**SECURITIES
      AND EXCHANGE COMMISISSION**


**WASHINGTON,
      DC 20549**





**FORM
      10-QSB**


_________________________





(Mark
      One)





x
            Quarterly
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934For
                the quarterly period ended December 31, 2005, oro
            Transition
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934For
                the transition period from ____________ to
                _____________Commission
                file number 0-49939





_________________________





**DICON
      FIBEROPTICS, INC.**


(Exact
      Name of Small Business Issuer as Specified in Its Charter)





**California**
            
            **94-3006185**(State
                or Other Jurisdiction of
            
            (IRS
                EmployerIncorporation
                or Organization)
            
            Identification
                No.)**1689
                Regatta Blvd.****Richmond,
                California**
            
            **94804**(Address
                of Principal Executive Offices)
            
            (Zip
                Code)





**(510)
      620-5000**


(Issuer's
      Telephone Number, Including Area Code)


_________________________





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


Yes  x  No  o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).





Yes  o  No  x





The
      number of shares outstanding of the issuer's common stock as of December 31,
      2005 was 111,923,473.





Transitional
      Small Business Disclosure Format (check one):  Yes  o  No  x





__________________________________________________________________________________________________________


1





**DICON
      FIBEROPTICS, INC.**





**Table
      of Contents**




**PART
                I**
            **FINANCIAL
                INFORMATION****Item
                1.**
            **Financial
                Statements.****Item
                2.**
            **Management's
                Discussion and Analysis or Plan of
                Operation.****Item
                3.**
            **Controls
                and Procedures.****PART
                II**
            **OTHER
                INFORMATION****Item
                1.**
            **Legal
                Proceedings.****Item
                2.**
            **Unregistered
                Sales of Equity Securities and Use of
                Proceeds.****Item
                3.**
            **Defaults
                Upon Senior
                Securities.****Item
                4.**
            **Submission
                of Matters to a Vote of Security
                Holders.****Item
                5.**
            **Other
                Information.****Item
                6.**
            **Exhibits.****Signatures.****Exhibit
                Index.**





2
 Table
          of Contents





**PART
      I**





**FINANCIAL
      INFORMATION**





**Item
      1. Financial Statements.**


**DiCon
                Fiberoptics, Inc. and Subsidiary**
              **Unaudited
                Consolidated Balance Sheets**
              **(in
                thousands)****December
                31,**
            
            **March
                31,****2005**
            
            **2005**
              **(1)****Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            2,991
            
            $
            1,784Marketable
                securities
            
            
            19,696
            
            
            14,677Accounts
                receivable, net of allowance for doubtful accounts of $73and$181, respectively
            
            
            2,803
            
            
            4,104Inventories
            
            
            2,884
            
            
            3,998Interest
                receivable and prepaid expenses
            
            
            549
            
            
            232Total
                current assets
            
            
            28,923
            
            
            24,795Property,
                plant and equipment, net
            
            
            38,863
            
            
            48,465Other
                assets
            
            
            14
            
            
            41Total
                assets
            
            $
            67,800
            
            $
            73,301**Liabilities
                and Shareholders' Equity**Current
                liabilities:Accounts
                payable and accrued liabilities
            
            $
            1,426
            
            $
            3,110Advances
                received from customers
            
            
            3,636
            
            
            3,594Mortgage
                and other debt
            
            
            2,978
            
            
            2,685Federal
              income tax payable
            
            
            150
            
            
            -Total
                current liabilities
            
            
            8,190
            
            
            9,389Mortgage
                and other debt, net of current portion
            
            
            9,455
            
            
            19,528Total
                liabilities
            
            
            17,645
            
            
            28,917Commitments
                (Note 14)Shareholders'
                equity:Common
                stock: no par value; 200,000 shares authorized; 111,923 and 111,950
                shares
                issued and outstanding at December 31, 2005 and March 31, 2005,
                respectively
            
            
            22,212
            
            
            22,238Additional
                paid-in capital
            
            
            13,266
            
            
            13,285Deferred
                compensation
            
            
            (60
            )
            
            (176
            )Retained
                earnings
            
            
            15,299
            
            
            9,537Accumulated
                other comprehensive loss
            
            
            (562
            )
            
            (500
            )Total
                shareholders' equity
            
            
            50,155
            
            
            44,384Total
                liabilities and shareholders' equity
            
            $
            67,800
            
            $
            73,301





The
      accompanying notes are an integral part of these unaudited consolidated
      financial statements.





(1)
      Balances at March 31, 2005 are derived from the audited Financial Statements
      at
      that date.





3
 Table
          of Contents





**DiCon
                Fiberoptics, Inc. and Subsidiary**
              **Unaudited
                Consolidated Statements of Operations and Comprehensive Income
                (Loss)**
              **(in
                thousands, except per share data)****For
                the three months ended**
              **December
                31,**
            
            **For
                the nine months ended**
              **December
                31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Net
                sales
            
            $
            4,757
            
            $
            6,699
            
            $
            15,157
            
            $
            17,970Cost
                of goods sold
            
            
            2,634
            
            
            4,855
            
            
            9,648
            
            
            13,123Gross
                profit
            
            
            2,123
            
            
            1,844
            
            
            5,509
            
            
            4,847Selling,
                general and administrative expenses
            
            
            1,175
            
            
            1,323
            
            
            3,479
            
            
            4,339Research
                and development expenses
            
            
            1,112
            
            
            1,299
            
            
            3,385
            
            
            4,3802,287
            
            
            2,622
            
            
            6,864
            
            
            8,719Income
                (loss) from operations
            
            
            (164)
            
            
            (778
            )
            
            (1,355)
            
            
            (3,872
            )Other
                (expense) income:Interest
                expense
            
            
            (276
            )
            
            (332
            )
            
            (875
            )
            
            (936
            )Interest
                income
            
            
            180
            
            
            88
            
            
            434
            
            
            260Gain
                (loss) on disposal of fixed assets
            
            
            7,259
            
            
            (1,935
            )
            
            7,433
            
            
            (1,953
            )Other
                income (expense), net
            
            
            72
            
            
            19
            
            
            275
            
            
            65Income
                (loss) before income taxes
            
            
            7,071
            
            
            (2,938
            )
            
            5,912
            
            
            (6,436
            )Income
                tax (expense)
            
            
            (150
            )
            
            (281
            )
            
            (151
            )
            
            (282
            )Net
                income (loss)
            
            
            6,921
            
            
            (3,219
            )
            
            5,761
            
            
            (6,718
            )Other
                comprehensive income (loss):Foreign
                currency translation adjustment
            
            
            88
            
            
            759
            
            
            (62
            )
            
            503Unrealized
                holding (losses) on marketable securities
              arising
                during the period, net of realized (losses)
            
            
            -
            
            
            -
            
            
            -
            
            
            (17
            )Comprehensive
                income (loss)
            
            $
            7,009
            
            $
            (2,460
            )
            $
            5,699
            
            $
            (6,232
            )Net
                income (loss) per share - Basic
            
            $
            0.06
            
            $
            (0.03
            )
            $
            0.05
            
            $
            (0.06
            )Net
                income (loss) per share - Diluted
            
            $
            0.06
            
            $
            (0.03
            )
            $
            0.05
            
            $
            (0.06
            )Average
                shares used in computing net income (loss) per share -
                basic
            
            
            111,927
            
            
            111,964
            
            
            111,938
            
            
            111,976Average
                shares used in computing net income (loss) per share -
                diluted
            
            
            111,988
            
            
            111,964
            
            
            112,002
            
            
            111,976





The
      accompanying notes are an integral part of these unaudited consolidated
      financial statements.





4
 Table
          of Contents





**DiCon
                Fiberoptics, Inc. and Subsidiary**
              **Unaudited
                Consolidated Statement of Cash Flows**
              **(in
                thousands)****Nine
                Months Ended****December
                31,****2005**
            
            **2004****Cash
                flows from operating activities:**Net
                income (loss)
            
            $
            5,761
            
            $
            (6,718
            )Adjustments
                to reconcile net income (loss) to net cash provided by operating
                activities:Depreciation
            
            
            3,722
            
            
            6,164Write
                down excess and obsolete inventories
            
            
            -
            
            
            890Provision
                for bad debts
            
            
            (107
            )
            
            87Provision
                for estimated losses due to vacated properties, net of sublease
                income
            
            
            -
            
            
            (121
            )(Gain)
                loss on disposal of property, plant and equipment
            
            
            (7,433
            )
            
            1,953Realized
                (gain) on available-for-sale marketable securities
            
            
            -
            
            
            (22
            )Stock
                compensation expense
            
            
            97
            
            
            332Changes
                in assets and liabilities:Accounts
                receivable
            
            
            1,407
            
            
            (823
            )Inventories
            
            
            1,014
            
            
            (972
            )Prepaid
                expenses and other current assets
            
            
            (318
            )
            
            287Other
                assets
            
            
            26
            
            
            24Accounts
                payable and accrued liabilities
            
            
            (1,332
            )
            
            (434
            )Income
                tax payable
            
            
            150
            
            
            281Deferred
                compensation payable
            
            
            -
            
            
            2Net
                cash provided by operating activities
            
            
            2,987
            
            
            930**Cash
                flows from investing activities:**Purchases
                of marketable securities
            
            
            (19,362
            )
            
            (14,068
            )Sales
                of marketable securities
            
            
            14,328
            
            
            19,670Sale
                of property, plant and equipment
            
            
            13,128
            
            
            12Purchases
                of property, plant and equipment
            
            
            (114
            )
            
            (209
            )Net
                cash provided by investing activities
            
            
            7,980
            
            
            5,405**Cash
                flows from financing activities:**Borrowings
                under mortgages and other debt
            
            
            2,408
            
            
            2,513Repayment
                of mortgages and other debt
            
            
            (12,121
            )
            
            (8,469
            )Repurchases
                of common stock
            
            
            (25
            )
            
            (30
            )Net
                cash (used in) financing activities
            
            
            (9,738
            )
            
            (5,986
            )Effect
                of exchange rate changes on cash and cash equivalents
            
            
            (22
            )
            
            57Net
                change in cash and cash equivalents
            
            
            1,207
            
            
            406Cash
                and cash equivalents, beginning of period
            
            
            1,784
            
            
            1,359Cash
                and cash equivalents, end of period
            
            $
            2,991
            
            $
            1,765**Supplemental
                disclosures of cash flow information:**Cash
                paid for interest
            
            $
            929
            
            $
            871Cash
                paid for income taxes
            
            $
            1
            
            $
            1





The
      accompanying notes are an integral part of these unaudited consolidated
      financial statements.





5
 Table
          of Contents





**DiCon
      Fiberoptics, Inc. and Subsidiary**


**Notes
      to Unaudited Consolidated Financial Statements**


**(in
      thousands)**


**_________________________________________________________________________________________________________**





**1.**
            **Nature
                of operations**





The
      business of DiCon Fiberoptics, Inc. and Subsidiary (the "Company") is
      developing, manufacturing and marketing optical components, modules, and test
      instruments for optical communications markets. DiCon Fiberoptics, Inc.
      ("DiCon") is incorporated in California. The Company has its headquarters and
      a
      domestic manufacturing facility in California. The Company, through Global
      Fiberoptics Inc. ("Global"), its wholly owned Taiwanese subsidiary, formed
      in
      December 1999, also operates a manufacturing and sales facility in Kaohsiung,
      Taiwan, and conducts manufacturing and Asian marketing and sales activities
      there.





**2.**
            **Basis
                of presentation**





The
      Company operates and reports based on a fiscal year that ends on March 31st.
      The
      accompanying unaudited consolidated financial statements have been prepared
      in
      accordance with generally accepted accounting principles in the United States
      of
      America for interim financial information and on the same basis of presentation
      as the audited financial statements included in the Company's Annual Report
      on
      Form 10-KSB/A-1 as filed with the Securities and Exchange Commission (SEC)
      on
      July 11, 2005 (the "Company's 10-KSB/A-1"). Accordingly, they do not include
      all
      of the information and footnotes required by generally accepted accounting
      principles for audited financial statements. In the opinion of the Company's
      management, the interim information includes all adjustments, consisting only
      of
      normal recurring adjustments, necessary for a fair presentation of the results
      for the interim periods. Footnote disclosures related to the interim financial
      information included herein are also unaudited. Such financial information
      should be read in conjunction with the audited consolidated financial statements
      and related notes thereto for the year ended March 31, 2005 included in the
      Company's 10-KSB/A-1.





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





**3.**
            **Stock-based
                compensation**





The
      Company accounts for stock-based compensation issued to employees using the
      intrinsic value method of Accounting Principles Board ("APB") Opinion No. 25,
      "Accounting for Stock Issued to Employees," and, accordingly, presents
      disclosure of pro forma information required under Statement of Financial
      Accounting Standard ("SFAS") No. 123, "Accounting for Stock-Based Compensation",
      as amended by SFAS No. 148, "Accounting for Stock-Based Compensation, Transition
      and Disclosure." Stock and other equity instruments issued to non-employees
      are
      accounted for in accordance with SFAS No. 123 and Emerging Issues Task Force
      Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other
      Than Employees for Acquiring, or in Conjunction with Selling Goods or Services,"
      and recorded at their fair value. Expenses associated with stock-based
      compensation is amortized on a straight line basis over the vesting period
      of
      the individual award.





Had
      compensation cost for the Company's stock option plans been determined based
      on
      the fair value of such awards at the grant dates as prescribed by SFAS No.
      123,
      stock-based compensation costs would have impacted net income (loss) and income
      (loss) per common share for the fiscal periods presented, as
      follows:


6
 Table
          of Contents





**DiCon
      Fiberoptics, Inc. and Subsidiary**


**Notes
      to Unaudited Consolidated Financial Statements**


**(in
      thousands,**  **except
      per share data)**


**__________________________________________________________________________________________________________**







**For
                the three months ended**
            
            **For
                the nine months ended****December
                31,**
            
            **December
                31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Net
                income (loss), as reported
            
            $
            6,921
            
            $
            (3,219
            )
            $
            5,761
            
            $
            (6,718
            )Add:
                Stock-based employee compensation expense included in reported net
                loss,
                net of tax
            
            
            32
            
            
            110
            
            
            97
            
            
            332Deduct:
                Compensation expense based on fair value method, net of
                tax
            
            
            (134
            )
            
            (132
            )
            
            (402
            )
            
            (405
            )Pro
                forma net income (loss)
            
            $
            6,819
            
            $
            (3,241
            )
            $
            5,456
            
            $
            (6,791
            )Reported
                net income (loss) per share-basic
            
            $
            0.06
            
            $
            (0.03
            )
            $
            0.05
            
            $
            (0.06
            )Reported
                net income (loss) per share-diluted
            
            $
            0.06
            
            $
            (0.03
            )
            $
            0.05
            
            $
            (0.06
            )Pro
                forma net income (loss) per share-basic
            
            $
            0.06
            
            $
            (0.03
            )
            $
            0.05
            
            $
            (0.06
            )Pro
                forma net income (loss) per share-diluted
            
            $
            0.06
            
            $
            (0.03
            )
            $
            0.05
            
            $
            (0.06
            )




No
      tax
      effects were included in the determination of pro forma net income (loss)
      because the deferred tax asset resulting from stock-based employee compensation
      would be offset by an additional valuation allowance for deferred tax
      assets.






**4.**  **Recent
      accounting pronouncements** ****




In
      May
      2005, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards No. 154 ("SFAS No.154") ,
      "Accounting Changes and Error Corrections." This statement replaces APB 20
      and SFAS 3 and changes the requirements for the accounting for and
      reporting of a change in accounting principle. APB 20 previously required
      that most voluntary changes in accounting principle be recognized by including
      in net income of the period of the change the cumulative effect of changing
      to
      the new accounting principle. SFAS No.154 requires retrospective
      application to prior periods' financial statements of changes in accounting
      principle. Adoption of this statement is not expected to have a material impact on
      its
      financial position and results of operations.





In
      December 2004, the FASB issued Statement of Financial Accounting Standards
      No.
      123(R) ("SFAS No. 123(R)"), "Accounting for Stock-Based Compensation". SFAS
      No.
      123(R) establishes standards for the accounting for transactions in which an
      entity exchanges its equity instruments for goods or services. This Statement
      focuses primarily on accounting for transactions in which an entity obtains
      employee services in share-based payment transactions. SFAS No. 123(R) requires
      that the fair value of such equity instruments be recognized as expense in
      the
      historical financial statements as services are performed. Prior to SFAS No.
      123(R), only certain pro-forma disclosures of fair value were required. SFAS
      No.
      123(R) shall be effective for nonpublic companies and small business issuers as
      of the
      beginning of the first annual reporting period that begins after December 15,
      2005. The
      Company has historically provided pro forma disclosures reflecting the effects
      of such compensation costs on its results of operations and financial condition.
      See Note 3, Stock-Based Compensation. The Company is still evaluating the impact
      of the adoption of this standard.





In
      November 2004, the FASB issued Statement of Financial Accounting Standards
      No.
      151 ("SFAS No. 151"), Inventory Costs, an amendment of ARB No. 43, Chapter
      4.
      The amendments made by SFAS No. 151 will improve financial reporting by
      clarifying those abnormal amounts of idle facility expense, freight, handling
      costs, and wasted materials (spoilage) that should be recognized as
      current-period charges and by requiring the allocation of fixed production
      overheads to inventory based on the normal capacity of the production
      facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal
      years beginning after June 15, 2005. Earlier application is permitted for
      inventory costs incurred during fiscal years beginning after November 24, 2004. Adoption
      of this statement is not expected to have a material impact on
      its
      financial position and results of operations.








7
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          of Contents


**DiCon
      Fiberoptics, Inc. and Subsidiary**


**Notes
      to Unaudited Consolidated Financial Statements**


**(in
      thousands,**  **except
      per share data)**


**___________________________________________________________________________________________________________**





**5.**
            **Liquidity**





As
      of
      December 31, 2005, the Company had cash and cash equivalents of $3.0 million.
      In
      addition, in conformity with the requirements of generally accepted accounting
      principles, $19.7 million was invested in certificates of deposit and other
      marketable securities that were classified as marketable securities. The Company
      invests cash in excess of short-term needs in these investments to attempt
      to
      improve yields on its total investment portfolio.





The
      Company believes its current cash and cash equivalents and marketable securities
      will be sufficient to meet its anticipated cash needs for working capital and
      capital expenditures for at least the next 12 months. There remains some
      possibility that the Company may need to raise additional capital. For instance,
      it might need additional capital in order to refinance its loans, finance
      unanticipated growth or to invest in new technology. There can be no certainty
      that the Company would be successful in raising the required capital or in
      raising capital at acceptable rates.





**6.**
            **Basic
                net income (loss) per
                share**





Basic
      income (loss) per share is computed by dividing the net income (loss)
      (numerator) by the weighted average number of common shares outstanding
      (denominator) during the periods presented, excluding the dilutive effect of
      stock options. Diluted net income (loss) per share gives effect to all
      potentially dilutive common stock equivalents outstanding during the period.
      In
      computing diluted net income (loss) per share, the average stock price for
      the
      period is used in determining the number of shares assumed to be purchased
      from
      the proceeds of stock option exercises.





The
      following is a reconciliation of the numerators and denominators of the basic
      and diluted net income (loss) per share computations for the periods presented
      below:


**For
                the three months ended**
            
            **For
                the nine months ended****December
                31,**
            
            **December
                31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Numerator:Net
                income (loss)
            
            $
            6,921
            
            $
            (3,219
            )
            $
            5,761
            
            $
            (6,718
            )Denominator:Basic
                weighted average shares
            
            
            111,927
            
            
            111,964
            
            
            111,938
            
            
            111,976Diluted
                weighted average shares
            
            
            111,988
            
            
            111,964
            
            
            112,002
            
            
            111,976Basicnet income (loss) per share
            
            $
            0.06
            
            $
            (0.03
            )
            $
            0.05
            
            $
            (0.06
            )Diluted
                net income (loss) per share
            
            $
            0.06
            
            $
            (0.03
            )
            $
            0.05
            
            $
            (0.06
            )








During
      all periods presented, the Company had options to purchase common stock
      outstanding, which could potentially dilute basic earnings per share in the
      future. For the three months and nine months ended December 31, 2004, they
      were
      excluded from the computation of diluted net loss per share, as their effect
      would have been antidilutive. Options to purchase 4,100 and 4,499 shares of
      common stock were outstanding at December 31, 2005 and 2004.





8
 Table
          of Contents





**DiCon
      Fiberoptics, Inc. and Subsidiary**


**Notes
      to Unaudited Consolidated Financial Statements**


**(in
      thousands)**


**__________________________________________________________________________________________________________**





**7.**
            **Marketable
                Securities**





The
      value
      of the Company's investments by major security type is as follows:





**Cost**
            
            **Unrealized**
            
            **Unrealized**
            
            **Fair****Gain**
            
            **Losses**
            
            **Value****December
                31, 2005**Certificate
                of Deposit
            
            
            18,691
            
            
            -
            
            
            -
            
            
            18,691Money
                market fund
            
            
            1,005
            
            
            -
            
            
            -
            
            
            1,005Total:
            
            $
            19,696
            
            $
            -
            
            $
            -
            
            $
            19,696**March
                31, 2005**Certificate
                of Deposit
            
            $
            14,677
            
            $
            -
            
            $
            -
            
            $
            14,677





Marketable securities include certificates of deposit with original maturities of greater
      than 90 days .





**8.**
            **Inventories**





Inventories
      consist of the following as of December 31, 2005 and March 31,
      2005:




**December
                31****,**
            
            **March
                31,****2005**
            
            **2005**Raw
                materials
            
            $
            739
            
            $
            1,177Work-in-process
            
            
            2,145
            
            
            2,821Total
            
            $
            2,884
            
            $
            3,998





During
      the nine months period ended December 31, 2005, no obsolete inventory was
      written off. During the fiscal year ended March 31, 2005, the Company wrote
      off
      approximately $1.3 million of obsolete inventory.





**9.**
            **Property,
                Plant and Equipment, net**





Property,
      plant and equipment consist of the following as of December 31, 2005 and March
      31, 2005:





**December
                31,**
            
            **March
                31,****2005**
            
            **2005**Land
            
            $
            5,944
            
            $
            10,000Building
                and improvements
            
            
            34,233
            
            
            36,281Machinery,
                equipment and fixtures
            
            
            40,736
            
            
            41,571Property,
                plant and equipment
            
            
            80,913
            
            
            87,852Less:
                Accumulated depreciation
            
            
            (42,050
            )
            
            (39,387
            )Property,
                plant and equipment, net
            
            $
            38,863
            
            $
            48,465





Depreciation
      expense was $3,722 and $8,090 for the nine months ended December 31, 2005 and
      for the year ended March 31, 2005.





On
      December 15, 2005, the Company sold approximately eleven (11) acres of land
      ("Property") adjacent to the Company's facility in Richmond, California, to
      Pulte Home Corporation ("Pulte"). The total purchase price for the Property
      was
      $12.93 million, which resulted in the removal of net book value of $4.1 million
      of Land and $1.6 million of Building and improvements from the Company's
      Unaudited Consolidated Balance Sheets. This transaction resulted in a pre-tax
      gain on sale of approximately $7.2 million. Pulte paid $0.98 million of the
      purchase price prior to the close of escrow for the sale and the balance of
      the
      purchase price of $11.95 million on the close of escrow for the
      sale.




9
 Table
          of Contents





**DiCon
      Fiberoptics, Inc. and Subsidiary**


**Notes
      to Unaudited Consolidated Financial Statements**


**(in
      thousands)**


_________________________________________________________________________________________________________





The
      sale
      was pursuant to a Purchase and Sale Agreement and Preliminary Escrow
      Instructions between the Company as seller and Pulte as buyer entered into
      as of
      February 27, 2004, as amended by a First Amendment, a Second Amendment, a Third
      Amendment, a Fourth Amendment, a Fifth Amendment, a Sixth Amendment and a
      Seventh Amendment.





During
      the year ended March 31, 2005, the Company consolidated its research &
development ("R&D") projects to better align its business needs with
      existing operations and to provide more efficient use of its facilities. As
      a
      result, certain R&D projects were discontinued and it was
      determined that related support equipment had no alternative use within the
      Company. Accordingly the equipment was either abandoned or scrapped. The loss
      on
      the disposal of fixed assets was $1,935 for the year ended March 31, 2005.
      In
      addition the Company wrote off excess and idle equipment with a net book value
      of $796 in the year ended March 31, 2005.





**10.**
            **Accounts
                Payable and Accrued
                Liabilities**





Accounts
      payable and accrued liabilities consist of the following as of December 31,
      2005
      and March 31, 2005:





**December
                31,**
            
            **March
                31,****2005**
            
            **2005**Accounts
                payable
            
            $
            500
            
            $
            1,186Accrued
                payroll
            
            
            326
            
            
            723Temporary
                receipts
            
            
            7
            
            
            510Accrued
                liabilities
            
            
            593
            
            
            691$
            1,426
            
            $
            3,110





**11.**
            **Mortgage
                and Other Debt******





The
      Company financed, in part, a new corporate campus located in Richmond,
      California, by obtaining a construction loan from a bank of $27.0 million on
      August 24, 2000. In November 2001, the same bank refinanced the outstanding
      balance of the construction loan with a mortgage loan maturing on November
      20,
      2004, with an amortization schedule based on a 25-year loan. Interest on the
      mortgage loan is accrued at a variable interest rate based on changes in the
      lender's prime rate as of the 20 th of each
      month. Principal and interest are payable monthly. During the year ended March
      31, 2002, the Chairman, President and Chief Executive Officer of the institution
      with which the Company maintains the mortgage loan was appointed to the
      Company's Board of Directors.





On
      June
      28, 2004, the bank agreed to extend the maturity date of the mortgage loan
      to
      October 20, 2007, subject to additional terms and conditions requiring the
      Company to make additional principal repayments as follows: $1.5 million 10
      days
      after the date of execution of the loan extension agreement; $1.0 million on
      October 1, 2004; and seven installments each in the amount of $0.5 million
      on
      the first day of each calendar quarter, commencing on January 1, 2005 and ending
      on July 1, 2006.





The
      Company was in compliance with the additional principal repayments requirement
      as of December 31, 2005. During the nine months ended December 31, 2005, the
      Company voluntarily prepaid three additional $0.5 million equal installments
      that were originally due on January 1, 2006, April 1, 2006 and July 1,
      2006.  In
      addition, the Company voluntarily prepaid an additional $8.5 million  principal
      of the mortgage loan during the nine months ended December 31, 2005. This
      included $5.5 million from the proceeds of the land
      sale. Rates
      of
      interest on the borrowings ranged from 6.5% to 7.0% during the period. The
      balance of the mortgage loan as of December 31, 2005 was $10.1 million with
      an
      interest rate of 7.0%.


10
 Table
          of Contents


**DiCon
      Fiberoptics, Inc. and Subsidiary**


**Notes
      to Unaudited Consolidated Financial Statements**


**(in
      thousands)**


__________________________________________________________________________________________________________





Global
      maintained a line of credit in Taiwan backed by commercial paper issued by
      Global for a maximum of 50 million New Taiwan Dollars (or approximately $1.5
      million as of December 31, 2005). The interest rate is based on a rate set
      by
      the bank at the time funds are drawn. The line of credit will mature on April
      7,
      2006. The outstanding balance of any commercial paper under this line of credit
      must be fully secured by either a cash deposit or bond fund certificate. As
      of
      December 31, 2005, there was no commercial paper outstanding.





Global
      maintained its second line of credit of 80 million New Taiwan Dollars
      (or  approximately
      $2.4 million as of December 31, 2005) from a Taiwan bank. The line of credit
      will mature on October 12, 2006. The interest rate is based on a rate set by
      the
      bank at the time funds are drawn.  The
      amount drawn as of December 31, 2005 was 76.0 million New Taiwan Dollars (or
      approximately $2.3 million as of December 31, 2005) with an interest rate of
      3. 4 5%
      to
      3.495%. Subsequent to December 31, 2005, the Company voluntarily repaid 41.0
      million New Taiwan Dollars (or approximately $1.2 million as of December 31,
      2005) of the line of credit. (See subsequent event in Note 15).





**12.**
            **Stock
                Plans and Deferred Compensation Liability**





As
      an
      incentive for employees to assist in growing the Company, prior to March 31,
      2001 the Company maintained a phantom stock plan (the "Phantom Stock Plan")
      under which it granted eligible employees phantom stock units that entitled
      the
      employees to participate in the current and future value of the Company. In
      addition, the Company made contingent commitments to eligible employees to
      grant
      stock units in the future (the "Contingently Promised Stock Units"). The shares
      under the plan were valued semiannually, typically in May and December. These
      stock units vested 50 percent upon receipt and 50 percent on the first
      anniversary of the grant date and had an exercise price of zero. During the
      service period of one-year following the date of the grant, the vested units
      could be redeemed for cash on a net basis by forfeiting additional units equal
      to the number of units redeemed. Thereafter, a maximum of 60 percent of the
      units could be redeemed while the holder was still an employee of the Company.
      The Company recorded a liability for the value of the unredeemed vested shares
      at the current value as of the financial statement date.





On
      March
      31, 2001, the Company offered its employees two new equity incentive plans,
      an
      Employee Stock Option Plan (the "Option Plan") and an Employee Stock Purchase
      Plan (the "Purchase Plan"). Grants under the Phantom Stock Plan have been
      discontinued. Under both the Option Plan and the Purchase Plan, the exercise
      or
      purchase price is not to be less than 85 percent of the fair value of Company's
      common stock at the time of grant under the Option Plan or purchase under the
      Purchase Plan. New options granted under the Option Plan generally vest over
      five years and expire after ten years.





Under
      the
      terms of the Option Plan, employees who were participants in the Phantom Stock
      Plan could convert their awarded phantom stock units and their Contingently
      Promised Stock Units into (1) options with an exercise price of $4.11 per share
      and cash payments of $4.11 per share (paid over four years); (2) additional
      options with an exercise price of $4.11; or (3) a combination of both (1) and
      (2). The cash payments and the options that were converted from vested stock
      units vested immediately. The cash payments and the options that were converted
      from Contingently Promised Units will vest in accordance with the original
      vesting schedule, but not less than 20 percent per year. At March 31, 2001,
      all
      phantom stock units for current employees under the Phantom Stock Plan were
      converted to options or options and cash payments pursuant to one of the
      alternatives noted above.


11
 Table
          of Contents


**DiCon
      Fiberoptics, Inc. and Subsidiary**


**Notes
      to Unaudited Consolidated Financial Statements**


**(in
      thousands)**


**___________________________________________________________________________________________________________**





Cash
      payments related to the conversion are payable in four annual installments
      beginning on March 31, 2002. As of March 31, 2001, the Company
      anticipated making four annual payments of $5,930 each commencing March 31,
      2002 for those employees who elected to receive a cash payout in lieu of
      additional options. The present value of the cash payments related to the
      conversion of vested phantom stock units of $15,131 was recorded as a liability
      as of March 31, 2001. The cash payments related to the conversion of the
      Contingently Promised Units are subject to continuing employment and,
      accordingly, the related expense and liability are accrued as earned by the
      employees. The first annual installment of $5,812 to those employees electing
      to
      receive cash in lieu of additional options was paid on March 28, 2002.





As
      of
      December 31, 2002, the total remaining undiscounted future cash payments related
      to the conversion of the Company's Phantom Stock Plan to its Option Plan totaled
      $7,645, payable in three equal annual installments beginning March 31, 2003.
      In
      order to reduce this liability, the Company offered the participants an
      opportunity to receive an early payment in January 2003. As a result, under
      the
      terms of the early payment program, the Company paid $1,979 on January 10,
      2003
      and reduced the future liability for Contingently Promised Units by $2,058.





The
      second, third and final annual installments of $416, $347 and $197 to those
      employees electing to receive cash in lieu of additional options but not
      electing the early payment program were paid on March 31, 2003, 2004 and
      2005.





The
      Purchase Plan was available to all eligible employees who met certain service
      requirements. Effective April 1, 2001, employees participating in the Purchase
      Plan could elect to deduct up to 10 percent of gross pay to purchase stock
      in
      the Company. Stock transactions pursuant to the Purchase Plan occurred
      semiannually on December 31 and March 31. The Company could sell up to
      3,230 shares of stock under the Purchase Plan. Employees purchased 70 shares
      at
      a price of $3.85 per share on December 31, 2001 and 174 shares at a price of
      $2.10 on March 31, 2002. In May 2002, the Company issued 659 additional shares
      of common stock to employees under the Purchase Plan for aggregate cash
      consideration of $1,384 at a price of $2.10. In September 2002, the Company
      suspended the sale of shares to employees under the Purchase Plan.





Compensation
      expense related to the Company's stock compensation plans and conversion of
      the
      Contingently Promised Units has been reflected in the Unaudited Consolidated
      Statements of Operations and Comprehensive Income (Loss) for the three months
      and nine months ended December 31, 2005 and 2004 as follows:





**For
                the three months ended**
            
            **For
                the nine months ended****December
                31,**
            
            **December
                31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Cost
                of goods sold
            
            $
            11
            
            $
            11
            
            $
            33
            
            $
            33Selling,
                general and administrative expenses
            
            
            16
            
            
            37
            
            
            49
            
            
            113Research
                and development expenses
            
            
            5
            
            
            78
            
            
            15
            
            
            238$
            32
            
            $
            126
            
            $
            97
            
            $
            384





**13.**
            **Income
                Taxes**





As
      of
      March 31, 2005, the Company had federal and state net operating loss
      carryforwards of approximately $11.8 million and $42.0 million, respectively,
      and federal and state tax credit carryforwards of approximately $0.8 million
      and
      $2.2 million, respectively. The net operating loss will expire at various dates
      beginning in 2013, if not utilized. The tax credit can be carried forward
      indefinitely.





For
      the
      three and nine months ended December 31, 2005, the Company recorded a tax
      provision of $0.15 million related to the 90% alternative minimum tax
      limitation.




Due
      to
      uncertainty surrounding the realization of the favorable tax attributes in
      future tax returns, the Company has recorded a valuation allowance against
      certain deferred tax assets as of December 31, 2005 and March 31, 2005.
      Management regularly evaluates the recoverability of the deferred tax asset
      and
      the level of the valuation allowance. At such time as it is determined that
      it
      is more likely than not that the deferred tax asset will be realizable, the
      valuation allowance will be reduced.


12
 Table
          of Contents








**DiCon
      Fiberoptics, Inc. and Subsidiary**


**Notes
      to Unaudited Consolidated Financial Statements**


**(in
      thousands)**


**___________________________________________________________________________________________________________**





The
      Company has amended the State income tax return for the fiscal year ended in
      2000 in order to claim the Enterprise
      Zone Credit. The amendment is currently under review. The
      Company may receive an additional income tax refund from credits not previousely
      claimed in the original return.





During
      the fiscal year ended March 31, 2005, the Company's federal income tax returns
      for fiscal years ended in 2000 to 2003 were examined
      by the Internal Revenue Service. As a result of this review, certain tax credits
      previously claimed were considered to be excessive and therefore an additional
      tax assessment was required. In the fiscal year ended March 31, 2005, the
      Company paid $281 for the tax assessments. The total related interest paid
      was
      $59.





The
      Company was granted a five-year tax holiday in Taiwan, which will expire in
      2006. There was no net impact of this tax holiday for the nine months ended
      December 31, 2005 and for
      the year
      ended March 31, 2005.





The
      Company's investment in its Taiwan subsidiary is essentially permanent in
      duration and undistributed foreign earnings on December 31, 2005 amounted to
      $5.0 million. In accordance with the Taiwan Company Law and Global's Articles
      of
      Incorporation, 10% of annual earnings shall be appropriated as legal reserve
      until the accumulated reserve equals the total capital of Global.





There
      is
      no plan to distribute these earnings to DiCon. If at some future date all or
      portions of these foreign earnings are distributed as dividends to DiCon,
      substantial additional taxes would be due. On October 22, 2004, the
      American Jobs Creation Act of 2004 (the "Act") was signed into law. The Act
      creates a temporary incentive for U.S. companies to repatriate accumulated
      foreign earnings by providing a one-time deduction of 85% for certain dividends
      from controlled foreign corporations. The deduction is subject to certain
      limitations and numerous provisions of the Act contain uncertainties that
      require interpretation and evaluation. The Company has not accrued income taxes
      on the accumulated undistributed earnings of the Company's Taiwan subsidiary,
      as
      these earnings are currently expected to be reinvested
      indefinitely.





The
      Company also has foreign net operating loss carry-forward of 119.0 million
      New
      Taiwan Dollars (or approximately $3.8 million as of March 31, 2005), which
      expire beginning in the year 2008.





**14.**
            **Commitments
                and contingencies**





The
      Company normally provides warranties for its products for one year. The Company
      provides reserves for the estimated cost of product warranties at the time
      revenue is recognized. Estimates of the costs of warranty obligations are based
      on the Company's historical experience of known project failure rates, use
      of
      materials and service delivery costs incurred in correcting product failures.
      In
      addition, from time to time, specific warranty accruals may be made if
      unforeseen technical problems arise. Should the Company's accrual experience
      relative to these factors differ from estimates, the Company may be required
      to
      record additional warranty reserves. Alternatively, if the Company provides
      more
      reserves than needed, the Company may reverse a portion of such provision in
      future periods.





Changes
      in the Company's warranty reserve during the nine months ended December 31,
      2005
      and 2004 were as follows:





**Nine
                months ended December 31,****2005**
            
            **2004**Beginning
                balance
            
            $
            24
            
            $
            16Provision
                for warranty
            
            
            39
            
            
            72Utilization
                of reserve
            
            
            (41
            )
            
            (53
            )Ending
                balance
            
            $
            22
            
            $
            35





13
 Table
          of Contents


**DiCon
      Fiberoptics, Inc. and Subsidiary**


**Notes
      to Unaudited Consolidated Financial Statements**


**(in
      thousands)**


**___________________________________________________________________________________________________________**





Global
      owns a condominium interest in the building in Kaohsiung, Taiwan. This facility
      is located on a ground lease that extends through 2011. The ground lease may
      be
      renewed indefinitely, and there is no penalty for early cancellation, except
      for
      forfeiture of the owned facility.




As
      of
      December 31, 2005,the Company's future gross commitments under all leases was
      $0.1 million.




Global
      maintained a line of credit in Taiwan backed by commercial paper issued by
      Global for a maximum of 50 million New Taiwan Dollars (or approximately $1.5
      million as of December 31, 2005). The interest rate is based on a rate set
      by
      the bank at the time funds are drawn. The line of credit will mature on April
      7,
      2006. The outstanding balance of any commercial paper under this line of credit
      must be fully secured by either a cash deposit or bond fund certificate. As
      of
      December 31, 2005, there was no commercial paper outstanding.





Global
      maintained its second line of credit of 80 million New Taiwan Dollars
      (or  approximately
      $2.4 million as of December 31, 2005) from a Taiwan bank. The line of credit
      will mature on October 12, 2006. The interest rate is based on a rate set by
      the
      bank at the time funds are drawn. The amount drawn as of December 31, 2005
      was
      76.0 million New Taiwan Dollars (or approximately $2.3 million as of December
      31, 2005) with an interest rate of 3. 4 5%
      to
      3.495%. Subsequent to December 31, 2005, the Company voluntarily repaid 41.0
      million New Taiwan Dollars (or approximately $1.2 million as of December 31,
      2005) of the line of credit. (See subsequent event in Note 15).





In
      May
      2005, Lucent Technologies Inc. ("Lucent") filed an action against the Company
      in
      the United States District Court for the District of New Jersey. Lucent alleges
      that certain switches purchased by it under a contract with the Company entered
      into in 2000 were defective. The complaint asserts breach of contract and the
      implied duty of good faith and fair dealing by the Company and seeks damages,
      costs, expenses and other sums totaling in excess of $10 million. The Company
      intends to contest the case vigorously.





**15.**
            **Subsequent
                event**





On
      January 6, 2006, the Board declared a special cash dividend of $0.02
      per
      share of common stock in the aggregate amount of $2.2 million  to
      shareholders of record as of January 6, 2006. The
      dividend was paid on January 24, 2006.





Subsequent
      to December 31, 2005, Global voluntarily repaid 41.0 million New Taiwan Dollars
      (or approximately $1.2 million as of December 31, 2005) of the line of
      credit.





14
 Table
          of Contents





**Item
      2. Management's Discussion and Analysis or Plan of
      Operation.**





*Certain
      statements contained in this report on Form 10-QSB that are not purely
      historical are "forward-looking statements" within the meaning of the federal
      securities laws, including, without limitation, statements regarding the
      Company's expectations, beliefs, anticipations, commitments, intentions and
      strategies regarding the future. Actual results could differ from those
      projected in any forward-looking statements. Factors that could contribute
      to
      such differences include, but are not limited to, those specific points
      discussed under "Risk Factors" in the Company's 10-KSB/A-1.*




**Overview**





The
      Company designs and manufactures passive optical components, modules and test
      instruments for current and next-generation optical communications markets.
      The
      Company designs and manufactures a broad portfolio of technically advanced
      products that filter, split, combine, attenuate, and route light in optical
      networks. The Company also sells products used for testing optical devices
      and
      systems. The Company's products are based on its proprietary technologies,
      including thin-film coating, micro-optic design, optical element finishing,
      Micro Electro-Mechanical Systems ("MEMS"), advanced packaging and process
      automation. The Company was founded in 1986 and first became profitable in
      1988.
      It remained profitable each fiscal year until the fiscal year ended March 31,
      2002.





The
      Company operates from its owned 200,000 square feet facility in Richmond,
      California, which contains all of the Company's domestic manufacturing, R&D,
      sales and administration operations. The Company has overseas manufacturing
      operations at its 88,000 square foot facility in Kaohsiung, Taiwan. Although
      the
      Company owns a condominium interest in the building, it is located on a ground
      lease that extends through 2011. The ground lease may be renewed indefinitely,
      and there is no penalty for early cancellation, except for forfeiture of the
      owned facility.





The
      Company's communications products include Wavelength Division Multiplexers
      ("WDMs"), amplifier components, switches and attenuators, MEMS devices and
      modules. Its measurement products include variable attenuators, tunable filters,
      and test instruments for telecommunication applications. The Company markets
      and
      sells its products worldwide through its direct sales force, its subsidiary
      Global and through selected distributors.





The
      optical networking industry is rapidly changing and the volume and timing of
      orders are difficult to predict. Since the fourth quarter of 2000, the
      fiberoptics industry has gone through a significant period of consolidation
      following a dramatic curtailment of capital spending by most carriers faced
      with
      substantial excess bandwidth capacity and very high levels of corporate debt.
      The Company's customers are manufacturers of telecommunications equipment.
      The
      Company believes its customers generally view the purchase of the Company's
      products as a significant and strategic decision. As a result, customers
      typically commit substantial effort in evaluating the Company's technology,
      and
      testing and qualifying its products and manufacturing processes. This customer
      evaluation and qualification process frequently results in a lengthy initial
      sales cycle of nine months or longer.





The
      Company's cost of goods sold consists primarily of the cost of direct materials,
      labor and manufacturing overhead, scrap and rework associated with products
      sold, as well as production start up costs. As demand changes, the Company
      attempts to manage its manufacturing capacity to meet demand for existing and
      new products; however, certain portions of its costs are fixed and as volumes
      decrease, these expenses are difficult to reduce proportionately, if at all.
      The
      Company assesses its inventory position on a monthly and quarterly basis with
      its then current forecasts. During the nine months ended December 31, 2005,
      no
      obsolete inventory was written off. During the fiscal year ended March 31,
      2005,
      the Company wrote off approximately $1.3 million of obsolete inventory.





Research
      and development expenses consist primarily of salaries and related personnel
      expenses, fees paid to consultants and outside service providers, material
      and
      equipment costs, and other expenses related to the design, development, testing
      and enhancement of the Company's products. The Company expenses all of its
      research and development costs as incurred and does not capitalize any research
      and development expenditures except for equipment with a useful life longer
      than
      one year and useful for purposes other than the current research and development
      project. The Company believes that research and development is critical to
      strategic product development and expects to continue to devote significant
      resources to product research and development. The Company expects its research
      and development expenses to fluctuate both in absolute dollars and as a
      percentage of sales based on its perceived need for, and expected return from,
      its research and development efforts.


15
 Table
          of Contents





Selling,
      general and administrative expenses include salaries, benefits, commissions,
      product promotion and administrative expenses. The Company expects these
      expenses to continue to be substantial as the Company strives to sustain its
      market share in the fiberoptic component manufacturing business.





On
      December 15, 2005, the Company sold approximately eleven (11) acres of land
      ("Property") adjacent to the Company's facility in Richmond, California, to
      Pulte Home Corporation ("Pulte"). The total purchase price for the Property
      was
      $12.93 million, which resulted in the removal of net book value of $4.1 million
      of Land and $1.6 million of Building and improvements from the Company's
      Consolidated Balance Sheets. This transaction resulted in a pre-tax gain on
      sale
      of approximately $7.2 million. Pulte paid $0.98 million of the purchase
      price prior to the close of escrow for the sale and the balance of the purchase
      price of $11.95 million on the close of escrow for the sale.




The
      sale
      was pursuant to a Purchase and Sale Agreement and Preliminary Escrow
      Instructions between the Company as seller and Pulte as buyer entered into
      as of
      February 27, 2004, as amended by a First Amendment, a Second Amendment, a Third
      Amendment, a Fourth Amendment, a Fifth Amendment, a Sixth Amendment and a
      Seventh Amendment.





On
      December 16, 2005, the Company voluntarily prepaid an additional $5.5
      million  principal
      of the mortgage loan.





During
      the fiscal year 2005, the Company consolidated its R&D projects to better
      align its business needs with existing operations and to provide a more
      efficient use of its facilities. As a result, certain R&D projects were
      discontinued and it was determined that related support equipment had no
      alternative use within the Company. Accordingly the equipment was either
      abandoned or scrapped, and a loss on the disposal of fixed assets of $1.9
      million was recorded in the year ended March 31, 2005 in the consolidated
      statements of operations and comprehensive loss. The Company incurred a
      $7,433,000 gain on disposal of fixed assets for the nine months ended December
      31, 2005.





Excess
      and idle equipment with a net book value of $796,000 had been written off in
      the
      year ended March 31, 2005. No additional excess and idle equipment were written
      off in the nine months ended December 31, 2005.





Other
      income (expenses) consists primarily of interest income, offset by interest
      expense.





The
      Company maintains an Employee Stock Option Plan and an Employee Stock Purchase
      Plan as a means of motivating its employees to make a tangible contribution
      towards achieving its corporate objectives. In September 2002, DiCon suspended
      the sale of DiCon shares to employees under the Employee Stock Purchase
      Plan.





On
      January 6, 2006, the Board declared a special cash dividend of $0.02
      per
      share of common stock in the aggregate amount of $2.2 millions to shareholders
      of record as of January 6, 2006. The
      dividend was paid on January 24, 2006.





Subsequent
      to December 31, 2005, Global voluntarily repaid 41.0 million New Taiwan Dollars
      (or approximately $1.2 million as of December 31, 2005) of the line of
      credit.





**Critical
      Accounting Policies and Estimates**





The
      preparation of the Company's consolidated financial statements in conformity
      with accounting principles generally accepted in the United States of America
      requires estimates and judgments that affect the reported amounts of assets
      and
      liabilities, disclosures of contingent assets and liabilities, net sales and
      expenses, and the related disclosures. Estimates are based on historical
      experience, knowledge of economic and market factors and various other
      assumptions that the Company believes to be reasonable under the circumstances.
      Actual results may differ from these estimates under different assumptions
      or
      conditions. The following critical accounting policies are affected by
      significant estimates, assumptions and judgments used in the preparation of
      the
      Company's consolidated financial statements.





*Revenue
      recognition*





The
      Company derives its revenue from the sale of fiberoptic networking components.
      Revenue from product sales is recognized upon shipment of the product, provided
      that persuasive evidence of an arrangement exists, delivery has occurred and
      no
      significant obligations remain, the fee is fixed or determinable and
      collectibility is reasonably assured. Sales to distributors do not include
      the
      right to return or exchange products or price protection. A provision for
      returns and allowances is recorded at the time revenue is recognized based
      on
      the Company's historical experience.


16
 Table
          of Contents





*Allowances
      for doubtful accounts*





The
      Company performs ongoing credit evaluations of its customers. Allowances for
      doubtful accounts for estimated losses are maintained resulting from the
      inability or unwillingness of customers to make required payments. When the
      Company becomes aware that a specific customer is unable to meet its financial
      obligations, such as the filing of a bankruptcy or deterioration in the
      customer's operating results or financial position, the Company records a
      specific allowance to reflect the level of credit risk in the customer's
      outstanding receivable balance. The Company is not able to predict changes
      in
      the financial condition of customers, and if circumstances related to the
      Company's customers deteriorate, estimates of the recoverability of trade
      receivables could be materially affected and the Company may be required to
      record additional allowances. Alternatively, if the Company provides allowances
      on receivables that are ultimately collected, the Company will reverse such
      provisions in future periods based on actual collection experience.





*Warranty
      accrual*





The
      Company generally provides warranties for its products for one year. The Company
      provides reserves for the estimated cost of product warranties at the time
      revenue is recognized. Because the Company's products are manufactured, in
      most
      cases, to customer specifications and their acceptance is based on meeting
      those
      specifications, the Company historically has experienced minimal warranty costs.
      Estimates of the costs of warranty obligations are based on the Company's
      historical experience of known product failure rates and the use of materials
      and service delivery costs incurred in correcting product failures. In addition,
      from time to time, specific warranty accruals may be made if unforeseen
      technical problems arise. Should the Company's actual experience relative to
      these factors differ from its original estimates, the Company may be required
      to
      record additional warranty reserves. Alternatively, if the Company provides
      more
      reserves that are in excess of its actual warranty costs, the Company will
      reverse a portion of such provisions in future periods.





*Fair
      value of financial instruments*





The
      Company has determined that the amounts reported for cash and cash equivalents,
      accounts receivable, short-term borrowings, accounts payable and accrued
      liabilities, mortgage and other debt approximate fair value because of their
      short maturities and/or variable interest rates. Marketable securities are
      reported at their fair market value based on quoted market prices.





*Inventories*





Inventories
      are valued at the lower of cost or market using the first-in, first-out (FIFO)
      method. Cost is determined using standard cost, which approximates actual cost.
      The inventory of the Company is subject to rapid technological changes and
      obsolescence that could have an adverse affect on its utilization in future
      periods. Accordingly, the Company writes down excess and obsolete inventory
      based on the Company's estimates of inventory to be sold or
      consumed.





*Property,
      plant and equipment*





The
      Company evaluates the recoverability of the net carrying value of its property,
      plant and equipment whenever events or changes in circumstances indicate
      impairment may exist, by comparing the carrying values to the estimated future
      undiscounted cash flows. A deficiency in these cash flows relative to the
      carrying values is an indication of the need for a write-down due to impairment.
      The impairment write-down would then be the difference between the carrying
      values and the fair value of these assets. A loss on impairment would be
      recognized by a charge to earnings. Changes in these estimates could have a
      material adverse effect on the assessment of property, plant and equipment,
      thereby requiring the Company to write down its assets.





*Deferred
      taxes*





Deferred
      income tax assets and liabilities represent the expected future tax consequences
      attributable to temporary differences between corresponding amounts stated
      on
      the Unaudited Consolidated Balance Sheets and their respective tax bases.
      Deferred tax assets and liabilities are measured using the enacted tax rates
      expected to apply to taxable income in the years in which those temporary
      differences are expected to be reversed. Valuation allowances are recognized
      as
      necessary to reduce the deferred tax assets to the amount that is more likely
      than not to be realized.


17
 Table
          of Contents


**Financial
      Results**





**Three
      Months Ended December 31, 2005 Compared with Three Months Ended December 31,
      2004**





*Net
      Sales*





Net
      sales
      declined 28.3% from $6.7 million for the quarter ended December 31, 2004 to
      $4.8
      million for the quarter ended December 31, 2005. This decline reflected the
      overall decline in the demand for the Company's fiberoptics components and
      test
      equipment by telecommunications equipment vendors as well as increased
      competition for the remaining business opportunities.





The
      fiberoptic communications industry is characterized by dynamic technological
      changes. Specific products may have a relatively short product life, even though
      basic product designs may have a substantial life. Generally, customers expect
      prices to decline steadily. During the current period of significant excess
      capacity, the pressure to reduce average selling prices may be even greater.
      The
      Company seeks to offset this trend through aggressive programs to improve
      manufacturing yields and cost reductions. There is no certainty that these
      programs will be successful to offset the pricing pressure from customers in
      the
      future.





Sales
      to
      different geographic areas may fluctuate from period to period depending on
      various factors such as new system development, purchase cycle and price. Net
      sales to customers in the United States accounted for $1.8 million and
      $3.9 million of total net sales, or 38.4 % and 58.4%, for the three months
      ended December 31, 2005 and 2004, respectively.





As
      of
      December 31, 2005 and 2004, the Company experienced the following concentrations
      in sales to customers.





**Three
                months ended****December
                31,****2005**
            
            **2004**Percentage
                of revenue for 3 largest customers
            
            
            42.2
            %
            
            51.7
            %No.
                of customers accounting for over 10% of net sales
            
            
            3
            
            
            3





Sales
      to
      the Company's leading customers vary significantly from year to year and the
      Company does not have the ability to predict future sales to these customers.





*Cost
      of Goods Sold and Gross Margin*





Costs
      of
      goods sold declined 45.8% to $2.6 million in the quarter ended December 31,
      2005
      from $4.9 million in the quarter ended December 31, 2004. The reduction of
      $2.3
      million is attributed to the lower volume of business in the current quarter.





Gross
      margin as a percentage of net sales was 44. 6 %
      in the
      quarter ended December 31, 2005, compared to 27.5% in the quarter ended December
      31, 2004. The improvement in gross margin for the quarter ended December 31,
      2005 was primarily a result of expense and cost reductions along with more
      efficient material management and production planning.





There
      were no significant inventory adjustments for the quarter ended December 31,
      2005. For the quarter ended December 31, 2004, the Company wrote off an
      approximately $0.4 million of obsolete inventory, or 5.0% of total net
      sales.





Gross
      margin can be affected by a number of factors, including product mix, customer
      mix, applications mix, product demand, pricing pressures, manufacturing
      constraints, higher costs resulting from new production facilities, and product
      yield. Considering these factors, gross margin fluctuations are difficult to
      predict and there can be no assurance that the Company will achieve or maintain
      gross margin percentages at historical levels in future periods.





*Selling,
      General and Administrative Expenses*





Selling,
      general and administrative ("SG&A") expense was $1.2 million in the quarter
      ended December 31, 2005, compared to $1.3 million in the quarter ended
      December 31, 2004. The reduction is mainly due to lower depreciation charges
      resulting from the full amoritization of certain fixed assets.





18
 Table
          of Contents





*Research
      and Development Expenses*





Research
      and development ("R&D") expense was $1.1 million in the quarter ended
      December 31, 2005, compared to $1.3 million in the quarter ended December
      31, 2004. The decrease in R&D spending reflects the cost reductions
      resulting from the elimination of certain product development programs and
      workforce reductions. Future expenditures are expected to fluctuate both in
      absolute dollars and as a percentage of revenue based on the need to invest
      in
      new research and development in order to remain competitive in this rapidly
      changing industry.




*Gain
      (loss) on disposal of fixed assets*





On
      December 15, 2005, the Company sold approximately eleven (11) acres of land
      ("Property") adjacent to the Company's facility in Richmond, California, to
      Pulte Home Corporation ("Pulte"). The total purchase price for the Property
      was
      $12.93 million, which resulted in the removal of net book value of $4.1 million
      of Land and $1.6 million of Building and improvements from the Company's
      Consolidated Balance Sheets. This transaction resulted in a pre-tax gain on
      sale
      of approximately $7.2 million.





*Other
      (Expense) Income*





Other
      (expense) ** income
      for the quarters ended December 31, 2005 and 2004 are as follows:





**Three
                months ended****December
                31,****(in
                thousands)**
            
            **2005**
            
            **2004**Other
                (expense) income:Interest
                expense
            
            $
            (276
            )
            $
            (332
            )Interest
                income
            
            
            180
            
            
            88Loss
                on currency exchange
            
            
            (14
            )
            
            (41
            )Gain
                on disposal of expensed items
            
            
            4
            
            
            6Non-refundable
                extension payments
            
            
            75
            
            
            -Other
                (expense) income, net
            
            
            7
            
            
            54$
            (24
            )
            $
            (225
            )





Interest
      expense primarily represents the costs of borrowing by DiCon for its mortgage
      loan on the facility in Richmond, California. In the quarter ended December
      31,
      2005, the Company sold certain expensed tools and equipment for total proceeds
      of $4.





*Income
      (Loss) Before Income Tax*





The
      Company reported a net profit before income tax of $7.1 million for the current
      quarter compared to a net loss before income tax of 2.9 million for the same
      quarter in the prior year.





*Income
      Tax (Expense) Benefit*





For
      the
      three and nine months ended December 31, 2005, the Company recorded a tax
      provision of $0.15 million related to the 90% alternative minimum tax
      limitation.


Due
      to
      the uncertainty surrounding the realization of the favorable tax attributes
      in
      future tax returns, the Company has recorded a valuation allowance against
      certain deferred tax assets at December 31, 2005. Management regularly evaluates
      the recoverability of the deferred tax asset and the level of the valuation
      allowance. At such time as it is determined that it is more likely than not
      that
      the deferred tax asset will be realizable, the valuation allowance will be
      reduced.





The
      effective tax rate for the three months ended December 31, 2005 and 2004 were
      both 2% and 0%. The tax rate for each period is the result of the consolidation
      of the tax provisions for the US operations with that of the Taiwan operations
      of Global, and can vary substantially from period to period depending on the
      relative performance of each operation.








19


**Nine
      Months Ended December 31, 2005 Compared with Nine Months Ended December 31,
      2004**





*Net
      Sales*





Net
      sales
      declined 15.7% to $15.2 million for the nine months ended December 31, 2005
      from
      $18.0 million for the nine months ended December 31, 2004. This decline
      reflected the overall decline in the demand for the Company's fiberoptics
      components and test equipment by telecommunications equipment vendors as well
      as
      increased competition for the remaining business opportunities.





The
      fiberoptic communications industry is characterized by dynamic technological
      changes. Specific products may have a relatively short product life, even though
      basic product designs may have a substantial life. Generally, customers expect
      prices to decline steadily. During the current period of significant excess
      capacity, the pressure to reduce average selling prices may be even greater.
      The
      Company seeks to offset this trend through aggressive programs to improve
      manufacturing yields and cost reductions. There is no certainty that these
      programs will be successful to offset the pricing pressure from customers in
      the
      future.





Sales
      to
      different geographic areas may fluctuate from period to period depending on
      various factors such as new system development, purchase cycle and price. Net
      sales to customers in the United States accounted for $4.9 million and
      $9.2 million of total net sales, or 33.6 % and 52.2%, for the nine months
      ended December 31, 2005 and 2004, respectively.





As
      of
      December 31, 2005 and 2004, the Company experienced the following concentrations
      in sales to customers.





**Nine
                months ended****December
                31,****2005**
            
            **2004**Percentage
                of revenue for 3 largest customers
            
            
            49.8
            %
            
            44.3
            %No.
                of customers accounting for over 10% of net sales
            
            
            3
            
            
            4








Sales
      to
      DiCon's leading customers vary significantly from year to year and DiCon does
      not have the ability to predict future sales to these customers.





*Cost
      of Goods Sold and Gross Margin*





Costs
      of
      goods sold declined 26.5% to $9.6 million in the nine months ended December
      31,
      2005 from $13.1 million in the nine months ended December 31, 2004. Gross margin
      as a percentage of net sales was 36.4% in the nine
      months ended December 31, 2005, compared to a 27.0% in the nine months ended
      December 31, 2004. The improvement in gross margin in the nine months ended
      December 31, 2005 is mainly due to expense and cost reductions along with more
      efficient material management and production planning. There were no significant
      inventory adjustments for the nine months ended December 31, 2005. During the
      nine months ended December 31, 2004, DiCon wrote off a total of $0.5 million
      or
      4.8% of total net sales.





Gross
      margin can be affected by a number of factors, including product mix, customer
      mix, applications mix, product demand, pricing pressures, manufacturing
      constraints, higher costs resulting from new production facilities, and product
      yield. Considering these factors, gross margin fluctuations are difficult to
      predict and there can be no assurance that DiCon will achieve or maintain gross
      margin percentages at historical levels in future periods.


20
 Table
          of Contents





*Selling,
      General and Administrative Expenses*





Selling,
      general and administrative ("SG&A") expense was $3.5 million for the
      nine months ended December 31, 2005, compared to $4.3 million for the nine
      months ended December 31, 2004. The reduction is mainly due to lower
      depreciation charges resulting from the full amoritization of certain fixed
      assets.





*Research
      and Development Expenses*





Research
      and development ("R&D") expense was $3.4 million for the nine months
      ended December 31, 2005, compared to $4.4 million for the nine months ended
      December 31, 2004. The decrease in R&D spending reflects the cost reductions
      resulting from the elimination of certain product development programs and
      workforce reductions. Future expenditures are expected to fluctuate both in
      absolute dollars and as a percentage of revenue based on the need to invest
      in
      new research and development in order to remain competitive in this rapidly
      changing industry.





*Gain
      (loss) on disposal of fixed assets*





On
      December 15, 2005, the Company sold approximately eleven (11) acres of land
      ("Property") adjacent to the Company's facility in Richmond, California, to
      Pulte Home Corporation ("Pulte"). The total purchase price for the Property
      was
      $12.93 million, which resulted in the removal of net book value of $4.1 million
      of Land and $1.6 million of Building and improvements from the Company's
      Consolidated Balance Sheets. This transaction resulted in a pre-tax gain on
      sale
      of approximately $7.2 million.





*Other
      (Expense) Income*





Other
      (expense) ** income
      for the nine months ended December 31, 2005 and 2004 are as
      follows:





**Nine
                months ended****December
                31,****(in
                thousands)**
            
            **2005**
            
            **2004**Other
                (expense) income:Interest
                expense
            
            $
            (875
            )
            $
            (936
            )Interest
                income
            
            
            434
            
            
            260Realized
                gain on sales of marketable securities
            
            
            -
            
            
            22Loss
                on currency exchange
            
            
            (218
            )
            
            (124
            )Gain
                on disposal of expensed items
            
            
            183
            
            
            6Non-refundable
                extension payments
            
            
            300
            
            
            -Other
                (expense) income, net
            
            
            10
            
            
            161$
            (166
            )
            $
            (611
            )








Interest
      expense primarily represents the costs of borrowing by DiCon for its mortgage
      loan on the Richmond, California, facility and its equipment loan. In the nine
      months ended December 31, 2005, the Company sold certain expensed tools and
      equipment for total proceeds of $183.





During
      the nine months ended December 31, 2005, the Company received $0.3 million
      non-refundable extension payments.





*Income
      (Loss) Before Income Tax*





The
      Company reported profit before income tax of $5.9 million for the nine months
      ended December 31, 2005 compared to loss $6.4 million for the same nine months
      in the prior year. The improvement in profit before income tax in the nine
      months ended December 31, 2005 is mainly due to the disposal of fixed
      assets.


21
 Table
          of Contents





*Income
      Tax (Expense) Benefit*





The
      Company has substantial net operating loss carryforwards. The Company reported
      $151 and $1 corporate estimated minimum tax expense for the nine months ended
      December 31, 2005 and 2004. For
      the
      three and nine months ended December 31, 2005, the Company recorded a tax
      provision of $0.15 million related to the 90% alternative minimum tax
      limitation. Due to uncertainty surrounding the realization of the
      favorable tax attributes in future tax returns, the Company has recorded a
      valuation allowance against certain deferred tax assets at December 31, 2005.
      Management regularly evaluates the recoverability of the deferred tax asset
      and
      the level of the valuation allowance. At such time as it is determined that
      it
      is more likely than not that the deferred tax asset will be realizable, the
      valuation allowance will be reduced.





For
      the
      nine months ended December 31, 2005 and 2004, the effective tax rate was 2%
      and 0%. The tax rate for each period is the result of the consolidation of
      the tax provisions for the US operations with that of the Taiwan operations
      of
      Global Fiberoptics, and can vary substantially from period to period depending
      on the relative performance of each operation.





**Liquidity
      and Capital Resources**





As
      of
      December 31, 2005, the Company had cash and cash equivalents of $3.0 million.
      In
      addition, the Company has $19.7 million invested in certificates of deposit
      and
      other marketable securities that in conformity with the requirements of
      generally accepted accounting principles were classified as marketable
      securities.





The
      net
      cash provided by operating activities of $3.0 million for the nine months ended
      December 31, 2005 resulted from non-cash adjustments of $3.7 million to the
      net
      income of $5.9 million for the nine months ended December 31 2005, and a
      reduction of accounts receivable and inventories of 2.4 million. The net cash
      provided by operating activities of 0.9 million for the nine months ended
      December 31, 2004 resulted from non-cash adjustments of $9.3 million to the
      net
      loss of $6.7 million for the nine months ended December 31 2004, a reduction
      of
      prepaid expenses and other current assets of 0.3 million, and an increase in
      income tax payable of 0.3 million.




The
      increase in cash flows provided by investing activities of $8.0 million for
      the
      nine months ended December 31, 2005 was primarily due to proceeds
      of 13.0 million from the sale of property, plant and equipment, and partially
      offset by net purch ases
      of
      $5.0 million of marketable securities. The increases in cash flows from investing activities
      for
      the nine months ended December 31, 2004 was primarily due to proceeds
      of $5.6 million
      from the sale and purchase of marketable securities offset by $0.2 million
      in
      purchases of property, plant and equipment.





Cash
      used
      in financing activities increased to $9.7 million for the nine months ended
      December 31, 2005 from $6.0 million used in the nine months ended December
      31,
      2004. This change is primarily attributable to the net increase of
      repayments of mortgages
      and other debt .





The
      Company financed, in part, a new corporate campus by obtaining a construction
      loan from a bank of $27.0 million on August 24, 2000. In November 2001, the
      same bank refinanced the outstanding balance of the construction loan with
      a
      mortgage loan maturing on November 20, 2004, with an amortization schedule
      based
      on a 25-year loan. Interest on the mortgage loan is accrued at a variable
      interest rate based on changes in the lender's prime rate as of the
      20 th of each
      month. Principal and interest are payable monthly. During the year ended March
      31, 2002, the Chairman, President and Chief Executive Officer of the institution
      with which the Company maintains the mortgage loan was appointed to the
      Company's Board of Directors.





On
      June
      28, 2004, the bank agreed to extend the maturity date of the mortgage loan
      to
      October 20, 2007, subject to additional terms and conditions requiring the
      Company to make additional principal repayments as follows: $1.5 million 10
      days
      after the date of execution of the loan extension agreement; $1.0 million on
      October 1, 2004; and seven installments each in the amount of $0.5 million
      on
      the first day of each calendar quarter, commencing on January 1, 2005 and ending
      on July 1, 2006.





The
      Company was in compliance with the additional principal repayments requirement
      as of December 31, 2005. During the nine months ended December 31, 2005, the
      Company voluntarily prepaid three additional $0.5 million equal installments
      that were originally due on January 1, 2006, April 1, 2006 and July 1,
      2006.  In
      addition, the Company voluntarily prepaid an additional $8.5 million  principal
      of the mortgage loan during the nine months ended December 31, 2005. This
      included $5.5 million from the proceeds of the land sale. Rates
      of
      interest on the borrowings ranged from 5.5% to 7.0% during the period. The
      balance of the mortgage loan as of December 31, 2005 was $10.1 million with
      an
      interest rate of 7.0%.


22
 Table
          of Contents





Global
      maintained a line of credit in Taiwan backed by commercial paper issued by
      Global for a maximum of 50 million New Taiwan Dollars (or approximately $1.5
      million as of December 31, 2005). The interest rate is based on a rate set
      by
      the bank at the time funds are drawn. The line of credit will mature on April
      7,
      2006. The outstanding balance of any commercial paper under this line of credit
      must be fully secured by either a cash deposit or bond fund certificate. As
      of
      December 31, 2005, there was no commercial paper outstanding.




Global
      maintained its second line of credit of 80 million New Taiwan Dollars
      (or  approximately
      $2.4 million as of December 31, 2005) from a Taiwan bank. The line of credit
      will mature on October 12, 2006. The interest rate is based on a rate set by
      the
      bank at the time funds are drawn. The amount drawn as of December 31, 2005
      was
      76.0 million New Taiwan Dollars (or approximately $2.3 million as of December
      31, 2005) with an interest rate of 3. 4 5%
      to
      3.495%. Subsequent to December 31, 2005, the Company voluntarily repaid 41.0
      million New Taiwan Dollars (or approximately $1.2 million as of December 31,
      2005) of the line of credit.




The
      Company believes its current cash and cash equivalents and marketable securities
      will be sufficient to meet its anticipated cash needs for working capital and
      capital expenditures for at least the next 12 months. There remains some
      possibility that the Company may need to raise additional capital. It might
      need
      additional capital in order to refinance its loans, finance unanticipated growth
      or to invest in new technology. There can be no certainty that the Company
      would
      be successful in raising the required capital or in raising capital at
      acceptable rates.




**Commitments
      and Off Balance Sheet Arrangements**





Global
      owns a condominium interest in the building in Kaohsiung, Taiwan. This facility
      is located on a ground lease that extends through 2011. The ground lease may
      be
      renewed indefinitely, and there is no penalty for early cancellation, except
      for
      forfeiture of the owned facility.




As
      of
      December 31, 2005, the Company's future gross commitments under all leases
      was
      $0.1 million.




Global
      maintained a line of credit in Taiwan backed by commercial paper issued by
      Global for a maximum of 50 million New Taiwan Dollars (or approximately $1.5
      million as of December 31, 2005). The interest rate is based on a rate set
      by
      the bank at the time funds are drawn. The line of credit will mature on April
      7,
      2006. The outstanding balance of any commercial paper under this line of credit
      must be fully secured by either a cash deposit or bond fund certificate. As
      of
      December 31, 2005, there was no commercial paper outstanding.





Global
      maintained its second line of credit of 80 million New Taiwan Dollars
      (or  approximately
      $2.4 million as of December 31, 2005) from a Taiwan bank. The line of credit
      will mature on October 12, 2006. The interest rate is based on a rate set by
      the
      bank at the time funds are drawn. The amount drawn as of December 31, 2005
      was
      76.0 million New Taiwan Dollars (or approximately $2.3 million as of December
      31, 2005) with an interest rate of 3. 45 %
      to
      3.495%. Subsequent to December 31, 2005, the Company voluntarily repaid 41.0
      million New Taiwan Dollars (or approximately $1.2 million as of December 31,
      2005) of the line of credit.





On
      January 6, 2006, the Board declared a special cash dividend of $0.02
      per
      share of common stock in the aggregate amount of $2.2 millions to shareholders
      of record as of January 6, 2006. The
      dividend was paid on January 24,2006.





**Item
      3. Controls and Procedures.**





*(a)*  *Evaluation
      of Disclosure Controls and Procedures* .
      The
      undersigned principal executive and financial officer of the Company concludes
      that the Company's disclosure controls and procedures are effective as of
      December 31, 2005 based on the evaluation of these controls and procedures
      required by paragraph (b) of Exchange Act Rule 13a-15.





*(b)*  *Changes
      in Internal Controls.* There
      has been no change in the Company's internal control over financial reporting
      identified in connection with the evaluation required by paragraph (d) of
      Exchange Act Rule 13a-15 that occurred during the quarter ended December 31,
      2005, that has materially affected, or is reasonably likely to materially
      affect, the Company's internal control over financial
      reporting.


23
 Table
          of Contents





**PART
      II**





**OTHER
      INFORMATION**





**Item
      1. Legal Proceedings.**





In
      May
      2005, Lucent Technologies Inc. ("Lucent") filed an action against the Company
      in
      the United States District Court for the District of New Jersey. Lucent alleges
      that certain switches purchased by it under a contract with the Company entered
      into in 2000 were defective. The complaint asserts breach of contract and the
      implied duty of good faith and fair dealing by the Company and seeks damages,
      costs, expenses and other sums totaling in excess of $10 million. The Company
      intends to contest the case vigorously.





**Item
      2. Unregistered Sales of Equity Securities
      and Use of
      Proceeds.**





(a)
            Unregistered
                Sales of Equity Securities by Small Business
                Issuer.





None.





(b)
            Purchases
                of Equity Securities by Small Business
                Issuer.





**Small
      Business Issuer Purchases of Equity Securities**





Period
            
            Total
                Number of Shares Purchased
              (1)
            
            Average
                Price Paid per Share
            
            Total
                Number of Shares Purchased as Part of Publicly Announced Plans or
                Programs
              (2)
            
            Maximum
                Number of Shares that May yet be Purchased Under the Plans or
                Programs
              (2)October
                1, 2005 through October 31, 2005
            
            3,356
            
            $0.96
            
            --
            
            --November
                1, 2005 through November 30, 2005
            
            1,747
            
            $0.96
            
            --
            
            --December
                1, 2005 through December 31, 2005
            
            1,536
            
            $0.96
            
            --
            
            --Total
            
            6,639
            
            $0.96
            
            --
            
            --





(1)  All
      of
      the shares purchased were issued under the Employee Stock Purchase
      Program.





(2)  DiCon
      does not have any publicly announced plans or programs for the purchase of
      shares.





**Item
      3. Defaults Upon Senior Securities.**





None.





**Item
      4. Submission of Matters to a Vote of Security
      Holders.**





None.





**Item
      5. Other Information.**





None.








**Item
      6. Exhibits.**








Exhibit
                No.
            
            Description31.1
            
            Certificate
                of President and Chief Executive Officer pursuant to Section 302
                of the
                Sarbanes - Oxley Act of 2002.32.1
            
            Certificate
                of President and Chief Executive Officer pursuant to Section 906
                of the
                Sarbanes - Oxley Act of 2002.








24
 Table
          of Contents




















**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




DICON
                FIBEROPTICS, INC.(Registrant)Date:
            February
                14, 2006
            By:
            /s/
                Ho-Shang Lee(Signature)Name:
            Ho-Shang
                LeeTitle:
            President
                and Chief Executive Officer
              (principal
                executive and financial officer)


25
 Table
          of Contents














**Exhibit
      Index**








Exhibit
                No.
            
            Description31.1
            
            Certificate
                of President and Chief Executive Officer pursuant to Section 302
                of the
                Sarbanes - Oxley Act of 2002.32.1
            
            Certificate
                of President and Chief Executive Officer pursuant to Section 906
                of the
                Sarbanes - Oxley Act of 2002.


26