<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 JUNE 29, 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 August 7, 2002 there were 63,394,016 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 JUNE 29, 2002

                                      INDEX


PART I.    FINANCIAL INFORMATION                                       PAGE NO.

Item 1.    Consolidated Financial Statements

           Consolidated Balance Sheets - June 29 (Unaudited) and
           March 30, 2002                                                 3

           Consolidated Statements of Operations - Quarter Ended
           June 29, 2002 and June 30, 2001 (Unaudited)                    4

           Consolidated Statements of Cash Flows -- Quarter Ended
           June 29, 2002 and June 30, 2001 (Unaudited)                    5

           Notes to Consolidated Financial Statements                   6 - 12

Item 2.    Management's Discussion and Analysis of Operations          13 - 22



PART II.   OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K                            23 - 27





                                       2



<PAGE>






Item. 1 Financial Statements

                    AM Communications, Inc. and Subsidiaries
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                              June 29,         March 30,
                                                                                                2002             2002
                                                                                            ------------    ------------
<S>                                                                                         <C>            <C>
ASSETS
Current assets
  Cash                                                                                      $    228,000    $    192,000
  Accounts receivable, net of reserves of $730,000 and $1,122,000, respectively                5,710,000       6,288,000
  Due from affiliates                                                                            411,000         157,000
  Inventory                                                                                    2,571,000       2,826,000
  Prepaid expenses and other                                                                     667,000         348,000
                                                                                            ------------    ------------
    Total current assets                                                                       9,587,000       9,811,000


Property and equipment, net                                                                    4,460,000       1,719,000
Notes receivable - officers                                                                    1,033,000       1,033,000
Goodwill                                                                                       3,735,000       3,735,000
Other intangible assets, net                                                                   1,347,000       1,425,000
Other assets                                                                                     160,000         144,000
                                                                                            ------------    ------------
    Total assets                                                                            $ 20,322,000    $ 17,867,000
                                                                                            ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities
  Current portion of mortgage and notes payable                                             $    285,000    $    152,000
  Current portion of subordinated note payable                                                   920,000         920,000
  Bank line of credit                                                                          2,991,000       2,991,000
  Accounts payable                                                                             2,898,000       2,381,000
  Accrued expenses                                                                             1,518,000       1,812,000
  Deferred revenue                                                                               104,000         120,000
  Due to affiliates                                                                              976,000         252,000
                                                                                            ------------    ------------
    Total current liabilities                                                                  9,692,000       8,628,000
                                                                                            ------------    ------------


Mortgage and notes payable - long term                                                         2,075,000         333,000
Subordinated note payable                                                                      1,380,000       1,610,000
Senior convertible redeemable preferred stock, $100 par value, authorized 1,000,000
  shares; issued and outstanding 51,852 shares at June 29 and March 30, 2002                   1,400,000       1,400,000

Commitments and contingencies                                                                          -               -


Stockholders' equity
  Common stock, $0.10 par value, authorized 100,000,000 shares at June 29 and
     March 30, 2002, issued and outstanding 56,494,016 at June 29 and March 30, 2002           5,640,000       5,640,000
Capital in excess of par                                                                      36,902,000      36,851,000
Accumulated deficit                                                                          (36,767,000)    (36,595,000)
                                                                                            ------------    ------------
    Stockholders' equity                                                                       5,775,000       5,896,000
                                                                                            ------------    ------------
Total liabilities and stockholders' equity                                                  $ 20,322,000    $ 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
<TABLE>
<CAPTION>


                                                                             Quarter ended
                                                                      ----------------------------
                                                                        June 29,        June 30,
                                                                          2002            2001
                                                                      ------------    ------------

<S>                                                                   <C>             <C>
Revenues                                                              $  9,739,000    $  4,026,000
                                                                      ------------    ------------
Costs and expenses
Cost of sales                                                            6,060,000       1,895,000
Selling, general and administrative                                      2,739,000         899,000
Research and development                                                 1,016,000         917,000
                                                                      ------------    ------------
                                                                         9,815,000       3,711,000
                                                                      ------------    ------------

Operating income (loss)                                                    (76,000)        315,000

Other expense, net                                                         (96,000)        (37,000)
                                                                      ------------    ------------
Income (loss) before income taxes                                         (172,000)        278,000
Income tax (benefit) provision                                                --             9,000
                                                                      ------------    ------------

Net income (loss)                                                     $   (172,000)   $    269,000
                                                                      ============    ============
Basic net income (loss) per share                                     $       --      $       0.01

Diluted net income (loss) per share                                   $       --      $       0.01

Shares used in computation of basic net income (loss) per share         56,394,000      43,365,000
                                                                      ============    ============
Shares used in computation of diluted net income (loss) per share       56,394,000      51,070,000
                                                                      ============    ============
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       4
<PAGE>



                    AM Communications, Inc. and Subsidiaries
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>


                                                                                                     Quarter ended
                                                                                               --------------------------
                                                                                                 June 29,       June 30,
                                                                                                   2002           2001
                                                                                               -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                            <C>            <C>
  Net income (loss)                                                                            $  (172,000)   $   269,000
  Adjustments to reconcile net income (loss) to net cash provided by (used in)
   operating activities
    Bad debt expense                                                                               325,000           --
    Depreciation and amortization                                                                  252,000         37,000
    Compensation related to stock purchase rights                                                   51,000           --
    Changes in assets and liabilities which provided (used) cash:
     Accounts receivable                                                                           253,000       (425,000)
     Due from affiliates                                                                          (254,000)      (147,000)
     Inventory                                                                                     255,000        120,000
     Prepaid expenses and other                                                                   (335,000)       (51,000)
     Accounts payable                                                                              517,000        (76,000)
     Deferred revenue                                                                              (16,000)          --
     Advances                                                                                         --          (56,000)
     Due to affiliates                                                                             724,000           --
     Accrued and other expenses                                                                   (294,000)       245,000
                                                                                               -----------    -----------
          Net cash provided by (used in) operating activities
                                                                                                 1,306,000        (84,000)
                                                                                               -----------    -----------


CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of capital assets                                                                    (2,915,000)       (15,000)
                                                                                               -----------    -----------
         Net cash used in investing activities                                                  (2,915,000)       (15,000)
                                                                                               -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from mortgage                                                                         1,924,000           --
  Exercise of stock options                                                                           --           40,000
  Payment on mortgage and notes payable                                                            (49,000)        (7,000)
  Payment on subordinated note payable                                                            (230,000)          --
  Payments under capital lease obligations                                                            --           (1,000)
                                                                                               -----------    -----------

          Net cash provided by financing activities                                              1,645,000         32,000
                                                                                               -----------    -----------

          Net increase (decrease)  in cash                                                          36,000        (67,000)

Cash
  Beginning                                                                                        192,000        350,000
                                                                                               -----------    -----------

  Ending                                                                                       $   228,000    $   283,000
                                                                                               ===========    ===========

Interest paid                                                                                  $   113,000    $    42,000
                                                                                               ===========    ===========

Income taxes paid                                                                              $      --      $      --
                                                                                               ===========    ===========
</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 June 29, 2002 and for the Quarters Ended
                         June 29, 2002 and June 30, 2001





1.       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 June
         29, 2002 and June 30, 2001 and for the three months ended June 29, 2002
         and 2001 have been prepared in accordance with accounting principles
         generally accepted in the United States. The Consolidated Balance Sheet
         as of June 29, 2002 and the related Consolidated Statements of
         Operations and Consolidated Statements of Cash Flows for the quarters
         ended June 29, 2002 and June 30, 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 ended June 29, 2002 are not necessarily
         indicative of the results that may be expected for the year ended March
         29, 2003.

         Consistent with the Company's plan to expand its Broadband Service
         Business Unit, the Company's wholly owned subsidiary, AM Broadband
         Services, Inc. acquired all the issued and outstanding common stock of
         SRS Communications Corporation and EDJ Communications, Inc. 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 and 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, which was the closing
         price of AM Communication'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, AM Broadband Services caused EDJ to be
         merged with and into SRS pursuant to the applicable provisions of
         Connecticut law (the "Merger"). Immediately upon the


                                       6
<PAGE>


         effectiveness of the 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 Merger, SRS is now
         the sole subsidiary of Broadband. 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.

         The following unaudited pro forma data summarizes the results of
         operations as if the above-mentioned acquisition 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 acquisition 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
         acquisition had occurred as of the beginning of the periods presented
         or that may be obtained in the future.

                                                                  Quarter
                                                                  Ended
                                                                  June 30, 2001
                                                                  -------------
         (In thousands, except per share data)

         Total revenue                                            $7,509,000
         Income before extraordinary items,
                  accounting change and taxes                        657,000
         Net income                                                  418,000
         Earnings per common share
                  Basic                                                  .01
                  Diluted                                                .01

2.       The consolidated financial statements include the accounts of AM
         Communications, Inc. and its wholly owned subsidiaries, AM Broadband
         Services, Inc., SRS Communications Corporation and AMC Services, Inc.
         All significant intercompany balances and transactions have been
         eliminated in consolidation. AM Nex-Link Communications, Inc. (formerly
         known as Nex-Link Acquisition Corp.), a Delaware corporation, was
         formed as a wholly-owned Subsidiary of AM Broadband Services, Inc. to
         complete the acquisition of Nex-Link Communication Project Services,
         LLC. This acquisition was completed on July 1, 2002. AM Nex-Link
         Communications, Inc. had no activity during the quarter ended June 29,
         2002.

3.       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.


                                       7
<PAGE>


         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. Individual contract are
         of short duration.

                                              June 29,              March 30,
                                                2002                  2002
                                              ---------             ---------

         Inventory comprises of:

             Raw material                     $1,416,000            $1,703,000
             Work in process                     821,000               718,000
             Finished goods                      434,000               505,000
                                              ----------            ----------
                                               2,671,000             2,926,000
         Inventory reserves                     (100,000)             (100,000)
                                              ----------            ----------

             Net inventory                    $2,571,000            $2,826,000
                                              ==========            ==========

                                               June 29,              March 30,
                                                 2002                  2002
                                              ---------             ----------

4.    Accrued expenses comprises of:

         Accrued compensation and
             commission                       $  647,000            $  789,000
         Accrued contracted research and
             development                              --               202,000
         Accrued interest and penalties          283,000               284,000
         Accrued rent                             22,000                22,000
         Accrued real estate taxes                39,000                43,000
         Accrued reserve                         226,000               226,000
         Accrued professional fees                15,000                64,000
         Accrued trade show costs                 12,000                    --
         Accrued income taxes                    116,000               135,000
         Other                                   158,000                47,000
                                              ----------            ----------
                                              $1,518,000            $1,812,000
                                              ==========            ==========


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 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.


                                       8
<PAGE>

         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 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 first quarter of fiscal
         2003 and first quarter of fiscal 2002, the Company paid $765,000 and
         $593,000 respectively, to NeST for development services. 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 ends
         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. 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 first
         quarter of fiscal 2003 and the first quarter of fiscal 2002, the
         Company paid $849,000 and $736,000, respectively, for services provided
         pursuant to the Manufacturing Agreement.


                                       9
<PAGE>


         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 first quarter of
         fiscal 2003 and first quarter of fiscal 2002, the Company charged fees
         totaling $58,000 and $258,000, respectively, for such services.

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

<TABLE>
<CAPTION>
                                                            Quarters Ended
                                                     -----------------------------
                                                      June 29,            June 30,
                                                        2002                2001
                                                     ------------      -----------
              <S>                                         <C>               <C>
          Net Income (Loss)                          $  (172,000)      $   269,000
                                                     ===========       ===========
            Basic shares                              56,394,000        43,365,000
            Convertible preferred stock                5,185,000         2,644,000
            Diluted options and warrants               5,194,000         5,060,000
                                                     -----------       -----------
            Diluted shares                            66,773,000        51,070,000
                                                     ===========       ===========
         Net income (loss) per common share:
            Basic                                            Nil              0.01
            Diluted                                          Nil              0.01
</TABLE>

         Net income (loss) per share-basic for the quarter ended June 29, 2002
         and June 30, 2001 is based on the weighted average number of shares of
         common stock outstanding. Net income per share-diluted for the quarter
         ended June 30, 2001 reflects the potential dilution that could occur if
         stock options and warrants were exercised. Net loss per share-diluted
         for the quarter ended June 29, 2002 does not reflect the potential
         dilution that could occur if stock options and warrants were exercised
         since the effect would be anti-dilutive.

7.       Supplemental cash flow and comprehensive income is as follows:

         Cash paid during the period:
                                                      Quarters Ended
                                              ---------------------------------
                                               June 29, 2002      June 30, 2001
                                              --------------      -------------
         Interest                                $113,000            $ 42,000
         Taxes                                         --                  --

         There was no comprehensive income for the periods presented.


                                       10
<PAGE>

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.

         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 ended June 29, 2002 and June 30, 2001 are shown below:
<TABLE>
<CAPTION>
                                                          Products               Services            Consolidated
                                                      ---------------         --------------       --------------
             <S>                                            <C>                     <C>                    <C>
     Quarter ended June 29, 2002
     ---------------------------
           Net sales                                   $    4,982,000         $   4,757,000         $   9,739,000
           Interest income                                      1,000                     -                 1,000
           Interest expense                                    77,000                35,000               112,000
           Depreciation and amortization                       87,000               165,000               252,000
           Income tax expense                                       -                     -                     -
           Capital expenditures                             2,861,000                56,000             2,917,000
           Operating income (loss)                            455,000              (531,000)              (76,000)

           Total assets as of June 29, 2002                 9,647,000            10,675,000            20,322,000


     Quarter ended June 30, 2001
     ---------------------------
           Net sales                                   $    3,795,000         $     231,000         $   4,026,000
           Interest income                                          -                     -                     0
           Interest expense                                    36,000                     -                36,000
           Depreciation and amortization                       37,000                     -                37,000
           Income tax expense                                   9,000                     -                 9,000
           Capital expenditures                                 9,000                 6,000                15,000
           Operating income (loss)                            346,000               (31,000)              315,000

           Total assets as of June 30, 2001                 6,478,000               309,000             6,787,000

</TABLE>


9.       RECENT ACCOUNTING PRONOUNCEMENTS

         In June 2001, the FASB approved the issuance of SFAS No. 141, Business
         Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.
         For the Company, these statements became effective after March 30,
         2002.

         SFAS No. 141 addresses financial accounting and reporting for business
         combinations and supercedes APB Opinion No. 16, Business Combinations,
         and SFAS No. 38, Accounting for Preacquisition Contingencies of
         Purchased Enterprises. SFAS No. 141 is effective for all business
         combinations initiated after June 30, 2001 and eliminates the
         pooling-of-interest method of accounting for business combinations
         except for qualifying business combinations that were initiated prior
         to July 1, 2001. SFAS No. 141 also changes the criteria to recognize
         intangible assets apart from goodwill. The Company adopted SFAS No. 141
         on July 1, 2001. The provisions of SFAS No. 141 were applied to the SRS
         acquisition in October 2001.

         SFAS No. 142 stipulates that goodwill and other intangible assets with
         indefinite lives are no longer subject to amortization, but must be
         evaluated periodically for impairment and written down and charged to
         results of operations only in the periods in which the recorded value
         of goodwill and certain intangibles is more than the fair value.
         Separable intangible assets that are not deemed to have indefinite life
         will be amortized over their useful lives.

         The Company had no recorded goodwill and intangibles with indefinite
         lives recorded prior to the acquisition recorded on October 1, 2001.
         The Company has applied the non-amortization and purchase accounting
         provisions of SFAS Nos. 141 and 142 to the SRS acquisition.

         In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
         Retirement Obligations. SFAS No. 143 establishes accounting standards
         for the recognition and measurement of legal obligations associated
         with the retirement of tangible long-lived assets that result from the
         acquisition, development and (or) the normal operation of long-lived
         assets, except for certain obligations of lessees. SFAS No. 143 is
         effective for financial statements issued for fiscal years beginning
         after June 15,2002 and requires recognition of a liability for an asset
         retirement obligation in the period in which it is incurred. Management
         is in the process of evaluating the impact this standard will have on
         the Company's financial statements.

         In August 2001, the FASB issued SFAS No. 144, Accounting for the
         Impairment or Disposal of Long-Lived Assets, that addresses financial
         accounting and reporting for the impairment or disposal of long-lived
         assets. While SFAS No. 144 supercedes SFAS No. 121, Accounting for the
         Impairment of Long-Lived Assets and for Long-Lived Assets to Be
         Disposed of, it removes goodwill from its impairment losses on
         long-lived assets held for use. SFAS No. 144 also supercedes the
         accounting and reporting provisions of APB

                                       11
<PAGE>
         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, for the
         disposal of a segment of a business. However, it retains the
         requirement in APB Opinion No. 30 to report separately discontinued
         operations and extends that reporting to a component of an entity that
         either has been disposed of (by sale, abandonment, or in a distribution
         to owners) or is classified as held for sale. SFAS No. 144 is effective
         for fiscal years beginning after December 15, 2001 and interim periods
         within those years. The adoption of this statement did not have a
         significant impact on the Company's financial position.

10.  Income Taxes:

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

     The provision for taxes on income consisted of:
<TABLE>
<CAPTION>
                                                                           Quarter Ended
                                                                           -------------
                                                                     June 29,            June 30,
                                                                        2002               2001
                                                                  --------------       ------------
           <S>                                                            <C>                <C>
     Current Income Taxes                                         $        --          $       --
     Deferred Income Taxes                                              (33,000)           114,000
     Change in Valuation Allowance                                       33,000           (105,000)
                                                                  -------------        ------------
     Net                                                          $          --        $     9,000
                                                                  =============        ===========
</TABLE>

     A reconciliation between the provision (benefit) 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>
                                                                             Quarter Ended
                                                                             -------------
                                                                      June 29,            June 30,
                                                                        2002                2001
                                                                 ------------------  ---------------
             <S>                                                          <C>                  <C>
     Federal Income Tax Provision (Benefit) at
        Statutory Rate                                            $     (58,000)       $    91,000
     State Income Taxes, Net of Federal Benefit                         (11,000)            18,000
     Research and Development Credits                                        --             (5,000)
     Permanent Differences                                                1,000              1,000
     Change in Valuation Allowance                                       33,000            105,000
     Other                                                              (35,000)             9,000
                                                                  --------------     -------------
     Income Tax Provision                                         $          --        $       --
                                                                  ==============     =============
</TABLE>
     The components of the net deferred tax asset as of June 29 and March 30
were as follows:
<TABLE>
<CAPTION>
                                                                      June 29,             March 30,
                                                                        2002                 2002
                                                                 -----------------   ---------------
           <S>                                                            <C>                 <C>
     Deferred Tax Items:
       Inventory                                                 $       25,000        $    296,000
       Accrued Expenses and Reserves                                    517,000             403,000
       Depreciation and Amortization                                    (83,000)            (87,000)
          Net Operating Loss Carryforwards                            7,324,000           7,138,000
       Tax Credit Carryforwards                                         743,000             743,000
       Valuation Allowance                                           (8,526,000)         (8,493,000)
                                                                 ----------------    ---------------
       Net Deferred Tax Assets                                   $           --        $         --
                                                                 ================    ===============
</TABLE>

       The Company has total net operating loss carryforwards available to
offset future taxable income of approximately $23 million expiring at various
times from 2003 to 2022. Due to certain statutory limitations under 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.

<PAGE>


11.      SUBSEQUENT EVENTS

         On August 14, 2002, subsequent to the end of the first quarter of
fiscal 2003, the Company entered into a $10,700,000 asset-based credit facility
with LaSalle Business Credit, Inc., as agent for Standard Federal Bank National
Association (the "Bank"), 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;

                  (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 will be used by the Company to
refinance all of its existing bank debt and for working capital needs associated
with the Company's growth.
<PAGE>

         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 "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 Merger. As a result of the completion of the Merger on July 1, 2002,
Nex-Link became a wholly-owned corporate subsidiary of Broadband. Simultaneously
with the completion of the Merger, the Acquisition Subsidiary changed its name
and is currently operating under the name "AM Nex-Link Communications, Inc."

         As a result of the 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
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.

                  (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 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 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 consideration payable by the Acquisition Subsidiary to the Members,
as evidenced by the Subsidiary Note, and any amounts due under the Company Note,
will be reduced on a dollar-for-dollar basis if and to the extent that the
aggregate Net Book Value of Nex-Link (defined as the book value of Nex-Link's
assets minus the book value of Nex-Link's liabilities), as of the Closing, is
less than $200,000.00. The Aggregate Net Book Value of Nex-Link as of the
Closing shall be determined by Broadband within sixty (60) days of the Closing
pursuant to the procedures set forth in the Agreement and Plan of Merger entered
into between Broadband, Acquisition Subsidiary, Nex-Link and the Members dated
as of June 3, 2002 (the "Merger Agreement").

         The consideration payable by Acquisition Subsidiary to the Members, as
evidenced by the Subsidiary Note, and any amounts due under the Company Note,
will be further reduced on a dollar-for-dollar basis if and to the extent that
any of Nex-Link's account receivables outstanding as of the date of the Closing
remains outstanding and uncollected on the one hundred twentieth (120th) day
following the date of the Closing.



                                       12



<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
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.

                                       13
<PAGE>


         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 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 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.



                                       14
<PAGE>

         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.

                                       15
<PAGE>

Results of Operations
Quarter 1 Fiscal 2003 vs. 2002


                                              Quarter 1           Quarter 1
                                             Fiscal 2003         Fiscal 2002
                                             -----------         -----------

Revenues                                        100.0%               100.0%

Cost of Sales                                     62.2                47.1
Selling, General and Administrative               28.1                22.3
Research and Development                          10.5                22.8

Operating Income (Loss)                           (0.8)                7.8
Other Expense                                     (1.0)               (0.9)
                                                ------               -----

Income (Loss) Before Income Taxes                 (1.8)                6.9
Income Tax (Benefit) Provision                      --                (0.2)
                                                ------               -----

Net Income (Loss)                                 (1.8)%               6.7%
                                                ======               =====

Revenues

         Total revenues were $9.7 million for the first quarter of fiscal 2003
compared to $4.0 million for the first quarter of fiscal 2002. The increase in
revenues in fiscal 2003 from fiscal 2002 is primarily due to growth in the
Company's Broadband Services Unit. This growth is attributable to the
acquisition of SRS Communications Corp./EDJ Communications, Inc., which together
contributed $3.7 million in revenue during the first quarter of fiscal 2003. The
remaining increase in revenues 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, Philips,
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% of its revenue for the first quarter of fiscal 2003,
compared to 61% of its revenue for the first quarter of 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.

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

                                       16
<PAGE>

         Three MSO customers contributed more than 10% of the Company's total
revenues in the first quarter of fiscal 2003 - 39%, 22% and 14%, respectively.
In first quarter of fiscal 2002, one OEM customer contributed 17% of the
Company's total revenues.

         Sales to foreign customers represented less than 5% of total revenues
for the first quarter of fiscal 2003. For the first quarter of fiscal 2002,
sales to foreign customers represented 22% of total revenues. Four customers
contributed 10%, 6%, 4% and 2%, respectively, of these sales.

         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 $306,000 in the first quarter of fiscal 2003,
compared to $321,000 in the first quarter of fiscal 2002. All software
development costs are charged to research and development when incurred.

         There were no development revenues in the first quarter of fiscal 2003,
compared to $68,000 in the first quarter of fiscal 2002. Development revenues
primarily relate to OEM development efforts, which are recognized when defined
milestones are reached.

         Backlog for the Company's Broadband Products Unit was $4.6 million as
of June 29, 2002, compared to $1.8 million as of June 30, 2001. One MSO customer
accounted for 58% of the total backlog as of June 29, 2002. The backlog has
increased to $5.3 million as of August 5, 2002. The Company's Broadband Services
Unit has multi-year master contracts with MSO(s) that currently generate
approximately $650,000 in weekly 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 62.2% of
total revenues in the first quarter of fiscal 2003 compared to 47.1% in the
first quarter of fiscal 2002. The increase in total cost of sales as a
percentage of total revenues in the first quarter of 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 54.4% for the first
quarter of 2003, compared to 55.0% for the first quarter of fiscal 2002. The
Broadband Products Unit's gross margin is generally dependent on customer mix
and product mix.

         Gross margin for the Broadband Services Unit was 20.4% for the first
quarter of fiscal 2003, compared to 18.7% for the first quarter of fiscal 2002.
The Broadband Services Unit's gross margin is dependent upon the mix of
fulfillment, engineering and construction services.

Selling, General and Administrative

         Selling, general and administrative expenses were $2.7 million in the
first quarter of fiscal 2003, compared to $899,000 in the first quarter 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. 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.

                                       17
<PAGE>

         General and administrative costs also 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. Compared to first quarter of fiscal 2002, the Company has in place
additional personnel and infrastructure that it believes will support growth to
an annual revenue level of over $45 million. Selling, general and administrative
expenses are expected to increase in fiscal 2003, but such expenses are expected
to decline as a percentage of revenue.

         Included in general and administrative costs in the first quarter 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. Additionally in the first quarter of fiscal 2003, the
Company incurred $113,000 in start-up expenses related to the Broadband Services
Unit's plan to offer training services.

Research and Development

         Research and development expense totaled $1.0 million in the first
quarter of fiscal 2003, compared to $917,000 in the first quarter of fiscal
2002. The Company continued to spend a significant amount on research and
development during the first quarter of 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 fiscal 2003 in response to increased customer demand for more
advanced systems and software, but anticipates that such expenses will decline
as a percentage of revenue.

Operating Income

         The Company had an operating loss of $76,000 in the first quarter of
fiscal 2003, compared to operating income of $315,000 in the first quarter of
fiscal 2002. The operating loss is primarily due to the increased general and
administrative costs in the first quarter of fiscal 2003 compared to the first
quarter of fiscal 2002. The Company has in place additional personnel and
infrastructure that it believes will support growth to an annual revenue level
of over $45 million. Included in general and administrative costs in the first
quarter 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. Additionally in the first quarter of
fiscal 2003, the Company incurred $113,000 in start-up expenses related to the
Broadband Services Unit's plan to offer training services.

Interest and Other Expense

         The Company had interest and other expense of $96,000 in the first
quarter of fiscal 2003, compared to $37,000 in the first quarter of fiscal 2002.
In both fiscal 2003 and 2002 this consists primarily of interest expense on the
Company's debt obligations.

                                       18
<PAGE>

Income Taxes

         Due to the significant net operating loss carry-forward, the Company
pays minimal income taxes, which includes federal income taxes, based on an
"alternative minimum tax" calculation 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 which include fulfillment, engineering
and construction services.

         Summarized financial information related to the Company's business
segments for the quarters ended June 29, 2002 and June 30, 2001 are shown below:
<TABLE>
<CAPTION>
                                                          Products               Services            Consolidated
                                                      ---------------         --------------       --------------
             <S>                                            <C>                     <C>                    <C>
     Quarter ended June 29, 2002
     ---------------------------
           Net sales                                   $    4,982,000         $   4,757,000         $   9,739,000
           Interest income                                      1,000                     -                 1,000
           Interest expense                                    77,000                35,000               112,000
           Depreciation and amortization                       87,000               165,000               252,000
           Income tax expense                                       -                     -                     -
           Capital expenditures                             2,861,000                56,000             2,917,000
           Operating income (loss)                            455,000              (531,000)              (76,000)

           Total assets as of June 29, 2002                 9,647,000            10,675,000            20,322,000


     Quarter ended June 30, 2001
     ---------------------------
           Net sales                                   $    3,795,000         $     231,000         $   4,026,000
           Interest income                                          -                     -                     0
           Interest expense                                    36,000                     -                36,000
           Depreciation and amortization                       37,000                     -                37,000
           Income tax expense                                   9,000                     -                 9,000
           Capital expenditures                                 9,000                 6,000                15,000
           Operating income (loss)                            346,000               (31,000)              315,000

           Total assets as of June 30, 2001                 6,478,000               309,000             6,787,000

</TABLE>

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.

         Demand for CATV monitoring products has increased recently as
monitoring of cable distribution systems has become an important factor in
increasing operating efficiency and reliability. As previously noted, the
Company's operations were adversely impacted in fiscal 1999 and during the first
three quarters of fiscal 2000 by the combined impact of reduced revenues
(resulting from customers electing to cease certain programs) and the need for
the Company to upgrade its software products. The Company's operations and
revenues are driven, in large part by the timing and success of new product
introductions and the scheduling of orders by customers. The Company also
continues to identify product development needs in excess of its available
development resources, which in the past has negatively impacted its competitive
position. The Company believes its strategic relationship with NeST will allow
the Company to become more responsive to market requirements.

Liquidity and Capital Resources

         In the first quarter of fiscal 2003, the Company generated net cash of
$36,000 compared to consuming net cash of $67,000 in the first quarter of fiscal
2002.

         Net cash generated by operating activities was $1,306,000 in the first
quarter of fiscal 2003 versus net cash consumed of $84,000 in the first quarter
of fiscal 2002. Despite the operating loss for the first quarter of fiscal 2003,
cash flow from operations was positive due to non-cash expenses for depreciation
and amortization and for bad debt reserves. Also contributing to the positive
cash flow from operations in the first quarter of 2003 were reductions in
accounts receivable ($253,000) and inventory ($255,000) and increases in
accounts payable ($517,000) and in due to affiliates ($724,000) for
manufacturing and engineering services.

                                       19
<PAGE>

         Net cash used in investing activities was $2,915,000 in the first
quarter of fiscal 2003 versus $15,000 in the first quarter of fiscal 2002. This
is due to increase in capital expenditures in the first quarter 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 booth.

         Cash flow from financing activities was $1,645,000 in the first quarter
of fiscal 2003 versus $32,000 in the first quarter of fiscal 2002. The major
sources of cash in the first quarter of fiscal 2003 were mortgage proceeds of
$1.9 million. Debt payments during the first quarter of fiscal 2003 were
$230,000 on subordinated notes payable and $49,000 on notes and mortgage
payable.

         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 June 29, 2002 was $53,000.

         The Company maintains a working capital line of credit from a
commercial bank to provide up to $3,000,000 based on 80% of the value of
qualified accounts receivable. Under the terms of the loan documents for such
financing, all of the Company's assets, including without limitation all of the
outstanding shares of the Company's subsidiaries, are pledged to the lender and
interest is payable at 2% above prime. The line expires on September 30, 2002.
Current borrowings under the line are $2,991,000. Subsequent to June 29, 2002,
the Company's credit facility with the commercial bank was amended to increase
the Company's maximum availability under the working capital line of credit
facility to $4,000,000.

         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 bears
interest at prime plus 2%.

         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. No amounts were borrowed under this
line during fiscal 2002 or fiscal 2001.

         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.

                                       20
<PAGE>

         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.

         Capital expenditures totaled $2,915,000 in the first quarter of fiscal
2003 and $15,000 in the first quarter of fiscal 2002. In both the first quarter
of fiscal 2002 and fiscal 2003, these expenditures included computer equipment,
software, manufacturing assembly/test equipment, test lab equipment, office
furniture/fixtures, vehicles, facility improvements and service technician
equipment. In addition, in the first quarter of fiscal 2003, these expenditures
also 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 booth.
The increase in capital expenditures in the first quarter of fiscal 2003 is also
due to the growth of the Company's Broadband Services Unit.

         The Company was in default, as of June 29, 2002, of certain covenants
contained in its loan documents with ComericaBank. However, prior to
ComericaBank taking action with respect to any of such defaults, the Company
refinanced all of its obligations owed to ComericaBank.

         On August 14, 2002, subsequent to the end of the first quarter of
fiscal 2003, the Company entered into a $10,700,000 asset-based credit facility
with LaSalle Business Credit, Inc., as agent for Standard Federal Bank National
Association (the "Bank"), collateralized by all assets of the Company. The
credit facility consists of the following:

                                       21
<PAGE>

         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;

                  (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 will be 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 believes 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 operations through
the next fiscal year.

                                       22
<PAGE>


                           PART II. OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K

      (a)     (1) 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)

                                       23
<PAGE>

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

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

                  10.7  Loan and Security Agreement dated as August 14, 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)

                  10.8  (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)


                                       24
<PAGE>



                  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 (filed
                        herewith)

                  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 Employment Agreement with Scott Lochhead (filed
                        herewith)

                  10.22 Employment Agreement with Steven L.M. Nickel (filed
                        herewith)

                  10.23 Amended and Restated Subordinated Promissory Note from
                        AM Nex-Link Communications, Inc. to 1401077 Ontario,
                        Ltd., 1418294 Ontario, Ltd., Steven Nickel, and Scott
                        Lochhead (filed herewith)

                  10.24 Amended and Restated Subordinated Promissory Note from
                        AM Nex-Link Communications, Inc. to 1401077 Ontario,
                        Ltd., 1418294 Ontario, Ltd., Steven Nickel, and Scott
                        Lochhead (filed herewith)

                  21.   Subsidiaries of the Company (filed herewith)

                  99.1  Statement of Chief Executive Officer Pursuant to Section
                        1350 of Title 18 of the United States Code (filed
                        herewith)

                  99.2  Statement of Chief Financial Officer Pursuant to Section
                        1350 of Title 18 of the United States Code (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.

(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.

                                       25
<PAGE>

(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

(b)      Reports on Form 8-K.
         -------------------

         The Company filed a report on Form 8-K on July 16, 2002 regarding the
completion of 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 "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 Merger. As a result of the
completion of the Merger on July 1, 2002, Nex-Link became a wholly-owned
corporate subsidiary of Broadband. Simultaneously with the completion of the
Merger, the Acquisition Subsidiary changed its name and is currently operating
under the name "AM Nex-Link Communications, Inc."

         As a result of the 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
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 Registrant will use funds
received as payments on the Nex-Link Receivables to make the aforementioned
weekly installment payments to the Members.

                  (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 Registrant anticipates that
internal funds of the 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
Registrant, 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 Registrant's common stock on
the date of the Closing).

         In connection with the 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.

                                       26
<PAGE>

         The consideration payable by the Acquisition Subsidiary to the Members,
as evidenced by the Subsidiary Note, and any amounts due under the Company Note,
will be reduced on a dollar-for-dollar basis if and to the extent that the
aggregate Net Book Value of Nex-Link (defined as the book value of Nex-Link's
assets minus the book value of Nex-Link's liabilities), as of the Closing, is
less than $200,000.00. The Aggregate Net Book Value of Nex-Link as of the
Closing shall be determined by Broadband within sixty (60) days of the Closing
pursuant to the procedures set forth in the Agreement and Plan of Merger entered
into between Broadband, Acquisition Subsidiary, Nex-Link and the Members dated
as of June 3, 2002 (the "Merger Agreement").

         The consideration payable by Acquisition Subsidiary to the Members, as
evidenced by the Subsidiary Note, and any amounts due under the Company Note,
will be further reduced on a dollar-for-dollar basis if and to the extent that
any of Nex-Link's account receivables outstanding as of the date of the Closing
remains outstanding and uncollected on the one hundred twentieth (120th) day
following the date of the Closing.


                                   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:    August 19, 2002            By:  /s/ H. Charles Wilson, III
                                       ------------------------------------
                                       H. Charles Wilson, III, Chief Financial
                                       Officer and Authorized Representative
                                       of the Registrant




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