<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   Form 10-QSB


[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 28, 2002

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
         _______________TO_______________

Commission File Number:  0-9856
                         ------


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


         Delaware                                        23-1922958
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

    1900 AM Drive, Quakertown, PA                        18951-2237
----------------------------------------                 ----------
(Address of principal executive offices)                 (Zip Code)

                                 (215) 538-8700
                           ---------------------------
                           (Issuer's Telephone Number)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 ___

On February 7, 2003 there were 63,422,350 shares of the Registrant's Common
Stock, par value $.10 per share, outstanding.

Transitional Small Business Disclosure Format (check one):  Yes ___  No _X_

<PAGE>


                             AM COMMUNICATIONS, INC.
                                   FORM 10-QSB
                     FOR THE QUARTER ENDED DECEMBER 28, 2002

                                      INDEX

<TABLE>
<CAPTION>
<S>            <C>                                                                              <C>  <C>
PART I.       FINANCIAL INFORMATION                                                           PAGE NO.
-----------------------------------                                                           --------

Item 1.       Consolidated Financial Statements

              Consolidated Balance Sheets - December 28 (Unaudited) and
              March 30, 2002                                                                     3

              Consolidated Statements of Operations - Quarter and Nine Months
              Ended December 28, 2002 and December 29, 2001 (Unaudited)                          4

              Consolidated Statements of Cash Flows - Quarter and Nine Months
              Ended December 28, 2002 and December 29, 2001 (Unaudited)                          5

              Notes to Consolidated Financial Statements                                         6 - 21

Item 2.       Management's Discussion and Analysis of Operations                                 22 - 36

Item 3        Controls and Procedures                                                            37


PART II.      OTHER INFORMATION
-------------------------------

Item 3.       Defaults Upon Senior Securities                                                    38

Item 4.       Submission of Matters to a Vote of Securities Holders                              39

Item 5.       Other Information                                                                  40

Item 6.       Exhibits and Reports on Form 8-K                                                   40 - 43
</TABLE>


                                       2
<PAGE>

Item. 1 Financial Statements

                    AM COMMUNICATIONS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                December 28,          March 30,
                                                                                                    2002                 2002
                                                                                                 (Unaudited)          (Audited)
                                                                                               -------------        ------------
<S>                                                                                                    <C>                 <C>
          ASSETS

Current assets
     Cash                                                                                       $    28,000          $   192,000
     Accounts receivable, net of reserves of $1,407,000 at December 28 and $1,122,000
          at March 30, 2002                                                                      14,507,000            6,288,000
     Due from affiliates                                                                            304,000              157,000
     Inventory                                                                                    2,385,000            2,826,000
     Prepaid expenses and other                                                                     744,000              348,000
                                                                                                -----------          -----------
          Total current assets                                                                   17,968,000            9,811,000

Property and equipment, net                                                                       4,733,000            1,719,000
Notes receivable - officers                                                                       1,258,000            1,033,000
Goodwill                                                                                          8,002,000            3,735,000
Other intangible assets, net                                                                      1,233,000            1,425,000
Other assets                                                                                        108,000              144,000
                                                                                                -----------          -----------
          Total assets                                                                          $33,302,000          $17,867,000
                                                                                                ===========          ===========

          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
     Bank overdraft                                                                               $ 522,000          $         -
     Current portion of mortgage and notes payable                                                  459,000              152,000
     Current portion of subordinated note payable                                                 1,583,000              920,000
     Bank line of credit                                                                          8,500,000            2,991,000
     Accounts payable                                                                             5,175,000            2,381,000
     Accrued expenses                                                                             2,592,000            1,812,000
     Deferred revenue                                                                                94,000              120,000
     Due to stockholders                                                                            445,000                    -
     Due to affiliates                                                                            2,317,000              252,000
                                                                                                -----------          -----------
          Total current liabilities                                                              21,687,000            8,628,000
                                                                                                -----------          -----------

Mortgage and notes payable - long term                                                            2,255,000              333,000
Subordinated notes payable                                                                        1,787,000            1,610,000
Senior convertible redeemable preferred stock, $100 par value, authorized 1,000,000
     shares; issued and outstanding 51,852 shares at December 28 and March 30, 2002               1,400,000            1,400,000

Commitments and contingencies                                                                             -                    -

Stockholders' equity
     Common stock, $0.10 par value, authorized 150,000,000 shares at December 28 and
          100,000,000 shares at March 30, 2002, issued and outstanding 63,422,350 at
          December 28 and 56,394,016 at March 30, 2002                                            6,343,000            5,640,000
Capital in excess of par                                                                         38,299,000           36,851,000
Accumulated deficit                                                                             (38,469,000)         (36,595,000)
                                                                                                -----------          -----------
          Stockholders' equity                                                                    6,173,000            5,896,000
                                                                                                -----------          -----------
          Total liabilities and stockholders' equity                                            $33,302,000          $17,867,000
                                                                                                ===========          ===========
</TABLE>

   The accompanying notes are an integral part of these statements.

                                       3
<PAGE>

                    AM COMMUNICATIONS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                Quarter Ended                           Nine Months Ended
                                                       ---------------------------------         ---------------------------------
                                                       December 28,         December 29,         December 28,         December 29,
                                                           2002                 2001                 2002                 2001
                                                       -----------          -----------          -----------          -----------
<S>                                                    <C>                  <C>                  <C>                  <C>
Revenues                                               $16,559,000          $11,443,000          $40,269,000          $19,544,000
                                                       -----------          -----------          -----------          -----------
Costs and expenses
     Cost of sales                                      12,455,000            6,977,000           27,664,000           10,883,000
     Selling, general and administrative                 4,772,000            1,688,000           11,123,000            3,723,000
     Research and development                              901,000              961,000            2,926,000            2,878,000
                                                       -----------          -----------          -----------          -----------
                                                        18,128,000            9,626,000           41,713,000           17,484,000
                                                       -----------          -----------          -----------          -----------

Operating income (loss)                                 (1,569,000)           1,817,000           (1,444,000)           2,060,000

Other expense, net                                        (185,000)            (108,000)            (430,000)            (181,000)
                                                       -----------          -----------          -----------          -----------

Income (loss) before income taxes                       (1,754,000)           1,709,000           (1,874,000)           1,879,000
Income tax provision                                             -              117,000                    -              126,000
                                                       -----------          -----------          -----------          -----------
Net income (loss)                                      $(1,754,000)         $ 1,592,000          $(1,874,000)         $ 1,753,000
                                                       ===========          ===========          ===========          ===========

Basic net income (loss) per share                      $     (0.03)         $      0.03          $     (0.03)          $     0.04

Diluted net income (loss) per share                    $     (0.03)         $      0.03          $     (0.03)          $     0.03
Shares used in computation of basic
     net income (loss) per share                        63,419,000           52,275,000           61,018,000           46,356,000
                                                       ===========          ===========          ===========          ===========
Shares used in computation of diluted
     net income (loss) per share                        63,419,000           61,689,000           61,018,000           54,372,000
                                                       ===========          ===========          ===========          ===========
</TABLE>

    The accompanying notes are an integral part of these statements.

                                       4
<PAGE>

                    AM COMMUNICATIONS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                                  Nine Months Ended
                                                                                           ---------------------------------
                                                                                           December 28,         December 29,
                                                                                               2002                 2001
                                                                                           ------------         ------------
<S>                                                                                        <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income (loss)                                                                     $(1,874,000)         $ 1,753,000
     Adjustments to reconcile net income to net cash provided by (used in)
       operating activities
          Bad debt expense                                                                           -                    -
          Depreciation and amortization                                                        787,000              172,000
          Compensation related to stock purchase rights                                        151,000                    -
          Amortization of retention bonuses                                                     75,000                    -
          Changes in assets and liabilities which provided (used) cash:
               Accounts receivable                                                          (7,250,000)          (2,906,000)
               Due from affiliates                                                            (147,000)            (275,000)
               Inventory                                                                       441,000              211,000
               Prepaid expenses and other                                                     (412,000)             (76,000)
               Accounts payable                                                              2,311,000              260,000
               Deferred revenue                                                                (26,000)              99,000
               Due to affiliates                                                             2,065,000              405,000
               Accrued and other expenses                                                      527,000              827,000
                                                                                           -----------          -----------

                    Net cash provided by (used in) operating activities                     (3,352,000)             470,000
                                                                                           -----------          -----------
CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of capital assets                                                             (3,570,000)            (245,000)
     Acquisition of business, net of cash acquired                                            (998,000)          (1,108,000)
     Notes receivable - officers                                                              (300,000)                   -
                                                                                           -----------          -----------

                    Net cash used in investing activities                                   (4,868,000)          (1,353,000)
                                                                                           -----------          -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Bank overdraft                                                                            522,000                    -
     Proceeds from mortgages                                                                 4,124,000                    -
     Proceeds from term loans                                                                  600,000                    -
     Proceeds from borrowing under bank line                                                 5,509,000              708,000
     Proceeds from stockholder loan                                                            250,000                    -
     Exercise of stock options                                                                   5,000               75,000
     Payments on mortgage and notes payable                                                 (2,494,000)             (37,000)
     Payments on subordinated notes payable                                                   (460,000)                   -
     Payments under capital lease obligations                                                        -               (2,000)
                                                                                           -----------          -----------

                    Net cash provided by financing activities                                8,056,000              744,000
                                                                                           -----------          -----------

                    Net increase (decrease) in cash                                           (164,000)            (139,000)
Cash
     Beginning                                                                                 192,000              350,000
                                                                                           -----------          -----------

     Ending                                                                                $    28,000          $   211,000
                                                                                           ===========          ===========

Interest paid                                                                              $   381,000          $   148,000
                                                                                           ===========          ===========

Income taxes paid                                                                          $    31,000          $         -
                                                                                           ===========          ===========
</TABLE>

   The accompanying notes are an integral part of these statements.

                                       5
<PAGE>

                    AM COMMUNICATIONS, INC. AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
          As of December 28, 2002 and for the Quarters and Nine Months
                 Ended December 28, 2002 and December 29, 2001

The accompanying interim consolidated financial statements should be read in
conjunction with AM Communications, Inc.'s ("Company") annual consolidated
financial statements and notes thereto included in AM Communications, Inc.'s
Annual Report on Form 10-KSB for fiscal 2002 ended March 30, 2002. Certain
information and footnote disclosures normally included in financial statements
have been condensed or omitted. The accompanying unaudited financial information
as of December 28, 2002 and December 29, 2001 and for the quarters and nine
months ended December 28, 2002 and December 29, 2001 have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The Consolidated Balance Sheet as of December 28, 2002 and the related
Consolidated Statements of Operations for the quarters and nine months ended
December 28, 2002 and December 29, 2001 and the related Consolidated Statements
of Cash Flows for the nine months ended December 28, 2002 and December 29, 2001
are unaudited, but in the opinion of management include all normal and recurring
adjustments necessary for a fair statement of the results for such interim
periods. Operating results for the quarter and nine months ended December 28,
2002 are not necessarily indicative of the results that may be expected for the
year ended March 29, 2003.

The consolidated financial statements include the accounts of AM Communications,
Inc. and its wholly owned subsidiaries, AM Broadband Services, Inc., SRS
Communications Corporation, AMC Services, Inc., AM Training Services, Inc. and
AM Nex-Link Communications, Inc. All significant intercompany balances and
transactions have been eliminated in consolidation.


1. ACQUISITIONS

Consistent with the Company's plan to expand its Broadband Service Business
Unit, the Company's wholly owned subsidiary, AM Broadband Services, Inc.
("Broadband") acquired all the issued and outstanding common stock (the "Stock")
of SRS Communications Corporation ("SRS") and EDJ Communications, Inc. ("EDJ")
on October 1, 2001. These companies provide services to the television cable and
wireless industry, their services include installation and maintenance of
television lines and wireless systems in the Northeastern and Southeastern parts
of the United States. Both of these companies are Connecticut corporations. The
selling shareholders of SRS and EDJ are, collectively, herein referred to as the
"Sellers". The transaction provides for the payment of $1,150,000 in cash to the
Sellers in weekly installments following the close of the stock acquisition.
Each installment is to equal the cash collection of the Sellers' accounts
receivable existing as of October 1, 2001 continuing until the total amount of
such installments equals $1,150,000. This obligation owed by the Company to the
Sellers has been satisfied in full. The Company also issued a $3,000,000
subordinated promissory note to the Sellers. The note bears interest at the rate
of 5% per annum. The outstanding principal balance of the note and all accrued
interest is payable in twelve consecutive quarterly payments, payable on the
first day of each quarter, commencing on January 1, 2002. The Company also
issued 9,000,000 shares of its common stock to the Sellers at closing, valued at
$.30 per share,

                                       6
<PAGE>

which was the closing price of AM Communications, Inc.'s stock on October 1,
2001, with an aggregate value of $2,700,000. The transaction has been accounted
for under the purchase method of accounting. Immediately following the
completion of the acquisition of the Stock, Broadband caused EDJ to be merged
with and into SRS pursuant to the applicable provisions of Connecticut law (the
"SRS Merger"). Immediately upon the effectiveness of the SRS Merger, EDJ ceased
to exist as a separate legal entity and SRS, as the surviving corporation,
succeeded to all of EDJ's rights and property, and became subject to all of
EDJ's debts and liabilities, by operation of law. As a result of the SRS Merger,
SRS is now the only subsidiary of Broadband existing as a result of the
acquisition of the Stock. During the fourth quarter of fiscal 2002, the Company
renegotiated the purchase price for this acquisition with the Sellers, based
upon the fact that certain receivables purchased by the Company from the Sellers
were not collectible. As a result of such subsequent negotiations, the purchase
price payable by the Company and the outstanding principal balance of the note
delivered to the Sellers were adjusted and reduced by $220,000.

On July 1, 2002, the Company completed the acquisition of all of the assets and
business of Nex-Link Communication Project Services, LLC, a Florida limited
liability company ("Nex-Link"). The transaction was completed as a merger (the
"Nex-Link Merger") in which Nex-Link was merged with and into a wholly-owned
Delaware corporate subsidiary of Broadband, Nex-Link Acquisition Corp. (the
"Acquisition Subsidiary"), which was formed for the sole purpose of completing
the Nex-Link Merger. As a result of the completion of the Nex-Link Merger on
July 1, 2002, Nex-Link became a wholly-owned corporate subsidiary of Broadband.
Simultaneously with the completion of the Nex-Link Merger, the Acquisition
Subsidiary changed its name and is currently operating under the name "AM
Nex-Link Communications, Inc." Nex-Link provided engineering, design,
construction and installation services to owners of broadband communications
networks.

As a result of the Nex-Link Merger, the four members of Nex-Link (the "Members")
received, in the aggregate, the following consideration:

         a)       $1,000,000.00 in cash, to be paid by the Acquisition
                  Subsidiary to the Members in weekly installments following the
                  closing for the Nex-Link Merger held on July 1, 2002 (the
                  "Closing"), each in an amount equal to that portion of the
                  Acquisition Subsidiary's accounts receivable (the "Nex-Link
                  Receivables") collected during the applicable week, and
                  continuing until the total of such installments equals
                  $1,000,000.00. The Company will use funds received as payments
                  on the Nex-Link Receivables to make the aforementioned weekly
                  installment payments to the Members. The Company has made
                  payments to the Members on this obligation, prior to the date
                  hereof, totalling $805,000. The right of the Members to
                  receive the additional $195,000 payable under this obligation
                  is limited to the proceeds, if any, received with respect to
                  the Nex-Link Receivables from Adelphia Communications
                  Corporation, which has filed for bankruptcy protection.

         b)       $1,000,000.00 in the form of a subordinated promissory note
                  (the "Subsidiary Note") delivered by the Acquisition
                  Subsidiary to the Members at the Closing. The Subsidiary Note
                  bears interest at the rate of five percent (5%) per annum. The
                  outstanding principal balance of the Subsidiary Note, and all
                  interest accrued thereon, is repayable in three (3) equal,
                  consecutive annual payments, payable on the first, second and
                  third anniversaries of the date of the Closing. The Company
                  anticipates that internal funds of the

                                       7
<PAGE>

                  Acquisition Subsidiary will be utilized to make all payments
                  due under the Subsidiary Note.

         c)       7,000,000 restricted shares of Common Stock of the Company,
                  par value $.10 per share, were delivered by Acquisition
                  Subsidiary to the Members at the Closing. These shares had a
                  value of approximately $1,995,000.00 (based on the closing
                  price of the Company's common stock on the date of the
                  Closing).

In connection with the Nex-Link Merger, the Acquisition Subsidiary and the
Members agreed to restructure certain indebtedness owed to the Members by
Nex-Link in the principal amount of $300,000.00. As evidence of such
restructuring, the Acquisition Subsidiary executed and delivered to the Members
at the Closing a subordinated promissory note (the "Company Note"), in the
original principal amount of $300,000.00, which bears interest at the rate of
five percent (5%) per annum. The outstanding principal balance of the Company
Note is payable in three (3) equal annual installments in the amount of
$100,000.00 each, on the first, second and third anniversaries of the date of
the Closing. Accrued interest on the Company Note is payable in quarterly
installments, commencing on October 1, 2002.

The Nex-Link Merger has been accounted for under the purchase method of
accounting. Accordingly, the excess cost over fair value of net assets acquired
of approximately $3,993,000 has been recorded on the December 28, 2002 balance
sheet. The Company is in the process of obtaining third-party valuations of
certain intangible assets and expects the valuations to be completed by fiscal
year-end. Thus, the allocation of the purchase price is subject to refinement.

The following unaudited pro forma data summarizes the results of operations as
if the above-mentioned acquisitions had been completed as of the beginning of
the periods presented. The pro forma information is based on the historical
financial statements of the Company and the acquired companies after giving
effect to the acquisition using the purchase method of accounting. The pro forma
data gives effect to the actual operating results prior to the acquisitions and
adjustments to interest expense, income taxes and common shares outstanding. No
effect has been given to cost reductions or operating synergies in the
presentation. These pro forma amounts do not purport to be indicative of the
results that would have actually been obtained if the acquisitions had occurred
as of the beginning of the periods presented or that may be obtained in the
future.

<TABLE>
<CAPTION>
                                                                             Quarter Ended          Nine Months Ended
                                                                              December 29,              December 29,
                                                                                  2001                      2001
                                                                             -------------          -----------------
(In thousands, except per share data)

<S>                                                                          <C>                      <C>
Total revenue                                                                $  13,301,000            $  31,166,000

Income before extraordinary items, accounting change and taxes                   2,091,000                3,476,000

Net income                                                                       1,974,000                3,021,000

Earnings per share
             Basic                                                                    0.03                     0.05
             Diluted                                                                  0.03                     0.04
</TABLE>

                                       8
<PAGE>

2. REVENUE RECOGNITION

The Company's Broadband Products Unit derives its revenues principally from
sales of its products to the cable TV industry. Revenue is recognized when the
product is shipped to customers. The Company's software revenue is recognized in
accordance with the American Institute of Certified Public Accountants Statement
of Position (SOP) 97-2. As is customary in the industry, the Company's sales are
made pursuant to individual purchase orders and are recognized upon shipment of
the product. Each component of the Company's products is sold separately and the
cost of each component is listed separately in the purchase documentation.
Revenue from custom development efforts is recognized as contractual milestones
are achieved.

The Company's Broadband Services Unit derives its revenues from sales of
outside-plant services to CATV operators. Revenue is recognized as contracted
tasks are completed and billed.

3. INVENTORY

Inventory consists of the following:

<TABLE>
<CAPTION>
                                                                               December 28,            March 30,
                                                                                   2002                  2002
                                                                               ------------           ----------
<S>                                                                              <C>                  <C>
Raw material                                                                     $1,382,000           $1,703,000

Work in process                                                                     704,000              718,000

Finished goods                                                                      474,000              505,000
                                                                                 ----------           ----------
                                                                                  2,560,000            2,926,000

Inventory reserves                                                                 (175,000)            (100,000)
                                                                                 ----------           ----------

Net inventory                                                                    $2,385,000           $2,826,000
                                                                                 ==========           ==========
</TABLE>

                                       9
<PAGE>

4. ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
                                                                           December 28,            March 30,
                                                                               2002                  2002
                                                                           ------------           ----------
<S>                                                                             <C>                  <C>
Accrued compensation and commissions                                       $ 1,101,000           $ 789,000

Accrued rent                                                                    22,000              22,000

Accrued real estate taxes                                                       15,000              43,000

Warranty reserve                                                               226,000             226,000

Accrued professional fees                                                       10,000              64,000

Accrued contracted services                                                    469,000             202,000

Accrued income taxes                                                           104,000             135,000

Accrued interest                                                               134,000              44,000

Accrued tax penalties and interest                                             240,000             240,000

Other                                                                          270,000              47,000
                                                                           -----------         -----------
                                                                           $ 2,591,000         $ 1,812,000
                                                                           ===========         ===========
</TABLE>


5. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Javad Hassan is the Chairman of the board of directors ("Chairman") of the
Company and has ownership interest in several other companies in the United
States, India and other parts of the world. Among these companies is the NeST
group of companies ("NeST"), including NeST Technologies, Inc. and NeSTronix,
Inc., which are U.S.-based technology service entities that provide engineering
development services and turn-key manufacturing services primarily through the
use of technology resources of staff and electronic manufacturing operations
located in India and controlled by the Chairman's brother, Mr. N. Jehangir. NeST
provides a substantial portion of the Company's engineering and manufacturing
requirements.

Mr. Hassan, the NeST companies and their respective affiliates collectively
control the voting of 23,254,171 shares of the Company's Common Stock. Under the
terms of an agreement with NeST (the "NeST Development Agreement"), the Company
has the option to pay for

                                       10
<PAGE>

development services performed by NeST either in cash or by the issuance of
warrants to purchase AM Common Stock. During fiscal 1999, the Company elected to
issue NeST warrants to purchase 4,234,018 shares of the Company's Common Stock,
at an exercise price of $0.01 per share, in lieu of payment of $670,000 of NeST
development services for the period from November 1998 through April 3, 1999.
The Company also issued warrants to purchase 3,628,316 shares of the Company's
Common Stock, at an exercise price of $0.01 per share, in lieu of payment of
$1,157,197 of NeST development services for the period from April 4, 1999
through January 1, 2000. Since January 2, 2000, the Company has paid cash for
NeST development services. As a result of improved operations, the Company
expects to pay ongoing NeST development expenses in cash, but continues to have
the option to issue warrants up to a limit of ten million total shares under the
NeST Development Agreement, including the 7,862,334 shares already issued.
During the third quarter and first nine months of fiscal 2003, the Company
incurred expenses of $855,000 and $2,578,000 respectively, under the NeST
Development Agreement. For the comparable periods in fiscal 2002, the Company
incurred expenses of $588,000 and $1,827,000 respectively. The Company has
negotiated favorable rates with NeST for services performed by both the
India-based and U.S.-based employees of NeST. The Company may not be able to
obtain the same negotiated rates from outside third parties.

Pursuant to a Manufacturing Services Agreement between NeSTronix, Inc. and the
Company (the "Manufacturing Agreement"), NeSTronix agreed to manufacture the
Company's products on a turn-key basis commencing on January 2, 2000. The
initial term of this Manufacturing Agreement ended on January 2, 2003 and the
Manufacturing Agreement is automatically renewable for an additional 18-month
period unless either party gives written notice to the contrary to the other
party at least six months prior to the end of the then current term. The
Manufacturing Agreement is also terminable by either party upon 60 days prior
written notice upon the default of the other party or the bankruptcy or
liquidation of the other party. As of the filing date of this Quarterly Report,
neither party has exercised its option to terminate the Manufacturing Agreement.
Nothing in the Manufacturing Agreement precludes the Company from resuming
manufacturing itself or transferring manufacturing rights to a third party. The
Company retains title to and ownership of all equipment, inventory and
intellectual property rights utilized in connection with the manufacture of its
products. The Company and NeSTronix jointly agree upon a "bill of materials"
price for each product manufactured pursuant to the Manufacturing Agreement. The
Company pays to NeSTronix for each product manufactured pursuant to the
Manufacturing Agreement, an amount equal to the actual cost of all materials
utilized to manufacture the product, plus 0.5 times the agreed upon "bill of
materials" price for the product. During the third quarter and first nine months
of fiscal 2003, the Company incurred expenses of $777,000 and $2,193,000,
respectively, for services provided pursuant to the Manufacturing Agreement. For
the comparable periods in fiscal 2002, the Company incurred expenses of $907,000
and $2,167,000, respectively.

During the third quarter and first nine months of fiscal 2003, the Company
incurred expenses of $6,000 and $51,000, respectively, for legal services
provided by the general counsel of NeST Technologies, Inc. on behalf of the
Company. No such expenses were incurred in the comparable periods in fiscal
2002.

During the third quarter and first nine months of fiscal 2003, the Company
incurred expenses of $312,000 and $632,000, respectively, for management
information system development costs

                                       11
<PAGE>

provided by NeST Technologies, Inc. For the quarter and nine months ended
December 29, 2001, the Company incurred $19,000 in such expenses.

During the third quarter and first nine months of fiscal 2003, the Company
incurred expenses of $21,000 and $68,000, respectively, for sales, marketing and
technical support costs provided by NeST Europe Ltd., an affiliate of NeST
Technologies, Inc. For the quarter and nine months ended December 29, 2001, the
Company incurred $30,000 in such expenses.

The Company provides certain administrative and support services and office
space to NeST, NeSTronix and several other entities associated with Mr. Hassan's
non-AM business ventures. During the third quarter and first nine months of
fiscal 2003, the Company charged fees totaling $88,000 and $233,000,
respectively, for such services. For the comparable periods in fiscal 2002, the
Company charged fees totaling $200,000 and $704,000, respectively, for such
services.


6. NET INCOME (LOSS) PER SHARE

The following is a reconciliation of the numerator and denominators of the basic
and diluted EPS computations:

<TABLE>
<CAPTION>
                                                     Quarter Ended                                  Nine Months Ended
                                          December 28,            December 29,             December 28,            December 29,
                                              2002                    2001                     2002                    2001
                                             ------                  ------                   ------                  ------
<S>                                      <C>                       <C>                     <C>                      <C>
Net income (loss)                        $ (1,754,000)             $ 1,592,000             $(1,874,000)             $ 1,753,000
                                         ============              ===========             ===========              ===========

Basic shares                               63,419,000               52,275,000              61,018,000               46,356,000

Convertible preferred stock                 5,185,000                3,892,000               5,185,000                3,060,000

Diluted options and warrants                3,383,000                5,522,000               4,187,000                4,956,000
                                         ------------              -----------             -----------              -----------

Diluted shares                             71,987,000               61,689,000              70,390,000               54,372,000

Shares used in computation of net
   income (loss) per share:
      Basic                                63,419,000               52,275,000              61,018,000               46,356,000
      Diluted                              63,419,000               61,689,000              61,018,000               54,372,000

Net income (loss) per common share:
      Basic                                      (.03)                     .03                    (.03)                     .04
      Diluted                                    (.03)                     .03                    (.03)                     .03
</TABLE>

                                       12
<PAGE>

The calculation of net loss per share-diluted for the quarter ended December 28,
2002 and for the nine months ended December 28, 2002 does not reflect the
potential dilution that could occur if stock options and warrants were exercised
and preferred stock converted since the effect would be anti-dilutive.


7. SUPPLEMENTAL CASH FLOW AND COMPREHENSIVE INCOME

Supplemental cash flow and comprehensive income is as follows:

<TABLE>
<CAPTION>
                                                                              Nine Months Ended
                                                                        -------------------------------
                                                                         December 28,      December 29,
                                                                             2002              2001
                                                                         ------------      ------------
<S>                                                                      <C>               <C>
Cash paid during the period for:

Interest                                                                 $   381,000       $   148,000
                                                                         ===========       ===========
Income taxes                                                             $    31,000       $         -
                                                                         ===========       ===========

Non-cash investing activities:

Common stock issued for businesses acquired                              $ 1,995,000       $ 2,700,000
                                                                         ===========       ===========
Assumed debt of acquired business                                        $         -       $ 1,428,000
                                                                         ===========       ===========
Assumed debt of acquired business converted
     to subordinated notes                                               $   300,000       $         -
                                                                         ===========       ===========
Conversion of preferred stock to common                                  $         -       $ 1,983,000
                                                                         ===========       ===========
</TABLE>

         There was no comprehensive income for the periods presented.


8. OPERATIONS BY BUSINESS SEGMENT

The Company has identified the following two business segments:

         The Broadband Products Unit (Products) manufactures and markets network
         monitoring systems, which include hardware and software sold to the
         broadband communications market, primarily for cable TV (CATV) systems.

                                       13
<PAGE>

         The Broadband Services Unit (Services) provides a range of
         outside-plant services to CATV operators which include fulfillment,
         engineering and construction services.

         Summarized financial information related to the Company's business
         segments for the quarters and six months ended December 28, 2002 and
         December 29, 2001 are shown below:

<TABLE>
<CAPTION>
                                                       Products         Services      Consolidated
                                                      -----------     ------------    ------------
<S>                                                   <C>             <C>              <C>
Quarter Ended December 28, 2002
-------------------------------

              Net sales                               $ 5,214,000     $ 11,345,000     $16,559,000

              Interest income                                   -                -               -

              Interest expense                             56,000          137,000         193,000

              Depreciation and amortization               110,000          142,000         252,000

              Income tax expense                                -                -               -

              Capital expenditures                         79,000           89,000         168,000

              Operating income (loss)                     439,000      (2,008,000)     (1,569,000)

              Total assets                              9,987,000       23,315,000      33,302,000

Quarter Ended December 29, 2001
-------------------------------

              Net sales                               $ 5,718,000      $ 5,725,000     $11,443,000

              Interest income                                   -                -               -

              Interest expense                             65,000           58,000         123,000

              Depreciation and amortization                38,000           57,000          95,000

              Income tax expense                          349,000        (232,000)         117,000

              Capital expenditures                         33,000          174,000         207,000

              Operating income (loss)                   1,072,000          745,000       1,817,000

              Total assets                              7,547,000       10,955,000      18,502,000
</TABLE>

                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                       Products         Services      Consolidated
                                                      -----------     ------------    ------------
<S>                                                   <C>             <C>              <C>
Nine Months Ended December 28, 2002
-----------------------------------

              Net sales                              $ 14,718,000     $ 25,551,000     $40,269,000

              Interest income                               1,000            1,000           2,000

              Interest expense                            224,000          247,000         471,000

              Depreciation and amortization               302,000          485,000         787,000

              Income tax expense                                -                -               -

              Capital expenditures                      3,034,000          536,000       3,570,000

              Operating income (loss)                   1,107,000      (2,551,000)     (1,444,000)

              Total assets                              9,987,000       23,315,000      33,302,000

Nine Months Ended December 29, 2001
-----------------------------------

              Net sales                              $ 13,551,000      $ 5,993,000     $19,544,000

              Interest income                               1,000                -           1,000

              Interest expense                            138,000           58,000         196,000

              Depreciation and amortization               112,000           60,000         172,000

              Income tax expense                          358,000        (232,000)         126,000

              Capital expenditures                         62,000          183,000         245,000

              Operating income (loss)                   1,663,000          397,000       2,060,000

              Total assets                              7,547,000       10,955,000      18,502,000
</TABLE>

                                       15
<PAGE>


9. RECENT ACCOUNTING PRONOUNCEMENTS

In August 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) 143, "Accounting for Asset Retirement
Obligations". This Statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS 143 requires an enterprise to record the
fair value of an asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the retirement of a tangible
long-lived asset. SFAS 143 also requires the enterprise to record the contra to
the initial obligation as an increase to the carrying amount of the related
long-lived asset (i.e., the associated asset retirement costs) and to depreciate
that cost over the remaining useful life of the asset. The liability is adjusted
at the end of each period to reflect the passage of time (i.e., accretion
expense) and changes in the estimated future cash flows underlying the initial
fair value measurement. Enterprises are required to adopt SFAS 143 for fiscal
years beginning after June 15, 2002. Management expects to adopt SFAS 143 on
March 30, 2003, and is currently determining the impact of the adoption.

In October 2001, the FASB issued SFAS 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS 144 supersedes SFAS 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
and certain provisions of APB Opinion No. 30 "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
144 establishes standards for long-lived assets to be disposed of, and redefines
the valuation and presentation of discontinued operations. SFAS 144 is effective
for fiscal years beginning after December 15, 2001, and interim periods within
those fiscal years. The adoption of SFAS 144 did not have a material effect on
the Company's financial position, results of operations, or cash flows.

In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". SFAS
145 eliminates extraordinary accounting treatment for reporting gain or loss on
debt extinguishment, and amends other existing authoritative pronouncements to
make various technical corrections, clarify meanings, or describe their
applicability under changed conditions. The provisions of SFAS 145 related to
the rescission of FASB Statement No. 4 are applicable in fiscal years beginning
after May 15, 2002, the provisions related to FASB Statement No. 13 are
effective for transactions occurring after May 15, 2002, and all other
provisions are effective for financial statements issued on or after May 15,
2002; however, early application is encouraged. Debt extinguishments reported as
extraordinary items prior to scheduled or early adoption of SFAS 145 would be
reclassified in most cases following adoption. Management does not expect the
adoption of SFAS 145 to have a material effect on the Company's financial
position, results of operations, or cash flows.

In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with
Exit or Disposal Activities". SFAS 146 requires recording costs associated with
exit or disposal activities at their fair values when a liability has been
incurred. Under previous guidance, certain

                                       16

<PAGE>
exit costs were accrued upon management's commitment to an exit plan, which is
generally before an actual liability has been incurred. The requirements of SFAS
146 are effective prospectively for exit or disposal activities initiated after
December 31, 2002; however, early application is encouraged. Management does not
expect the adoption of SFAS 146 to have a material effect on the Company's
financial position, results of operations, or cash flows.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 requires that upon
issuance of a guarantee, a guarantor must recognize a liability for the fair
value of an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
recognition provisions of FIN 45 are effective for any guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002. Management is currently evaluating the effects of FIN 45; however, it does
not expect that the adoption of FIN 45 will have a material effect on the
Company's financial position, results of operations, or cash flows.

In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure". SFAS 148 amends SFAS 123 "Accounting
for Stock-Based Compensation," to provide alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. SFAS 148 is
effective for fiscal years beginning after December 15, 2002. The expanded
annual disclosure requirements and the transition provisions are effective for
fiscal years ending after December 15, 2002. The interim disclosure provisions
are effective for financial reports containing financial statements for interim
periods beginning after December 15, 2002. Management does not expect the
adoption of SFAS 148 to have a material effect on the Company's financial
position, results of operations, or cash flows.

10.  INCOME TAXES

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109.

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                 Nine Months Ended
                                                           -----------------------------
                                                           December 28,     December 29,
                                                               2002             2001
                                                           ------------     ------------
<S>                                                         <C>               <C>
            Current income taxes                            $        -        $  126,000

            Deferred income taxes                             (757,000)          626,000

            Change in valuation allowance                      757,000          (626,000)
                                                            ----------        ----------
            Net                                             $        -        $  126,000
                                                            ==========        ==========
</TABLE>

                                       17
<PAGE>

A reconciliation between the provision for income taxes, computed by applying
the statutory federal income tax rate of 34% to income before income taxes and
the actual provision for income taxes follows:

<TABLE>
<CAPTION>
                                                                 Nine Months Ended
                                                           -----------------------------
                                                           December 28,     December 29,
                                                               2002             2001
                                                           ------------     ------------
<S>                                                         <C>               <C>
            Federal income tax provision at statutory rate  $ (637,000)       $  639,000

            State income taxes, net of federal benefit        (124,000)          124,000

            Research and development credits                         -           (15,000)

            Permanent differences                                4,000             4,000

            Change in valuation allowance                      757,000          (626,000)

            Other                                                    -                 -
                                                            ----------        ----------
            Income tax provision                            $        -        $  126,000
                                                            ==========        ==========
</TABLE>

The components of the net deferred tax asset as of December 28, 2002 and March
30, 2002 are as follows:

<TABLE>
<CAPTION>
                                                            December 28,        March 30,
                                                                2002              2002
                                                            ------------      ------------
<S>                                                                <C>             <C>
            Inventory                                        $  355,000        $  296,000

            Accrued expenses and reserves                       546,000           403,000

            Depreciation and amortization                       (87,000)          (87,000)

            Net operating loss carryforwards                  7,693,000         7,138,000

            Tax credit carryforwards                            743,000           743,000

            Valuation allowance                              (9,250,000)       (8,493,000)
                                                             ----------        ----------
            Net deferred tax assets                          $        -        $        -
                                                             ==========        ==========
</TABLE>

                                       18
<PAGE>

The Company has total net operating loss carryforwards available to offset
future taxable income of approximately $22.6 million expiring at various times
from 2003 to 2022. Due to certain statutory limitations under the Internal
Revenue Code, a portion of such carryforwards may expire unutilized.

The Company has a valuation allowance equal to 100% of the deferred tax assets.
In assessing the Company's ability to realize deferred income tax assets, the
Company considered whether it is more likely than not that some or all of the
deferred tax assets will be realized. Several factors such as changes in stock
ownership that may restrict the utilization of net operating loss and tax credit
carryforwards, and the Company's ability to generate sufficient taxable income
in the periods before the net operating loss and tax credit carryforwards expire
or the timing differences reverse were considered.

11. CREDIT FACILITY

On August 14, 2002, the Company entered into a $10,700,000 asset-based credit
facility with LaSalle Business Credit, Inc. (the "Bank"), as agent for Standard
Federal Bank National Association, collateralized by all assets of the Company.
The credit facility consists of the following:

         1.       Revolving Credit Loan Facility

                  A revolving credit loan facility having a maximum availability
                  equal to the lesser of (a) Seven Million Five Hundred Thousand
                  Dollars ($7,500,000); and (b) eighty-five percent (85%) of the
                  Company's eligible accounts (as defined in the loan
                  documents). The revolving credit loans bear interest, at the
                  Company's option, at either (i) a base rate equal to the prime
                  rate of the Bank plus 0.50% or (ii) at the LIBOR rate plus
                  2.75%.

                                       19
<PAGE>

         2.       Letters of Credit

                  The ability for the Company to obtain standby letters of
                  credit, provided that the aggregate undrawn face amount of
                  such letters of credit is not in excess of, at any one time,
                  $1,000,000. In addition to the normal charges for letters of
                  credit, the Company is subject to an annual 3% administrative
                  fee of the face amount of the letters of credit, which fee is
                  payable monthly. The outstanding letters of credit will
                  automatically reduce, dollar for dollar, the amount that may
                  be borrowed by the Company as revolving credit loans under the
                  revolving credit facility.

         3.       Term Loans

                  a)       A $500,000 discretionary machinery and equipment
                           acquisition line. Advances are limited to 80% of the
                           net invoice cost, cannot be less than $100,000 and
                           will be permitted only during the first two years
                           following the closing date;

                  b)       A $2,200,000, three-year term loan with a balloon
                           payment payable upon the earlier to occur of the
                           termination of the credit facility or the expiration
                           of the initial contract term; (these two term loans
                           bear interest, at the Company's option, at either (i)
                           the Bank's prime rate as in effect from time to time
                           plus 0.75% or (ii) the LIBOR rate plus 3%); and

                  c)       Up to a $500,000 two-year term loan, with an annual
                           excess cash flow recapture provision of 50%. The
                           interest rate for this loan is the Bank's prime rate
                           as in effect from time to time plus 2%.

The proceeds of these credit facilities were used by the Company to refinance
all of its existing bank debt and for working capital needs associated with the
Company's growth.

The Company failed to comply with certain financial covenants made by the
Company under the Loan Agreement. Specifically, the Company failed to comply
with (i) the covenant requiring that the Company's fixed charge coverage ratio
be not less than 0.75:1.00 for the three month period ended September 28, 2002,
(ii) the covenant that the aggregate cost of all fixed capital assets purchased
during the fiscal year ended March 31, 2003 would not exceed $615,000 (excluding
capital expenditures made prior to the date of the Loan Agreement which relate
to the Company's headquarters facility); (iii) the covenant requiring that the
Company's leverage ratio not exceed 3.00:1.00 for the nine month period ended
December 28, 2002; and (iv) the covenant requiring that the Company's fixed
charge coverage ratio be not less than 1.10:1.00 for the nine month period ended
December 28, 2002. The Company's failure to comply with each of these

                                       20
<PAGE>

financial covenants constituted individual events of default under the terms of
the Loan Agreement. On December 13, 2002, the Bank and the Company entered into
a Forbearance Agreement under which the Bank agreed, subject to certain
conditions, to forbear for a period of sixty (60) days from exercising its
rights and remedies with respect to the events of default that had occurred as
of the date of the Forbearance Agreement. The Forbearance Agreement also
modified the Loan Agreement to temporarily increase the maximum revolving loan
limit to $8,500,000, to increase the applicable interest rate payable on the
outstanding principal balance of each credit facility by 0.50%, to suspend the
availability of the LIBOR interest rate option for each credit facility, to
suspend the ability of the Company to obtain advances under the equipment loan
facility, and to suspend the Company's ability to make any payments on any
subordinated debt. The Company was also required to obtain additional
subordinated debt financing in the amount of at least $3,500,000, but not
greater than $4,500,000, on or before January 31, 2003. On February 13, 2003,
the Bank agreed, pursuant to the terms of an amendment to the Forbearance
Agreement, not to exercise its rights and remedies with respect to events of
default pertaining to the four financial covenants listed above until March 3,
2003. Pursuant to the terms of an agreement dated February 14, 2003, the Bank
has agreed to waive the Company's compliance with the four financial covenants
listed above. The Company and the Bank are currently in the process of
determining the amended financial covenants which will be in effect for the
periods ending on or after December 29, 2002.

Should the Company have another event of default under the Loan Agreement or the
Forbearance Agreement, the entire amount of the outstanding loans extended by
the Bank to the Company will become immediately callable as a consequence of
such default. Based on the terms of the Forbearance Agreement and the status of
the current negotiations between the Company and the Bank concerning the terms
of the additional financing required to be obtained by the Company pursuant to
the terms of the Forbearance Agreement, management of the Company believes that
the LaSalle credit facilities will continue to be available to the Company.
However, the continued availability of such credit facilities to the Company
through the remaining scheduled term of such facilities will be dependent upon
the Company's ability in the future to comply with all of the terms of the Loan
Agreement and any other agreements related to such credit facilities.

                                       21
<PAGE>

Item 2. Management's Discussion and Analysis of Operations

Cautionary Statement For Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995

The statements contained in this Quarterly Report on Form 10-QSB, along with
statements in other reports filed by the Company with the Securities and
Exchange Commission, external documents and oral presentations, which are not
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements represent the
present expectations or beliefs of the Company concerning future events. Such
statements must be qualified by important factors that could cause actual
results to differ materially from those achieved in the past or those expected
by the Company. Those factors which specifically relate to the Company's
business include: a history of operating losses (including a significant
reduction in revenue in fiscal 1999), rapid technological change along with the
need to continually develop new products and gain market acceptance, dependence
on a relatively small total available market size, competition, dependence on
key employees, dependence on a small number of large customers, whose demand for
Company products are subject to substantial changes from year to year,
dependence on certain suppliers, and reliance on Network Systems and
Technologies (P) Ltd. ("NeST"), and NeST-related companies, for engineering and
manufacturing services with respect to the Company's products unit.

The following discussion should be read in conjunction with the Company's Form
10-KSB for its 2002 fiscal year ended March 30, 2002.

Overview

The Company provides products (which include hardware and software systems) and
services (which include network engineering, design and construction and
subscriber installation) to the broadband communications industry, primarily for
CATV systems. AM has applied its technical strengths, and the strengths of its
strategic partners, in RF communications, microprocessor controlled circuits and
application software in order to produce a suite of products and services that
allows CATV system operators to build better networks, maintain them more
efficiently, and continually monitor their technical performance and operation.

The Company's principal activity from its formation in 1974 to 1989 was the
construction of cable TV systems, which was discontinued in 1989. From 1989 to
2001, the Company's primary revenue was derived from the sale of its OmniStatTM
family of network monitoring and management systems. Beginning in 1999, the
Company began to pursue a diversification strategy to broaden its offerings to
include services as well as products. As part of this diversification strategy,
the Company formed a new business unit, AM Broadband Services, Inc. ("AMBS").
AMBS is a wholly owned subsidiary of the Company that began operations in
January 2001. This business unit provides a range of outside-plant services to
CATV systems operators that include design, engineering, installation,
certification and maintenance. The Company's Broadband Products ("AMBP")
business unit continues to market its OmniStatTM

                                       22
<PAGE>

product line and other newly developed products through its traditional sales
channels, but is also utilizing the AMBS services unit as an additional sales
channel.

During fiscal 2002, the Broadband Services Unit embarked on an aggressive growth
strategy with the following actions:

         a)       On October 1, 2001, with the acquisition of SRS Communications
                  Corporation and EDJ Communications, Inc., AMBS entered into
                  the subscriber fulfillment services business.

         b)       In January 2002, AMBS formed its design and engineering
                  services division in order to provide specialized engineering
                  services to the cable television and telecommunications
                  industries.

         c)       In January 2002, AMBS formed AMC Services, Inc. in order to
                  provide construction services to the cable television and
                  broadband communications industries.

The formation of both of the new divisions of AMBS required significant capital
and employee-related expenditures to start and were built by procuring the
services of highly experienced, industry professionals with strong reputations.

On June 3, 2002, subsequent to the end of the 2002 fiscal year, the Company
entered into a definitive merger agreement with Nex-Link Communication Project
Services, LLC. On July 3, 2002, the Company announced the completion of the
merger with an effective date of July 1, 2002. Management of the Company
believes that the acquisition of this entity, as a result of the merger, will
add significant depth to AMBS's ability to provide engineering, design,
construction, and installation services to owners of broadband communications
networks.

Critical Accounting Policies

In December 2001, the Securities and Exchange Commission ("SEC") issued
disclosure guidance for "critical accounting policies". The SEC defines
"critical accounting policies" as those that require application of management's
most difficult, subjective or complex judgments, often as a result of the need
to make estimates about the effect of matters that are inherently uncertain and
may change in subsequent periods.

The Company's significant accounting policies are described in the Notes to
Consolidated Financial Statements. Not all of these significant accounting
policies require management to make difficult, subjective or complex judgments
or estimates. However, the following policies could be deemed to be critical
within the SEC definition:

Revenue Recognition

The Company's Broadband Products segment derives its revenues principally from
sales of its products to the cable television industry. Revenue is recognized
when the product is shipped to customers. The Company's software revenue is
recognized in accordance with the American Institute of Certified Public
Accountant's Statement of Position (SOP) 97-2 and related amendments. As is
customary in the

                                       23
<PAGE>

industry, the Company's sales are made pursuant to individual purchase orders
and are recognized upon the shipment of the product. Each component of the
Company's products is sold separately and the cost of each component is listed
separately in the purchase documentation. Revenue from custom development
efforts is recognized as contractual milestones are achieved.

The Broadband Services Unit segment derives its revenues from sales of
outside-plant services to CATV operators. Revenue is recognized as contracted
tasks are completed and billed. Individual contracts are of short duration.

Inventory

Manufacturing inventory, which is comprised of raw materials, work-in-process
and finished goods, is valued at the lower of cost (first-in, first-out method)
or market.

Intangibles

Intangibles include goodwill, customer relations, covenants not to compete and
the costs associated with the acquisition of patents and fees for the successful
defense of patents. Customer relationships and covenants-not-to-compete are
amortized on a straight-line basis over 10 and 5 years, respectively. Pursuant
to SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets, goodwill is not amortized but evaluated periodically for
impairment and charged to operations only in the period of impairment. Patents
are being amortized on a straight-line basis, over their estimated useful lives
of five years. Costs related to unsuccessful patents or patents relating to
products no longer manufactured are written off.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

The above listing is not intended to be a comprehensive list of all of the
Company's accounting policies. In some cases, the accounting treatment of a
particular transaction is specifically dictated by accounting principles
generally accepted in the United States of America, with no need for
management's judgment in their application. There are also areas in which
management's judgment in selecting any available alternatives would not produce
a materially different result. See the Company's audited Consolidated Financial
Statements and Notes thereto contained in the Company's Form 10-KSB for its 2002
fiscal year ended March 30, 2002 that contain accounting policies and other
disclosures required by accounting principles generally accepted in the United
States of America.

                                       24
<PAGE>

Results of Operations
<TABLE>
<CAPTION>
                                                  Quarter Ended                        Nine Months Ended
                                          -------------------------------       -------------------------------
                                          December 28,       December 29,       December 28,      December 29,
                                             2002               2001               2002              2001
                                          ------------       ------------       ------------      -------------
<S>                                           <C>                <C>                <C>               <C>
Revenues                                     100.0%            100.0%             100.0%            100.0%

Cost of Sales                                 75.2              61.0               68.7              55.7
Selling, General and Administrative           28.8              14.7               27.6              19.1
Research and Development                       5.5               8.4                7.3              14.7
                                             -----             -----              -----             -----

Operating Income (Loss)                       (9.5)             15.9               (3.6)             10.5
Other Expense                                  1.1               1.0                1.1               0.9
                                             -----             -----              -----             -----

Income (Loss) Before Income Taxes            (10.6)             14.9               (4.7)              9.6
Income Taxes                                   0.0               1.0                0.0               0.6
                                             -----             -----              -----             -----

Net Income (Loss)                            (10.6)%            13.9%              (4.7)%             9.0%
                                             =====             =====              =====             =====
</TABLE>


Revenues

Total revenues were $16.6 million and $40.3 million for the third quarter and
first nine months of fiscal 2003, respectively, compared to $11.4 million and
$19.5 million for the comparable periods in fiscal 2002. The increase in
revenues in fiscal 2003 from fiscal 2002 is primarily due to growth in the
Company's Broadband Services Unit. A major portion of this growth is
attributable to the acquisition of SRS Communications Corp./EDJ Communications,
Inc. (SRS/EDJ) and Nex-Link Communication Project Services, LLC (Nex-Link). The
SRS/EDJ acquisition was effective October 1, 2001. SRS/EDJ generated $13.1
million in revenue for the nine months ended December 28, 2002, compared to $5.0
million in revenue for the comparable period in fiscal 2002 when it had been a
part of the Company for only one fiscal quarter. Nex-Link generated $1.8 million
and $3.4 million in revenue in the third quarter and first nine months of fiscal
2003, respectively. The Nex-Link acquisition was effective July 1, 2002.
Additionally, the Broadband Services Unit's new offering of construction
services generated $3.7 million and $6.0 million of revenue during the third
quarter and first nine months of fiscal 2003, respectively. The remaining
increase in revenues for the nine month period in fiscal 2003 is due to the
Company's Broadband Products Unit expanding its direct global sales and
marketing efforts, and sales made pursuant to its multi-year agreement with
Charter Communications.

The Company's Broadband Products Unit maintains key strategic OEM (original
equipment manufacturer) relationships with Motorola, C-Cor, Scientific-Atlanta
and others, which purchase the Company's products under private label
relationships and re-sell them primarily to their international customers. The
Broadband Products Unit's revenue from OEMs and foreign distributors was 11% and
10% of its revenue for the third quarter and first nine months of fiscal 2003,
respectively, compared to 15% and 32% for the comparable periods in fiscal 2002.
A greater portion of the Product Unit's revenue is coming from MSOs (multiple
system operators) and other direct end-user customers as a result of its
expanded direct global sales and marketing efforts and its multi-year agreement
with Charter Communications.


                                       25

<PAGE>

The Company's Broadband Services Unit primarily generates its revenue through
the sale of fulfillment, engineering and construction services to MSOs.

Three MSO customers contributed more than 10% of the Company's total revenues in
the third quarter of fiscal 2003 - 34%, 29% and 18%, respectively. For the first
nine months of fiscal 2003, the same three MSO customers contributed more than
10% of total revenues - 34%, 32% and 14%, respectively. In fiscal 2002, the same
three MSO customers contributed more than 10% of the Company's total revenues -
17%, 46% and 22%, respectively, in the third quarter and 10%, 40% and 14%,
respectively for the first nine months.

Sales to foreign customers represented less than 5% of total revenues for the
third quarter and first nine months of both fiscal 2003 and fiscal 2002.

As the purchase of the Company's products and services is generally associated
with a customer's capital upgrade, expansion or marketing programs, contribution
levels of individual customers can be subject to wide fluctuations from year to
year.

Software revenues totaled $431,000 and $1,173,000 in the third quarter and first
nine months of fiscal 2003, respectively, compared to $694,000 and $1,382,000 in
the comparable periods of fiscal 2002. All software development costs are
charged to research and development when incurred.

Development revenues were $37,000 and $39,000 in the third quarter and first
nine months of fiscal 2003, respectively, compared to $60,000 and $143,000 in
the third quarter and first nine months of fiscal 2002, respectively.
Development revenues primarily relate to OEM development efforts, which are
recognized when defined milestones are reached, the timing of which may be
different from when the related development expenses were incurred.

Backlog for the Company's Broadband Products Unit was $1.6 million as of
December 28, 2002, compared to $3.7 million as of December 29, 2001. The backlog
remained at $1.6 million as of February 10, 2003. The Company's Broadband
Services Unit has multi-year master contracts with MSO(s) that currently
generate in excess of $650,000 per week in billings.

Cost of Sales

Cost of sales includes all manufacturing costs of the Company's Broadband
Products Unit's hardware products and the job costs of the Company's Broadband
Services Unit's services. Total cost of sales represented 75.2% and 68.7% of
total revenues in the third quarter and first nine months of fiscal 2003,
respectively, compared to 61.0% and 55.7% in the comparable periods of fiscal
2002. The increase in total cost of sales as a percentage of total revenues in
the fiscal 2003 is due to a much larger percentage of the Company's total
revenues coming from the Broadband Services Unit. These revenues carry a lower
gross margin.

Gross margin for the Broadband Products Unit was 55.1% and 56.0% for the third
quarter and first nine months of fiscal 2003, respectively, compared to 53.7%
and 53.5% in the comparable periods of fiscal 2002. The Broadband Products
Unit's gross margin is generally dependent on customer mix and product mix.


                                       26
<PAGE>


Gross margin for the Broadband Services Unit was 10.9% and 17.1% for the third
quarter and first nine months of fiscal 2003, respectively, compared to 24.4%
and 23.5% for the third quarter and first nine months of fiscal 2002,
respectively. The Broadband Services Unit's gross margin is dependent upon the
mix of fulfillment, engineering and construction services. Although the
Broadband Services Unit experienced explosive growth in fiscal 2003, certain of
its contracts were either not profitable or marginally profitable. The Company
has completed a review of all contracts and has terminated or plans to terminate
certain contracts to focus resources on more profitable opportunities.

Selling, General and Administrative

Selling, general and administrative expenses were $4.8 million and $11.1 million
in the third quarter and first nine months of fiscal 2003, respectively,
compared to $1.7 million and $3.7 million in the comparable periods of fiscal
2002. Selling expenses increased from fiscal 2002 as the result of the Company's
Broadband Products Unit expanding its direct global sales and marketing efforts.
These expanded efforts included the addition of international sales
consultants/salesmen, product marketing managers for hardware and software, a
sales and marketing executive, and additional advertising and promotion efforts.
Additionally, selling expenses increased due to higher sales commissions
associated with a greater percentage of revenues coming from MSO(s) and other
direct-end user customers.

General and administrative costs increased to support the Company's new
Broadband Services Unit and its increased business levels, including the
acquisition of SRS Communications Corporation/EDJ Communications, Inc. In fiscal
2003, the Company rapidly put in place additional personnel and infrastructure
that it believed was necessary to support the explosive growth in sales. The
Company is in the process of evaluating this infrastructure with the goals of
increased operating efficiencies and reduced costs. Selling, general and
administrative expenses are expected to decline during the remainder of fiscal
2003.

Included in general and administrative costs in the first nine months of fiscal
2003, is a $325,000 charge related to the Company's outstanding receivables from
Adelphia Communications Corporation, which filed for bankruptcy protection in
June 2002. In the third quarter and first nine months of fiscal 2003, the
Company also incurred $61,000 and $262,000 in start-up expenses related to the
Broadband Services Unit's plan to offer training services. Additionally, the
Company incurred $300,000 and $612,000 of costs in developing management
information systems to support its growing Broadband Services Unit during the
third quarter and first nine months of fiscal 2003, respectively. During fiscal
2003, the Company also incurred significant increases in costs for liability,
auto and workers compensation insurance.

Research and Development

Research and development expense were $901,000 and $2.9 million in the third
quarter and first nine months of fiscal 2003, respectively, compared to $961,000
and $2.9 million in the comparable periods of fiscal 2002. The Company continues
to spend a significant amount on research and development during in fiscal 2003,
including expenditures related to its major development efforts to upgrade and
expand its software and hardware products. The Company expects research and
development spending to increase in response to increased customer demand for
more advanced systems and software, but anticipates that such expenses will
decline as a percentage of revenue.

                                       27

<PAGE>

Operating Income (Loss)

The Company had operating losses of $1.6 million and $1.4 million in the third
quarter and first nine months of fiscal 2003, respectively, compared to
operating income of $1.8 million and $2.1 million in the third quarter and first
nine months of fiscal 2002, respectively. Despite the significant increase in
revenues in fiscal 2003, the Company generated operating losses. This is
primarily due to the low gross margins generated by the Company's Broadband
Services Unit and the significant increase in selling, general and
administrative expenses.

Interest and Other Expense

The Company had interest and other expense of $185,000 and $430,000 in the third
quarter and first nine months of fiscal 2003, respectively, compared to $108,000
and $181,000 in the comparable periods of fiscal 2002. In both fiscal 2003 and
2002 this consists primarily of interest expense on the Company's debt
obligations. The increase in fiscal 2003 is due to the additional interest
expense associated with the Company's larger bank line of credit facility, the
mortgage on the Company's corporate headquarters and the subordinated notes
issued in connection with Company's acquisitions.

Income Taxes

Due to the significant net operating loss carry-forward, the Company pays
minimal income taxes, which include federal income taxes and state taxes in
those states where the Company does not have net operating loss carry-forwards.

Operations by Business Segment

The Company has identified the following two business segments:


              The Broadband Products Unit (Products) manufactures and markets
              network monitoring systems, which include hardware and software
              sold to the broadband communications market, primarily for cable
              TV (CATV) systems.

              The Broadband Services Unit (Services) provides a range of
              outside-plant services to CATV operators that include fulfillment,
              engineering and construction services.

Summarized financial information related to the Company's business segments for
the quarters and nine months ended December 28, 2002 and December 29, 2001 are
shown below:

                                       28

<PAGE>
<TABLE>
<CAPTION>
                                                      Products             Services           Consolidated
                                                      --------             --------           ------------
<S>                                                      <C>                   <C>                  <C>
            Quarter Ended December 28, 2002
            -------------------------------

                   Net sales                         $ 5,214,000          $11,345,000          $16,559,000
                   Interest income                             -                    -                    -
                   Interest expense                       56,000              137,000              193,000
                   Depreciation and amortization         110,000              142,000              252,000
                   Income tax expense                          -                    -                    -
                   Capital expenditures                   79,000               89,000              168,000
                   Operating income (loss)               439,000           (2,008,000)          (1,569,000)

                   Total assets                        9,987,000           23,315,000           33,302,000

            Quarter Ended December 29, 2001
            -------------------------------

                   Net sales                         $ 5,718,000          $ 5,725,000          $11,443,000
                   Interest income                             -                    -                    -
                   Interest expense                       65,000               58,000              123,000
                   Depreciation and amortization          38,000               57,000               95,000
                   Income tax expense                    349,000             (232,000)             117,000
                   Capital expenditures                   33,000              174,000              207,000
                   Operating income (loss)             1,072,000              745,000            1,817,000

                   Total assets                        7,547,000           10,955,000           18,502,000

            Nine Months Ended December 28, 2002
            -----------------------------------

                   Net sales                         $14,718,000          $25,551,000          $40,269,000
                   Interest income                         1,000                1,000                2,000
                   Interest expense                      224,000              247,000              471,000
                   Depreciation and amortization         302,000              485,000              787,000
                   Income tax expense                          -                    -                    -
                   Capital expenditures                3,034,000              536,000            3,570,000
                   Operating income (loss)             1,107,000           (2,551,000)          (1,444,000)

                   Total assets                        9,987,000           23,315,000           33,302,000

            Nine Months Ended December 29, 2001
            -----------------------------------

                   Net sales                         $13,551,000          $ 5,993,000          $19,544,000
                   Interest income                         1,000                    -                1,000
                   Interest expense                      138,000               58,000              196,000
                   Depreciation and amortization         112,000               60,000              172,000
                   Income tax expense                    358,000             (232,000)             126,000
                   Capital expenditures                   62,000              183,000              245,000
                   Operating income (loss)             1,663,000              397,000            2,060,000

                   Total assets                        7,547,000           10,955,000           18,502,000
</TABLE>

                                       29
<PAGE>

Industry Factors

The cable and broadband communications industry is presently undergoing
significant change as cable television (CATV) operators continue to expand and
consolidate their operations. Operators are also implementing new interactive
services such as video on demand, Internet access and telephony. In addition,
competition for video services has increased with new entrants, including
telephone and satellite providers. This has resulted in existing CATV operators
planning to expand and upgrade their distribution infrastructures and new
providers planning to construct new distribution systems capable of providing a
mix of services. However, there continues to be many unresolved issues and
uncertainties impacting this convergence of CATV and telecommunications
industries, including governmental regulations, competing distribution
technologies, and significant capital costs.


Liquidity and Capital Resources

In the first nine months of fiscal 2003, the Company consumed net cash of
$164,000 compared to consuming net cash of $139,000 in the first nine months of
fiscal 2002.

Net cash consumed by operating activities was $3,352,000 in the first nine
months of fiscal 2003 versus net cash generated of $470,000 in the first nine
months of fiscal 2002. The cash consumed in fiscal 2003 was primarily due to an
increase in accounts receivable ($7.3 million) which was partially offset by
increases in accounts payable ($2.3 million) and in due to affiliates ($2.1
million). The increase in accounts receivable is due to the rapid growth of the
Company's Broadband Services Unit and to the timing of sales and collections in
the third quarter of fiscal 2003. During the third quarter of fiscal 2003, one
of the Company's major customers held payments until the end of the calendar
year. These amounts were not received by the Company until the new fiscal
quarter. The increase in due to affiliates represents amounts due to NeST
Technologies, Inc. and NeSTronix, Inc. for contracted manufacturing and
engineering services.

Net cash used in investing activities was $4,868,000 in the first nine months of
fiscal 2003 versus $1,353,000 in the first nine months of fiscal 2002. This is
primarily due to an increase in capital expenditures in the first nine months of
fiscal 2003 which included $2.6 million associated with the purchase of the
Company's corporate headquarters and $163,000 for the purchase of a new trade
show exhibit. In fiscal 2003, the Company also expended net cash of $998,000 for
the acquisition of Nex-Link Communication Project Services, LLC and $300,000 for
notes receivable from officers.

                                       30

<PAGE>

Cash flow from financing activities was $8,056,000 in the first nine months of
fiscal 2003 versus $744,000 in the first nine months of fiscal 2002. The major
sources of cash in the first nine months of fiscal 2003 were the Company's new
bank line of credit and mortgage loan proceeds associated with the financing of
the purchase of the Company's corporate headquarters.

On August 14, 2002, the Company entered into a $10,700,000 asset-based credit
facility with LaSalle Business Credit, Inc. (the "Bank"), as agent for Standard
Federal Bank National Association, collateralized by all assets of the Company.
The credit facility consists of the following:


              1)  Revolving Credit Loan Facility

                  A revolving credit loan facility having a maximum availability
                  equal to the lesser of (a) Seven Million Five Hundred Thousand
                  Dollars ($7,500,000); and (b) eighty-five percent (85%) of the
                  Company's eligible accounts (as defined in the loan
                  documents). The revolving credit loans bear interest, at the
                  Company's option, at either (i) a base rate equal to the prime
                  rate of the Bank plus 0.50% or (ii) at the LIBOR rate plus
                  2.75%.

              2)  Letters of Credit

                  The ability for the Company to obtain standby letters of
                  credit, provided that the aggregate undrawn face amount of
                  such letters of credit is not in excess of, at any one time,
                  $1,000,000. In addition to the normal charges for letters of
                  credit, the Company is subject to an annual 3% administrative
                  fee of the face amount of the letters of credit, which fee is
                  payable monthly. The outstanding letters of credit will
                  automatically reduce, dollar for dollar, the amount that may
                  be borrowed by the Company as revolving credit loans under the
                  revolving credit facility.

              3)  Term Loans

                  a)       A $500,000 discretionary machinery and equipment
                           acquisition line. Advances are limited to 80% of the
                           net invoice cost, cannot be less than $100,000 and
                           will be permitted only during the first two years
                           following the closing date;


                                       31
<PAGE>


                  b)       A $2,200,000, three-year term loan with a balloon
                           payment payable upon the earlier to occur of the
                           termination of the credit facility or the expiration
                           of the initial contract term; (these two term loans
                           bear interest, at the Company's option, at either (i)
                           the Bank's prime rate as in effect from time to time
                           plus 0.75% or (ii) the LIBOR rate plus 3%); and

                  c)       Up to a $500,000 two year term loan, with an annual
                           excess cash flow recapture provision of 50%. The
                           interest rate for this loan is the Bank's prime rate
                           as in effect from time to time plus 2%.

The proceeds of these credit facilities were used by the Company to refinance
all of its existing bank debt with Comerica Bank and for working capital needs
associated with the Company's growth. As of December 28, 2002, the outstanding
balance under the revolving credit facility was $8,500,000. The outstanding
balances on the cash flow term loan and the equipment line were $417,000 and
$97,000, respectively.

The Company has failed to comply with certain financial covenants made by the
Company under the Loan Agreement. Specifically, the Company failed to comply
with (i) the covenant requiring that the Company's fixed charge coverage ratio
be not less than 0.75:1.00 for the three month period ended September 28, 2002,
(ii) the covenant that the aggregate cost of all fixed capital assets purchased
during the fiscal year ended March 31, 2003 would not exceed $615,000 (excluding
capital expenditures made prior to the date of the Loan Agreement which relate
to the Company's headquarters facility); (iii) the covenant requiring that the
Company's leverage ratio not exceed 3.00:1.00 for the nine month period ended
December 28, 2002; and (iv) the covenant requiring that the Company's fixed
charge coverage ratio be not less than 1.10:1.00 for the nine month period ended
December 28, 2002. The Company's failure to comply with each of these financial
covenants constituted individual events of default under the terms of the Loan
Agreement. On December 13, 2002, the Bank and the Company entered into a
Forbearance Agreement under which the Bank agreed, subject to certain
conditions, to forbear for a period of sixty (60) days from exercising its
rights and remedies with respect to the events of default that had occurred as
of the date of the Forbearance Agreement. The Forbearance Agreement also
modified the Loan Agreement by temporarily increasing the maximum revolving loan
limit to $8,500,000 during this period, increasing the applicable interest rate
payable on the outstanding principal balance of each credit facility by 0.50%,
suspending the availability of the LIBOR interest rate option for each credit
facility, suspending the ability of the Company to obtain advances under the
equipment loan facility, and suspending the Company's ability to make any
payments on any subordinated debt. Under the terms of the Forbearance Agreement,
the Company was also required to obtain additional subordinated debt financing
of at least $3,500,000, but not greater than $4,500,000, on or before January
31, 2003. On February 13, 2003, the Bank agreed, pursuant to the terms of an
amendment to the Forbearance Agreement, not to exercise its rights and remedies
with respect to events of default pertaining to the four financial covenants
listed above until March 3, 2003. Pursuant to the terms of an agreement dated
February 14, 2003, the Bank has agreed to waive the Company's compliance with
the four financial covenants listed above. The Bank and the Company are
currently in the process of determining the amended financial covenants which
will be in effect for the periods ending on or after December 29, 2002.

                                       32
<PAGE>

Should the Company have any other event of default under the Loan Agreement or
the Forbearance Agreement, the entire amount of the outstanding loans extended
by the Bank to the Company will become immediately callable as a consequence of
such default. Based on the terms of the Forbearance Agreement and the status of
the current negotiations between the Company and the Bank concerning the terms
of the additional financing required to be obtained by the Company pursuant to
the terms of the Forbearance Agreement, management of the Company believes that
the Bank credit facilities will continue to be available to the Company.
However, the continued availability of such credit facilities to the Company
through the remaining scheduled term of such facilities will be dependent upon
the Company's ability in the future to comply with all of the terms of the Loan
Agreement and any other agreements related to such credit facilities.

The Company, the Bank and Chatham Investments LLC ("Chatham") have executed a
conditional commitment letter under which the Company's maximum revolving loan
limit under the Loan Agreement would be further increased to $12,500,000, and
the Bank and Chatham would make available to the Company additional term loans
totaling up to $4,500,000 in order to provide additional working capital to the
Company. While the terms of these proposed additional credit facilities have yet
to be finalized by the parties, it is anticipated that the interest rates
applicable to the additional credit facilities would be substantially higher
than the rates which the Company is currently being charged under the existing
Bank facilities, that the Company would be charged significant fees by the Bank
and/or Chatham for making such mezzanine financing available to the Company, and
that, as additional compensation for their increased risk, the Bank and/or
Chatham would receive some form of equity "kicker" (such as warrants to purchase
shares of the Company's common stock). It is anticipated that the proposed
transactions between the Company, the Bank and Chatham, if consummated, will
close in early March 2003.

On May 10, 2002, the Company purchased the property where its corporate
headquarters is located for $2,565,000. The Company obtained a $1,923,750,
15-year mortgage loan, with a five-year balloon payment. The mortgage bore
interest at prime plus 2%. This mortgage was refinanced on August 14, 2002 as
part of the Company's new credit facility with LaSalle Business Credit, Inc. The
mortgage was replaced with a $2,200,000, 15-year mortgage loan, with a
three-year balloon payment. The mortgage bears interest at prime plus .75%.

During fiscal 1999, the Company received a $150,000 technology improvement fund
loan from the Ben Franklin Technology Center of Southeastern Pennsylvania. The
loan was for the initial phase development of the Company's Omni2000 software
package. The loan principal is payable in quarterly installments of $7,500 over
five years. Interest is payable quarterly, contingent on the commercial success
of the product, in an amount equal to 3% of the product sales for the
immediately preceding quarter, until a cumulative amount equal to 50% of the
loan has been repaid. The outstanding loan balance as of December 28, 2002 was
$38,000.


                                       33
<PAGE>

In June 1999, the Company entered into an agreement with its chairman, Javad K.
Hassan, whereby Mr. Hassan will provide a $500,000 line of credit to the
Company, with interest payable at 10%. Payment of all outstanding borrowings and
interest is due by December 31, 2002. On November 1, 2002, the Company borrowed
$250,000 under the line. This amount remains outstanding pending the Company
obtaining additional bank financing.

Under the terms of the NeST development agreement, the Company has the option to
pay for NeST development services either in cash or by the issuance of warrants
to purchase AM Common Stock. The Company elected to issue NeST warrants to
purchase 4,234,018 shares of the Company's Common Stock, at an exercise price of
$.01 per share, in lieu of payment of $670,000 of NeST development services for
the period from November 1998 through April 3, 1999. The Company also issued
warrants to purchase 3,628,316 shares of the Company's Common Stock, at an
exercise price of $.01 per share, in lieu of payment of $1,157,197 of NeST
development services for the period from April 4, 1999 through January 1, 2000.
Since January 2, 2000, the Company has paid cash for NeST development services.
As a result of improved operations, the Company expects to pay ongoing NeST
development expenses in cash, but continues to have the option to issue
warrants, up to a limit of 10 million total shares, under the NeST agreement.
The Company has negotiated favorable rates with NeST for services performed by
both the India-based and U.S.-based employees of NeST. The Company may not be
able to obtain the same negotiated rates from outside third parties.

In October 2000, the Company's majority shareholder exercised his right to
convert 6,000 shares of senior convertible preferred stock into 800,000 shares
of the Company's common stock. In October 2001, the Company's majority
shareholder exercised his right to convert 19,825 shares of senior convertible
preferred stock into 3,965,000 shares of the Company's common stock at an
exercise price of $0.50 per share. Following such conversion, no shares of the
Company's senior convertible preferred stock remained outstanding.

In January 2001, the NeST related companies exercised their warrants to purchase
7,862,334 shares of the Company's common stock at an exercise price of .01 per
share.

In January 2002, the Company's Board of Directors authorized the Company's
investment banker to raise up to $2,000,000 in additional equity financing
through a private placement of restricted shares of the Company's Series A
Preferred Stock, at a price of $27.00 per share. The Series A Preferred Stock
bears a 10% annual cumulative dividend. Each share of the Series A Preferred
Stock can be converted into 100 shares of the Company's Common Stock, subject to
standard anti-dilution provisions. Purchasers of each share of the Company's
Series A Preferred Stock in this offering are entitled to receive a warrant to
purchase up to 25 shares of the Company's Common Stock, at a price of $0.27 per
share. These warrants vest immediately and are exercisable for six years from
the date of purchase. The sale of shares of the Series A Preferred Stock in this
offering is restricted to accredited investors, including without limitation
certain members of the Company's Board of Directors. On January 29, 2002, the
Company's Chairman and CEO purchased $1,000,000 of the shares. In February 2002,
one of the Company's Board of Directors and a family member of such director
each purchased $200,000 of the preferred shares. The remaining $600,000 of the
equity offering was not purchased as of May 21, 2002, at which time the
Company's Board of Directors voted to terminate the offering.

                                       34
<PAGE>

Capital expenditures totaled $3,570,000 in the first nine months of fiscal 2003
compared to $245,000 in the first nine months of fiscal 2002. Capital
expenditures include computer equipment, software, manufacturing assembly/test
equipment, test lab equipment, office furniture/fixtures, vehicles, facility
improvements and service technician equipment. In addition, in fiscal 2003,
these expenditures also include $2.6 million associated with the purchase of the
Company's corporate headquarters and $163,000 for the purchase of a new trade
show exhibit. The increase in capital expenditures in fiscal 2003 is also due to
the growth of the Company's Broadband Services Unit.

Due to the tremendous growth in the Company's operations and the operating
losses sustained for the quarter and nine months ended December 28, 2002, the
Company does not believe that cash from profitable operations, available credit
facilities and the ability to pay for NeST development services in cash or
warrants will provide sufficient liquidity to support its projected operations
through the next fiscal year. Accordingly, management of the Company is
currently evaluating potential sources of additional funding to finance the
Company's projected cash needs, including without limitation additional sources
of debt and/or equity financing. There can be no assurances, however, that
additional equity offerings, additional banking arrangements or other sources of
financing, if needed, will be available to the Company on acceptable terms, if
at all.

Recent Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) 143, "Accounting for Asset Retirement
Obligations". This Statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS 143 requires an enterprise to record the
fair value of an asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the retirement of a tangible
long-lived asset. SFAS 143 also requires the enterprise to record the contra to
the initial obligation as an increase to the carrying amount of the related
long-lived asset (i.e., the associated asset retirement costs) and to depreciate
that cost over the remaining useful life of the asset. The liability is adjusted
at the end of each period to reflect the passage of time (i.e., accretion
expense) and changes in the estimated future cash flows underlying the initial
fair value measurement. Enterprises are required to adopt SFAS 143 for fiscal
years beginning after June 15, 2002. Management expects to adopt SFAS 143 on
March 30, 2003, and is currently determining the impact of the adoption.

In October 2001, the FASB issued SFAS 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS 144 supersedes SFAS 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
and certain provisions of APB Opinion No. 30 "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
144 establishes standards for long-lived assets to be disposed of, and redefines
the valuation and presentation of discontinued operations. SFAS 144 is effective
for fiscal years beginning after December 15, 2001, and interim periods within
those fiscal years. The adoption of SFAS 144 did not have a material effect on
the Company's financial position, results of operations, or cash flows.


                                       35
<PAGE>

In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". SFAS
145 eliminates extraordinary accounting treatment for reporting gain or loss on
debt extinguishment, and amends other existing authoritative pronouncements to
make various technical corrections, clarify meanings, or describe their
applicability under changed conditions. The provisions of SFAS 145 related to
the rescission of FASB Statement No. 4 are applicable in fiscal years beginning
after May 15, 2002, the provisions related to FASB Statement No. 13 are
effective for transactions occurring after May 15, 2002, and all other
provisions are effective for financial statements issued on or after May 15,
2002; however, early application is encouraged. Debt extinguishments reported as
extraordinary items prior to scheduled or early adoption of SFAS 145 would be
reclassified in most cases following adoption. Management does not expect the
adoption of SFAS 145 to have a material effect on the Company's financial
position, results of operations, or cash flows.

In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with
Exit or Disposal Activities". SFAS 146 requires recording costs associated with
exit or disposal activities at their fair values when a liability has been
incurred. Under previous guidance, certain exit costs were accrued upon
management's commitment to an exit plan, which is generally before an actual
liability has been incurred. The requirements of SFAS 146 are effective
prospectively for exit or disposal activities initiated after December 31, 2002;
however, early application is encouraged. Management does not expect the
adoption of SFAS 146 to have a material effect on the Company's financial
position, results of operations, or cash flows.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 requires that upon
issuance of a guarantee, a guarantor must recognize a liability for the fair
value of an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
recognition provisions of FIN 45 are effective for any guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002. Management is currently evaluating the effects of FIN 45; however, it does
not expect that the adoption of FIN 45 will have a material effect on the
Company's financial position, results of operations, or cash flows.

In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure". SFAS 148 amends SFAS 123 "Accounting
for Stock-Based Compensation," to provide alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. SFAS 148 is
effective for fiscal years beginning after December 15, 2002. The expanded
annual disclosure requirements and the transition provisions are effective for
fiscal years ending after December 15, 2002. The interim disclosure provisions
are effective for financial reports containing financial statements for interim
periods beginning after December 15, 2002. Management does not expect the
adoption of SFAS 148 to have a material effect on the Company's financial
position, results of operations, or cash flows.

                                       36

<PAGE>

Item 3.  Controls and Procedures

Based on their evaluation of the Company's disclosure controls and procedures
(as defined in 17 C.F.R. Sections 240.13a-14(c) and 240.15d-14(c)) as of a date
within 90 days prior to the filing of this quarterly report, the issuer's Chief
Executive Officer and Chief Financial Officer concluded that the effectiveness
of such controls and procedures was adequate in timely alerting them to material
information relating to the Company required to be included in its SEC periodic
filings.

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation. There were also no significant deficiencies or material
weaknesses identified for which corrective actions needed to be taken.


                                       37


<PAGE>

                           PART II. OTHER INFORMATION

Item 3. Defaults Upon Senior Securities

Under a Loan and Security Agreement dated August 13, 2002 (the "Loan
Agreement"), the Company obtained from LaSalle Business Credit, Inc. (the
"Bank"), as agent for Standard Federal Bank National Association, a $10,700,000
asset-based credit facility collateralized by all assets of the Company. The
Company failed to comply with certain financial covenants made by the Company
under the Loan Agreement. Specifically, the Company failed to comply with (i)
the covenant requiring that the Company's fixed charge coverage ratio be not
less than 0.75:1.00 for the three month period ended September 28, 2002, (ii)
the covenant that the aggregate cost of all fixed capital assets purchased
during the fiscal year ended March 29, 2003 would not exceed $615,000 (excluding
capital expenditures made prior to the date of the Loan Agreement which relate
to the Company's headquarters facility); (iii) the covenant requiring that the
Company's leverage ratio not exceed 3.00:1.00 for the nine month period ended
December 28, 2002; and (iv) the covenant requiring that the Company's fixed
charge coverage ratio be not less than 1.10:1.00 for the nine month period ended
December 28, 2002. The Company's failure to comply with each of these financial
covenants constituted individual events of default under the terms of the Loan
Agreement. On December 13, 2002, the Bank and the Company entered into a
Forbearance Agreement under which the Bank agreed, subject to certain
conditions, to forbear for a period of sixty (60) days from exercising its
rights and remedies with respect to the events of default that had occurred as
of the date of the Forbearance Agreement. See "Management's Discussion and
Analysis of Operations -- Liquidity and Capital Resources" for a more detailed
description of the terms of the Forbearance Agreement. On February 13, 2003, the
Bank agreed, pursuant to the terms of an amendment to the Forbearance Agreement,
not to exercise its rights and remedies with respect to events of default
pertaining to the four financial covenants listed above until March 3, 2003.
Pursuant to the terms of an agreement dated February 14, 2003, the Bank has
agreed to waive the Company's compliance with the four financial covenants
listed above.


                                       38
<PAGE>

Item 4. Submission of Matters to a Vote of Securities Holders

         (a)      The Company's Annual Meeting of Stockholders was held on
                  November 15, 2002.

         (b)      At such Annual Meeting, a proposal to amend the Company's
                  Certificate of Incorporation and By-laws to eliminate the
                  requirement to annually elect directors and to substitute, in
                  its stead, a classified board of directors having three
                  classes with staggered three-year terms was voted upon. The
                  result of such voting were as follows:


                                    For              Against           Abstain
                                    ---              -------           -------
                                    35,159,382       711,310           199,613

         (c)      The following directors were elected at the Annual Meeting:

         Director                   For             Against            Abstain
         --------                   ---             -------            -------
         R. Barry Borden            48,344,974          400            267,764
         Jill D. Felix              48,333,707       11,667            267,764
         C. David Ferguson          48,332,307       13,067            267,764
         Javad K. Hassan            48,332,482       12,892            293,764
         Alvin Hoffman              48,345,374            0            267,764
         George L. Kotkiewicz       48,331,907       13,467            267,764
         Keith D. Schneck           48,345,374            0            379,229

         (d)      At such Annual Meeting, a proposal  to increase the aggregate
                  number of shares of the Company's Common Stock authorized for
                  issuance under the Company's 1999 Stock Option Plan from
                  15,000,000 to 25,000,000 shares was voted upon. The results of
                  such voting were as follows:

                                    For              Against           Abstain
                                    ---              -------           -------
                                    35,153,920       1,336,745         25,030

         (e)      At such Annual Meeting, a proposal to amend the Company's
                  Certificate of Incorporation to increase the number of shares
                  of Common Stock authorized to be issued by the Company from
                  100,000,000 to 150,000,000 shares was voted upon. The results
                  of such voting were as follows:

                                    For              Against           Abstain
                                    ---              -------           -------
                                    47,390,629       1,128,629         13,280


                                       39
<PAGE>
Item 5. Other Information.

On December 8, 2002, C. David Ferguson resigned his position on the Company's
Board of Directors due to personal reasons. The Company has not yet filled the
vacant seat on the Board, but it is expected that an appointment to fill the
vacant Board seat will be made before the end of the current fiscal year.

Item 6. Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  3.1      (3.1) Restated Certificate of Incorporation of
                           Registrant(1)

                  3.2      (3.1) Certificate of Amendment to Certificate of
                           Incorporation of Registrant(2)

                  3.3      (3.3) Certificate of Designation for Series A
                           Preferred Stock dated January 23, 2002(9)

                  3.4      (3.2) Amended By-Laws of Registrant(1)

                  4.1      (4.1) Specimen of Common Stock Certificate, par value
                           $.10 per share(1)

                  4.2      (4.2) Series A Common Stock Purchase Warrant(9)

                  4.3      (4.3) Amended and Restated Warrant issued to
                           Scientific-Atlanta(9)

                  9.1      (9.1) Voting Trust and Share Participation
                           Agreement(4)

                  9.2      (9-b) First Amendment to Voting Trust and Share
                           Participation Agreement dated November 30, 2001(3)

                  9.3      (9-c) Stock Purchase Rights Agreement, dated as of
                           December 30, 2001, between AM and Javad K. Hassan(3)

                  10.1     (10-a) 1991 Incentive Stock Option Plan(5)

                  10.2     (10-b) Joint Development Agreement between AM and
                           Scientific-Atlanta dated May 1996(6)

                  10.3     (10-c) Distribution Agreement and Manufacturing
                           License dated June 14, 1996(6)

                  10.4     (10-d) Registration Rights Agreement dated June 17,
                           1996(6)

                  10.5     (10-e) Warrant Agreement dated June 17, 1996(6)

                  10.6     (10-f) 1999 Stock Option Plan(4)

                                       40
<PAGE>

                  10.7     (10.7) Loan and Security Agreement dated as August
                           13, 2002 between the Company, its direct and indirect
                           subsidiaries and LaSalle Business Credit, Inc., as
                           agent for Standard Federal Bank National Association,
                           as lender(10)

                  10.8     (10-i) Consulting Services Agreement between the
                           Company and NeST(7)

                  10.9     (10.1)Manufacturing Services Agreement between the
                           Company and NeSTronix(4)

                  10.10    (10.10) Common Stock Purchase Warrant issued to
                           Investec PMG Capital(9)

                  10.11    (2) Stock Purchase Agreement between the Company,
                           AMBS, SRS Communications Corporation, EDJ
                           Communications, Inc, David P. Sylvestre, Clifford P.
                           Sylvestre, Edward L. Reynolds, Joanne Sylvestre, and
                           Elizabeth D. Reynolds(8)

                  10.12    (4) Registration Rights Agreement dated as of October
                           1, 2001 between the Company and David P. Sylvestre,
                           Clifford P. Sylvestre, Edward L. Reynolds, Joanne
                           Sylvestre, Donna M. Sylvestre and Elizabeth D.
                           Reynolds(8)

                  10.13    (10-m) Agreement to Terminate Service Agreement
                           between the Company and Javad Hassan (Executive)
                           dated November 1, 2001(3)

                  10.14    (10-n) Executive Employment Agreement between the
                           Company and Javad Hassan dated November 1, 2001(3)

                  10.15    (10-o) Loan Agreement between Javad Hassan (Executive
                           Borrower) and the Company dated December 30, 2001(3)

                  10.16    (10-16) Agreement and Plan or Merger for Acquisition
                           of Nex-Link Communications Project Services, LLC(9)

                                       41
<PAGE>

                  10.17    (10.17) Amended and Restated Subordinated Note from
                           AM Broadband Services, Inc. in favor of David P.
                           Sylvestre, Clifford P. Sylvestre, Edward L. Reynolds,
                           Joanne Sylvestre, Donna M. Sylvestre and Elizabeth D.
                           Reynolds(10)

                  10.18    (10.18) First Amendment to Stock Purchase Agreement
                           (SRS/EDJ acquisition)(9)

                  10.19    (10.19) Employment Agreement with Linda Johnson(9)

                  10.20    (10.20) Employment Agreement with Michael N.
                           Johnson(9)

                  10.21    Forbearance Agreement dated as of December 13, 2002
                           between the Company, its direct and indirect
                           subsidiaries and LaSalle Business Credit, Inc., as
                           agent for Standard Federal Bank National Association,
                           as lender (filed herewith)

                  10.22    Letter Agreement dated as of February 13, 2003
                           amending Forbearance Agreement (filed herewith)

                  10.23    Letter Agreement dated as of February 14, 2003
                           waiving events of default under Forbearance Agreement
                           (filed herewith)

                  21.      (21) Subsidiaries of the Company(10)

                  99.1     Certification of Chief Executive Officer Pursuant to
                           Section 1350 of Title 18 of the United States Code,
                           as Adopted Pursuant to Section 906 of the
                           Sarbanes-Oxley Act of 2002 (filed herewith)

                  99.2     Certification of Chief Financial Officer Pursuant to
                           Section 1350 of Title 18 of the United States Code,
                           as Adopted Pursuant to Section 906 of the
                           Sarbanes-Oxley Act of 2002 (filed herewith)


(1)      Incorporated by reference to the Exhibit with the number indicated
         parenthetically in Registrant's Registration Statement on Form S-1,
         File No. 33-10163.

(2)      Incorporated by reference to the Exhibit number indicated in
         Registrant's Annual Report on Form 10-KSB for the fiscal year ended
         March 31, 2001.

(3)      Incorporated by reference to the Exhibit number indicated in
         Registrant's Report Form 10-QSB for the fiscal quarter ended December
         29, 2001.

(4)      Incorporated by reference to the Exhibit number indicated in
         Registrant's Annual Report on Form 10-KSB for the fiscal year ended
         April 3, 1999.

                                       42
<PAGE>

(5)      Incorporated by reference to the Exhibit number indicated in
         Registrant's Annual Report on Form 10-K for the fiscal year ended March
         28, 1992.

(6)      Incorporated by reference to the Exhibit number indicated in
         Registrant's Annual Report on Form 10-KSB for the fiscal year ended
         March 30, 1996.

(7)      Incorporated by reference to the Exhibit number indicated in
         Registrant's Report on Form 8-K dated November 9, 1998.

(8)      Incorporated by reference to the Exhibit number indicated in the
         Registrant's Report on Form 8-K dated October 15, 2001.

(9)      Incorporated by reference to the Exhibit number indicated in the
         Registrant's Report on Form 10-KSB for the fiscal year ended March 30,
         2002

(10)     Incorporated by reference to the Exhibit number indicated in
         Registrant's Report Form 10-QSB for the fiscal quarter ended September
         28, 2002.


                                   SIGNATURES

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

                                AM COMMUNICATIONS, INC.
                                (Registrant)


Date:    February 19, 2003      By: /s/ H. Charles Wilson, III
                                    --------------------------------------------
                                    H. Charles Wilson, III, Corporate Controller
                                    and Authorized Representative of the
                                    Registrant



                                       43
<PAGE>



            Certification of the Chief Executive Officer Pursuant to
                 Section 302 of the Sarbanes-Oxley Act of 2002


I, Javad K. Hassan, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of AM Communications,
     Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

                                       44
<PAGE>


     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Dated: February 19, 2003


By:    /s/   Javad K. Hassan
       ------------------------------------
       Javad K. Hassan
       Chairman and Chief Executive Officer


                                       45



<PAGE>

                  Certification of the Chief Financial Officer
               (or equivalent thereof) Pursuant to Section 302 of
                         the Sarbanes-Oxley Act of 2002


I, H. Charles Wilson, III, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of AM Communications,
     Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

                                       46
<PAGE>

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Dated: February 19, 2003

By:    /s/   H. Charles Wilson, III
       ----------------------------
       H. Charles Wilson, III
       Corporate Controller


                                       47