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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes   o No   x

          The registrant has two classes of common stock authorized, Class A Common Stock and Class B Common Stock.  The rights, preferences and privileges of each class of common stock are substantially identical except for voting rights. The holders of Class A Common Stock are entitled to one vote per share while holders of Class B Common Stock are entitled to ten votes per share on matters to be voted on by stockholders.  As of January 31, 2003, there were approximately 44,712,500 shares of Class A common stock outstanding and 66,000,000 shares of Class B Common Stock outstanding.

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OPTICAL COMMUNICATION PRODUCTS, INC.

INDEX TO FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED DECEMBER 31, 2002

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PART I.
FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

OPTICAL COMMUNICATION PRODUCTS, INC.

BALANCE SHEETS
(Dollars in thousands)

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OPTICAL COMMUNICATION PRODUCTS, INC.

STATEMENTS OF INCOME (LOSS)
(In thousands, except per share data)

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OPTICAL COMMUNICATION PRODUCTS, INC.

STATEMENTS OF CASH FLOWS
(In thousands)

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NOTES TO FINANCIAL STATEMENTS

1.          BASIS OF PRESENTATION

2.          INVENTORIES

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3.          PROPERTY, PLANT AND EQUIPMENT

4.          EARNINGS (LOSS) PER SHARE

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5.          COMMITMENTS AND CONTINGENCIES

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          The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to such financial statements included elsewhere in this Report.  The following discussion contains forward-looking statements that involve risks and uncertainties.  Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “may,” “will” or similar expressions are intended to identify forward-looking statements.  The statements are based on current expectations and actual results could differ materially from those discussed herein.  Factors that could cause or contribute to the differences are discussed below in this Report under “Risk Factors” and elsewhere in this Report, and in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended September 30, 2002.

Critical Accounting Policies 

          The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported in the Financial Statements and accompanying notes. Note 2 to the Financial Statements in the Annual Report on Form 10-K for the fiscal year ended September 30, 2002 describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, the accounting for the allowance for doubtful accounts, inventory  write-downs, and accrued expenses. Actual results could differ from these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of the Financial Statements.

          The allowance for doubtful accounts is based on our assessment of the collectibility of specific customer accounts and the aging of the accounts receivable. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than our historical experience, our estimates of the recoverability of amounts due us could be adversely affected.

          Inventory purchases and commitments are based upon future demand forecasts. If there is a sudden or significant decrease in demand for our products or there is a higher risk of inventory obsolescence because of rapidly changing technology and customer requirements, we may be required to write down our inventory and our gross margin could be adversely affected.

          We use estimates in the determination of the required accrual for warranty costs.  This estimate is based upon a detailed examination of past experience and current information. The information available to us may change in the future and may require us to revise this accrual.

          We continually reassess our assumptions and judgments and make adjustments when significant facts and circumstances dictate. 

Overview

          We design, manufacture and sell a comprehensive line of high performance, highly reliable fiber optic subsystems and modules for fiber optic transmission systems that are used to address the bandwidth limitations in metropolitan area networks, or MANs, local area networks, or LANs, and storage area networks, or SANs, markets.  Our subsystems and modules include optical transmitters, receivers, transceivers and transponders that convert electronic signals into optical signals and back to electronic signals, enabling high-speed communication of voice and data traffic over public and private networks.  We began our operations and shipped our first products in November of 1991.

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          Furukawa beneficially owns all of our outstanding Class B common stock, representing 59.7% of our outstanding shares of common stock and 93.7% of the combined voting power of all of our outstanding common stock as of the fiscal quarter ended December 31, 2002.  Since our inception, we have purchased substantially all of our lasers and the majority of our other fiber optic components from Furukawa.  We have relied on Furukawa’s research and development capabilities to provide us with technologically advanced lasers and fiber optic components that we purchase from Furukawa for inclusion in our products.  We currently purchase the majority of lasers from Furukawa using short-term purchase orders.

          We operate in one industry segment, the design and manufacture of fiber optic subsystems and modules.  We sell our products to fiber optic communication equipment manufacturers or CEMs, directly and through contract manufacturers, who incorporate them into systems they assemble for equipment manufacturers.  We define our customers as equipment manufacturers who have purchased our products directly or ordered our products for incorporation into systems produced by contract manufacturers.  We recognize revenue upon product shipment, and sales returns and allowances have been insignificant.  Historically, a relatively small number of customers have accounted for a significant percentage of our revenue. Our 10 largest customers accounted for approximately 63.3% and 56.4% of our total revenue for the fiscal quarters ended December 31, 2002 and 2001, respectively. Acterna, Cisco Systems and Alcatel, (including sales to each of their contract manufacturers) accounted for approximately 12.8%, 12.2% and 10.7%, respectively, of our total revenue for the fiscal quarter ended December 31, 2002. Alcatel (including sales to its contract manufacturers) accounted for approximately 19.1% of our total revenue for the fiscal quarter ended December 31, 2001.  No other customer accounted for more than 10.0% of our total revenue for the fiscal quarters ended December 31, 2002 and 2001.  For financial reporting purposes, we consider our customers to be the contract manufacturers and CEMs who place purchase orders with us or otherwise purchase our products directly.  For the fiscal quarters ended December 31, 2002 and 2001, no direct sales customer accounted for more than 10% of our total revenue.  Although our revenue from sales to our other customers continues to increase, we expect that significant customer concentration will continue for the foreseeable future.  Our sales are made on a purchase order basis rather than by long-term purchase commitments.  Our customers may cancel or defer purchase orders without penalty on short notice.

          Since early 2001, the telecommunications sector, and in particular the fiber optic networking sector, has suffered a severe downturn.  System providers have scaled back on deployment and have dramatically slowed their purchases of systems from equipment manufacturers.  As a result, equipment manufacturers have also slowed purchases of components and modules from our competitors and from us. Moreover, as equipment manufacturers’ sales declined, they have relied on their excess component inventories to meet reduced demand and have moved to reduce their overall component and module inventory levels. Consequently, the slowdown continues to have a negative impact on our business and our revenue as a result of our customers’ declining business and the resulting adjustment to their inventory levels.

          On October 9, 2002, we acquired certain assets of Cielo Communications, Inc., a research and design company located in Broomfield, Colorado, focused on creating VCSEL technology for fiber optic communication networks for a cash purchase price of $5 million.  The purchase price includes the acquisition of capital equipment and intellectual property.

          The average selling prices of our products generally decrease as the products mature from factors such as increased competition, the introduction of new products, increased unit volumes, and price concessions required by our customers.  We anticipate that average selling prices of our existing products will continue to decline in future periods although the timing and degree of the declines cannot be predicted with any certainty.  We must continue to develop and introduce new products that incorporate features that can be sold at higher average selling prices on a timely basis.

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          Our cost of revenue consists principally of materials, as well as salaries and related expenses for manufacturing personnel, manufacturing overhead and the write down for excess and obsolete inventory.  We purchase several key components for our products from a limited number of suppliers.

          Our research and development expenses consist primarily of salaries and related expenses for design engineers and other technical personnel, cost of developing prototypes, and depreciation of test and prototyping equipment.  Our research and development expenses also consist of materials and overhead costs related to major product development projects.  We charge all research and development expenses to operations as incurred.  We believe that continued investment in research and development is critical to our future success.  Accordingly, we intend to expand our internal research and development capabilities in the future to develop new products.  As a result, we expect that our research and development expenses in absolute dollar amounts will increase in future periods.

          Sales and marketing expenses consist primarily of personnel costs, commissions paid to independent manufacturers’ representatives, marketing and promotion costs.  We intend to expand our sales and marketing operations and efforts in order to increase sales and market awareness of our products.  In July 2000 we opened sales offices in Bury St. Edmunds, England and Richardson, Texas, in May 2001 we opened a sales office in Ottawa, Canada and in May 2002 we opened a sales office in Santa Clara, California.  We plan to establish sales offices in the Eastern United States for our direct sales force that currently work from their homes.  We believe that investment in sales and marketing is critical to our success and expect these expenses to increase in the future.

          General and administrative expenses consist primarily of salaries and related expenses for our administrative, finance and human resources personnel, professional fees and other corporate expenses.  We expect that general and administrative expenses will increase particularly due to the increase in our directors and officers’ insurance premiums as a result of market changes for such insurance coverage, and increases in our legal and consulting fees associated with analysis of strategic alternatives, including future market opportunities that have been undertaken by our management and board of directors.

Results of Operations – Comparison of Three Months Ended December 31, 2002 and 2001

          Revenue – Revenue increased 6.3% to $9.4 million in the quarter ended December 31, 2002 from $8.8 million in the quarter ended December 31, 2001.  This increase was primarily due to an increase in sales of our products for local area and storage area networks, which increased to approximately 15.9% of revenue for the quarter ended December 31, 2002 from approximately 9.5% of revenue for the quarter ended December 31, 2001.  Sales of our products for metropolitan area networks decreased to approximately 79.2% of revenue for the quarter ended December 31, 2002 from approximately 87.2% of revenue for the quarter ended December 31, 2001.  We expect our revenue to continue to be affected by the economic downturn and its impact on the overall market growth in the foreseeable future.  In addition, the average selling prices for existing products may decline in response to product introductions by competitors or us, and pressure from significant customers for price concessions.

          Cost of Revenue – Cost of revenue decreased 4.0% to $6.4 million in the quarter ended December 31, 2002 from $6.7 million in the quarter ended December 31, 2001. Gross margin increased to 31.5% from 24.1% during this period. The increase in gross margin was primarily due to an increase in sales of higher margin products, which resulted in a decrease of 5.9% in material costs as a percentage of revenue. The increase in gross margin was also the result of a 1.5% decrease in manufacturing overhead as a percentage of revenue, which was due to a decrease in personnel costs primarily as the result of our April 2002 workforce reduction. The decrease in personnel costs was partially offset by an increase in licensing fees as a result of the licensing agreement with Stratos Lightwave.

          Research and Development – Research and development expenses increased 174.7% to $3.0 million in the quarter ended December 31, 2002 from $1.1 million in the quarter ended December 31,

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2001.  This increase was primarily due to an increase in salaries and other operating costs associated with the addition of engineering personnel hired in conjunction with our October 9, 2002 acquisition of the business of Cielo Communications, Inc, a research and design company located in Broomfield, Colorado, and the addition of other engineering personnel hired since December 31, 2001.  We expect research and development expenses to increase in absolute dollars as we continue to expand our research and development efforts.

          Sales and Marketing – Sales and marketing expenses increased 30.8% to $959,000 in the quarter ended December 31, 2002 from $733,000 in the quarter ended December 31, 2001.  This increase was primarily due to an increase in salaries and benefits from the addition of sales and marketing personnel hired since December 31, 2001.  We believe that investment in sales and marketing is critical to our success and expect these expenses to increase in absolute dollars in the future.

          General and Administrative – General and administrative expenses increased 28.0% to $1.3 million in the quarter ended December 31, 2002 from $1.0 million in the quarter ended December 31, 2001.  This increase was primarily due to increases in legal and consulting fees associated with analysis of strategic alternatives and insurance expense related to an increase in directors’ and officers’ insurance premiums.  We expect the dollar level of these costs to increase as a result of increased legal fees, and expenses as we continue to explore and evaluate strategic alternatives.

          Income Taxes – The income tax benefit for December 31, 2002 was $587,000 in the quarter ended December 31, 2002, based on an effective tax rate of 34.0%, compared to a provision for income taxes of $122,000 in the quarter ended December 31, 2001, based on an effective tax rate of 40.0%.  The effective tax rate for the quarter ended December 31, 2002 reflects only a federal income tax benefit, as a result of federal tax regulations that allow us to carry back our December 31, 2002 loss against prior years income.

Liquidity and Capital Resources

          As of December 31, 2002, our primary source of liquidity was our cash and cash equivalents balance of $71.4 million and our marketable securities balance of $70.7 million, which consists primarily of United States Treasury notes and bonds.  Our unused revolving line of credit totaling $1.0 million provided an additional source of liquidity.  At September 30, 2002, we had $85.4 million in cash and cash equivalents balance and $65.8 million in marketable securities.  Our cash and cash equivalents balance and marketable securities balance decreased during the three months ended December 31, 2002 primarily due to the $6.7 million in cash purchase price and direct costs associated with the acquisition of certain assets of Cielo Communications, Inc., a $1.4 million increase in prepaid expenses and other current assets as a result of the prepayment of our annual directors’ and officers’ insurance premium and a $837,000 decrease in accrued bonus as a result of the November annual payment of incentive compensation net of current quarter accruals.

          Since inception, we have financed our operations primarily with cash generated from operations.  Additional financing has been generated through lines of credit and term loans, and through our initial public offering of our Class A common stock, which we completed on November 3, 2000.  As of December 31, 2002, our working capital was $161.6 million with a current ratio of 30:1 compared to our working capital of $167.9 million with a current ratio of 30:1 as of September 30, 2002.  Our working capital decreased during the three months ended December 31, 2002 primarily due to $6.7 million in cash purchase price and direct costs associated with the acquisition of certain assets of Cielo Communications, Inc.  Because of our low debt balances, we believe that additional cash could be borrowed if necessary; however, cash flow from operations, cash and equivalents and existing loan facilities are expected to be sufficient to fund operations for the next twelve months.

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          As of December 31, 2002, we had a $1.7 million balance outstanding under our term loan and no balance outstanding under our $1.0 million revolving line of credit.  The term loan and the revolving credit facility bear interest on amounts outstanding at various time intervals and the market rates based on our election at a per annum rate equal to either (a) the prime rate or (b) LIBOR plus 1.8%.  The term loan matures in July 2006, and the proceeds of the term loan were used to purchase our primary corporate and manufacturing facility in Chatsworth, California.  The revolving credit facility can be used to fund working capital requirements.

          The term loan and our revolving credit facility contain customary covenants, including covenants limiting indebtedness and the disposition of assets.  To secure our payment and performance obligations under the term loan we have pledged all of our assets as collateral.  The term loan and the revolving credit facility also require that we comply with financial covenants, which require us to maintain our tangible net worth, cash position and revenue at specified levels.  Our need to comply with these covenants does not materially affect the operation of our business.

          During the three months ended December 31, 2002, cash used in operations was $1.8 million compared to cash provided by operations of  $5.1 million in the three months ended December 31, 2001.  The cash used in operating activities during the three months ended December 31, 2002 was the result of increases in accounts receivable, income taxes receivable and prepaid expenses and a decrease in accrued bonus.  These were partially offset by the net loss after adding back the adjustments and a decrease in inventories.  The cash generated from operating activities during the three months ended December 31, 2001 was the result of a decrease in accounts receivable and inventories.

          During the three months ended December 31, 2002, cash used in investing activities was $12.1 million compared to cash provided by operations of  $4.3 million in the three months ended December 31, 2001.  The cash used in investing activities during the three months ended December 31, 2002 was due to $6.7 million in cash purchase price and direct costs associated with the October 9, 2002 acquisition of certain assets of Cielo Communications, Inc. and $5.4 million in marketable securities purchases net of maturities.  Cielo Communications, Inc. is a research and design company located in Broomfield, Colorado.  The purchase price includes the acquisition of capital equipment and intellectual property.  The cash provided by investing activities in the three months ended December 31, 2001 was primarily the result of $4.4 million in marketable securities maturities net of purchases to purchase additional equipment to develop new products.

          During the three months ended December 31, 2002 and 2001, cash used in financing activities was $91,000 and $59,000, respectively.  The majority of cash used in financing activities was for principal payments on the long-term debt. 

          On April 12, 2002, we resolved our patent infringement litigation with Stratos Lightwave, Inc.  As part of the settlement, we entered into a five-year license agreement with Stratos covering Stratos’ portfolio of optoelectronic transceiver patents. In consideration of the license agreement, we are required to pay a total of $2 million over the five-year license term.

          We believe that our existing cash, cash equivalents and investments on hand, together with cash that we expect to generate from our operations, will be sufficient to meet our capital needs for at least the next twelve months. However, it is possible that we may need or elect to raise additional funds to fund our activities beyond the next year or to consummate acquisitions of other businesses, products or technologies. We could raise such funds by selling more stock to the public or to selected investors, or by borrowing money. In addition, even though we may not need additional funds, we may still elect to sell additional equity securities or obtain credit facilities for other reasons. We cannot assure you that we will be able to obtain additional funds on commercially favorable terms, or at all. If we raise additional funds by issuing additional equity or convertible debt securities, the ownership percentages of existing

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stockholders would be reduced. In addition, the equity or debt securities that we issue may have rights, preferences or privileges senior to those of the holders of our common stock.

     Although we believe we have sufficient capital to fund our activities for at least the next twelve months, our future capital requirements may vary materially from those now planned. The amount of capital that we will need in the future will depend on many factors, including:

          In addition, we may require additional capital to accommodate planned growth, hiring, infrastructure and facility needs or to consummate acquisitions of other businesses, products or technologies.

Inflation

          Inflation has not had a material adverse effect on our results of operations, however, our results of operations may be materially and adversely affected by inflation in the future.

Subsequent Events

          On January 31, 2003, we acquired certain assets and intellectual property from Gore Photonics, a unit of W. L. Gore & Associates, Inc. located in Elkton, Maryland, focused on the research and development of VCSEL parallel optical modules for fiber optic communication networks.  The purchase price includes the acquisition of all capital equipment and intellectual property in the Gore Photonics module development and manufacturing facility in Elkton, Maryland.  In addition, we have hired the core technical team of Gore Photonics and will continue to operate a development center in Elkton, Maryland.

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RISK FACTORS

          This Report contains forward-looking statements based on the current expectations, assumptions, estimates and projections about us and our industry.  Our actual results could differ materially from those discussed in these forward-looking statements as a result of certain factors, as more fully described in this section and elsewhere in this Report. These forward-looking statements involve risks and uncertainties.  You should carefully consider the following risks before you decide to buy shares of our Class A common stock.  The risks and uncertainties described below are not the only ones facing us.  Additional risks and uncertainties, including those risks set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Report, may also adversely impact and impair our business.  If any of the following risks actually occur, our business, results of operations or financial condition would likely suffer.  In such case, the trading price of our Class A common stock could decline, and you may lose all or part of the money you paid to buy our stock. We do not undertake to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Our continued success in generating revenue depends on growth in construction of fiber optic MAN, LAN, and SAN.

          Our fiber optic subsystems and modules are used primarily in MAN, LAN, and SAN.  These markets are rapidly evolving, and it is difficult to predict their potential size or future growth rate.  In addition, we are uncertain as to the extent to which fiber optic technologies will be used in these markets.  Our success in generating revenue will depend on the growth of these markets and their adoption of fiber optic technologies. A substantial portion of our revenue is derived from sales of our product in the MAN market.  Sales of our products for the MAN market represented approximately 79% and 87% of our revenue for the three months ended December 31, 2002 and 2001, respectively.

          The continuing downturn in our industry have caused communications service providers to reduce their capital spending on fiber optic equipment and delayed the deployment of new and build-out of existing fiber optic networks.  As the result of currently unfavorable economic and market conditions, (a) our revenue may continue to decline, (b) we are unable to predict future revenue accurately, and (c) we are currently unable to provide long-term guidance for future financial performance. The conditions contributing to this difficulty include:

          Based on these and other factors, many of our major customers have reduced orders for our products and have expressed uncertainty as to their future requirements. As a result, our revenue in future periods may continue to decline. In addition, our ability to meet financial expectations for future periods may be harmed.

We derive a significant portion of our total revenue from a few significant customers, and our total revenue may decline significantly if any of these customers cancels, reduces or delays purchases of our products or extracts price concessions from us.

          Our success depends on our continued ability to develop and maintain relationships with a limited number of significant customers.  We sell our products into markets dominated by a relatively small number of systems manufacturers, a fact that limits the number of our potential customers.  Our

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dependence on orders from a relatively small number of customers makes our relationship with each customer critical to our business.

          We do not have long-term sales contracts with our customers.  Instead, sales to our customers are made on the basis of individual purchase orders that our customers may cancel or defer on short notice without significant penalty.  In the past, some of our major customers canceled, delayed or significantly accelerated orders in response to changes in the manufacturing schedules for their systems, and they are likely to do so in the future.  The reduction, cancellation or delay of individual customer purchase orders would cause our revenue to decline.  Moreover, these uncertainties complicate our ability to accurately plan our manufacturing schedule.  Additionally, if any of our customers cancel or defer orders, our operating expenses may increase as a percentage of revenue.

          In the past, our customers have sought price concessions from us, and they are likely to continue to do so in the future.  In addition, some of our customers may shift their purchases of products from us to our competitors.  The loss of one or more of our significant customers, our inability to successfully develop relationships with additional customers or future price concessions could cause our revenue to decline significantly.

We are dependent on a limited number of suppliers for most of our key components.  If these suppliers are unable to meet our manufacturing requirements, we may experience production delays leading to delays in shipments, increased costs and cancellation of orders for our products.

          We purchase several key components that we incorporate into our products from a limited number of suppliers.  We also purchase the majority of lasers from Furukawa.  We do not have long-term supply contracts with any of our key suppliers.  Our dependence on a small number of suppliers and our lack of long-term supply contracts exposes us to several risks, including our potential inability to obtain an adequate supply of quality components, price increases and late deliveries.  We have experienced shortages and delays in obtaining key components in the past and expect to experience shortages and delays in the future.

          In the past, industry capacity has been constrained and some of our component suppliers placed limits on the number of components sold to us.  If industry capacity becomes constrained in the future, our component suppliers may place similar limits on us.  We do not have any control over these limits, and our suppliers may choose to allocate more of their production to our competitors.  In addition, our suppliers could discontinue the manufacture or supply of these components at any time.

          A disruption in, or termination of, our supply relationship with Furukawa or any of our other key suppliers, or our inability to develop relationships with new suppliers would interrupt and delay the manufacturing of our products, which could result in delays in our revenue, or the cancellation of orders for our products.  We may not be able to identify and integrate alternative suppliers in a timely fashion, or at all.  Any transition to alternative suppliers would likely result in delays in shipment, quality control issues and increased expenses, any of which would limit our ability to deliver products to our customers.  Furthermore, if we are unable to identify an alternative source of supply, we may have to redesign or modify our products, which would cause delays in shipments, increase design and manufacturing costs and require us to increase the prices of our products.

Our future operating results are likely to fluctuate from quarter to quarter, and if we fail to meet the expectations of securities analysts or investors, our stock price could decline significantly.

          Our historical quarterly operating results have varied significantly, and our future quarterly operating results are likely to continue to vary significantly from period to period.  As a result, we believe

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that period-to-period comparisons of our operating results should not be relied upon as an indicator of our future performance.  Some of the factors that could cause our operating results to vary include:

          We incur expenses from time to time that may not generate revenue until subsequent quarters.  In addition, in connection with new product introductions, we incur research and development expenses and sales and marketing expenses that are not matched with revenue until a subsequent quarter when the new product is introduced.  We cannot assure you that our expenditures on manufacturing capacity will generate increased revenue in subsequent quarters.  If growth in our revenue does not outpace the increase in our expenses, our quarterly operating results may fall below expectations and cause our stock price to decline significantly.

          Due to these and other factors, we believe that our quarterly operating results are not an indicator of our future performance.  If our operating results are below the expectations of public market analysts or investors in future quarters, the trading price of our Class A common stock would be likely to decrease significantly.

General economic factors could negatively impact our growth plan.

          Since early 2001, unfavorable economic conditions in the United States detrimentally affected the U.S. manufacturing industry, particularly sales of fiber optics equipment to service providers and communication equipment companies. Announcements by fiber optics equipment manufacturers and their customers during this period indicate that there is a reduction in spending for fiber optic equipment as a result of the economic slowdown and efforts to reduce existing inventories. Based on these and other factors, some of our customers have reduced, modified, cancelled or rescheduled orders for our products and have expressed uncertainty as to their future requirements. In addition, the economic slowdown has required us to aggressively manage our costs and expenses, including our July 2001 and April 2002 announcements of the elimination of approximately 110 jobs and 45 jobs, respectively, primarily in the manufacturing area, and may require us to implement further cost management procedures in the future. Our business, operating results and financial condition will suffer if economic conditions in the United States worsen, the fiber optics equipment market continues to slowdown, or if a wider or global economic slowdown occurs.

If we do not develop and introduce new products with higher average selling prices in a timely manner, the overall average selling prices of our products will decrease.

          The market for fiber optic subsystems and modules is characterized by declining average selling prices for existing products due to increased competition, the introduction of new products, product obsolescence and increased unit volumes as manufacturers deploy new network equipment.  We have in the past experienced, and in the future may experience, period-to-period fluctuations in operating results due to declines in our overall average selling prices.  We anticipate that the selling prices for our existing products will decrease in the future in response to product introductions by competitors or us, or other factors, including pressure from significant customers for price concessions.  Therefore, we must continue

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to develop and introduce new products that can be sold at higher prices on a timely basis to maintain our overall average selling prices.  Failure to do so could cause our revenue and gross margins to decline. 

If our customers do not approve our manufacturing process and qualify our products, we will lose significant customer sales and opportunities.

          Customers generally will not purchase any of our products before they qualify them and approve our manufacturing process and quality control system.  Our customers may require us to register under international quality standards, such as ISO 9001.  Delays in product qualification or loss of ISO 9001 certification may cause a product to be dropped from a long-term supply program and result in a significant lost revenue opportunity.  If particular customers do not approve of our manufacturing process, we will lose the sales opportunities with those customers.

If we fail to predict our manufacturing requirements accurately, we could incur additional carrying costs and have excess and obsolete inventory or experience manufacturing delays, which could cause us to lose orders or customers.

          We currently use historical data, a backlog of orders and estimates of future requirements to determine our demand for components and materials.  We must accurately predict both the demand for our products and the lead-time required to obtain the necessary components and materials.  Lead times for components and materials vary significantly depending on factors such as the specific supplier, the size of the order, contract terms and demand for each component at a given time.  We generally maintain excess inventory of parts that increases our inventory carrying costs and periodically causes us to have excess and obsolete inventory.  However, if we were to underestimate our purchasing requirements, manufacturing could be interrupted, resulting in delays in shipments.

Our markets are highly competitive, some of our customers are also our competitors, and our other customers may choose to purchase our competitors’ products rather than our products or develop internal capabilities to produce their own fiber optic subsystems and modules.

          The market for fiber optic subsystems and modules is highly competitive and we expect competition to intensify in the future. Our primary competitors include Agilent Technologies, ExceLight Communications, Finisar, Infineon Technologies, JDS Uniphase, Molex Fiber Optics, MRV Communications, Picolight, and Stratos Lightwave.   We also face indirect competition from public and private companies providing products that address the same fiber optic network problems that our products address.  The development of alternative solutions to fiber optic transmission problems by our competitors, particularly systems companies that also manufacture modules, such as Alcatel (via Alcatel Optronics) and Fujitsu, could significantly limit our growth and harm our competitive position.

          Many of our current competitors and potential competitors have longer operating histories and significantly greater financial, technical, sales and marketing resources than we do.  As a result, these competitors are able to devote greater resources to the development, promotion, sale and support of their products.  In addition, our competitors that have large market capitalization or cash reserves are in a much better position to acquire other companies in order to gain new technologies or products that may displace our products.  Any of these potential acquisitions could give our competitors a strategic advantage.  In addition, many of our competitors have much greater brand name recognition, more extensive customer bases, more developed distribution channels and broader product offerings than we do.  These companies can use their broader customer bases and product offerings and adopt aggressive pricing policies to gain market share.

          In addition, existing and potential customers, especially in Japan and other international markets, may also become competitors.  These customers have the internal capabilities to integrate their operations by producing their own optical subsystems and modules or by acquiring our competitors or the rights to

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produce competitive products or technologies, which may allow them to reduce their purchases or cease purchasing from us.

          We expect our competitors to introduce new and improved products with lower prices, and we will need to do the same to remain competitive.  We may not be able to compete successfully against either current or future competitors with respect to new products.  We believe that competitive pressures may result in price reductions, reduced margins and our loss of market share.

Our sales cycle runs from our customers’ initial design to production for commercial sale.  This cycle is long and unpredictable and may cause our revenue and operating results to vary from our forecasts.

          The period of time between our initial contact with a customer and the receipt of a purchase order from that customer may span to more than a year and varies by product and customer.  During this time, customers may perform, or require us to perform, extensive evaluation and qualification testing of our products.  Generally, they consider a wide range of issues before purchasing our products, including interoperation with other subsystems and components, product performance and reliability.  We may incur substantial sales and marketing expenses and expend significant management effort while potential customers are qualifying our products.  Even after incurring these costs, we ultimately may not sell any or sell only small amounts of our products to a potential customer.  If sales forecasts to specific customers are not realized, our revenue and results of operations may be negatively impacted.

If we do not achieve acceptable manufacturing yields in a cost-effective manner, or we are required to develop new manufacturing processes to improve our yields, our operating results would be impaired.

          The manufacture of our products involves complex and precise processes.  As a result, it may be difficult to cost-effectively meet our production goals.  In addition, changes in our manufacturing processes or those of our suppliers, or our suppliers’ inadvertent use of defective materials, could significantly reduce our manufacturing yields, increase our costs and reduce our product shipments.  To increase our gross margin, while offering products at prices acceptable to customers, we will need to develop new manufacturing processes and techniques that will involve higher levels of automation.

We could be subjected to litigation regarding intellectual property rights, which may divert management attention, cause us to incur significant costs or prevent us from selling our products.

          In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights in the networking technologies industry.  Many companies aggressively use their patent portfolios to bring infringement claims against competitors.  As a result, we may be a party to litigation or be involved in disputes over our alleged infringement of others’ intellectual property in the future.  These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and prevent us from making or selling some of our products.  These lawsuits, regardless of their merit, would likely be time-consuming and expensive to resolve and would divert management’s time and attention.  Any potential intellectual property litigation also could force us to do one or more of the following:

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          If we are forced to take any of these actions, we may be limited in our ability to execute our business plan.

          We may in the future initiate claims or litigation against third parties for infringement of our proprietary rights.  These claims could result in costly litigation and the diversion of our technical and management personnel.  In the process of asserting our intellectual property rights, these rights could be found to be invalid, unenforceable or not infringed.  Failure to successfully assert our intellectual property rights could result in our inability to prevent our competitors from utilizing our proprietary rights.

If we are unable to protect our proprietary technology, this technology could be misappropriated, which would make it difficult for us to compete in our industry.

          Our success and ability to compete is dependent in part on our proprietary technology. We rely primarily on patent, copyright, trademark and trade secret laws, as well as confidentiality agreements and other methods, to establish and protect our proprietary rights.  Existing patent, copyright, trademark and trade secret laws afford only limited protection.  While we are pursuing foreign patent protections, the laws of some foreign countries do not protect the unauthorized use of our proprietary technology and processes to the same extent as do the laws of the United States, and policing the unauthorized use of our products is difficult.  Many U.S. companies have encountered substantial infringement problems in some foreign countries.  Because we sell some of our products overseas, we have exposure to foreign intellectual property risks. Any infringement of our proprietary rights could result in costly litigation, and any failure to adequately protect our proprietary rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue.

If we are unable to generate adequate additional revenue as a result of the planned expansion of our sales operations, our competitive position may be harmed and our revenue or margins may decline.

          Historically, we have relied primarily on a limited direct sales force, supported by third party manufacturers’ representatives and distributors, to sell our products.  Our sales strategy focuses primarily on developing and expanding our direct sales force, manufacturers’ representatives and distributors.  We will incur significant costs related to the expansion of our sales operations.  If the expansion of our sales operations does not generate adequate additional revenue, the cost of any expansion may exceed the revenue generated, and our margins may decline.  To the extent we are unsuccessful in expanding our direct sales force, we will likely be unable to compete successfully against the significantly larger and well-funded sales and marketing operations of many of our current or potential competitors.  In addition, if we fail to develop relationships with significant manufacturers’ representatives or distributors, or if these representatives or distributors are not successful in their sales or marketing efforts, sales of our products may decrease and our competitive position would be harmed.  Our representatives or distributors may not market our products effectively or may not continue to devote the resources necessary to provide us with effective sales, marketing and technical support.  Our inability to effectively manage the expansion of our domestic and foreign sales and support staff or maintain existing or establish new relationships with manufacturer representatives and distributors would harm our revenue and result in declining margins.

The market for our products is new and is characterized by rapid technological changes and evolving industry standards.  If we do not respond to the changes in a timely manner, our products likely will not achieve market acceptance.

          The market for our products is characterized by rapid technological change, new and improved product introductions, changes in customer requirements and evolving industry standards.  Our future success will depend to a substantial extent on our ability to develop, introduce and support cost-effective

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new products and technology on a successful and timely basis.  We plan to increase our budget for research and development of new products and technology.  Since these costs are expensed as incurred, we expect a negative impact on our reported net income.  If we fail to develop and deploy new cost-effective products and technologies or enhancements of existing products on a timely basis, or if we experience delays in the development, introduction or enhancement of our products and technologies, our products will no longer be competitive and our revenue will decline.

          The development of new, technologically advanced products is a complex and uncertain process requiring high levels of innovation and highly skilled engineering and development personnel, as well as the accurate anticipation of technological and market trends.  We cannot assure you that we will be able to identify, develop, manufacture, market or support new or enhanced products on a timely basis, if at all.  Furthermore, we cannot assure you that our new products will gain market acceptance or that we will be able to respond effectively to product announcements by competitors, technological changes or emerging industry standards.  Our failure to respond to product announcements, technological changes or industry changes in standards would likely prevent our products from gaining market acceptance and harm our competitive position.

Terrorist activities and resulting military and other actions could adversely affect our business.

          The September 11, 2001 terrorist attacks in the United States and recent terrorist attacks in other parts of the world, as well as continued threats of global terrorism, current and future military response to them and the possible United States military action against Iraq have created many economic and political uncertainties that make it extremely difficult for us, our customers and our suppliers to accurately forecast and plan future business activities. This reduced predictability challenges our ability to operate profitably or to grow our business. In particular, it is difficult to develop and implement strategies, sustainable business models and efficient operations, and effectively manage contract manufacturing and supply chain relationships.  In addition, the continued threats of terrorism and the heightened security measures in response to such threats have and may continue to cause significant disruption to commerce throughout the world.  Disruption in air transportation in response to these threats or future attacks may result in transportation and supply-chain disruptions, increase our costs for both receipt of inventory and shipment of products to our customers, and cause customers to defer their purchasing decisions.  Disruptions in commerce could also cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and worldwide financial markets and economy. They also could result in economic recession in the U.S. or abroad. Any of these occurrences could have a significant impact on our operating results, revenue and costs and may result in the volatility of the market price for our Class A common stock and on the future price of our Class A common stock.

Our success depends on our key personnel, including our executive officers, the loss of any of whom could harm our business.

          Our success depends on the continued contributions of our senior management and other key research and development, sales and marketing and operations personnel, including Muoi Van Tran, our Chief Executive Officer and President, Susie Nemeti, our Chief Financial Officer and Vice President of Finance and Administration, and Mohammad Ghorbanali, our Chief Operating Officer and Vice President of Technical Operations.  Competition for employees in our industry is intense.  We do not have life insurance policies covering any of our executives.  There can be no assurance that we will be successful in retaining such key personnel, or that we will be successful in hiring replacements or additional key personnel.  Our loss of any key employee, the failure of any key employee to perform in his or her current position, or the inability of our officers and key employees to expand, train and manage our employee base would prevent us from executing our growth strategy.

          We will need to attract and retain highly qualified managers, sales and marketing and technical support personnel.  We have had difficulty hiring the necessary engineering, sales and marketing and

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management personnel in the past.  If we fail to hire and retain qualified personnel when needed, our product development efforts and customer relations will suffer.  Our key management personnel have limited experience in managing the growth of technologically complex businesses in a rapidly evolving environment.  If we are unable to manage our growth effectively, we will incur additional expenses that will negatively impact our operating results.

Our products may have defects that are not detected until full deployment of a customer’s system.  Any of these defects could result in a loss of customers, damage to our reputation and substantial costs.

          We design our products for large and complex fiber optic networks, and our products must be compatible with other components of the network system, both current and future.  We have experienced in the past, and may continue to experience in the future, defects in our products.  Defects in our products or incompatibilities in our products may appear only when deployed in networks for an extended period of time.  In addition, our products may fail to meet our customers’ design specifications, or our customers may change their design specifications after the production of our product.  A failure to meet our customers’ design specification often results in a loss of the sale due to the length of time required to redesign the product.  We may also experience defects in third party components that we incorporate into our products.  We have experienced the following due to our inability to detect or fix errors in the past:

Our products and the systems into which our products are incorporated must comply with domestic and international governmental regulations, and if our products do not meet these regulations, our ability to sell our products will be restricted.

          Our products are subject to various regulations of U.S. and foreign governmental authorities principally in the areas of radio frequency emission standards and eye safety.  Radio frequency emission standards govern allowable radio interference with other services.  Eye safety standards govern the labeling and certification of laser products to ensure that they are used in a way that does not create a hazard to the human eye.  Our products and the systems into which they are incorporated must also comply with international standards and governmental standards of the foreign countries where our products are used.  Our inability, or the inability of our customers, to comply with existing or evolving standards established by regulatory authorities, or to obtain timely domestic or foreign regulatory approvals or certificates will restrict our ability to sell our products.

We are subject to environmental laws and other legal requirements that have the potential to subject us to substantial liability and increase our cost of doing business.

          Our properties and business operations are subject to a wide variety of federal, state and local environmental, health and safety laws and other legal requirements, including those relating to the storage, use, discharge and disposal of toxic, volatile or otherwise hazardous substances.  We may be required to incur substantial costs to comply with current or future legal requirements.  In addition, if we fail to obtain required permits or otherwise fail to operate within these or future legal requirements, we may be required to pay substantial penalties, suspend our operations or make costly changes to our manufacturing processes or facilities.  We believe our properties and business operations are in compliance with applicable environmental laws.  We do not anticipate any material capital expenditures for environmental control facilities for the 2003 fiscal year.

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We face risks associated with our international operations that could prevent us from marketing and distributing our products internationally.

          Although a significant portion of our sales has historically been in North America, a growing percentage of our revenue is generated from sales outside North America.  Sales of our products outside North America accounted for approximately 39.6% and 19.6% of our revenue for the three months ended December 30, 2002 and 2001, respectively.  We expect that our sales outside of North America will continue to contribute materially to our revenue.   We have limited experience in marketing and distributing our products internationally.  We intend to expand our international operations in the future.  Significant management attention and financial resources are needed to develop our international sales, support and distribution channels and manufacturing.  We may not be able to establish or maintain international market demand for our products.

          In addition, international operations are subject to other risks, including:

          A portion of our international revenue and expenses may be denominated in foreign currencies in the future.  Accordingly, we could experience the risks of fluctuating currencies and may choose to engage in currency hedging activities.  These factors could adversely impact our international sales or increase our costs of doing business abroad or impair our ability to expand into international markets, and therefore could significantly harm our business.

Disruption of our operations at our Chatsworth, California manufacturing facility could require us to lease alternative manufacturing facilities or limit our manufacturing operations.

          All of our manufacturing operations are conducted in our Chatsworth, California headquarters.  Due to this geographic concentration, a disruption of our manufacturing operations, resulting from sustained process abnormalities, human error, government intervention or natural disasters, such as earthquakes, fires or floods, or other causes, could require us to cease or limit our manufacturing operations. 

Our limited experience in acquiring other businesses, product lines and technologies may make it difficult for us to overcome problems encountered in connection with any acquisition we may undertake.

          We expect to review opportunities to buy other businesses, products or technologies that would enhance our technical capabilities, complement our current products or expand the breadth of our markets or which may otherwise offer growth opportunities.  Our acquisition of businesses or technologies will require significant commitment of resources.  We may be required to pay for any acquisition with cash, but we cannot be certain that additional capital will be available to us on favorable terms, if at all.  In lieu of paying cash, we could issue stock as consideration for an acquisition that would dilute existing stockholders’ percentage ownership, incur substantial debt or assume contingent liabilities.  We have little experience in acquiring other businesses and technologies.  Potential acquisitions also involve numerous risks, including:

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          On October 9, 2002 and January 31, 2003, we acquired certain assets of Cielo Communications, Inc. and W. L. Gore & Associates, respectively.  We may encounter problems integrating the acquired operations, technologies or products into our own and could lose the services of certain key employees associated with the acquired entities.

Our stock price is likely to be volatile and could drop unexpectedly.

          Our Class A common stock has been publicly traded since November 3, 2000. The market price of our Class A common stock has been subject to significant fluctuations since the date of our initial public offering.  The stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices of securities, particularly securities of telecommunications and fiber optic companies. As a result, the market price of our Class A common stock may materially decline, regardless of our operating performance. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. We may become involved in this type of litigation in the future. Litigation of this type is often expensive and diverts management’s attention and resources.

We may not be able to maintain our listing on the Nasdaq National Market and if we fail to do so, the price and liquidity of our Class A common stock may decline.

          The Nasdaq Stock Market has quantitative maintenance criteria for the continued listing of securities on the Nasdaq National Market.  The current requirements affecting us include maintaining a minimum bid price per share of $1.  Our bid price has been below $1 in the past.  If the bid price of our Class A common stock drops below $1 per share and remains at that level for more than 30 consecutive trading days, we will be in violation of Nasdaq’s listing standards.  If within 90 days thereafter, our Class A common stock does not have a minimum bid price of $1 per share for 10 consecutive trading days, Nasdaq will commence proceedings to delist our Class A common stock from the Nasdaq National Market.  If we fail to maintain continued listing on the Nasdaq National Market and must move to a market with less liquidity, our stock price would likely decline.  If we are delisted, it could have a material adverse effect on the market price of, and the liquidity of the trading market for, our Class A common stock.

We have business conflicts of interest with Furukawa, the resolution of which may not be as favorable to us as if we were dealing with an unaffiliated third party.

          We have historically relied on Furukawa’s research and development capabilities to provide us with technologically advanced lasers and fiber optic components that we purchase from Furukawa for inclusion in our products, and we expect to continue to rely on Furukawa in the future.  We currently purchase the majority of lasers from Furukawa.  We currently have no written agreements with Furukawa with respect to our research and development and supply relationship.  We cannot assure you that Furukawa will continue to provide services and components to us, and if not, whether or on what terms we could find adequate alternative sources for these services and components.  We believe that our past business dealings with Furukawa and its subsidiaries and affiliates were on terms that were no less favorable than terms that would be available from third parties for similar transactions.  We intend to continue to maintain our relationship with Furukawa and Furukawa will continue to control us.  The terms of future transactions with Furukawa may or may not be comparable to those that would be available from unaffiliated third parties.

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          Conflicts of interest may arise between Furukawa and us in a number of areas, including the nature and quality of services rendered by Furukawa to us, potential competitive business activities, sales or distributions by Furukawa of all or any portion of its ownership interest in us, or Furukawa’s ability to control our management and affairs.  It is possible that business decisions made by management that are in the best interest of our stockholders may conflict with Furukawa’s interests.  For example, we may decide to enter into or acquire a line of business competitive with Furukawa, or Furukawa may decide to enter into or acquire a line of business competitive with us.  Any of these events may alter or eliminate our ability to rely on Furukawa to supply key components to us in the future, increase our costs of producing our products and result in increased competition in our markets.  We cannot assure you that we will be able to resolve any conflicts we may have with Furukawa or, if we are able to do so, that the resolution will be favorable to us.

Furukawa will control the outcome of stockholder voting and there may be an adverse effect on the price of our Class A common stock due to disparate voting rights of our Class A common stock and our Class B common stock.

          Furukawa beneficially owns all of our outstanding shares of Class B common stock, which as of December 31, 2002 represented 59.7% of our outstanding shares of common stock and 93.7% voting control over all stockholder issues.  The holders of our Class A common stock and Class B common stock have identical rights except that holders of our Class A common stock are entitled to one vote per share while holders of our Class B common stock are entitled to ten votes per share on matters to be voted on by stockholders.  The differential in the voting rights of our Class A common stock and Class B common stock could adversely affect the price of our Class A common stock to the extent that investors or any potential future purchaser of our shares of Class A common stock give greater value to the superior voting rights of our Class B common stock.  Each share of our Class B common stock will automatically convert into one share of Class A common stock if it is transferred to any entity, other than an entity controlling, controlled by or under common control with Furukawa.  In addition, our Class B common stock will automatically convert into shares of our Class A common stock if the total number of outstanding shares of Class B common stock falls below 20% of total number of outstanding shares of our common stock.  As long as Furukawa has a controlling interest, it will continue to be able to elect our entire board of directors and generally be able to determine the outcome of all corporate actions requiring stockholder approval.  As a result, Furukawa will be in a position to continue to control all matters affecting us, including:

          Two members of our board of directors are also executives of Furukawa. These individuals have obligations to both our company and Furukawa and may have conflicts of interest with respect to matters potentially or actually involving or affecting us, such as acquisitions and other corporate opportunities that may be suitable for both Furukawa and us.

ITEM 3.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          We are currently exposed to interest rate risk on our existing term loan and revolving credit facility and on our investment portfolio.  Our variable rate debt consists of term loan borrowing of $1.8 million.  To date we have not utilized our floating rate debt under the revolving credit facility.  The primary objective of our investment activities is to preserve capital.  We have not used derivative

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financial instruments in our investment portfolio.  Our cash and cash equivalents includes $71.4 million the majority of which is invested in money market and other interest bearing accounts.   In addition, we have $70.7 million invested in marketable securities, which represents investments in United States treasury notes and treasury bonds.

          As of December 31, 2002, our investment in marketable securities had a weighted-average time to maturity of approximately 212 days. Marketable securities represent United States treasury notes and treasury bonds with maturity on the date purchased of greater than three months.  These securities are classified as held to maturity because we have the intention and ability to hold the securities to maturity.  Gross unrealized gains and losses on held-to-maturity marketable securities have historically not been material.  Maturities on the date purchased of held-to-maturity marketable debt securities range from three months to two years.

          If interest rates were to increase or decrease 1%, the result would be an annual increase or decrease of interest expense of approximately $17,000 on our term loan and an annual increase or decrease of interest income of  $1.4 million on our investment portfolio.  However, due to the uncertainty of the actions that would be taken and their possible effects, this analysis assumes no such action.  Further, this analysis does not consider the effect of the change in the level of overall economic activity that could exist in such an environment.  Sales to foreign customers are denominated in U.S. dollars and as such we have no foreign currency fluctuation risk.

ITEM 4.          CONTROLS AND PROCEDURES

          (a) Evaluation of Disclosure Controls and Procedures.  Based on their evaluation as of a date within 90 days of the filing date of this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934)(the “Exchange Act”) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

          (b) Changes in Internal Controls.  There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced in paragraph (a) above.

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PART II.
OTHER INFORMATION AND SIGNATURES

          We are not currently involved in any material legal proceedings.  We are not aware of any other material legal proceedings threatened or pending against us. From time to time, however, we may become subject to additional legal proceedings, claims, and litigation arising in the ordinary course of business. In addition, in the past we have received, and we may continue to receive in the future, letters alleging infringement of patent or other intellectual property rights. Our management believes that these letters generally are without merit and intend to contest them vigorously.

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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.

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PERIODIC REPORT CERTIFICATION
of the Chief Executive Officer

I, Muoi Van Tran, the Chief Executive Officer of Optical Communication Products, Inc., certify that:

1.          I have reviewed this quarterly report on Form 10-Q of Optical Communication Products, Inc.;

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

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

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

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

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

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PERIODIC REPORT CERTIFICATION
of the Chief Financial Officer

I, Susie L. Nemeti, the Chief Financial Officer of Optical Communication Products, Inc., certify that:

1.          I have reviewed this quarterly report on Form 10-Q of Optical Communication Products, Inc.;

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

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

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

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

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

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