**UNITED STATES**SECURITIES AND EXCHANGE COMMISSION

**Washington,D.C. 20549**

**FORM 10-Q**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe quarterly period ended October 28, 2006**

**or**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**CommissionFile Number: 001-33109**

**OPTIUM CORPORATION**

(Exact name of registrantas specified in its charter)

| **Delaware**                     |   | **59-3684497**                        |
|----------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of |   | (I.R.S. Employer  Identification No.) |
| incorporation or  organization)  |   |                                  |

 

**500 Horizon Drive, Suite505 Chalfont PA 18914**

(Address of principal executive offices)        (Zip Code)

** **

**(215) 712-6200**

(Registrant’s telephone number, including area code)

** **

**Not Applicable**

(Former name, former address and former fiscal year, ifchanged since last report)

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. oYes x No

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act. (Check one):

| Large accelerated file o |   | Accelerated  filer o |   | Non-accelerated  filer x |
|--------------------------|--------|----------------------|--------|--------------------------|

 

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

The number ofshares of Common Stock, $.0001 par value,outstanding as of December 6, 2006 was 25,324,100

 

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**TABLE OF CONTENTS**

**PART I**

**Financial Information**
|                | ** ** | ** **                                                                                                          | ** ** | **Page**   |
|----------------|------------|---------------------------------------------------------------------------------------------------------------------|------------|------------|
| **ITEM  1.**   | ** ** | **Financial  Statements**                                                                                           | ** ** | ** ** |
| 1.             |       | Condensed Consolidated Statements of Operations for  the   Three-Months ended October 28, 2006 and October 29, 2005 |       | 2          |
|           |       |                                                                                                                |       |       |
| 2.             |       | Condensed Consolidated Balance Sheets as   of October 28, 2006 and July 29, 2006                                    |       | 3          |
|           |       |                                                                                                                |       |       |
| 3.             |       | Condensed Consolidated Statements of Cash Flows for   the Three-Months ended October 28, 2006 and October 29, 2005  |       | 4          |
|           |       |                                                                                                                |       |       |
| 4.             |       | Notes to Condensed Consolidated Financial Statements                                                                |       | 5          |
| ** **     | ** ** | ** **                                                                                                          |       |       |
| **ITEM 2.**    | ** ** | **Management’s Discussion and Analysis of   Financial Condition and Results of Operations**                    |       | 16         |
| ** **     | ** ** | ** **                                                                                                          |       |       |
| **ITEM 3.**    | ** ** | **Quantitative and Qualitative Disclosures about   Market Risk**                                                    |       | 21         |
| ** **     | ** ** | ** **                                                                                                          |       |       |
| **ITEM 4.**    | ** ** | **Controls and Procedures**                                                                                         |       | 21         |
| ** **     |       | **PART  II**                                                                                                        |       |       |
| ** **     |       | **Other  Information**                                                                                              |       |       |
| **ITEM  1.**   | ** ** | **Legal  Proceedings**                                                                                              |       | 22         |
| ** **     | ** ** | ** **                                                                                                          |       |       |
| **ITEM  1A.**  | ** ** | **Risk  Factors**                                                                                                   |       | 22         |
| **ITEM 2.**    | ** ** | **Unregistered Sales of Equity Securities and Use of  Proceeds**                                                    |       | 33         |
| **ITEM 3.**    | ** ** | **Defaults Upon Senior Securities**                                                                                 |       | 33         |
| **ITEM 4.**    | ** ** | **Submission of Matters to a Vote of Security Holders**                                                             |       | 33         |
| **ITEM  5.**   | ** ** | **Other  information**                                                                                              |       | 34         |
| **ITEM 6.**    | ** ** | **Exhibits**                                                                                                        |       | 34         |
| ** **     |       |                                                                                                                |
| **SIGNATURES** |       | 35                                                                                                                  |

 

ii

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**FORWARD-LOOKINGSTATEMENTS**

Fromtime to time, the Company makes forward-looking statements. Forward-lookingstatements include financial projections, statements of plans and objectivesfor future operations, statements of future economic performance, and statementsof assumptions relating thereto. When used in this document, the words “will,” “plan,” “believe,” “may,”“anticipate,” “ could,” “seek,” “estimate,” “expect,” “continue,” “intend,” andsimilar expressions, variations or the negatives of these terms are intended toidentify forward-looking statements. Although management believes that theexpectations reflected in these forward-looking statements are reasonable atthe time they are made, no assurance can be made that these expectations willprove to be correct.

The Company may includeforward-looking statements in its periodic reports to the Securities andExchange Commission on Forms 10-K, 10-Q, and 8-K, in its annual report toshareholders, in its proxy statements, in its press releases, in other writtenmaterials, and in statements made by employees to analysts, investors,representatives of the media, and others.

Bytheir very nature, forward-looking statements are subject to uncertainties,both general and specific, and risks exist that predictions, forecasts,projections and other forward-looking statements will not be achieved.  Actual results may differ materially due to avariety of factors including, without limitation, those discussed under “CertainTrends Affecting Our Results of Operations;” Risk Factors;” and elsewhere inthis report.  Investors and others shouldcarefully consider these factors and other uncertainties and events, whether ornot the statements are described as forward-looking.

Forward-lookingstatements made by the Company are intended to apply only at the time they aremade, unless explicitly stated to the contrary. Moreover, whether or not statedin connection with a forward-looking statement, the Company makes no commitmentto revise or update any forward-looking statements in order to reflect eventsor circumstances after the date any such statement is made. If the Company werein any particular instance to update or correct a forward-looking statement,investors and others should not conclude that the Company will make additionalupdates or corrections thereafter.

1

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**PART I**

**FinancialInformation**

**ITEM 1.Financial Statements**

**Optium CorporationCondensed Consolidated Statements of Operations(unaudited)***(inthousands, except per share data)*
| ** **                                         | ** ** | **Three months ended** | ** ** |
|----------------------------------------------------|------------|----------------------------------|------------|
| ** **                                         | ** ** | **October 28,  2006**       | ** ** | **October 29,  2005** | ** ** |
| Revenue                                            |       | $                                | 30,010     |   | $ | 14,016 |   |
| Cost of revenue                                    |       | 21,305                           |       | 10,974 |   |
| Gross profit                                       |       | 8,705                            |       | 3,042 |   |
| Operating expenses:                                |       |                             |       |   |   |
| Research and  product development                  |       | 2,996                            |       | 1,742 |   |
| Selling, general  and administrative               |       | 2,827                            |       | 947 |   |
| Total operating  expenses                          |       | 5,823                            |       | 2,689 |   |
| Income from operations                             |       | 2,882                            |       | 353 |   |
| Interest and other  income (expense), net          |       | 56                               |       | 32 |   |
| Income before income  tax expense                  |       | 2,938                            |       | 385 |   |
| Income tax expense                                 |       | 179                              |       | 8 |   |
| Net income                                         |       | $                                | 2,759      |   | $ | 377 |   |
|                                               |       |                             |       |   |   |
| Basic net income per  share                        |       | $                                | 0.96       |   | $ | 0.21 |   |
| Basic weighted average  common shares outstanding  |       | 2,864                            |       | 1,818 |   |
|                                               |       |                             |       |   |   |
| Diluted net income per  share                      |       | $                                | 0.13       |   | $ | 0.02 |   |
| Diluted weighted average common shares outstanding |       | 20,630                           |       | 16,981 |   |

 

*Seeaccompanying notes.*

2

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**Optium CorporationCondensed Consolidated Balance Sheets(unaudited)***(inthousands, except share amounts)*
| ** **                                                                                                                                                                                                          | ** ** | **October 28,  2006** | ** ** | **July 29,  2006** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------|------------|-------------------------|------------|
| **Assets**                                                                                                                                                                                                          |       |                       |       |                    |       |
| Current assets:                                                                                                                                                                                                     |       |                       |       |                    |       |
| Cash and cash  equivalents                                                                                                                                                                                          |       | $                          | 8,513      |                    | $          | 10,377 |   |
| Accounts  receivable—net of allowance of $55 and $25                                                                                                                                                           |       | 18,306                     |       | 19,075                  |       |
| Inventories                                                                                                                                                                                                         |       | 16,378                     |       | 11,701                  |       |
| Prepaid expenses  and other current assets                                                                                                                                                                          |       | 397                        |       | 407                     |       |
| Total current assets                                                                                                                                                                                                |       | 43,594                     |       | 41,560                  |       |
| Property and  equipment—net                                                                                                                                                                                    |       | 5,514                      |       | 5,207                   |       |
| Other assets                                                                                                                                                                                                        |       | 3,720                      |       | 2,009                   |       |
| Goodwill                                                                                                                                                                                                            |       | 10,565                     |       | 10,533                  |       |
| Total assets                                                                                                                                                                                                        |       | $                          | 63,393     |                    | $          | 59,309 |   |
| **Liabilities, redeemable convertible  preferred stock and stockholders’ deficit**                                                                                                                             |       |                       |       |                    |       |
| **Current liabilities:**                                                                                                                                                                                            | ** ** | ** **                 | ** ** | ** **              | ** ** |
| Accounts payable                                                                                                                                                                                                    |       | $                          | 21,009     |                    | $          | 18,386 |   |
| Accrued expenses                                                                                                                                                                                                    |       | 3,047                      |       | 2,207                   |       |
| Accrued warranty                                                                                                                                                                                                    |       | 341                        |       | 223                     |       |
| Other current  liabilities                                                                                                                                                                                          |       | 158                        |       | 2,640                   |       |
| Current portion  of debt                                                                                                                                                                                            |       | 594                        |       | 320                     |       |
| Total current  liabilities                                                                                                                                                                                          |       | 25,149                     |       | 23,776                  |       |
| Long-term debt,  net of current portion                                                                                                                                                                             |       | —                     |       | 351                     |       |
| Other long-term  liabilities                                                                                                                                                                                        |       | 143                        |       | 97                      |       |
| Total liabilities                                                                                                                                                                                                   |       | 25,292                     |       | 24,224                  |       |
| Commitments and  contingencies                                                                                                                                                                                      |       |                       |       |                    |       |
| Series A redeemable  convertible preferred stock, $0.0001 par value—24,450,000 shares authorized,  24,000,000 shares issued and 23,818,500 outstanding, liquidation preference  of $7,939 at October 28, 2006  |       | 7,939                      |       | 7,939                   |       |
| Series B redeemable  convertible preferred stock, $0.0001 par value—42,702,958 shares authorized,  42,702,949 shares issued and 41,969,418 outstanding, liquidation preference  of $35,674 at October 28, 2006 |       | 35,674                     |       | 35,674                  |       |
| Series C senior  redeemable convertible preferred stock, $0.0001 par value—60,526,000 shares  authorized, 59,879,318 shares issued and outstanding, liquidation preference  of $55,025 at October 28, 2006     |       | 11,962                     |       | 11,962                  |       |
| Series D senior  redeemable convertible preferred stock, $0.0001 par value—25,500,000 shares  authorized, 25,245,570 shares issued and outstanding, liquidation preference  of $20,510 at October 28, 2006     |       | 10,255                     |       | 10,255                  |       |
| Series D-1 senior  redeemable convertible preferred stock, $0.0001 par value—24,475,897 shares  authorized, issued and outstanding, liquidation preference of $21,343 at  October 28, 2006                     |       | 21,343                     |       | 21,343                  |       |
| **Stockholders’ deficit:**                                                                                                                                                                                     | ** ** | ** **                 | ** ** | ** **              | ** ** |
| Common stock, $0.0001  par value — 100,000,000 shares authorized, 4,372,659 and 4,353,509 shares  issued, respectively; 2,878,580 and 2,859,430 shares outstanding,  respectively                              |       | —                     |       | —                  |       |
| Additional paid in  capital—common stock                                                                                                                                                                       |       | 9,530                      |       | 9,173                   |       |
| Deferred compensation                                                                                                                                                                                               |       | (1,300                     | )          | (1,170                  | )          |
| Accumulated other  comprehensive income                                                                                                                                                                             |       | 350                        |       | 320                     |       |
| Treasury stock,  1,494,085 shares of common stock—at cost                                                                                                                                                      |       | (2,762                     | )          | (2,762                  | )          |
| Accumulated deficit                                                                                                                                                                                                 |       | (54,890                    | )          | (57,649                 | )          |
| Total stockholders’  deficit                                                                                                                                                                                   |       | (49,072                    | )          | (52,088                 | )          |
| Total liabilities, redeemable convertible preferred stock and  stockholders’ deficit                                                                                                                           |       | $                          | 63,393     |                    | $          | 59,309 |   |

 

*Seeaccompanying notes.*

3

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**Optium CorporationCondensed Consolidated Statements of Cash Flows(unaudited)***(inthousands)*
| ** **                                                                         | ** ** | **Three months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                         | ** ** | **October 28,  2006**       | ** ** | **October 29,  2005** | ** ** |
| **Cash flows from operating  activities**                                          |       |                             |       |   |   |
| Net income                                                                         |       | $                                | 2,759      |   | $ | 377 |   |
| Adjustments to  reconcile net income to net cash provided by (used in) operations: |       |                             |       |   |   |
| Depreciation and  amortization                                                     |       | 626                              |       | 588 |   |
| Stock-based  compensation                                                          |       | 192                              |       | — |   |
| Provision for  doubtful accounts                                                   |       | 30                               |       | — |   |
| Changes in  operating assets and liabilities:                                      |       |                             |       |   |   |
| Accounts  receivable                                                               |       | 738                              |       | (1,269 | ) |
| Inventories                                                                        |       | (4,677                           | )          | 46 |   |
| Prepaid expenses  and other current assets                                         |       | 11                               |       | (121 | ) |
| Other assets                                                                       |       | (610                             | )          | 6 |   |
| Accounts payable                                                                   |       | 2,623                            |       | (875 | ) |
| Accrued expenses                                                                   |       | 838                              |       | 82 |   |
| Other current  liabilities                                                         |       | (2,482                           | )          | — |   |
| Accrued warranty                                                                   |       | 118                              |       | 31 |   |
| Other long-term  liabilities                                                       |       | 45                               |       | 2 |   |
| Net cash provided by  (used in) operating activities                               |       | 211                              |       | (1,133 | ) |
| **Cash flows from investing  activities**                                          |       |                             |       |   |   |
| Purchase of property  and equipment                                                |       | (930                             | )          | (639 | ) |
| Net cash used in  investing activities                                             |       | (930                             | )          | (639 | ) |
| **Cash flows from financing  activities**                                          |       |                             |       |   |   |
| Payments of line of  credit                                                        |       | (77                              | )          | — |   |
| Deferred financing  costs                                                          |       | (1,101                           | )          | — |   |
| Proceeds from exercise  of employee stock options                                  |       | 36                               |       | 3 |   |
| Net cash (used in)  provided by financing activities                               |       | (1,142                           | )          | 3 |   |
| Effect of exchange rate  changes on cash and cash equivalents                      |       | (3                               | )          | — |   |
| **Net decrease in cash and cash  equivalents**                                     |       | (1,864                           | )          | (1,769 | ) |
| **Cash and cash equivalents,  beginning of period**                                |       | 10,377                           |       | 8,474 |   |
| **Cash and cash equivalents, end  of period**                                      |       | $                                | 8,513      |   | $ | 6,705 |   |

 

*Seeaccompanying notes.*

4

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** **

**OptiumCorporationNotes to Condensed Consolidated Financial Statements(unaudited)**

**1.  Organizationand Operations**

Optium Corporation (the “Company”) was incorporated inthe State of Delaware on September 8, 2000. The Company is a supplier ofhigh-performance optical subsystems for use in telecommunications andcable TV network systems. Since its founding in 2000, the Company has developedproprietary technology and products that enable transmission, reception andswitching functionality for high-bandwidth, intelligent opticalnetworking applications. The Company designs, manufactures and sells opticalsubsystems, including transceivers and transmitters. The Company has alsorecently launched a technologically innovative reconfigurable add-dropmultiplexer or ROADM, which enables dynamic wavelength processing.

Refer to Note 14, Subsequent Event, related to theCompany’s recent initial public offering.

**2.  Summary ofSignificant Accounting Policies**

***Principles of consolidation***

As of March 5, 2006, the consolidated financialstatements include Optium Corporation and its wholly owned subsidiary, OptiumAustralia Pty Limited. All significant intercompany accounts andtransactions have been eliminated in the consolidation.

***Fiscal year***

The Company’s fiscal year ends on the Saturday closest toJuly 31. The first quarters of fiscal 2007 and 2006 ended on October 28,2006 and October 29, 2005, respectively.

***Basis of presentation***

The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with generally acceptedaccounting principles in the United States (GAAP) for interim financialinformation and with the instructions to Form 10-Q and Article 10 of RegulationS-X. Accordingly, they do not include all of the information and footnotesrequired by GAAP for complete financial statements. The preparation offinancial statements in conformity with GAAP requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of income and loss during thereporting period. Actual results could differ from those estimates. Operatingresults for the three months ended October 28, 2006 are not necessarilyindicative of the results that may be expected for the fiscal year ended July28, 2007. In the opinion of management, all adjustments (consisting solely ofnormal recurring adjustments) necessary for a fair presentation of the financialstatements for these interim periods have been included. Theaccompanying financial information should be read in conjunction with thefinancial statements, including the notes thereto, for the fiscal year endedJuly 29, 2006 included with the Company’s registration statement on Form S-1(Registration No. 333-135472) declared effective by the Securities and ExchangeCommission on October 26, 2006.

***Stock-based compensation***

EffectiveJuly 30, 2006, the Company adopted Statement of Financial Accounting Standards(“SFAS”) No. 123(R) “Share-Based Payment”, which requires companies torecognize in their statement of operations all share-based payments, includinggrants of stock options, based on the grant date fair value. The Companyadopted SFAS No. 123(R) using the prospective-transition method. Stock-basedcompensation is measured at the grant date, based on the fair value of theaward, and expensed over the requisite service period. The application of SFASNo. 123(R) involves significant amounts of judgment in the determination ofinputs into the Black-Scholes model which the Company uses to determine thevalue of stock options. Inherent in this model are assumptions related toexpected stock price volatility, option life, risk free interest rate and dividendyield. While the risk free interest rate and dividend yield are less subjectiveassumptions, typically based on factual data derived from public sources, theexpected stock-price volatility and option life assumptions require a greaterlevel of judgment which make them critical accounting estimates. The fair valueof each stock option grant was estimated on the date of the grant using theBlack-Scholes option-pricing model with the following assumptions:

5

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|                          | ** ** | **Three months  ended  October 28, 2006** | ** ** |
|--------------------------|------------|----------------------------------------------------------|------------|
| Risk-free  interest rate |       | 4.82%-4.74%                                              |       |
| Expected  dividend yield |       | 0%                                                       |       |
| Expected life            |       | 5 years                                                  |       |
| Expected volatility      |       | 80%                                                      |       |

 

Risk-free interestrate: The Company uses the risk free interest rate of a U.S. Treasury Note witha similar term on the date of the grant.

Expected dividendyield: The Company uses a 0% expected dividend yield as the Company has notpaid and does not anticipate declaring dividends in the near future.

Expected life: TheCompany’s expected life is based on the period the options are expected toremain outstanding based on the vesting periods and expectations of futureemployee actions.

Expectedvolatility: The Company estimated the expected volatility of the stock pricebased on an analysis of other volatility factors exhibited in the marketbecause of the limited history of the Company’s stock.

Forfeitures: TheCompany estimates forfeitures based on historical experience and factors ofknown historical or future projected work force reduction actions to anticipatethe projected forfeiture rates.

During the three months ended October 28, 2006, 188,924stock options  with a weighted averagegrant date  fair value of $10.05 peroption were granted under the Company’s 2000 Stock Option Plan. Thecompensation expense charged against earnings for SFAS 123(R) stock-basedcompensation for the first quarter of fiscal year 2007 was approximately$47,000. As of October 28, 2006, there was approximately $1.7 millionunrecognized compensation expense related to non-vested stock optionagreements. The stock-based compensation expense is expected to be recognizedin earnings over the weighted-average vesting period of 4 years.

Prior to the adoption of SFAS No. 123(R), the Company accountedfor its stock-based compensation granted to employees in accordance withthe provisions of Accounting Principles Board Opinion 25 (“APB 25”), “Accountingfor Stock Issued to Employees.” Under APB 25, compensation expense is based onthe difference, if any, on the date of the grant, between the fair value of theCompany’s stock and the exercise price of the option. The Company recordedstock-based compensation to the extent that the exercise price was less thanthe fair value of the Company’s stock on the date of grant.

Additionally, in the prior period, the Company disclosedthe information required by the Financial Accounting Standards Board (“FASB”)under Statement of Financial Accounting Standards Statement No. 123, “Accountingfor Stock-Based Compensation” (“Statement 123”) using the minimum value method.Stock issued to non-employees is accounted for under the provisions ofStatement 123 and the Emerging Issues Task Force (“EITF”) Consensus in IssueNo. 96-18, “Accounting for Equity Instruments that are Issued toOther than Employees for Acquiring, or in Conjunction with, Selling Goods orServices” (“EITF 96-18”).  Inaccordance with SFAS No. 123(R), options that were valued using the minimumvalue method under Statement 123, for purposes of pro forma disclosure, must betransitioned to SFAS No. 123(R) using the prospective method. Under theprospective method options granted prior to fiscal 2007 will continue to beaccounted for under the same accounting principles (recognition andmeasurement) originally applied to those awards, which for the Company was APB25. Accordingly, the adoption of SFAS 123(R) did not result in any compensationcost being recognized for the options granted prior to the adoption of SFAS123(R).

Under Statement 123, non-employee stock-basedcompensation is accounted for based on the fair value of the considerationreceived or equity instruments issued, whichever is more readily determinable.However, Statement 123 does not address the measurement date and recognitionperiod. EITF 96-18 states a consensus that the measurement date should bethe earlier of the date at which a commitment for performance by thecounterparty is reached or the date at which the counterparty’s performance iscomplete.

Under the pro forma disclosure previously required underSFAS 123, the compensation cost for the Company’s stock-basedcompensation plans had been determined based upon the fair value of the optionsat the grant date. Consistent with the methodology prescribed under Statement123, the Company would have recorded $106,439 and $12,001 as stock basedcompensation in 

6

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selling, general and administrative expenses for the three months endedOctober 28, 2006 and October 29, 2005, respectively, related to the grantsissued prior to the adoption of SFAS 123(R), as presented below:

|                                                                                           | ** ** | **Three months ended** | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                | ** ** | **October 28,  2006**       | ** ** | **October 29,  2005** | ** ** |
| ** **                                                                                | ** ** | **(in thousands)**          | ** ** |
| Net income, as  reported                                                                  |       | $                                | 2,759      |   | $ | 377 |   |
| Add: Stock-based  compensation under APB 25                                          |       | 139                              |       | — |   |
| Add: Stock-based  compensation under SFAS123(R)                                           |       | 45                               |       |   |   |
| Less: Stock-based  compensation expense determined under fair value method for all awards |       | (147                             | )          | (12 | ) |
| Net income, pro  forma                                                                    |       | $                                | 2,796      |   | $ | 365 |   |
| Basic EPS, as  reported                                                                   |       | $                                | 0.96       |   | $ | 0.21 |   |
| Diluted EPS, as  reported                                                                 |       | $                                | 0.13       |   | $ | 0.02 |   |
| Basic EPS, pro  forma                                                                     |       | $                                | 0.98       |   | $ | 0.20 |   |
| Diluted EPS, pro forma                                                                    |       | $                                | 0.14       |   | $ | 0.02 |   |

 

***Revenue recognition***

The Company derives revenue from the manufacture and saleof optical subsystem products for use in high-performance networksystems. Our revenue recognition policy follows SEC Staff Accounting BulletinNo. 104, “Revenue Recognition.” Specifically, the Company recognizesproduct revenue when the following requirements have been met:

·                  *Evidence of an arrangement.*  Persuasive evidence exists of an arrangementwith a customer, typically consisting of a purchase order which detailsquantity, fixed schedule of delivery and agreed upon terms.

·                  *Delivery and acceptance.*  Product has been shipped via third partycarrier, accepted and title has transferred to the customer, under free onboard, or FOB, terms agreed to by the customer. The only rights of return areunder our warranty policy.

·                  *Fixed or determinable fee.*  The amount of revenue to which we areentitled is fixed or determinable at the time of shipment. We assess whetherthe fee is fixed or determinable based on the payment terms associated with thetransaction and whether the sales price is subject to refund or adjustment.

·                  *Collection is deemed probable.*  Collectibility is reasonably assured andthere are no uncertainties with respect to customer acceptance. We assesscollectibility based primarily on the creditworthiness of the customer asdetermined by credit checks and analysis, as well as the customer’s paymenthistory.

The Company is required to determine whether delivery hasoccurred, whether items will be returned or whether the Company will be paidunder normal terms. The Company specifies delivery terms and accesses eachshipment against those terms and only recognizes revenue when certain that thedelivery terms have been met to the extent that one or more of the conditionsare not present, the Company delays recognition of revenue until all conditionsare present.

***Comprehensive income (loss)***

Statement of Financial Accounting Standards No. 130,“Reporting Comprehensive Income” (“Statement 130”), requires disclosure of allcomponents of comprehensive income (loss) on an annual and interim basis.Comprehensive income (loss) is defined as the change in equity of a businessenterprise during a period from transactions and other events and circumstancesfrom non-owner sources. Components of other comprehensive income (loss)that the Company currently reports are gains and losses from foreign currencytranslations, as follows:

|                                                                   | ** ** | **Three months ended** | ** ** |
|-------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                        | ** ** | **October 28,  2006**       | ** ** | **October 29,  2005** | ** ** |
| ** **                                                        | ** ** | **(in thousands)**          | ** ** |
| Net income                                                        |       | $                                | 2,759      |   | $ | 377 |   |
| Other  comprehensive income:                                      |       |                             |       |   |   |
| Net change in  cumulative foreign currency translation adjustment |       | 30                               |       | — |   |
| Comprehensive income                                              |       | $                                | 2,789      |   | $ | 377 |   |

 

7

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*** ***

***Net income per share***

The Company computes net income per common share inaccordance with SFAS No. 128, “Earnings per Share” (“SFAS No. 128”).Under the provisions of SFAS No. 128, basic net income per common share iscomputed by dividing the net income applicable to common stockholders for theperiod by the weighted average number of shares of common stock outstanding. Inaccordance with SFAS No. 128, incremental potential common shares from theconversion of preferred stock and the exercise of stock options and warrantsare included in the calculation of diluted net income per share except when theeffect would be anti-dilutive.

The calculations for basic and diluted net income pershare were as follows:

|                                                                                                        | ** ** | **Three months ended**                                   | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                                                             | ** ** | **October 28, 2006**                                     | ** ** | **October 29, 2005** | ** ** |
| ** **                                                                                             | ** ** | **(in thousands, except per share data)** | ** ** |
| **Numerator:**                                                                                         |       |                                                               |       |   |   |
| Numerator for  basic and diluted income per share - net income                                         |       | $                                                                  | 2,759      |   | $ | 377 |   |
|                                                                                                   |       |                                                               |       |   |   |
| **Denominator:**                                                                                       |       |                                                               |       |   |   |
| Denominator for  basic earnings per share - weighted average common shares outstanding                 |       | 2,864                                                              |       | 1,818 |   |
| Effect of  dilutive shares                                                                             |       |                                                               |       |   |   |
| Stock options                                                                                          |       | 1,240                                                              |       | 746 |   |
| Series A and C warrants                                                                                |       | 82                                                                 |       | 67 |   |
| Conversion of preferred shares into common stock                                                       |       | 16,444                                                             |       | 14,350 |   |
| Denominator for  diluted earnings per share — adjusted weighted-average common shares outstanding |       | 20,630                                                             |       | 16,981 |   |
| Basic net income  per share                                                                            |       | $                                                                  | 0.96       |   | $ | 0.21 |   |
| Diluted net income per  share                                                                          |       | $                                                                  | 0.13       |   | $ | 0.02 |   |

 

Diluted earnings per share does not reflect thefollowing weighted-average potential common shares as the exercise prices ofsuch options were greater than the average fair value of the Company’s commonstock during the respective periods.

|                                                 | ** ** | **Three months ended** | ** ** |
|-------------------------------------------------|------------|----------------------------------|------------|
| ** **                                      | ** ** | **October 28,  2006**       | ** ** | **October 29,  2005** | ** ** |
| ** **                                      | ** ** | **(in thousands)**          | ** ** |
| Unvested common  stock “out of money” |       | 2                                |       | 14 |   |

 

***Recent accounting pronouncements***

In July 2006, the FASB issued FIN 48, “Accountingfor Uncertainty in Income Taxes,” which is an interpretation of SFASNo. 109, “Accounting for Income Taxes.” FIN 48 creates a single modelto address uncertainty in tax positions and clarifies the accounting foruncertainty in income taxes recognized in an enterprise’s financial statementsin accordance with SFAS 109 by prescribing the minimum threshold a taxposition is required to meet before being recognized in an enterprise’sfinancial statements. FIN 48 also provides guidance on derecognition,measurement, classification, interest and penalties, accounting in interimperiods, disclosure and transition, and clearly scopes out income taxes fromSFAS No. 5, “Accounting for Contingencies.” FIN 48 is effective forfiscal years beginning after December 15, 2006 but earlier application isencouraged. Differences between the amounts recognized in the statements offinancial position prior to adoption of FIN 48 and the amounts reportedafter adopted should be accounted for as a cumulative-effect adjustmentrecorded to the beginning balance of retained earnings. The Company iscurrently determining the impact of FIN 48 on its consolidated financialstatements.

In September 2006, the FASB issued SFAS No. 157, “FairValue Measurements”. SFAS No. 157 establishes a common definition to provideenhanced guidance when using fair value to measure assets and liabilities,establishes a 

8

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framework for measuring fair value, and expands disclosures about suchfair value measurements. SFAS No. 157 is effective for fiscal years beginningafter November 15, 2007. The Company is currently determining the impact ofimplementating SFAS No. 157.

In September 2006, the SEC staff issued Staff AccountingBulletin No. 108 “Considering the Effects of Prior Year Misstatements whenQuantifying Misstatements in Current Year Financial Statements” (“SAB 108”).SAB 108 requires that public companies utilize a “dual-approach” to assessingthe quantitative effects of financial misstatements. The dual approach includesboth an income statement focused assessment and a balance sheet focusedassessment. The guidance in SAB 108 must be applied to annual financialstatements for fiscal years ending after November 15, 2006. The implementationof SAB 108 is not expected to have a material impact on the Company’sconsolidated financial position or results of operations.

***Segment information***

SFAS No. 131, “Disclosures about Segments of anEnterprise and Related Information” establishes standards for reportinginformation regarding operating segments in annual financial statements andrequires selected information of those segments to be presented in interimfinancial reports issued to stockholders. Operating segments are identified ascomponents of an enterprise about which separate financial information isavailable for evaluation by the chief operating decision-maker, ordecision-making group, in making decisions on how to allocate resourcesand assess performance. The Company views its operations and manages itsbusiness as one operating segment. There were no significant tangible assetslocated or revenue generated outside of the U.S. as of October 28, 2006 orJuly 29, 2006.

**3.  Inventories**

Inventories consist of the following at: 

|                 | ** ** | **October 28,  2006** | ** ** | **July 29,  2006** | ** ** |
|-----------------|------------|----------------------------|------------|-------------------------|------------|
| ** **      | ** ** | **(in thousands)**    | ** ** |
| Raw materials   |       | $                          | 11,305     |                    | $          | 7,685 |   |
| Work in process |       | 1,450                      |       | 1,276                   |       |
| Finished goods  |       | 3,623                      |       | 2,740                   |       |
|            |       | $                          | 16,378     |                    | $          | 11,701 |   |

 

**4.  Other Assets**

Other assets consist of the following at:

|                           | ** ** | **October 28,  2006** | ** ** | **July 29,  2006** | ** ** |
|---------------------------|------------|----------------------------|------------|-------------------------|------------|
| ** **                | ** ** | **(in thousands)**    | ** ** |
| Deferred  financing costs |       | $                          | 3,631      |                    | $          | 1,916 |   |
| Restricted cash           |       | 68                         |       | 68                      |       |
| Other                     |       | 21                         |       | 25                      |       |
|                      |       | $                          | 3,720      |                    | $          | 2,009 |   |

 

On October 26, 2006, the Securities and Exchange Commissiondeclared effective the Company’s registration statement on Form S-1(Registration No. 333-135472) The Company’s common stock began trading on theNASDAQ Global Market under the symbol “OPTM” on October 27, 2006. The deferredfinancing costs represent direct transactional costs the Company has incurredin connection with the public offering. The deferred financing costs will bereflected as a reduction of equity upon closing of the offering which occurredon November 1, 2006.

**5.  Line ofCredit**

On May 25, 2004, the Company entered into a$3,500,000 line of credit agreement, including a revolving promissory note of$2,500,000 and an equipment term note of $1,000,000. The line of credit bearsinterest at 1.75% plus Prime. On June 27, 2005, the Company modified theterms of the debt to increase the equipment term note to $2,000,000; change theinterest rate to prime plus 1.25% (7.75% at July 30, 2005) for the initialequipment advance and the first draw on the line of credit of $820,778. On June 6,2006, the Company renewed the line of credit to modify the interest rate on theoutstanding principal to prime plus 

9

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0.75% and to extend the renewal date to May 22, 2007. The interestrate would be prime plus 1.5% for supplemental advances. As of October 28, 2006,$593,560 was outstanding on the equipment term note.

Aggregate maturities on the equipment term notesubsequent to October 28, 2006 are as follows: $242,953 in fiscal year 2007,and $350,607 in 2008. The line of credit agreement contains financial covenantssuch as a minimum quick ratio of 1.50:1.00, tangible net worth of $22,000,000plus an increase based on a percentage of quarterly net income and an accountsreceivable balance in excess of the line (based on specified criteria). Theterms of the equipment loan were amended for July 29, 2006 and October 28,2006. At July 29, 2006, the terms of the covenants were amended to require aminimum quick ratio of 1.25:1.00 and a tangible net worth of $22,000,000. AtOctober 28, 2006, the terms of the covenants were amended to require a minimumquick ratio of 0.75:1.00 through January 2007. Absent these amendments, theCompany would not have been in compliance with the financial covenants in theequipment loan as of July 29, 2006 or October 28, 2006.

Subsequent to October 28, 2006, the Company paid theoutstanding line of credit in full on November 3, 2006.

**6.  Other CurrentLiabilities**

Other current liabilities consist of $158,600 and$2,639,560 in deferred revenue at October 28, 2006 and July 29, 2006, respectively.The Company is required to determine whether delivery of each shipment hasoccurred, and the Company specifies delivery terms and assesses each shipmentagainst those terms and only recognizes revenue when there is certainty thatthe delivery terms are met. The Company recorded deferred revenue of $45,000and $2,639,560 as of October 28, 2006 and July 29, 2006 for shipments whenconfirmation of delivery occurred after the end of the fiscal period.Additionally, at October 28, 2006, the Company recorded deferred revenue of$113,600 related to a prepayment for future shipments.

**7.  Acquisition**

On March 5, 2006, the Company acquired Engana PtyLimited, renamed Optium Australia Pty Limited, a leading innovator of ROADMtechnology, for approximately $26,272,000 including $638,000 in relatedacquisition costs. The purchase was funded through the issuance of 24,475,897shares of Series D-1 Senior Convertible Preferred Stock and729,361 shares of Series 2 non-voting common stock of the Company,including 2,447,583 and 72,936 of shares held in escrow, respectively, for allof the outstanding shares of Engana Pty Limited. The escrow shares will bereleased upon the earlier of 18 months or six months following the closing ofthe Company’s initial public offering. In determining the aggregate purchaseprice paid for Engana Pty Limited, the Company used $0.87204 per share for theSeries D-1 Senior Convertible Preferred Stock, the per share baseliquidation value of such stock, and $5.76 per share for the Series 2 non-votingcommon stock, the contemporaneous per share fair market value of the Company’scommon stock as determined by the Board of Directors. Additionally, fully-vestedoptions to purchase 55,305 shares of common stock were granted in exchangefor all outstanding options of Engana Pty Limited (which were fully-vested).This acquisition provided additional technology and products to enhance theCompany’s product offerings. The transaction was accounted for as a purchase inaccordance with Statement of Financial Accounting Standards, or SFAS,No. 141, “Business Combinations.” As a result, the assets that the Companyacquired were accounted for at fair value on the acquisition date, and theresults of operations of Engana Pty Limited are included in the Company’sconsolidated results of operations since the acquisition date.

The Engana Pty Limited purchase price was allocated asfollows *(in thousands)*:

| Net assets acquired                           |   | $      | 4,788  |   |
|-----------------------------------------------|--------|--------|--------|--------|
| Acquired in-process  research and development |   | 11,187 |   |
| Goodwill                                      |   | 10,297 |   |
| Total purchase price                          |   | $      | 26,272 |   |

 

The following table summarizes the components of theassets acquired at fair value *(in thousands)*:

| Cash                        |   | $    | 4,639  |   |
|-----------------------------|--------|------|--------|--------|
| Net fixed assets  and other |   | 491  |   |
| Less liabilities  assumed   |   | (342 | )      |
| Net assets acquired         |   | $    | 4,788  |   |

 

Engana’s developmental project that had not reachedtechnological feasibility and had no future alternative use was classified asacquired in-process research and development and expensed on theacquisition date. Efforts required to develop 

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acquired in-process research and development into commerciallyviable products include the planning, designing, prototyping, verification andtesting activities that are necessary to establish that the products can beproduced to meet their design specifications, including functions, features andtechnical performance requirements.

The results of operations of Engana have been included inthe Company’s condensed consolidated financial statements subsequent to thedate of acquisition. The financial information in the table below summarizesthe combined results of operations of us and Engana, on a pro forma basis, forthe period prior to the acquisition as if the acquisition occurred at thebeginning of the period presented:

|                                                      | ** ** | **Three months ended**                               | ** ** |
|------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                           | ** ** | **October 29, 2005**                                 | ** ** |
| ** **                                           | ** ** | **(in thousands, except  per share data)** | ** ** |
| Total revenues                                       |       | $                                                              | 14,016     |   |
| Pro forma net  loss                                  |       | (430                                                           | )          |
| Pro forma net  loss per share—basic and diluted |       | (0.24                                                          | )          |
| Reported net  income                                 |       | 377                                                            |       |
| Reported net income  per share—basic            |       | 0.21                                                           |       |
| Reported net income per  share—diluted          |       | 0.02                                                           |       |
|                                                      |            |                                                                |            |  |

 

The pro forma financial information is presented forinformational purposes only and is not indicative of the results of operationsthat would have been achieved if the acquisition had taken place at thebeginning of the period presented. The pro forma financial information excludesan $11,187,000 charge for acquired in-process research and development,which is a non-recurring charge not representative of research anddevelopment expenses incurred for that period.

**8.  RedeemableConvertible Preferred Stock**

As of October 28, 2006, the Company has authorized underits Certificate of Incorporation, as amended on October 10, 2006, the issuanceof 177,654,855 shares of preferred stock, of which 24,450,000 have beendesignated as Series A redeemable convertible preferred stock(Series A), 42,702,958 shares have been designated Series Bredeemable convertible preferred stock (Series B), 60,526,000 shares havebeen designated Series C senior redeemable convertible preferred stock(Series C), 25,500,000 shares have been designated Series D seniorredeemable convertible preferred stock (Series D), and 24,475,897 shareshave been designated Series D-1 senior redeemable convertiblepreferred stock (Series D-1).

As the potential redemption of the preferred stock isoutside the control of the Company, it has been classified outside ofstockholders’ deficit.

Subsequent to October 28, 2006, the Company closed itsinitial public offering. Refer to Note 14, Subsequent Event for moreinformation. Upon closing of the offering, all outstanding preferred sharesconverted to common stock. Outstanding warrants will convert into common stockupon exercise of such warrants.

At October 28, 2006, the Company has reserved 16,537,680shares of its common stock for the conversion of its outstanding preferredshares as follows:

|                    | ** ** | **Outstanding  Preferred Shares** | ** ** | **As Converted into  Common Stock** | ** ** |
|--------------------|------------|----------------------------------------|------------|----------------------------------------------------|------------|
| Series A           |       | 23,818,500                             |       | 2,344,496                                          |       |
| Series A  warrants |       | 450,000                                |       | 44,294                                             |       |
| Series B           |       | 41,969,418                             |       | 4,966,532                                          |       |
| Series C           |       | 59,879,318                             |       | 4,989,932                                          |       |
| Series C  warrants |       | 587,769                                |       | 48,979                                             |       |
| Series D           |       | 25,245,570                             |       | 2,103,793                                          |       |
| Series D-1         |       | 24,475,897                             |       | 2,039,654                                          |       |
|               |       | 176,426,472                            |       | 16,537,680                                         |       |

 

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** **

**9.  Stockholders’Deficit**

***Common stock***

As of October 28, 2006, the Company has authorized underits Certificate of Incorporation, as amended October 10, 2006, theissuance of 100,000,000 shares of common stock, of which 729,361 have beendesignated Series 2 nonvoting common stock. The Series 2 nonvotingcommon stock automatically converts into voting common stock upon the earlierof (i) March 31, 2011, (ii) the conversion of all shares ofpreferred stock, (iii) a change in control transaction with respect to theCompany, or (iv) the redemption of any shares of preferred stock.Subsequent to October 28, 2006, the Company closed its initial public offering;refer to Note 14, Subsequent Event. Upon closing of the offering, alloutstanding shares of preferred shares converted to voting common stock and alloutstanding shares of Series 2 nonvoting common stock converted into votingcommon stock.

On October 9, 2006, the Company’s Board of Directorsapproved a 1-for-12 reverse stock split of the Company’s issued commonstock, subject to stockholder approval. On October 10, 2006, the Company’sstockholders approved the reverse stock split. The reverse stock split becameeffective on October 10, 2006, upon the filing by the Company of anamendment to the Certification of Incorporation with the Delaware Secretary ofState giving effect to the reverse stock split. Common share and common share-equivalentshave been restated to reflect the reverse stock split for all periodspresented.

***Stock incentive plan***

In fiscal 2000, the Company adopted the 2000 OptiumCorporation Stock Incentive Plan, as amended, (the “2000 Plan”) under which3,457,073 shares of common stock were reserved for issuance. As of October 28,2006, no shares are available for future grants under the 2000 Plan. Under theterms of the 2000 Plan, the Company could grant nonqualified or incentive stockoptions, restricted stock, or make awards of stock appreciation rights todirectors, officers, employees, and consultants of the Company. Option grantsunder the 2000 Plan generally vest over four years and expire ten years fromthe date of grant.

During the first quarter of fiscal year 2007, the Companyadopted the 2006 Optium Corporation Stock Incentive Plan, as amended, (the “2006Plan”) under which 283,333 shares of common stock have been reserved forissuance. Under the terms of the 2006 Plan, the Company may grant nonqualifiedor incentive stock options, restricted stock, or make awards of stockappreciation rights to directors, officers, employees, and consultants of theCompany. The exercise price for grants shall be determined by the Board ofDirectors on the date of grant, but in no event shall the exercise price ofincentive stock options be less than 100% of the fair market value of thecommon stock (110% for any incentive stock option granted to a person owningmore than 10% of the total combined voting power of all classes of stock asdetermined by the Board of Directors on the date of grant). Option grants underthe 2006 Plan generally vest over four years and expire ten years from the dateof grant. As of October 28, 2006, no grants were made under the 2006 Plan.

Stock option transactions underthe 2000 Plan for the three months ended October 28, 2006 are summarized asfollows:
| ** **                                 | ** ** | **Number of  Options** | ** ** | **Range of  Exercise Prices** | ** **  | **Weighted Average  Exercise Price** | ** ** |
|--------------------------------------------|------------|-----------------------------|------------|-----------------------------------------|-------------|------------------------------------------------|------------|
| Balance—July 29,  2006           |       | 1,651,766                   |       | $                                       | 0.48-10.92  |                                           | $          | 3.6692 |   |
| Granted                                    |       | 188,924                     |       | $                                       | 14.04-17.50 |                                           | $          | 14.9403 |   |
| Forfeited                                  |       | (8,125                      | )          | $                                       | 2.40-14.04  |                                           | $          | 10.1662 |   |
| Exercised                                  |       | (19,150                     | )          | $                                       | 0.48-10.92  |                                           | $          | 1.8611 |   |
| Outstanding—October 28,  2006    |       | 1,813,415                   |       | $                                       | 0.48-17.50  |                                           | $          | 4.8334 |   |
| Options  exercisable—October 28, 2006 |       | 718,597                     |       | $                                       | 0.48- 5.76  |                                           | $          | 1.2310 |   |

 

During the three months ended October 28, 2006 certainemployees exercised options to purchase 19,150 shares of the Company’s commonstock for proceeds of $35,640.

The weighted average remaining life of the options as ofOctober 28, 2006 is 8.41 years.

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The detail of the options exercisable as of October 28, 2006 is asfollows:

| Number of  Options | ** ** | **Range of  Exercise Prices** | ** ** | **Weighted Average  Exercise Price** | ** ** | **Weighted Average  Remaining Life** | ** ** |
|-------------------------|------------|-----------------------------------------|------------|------------------------------------------------|------------|------------------------------------------------|------------|
| 613,574                 |       | $0.4800-1.08                            |       | $0.5957                                        |       | 7.26                                           |       |
| 105,023                 |       | $2.4000-5.76                            |       | $4.9425                                        |       | 9.45                                           |       |

 

***Deferred Compensation***

The Company’s Board of Directors has determined the fairvalue of all stock option grants on the date of the grants. In April 2006, as aresult of improved operating performance, the execution of a letter of intentto acquire Engana, external market factors affecting the Company’s marketsector, as well as feedback from investment bankers indicating that the Companywas now a viable initial public offering candidate, the Board of Directorsretrospectively determined the fair value of the Company’s common stock for allstock options granted during the three fiscal quarters beginning May 1,2005 and ending January 28, 2006. As a result of the Company’s retrospectivedeterminations of fair value of the common stock for prior option grant datesof June 23, 2005, September 21, 2005 and November 7, 2005, theCompany recorded an aggregate of approximately $125,000 of deferred stock-basedcompensation on the balance sheet for the stock options granted on those dates.The amount of deferred stock-based compensation for each stock optiongrant on these dates was calculated based on the difference between theretrospectively determined fair value per share of the common stock at the dateof the grant and the exercise price of the option. The Company will amortizethis deferred stock-based compensation expense over the vesting period ofthe applicable stock option grants, subject to adjustment for any stock optionswhich are cancelled or accelerated.

In June 2006, based on the Company’s retrospectivedeterminations of fair value of its common stock, the Company offered to therecipients of stock option grants on June 23, 2005, September 21,2005 and November 7, 2005, the ability to amend the terms of their stockoptions to increase their per share exercise price from $0.96 to $1.08 in thecase of June 23, 2005 grants, from $1.20 to $2.40 in the case of theSeptember 21, 2005 grants and from $1.20 to $3.96 in the case of theNovember 7, 2005 grants. All of such stock option recipients have chosento amend their stock options to a higher exercise price in order to avoid potentialadverse personal income tax consequences. There was no additional considerationoffered to the employees in exchange for amending their stock options.

In relation to these amended stock options, the Companyrecorded deferred stock-based compensation of approximately $1.5 millionin the balance sheet in addition to the approximately $125,000 in deferredstock-based compensation referenced above. The amount of additionaldeferred stock-based compensation for each amended stock option wascalculated based upon the difference between the amended exercise price of$1.08 per share, $2.40 per share or $3.96 per share, as applicable, and $10.92per share, the valuation by the Board of Directors of the per share fair valueof our common stock as of the date of amendment of the stock options. TheCompany will amortize this additional deferred stock-based compensationexpense over the vesting period of the applicable stock option grants, subjectto adjustment for any stock options which are cancelled or accelerated. Duringthe three months ended October 28, 2006, total stock-based compensation relatedto the revaluation and remeaurement of these grants was approximately $144,900.

***Warrants issued to employees***

On January 31, 2003, the Company issued 1,308,954warrants with an exercise price of approximately $0.05 per share to purchaseshares of the Company’s Series C preferred stock to officers and employeeswho invested in the Series B preferred stock offering in fiscal 2001. Thewarrants are immediately exercisable and expire on the earliest of terminationof employment with the Company or January 31, 2013. The excess of the fairmarket value of the Series C preferred stock over the exercise price ofapproximately $195,900 is included in general and administrative expenses forthe year ended August 2, 2003. During fiscal year 2004, the Companycanceled 58,007 Series C warrants as a result of an employee termination.In connection with the cancellation, the Company reduced its fiscal year 2004salary expense by $8,680, which is included in selling, general andadministrative expenses on the statements of operations. During the year endedJuly 29, 2006, 663,178 warrants were exercised for proceeds of $33,398.The conversion rate of Series C preferred stock is indicated inNote 8.

***Warrants issued in connection withcapital lease financing***

On May 16, 2001, in connection with the closing ofthe capital lease line of credit (see Note 5), the Company issued awarrant to purchase 450,000 shares of Series A preferred stock at $0.33333per share. The warrant vested immediately upon

13

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issuance and expires at the later of (i) ten years from the date ofissuance or (ii) five years after the date of a qualified public offeringof the Company’s common stock, as defined. The Company has reserved 450,000shares of Series A preferred stock for issuance under the warrantagreement. The Company accounts for these warrants in accordance with APBOpinion No. 14, “Accounting for Convertible Debt and Debt Issued withStock Purchase Warrants.” The Company valued these warrants using the Black-Scholesoption pricing model using the following assumptions: 80% volatility, 5.39%risk-free interest rate, 0.0% dividend yield, and a ten-yearexpected life, resulting in deferred financing costs of $125,336. Deferred financingcosts are amortized to interest expense over the term of the debt using amethod that approximates the interest method. The conversion rate ofSeries A preferred stock is indicated in Note 8.

**10.  Income Taxes**

At October 28, 2006, the Company has federal netoperating loss (“NOL”) carry forwards of approximately $35 million which expirethrough July 2025. NOL carry forwards and credits are subject to review andpossible adjustments by the Internal Revenue Service (“IRS”) and may be limitedby the occurrence of certain events, including significant changes in ownershipinterests. The Company has performed a preliminary analysis to determinewhether an ownership change under Section 382 of the Internal Revenue Codehas occurred. The effect of an ownership change would be the imposition of anannual limitation on the use of the net operating loss carry forwardsattributable to periods before the change. The preliminary review determinedthe Company has potential limitations related to approximately $2.5 million ofthe NOL carry forwards.

In connection with the acquisition of Engana Pty Limited,the Company acquired NOL tax carry forwards and credits in the amount ofapproximately $4.8 million. These NOL carry forwards and credits are subject toreview and possible adjustments by the Australian Taxation Office (“ATO”) andmay be limited by the occurrence of certain events, including significantchanges in ownership interests or significant changes in the business of theCompany. This is a factual test that can only be determined in the year inwhich the NOL carry forward is sought to be utilized. There is no time limit onthe use of NOL carry forwards. The acquired net operating losses have beenoffset by a valuation allowance. Upon utilization of such NOL carry forwards,goodwill will be reduced.

Because of the Company’s lack of earnings history, thedeferred tax assets have been fully offset by a valuation allowance. Inassessing the realizability of deferred tax assets, management considerswhether it is more likely than not that some portion or all of the deferred taxassets will not be realized. The ultimate realization of deferred tax assets isdependent upon the generation of future taxable income during those periods inwhich those temporary differences become deductible or within the periodsbefore carry forwards expire.

For the three months ended October 28, 2006, the Companyhas a current tax provision of approximately $179,000 for federal and statealternative minimum tax (“AMT”).

**11.  Commitments andContingencies**

***Litigation***

On September 11, 2006, JDS Uniphase Corporation andEMCORE Corporation filed a complaint in the United States District Court forthe Western District of Pennsylvania alleging that the Company’s 1550 nm HFCexternally modulated transmitter, in addition to possibly “products as yetidentified,” infringes on two U.S. patents. Since discovery has not yetcommenced, the Company is unable to determine the ultimate outcome of thislitigation.

In the ordinary course of business, the Company is partyto litigation, claims and assessments. Based on information currentlyavailable, management does not believe the impact of these matters will have amaterial effect on the financial condition, results of operations or cash flowsof the Company.

***Employment agreements***

The Company has employment agreements with certainofficers and key employees. According to the terms of the agreements, if thereis a termination without cause, as defined, the Company must pay, depending onthe agreement, severance pay of one to two years.

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**12.  MajorCustomers**

Accounts receivable potentially subject the Company to aconcentration of credit risk. The Company currently derives its revenues from avariety of companies in many different geographic locations internationally andin the United States operating within the telecommunications and Cable TVindustry.

Revenues from major customers during the three monthsended October 28, 2006 comprising 10% or more of total revenues were asfollows:

|            | ** ** | **Three months ended  October 28, 2006** | ** ** |
|------------|------------|--------------------------------------------------------------|------------|
| ** ** | ** ** | ** **                                                   | ** ** |
| Customer A |       | 33                                                           | %          |
| Customer B |       | 18                                                           | %          |
| Customer C |       | 11                                                           | %          |

 

Accounts receivable from these three customers at October28, 2006 represented 69% of total accounts receivable.

**13.  RelatedParty Transactions**

During the three months ended October 28, 2006 andOctober 29, 2005, the Company paid Guy Gertel, a consultant for sales andmarketing and brother of the president and chief executive officer of theCompany, $32,884 and $31,568, respectively, in cash compensation during suchfiscal periods.

During the three months ended October 28, 2006, theCompany reimbursed the president and chief executive officer for businesstravel expenses on a private jet of which he currently owns a fractionalinterest. The amount of such reimbursement was approximately $20,300.

Amounts paid to related parties represented valuesconsidered fair and reasonable, reflective of an arm’s length transaction.

**14.  SubsequentEvent**

On November 1, 2006, theCompany completed its initial public offering of 5.2 million shares of commonstock at a price to the public of $17.50 per share as well as the sale of anadditional 780,000 shares to cover underwriter over-allotments.  The Company’s common stock, quoted on theNasdaq Global Market under the symbol “OPTM,” began trading on October 27,2006.  Cash proceeds to the Company, netof underwriter commissions of approximately $7.4 million and related offeringexpenses of approximately $3.6 million, totaled approximately $93.7million.  All preferred stock outstandingat the end of the quarter was converted to common stock upon the completion ofthe initial public offering.

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**ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OFOPERATIONS**

**FORTHE THREE MONTHS ENDED OCTOBER 28, 2006AND COMPARABLE PERIOD ENDED OCTOBER 29, 2005**

*The following discussion and analysisof our financial condition and results of operations should be read inconjunction with the Management’s Discussion and Analysis of FinancialCondition and Results of Operations and the consolidated financial statementsand notes thereto included in our registration statement on Form S-1**(Registration No. 333-135472)declared effective by the Securities and Exchange Commission on October 26,2006.*

*In addition to historical information,Management’s Discussion and Analysis of Financial Condition and Results ofOperation and other items in this Quarterly Report on Form 10-Q contain forward-lookingstatements based on current expectations that involve risks, uncertainties andassumptions. Our actual results may differ materially from those anticipated inthese forward-looking statements as a result of various factors. Whenused in this document, the words “will,” “plan,” “believe,” “may,” “anticipate,”“ could,”,” “seek,” “estimate,” “expect,” “continue,” “intend,” and similarexpressions, variations or the negatives of these terms are intended toidentify forward-looking statements. Although management believes that theexpectations reflected in these forward-looking statements are reasonable atthe time they are made, we can give no assurance that these expectations willprove to be correct. We undertake no obligation to publicly revise anyforward-looking statement to reflect circumstances or events after the date ofthis document.*

**Overview**

We are a supplier of high-performance opticalsubsystems for use in telecommunications and cable TV network systems. Sinceour founding in 2000, we have developed proprietary technology and productsthat enable transmission, reception and switching functionality for high-bandwidth,intelligent networking applications. We design, manufacture and sell a suite ofoptical subsystems including transceivers and transmitters. We have alsorecently launched a technologically innovative ROADM, that enables dynamicwavelength processing, or DWP, which we refer to as our DWP ROADM. We believethat we have a fundamentally different product design approach from that of ourcompetitors, allowing us to achieve mass customization of our products usingcommon hardware platforms and customized embedded software. We also haveimplemented several unique automated and semi-automated manufacturingsystems and processes designed to further improve our manufacturing yields andproduce higher volumes of products than generally possible using manualproduction techniques.

**Background**

We were incorporated on September 8, 2000 andcommenced operations in October 2000. In November 2000 andJanuary 2001, we raised approximately $7.9 million through theissuance of shares of series A convertible preferred stock. In May, Juneand July of 2001, we raised approximately $35.7 million through the issuanceof shares of series B convertible preferred stock. We completed anotherround of preferred stock financing in January 2003 in which we sold sharesof series C senior convertible preferred stock for an aggregate purchaseprice of approximately $11.9 million. In May 2004 we raisedapproximately $10.3 million through the issuance of shares ofseries D senior convertible preferred stock, bringing total funds raisedby us through preferred stock financings over the past six years to approximately$65.9 million.

On November 1, 2006, wecompleted our initial public offering of 5.2 million shares of common stock ata price to the public of $17.50 per share as well as the sale of an additional780,000 shares to cover underwriter over-allotments.  Our common stock, quoted on the Nasdaq GlobalMarket under the symbol “OPTM,” began trading on October 27, 2006.  Cash proceeds to us, net of underwritercommissions of approximately $7.4 million and related offering expenses ofapproximately $3.6 million, totaled approximately $93.7 million.  All outstanding preferred stock was convertedto common stock upon the completion of the initial public offering.

**CriticalAccounting Policies**

The accompanying unauditedcondensed consolidated financial statements have been prepared in accordancewith generally accepted accounting principles for interim financial informationand with the instructions to Form 10-Q and Article 10 of Regulation S-X.Accordingly, they do not include all of the information and footnotes requiredby generally accepted accounting principles for complete financial statements.The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States requires management to makeestimates and assumptions that affect the 

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reported amounts of assets and liabilities and disclosureof contingent assets and liabilities at the date of the financial statementsand the reported amounts of income and loss during the reporting period. Actualresults could differ from those estimates. Operating results for the fiscalquarters presented are not necessarily indicative of the results that may beexpected for the fiscal year. In the opinion of management, all adjustments(consisting solely of normal recurring adjustments) necessary for a fairpresentation of the financial statements for these interim periods have beenincluded. There have been no material changes to the critical accountingpolicies and estimates as disclosed in our registration statement on Form S-1 (Registration No. 333-135472) declared effectiveby the Securities and Exchange Commission on October 26, 2006.

**Recent Accounting Pronouncements**

In July 2006, the FASB issued FIN 48, “Accountingfor Uncertainty in Income Taxes,” which is an interpretation of SFASNo. 109, “Accounting for Income Taxes.” FIN 48 creates a single modelto address uncertainty in tax positions and clarifies the accounting foruncertainty in income taxes recognized in an enterprise’s financial statementsin accordance with SFAS 109 by prescribing the minimum threshold a taxposition is required to meet before being recognized in an enterprise’sfinancial statements. FIN 48 also provides guidance on derecognition,measurement, classification, interest and penalties, accounting in interimperiods, disclosure and transition, and clearly scopes out income taxes fromSFAS No. 5, “Accounting for Contingencies.” FIN 48 is effective forfiscal years beginning after December 15, 2006 but earlier application isencouraged. Differences between the amounts recognized in the statements offinancial position prior to adoption of FIN 48 and the amounts reportedafter adopted should be accounted for as a cumulative-effect adjustmentrecorded to the beginning balance of retained earnings. We are currentlydetermining the impact of FIN 48 on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “FairValue Measurements”. SFAS No. 157 establishes a common definition to provideenhanced guidance when using fair value to measure assets and liabilities,establishes a framework for measuring fair value, and expands disclosures aboutsuch fair value measurements. SFAS No. 157 is effective for fiscal yearsbeginning after November 15, 2007. We are currently determining the impact ofimplementating SFAS No. 157.

In September 2006, the SEC staff issued Staff AccountingBulletin No. 108 “Considering the Effects of Prior Year Misstatements whenQuantifying Misstatements in Current Year Financial Statements” (“SAB 108”).SAB 108 requires that public companies utilize a “dual-approach” to assessingthe quantitative effects of financial misstatements. The dual approach includesboth an income statement focused assessment and a balance sheet focusedassessment. The guidance in SAB 108 must be applied to annual financialstatements for fiscal years ending after November 15, 2006. The implementationof SAB 108 is not expected to have a material impact on our consolidatedfinancial position or results of operations.

**Current Trends Affecting Our Results of Operations**

We have experienced increased demand for our products, which has beendriven by market trends in the telecommunications and cable TV carrierindustries such as network expansion, the implementation of new technologiesand value-added services, network changes and consolidations in theseindustries. We expect growth of our current product portfolio to continue, andwe also expect the market for our new products to expand our potential sourcesof revenue. Growth was driven by increased volumes in telecommunication,fiber to the home, or FTTH, and cable TV applications.  Service providers have driven demand withaccelerated deployment of Internet protocol TV, or IPTV, networks, FTTH and 3Gcellular backhaul requirements.  Thesesystems utilize products from our tunable and fixed wavelength 10 gigabitper second, or 10 Gb/s, FTTH and cable TV offerings.

Network build-outopportunities in emerging economies have also driven increased demand for ourfixed wavelength dense wavelength division multiplexing, or DWDM, products,including our pluggable DWDM transceivers.

Steady increases in data traffic and the expectedincrease in bandwidth requirements are driving carriers to deploy high-bandwidth,flexible, or agile, network systems. Our optical subsystems are designed toenable our customers to shorten product development cycles and to readily addproduct features to their network systems. We believe this will allow carriersto support high-bandwidth applications at significantly lower operatingcosts while simplifying network reconfiguration, improving reliability andenabling greater network functionality. In addition, we believe that networksystems vendors are increasing their focus on providing higher value-addedsolutions, services and software to their carrier customers and de-emphasizingtheir optical hardware manufacturing efforts. We believe that we are wellpositioned to capitalize on the hardware design and manufacturing opportunitiescreated by this shift and enhance our position as a supplier of high-performanceoptical subsystems to network systems vendors.

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We do remain cautious, however, in attempting to forecastfuture results. Visibility remains limited, and we cannot provide any assuranceas to the timing or scale of any new optical network deployments or sustainedindustry recovery, in general. Further, we rely on a sole supplier or limitednumber of suppliers for certain components used in the manufacturing of certainof our products, which could result in delivery problems, reduced control overproduct pricing and quality, and an inability to identify and qualifyadditional suppliers in a timely manner. Any supply deficiencies relating tothe quality or quantities of components we use to manufacture our productscould adversely affect our ability to fulfill customer orders and our resultsof operations.

**Results ofoperations**

***Consolidated results of operations indollars and as a percentage of revenues for the three-month periods endedOctober 28, 2006 and October 29, 2005 were as follows:***
| ** **                                | ** ** | **Three months ended**                      | ** ** |
|-------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                | ** ** | **(in thousands, except percentages)** | ** ** |
| ** **                                | ** ** | **(unaudited)**                                       | ** ** |
| ** **                                | ** ** | **October 28,  2006**                            | ** ** | **% of  Revenue** | ** ** | **October 29,  2005** | ** ** | **% of  Revenue** | ** ** | **Variance** | ** ** | **%  Variance** | ** ** |
| Revenue                                   |       | $                                                     | 30,010     |   |   |   | $ | 14,016 |   |   |   | $ | 15,994 |   | 114.1 | % |
| Cost of revenue                           |       | 21,305                                                |       | 71.0 | % | 10,974 |   | 78.3 | % | 10,331 |   | 94.1 | % |
| Gross profit                              |       | 8,705                                                 |       | 29.0 | % | 3,042 |   | 21.7 | % | 5,663 |   | 186.2 | % |
| Operating  expenses:                      |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |
| Research and product development          |       | 2,996                                                 |       | 10.0 | % | 1,742 |   | 12.4 | % | 1,254 |   | 72.0 | % |
| Selling, general and administrative       |       | 2,827                                                 |       | 9.4 | % | 947 |   | 6.8 | % | 1,880 |   | 198.5 | % |
| Total operating  expenses                 |       | 5,823                                                 |       | 19.4 | % | 2,689 |   | 19.2 | % | 3,134 |   | 116.5 | % |
| Income from  operations                   |       | 2,882                                                 |       | 9.6 | % | 353 |   | 2.5 | % | 2,529 |   | 716.4 | % |
| Interest and  other income (expense), net |       | 56                                                    |       | 0.2 | % | 32 |   | 0.2 | % | 24 |   | 75.0 | % |
| Income before  income tax expense         |       | 2,938                                                 |       | 9.8 | % | 385 |   | 2.7 | % | 2,553 |   | 663.1 | % |
| Income tax  expense                       |       | 179                                                   |       | 0.6 | % | 8 |   | 0.1 | % | 171 |   | 2,137.5 | % |
| Net income                                |       | $                                                     | 2,759      |   | 9.2 | % | $ | 377 |   | 2.7 | % | $ | 2,382 |   | 631.8 | % |

 

***Revenue***

Total revenue increased 114.1% to approximately$30.0 million for the three months ended October 28, 2006 fromapproximately $14.0 million for the three months ended October 29, 2005. Thisincrease in revenue is primarily attributable to an increase in sales of our 10GB/s transceivers of approximately $11.8 million, as well as an increasein sales supporting hybrid fiber coaxial network systems of approximately$3.1 million. Growth was driven by increased volumes in Telecom, Fiber tothe Home and Cable TV applications. Service providers have driven demand withaccelerated deployment of IPTV networks, Fiber to the Home and 3G cellularbackhaul requirements. These systems utilize our 10 GB/s transceivers, Cable TVand Fiber to the Home product offerings.

***Gross profit***

Gross profit increased 186.2% to approximately$8.7 million for the three months ended October 28, 2006 fromapproximately $3.0 million for the three months ended October 29, 2005.Gross margin increased to 29.0% from 21.7% over the three months ended October28, 2006 compared to the three months ended October 29, 2005. The increase ingross profit was primarily attributable to unit volume increases with increaseddemand for our products and driving additional operational costefficiencies.  Additionally, there was afavorable product mix shift from lower margin short reach products to highermargin long reach products.

***Research and product development***

Research and product development expenses increased 72.0%to approximately $3.0 million for the three months ended October 28, 2006from approximately $1.7 million for the three months ended October 29,2005. The increase in research 

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and development expenses was due to higher headcount and associatedcosts related to our decision to increase the number of engineering projectswhich will further expand our product portfolio. Additionally, the three monthsended October 28, 2006 includes approximately $912,000 of research anddevelopment costs with respect to our Optium Australia operations acquired inour acquisition of Engana on March 5, 2006. We expect these costs tocontinue to increase as we undertake additional research and developmentprojects as we continue to expand our product suite.

***Selling, general and administrative***

Selling, general and administrative expenses increased198.5% to approximately $2.8 million the three months ended October 28,2006 from approximately $0.9 million for the three months ended October29, 2005. The Company experienced increased costs for the additionalinfrastructure necessary support our revenue growth. These costs includedincreased labor costs as a result of additional headcount and additional legaland other professional fees. Additionally, we incurred $0.2 million instock-based compensation primarily related to the adoption of SFAS 123(R) and$0.2 million related to duplicate facility costs as we relocate our operationsto a new facility. We expect that the costs of being a publicly-tradedcompany, including the costs of compliance with the Sarbanes-Oxley Act of2002 and other regulations governing public companies, will significantlyincrease our general and administrative expenses in the future.

***Interest and other income (expense),net***

Interest and other income (expense), net, increased toapproximately $56,000 for the three months ended October 28, 2006 fromapproximately $32,000 for the three months ended October 29, 2005. The increasewas due to additional interest income earned on cash and cash equivalents heldfor investment. We expect interest and other income (expense), net tosignificantly increase as we invest the proceeds from our initial publicoffering.

***Income tax expense***

Income tax expense was approximately $180,000 for thethree months ended October 28, 2006 compared to approximately $8,000 for thethree months ended October 29, 2005. The Company’s overall effective tax ratewas approximately 6% and 2% in the three-month periods ended October 28, 2006and October 29, 2005, respectively. Income tax expense will increase as ourprofits increase.

***Net income***

Net income increased 631.8% to approximately $2.8 millionfor the three months ended October 28, 2006 from approximately $0.4 million forthe three months ended October 29, 2005. As a percentage of sales, net incomewas approximately 9.2% and 2.7% in the three-month periods ended October 28,2006 and October 29, 2005, respectively. The changes are primarily attributable to the factors described above.

**Liquidity and Capital Resources**

***Operating activities***

Net cash provided by operating activities wasapproximately $211,000 for the three months ended October 28, 2006. Net cashused in operating activities for the three months ended October 29, 2005 wasapproximately $1.1 million. Net cash provided by operating activities for thethree months ended October 28, 2006 primarily resulted from net income ofapproximately $2.8 million offset by a decrease in our other currentliabilities of $2.5 million and increases in inventories, accounts payables,and other assets of approximately $4.7 million, $2.6 million, and $0.6million, respectively. Net cash used in operating activities for the threemonths ended October 29, 2005 primarily resulted from an increase in accountsreceivable of $1.3 million, partially offset by net income of $0.4 million.

***Investing activities***

Net cash used in investing activities was approximately$0.9 million for the three months ended October 28, 2006 and $0.6 millionfor the three months ended October 29, 2005. Net cash used in investingactivities for the three months ended October 28, 2006 and October 29, 2005 wasfor purchases of property and equipment.

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***Financing activities***

Net cash used in financing activities was approximately$1.1 million for the three months ended October 28, 2006 and net cash providedby financing activities was approximately $3,000 for the three months endedOctober 29, 2005. Net cash used by financing activities for the three monthsended October 28, 2006 primarily related to payments of associated costs to ourinitial public offering. Net cash provided by financing activities for thethree months ended October 29, 2005 was related to proceeds from the issuanceof common stock in connection with the exercise of employee stock options.

***Sources of cash***

On November 1, 2006, wecompleted our initial public offering of 5.2 million shares of common stock ata price to the public of $17.50 per share as well as the sale of an additional780,000 shares to cover underwriter over-allotments.  Our common stock, quoted on the Nasdaq GlobalMarket under the symbol “OPTM,” began trading on October 27, 2006.  Cash proceeds to us, net of underwritercommissions of approximately $7.4 million and related offering expenses ofapproximately $3.6 million, totaled approximately $93.7 million.  All preferred stock outstanding at the end ofthe quarter was converted to common stock upon the completion of the initial publicoffering.

Prior to our public offering of common stock, we hadfinanced our operations primarily through internally generated cash flows, ourlines of credit and the issuance of preferred stock. As of October 28, 2006, wehad cash and cash equivalents of $8.5 million and accounts receivable ofapproximately $18.3 million. As of October 28, 2006, we had debt ofapproximately $0.6 million and no amount remaining on our capital equipmentleases. As of October 28, 2006, the aggregate outstanding redemption value ofour Series A Convertible Preferred Stock, Series B ConvertiblePreferred Stock, Series C Senior Convertible Preferred Stock,Series D Senior Convertible Preferred stock, and Series D-1Senior Convertible Preferred Stock was approximately $7.9 million,$35.7 million, $11.9 million, $10.3 million, and$21.3 million, respectively.

We believe our existing cash and cash equivalents, ourcash flows from operating activities, and the net proceeds of our offering willbe sufficient to meet our anticipated cash needs for at least the next twelvemonths. Our future working capital requirements will depend on many factors,including the rate of our revenue growth, the introduction and acceptance ofnew products, and the expansion of our sales and marketing and research anddevelopment activities. To the extent that our cash and cash equivalents, cashflows from operating activities, and net proceeds of this offering areinsufficient to fund our future activities, we may need to raise additionalfunds through bank credit arrangements or public or private equity or debtfinancings.

We also may need to raise additional funds in the eventwe determine, in the future, to effect one or more acquisitions of businesses,technologies and/or products. Although there are no present understandings,commitments or agreements with respect to acquisitions of other businesses,products or technologies, we may in the future consider such transactions,which may require debt or equity financing. The issuance of debt or equity securities could be expected to have adilutive impact on the our stockholders, and there can be no assurance as towhether or when any acquired business would contribute positive operatingresults commensurate with the associated investment. In the event we requireadditional cash resources, we may not be able to obtain bank creditarrangements or affect an equity or debt financing on terms acceptable to us orat all. Any material acquisition could result in a decrease in working capitaldepending upon the amount, timing, and nature of the consideration paid.

***Equity sales***

We raised approximately $7.9 million of proceedsthrough sales of our series A convertible preferred stock in the fiscalyear ended July 28, 2001. We raised approximately $35.7 million of proceedsthrough sales of our series B convertible preferred stock in the fiscalyear ended July 28, 2001. We raised approximately $11.9 million ofproceeds through sales of our series C senior convertible preferred stockin the fiscal year ended August 2, 2003. We raised approximately$10.3 million of proceeds through sales of our series D seniorconvertible preferred stock in the fiscal year ended July 31, 2004. Weissued approximately $21.3 million of series D-1 seniorconvertible preferred stock and approximately $4.2 million in common stockduring the fiscal year 2006 as consideration for the acquisition of alloutstanding equity securities of Engana. In connection with the acquisition, weacquired Engana’s cash and cash equivalent assets of approximately$4.6 million. All of the shares of our preferred stock were converted intocommon stock in connection with the closing of our initial public offering onNovember 1, 2006.

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***Line of credit***

On May 25, 2004, we entered into a $3.5 millionline of credit agreement with Silicon Valley Bank, including a revolving creditfacility of $2.5 million and an equipment term loan of $1.0 million.This line of credit bears interest at the prime rate plus 1.75%. OnJune 27, 2005, we modified the terms of the line of credit to increase theequipment term note to $2.0 million; change the interest rate to the primerate plus 1.25% for the initial equipment advance of $820,778. On June 6,2006, we renewed the line of credit, to modify the interest rate on the outstandingprincipal to the prime rate plus 0.75% and extending the renewal date toMay 22, 2007. The interest rate would be prime plus 1.5% for supplementaladvances. As of October 28, 2006, $0.6 million was outstanding on the equipmentterm note. Aggregate maturities on the equipment term note subsequent toJuly 29, 2006 are as follows: approximately $243,000 and $351,000 infiscal years 2007 and 2008 respectively. The terms of the equipment loan wereamended for July 29, 2006 and October 28, 2006. At July 29, 2006, the terms ofthe covenants were amended to require a minimum quick ratio of 1.25:1.00 and atangible net worth of $22,000,000. At October 28, 2006, the terms of thecovenants were amended to require a minimum quick ratio of 0.75:1.00 throughJanuary 2007. Absent these amendments, we would not have been in compliancewith the financial covenants in the equipment loan as of July 29, 2006 orOctober 28, 2006.

Subsequent to October 28, 2006, we paid the outstandingline of credit in full on November 3, 2006 in the amount of $568,768.

**Foreign Currency Exchange Risk**

Our subsidiary Optium Australia is located in Sydney,Australia. Due to the relative low volume of payments made by us through thissubsidiary, and the fact we intend that all of our sales will continue to bemade in U.S. dollars, we do not believe that we have significant exposure toforeign currency exchange risks. We currently do not use derivative financialinstruments to mitigate this exposure. We continue to review this issue and mayconsider hedging certain foreign exchange risks through the use of currencyfutures or options in future years.

**Interest Rate Risk**

The primary objective of our investment activities is topreserve principal while maximizing income without significantly increasingrisk. Some of the securities in which we invest may be subject to market risk.This means that a change in prevailing interest rates may cause the principalamount of the investment to fluctuate. To minimize this risk in the future, weintend to maintain our portfolio of cash equivalents and short-terminvestments in a variety of securities, including money market funds andcertificates of deposit. Our cash equivalents are not subject to market riskbecause the interest paid on these funds fluctuates with the prevailinginterest rate. We do not believe that a 10% change in interest rates would havea significant effect on our interest income.

**Off-Balance Sheet FinancingArrangements**

We do not engage in any off-balance sheet financingarrangements. We do not have any interest in entities referred to as variableinterest entities, which includes special purpose entities and other structuredfinance entities.

**ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

Market risk represents the risk of loss that may impactour financial position due to adverse changes in financial market prices andrates. Our market risk exposure is primarily a result of fluctuations ininterest rates and foreign currency exchange rates. We do not hold or issuefinancial instruments for trading purposes.

**ITEM 4.CONTROLS AND PROCEDURES**

Under the supervision andwith the participation of our management, including our Chief Executive Officerand our Chief Financial Officer, we evaluated the effectiveness of ourdisclosure controls and procedures, as such term is defined under Rule13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended.Based upon that evaluation, our Chief Executive Officer and Chief FinancialOfficer concluded that our disclosure controls and procedures were effective asof the end of the period covered by this quarterly report.

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**PART II - OTHER INFORMATION**

**ITEM 1. Legal Proceedings**

In December 2004, we terminated our relationshipwith Appletec Limited, an Israeli company that was assisting us with our salesefforts in Israel. Beginning in February 2005 and through May 2005,we received correspondence from Appletec claiming we owed Appletec salescommissions. We do not believe that we owe any further commissions to Appletec.However, in June 2005 we sent a letter to Appletec’s counsel proposing asettlement. We did not receive a response to our proposal and Appletec filed anaction in Israel against us and a consultant of ours alleging damages in anamount of approximately $1,800,000. We intend to defend ourselves vigorouslyand we do not expect the ultimate outcome of this matter to have a materialadverse effect on our business or financial position.

On September 11, 2006, JDS Uniphase Corporation andEMCORE Corporation filed a complaint in the United States District Court forthe Western District of Pennsylvania alleging that the Company’s 1550 nm HFCexternally modulated transmitter, in addition to possibly “products as yetidentified,” infringes on two U.S. patents. Since discovery has not yet commenced, the Company is unable todetermine the ultimate outcome of this litigation.

In the ordinary course of business, the Company is partyto litigation, claims and assessments. Based on information currentlyavailable, management does not believe the impact of these matters will have amaterial effect on the financial condition, results of operations or cash flowsof the Company.

**ITEM 1A. Risk Factors**

*Investing in our common stock involvesa high degree of risk. You should carefully consider the following riskfactors, as well as the other information in this Form 10-Q, before decidingwhether to invest in our common stock. If any of the following risks actuallymaterializes, our business, financial condition and results of operations willsuffer. The trading price of our common stock could decline as a result of anyof these risks, and you might lose all or part of your investment in our commonstock.*

**Risks Related to Our Business**

***If optical communications networks donot continue to expand as expected, our business will suffer.***

Our future success as a manufacturer of opticalsubsystems ultimately depends on the continued growth of the communicationsindustry and, in particular, the continued expansion of global informationnetworks, particularly those directly or indirectly dependent upon a fiberoptics infrastructure. As part of that growth, we are relying on increasingdemand for voice, video and other data delivered over high-bandwidthnetwork systems as well as commitments by network systems vendors to invest inthe expansion of the global information network. As network usage and bandwidthdemand increase, so does the need for advanced optical networks to provide therequired bandwidth. Without network and bandwidth growth, the need for ouroptical subsystems, and hence our future growth as a manufacturer of theseproducts, is jeopardized. Currently, while increasing demand for networkservices and for broadband access, in particular, is apparent, growth islimited by several factors, including, among others, an uncertain regulatoryenvironment, reluctance from content providers to supply video and audiocontent over the communications infrastructure, and uncertainty regarding longterm sustainable business models as multiple industries (cable TV, traditionaltelecommunications, wireless, satellite, etc.) offer non-complementaryand competing content delivery solutions. Ultimately, if long-termexpectations for network growth and bandwidth demand are not realized or do notsupport a sustainable business model, our business would be significantlyharmed.

***We are under continuous pressure toreduce the prices of our products.***

The optical network equipment industry has beencharacterized by falling product prices over time. Many of our competitorsoutsource their manufacturing operations to locations with low labor costs,allowing them to offer their products at lower prices than if they usedmanufacturing facilities in the United States. If optical subsystem productsbecome more standardized, the cost advantages of our embedded software approachto product customization will be reduced and our business would besignificantly harmed.

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***We depend on a limited number ofcomponent suppliers who could disrupt our business if they stopped, decreasedor delayed shipments and increased demand for components generally could leadto shortages.***

We depend on a limited number of suppliers of componentsused to manufacture certain of our products. Some of these suppliers are solesources. We typically have not entered into long-term agreements with oursuppliers and, therefore, these suppliers generally may stop supplyingmaterials and equipment at any time. The reliance on a sole supplier or limitednumber of suppliers could result in delivery problems, reduced control overproduct pricing and quality, and an inability to identify and qualify anothersupplier in a timely manner. During the last several years the number ofsuppliers of components has decreased significantly and more recently, demandfor components has rapidly increased. For example, a recent surge in demand formicroprocessors and lasers has resulted in shortages of such components. Anysupply deficiencies relating to the quality or quantities of components we useto manufacture our products could adversely affect our ability to fulfillcustomer orders or our financial results of operations.

***Our success will depend on ourability to anticipate and quickly respond to evolving technologies and customerrequirements.***

The market for optical networking equipment ischaracterized by substantial capital investment and diverse and evolvingtechnologies. For example, the market for optical subsystems is currentlycharacterized by a trend toward the adoption of “pluggable” modules andsubsystems that do not require customized interconnections and by thedevelopment of more complex and integrated optical subsystems. Our ability toanticipate and respond to these and other changes in technology, industrystandards, customer requirements and product offerings, and to develop andintroduce new and enhanced products, will be significant factors in our abilityto succeed. We expect that new technologies will continue to emerge ascompetition in the optical networking equipment industry increases and the needfor higher and more cost efficient bandwidth expands. Our success, in largepart, depends upon our ability to continuously and successfully introduce andmarket new products and technologies meeting or exceeding our customers’expectations. The introduction of new products embodying new technologies orthe emergence of new industry standards could render our existing productsuncompetitive from a pricing standpoint, obsolete or unmarketable. Further,time to market with new products can provide significant competitive advantagesin our industry. It is difficult to displace an existing supplier or aparticular type of optical subsystems once a network systems vendor has chosenan initial optical subsystems supplier for a particular product even if a laterto market product supplies superior performance and/or cost efficiency. If weare unable to make our new products commercially available quickly, we may loseexisting and potential customers and our financial results would suffer.

***We are subject to a number of specialrisks as a result of our recent acquisition of Engana.***

In March 2006, we acquired Engana of Sydney,Australia, a developer of DWP ROADMs and related technologies. Our futureresults of operations will be substantially influenced by the operations ofthis new business, and we are subject to a number of risks and uncertaintiesrelated to this acquisition, including the following:

·                  Inthe near term, we are expecting that our DWP ROADMs will become keycomponents of next generation network systems demanded by the market. Weacquired Engana, in part, based upon this expectation. Any delay by networksystems vendors in including our DWP ROADMs in their network systems fromthe timetable we expect, or any decision by such vendors not to include our DWPROADMs in amounts we expect, would significantly alter our near termprospects for growth and harm our business and financial condition.

·                  Weare establishing a production line for our DWP ROADMs at our acquired facilityin Sydney, Australia. Any delay in the production line being able to producecommercial volumes in the quantities anticipated would delay our ability tocommercialize our DWP ROADMs, which would negatively affect our revenues andcompetitive position. In addition, a failure to achieve manufacturing yieldsfrom such production line comparable to the yields obtained at our Chalfont,Pennsylvania facility would negatively impact our margins and operatingresults.

·                  Theintegration of the products and technology we acquired as part of ouracquisition of Engana with our products and technology and the coordination ofthe manufacturing operations for such products will be complex, time-consumingand expensive. The execution of these activities could potentially disrupt ourongoing business operations and distract management from day-to-dayoperational matters, as well as other strategic opportunities, and could strainour financial and managerial controls and reporting systems and procedures. Inaddition, unanticipated costs could arise during the integration of theproducts and manufacturing operations. If we are unable to successfullyintegrate these products and technology with our products and technology, or ifactual 

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integration andmanufacturing costs are significantly greater than currently anticipated, wemay not achieve the anticipated benefits of the acquisition and our revenuesand operating results could be adversely affected.

·                  Immediatelyprior to the acquisition, Engana was engaged in an ongoing research anddevelopment project related to ROADM technology. We may not be able tosuccessfully complete this project, and our inability to do so could prevent usfrom achieving some of the strategic objectives and other anticipated potentialbenefits of the acquisition, and could have a material adverse effect on ourrevenues and operating results.

·                  Wemay incur charges to operations in amounts that are not currently estimable toreflect costs associated with integrating the acquired business with ourcompany. These costs could adversely affect our future operating results.

·                  Wehave become a larger and more geographically dispersed organization, and if ourmanagement is unable to effectively manage the combined business, our operatingresults will suffer.

***We and our customers are eachdependent upon a limited number of end customers.***

Historically, we have generated most of our revenues froma limited number of end customers. For example, in the three months endedOctober 28, 2006 and October 29, 2005, we generated 61.5% and 41.1%,respectively, of our revenues from our three largest end customers during thoseperiods. We may not be able to offset any decline in revenues from our existingmajor customers with revenues from new customers and our quarterly results maybe volatile because we are dependent on large orders from these customers thatmay be reduced or delayed. Our dependence on a limited number of customers isdue to the fact that the network systems industry is dominated by a smallnumber of large companies, and the industry continues to consolidate, as withthe recent mergers of Cisco Systems and Scientific Atlanta and of Lucent andAlcatel. Similarly, our customers depend primarily on a limited number of majorcarrier customers to purchase their network systems products that incorporateour optical subsystems. Many major telecommunication services providers areexperiencing losses from operations. The further consolidation of the industry,coupled with potential declining revenues from our major customers, may have amaterial adverse impact on our business.

***We do not have long-term volumepurchase contracts with our customers.***

Generally, we have not entered into long-termvolume purchase contracts with our customers. As a result, any of our customersmay cease to purchase our products at any time. If any of our major customersstop purchasing our products for any reason, our business and results ofoperations would be harmed.

***If we fail to retain our chiefexecutive officer and other key personnel or if we fail to attract additionalqualified personnel, we may not be able to achieve our anticipated level ofgrowth and our business could suffer.***

Our future depends, in part, on our ability to attractand retain key personnel. Our future depends on the continued contributions ofour executive officers and other key technical personnel, each of whom would bedifficult to replace. In particular, Eitan Gertel, our chief executive officer,president and chairman, is critical to the management of our business andoperations, as well as the development of our strategic direction. The loss ofservices of Mr. Gertel or other executive officers or key personnel or theinability to continue to attract qualified personnel could have a materialadverse effect on our business. Competition for highly skilled technical peopleis extremely intense and we continue to face difficulty identifying and hiringqualified personnel in many areas of our business. We may not be able to hireand retain such personnel at compensation levels consistent with our existingcompensation and salary structure. Many of the companies with which we competefor hiring experienced employees have greater resources than we have. Inaddition, in making employment decisions, particularly in the high-technologyindustries, job candidates often consider the value of the equity they are toreceive in connection with their employment. Therefore, significant volatilityin the price of our stock after this offering may adversely affect our abilityto attract or retain technical personnel. Furthermore, changes to accountingprinciples generally accepted in the United States relating to the expensing ofstock options may discourage us from granting the sizes or types of stockoptions that job candidates may require to accept our offer of employment.

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***Potential future acquisitions couldbe difficult to integrate, divert the attention of key personnel, disrupt ourbusiness, dilute stockholder value and impair our financial results.***

As part of our business strategy, we intend to pursueacquisitions of companies, technologies and products that we believe couldaccelerate our ability to compete in our core markets or allow us to enter newmarkets. Acquisitions involve numerous risks, any of which could harm ourbusiness, including:

·                  difficultiesin integrating the operations, technologies, products, existing contracts,accounting and personnel of the target company and realizing the anticipatedsynergies of the combined businesses;

·                  difficultiesin supporting and transitioning customers, if any, of the target company;

·                  diversionof financial and management resources from existing operations;

·                  theprice we pay or other resources that we devote may exceed the value we realize,or the value we could have realized if we had allocated the purchase price orother resources to another opportunity;

·                  risksof entering new markets in which we have limited or no experience;

·                  potentialloss of key employees, customers and strategic alliances from either ourcurrent business or the target company’s business;

·                  assumptionof unanticipated problems or latent liabilities, such as problems with thequality of the target company’s products;

·                  inabilityto generate sufficient revenue to offset acquisition costs;

·                  equitybased acquisitions may have a dilutive effect on our stock; and

·                  inabilityto successfully complete transactions with a suitable acquisition candidate.

Acquisitions also frequently result in the recording ofgoodwill and other intangible assets which are subject to potential impairmentsin the future that could harm our financial results. As a result, if we fail toproperly evaluate acquisitions or investments, we may not achieve theanticipated benefits of any such acquisitions, and we may incur costs in excessof what we anticipate. The failure to successfully evaluate and executeacquisitions or investments or otherwise adequately address these risks couldmaterially harm our business and financial results.

***If we fail to manage or anticipateour long-term growth and expansion requirements, our business willsuffer.***

In recent years, we have experienced significant growththrough among other things, internal expansion programs, product developmentand our acquisition of Engana. We currently anticipate continued growth. Inconnection with this growth, we will be required to expand our manufacturingoperations, including hiring new personnel, purchasing additional equipment,leasing or purchasing additional facilities and developing the managementinfrastructure to manage any such expansion. If we fail to secure theseexpansion requirements and /or manage our future growth effectively, inparticular during periods of industry uncertainty, our business could suffer.

***If we fail to properly manage theplanned relocation of our U.S. operating facilities, our business could suffer.***

During the first calendar quarter of 2007, we plan torelocate our U.S. operating facilities from Chalfont, Pennsylvania to Horsham,Pennsylvania.  This relocation includesrelocation of all of our U.S. manufacturing operations, including significantcapital equipment and assets, and is planned to occur during the winter months.There are various risks in connection with the planned relocation, includingdelays and other issues caused by inclement weather, damage to our equipment,and problems in recommencing manufacturing operations after the relocation ofour equipment. If we fail to properly manage this relocation to minimizemanufacturing and other business interruption, our business and financialresults could be materially harmed.

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***Our financial results often varysignificantly from quarter-to-quarter due to a number of factors,which may lead to volatility in our stock price.***

Our quarterly revenue and other operating results havevaried in the past and are likely to continue to vary significantly fromquarter to quarter. This variability may lead to volatility in our stock priceas equity research analysts and investors respond to these quarterlyfluctuations. These fluctuations are due to numerous factors, including:

·                  fluctuationsin demand for intelligent optical networking products;

·                  thetiming and size of sales of our products;

·                  lengthand variability of the sales cycles of our products;

·                  thetiming of recognizing revenue;

·                  newproduct introductions and enhancements by our competitors and ourselves;

·                  changesin our pricing policies or the pricing policies of our competitors;

·                  ourability to develop, introduce and ship new products and product enhancementsthat meet customer requirements in a timely manner; and

·                  ourability to attain and maintain production volumes and quality levels for ourproducts.

Because of quarterly fluctuations, we believe thatquarter-to-quarter comparisons of our operating results are notnecessarily meaningful. Moreover, our operating results may not meet ourannounced guidance or expectations of equity research analysts or investors, inwhich case the price of our common stock could decrease significantly.

In addition, our expense levels are based, in significantpart, on our expectations as to future revenue and are largely fixed in theshort term. As a result, we may be unable to adjust spending in a timely mannerto compensate for any unexpected shortfall in revenue. Furthermore, we intendto increase our operating expenses as we expand our manufacturing, research anddevelopment, sales and marketing, and administrative organizations. The timing ofthese increases and the rate at which new personnel become productive willaffect our operating results. Any revenue shortfall, and the resulting decreasein operating income or increase in operating loss, could lead to volatility inthe price of our common stock.

***Our products are complex and may takelonger to develop than anticipated and we may not recognize revenues from newproducts until after long field testing and customer acceptance periods.***

Many of our new products must be tailored to customer specifications.As a result, we are constantly developing new products and using newtechnologies in those products. These products often take substantial time todevelop because of their complexity and because customer specificationssometimes change during the development cycle. We often incur substantial costsassociated with the research and development and sales and marketing activitiesin connection with products that may be purchased long after we have incurredthe costs associated with designing, creating and selling such products.

***If our customers do not qualify ourproducts or if our customers determine not to purchase products we have indevelopment, our operating results could suffer.***

Most of our customers do not purchase our products, otherthan limited numbers of evaluation units, prior to qualification of ourproducts. Our existing products, as well as each new product, must pass throughvarying levels of qualification with our customers. In addition, due to therapid technological changes in our market, a customer may cancel or modify adesign project before we begin large-scale manufacture of the product andreceive revenue from the customer. It is unlikely that we would be able torecover the expenses for cancelled or unutilized design projects. It isdifficult to predict with any certainty the frequency with which customers willcancel or modify their projects, or the effect that any cancellation ormodification would have on our results of operations.

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***If carriers that purchase networksystems from customers fail to qualify or delay qualifications of any productssold by our customers that contain our products, our business could be harmed.***

The qualification and field testing of our customers’network system products by their carrier customers is long and unpredictable.This process is not under the control of us or our customers, and as a resulttiming of our revenues is unpredictable. Any delay in qualification of one ofour customers’ network systems from what we anticipate could result in thedelay or cancellation of orders from our customers for subsystems included inthe applicable network system, which could harm our results of operations.

***Delays, disruptions or qualitycontrol problems in manufacturing could result in delays in product shipmentsto customers and could adversely affect our business.***

We may experience delays, disruptions or quality controlproblems in our manufacturing operations. As a result, we could incuradditional costs that would adversely affect gross margins, and productshipments to our customers could be delayed beyond the shipment schedulesrequested by our customers, which would negatively affect our revenues,competitive position and reputation.

***We may experience low manufacturingyields.***

Manufacturing yields depend on a number of factors,including the volume of production due to customer demand and the nature andextent of changes in specifications required by customers for which we performdesign-in work. Higher volumes due to demand for a fixed, rather than continuallychanging, design generally results in higher manufacturing yields, whereaslower volume production generally results in lower yields. In addition, loweryields may result, and have in the past resulted, from commercial shipments ofproducts prior to full manufacturing qualification to the applicablespecifications. Changes in manufacturing processes required as a result ofchanges in product specifications, changing customer needs and the introductionof new product lines have historically caused, and may in the future cause,significantly reduced manufacturing yields, resulting in low or negativemargins on those products. Moreover, an increase in the rejection rate ofproducts during the quality control process either before, during or after manufacture,results in lower yields and margins. Finally, manufacturing yields and marginscan also be lower if we receive or inadvertently use defective or contaminatedmaterials from our suppliers.

***We face intense competition fromother providers of optical subsystems, as well as competition from providersoffering alternative products, which could negatively impact our results ofoperations and cause our market share to decline.***

We believe that a number of companies have developed orare developing optical subsystems that compete directly with our productofferings. Many current and potential competitors have substantially greaterfinancial, marketing, research and manufacturing resources than we possess, andthere can be no assurance that our current and future competitors will not bemore successful than us.

In the event that the optical subsystems market expands,competition may intensify as additional competitors enter the market andcurrent competitors expand their product lines. Companies competing with us mayintroduce products that are competitively priced, have increased performance orfunctionality, or incorporate technological advances that we have not yetdeveloped or implemented, and may be able to react quicker to changing customerrequirements and expectations. There is also the risk that network systemsvendors may re-enter the subsystem market and begin to manufacture theoptical subsystems incorporated in their network systems. Increased competitivepressure or a decision by any of our customers to manufacture opticalsubsystems for inclusion in their network systems could result in a loss ofsales or market share or cause us to lower prices for our products, any ofwhich would harm our business and operating results.

***Our future operating results may besubject to volatility as a result of exposure to foreign currency exchangerisks.***

All sales of our products are made in United Statesdollars. Nevertheless, most of our suppliers to our subsidiary Engana, renamedOptium Australia Pty Limited (“Optium Australia”), are paid in Australiandollars. In addition, all employee and other local expenses of Optium Australiaare paid in Australian dollars. This exposes us to foreign currency exchangerate risks. If the value of the Australian dollar relative to the United Statesdollar rises, these expenses of Optium Australia will correspondingly increase.If the relative value of the Australian dollar increases significantly, ourexpenses would increase and our results of operations could be harmed. We currentlydo not use derivative financial instruments to mitigate this exposure. Wecontinue to review this issue and may consider hedging certain foreign exchangerisks through the use of currency futures or options in future periods.

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***If we fail to protect, or incursignificant costs in defending, our intellectual property and other proprietaryrights, our business and results of operations could be materially harmed.***

Our success depends on our ability to protect ourintellectual property and other proprietary rights. We rely primarily onpatents, trademarks, copyrights, trade secrets and unfair competition laws, aswell as license agreements and other contractual provisions, to protect ourintellectual property and other proprietary rights. Significant technology usedin our products, however, is not the subject of any patent protection, and wemay be unable to obtain patent protection on such technology in the future.Moreover, existing U.S. legal standards relating to the validity, enforceabilityand scope of protection of intellectual property rights offer only limitedprotection, may not provide us with any competitive advantages, and may bechallenged by third parties. In addition, the laws of countries other than theUnited States in which we market our products may afford little or no effectiveprotection of our intellectual property. Accordingly, despite our efforts, wemay be unable to prevent third parties from infringing upon or misappropriatingour intellectual property or otherwise gaining access to our technology.Unauthorized third parties may try to copy or reverse engineer our products orportions of our products or otherwise obtain and use our intellectual property.If we fail to protect our intellectual property and other proprietary rights,our business, results of operations or financial condition could be materiallyharmed.

In addition, defending our intellectual property rightsmay entail significant expense. We believe that certain products in themarketplace may infringe our existing intellectual property rights. We have,from time to time, resorted to legal proceedings to protect our intellectualproperty and may continue to do so in the future. We may be required to expendsignificant resources to monitor and protect our intellectual property rights.Any of our intellectual property rights may be challenged by others orinvalidated through administrative processes or litigation. If we resort tolegal proceedings to enforce our intellectual property rights or to determinethe validity and scope of the intellectual property or other proprietary rightsof others, the proceedings could result in significant expense to us and divertthe attention and efforts of our management and technical employees, even if wewere to prevail.

***Third parties may claim we areinfringing their intellectual property rights, and we could be prevented fromselling our products, or suffer significant litigation expense, even if theseclaims have no merit.***

Our competitive position is driven in part by ourintellectual property and other proprietary rights. Third parties, however, mayclaim that we or our products or operations are infringing their intellectualproperty rights, and we may be unaware of intellectual property rights ofothers that may cover some of our assets, technology and products. In thatregard, JDS Uniphase Corporation and EMCORE Corporation filed a complaint onSeptember 11, 2006 alleging that our 1550 nm HFC externally modulatedtransmitter, in addition to possibly “products as yet identified,” infringes ontwo U.S. patents. The plaintiffs are seeking for the court to declare that wehave willfully infringed on such patents and to be awarded up to three timesthe amount of any compensatory damages found, if any, plus any other damages orcosts incurred. Any litigation regarding patents, trademarks, copyrights orother intellectual property rights, even those without merit, could be costlyand time consuming, and divert our management and key personnel from operatingour business. The complexity of the technology involved and inherentuncertainty and cost of intellectual property litigation increases our risks.If any third party has a meritorious or successful claim that we are infringingits intellectual property rights, we may be forced to change our products ormanufacturing processes, which may be costly or impractical. This also mayrequire us to stop selling our products as currently engineered, which couldharm our competitive position. We also may be subject to significant damages orinjunctions that prevent the further development of certain of our products orservices.

***If we fail to obtain the right to usethe intellectual property rights of others necessary to operate our business,our ability to succeed will be adversely affected.***

Numerous patents in our industry are held by others,including academic institutions and our competitors. Optical subsystemsuppliers may seek to gain a competitive advantage or other third parties mayseek an economic return on their intellectual property portfolios by makinginfringement claims against us. In the future, we may need to obtain licenserights to patents or other intellectual property held by others to the extentnecessary for our business. Unless we are able to obtain those licenses oncommercially reasonable terms, patents or other intellectual property held byothers could inhibit our development of new products for our markets. Licensesgranting us the right to use third party technology may not be available oncommercially reasonable terms, if at all. Generally, a license, if granted,would include payments of up-front fees, ongoing royalties or both. Thesepayments or other terms could have a significant adverse impact on ouroperating results. Our larger competitors may be able to obtain licenses orcross-license their technology on better terms than we can, which couldput us at a competitive disadvantage.

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***We will incur significant increasedcosts as a result of operating as a public company, and our management will berequired to devote substantial time to new compliance initiatives.***

We have only recently begun to operate as a publiccompany. As a public company, we will incur significant legal, accounting andother expenses that we did not incur as a private company. In addition, theSarbanes-Oxley Act of 2002, as well as new rules subsequently implementedby the Securities and Exchange Commission, or SEC, and the NASDAQ GlobalMarket, has imposed various new requirements on public companies, includingrequiring changes in corporate governance practices. Our management and otherpersonnel will need to devote a substantial amount of time to these newcompliance initiatives. Moreover, these rules and regulations will increase ourlegal and financial compliance costs and will make some activities more time-consumingand costly.

In addition, the Sarbanes-Oxley Act requires, amongother things, that we maintain effective internal control over financialreporting and disclosure controls and procedures. In particular, under currentrules, commencing with respect to fiscal year ending July 28, 2007, wemust perform system and process evaluation and testing of our internal controlover financial reporting to allow management and our independent registeredpublic accounting firm to report on the effectiveness of our internal controlover financial reporting, as required by Section 404 of the Sarbanes-OxleyAct, or Section 404. Our testing, or the subsequent testing by ourindependent registered public accounting firm, may reveal deficiencies in ourinternal control over financial reporting that are deemed to be materialweaknesses. Our compliance with Section 404 will require that we incursubstantial accounting expense and expend significant management time oncompliance-related issues. We will evaluate the need to hire additionalaccounting and financial staff with appropriate public company experience andtechnical accounting knowledge. Moreover, if we are not able to comply with therequirements of Section 404 in a timely manner, or if we or ourindependent registered public accounting firm identifies deficiencies in ourinternal control over financial reporting, the market price of our stock coulddecline and we could be subject to sanctions or investigations by the NASDAQGlobal Market, the SEC or other regulatory authorities, which would requireadditional financial and management resources. On August 9, 2006, the SECpublished a proposed rule to modify the Section 404 compliancerequirements applicable to newly public companies. If the proposed rules areadopted in their current form, we will be subject to the Section 404 rulesbeginning with our fiscal year ending August 2, 2008.

***We may not be able to obtain capitalwhen desired on favorable terms, if at all, or without dilution to ourstockholders.***

We anticipate that the net proceeds of this offering,together with current cash, cash equivalents, cash provided by operatingactivities and funds available through our working capital line of credit, willbe sufficient to meet our current and anticipated needs for general corporatepurposes for at least the next 12 months. We operate in a market, however, thatmakes our prospects difficult to evaluate. It is possible that we may notgenerate sufficient cash flow from operations or otherwise have the capitalresources to meet our future capital needs. If this occurs, we may needadditional financing to execute on our current or future business strategies,including to:

·                  acquirecomplementary businesses or technologies;

·                  enhanceour operating infrastructure;

·                  hireadditional technical and other personnel; or

·                  otherwiserespond to competitive pressures.

If we raise additional funds through the issuance ofequity or convertible debt securities, the percentage ownership of ourstockholders could be significantly diluted, and these newly-issuedsecurities may have rights, preferences or privileges senior to those ofexisting stockholders, including those acquiring shares in this offering. Wecannot assure you that additional financing will be available on termsfavorable to us, or at all. If adequate funds are not available or are notavailable on acceptable terms, if and when needed, our ability to fund ouroperations, take advantage of unanticipated opportunities, develop or enhanceour products, or otherwise respond to competitive pressures could besignificantly limited.

***We may be faced with productliability claims.***

Despite quality assurance measures, there remains a riskthat defects may occur in our products. The occurrence of any defects in ourproducts could give rise to liability for damages caused by such defects. Theycould, moreover, impair the 

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market’s acceptance of our products. Both could have a material adverseeffect on our business and financial condition. Although we carry productliability insurance, we cannot assure investors that this insurance wouldadequately cover our costs arising from defects in our products.

***Business disruptions resulting frominternational uncertainties could negatively impact our profitability.***

We derive, and expect to continue to derive, asignificant portion of our revenue from international sales in various markets.In addition, we recently acquired Engana, which is located in Sydney,Australia. Our international revenue and operations are subject to a number ofmaterial risks, including, but not limited to:

·                  difficultiesin staffing, managing and supporting operations in more than one country;

·                  difficultiesin enforcing agreements and collecting receivables through foreign legalsystems;

·                  fewerlegal protections for intellectual property;

·                  foreignand U.S. taxation issues and international trade barriers;

·                  difficultiesin obtaining any necessary governmental authorizations for the export of ourproducts to certain foreign jurisdictions;

·                  fluctuationsin foreign economies;

·                  fluctuationsin the value of foreign currencies and interest rates;

·                  generaleconomic and political conditions in the markets in which we operate;

·                  domesticand international economic or political changes, hostilities and otherdisruptions in regions where we currently operate or may operate in the future;and

·                  differentand changing legal and regulatory requirements in the jurisdictions in which wecurrently operate or may operate in the future.

Negative developments in any of these areas in one ormore countries could result in a reduction in demand for our products, thecancellation or delay of orders already placed, difficulties in producing anddelivering our products, threats to our intellectual property, difficulty incollecting receivables, and a higher cost of doing business, any of which couldnegatively impact our business, financial condition or results of operations.Moreover, our sales, including sales to customers outside the United States,are denominated in U.S. dollars, and downward fluctuations in the value offoreign currencies relative to the U.S. dollar may make our products moreexpensive than other products, which could harm our business.

***We may be unable to utilize our netoperating loss carryforwards to reduce our income taxes.***

As of October 28, 2006, we had net operating loss, orNOL, carryforwards of approximately $35 million for federal and stateincome tax purposes expiring through fiscal year ending August 2, 2025.These net operating loss carryforwards represent an asset to us to the extentthey can be utilized to reduce cash income tax payments expected in the future.Utilization of our net operating loss carryforwards depends on the timing andamount of taxable income earned by us in the future, which we are unable topredict. We have performed a preliminary analysis to determine whether anownership change under Section 382 of the Internal Revenue Code hasoccurred. The effect of an ownership change would be the imposition of an annuallimitation on the use of the net operating loss carryforwards attributable toperiods before the change. The preliminary review determined we have potentiallimitations related to approximately $2.5 million of the NOLcarryforwards.

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**Risks Related to Ownership of Our Common Stock**

***If equity research analysts do notpublish research or reports about our business or if they issue unfavorablecommentary or downgrade our common stock, the price of our common stock coulddecline.***

The trading market for our common stock relies in part onthe research and reports that equity research analysts publish about us and ourbusiness. The price of our stock could decline if one or more securitiesanalysts downgrade our stock or if those analysts issue other unfavorable commentaryor cease publishing reports about us or our business.

Some of the factors that may cause the market price ofour common stock to fluctuate include:

·                  fluctuationsin our quarterly financial results or the quarterly financial results ofcompanies perceived to be similar to us;

·                  changesin estimates of our financial results or recommendations by securitiesanalysts;

·                  failureof any of our products to achieve or maintain market acceptance;

·                  changesin market valuations of similar companies;

·                  successof competitive products;

·                  changesin our capital structure, such as future issuances of securities or theincurrence of additional debt;

·                  announcementsby us or our competitors of significant products, contracts, acquisitions orstrategic alliances;

·                  regulatorydevelopments in the United States, foreign countries or both;

·                  litigationinvolving our company, our general industry or both;

·                  additionsor departures of key personnel;

·                  investors’general perception of us;

·                  changesin general economic, industry and market conditions; and

·                  changesin regulatory and other dynamics.

In addition, if the market for technology stocks or thestock market in general experiences a loss of investor confidence, the tradingprice of our common stock could decline for reasons unrelated to our business,financial condition or results of operations. If any of the foregoing occurs,it could cause our stock price to fall and may expose us to class actionlawsuits that, even if unsuccessful, could be costly to defend and a distractionto management.

***A significant portion of our totaloutstanding shares may be sold into the public market in the near future, whichcould cause the market price of our common stock to drop significantly, even ifour business is doing well.***

Sales of a substantial number of shares of our commonstock in the public market could occur at any time after the expiration of thelock-up agreements covering approximately 19.3 million shares of ouroutstanding common stock.  These sales,or the market perception that the holders of a large number of shares intend tosell shares, could reduce the market price of our common stock.  These shares will be able to be sold, subjectto any applicable volume limitations under federal securities laws, beginning180 days following the effective date of our initial public offering.

In addition, as of December 6, 2006, there were 48,979 shares subject to outstandingwarrants and 1,818,357 shares subject to outstanding options, and additionalshares will be available for issuance under our stock option plans. Theseshares will become eligible for sale in the public market to the extentpermitted by any applicable vesting requirements, the lock-up agreementsand Rules 144 and 701 under the Securities Act of 1933, as amended. Moreover,after this offering, holders of an aggregate of approximately 17million shares of our common stock have rights, subject to someconditions, to require us to file registration statements covering their sharesor to include their shares in registration statements that we may file forourselves or other stockholders. We have also registered all shares of commonstock that we may issue under our employee benefit plans. Once we registerthese shares, they can be freely sold in the public market upon issuance,subject to the lock-up agreements, and in certain cases, applicablevolume limitations.

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***Our directors, management andentities associated with them will exercise significant control over ourcompany, which will limit your ability to influence corporate matters.***

Our executive officers and directors and entitiesassociated with them will collectively beneficially own approximately 50.1% ofour outstanding common stock. As a result, these stockholders, if they acttogether, will be able to influence our management and affairs and all mattersrequiring stockholder approval, including the election of directors andapproval of significant corporate transactions. This concentration of ownershipmay have the effect of delaying or preventing a change in control of ourcompany and might negatively affect the market price of our common stock.

***Provisions in our certificate ofincorporation and by-laws and Delaware law might discourage, delay orprevent a change of control of our company or changes in our management and,therefore, depress the trading price of our common stock.***

Provisions of our certificate of incorporation and by-lawsand Delaware law may discourage, delay or prevent a merger, acquisition orother change in control that stockholders may consider favorable, includingtransactions in which you might otherwise receive a premium for your shares ofour common stock. These provisions may also prevent or frustrate attempts byour stockholders to replace or remove our management. These provisions include:

·                  limitationson the removal of directors;

·                  aclassified board of directors so that not all members of our board are electedat one time;

·                  advancenotice requirements for stockholder proposals and director nominations;

·                  theinability of stockholders to act by written consent or to call specialmeetings;

·                  theability of our board of directors to make, alter or repeal our by-laws;and

·                  theability of our board of directors to designate the terms of and issue newseries of preferred stock without stockholder approval.

The affirmative vote of the holders of at least 75% ofour shares of capital stock entitled to vote is necessary to amend or repealthe above provisions of our certificate of incorporation. In addition, absentapproval of our board of directors, our by-laws may only be amended orrepealed by the affirmative vote of the holders of at least 75% of our sharesof capital stock entitled to vote.

In addition, Section 203 of the Delaware GeneralCorporation Law prohibits a publicly-held Delaware corporation fromengaging in a business combination with an interested stockholder, generally aperson which together with its affiliates owns, or within the last three yearshas owned, 15% of our voting stock, for a period of three years after the dateof the transaction in which the person became an interested stockholder, unlessthe business combination is approved in a prescribed manner.

The existence of the foregoing provisions and anti-takeovermeasures could limit the price that investors might be willing to pay in thefuture for shares of our common stock. They could also deter potentialacquirers of our company, thereby reducing the likelihood that you couldreceive a premium for your common stock in an acquisition.

***We do not currently intend to pay dividendson our common stock and, consequently, your ability to achieve a return on yourinvestment will depend on appreciation in the price of our common stock.***

We have never declared or paid any cash dividends on ourcommon stock and do not currently intend to do so for the foreseeable future.We currently intend to invest our future earnings, if any, to fund our growth.Additionally, the terms of certain of our credit facilities restrict ourability to pay dividends. Therefore, you are not likely to receive anydividends on your common stock for the foreseeable future.

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**ITEM 2. Unregistered Sales of Equity Securities and Use ofProceeds**

*(a)Issuances and Exercises of Employee Stock Options*

Duringthe three months ended October 28, 2006, we granted stock options to purchase188,924 shares of common stock with exercise prices ranging from $14.04 to$17.50 per share, to employees, directors and consultants pursuant to our stockoption plans.  During the three monthsended October 28, 2006, 19,150 options have been exercised for considerationaggregating $35,640.  The considerationpaid was used for general corporate purposes. The issuance of stock options and common stock upon exercise of theoptions was exempt either pursuant to Rule 701, as a transaction pursuantto a compensatory benefit plan, or pursuant to Section 4(2) of theSecurities Act or Regulation S of the Securities Act, as a transaction byan issuer not involving a public offering. The shares of common stock issuedupon exercise of options described above are deemed restricted securities forthe purposes of the Securities Act.  Thenumber of options granted and the number of shares issued upon the exercise ofoptions described above do not include options granted and shares issued uponexercise of options under the Registration Statement on Form S-8 we filed withthe Securities and Exchange Commission on November 17, 2006.

Upon the closingof our initial public offering, all shares of convertible preferred stockoutstanding automatically converted into 16,444,407 shares of common stock.

*(b)Use of Proceeds from Public Offering of Common Stock*

In November 2006,we completed an initial public offering of common stock in which we sold5,980,000 shares of our common stock, including 780,000 shares sold by uspursuant to the underwriters’ full exercise of their over-allotment option, ata price to the public of $17.50 per share. We raised approximately $93.7million in net proceeds after deducting underwriting discounts and commissionsof approximately $7.4 million but before other estimated offering costs ofapproximately $3.6 million. None of our net proceeds from the initial publicoffering have been applied. Pending such application, we have invested the netproceeds in cash, cash equivalents and short-term investments, in accordancewith our investment policy, in money-market mutual funds. None of the netproceeds were paid, directly or indirectly, to directors, officers, personsowning ten percent or more of our equity securities, or any of our otheraffiliates.

**ITEM 3. Defaults Upon Senior Securities**

None.

**ITEM 4.  Submission ofMatters to a Vote of Security Holders**

OnSeptember 28, 2006, we held our annual meeting of stockholders.  Prior tothe meeting, proxies were solicited from all stockholders to vote their shareswith respect to: 1. the re-election as directors of all directors in office asof the record date of the notice for the annual meeting (Eitan Gertel,Christopher Crespi, Kerry DeHority, Steven Foster, Russell Johnson and MorganJones) and 2. any other matters that may properly come before the meeting.  At the meeting, stockholder proxies werereceived and voted regarding the director nominees referenced in no. 1 above asfollows, approximately 15,891,063 shares of our capital stock voting in favorof all nominees referenced above, approximately 475 shares of our capital stockvoting in favor of all nominees referenced above other than Christopher Crespi,and approximately 1,214 shares of our capital stock against all nominees.  At the meeting, a proposal to re-elect JamesBarbookles, who had been appointed to the Board of Directors after the recorddate of the notice for the annual meeting, was made and duly seconded.   Stockholder proxies received with respect toitem no. 2 of the first sentence of this paragraph were voted in favor of theproposal to re-elect James Barbookles as follows, approximately 15,844,798shares of our capital stock voting in favor of the proposal and approximately47,954 shares of our capital stock abstaining. Proxies for the annual meeting were not received with respect to approximately3,198,249 shares of our capital stock.

InOctober 2006, we distributed a written consent to our preferred stockholdersrequesting approval of the conversion of all outstanding shares of preferredstock into common stock effective upon the closing of our IPO in accordancewith the terms of the preferred stock. All such actions were effected on October 10, 2006 pursuant to an actionby written consent of our stockholders entitled to vote thereon pursuant to Section228 of the Delaware General Corporation Law.  Written consents fromstockholders holding an aggregate of approximately 13,110,316 shares of ourcapital stock

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voting in favor ofall of this matter were received by us and written consents were not receivedby us from stockholders holding an aggregate of 3,335,705 shares of our capitalstock entitled to vote on such matter.

InOctober 2006, we distributed a written consent to our stockholders requestingapproval of the following matters in connection with our IPO: (1) the amendmentand restatement of our Certificate of Incorporation to implement certaincorporate governance requirements and increases to our authorized capital stockthat was to become (and later became) effective prior to the closing of ourinitial public offering, (2) the amendment and restatement of our Certificateof Incorporation to eliminate the terms of our formerly outstanding preferredstock that was to become (and later became) effective upon the closing of ourIPO, (3) the amendment and restatement of our Bylaws to provide certain changesconsistent with our becoming a public company that was to become (and laterbecame) effective prior to the closing of our IPO, and (4) the adoption of our2006 Stock Option and Incentive Plan. All such actions were effected on October10, 2006 pursuant to an action by written consent of our stockholders entitledto vote thereon pursuant to Section 228 of the Delaware General CorporationLaw.  Written consents from stockholders holding an aggregate ofapproximately 11,108,191 shares of our capital stock voting in favor of all ofthese matters were received by us and written consents were not received by usfrom stockholders holding an aggregate of 8,128,408 shares of our capital stockentitled to vote on such matters.

**ITEM 5.  Other information**

*(a) Management Compensation Plan*

On December 8, 2006, the Compensation Committee ofthe Board of Directors met to consider certain executive officer compensationmatters.  At the meeting, theCompensation Committee approved an increase in base salary for David Renner,Chief Financial Officer, to $180,000 per year and for Anthony Musto, VicePresident of Sales and Marketing, to $180,000.

On December 12, 2006, the Compensation Committeealso adopted a fiscal year bonus plan for our Named Executive Officers.  Under the bonus plan, the Named ExecutiveOfficers are eligible to receive annual bonuses of up to 100% of their annualbase salary depending on us meeting certain financial goals as well asindividual performance.  Forty percent ofthe amount payable under the plan with respect to each Named Executive Officerwill be discretionary and the bonuses will be paid semi-annually.  Under some circumstances, payment of suchbonuses will be 100% discretionary.  Inaddition, under the plan, (i) our Chief Executive Officer is eligible toreceive an additional annual bonus of up to $350,000 based on our achievementin strategic development, investor relations, human resources and corporatecitizenship, as well as our stock trading price performance, and (i) our Vice President of Sales andMarketing  is eligible to receiveadditional quarterly bonuses of up to $10,000 based on our achievementin product order development during the applicable fiscal quarter.  Payment of these additional bonuses to ourChief Executive Officer and Vice President of Sales and Marketing will be 100%discretionary.

**ITEM 6. Exhibits**

(a)   Exhibit Index.
| 10.1   |   | Executive  Officer Fiscal Year Bonus Plan                                                                                                                                                                                 |   |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   |   |                                                                                                                                                                                                                      |   |
| 10.2   |   | Form of Stock  Option Grant Notice under the Optium Corporation 2006 Stock Option and  Incentive Plan                                                                                                                     |   |
|   |   |                                                                                                                                                                                                                      |   |
| 10.3   |   | Form of Employee Incentive Stock Option Agreement  under the Optium Corporation 2006 Stock Option and Incentive Plan                                                                                                      |   |
|   |   |                                                                                                                                                                                                                      |   |
| 10.4   |   | Form of Employee Non-Qualified Stock Option  Agreement under the Optium Corporation 2006 Stock Option and Incentive Plan                                                                                                  |   |
|   |   |                                                                                                                                                                                                                      |   |
| 10.5   |   | Form of Non-Employee Non-Qualified Stock Option  Agreement under the Optium Corporation 2006 Stock Option and Incentive Plan                                                                                              |   |
|   |   |                                                                                                                                                                                                                      |   |
| 31.1   |   | Certification of Chief Executive Officer pursuant to  Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302  of the Sarbanes-Oxley Act of 2002.                                                     |   |
|   |   |                                                                                                                                                                                                                      |   |
| 31.2   |   | Certification of Chief Financial Officer pursuant to  Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302  of the Sarbanes-Oxley Act of 2002.                                                     |   |
|   |   |                                                                                                                                                                                                                      |   |
| 32.1   |   | Certifications  of Chief Executive Officer and Chief Financial Officer pursuant to Rule  13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002. |   |

** **

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** **

**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|        |              | OPTIUM CORPORATION.                   |
|--------|-------------------|---------------------------------------|
|   |              |                                  |
|   |              |                                  |
| Dated: | December 12, 2006 | /s/ Eitan Gertel                      |
|   |              | Eitan Gertel                          |
|   |              | President and Chief Executive Officer |
|   |              |                                  |
| Dated: | December 12, 2006 | /s/ David Renner                      |
|   |              | David Renner                          |
|   |              | Vice President of Finance and         |
|   |              | Chief Financial Officer               |

 

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