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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

Commission File Number: 000-31851

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

          As of November 11, 2002, the number of shares of the Registrant’s common stock, $0.0001 par value per share, issued and outstanding, were: 4,984,930 shares of Class A Common Stock and 2,600,000 shares of Class B Common Stock.

MULTILINK TECHNOLOGY CORPORATION

FORM 10-Q

INDEX

Part I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for per share amounts)
(unaudited)

See accompanying notes to condensed consolidated financial statements.

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(unaudited)

See accompanying notes to condensed consolidated financial statements.

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

See accompanying notes to condensed consolidated financial statements.

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION

               The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.  In the opinion of management, all adjustments consisting of normal recurring items considered necessary for the fair presentation have been included.  The results of operations for the three and nine months ended September 30, 2002 are not necessarily indicative of the results to be expected for the entire year.

               The financial statements included herein have been prepared with the understanding that the users of the interim financial information have read or have access to the audited financial statements for the preceding fiscal year.  Accordingly, these financial statements should be read in conjunction with the audited financial statements and the related notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

               Derivative Financial Instruments – During the nine months ended September 30, 2002, the Company utilized foreign currency forward contracts. The Company is exposed to market risk from changes in foreign currency exchange rates associated with forecasted foreign currency-denominated expenses. The Company uses foreign currency forward contracts designated as cash flow hedges to hedge this exposure and the fair value changes of the forward contracts related to the effective portion of the hedges are initially recorded as a component of other comprehensive income. The Company utilizes these foreign currency forward contracts to hedge its variability in U.S. dollar cash flows associated with probable forecasted foreign inter-company Euro denominated expenses because the Company reimburses its German subsidiary for such expenses. Unrealized and realized gains and losses on cash flow hedges accumulate in other comprehensive income and are reclassified into earnings in the periods in which earnings are impacted by the variability of the cash flows of the hedged item. Gains and losses on derivatives that are terminated prior to their maturity are also reclassified into earnings when the underlying hedged items impact earnings, unless it is no longer probable that the hedged forecasted transaction will occur, whereby such gains and losses are recognized immediately in earnings. The Company hedges forecasted exposures up to 12 months in the future. For the three and nine months ended September 30, 2002, hedge ineffectiveness associated with instruments designated as cash flow hedges was not significant. For the three and nine months ended September 30, 2002, net gains of less than $0.2 million were reclassified into earnings as an adjustment to research and development expense. These net gains were offset by gains and losses on the transactions being hedged. At September 30, 2002, less than $0.2 million of net derivative gains/losses included in accumulated other comprehensive income will be reclassified into earnings within three months from that date. The unrealized amounts in accumulated other comprehensive income will fluctuate based on changes in fair value of open contracts at each reporting period. At September 30, 2002, the Company’s liability of less than $0.2 million relating to these forward contracts is included in accrued expenses in the accompanying condensed consolidated balance sheet.

               Reclassifications – Certain prior period amounts have been reclassified in order to conform to the current period presentation.

2.    REVERSE STOCK SPLIT

               In July 2002, the Company was notified by Nasdaq that, based upon its review of price data for the Company’s Class A common stock, the closing bid price for the Class A common stock was less than $1.00 per share during the relevant review period of thirty consecutive trading days, which is a requirement for continued inclusion of the Class A common stock on the Nasdaq National Market.  On July 18, 2002, the Company’s board of directors authorized an amendment to the Company’s articles of incorporation to effect a reverse stock split for the purpose of increasing the market price of the Company’s Class A common stock above the Nasdaq minimum of $1.00.

               On September 6, 2002, the Company’s shareholders and board of directors approved a one-for-ten reverse stock split of the Company’s Class A and Class B common stock.  The par value of the Class A and Class B common stock will remain at $0.0001 per share and the number of authorized shares of Class A and Class B

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-continued

common stock will remain at 200 million and 100 million, respectively.  As a result of the reverse stock split, the accompanying consolidated financial statements reflect a decrease in the number of outstanding shares of Class A and B common stock and the transfer of the par value of these reduced shares to additional paid-in capital.  All share and per share amounts have been restated to reflect the retroactive effect of the reverse stock split, except for the capitalization of the Company.  Previously awarded stock options, restricted stock awards and warrants have been adjusted or amended to reflect the reverse split.

3.   CORPORATE REALIGNMENT

               During the third quarter of 2002, the Company commenced a corporate realignment program (the “Realignment Plan”) to create a more efficient cost structure and realign its business to reflect the current telecommunication market environment which will permit the Company to focus its personnel on its key business strategies.  The major initiatives of the Realignment Plan include a reduction of 40 to 45 percent in the Company’s worldwide headcount and the consolidation of facilities through the closure of certain locations and the reduction in the level of activity at other locations.

               In connection with the implementation of the Realignment Plan, the Company recorded a realignment charge of $12.3 million on a pre-tax basis in the third quarter ended September 30, 2002.  The major components of the realignment charge and the activity through September 30, 2002 were as follows:

               Total severance and termination benefits as a result of the Realignment Plan relates to approximately 150 employees of which the majority will be terminated by December 2002 and the remainder will be terminated by June 2003.  As a result of the employee terminations associated with the Realignment Plan, a portion of the Company’s purchased research and development software and equipment will not be fully utilized.  The asset write down charge of $6.5 million was determined upon the review of the future undiscounted cash flows related primarily to purchased research and development software, equipment and leasehold improvements.  The Company concluded that an impairment charge was necessary to write down these assets to their fair value.   Total cash outlays related to the Realignment Plan are approximately $5.8 million, less than $0.5 million of which has been paid through September 30, 2002.  Assuming that the lease termination costs are paid out through the end of the corresponding lease, cash payments are expected to be $1.7 million during each 2002 and 2003 and $2.4 million thereafter.

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-continued

4.   INVESTMENT IMPAIRMENTS AND RELATED CHARGES

               ASIP, Inc. (“ASIP”) is a privately held, optical device start-up company that is subject to many of the same risks as the Company.  The Company accounts for its investment in ASIP under the equity method of accounting.  During the three months ended September 30, 2002, the Company recorded a $3.5 million charge associated with its relationship with ASIP.  This charge consists of (i) an impairment charge on the remaining net investment balance of $0.4 million, (ii) a $0.7 million write off of goodwill associated with the ASIP investment and (iii) a $2.4 million asset impairment charge on equipment that was consigned to ASIP in accordance with an existing development and license agreement that expires in April 2003. 

               In determining whether its investment in ASIP and related goodwill was impaired, the Company considered several factors such as, but not limited to, the reduction in market valuations for optical device companies, the continued reduction in spending by communications equipment manufacturers, the historical and forecasted operating results of ASIP and changes in technology. Upon review of these and other qualitative and quantitative factors, the Company concluded that its remaining net investment in ASIP and corresponding goodwill was impaired. The Company also performed a recoverability analysis of the consigned equipment at ASIP. The Company has no alternative uses for this equipment and cannot project any future cash flows from such equipment. Accordingly, the Company recorded an asset impairment charge to write down the consigned equipment to fair value.

               The Company has also provided a guarantee for a facility lease of ASIP.  The guarantee is through December 31, 2005, provided that ASIP continues to meet all terms and conditions of the lease.  Assuming that ASIP is current on their lease payments, the total remaining lease payments to be made by ASIP during the guarantee period are $1.1 million.  Because the likelihood that the Company would have to satisfy this guarantee is not probable, no liability has been recorded for the guarantee.  In addition, the Company is obligated to incur an additional $1.0 million of development expenses and to expend an additional $0.8 million for capital in accordance with the development and license agreement. 

               During the three months ended September 30, 2002, the Company recorded a $1.4 million impairment charge against its investment in Internet Machines Corporation (“IMC”).  The Company believes that the reduction in the value of the IMC investment is other than temporary. IMC is an optical device company and is subject to many of the same industry risks as the Company.  Given the market valuation reductions in the Company’s and IMC’s industries coupled with new financial projections received from IMC, the Company concluded that a write down was required. 

5.   INVENTORIES

               Inventories consisted of the following:

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-continued

               During the nine months ended September 30, 2002, the Company recorded a charge of $5.3 million to reduce inventories to their net realizable value and to write off an advance made to a supplier. Included in the $5.3 million is a $4.8 million inventory write-down.  The inventory was written down to its net realizable value based upon the Company’s determination that excess quantities existed of certain modules and raw materials.  The excess quantities of the modules are the result of forecasted demand not developing as expected and the introduction of two new modules.  The Company also wrote off an advance made to a finished good supplier of $0.5 million.

               During the nine months ended September 30, 2001, the Company recorded a charge of $4.9 million to reduce inventories to their net realizable value. Of this charge, $4.3 million resulted primarily from order cancellations as customers are transitioning from certain Gallium Arsenide products to Silicon Germanium products and $0.6 million relates to inventory shrink and lower than expected production yields at three of the Company’s finished good suppliers.

6.   SEGMENT INFORMATION AND CONCENTRATION OF REVENUES

               Revenues to geographic locations are as follows:

               Revenues to certain geographic locations within Europe are as follows:

               The following is a summary of the percentage of revenues from major customers:

* Customer’s or country’s revenues represents less than 10% of total revenue in the respective period.

7.   RELATED PARTY TRANSACTIONS

               During the three and nine months ended September 30, 2002, the Company incurred expenses relating to services performed by Innovative Processing AG (“IPAG”) of zero and $0.3 million, respectively.  Also during the

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-continued

three and nine months ended September 30, 2002, the Company incurred expenses of $0.3 million and $0.7 million, respectively, relating to services performed by ASIP.  These payments were made under existing development agreements with these entities. 

               The Company did not incur any expenses during the three months ended September 30, 2002 and incurred $0.1 million of expenses during the nine months ended September 30, 2002 relating to services performed by TRW.   During the three and nine months ended September 30, 2002, the Company incurred $0.5 million and $1.3 million of expenses related to services performed by IBM.

               In January 2002, the Company entered into a full-recourse promissory note with its Executive Vice President and Co-Chairman, to assist the officer with the purchase of a new home upon his transfer from the Company’s European headquarters in Germany to its California facility. The note is for $0.5 million, bears interest at 5.5% per annum and is due in January 2007 (including all accrued and unpaid interest). The note is secured by a portion of the officer’s Class B common stock pursuant to a pledge agreement between the Company and the officer and is payable upon the earlier of the stated due date or 30 days after the officer’s employment with the Company ceases.  On August 8, 2002, the Company announced that the officer would depart from the Company on December 31, 2002, which will result in the note and related accrued interest becoming payable on or before January 30, 2003.  In October 2002, the Company entered into a separation agreement with this officer.  The significant terms of the separation agreement include (i) a $125,000 separation payment, (ii) the immediate vesting of 140,000 of the officer’s remaining unvested stock options and the extension of the exercise period to 18 months for all vested options for a total of 580,000 vested options, (iii)  the payment of COBRA benefits for up to six months, (iv) the reimbursement of up to $50,000 for brokerage commissions paid (to be reduced dollar-for-dollar by the amount which the net proceeds (as defined) of the sale exceeds original purchase price of the residence) by the officer in connection with a closing on or before December 31, 2002 of the sale of his California residence and (v) the reimbursement of up to $25,000 for relocation expenses incurred in moving from the United States to Germany. The Company’s obligations are conditioned upon the sale by the officer of his California residence by December 31, 2002.

8.   CREDIT FACILITY

               During April 2002, the Company entered into an unsecured $6.0 million credit facility.  All amounts drawn down under this facility must be used for the purchase of capital assets.  The amount drawn down under the facility from May 2002 through October 2002 will be converted into a 30-month term loan (referred to as Tranche A).  The amount drawn down under the facility from November 2002 through April 2003 will also be converted into a 30-month term loan (referred to as Tranche B).  The Tranche A and B term loans will have a fixed interest rate determined at 150 basis points above the three year Treasury Note at the time such amounts are converted into their respective term loan.  During each six-month draw down period, only monthly interest payments are due.  During this period, interest is calculated at the London Interbank Offered Rate (“LIBOR”) plus 150 basis points.  The agreement requires that the Company maintain (i) a liabilities to tangible net worth ratio of .50 to 1, (ii) a minimum cash balance of $50 million and (iii) at least $12 million invested at the financial institution.

               As of  September 30, 2002, $3.0 million was outstanding under Tranche A described above, of which $1.1 million, plus interest, is due within the next 12 months.

               As a result of significant reductions in our net assets during the nine months ended September 30, 2002, the Company did not meet its liabilities to tangible net worth ratio covenant discussed above.  The asset reduction is principally due to the following factors, all of which are discussed herein; (i) the impairments and related charges associated with of the Company’s investments in ASIP and IMC, (ii) fixed asset impairment charges, (iii) additional inventory obsolescence reserves and (iv) a valuation allowance against all of the Company’s deferred tax assets.  The Company received a waiver for this covenant violation and is currently in the process of amending the covenant.  The Company has previously announced that it expects its cash usage during the fourth quarter of 2002 will be in the range of $17 to $19 million. Based upon this projected cash usage, the Company would not be in compliance with the minimum cash balance covenant of $50 million. Subsequent to September 30, 2002, the Company began negotiations with the financial institution to amend the credit facility to address the liabilities to tangible net worth covenant discussed above and the projected noncompliance of the minimum cash balance covenant. The Company cannot give any assurance that in the future it will be able to obtain a waiver in the event of noncompliance or that it can successfully amend the credit facility.  In accordance with the credit facility agreement, if a covenant noncompliance is not cured, the bank has the right to demand immediate payment of the outstanding balance under the facility.

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-continued

9.   INCOME TAXES

               On a quarterly basis, the Company assesses the recoverability of its deferred tax assets by reviewing a number of factors, including operating trends, the scheduled reversal of deferred tax liabilities and future projections of taxable income, to determine whether a valuation allowance is required to reduce such deferred tax assets to an amount that is more likely than not to be realized.  The Company considered the following factors that occurred during the three months ended June 30, 2002 in assessing the recoverability of its deferred tax assets: (i) further announced reductions in 2002 capital spending by the major telecommunication service providers and industry analysts forecasting a further reduction in capital spending in 2003, (ii) significant workforce reductions within the telecommunications and related industries, (iii) continued poor visibility of customer orders, (iv) a depressed capital market which makes obtaining new capital difficult and (v) a lower than expected demand for 10 gigabit products. 

               Based on the revised projections for future taxable income over the periods in which the deferred tax assets are realizable, management believes that significant uncertainty exists surrounding the recoverability of the deferred tax assets.  Accordingly, during the three months ended June 30, 2002, the Company recorded a valuation allowance equal to its deferred tax assets.  As a result of recording the valuation allowance, $20.8 million was charged to income tax expense and $12.2 million was charged against additional paid-in capital.  The $12.2 million charge against additional paid-in capital represents deferred tax assets that were originally recorded as a credit to additional paid-in capital as a result of employee stock option and warrant exercises.

10.  STOCK OPTION EXCHANGE OFFER

               In June 2002, the Company initiated a voluntary stock option exchange program to its employees, officers and board members located in the United States and Europe. The program commenced on June 24, 2002, and as amended in July 2002, participants were be able to tender for cancellation stock options to purchase the Company’s Class A common stock that had an exercise price equal to or greater than $1.35 per share (calculated prior to the one-for-ten reverse stock split) for replacement options to purchase Class A common stock to be granted on a date which is at least six months plus one day from the date of cancellation of the tendered options.   The cancellation date was August 30, 2002.  Pursuant to the offer, the Company accepted for exchange and cancelled options to purchase an aggregate of 11.4 million shares (calculated prior to the one-for-ten reverse stock split) of the Company’s Class A common stock from 206 eligible participants representing 63% of the options subject to the offer.  The exercise price of the replacement options will be the market price of the Company’s Class A common stock on the grant date of the replacement options. The remaining terms and conditions of the replacement options, including the vesting schedules, will be substantially the same as the terms and conditions of the options cancelled.  During the third quarter ended September 30, 2002, $2.6 million of deferred stock compensation associated with the stock options that were tendered in connection with this offer was accelerated into the statement of operations.

11.  ASSET IMPAIRMENT

               During 2000 and 2001, the Company expanded its manufacturing capacity in order to meet demand. As a result of the sharp decrease in product demand during 2002, the Company recorded a charge of approximately $1.1 million during the nine months ended September 30, 2002 for the elimination of certain excess manufacturing equipment.  The Company reviewed the future undiscounted cash flows related to this equipment and concluded that an impairment charge was necessary to write down these assets to their fair value.  The remaining net book value of this equipment after the impairment charge is less than $0.2 million.  The Company intends to sell this equipment within the next twelve months.  This asset impairment is incremental to those impairments recorded as part of the Company’s Realignment Plan.

12.  COMPREHENSIVE INCOME (LOSS)

               The components of comprehensive income (loss), net of tax, are as follows:

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-continued

13.  COMMITMENTS AND CONTINGENCIES

               In May 2002, a complaint was filed in Los Angeles Superior Court against the Company, its Chief Executive Officer and its former Executive Vice President arising out of an alleged oral joint venture agreement between the plaintiff, the Company and the named officers in connection with the development of a subsidiary of the Company in Israel.  The action claims that the Company and the named officers breached an oral agreement to deliver to the plaintiff a warrant to purchase at least 10,000 shares of the Company’s stock at a price of $13.00 per share, and seeks damages in excess of $1.0 million.  Although the Company has denied the allegations in the complaint and believes that they are without merit, it cannot predict the outcome of the litigation.

               The Company, in the ordinary course of its business, is the subject of, or party to, various pending or threatened legal actions. The Company believes that an ultimate liability arising from these actions will not have a material adverse effect on its financial position, results of operations or cash flows.

14.  SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS

               During the three and nine months ended September 30, 2002, the Company financed the acquisition of equipment or software in the amount of $0.6 million and $9.0 million, respectively.  During the three and nine months ended September 30, 2001, the Company financed the acquisition of equipment or software in the amount of $0.1 million and $1.9 million, respectively. 

               During the three and nine months ended September 30, 2002, the Company issued approximately 67,000 and 240,000 shares of restricted Class A common stock, respectively, and recorded $0.3 million and $3.3 million of deferred stock compensation, respectively.  Such shares were issued to employees with either tenure vesting of six months or vesting upon the attainment of certain performance criteria in 2002.  Also during the nine months ended September 30, 2002, a shareholder converted 200,000 shares of the Company’s Class B common stock into the same number of shares of Class A common stock.

15.  EARNINGS PER SHARE

               Basic net income or loss per share excludes dilution for potentially dilutive securities and is computed by dividing net income or loss attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income or loss per share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock. Potentially dilutive securities are excluded from the computation of diluted net income or loss per share when their inclusion would be antidilutive. All amounts have been restated for the one-for-ten reverse stock split discussed above.  A reconciliation between basic and diluted weighted average shares outstanding is as follows:

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-continued

* Since there was a loss attributable to common shareholders in these periods, the basic weighted average shares outstanding were used in calculating diluted loss per share, as inclusion of the incremental shares shown in this calculation would be antidilutive.  During the nine months ended September 30, 2002, stock options and warrants totaling 2,026,000 were excluded from the computation of diluted shares outstanding due to their antidilutive effect.

16.  RECENTLY ISSUED OR ADOPTED ACCOUNTING PRONOUNCEMENTS

               Effective January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” With the adoption of Statement 142, goodwill is no longer subject to amortization over its estimated useful life.  Rather, goodwill is subject to at least an annual assessment for impairment by applying a fair-value-based test.  Similarly, goodwill associated with equity method investments is no longer amortized.  Equity method goodwill is not, however, subject to the new impairment rules; the impairment guidance in existing rules for equity method investments continues to apply.  The adoption of this standard did not have a material impact on the Company’s financial position or results of operations.  As of September 30, 2002, the Company had $0.7 million of unamortized goodwill recorded resulting from one of its equity investments.

               In June 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations.”  Statement No. 143, which is effective for the Company on January 1, 2003, requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made.  The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset.  The Company does not expect that the adoption of this standard will have a material impact on its financial position, results of operations or cash flows.

               In July 2002, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.”  This statement requires that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred.  This differs from prior guidance, which required the liability to be recognized when a commitment plan was put into place.   Statement No. 146 also establishes that fair value is the objective for initial measurement of the liability.  This statement is effective for exit or disposal activities that are initiated after December 31, 2002.  The Company does not expect that the adoption of this standard will have a material impact on its financial position, results of operations or cash flows.

17.  SUBSEQUENT EVENTS

              During November 2002, the Company’s Senior Vice President of Operations and its Vice President of Wordlwide Sales resigned from the Company to pursue other interests. All of the responsibilities related to these two officers have been reassigned to other members of management.

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

Cautionary Statement

               You should read the following discussion and analysis in conjunction with the consolidated financial statements and related notes thereto contained elsewhere in this report. The information contained in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2001 and our Quarterly Reports on Form 10-Q for the periods ended March 31, 2002 and June 30, 2002.

               This Report contains forward-looking statements which include, but are not limited to, statements concerning projected revenues, expenses, gross profit and income, the need for additional capital, market demand for and acceptance of our products, the competitive nature of and anticipated changes in our markets, our ability to achieve further product integration, the status of evolving technologies and their growth potential, the timing of new product introductions, the adoption of future industry standards and new technologies. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs, and certain assumptions made by us. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will” and variations of these words or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors, some of which are listed herein. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

 OVERVIEW

              As used in this Form 10-Q, “company,” “we,” “us,” “our,” “Multilink” and “Multilink Technology” refer to Multilink Technology Corporation and its subsidiary companies.

               We design, develop and market advanced integrated circuits, modules, transponders and higher-level assemblies that enable next generation optical networking systems. We outsource substantially all of our semiconductor fabrication and focus our efforts on the design, development and marketing of our products.

               From our inception on July 26, 1994 through December 31, 1996, our operations consisted primarily of start-up activities, including development of our initial products. During 1996, we began generating development revenues through technology development contracts with several of our customers. In July 1997, we began shipping our first product for customer evaluation. During the first quarter of 1998, we recognized our first significant product revenues and further invested in research and development, sales and marketing, operations and our general and administrative infrastructure.

               To date, we have generated a substantial portion of our revenues from a limited number of customers. Our top three customers for the three months ended September 30, 2002 were Cisco, Xtera and Algety, representing 16%, 15% and 15% of our revenues, respectively, with an additional five customers each accounting for more than 5% of our revenues.   Our top three customers for the nine months ended September 30, 2002 were TyCom, Alcatel and Lucent, representing 27%, 24% and 13% of our revenues, respectively, with an additional two customers accounting for more than 5% of our revenues.  During the year ended December 31, 2001, TyCom and Alcatel accounted for 34% and 29% of our revenues, respectively, and four other customers each accounted for greater than 5% of our revenues.  

               A number of telecommunication service providers have continued to curtail the level of their capital expenditures on their infrastructure build-out, which has significantly reduced the demand for our products by communications equipment manufacturers, including these principal customers. Our revenues have declined substantially during the past several quarters.    Due to general economic conditions and slowdowns in purchases of optical networking equipment, it has become increasingly difficult for us to predict the purchasing activities of our customers and we expect that our operating results will fluctuate substantially in the future.  Our revenues will be substantially lower and loss per share will be substantially greater in fiscal 2002 than in fiscal 2001.

               During August 2002, we commenced a significant corporate realignment plan that included workforce reductions, the consolidation of facilities through closure of certain locations, a reduction in the level of activity at other locations and asset impairment charges.  As a result of our corporate realignment plan, we recorded a charge during the third quarter of 2002 of $12.3 million.

               We have focused our sales and marketing efforts on North American and European communications equipment manufacturers. We have also established a sales organization in Asia and have developed relationships with most of the major communications equipment manufacturers within Asia.  During the three and nine months ended September 30, 2002, we derived 53% and 80%, respectively, of our total revenues from communications equipment manufacturers in North America compared with 87% and 72%, respectively, during the comparable periods in 2001.  We currently sell through our direct sales force in North America and Europe as well as through selected independent sales representatives in the United States, Canada, Germany, the United Kingdom, Italy, France, Israel, China, Korea and Japan. We have also opened sales offices in Canada, Italy, and the United Kingdom.  International revenues are denominated in U.S. dollars, which reduces our exposure to foreign currency risks. We expect international revenues to continue to account for a significant percentage of total revenues.

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               Revenues.  We recognize product revenues at the time of shipment. Our customers are not obligated by long-term contracts to purchase our products and can generally cancel or reschedule orders on short notice. The slowdown in the build-out of the communications infrastructure has caused our revenues to decrease as compared with prior years.  Our revenues declined substantially during the 2002 quarters, compared to the comparable quarters in 2001. In the ordinary course of business, we receive order cancellations and rescheduled shipments.  To the extent possible, we pursue order cancellation fees from our customers.  Depending upon the facts and circumstances surrounding these cancellation fees, the receipt of such fees may have an immediate impact on revenues in the period that such fees are collected or the fees may need to be deferred and then recognized as revenue over some future period.  We cannot ensure that we will be able to collect an order cancellation fee for each order canceled and we cannot project how such fees will affect revenue.

               Cost of Revenues.  Cost of revenues consists of component and materials cost, direct labor, deferred stock compensation relating to manufacturing labor, manufacturing, overhead costs and estimated warranty costs. Cost of revenues also includes adjustments to write down inventory to its net realizable value resulting from such items as customer order cancellations and excess and obsolete inventory.  We outsource substantially all of the fabrication and assembly, and a portion of the testing, of our products. Accordingly, a significant portion of our cost of revenues consists of payments to our third-party manufacturers. If revenues increase, we believe favorable trends should occur in manufacturing costs due to our ability to absorb overhead costs over higher volumes. Nevertheless, there is a substantial fixed component to cost of revenues, and the announced decline in our revenues in 2002, as compared with 2001, has adversely affected our gross margins.

               Research and Development.  Research and development expenses consist primarily of salaries and related personnel costs, equipment, material, third-party costs and fees related to the development and prototyping of our products and depreciation associated with engineering and design software costs. We expense our research and development costs as they are incurred, except for the purchase of engineering and design software licenses, which are capitalized and depreciated over their estimated useful life. Research and development is key to our future success and we will continue to strategically invest in research and development in order to maximize our product offerings.  We expect that research and development expenses will decrease during the fourth quarter of 2002 in absolute dollar amounts as we execute on our previously announced corporate realignment plan.

               Sales and Marketing.  Sales and marketing expenses consist primarily of salaries, commissions and related expenses for personnel engaged in sales, marketing, customer service and application engineering support functions. As a result of our corporate realignment plan, we expect that sales and marketing expenses will decrease during the fourth quarter of 2002 in absolute dollar amounts as we execute on our previously announced corporate realignment plan.

               General and Administrative.  General and administrative expenses consist primarily of salaries and related expenses for executive, finance, accounting, facilities, information services, human resources, recruiting, professional fees and other corporate expenses. We expect that general and administrative expenses will decrease in the fourth quarter of 2002 in absolute dollar amounts as we continue to execute on our corporate realignment plan and various cost reduction programs that were initiated in 2001 with the purpose of maximizing the leverage within general and administrative functions.

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               Deferred Stock Compensation.  In connection with stock option and restricted stock grants to our employees, officers and directors, we recorded deferred stock compensation. Deferred stock compensation represents the difference between the grant price and the fair value of the common stock underlying options granted during these periods. Deferred stock compensation is presented as a reduction of shareholders’ equity. We are amortizing our deferred stock compensation using the graded vesting method, in accordance with FASB Interpretation No. 28, over the vesting period of each respective option, generally three to four years.  Based on our balance of deferred stock compensation as of September 30, 2002, we estimate our amortization of deferred stock compensation for each of the periods below to be as follows:

               Less than $0.5 million of the remaining amortization of deferred stock compensation will be charged to cost of revenues.

               Net Income (Loss).   In addition to the items discussed above, net income (loss) also includes interest expense, other income, income or loss associated with our equity investments and a provision or benefit for income taxes. Interest expense relates to interest associated with capital leases and equipment and software financings. Other income represents investment earnings on our cash and cash equivalents and short-term investments and any income or loss associated with our equity investments.

RESULTS OF OPERATIONS

               Revenues.   Revenues decreased $35.8 million to $1.8 million for the three months ended September 30, 2002, compared with $37.6 million for the three months ended September 30, 2001.  Revenues decreased $87.0 million to $16.8 million for the nine months ended September 30, 2002, compared with $103.8 million for the nine months ended September 30, 2001.  The decrease was due to a continuing dramatic decline in demand for products in our sector generally, resulting in reduced component purchases by communications equipment manufacturers.

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               Gross Profit.

               For the three months ended September 30, 2002 and 2001

               Cost of revenues decreased to $2.4 million for the three months ended September 30, 2002, compared to $13.9 million for the three months ended September 30, 2001. During the three months ended September 30, 2002, cost of revenues included $0.5 million of deferred stock compensation.  Gross profit as a percentage of revenues, or gross margin, decreased to a negative 35% for the three months ended September 30, 2002, compared with 63% for the three months ended September 30, 2001.  The negative gross margin during the three months ended September 30, 2002 is predominantly due to the reduced sales volume discussed above as communications equipment manufacturers continue to reduce spending, offset by $0.3 million of cancellation fee revenue included in revenues.

               Excluding the impact of the cancellation fee revenue during the three months ended September 30, 2002 and deferred stock compensation, gross margins would have been a negative 23% and 65% for the three months ended September 30, 2002 and 2001, respectively.  As discussed above, this decrease in gross margin is due to the decrease in sales volume as a result of reduced spending by communications equipment manufacturers.

               During the three months ended September 30, 2002, stock-based compensation expense associated with cost of revenues did not fluctuate significantly compared to the three months ended September 30, 2001.  For the three months ended September 30, 2002, stock-based compensation includes additional charges of $0.3 million relating to stock-based compensation that was accelerated into the statement of operations as a result of our stock option exchange program that concluded on August 30, 2002.

               For the nine months ended September 30, 2002 and 2001

               Cost of revenues decreased to $17.2 million for the nine months ended September 30, 2002, compared with $43.8 million for the nine months ended September 30, 2001. During the nine months ended September 30, 2002, cost of revenues included $1.4 million of deferred stock compensation.  Gross margin decreased to negative 2% for the nine months ended September 30, 2002 compared with 58% for the nine months ended September 30, 2001.  The significant reduction in gross margin during the nine months ended September 30, 2002 is the result of the significant charges, offset by certain credits, recorded against cost of revenues during the three months ended June 30, 2002.  The significant items that affected gross margin during the nine months ended September 30, 2002 and 2001 were as follows:

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