
 Nine Months Ended June 30, 2000

     Sales. Sales for the quarter ended June 30, 2001 were $4.5 million, a
decrease of $0.4 million, or 8.2%, from $4.9 million for the quarter ended June
30, 2000. This decrease in sales is mainly attributed to a general economic
slowdown specifically evident in the technology sector. Sales to Government and
indirect Government customers totaled 51.2% of total sales for the quarter ended
June 30, 2001 compared with 42.5% for the comparable period in 2000.
International shipments for the quarter ended June 30, 2001 represented 14.1% of
total sales compared with 21.8% for the comparable period in 2000. For the nine
months ended June 30, 2001, sales were $14.0 million, a decrease of $1.2
million, or 7.9%, from $15.2 million for the nine months ended June 30, 2000.
The decrease in sales for this comparable period is attributed to a general
economic slowdown specifically evident in the technology sector and the large
amount of backlog at the beginning of fiscal 2000. The actual backlog of orders
decreased by $0.5 million for the nine months ended June 30, 2001 compared to a
decrease in backlog of $2.9 million for the same period last year. TrueTime has
emphasized entering the computer networking and telecommunications markets as
part of its strategy. These markets have experienced economic slowdowns, and in
turn, TrueTime has also experienced a slowdown with regards to order growth in
these markets. We are unable to predict the duration or depth of the declining
economic conditions affecting these technology sectors. This economic
development is leading to an increased effort on our part to reduce inventories.
We are also experiencing an increased level of competition in our traditional
government business as many of our competitors, possibly driven by the economic
slowdown in the commercial markets, refocus their efforts in the government
market space. This increased competition could also affect our operations for
the foreseeable future.

     Cost of Sales. Cost of sales for the quarter ended June 30, 2001 was $2.8
million, an increase of $0.6 million, or 27.3%, from $2.2 million for the
quarter ended June 30, 2000. Cost of sales increased as a percentage of total
sales to 60.9% in the quarter ended June 30, 2001 from 44.9% in the quarter
ended June 30, 2000 resulting in an effective increase of $0.7 million. 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 42.9% of total increase)

         -        decreasing raw material purchases resulted in an increase in
                  unabsorbed procurement overhead expense ($0.1 million or 14.3%
                  of total increase)


                                       8
<PAGE>   9
         -        increased depreciation expenses and facility costs related to
                  investments in upgrading our production facilities and
                  equipment ($0.12 million or 17.1% of total increase)

         -        increased inventory obsolescence ($0.05 million or 7.1% of
                  total increase)


Cost of sales for the nine months ended June 30, 2001 was $7.6 million, an
increase of $0.8 million, or 11.8% from $6.8 million in the nine months ended
June 30, 2000. Cost of sales as a percentage of total sales increased to 54.1%
of sales in the nine months ended June 30, 2001 from 44.5% of sales in the nine
months ended June 30, 2000 resulting in an effective increase of $1.3 million.
Such percentage increases are 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 ($.7
                  million or 53.8% of total increase )

         -        decreasing raw material purchases resulted in an increase in
                  unabsorbed procurement overhead expense ($0.3 million or 23.1%
                  of total increase)

         -        increased depreciation expenses related to investments in
                  upgrading our production facilities and equipment ($0.2
                  million or 15.4% of total increase)

         -        increased inventory obsolescence ($0.1 million or 7.7% of
                  total increase)


     Operating Expenses. Operating expenses for the quarter ended June 30, 2001
were $2.8 million, no change from $2.8 million for the quarter ended June 30,
2000. Operating expenses increased as a percentage of total sales to 61.3% in
the quarter ended June 30, 2001 from 55.7% in the quarter ended June 30, 2000.
Fluctuations in operating expenses compared to the prior year are primarily
related to the following:

         -        higher rent and building overhead expenses ($0.2 million)

         -        offset by decreased administrative wage expenses (reduction of
                  $0.2 million)

Operating expenses for the nine months ended June 30, 2001 were $8.4 million, an
increase of $0.8 million, or 10.5% from $7.6 million in the nine months ended
June 30, 2000. Operating expenses increased to 59.8% of sales in the nine months
ended June 30, 2001 from 49.9% in the nine months ended June 30, 200. Actual
increases are primarily related to the following:

         -        increased investments in our sales and marketing efforts ($0.6
                  million)

         -        higher rent and building overhead expenses ($0.5 million)

         -        increased administrative expenses and fees relating to being a
                  public company ($0.2 million)

         -        offset by decreased administrative wage expenses (reduction of
                  $0.4 million) and consultant costs (reduction of $0.1 million)

     Interest Income. Interest income for the quarter ended June 30, 2001 was
$0.07 million, a decrease of $0.08 million from $0.15 million for the quarter
ended June 30, 2000. Interest income decreased as a percentage of total sales to
1.5% in the quarter ended June 30, 2001 from 2.9% in the quarter ended June 30,
2000. Interest income for the nine months ended June 30, 2001 was $0.26 million,
a decrease of $0.14 million, or 35% from $0.40 million for the nine months ended
June 30, 2000. Such percentage decreases are the result of decreased cash
balances due to facility and equipment investments and a decrease in interest
rates over the prior year.


                                       9
<PAGE>   10
     Interest Expense. Interest expense for the three months and nine months
ended June 30, 2001 was $0.1 million. There was no interest expense in the three
months and six months ended June 30, 2000. Interest expense was the result of
the Company entering into a $0.75 million sale leaseback transaction in April
2001 for modular furniture and a portion of computer equipment purchases made
during the current fiscal year.

     Income Taxes. Income taxes for the quarter ended June 30, 2001 were 44.6%
of the (loss) before tax compared to 43.1% of income before tax for the quarter
ended June 30, 2000. Income taxes for the nine months ended June 30, 2001 were
42.5% of the (loss) before tax compared to 41% of income before tax for the nine
months ended June 30, 2000. The taxes include federal and state income taxes and
are included on an estimated basis for the current year. The decrease in the tax
expense for the quarter and the nine months ended June 30, 2001 is a result of
the estimated impact of tax credits and other accrual adjustments.

LIQUIDITY AND SOURCES OF CAPITAL

     TrueTime completed its Initial Public Offering of its common stock on
December 16, 1999. Gross proceeds to TrueTime were $7,500,000. Net proceeds
after discounts, commissions, and expenses of the Offering were $6,564,118. On
January 6, 2000, the Company's underwriters exercised their over-allotment
option and purchased an additional 450,000 shares of the Company's common stock
at $5.00 per share. Gross proceeds to TrueTime were $2,250,000. Net proceeds
after discounts, commissions, and expenses were $2,078,549.

At June 30, 2001, our cash and cash equivalents were $7.0 million compared to
$7.9 million on September 30, 2000.

For the nine month period ended June 30, 2001, operating activities provided
$0.1 million. Net loss for the nine month period was $1.0 million. The largest
contributors of cash include $1.5 million provided by a reduction in trade
receivables and $0.5 million provided by the reduction of inventories. Cash used
by operating activities include $0.7 million in increased prepaid expenses which
includes federal and state income taxes receivable, $0.7 million in decreased
trade payables and accrued expenses and $0.2 million in decreased federal and
state deferred taxes.

For the nine month period ended June 30, 2001, investing activities used $1.0
million.Capital expenditures of $1.8 million were the largest contributor. Of
this amount, $0.7 million was used for facility improvements, $0.6 million was
used for the purchase of new modular furnishings, $0.3 million was used for the
purchase of electronic equipment and $0.2 million was used for new computer
equipment and software. Anticipated capital expenditures for the next three
months are $0.1 million, primarily in the area of electronic test and computer
equipment and computer software. TrueTime entered into a sale leaseback
transaction with a commercial bank on modular furnishings and other previously
purchased equipment in the third quarter. The results of this transaction
increased our cash by $0.75 million in May 2001.

For the nine month period ended June 30, 2001, financing activities used $0.02
million. The decrease was the result of the principal payments on the sale
leaseback transaction made in May and June, in the amount of $0.02 million.

RECENT ACCOUNTING PRONOUNCEMENTS

On June 29, 2001, the Financial Accounting Standards Board (FASB or the "Board")
unanimously voted in favor of issuing two Statements: Statement No. 141 (FAS
141), Business Combinations, and Statement No. 142 (FAS 142), Goodwill and Other
Intangible Assets.

FAS 141 primarily addresses the accounting for the cost of an acquired business
(i.e., the purchase price allocation), including any subsequent adjustments to
its cost. FAS 141 supercedes APB 16, Business Combinations

The most significant changes made by FAS 141 are:

         - It requires use of the purchase method of accounting for all business
         combinations, thereby eliminating use of the pooling-of-interests
         method.


                                       10
<PAGE>   11
         - It provides new criteria for determining whether intangible assets
         acquired in a business combination should be recognized separately from
         goodwill.

FAS 141 is effective for all business combinations (as defined in the Statement)
initiated after June 30, 2001 and for all business combinations accounted for by
the purchase method that are completed after June 30, 2001 (that is, the date of
acquisition is July 1, 2001, or later).

FAS 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 FAS 142 are:

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

         - 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

FAS 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 FAS
142 should be applied at the beginning of a fiscal year. Retroactive application
is not permitted.

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 and
objectives for future operations, 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, 2000, as amended, and the Company's
registration statement on Form S-3 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.

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. A general economic downturn will adversely affect demand for our
products and services. Although the


                                       11
<PAGE>   12
economy of the United States has experienced one of its longest periods of
growth in recent history it seems to have entered a period of general economic
slowdown and a particularly acute slowdown in technology markets. Moreover,
there are also some signs that we are entering a period of a world economic
slowdown. If the United States or world economies were to begin to decline or
the demand for technology continues its recent trends, the demand for, and price
of, our products could be adversely affected, thus adversely affecting 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.

     POWER GENERATION PROBLEMS IN CALIFORNIA COULD BE DETRIMENTAL TO OUR
BUSINESS.

     California has recently experienced power shortages, resulting in the
implementation of rolling blackouts throughout the state. These blackouts could
disrupt our operations and increase our expenses. Our insurance currently does
not provide for coverage for any damages we may incur as a result of any
disruption in our power supply. California has also recently experienced rising
energy costs which could increase our operating expenses, and decrease our
profitability.

     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 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.

     It is likely that we will 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.

     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 hope 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.


                                       12
<PAGE>   13
     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 85% of our orders come through our 43 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.

     BECAUSE MANY OF OUR KEY CUSTOMERS ARE UNITS OF THE U.S. GOVERNMENT AND
ENTITIES THAT ARE DEPENDENT UPON U.S. GOVERNMENT FUNDING FOR PURCHASES,
DECREASED GOVERNMENT SPENDING OR INCREASED COMPETITION FOR GOVERNMENT BUSINESS
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. In recent years, units of the
U.S. government have collectively accounted for an approximate range of 21% to
47% of our annual revenues. 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. With the
slowdown in technology markets in the U.S. in general, we may experience
considerable competition for our traditional government business.


                                       13
<PAGE>   14
     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.

     IF WE ARE UNABLE TO EXPAND OUR PRODUCTION CAPACITY TO MAINTAIN COMPETITIVE
DELIVERY TIMES, WE WILL LIKELY LOSE CUSTOMERS.

     Our production capacity, and ability to fill orders for our customers on a
timely basis, is limited by our equipment, the size of our production
facilities, the ability of our suppliers and subcontractors to meet our needs,
and our human resources. These resources in turn are limited by the availability
of capital and the time required to increase capacity, particularly to qualify
acceptable subcontractors, and to hire and train employees. We cannot assure you
that we will have sufficient capital and resources to expand our production
capacity and to maintain delivery times which our customers consider
appropriate. Further, an increase in our delivery times may result in loss of
customers.

     OUR RESULTS OF OPERATIONS WILL BE ADVERSELY AFFECTED IF WE DO NOT HAVE
ENOUGH DEMAND FOR OUR PRODUCTS TO JUSTIFY OUR INCREASED CAPACITY.

     To meet our goals for future growth, we have moved into new, larger
manufacturing and office facilities, using a portion of our working capital to
build out and equip the new facility. The additional capacity provided by the
new facility and equipment will allow us to more than double our output given
sufficient market demand. However, after increasing our production capacity, we
may find that demand for our products does not remain sufficiently high for us
to realize a satisfactory return on the capital we have spent to increase
capacity.

     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
and result in the loss of future business.


                                       14
<PAGE>   15
     CARRYING VALUES OF INVENTORIES OF OUR PRODUCTS AND COMPONENTS MAY BE
SUBJECT TO PERIODIC WRITE-DOWN, ADVERSELY AFFECTING OUR OPERATIONS.

     To be competitive in certain of our markets, particularly commercial
markets, we will be required to build up inventories of certain products 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 the prospect of future orders, and
our operations may, therefore, be adversely affected by inventory write-downs
from time to time. In periods of general economic slowdown or slowdowns in the
technology sector we could be especially affected by such problems.

     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.

ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         We are exposed to market risks related to changes in interest rates in
the future. The unused proceeds from our Initial Public Offering are 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 for which fluctuations in the interest rate
would have very little effect on our results of operations. Additionally, 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.


                                       15
<PAGE>   16
                           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. The
Company has used approximately $6,557,335 of the initial net proceeds of
$8,642,667 from the offering for day to day working capital requirements and
capital improvements. As of June 30, 2001, the Company had invested unused net
proceeds of the Offering in the amount of approximately $2,085,000 in short-term
money market investments.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

     None.


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

     None

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
                   --------------      -----------
<S>                                    <C>
                        10.1           Lease Intended as Security dated as of April 30, 2001 by and between
                                       Bank of America and TrueTime, Inc.
</TABLE>

(b)  Reports on Form 8-K.

     None.



                                       16
<PAGE>   17
                                   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.


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


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

Date: Aug 10, 2001



                                       17
<PAGE>   18
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
                   Exhibit Number      Description
                   --------------      -----------
<S>                                    <C>
                        10.1           Lease Intended as Security dated as of April 30, 2001 by and between
                                       Bank of America and TrueTime, Inc.
</TABLE>



                                       18