<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

           FOR THE TRANSITION PERIOD FROM ___________ TO ____________.

                        COMMISSION FILE NUMBER: 000-31393

                                 LUMINENT, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

             DELAWARE                                     95-4798130
(STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NO.)

            20550 NORDHOFF ST.
         CHATSWORTH, CALIFORNIA                             91311
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                  (ZIP CODE)

                                 (818) 773-9044
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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

As of July 31, 2001 156,000,000 shares of the registrant's common stock were
outstanding.

<PAGE>   2

                                 LUMINENT, INC.

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

                     INDEX TO QUARTERLY REPORT ON FORM 10-Q

                          PART I. Financial Information

<TABLE>
<S>                                                                                       <C>
Item 1      Financial Statements

                Consolidated Condensed Balance Sheets as of June 30, 2001 (unaudited)
                  and December 31, 2000                                                   1

                Unaudited Consolidated Condensed Statements of Operations for the
                  three months and six months ended June 30, 2001 and 2000                3

                Unaudited Consolidated Condensed Statements of Cash Flows for the
                  three months and six months ended June 30, 2001 and 2000                4

                Notes to Consolidated Condensed Financial Statements                      5

Item 2      Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                                   9

Item 3      Quantitative and Qualitative Disclosures About Market Risk                   26

                           PART II. Other Information

Item 1      Legal Proceedings                                                            26

Item 2      Changes in Securities and Use of Proceeds                                    26

Item 3      Defaults upon Senior Securities                                              27

Item 4      Submission of Matters to a Vote of Security Holders                          27

Item 5      Other Information                                                            28

Item 6      Exhibits and Reports on Form 8-K                                             29

            Signatures                                                                   33
</TABLE>

<PAGE>   3

                          PART I. FINANCIAL INFORMATION

ITEM 1.  Financial Statements

                                 LUMINENT, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (in thousands)

                                     ASSETS

<TABLE>
<CAPTION>
                                                        December 31,    June 30,
                                                            2000          2001
                                                          --------      --------
                                                                       (unaudited)
<S>                                                       <C>           <C>
Current assets:
  Cash and cash equivalents                               $131,778      $ 93,037
  Short-term investments                                     1,082            81
  Accounts receivable, net of allowance of $4,455
    at December 31, and $6,003 at June 30                   21,613        24,628
  Inventories                                               39,428        29,886
  Deferred income taxes                                      6,220         9,863
  Prepaid and other current assets                           9,106        21,398
                                                          --------      --------

        Total current assets                               209,227       178,893

Property and equipment, net                                 51,366        52,129
Goodwill, net                                              341,540       302,564
Other assets                                                 3,247         8,039
                                                          --------      --------

        TOTAL ASSETS                                      $605,380      $541,625
                                                          ========      ========
</TABLE>


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


                                       1
<PAGE>   4
                                 LUMINENT, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                        (in thousands, except share data)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                              December 31,      June 30,
                                                                 2000             2001
                                                               ---------       ---------
                                                                              (unaudited)
<S>                                                            <C>             <C>
Current liabilities:
  Current portion of long-term debt                            $   2,607       $   2,152
  Short-term borrowings                                            7,957          12,822
  Accounts payable                                                20,021          21,143
  Accrued expenses                                                10,337          12,720
  Income taxes payable                                             6,634           7,049
                                                               ---------       ---------

        Total current liabilities                                 47,556          55,886

Long-term debt, net of current portion                             9,550           8,596
Other long-term liabilities                                          779             702
                                                               ---------       ---------

        Total liabilities                                         57,885          65,184

Minority interest                                                    444             329

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.001 par value, 30,000,000 shares
    authorized; none issued and outstanding                           --              --
  Common stock, $.001 par value, 300,000,000 shares
    authorized; 156,000,000 shares issued and outstanding            156             156
  Additional paid-in capital                                     635,066         635,066
  Accumulated deficit                                            (29,241)       (117,492)
  Deferred stock compensation, net                               (55,570)        (36,659)
  Accumulated other comprehensive loss                            (3,360)         (4,959)
                                                               ---------       ---------

        Total stockholders' equity                               547,051         476,112
                                                               ---------       ---------

        TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY             $ 605,380       $ 541,625
                                                               =========       =========
</TABLE>


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


                                       2
<PAGE>   5
                                 LUMINENT, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                           Three Months Ended June 30,    Six Months Ended June 30,
                                                            ------------------------      ------------------------
                                                               2000          2001            2000           2001
                                                            ---------      ---------      ---------      ---------
<S>                                                         <C>            <C>            <C>            <C>
Net Sales                                                   $  28,107      $  41,103      $  43,006      $  89,344
Cost of sales (1)(2)(3)                                        18,147         57,934         27,801         90,146
                                                            ---------      ---------      ---------      ---------

  Gross Profit                                                  9,960        (16,831)        15,205           (802)

Operating costs and expenses:
  Selling, general and administrative (1)(2)(3)                 5,906         24,156          8,084         39,528
  Research and development (1)(2)(3)                            4,175          4,834          6,624         10,030
  Amortization of goodwill                                      9,580         19,488          9,580         38,976
                                                            ---------      ---------      ---------      ---------

                                                               19,661         48,478         24,288         88,534
                                                            ---------      ---------      ---------      ---------

        Operating loss                                         (9,701)       (65,309)        (9,083)       (89,336)

Other income, net (3)                                             192            972            192          2,822
                                                            ---------      ---------      ---------      ---------

        Loss before provision for income taxes
         and minority interest                                 (9,509)       (64,337)        (8,891)       (86,514)

Provision for income taxes                                      1,223          1,754          1,469          1,854

Minority interest                                                 128           (136)           318           (115)
                                                            ---------      ---------      ---------      ---------

        Net loss                                            $ (10,860)     $ (65,955)     $ (10,678)     $ (88,253)
                                                            =========      =========      =========      =========

Net loss per share, basic and diluted                       $   (0.08)     $   (0.42)     $   (0.07)     $   (0.57)
                                                            =========      =========      =========      =========

Shares used in per-share calculation, basic and diluted       144,000        156,000        144,000        156,000
                                                            =========      =========      =========      =========
</TABLE>

  (1) Includes amounts relating to deferred stock compensation of $744,000 and
      $566,000 presented in "cost of sales", $1.1 million and $7.0 million
      presented in "selling, general and administrative", and $1.2 million and
      $890,000 presented in "research and development" for the three months
      ended June 30, 2000 and 2001, respectively.

  (2) Includes amounts relating to deferred stock compensation of $744,000 and
      $1.2 million presented in "cost of sales", $1.1 million and $15.7 million
      presented in "selling, general and administrative", and $1.2 million and
      2.0 million and "research and development" for the six months ended June
      30, 2000 and 2001, respectively.

  (3) Includes one-time charges of $29.3 million, $11.4 million, $501,000 and
      $16,000 presented in "cost of sales", "selling, general and
      administrative", "research and development" and "other income, net",
      respectively, for the three months ended June 30, 2001 to write-down
      inventory, purchase commitments, asset impairment, workforce reduction,
      restructuring costs and other non-recurring items. These charges resulted
      from the lower demand for our products and pricing pressures stemming from
      the continuing downturn in the communications equipment industry generally
      and the optical components sector in particular.

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


                                       3
<PAGE>   6

                                 LUMINENT, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                    Three Months Ended June 30,    Six Months Ended June 30,
                                                                     ------------------------      ------------------------
                                                                       2000           2001            2000           2001
                                                                     ---------      ---------      ---------      ---------
<S>                                                                  <C>            <C>            <C>            <C>
Cash Flows from Operating Activities:
  Net (loss) income                                                  $ (10,860)     $ (65,955)     $ (10,678)     $ (88,253)
  Adjustments to reconcile net (loss) income to net cash
    (used in) provided by operating activities:
      Depreciation and amortization                                      9,763         22,084          9,953         43,046
      Amortization of deferred stock compensation                        2,973          8,465          2,973         18,911
      Impairment loss on property and equipment                             --          8,904             --          8,904
      Minority interest                                                    142           (136)           332           (115)
      Deferred income taxes                                               (350)        (1,438)          (350)        (3,643)
  Changes in operating assets and liabilities
    Accounts receivable                                                  2,146         (2,247)         1,281         (3,015)
    Inventories                                                            925         27,443            426          9.542
    Prepaid and other current assets                                    (1,879)        (3,064)        (1,879)       (12,292)
    Accounts payable                                                     3,489         (3,609)         4,225          1,122
    Accrued expenses                                                    (1,272)         3,927         (1,093)         2,383
    Income taxes payable                                                (1,723)         2,107         (1,452)           415
                                                                     ---------      ---------      ---------      ---------

        Net cash provided by (used in) operating activities              3,354         (3,519)         3,738        (22,995)

Cash Flows from Investing Activities:
  Purchases of property and equipment                                   (1,087)        (3,819)        (1,243)       (13,735)
  Sale of short-term investments                                            --            212             --          1,001
  Other assets                                                           1,463         (4,792)         1,463         (4,792)
                                                                     ---------      ---------      ---------      ---------

        Net cash provided by (used in) investing activities                376         (8,399)           220        (17,526)

Cash flows form financing activities:
  Payments on long-term debt                                              (116)          (979)          (116)        (1,409)
  Borrowings on long-term debt                                              --             --             --             --
  Payments on short-term debt                                               --         (3,259)            --         (9,077)
  Borrowings on short-term debt                                          3,383          4,108          3,383         13,942
  Net change in other liabilities                                          (77)           (92)           (77)           (77)
  Net cash distributions to MRV Communications, Inc.                    (1,458)            --         (1,723)            --
                                                                     ---------      ---------      ---------      ---------

        Net cash provided by financing activities                        1,732           (222)         1,467          3,379

Effect of exchange rate on cash and cash equivalents                      (680)        (1,579)          (663)        (1,599)
                                                                     ---------      ---------      ---------      ---------

Net increase (decrease) in cash and cash equivalents                     4,782        (13,719)         4,762        (38,741)
Cash and cash equivalents, beginning of period                             200        106,756            220        131,778
                                                                     ---------      ---------      ---------      ---------

Cash and cash equivalents, end of period                             $   4,982      $  93,037      $   4,982      $  93,037
                                                                     =========      =========      =========      =========

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for
        Income taxes                                                        --          1,272             --          5,023
        Interest                                                            --            339             --            647
</TABLE>



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


                                       4
<PAGE>   7

                                 LUMINENT, INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)

1. BUSINESS AND BASIS OF PRESENTATION

Business

Luminent, Inc. ("Luminent" or the "Company") designs, manufactures, and sells a
comprehensive line of fiber optic components that enable communications
equipment manufacturers to provide optical networking solutions for the rapidly
growing metropolitan and access segments of the communications network. The
Company's products are designed to meet the increasing bandwidth requirements
between long-haul telecommunication networks and end users. Luminent specializes
in singlemode fiber optic components and subsystems for high-capacity data
transmission for long-reach applications in the metropolitan and access markets.

Luminent was incorporated in Delaware in March 2000 as a wholly owned subsidiary
of MRV Communications, Inc. ("MRV"). Since the completion of Luminent's initial
public offering in November 2000, MRV has owned approximately 92% of Luminent's
outstanding common stock.

On July 25, 2000, MRV and Luminent entered into a Master Separation and
Distribution Agreement (the "Separation Agreement") which became effective as of
September 8, 2000 (the "Separation Date"). MRV transferred to Luminent,
substantially all of the assets and liabilities associated with Luminent's
business.

As of the Separation Date, Luminent began operating independently from MRV. For
periods prior to the Separation Date, the accompanying consolidated condensed
financial statements reflect MRV's historical bases in the assets and
liabilities and the historical results of operations that were transferred to
Luminent. Additionally, the consolidated condensed financial statements include
allocations of certain MRV corporate expenses, including centralized legal,
accounting, employee benefits, real estate, insurance services, information
technology services, treasury and other MRV corporate and infrastructure costs.
The expense allocations have been determined on bases that MRV and Luminent
considered to be a reasonable reflection of the utilization of services provided
or the benefit received by Luminent. The allocation methods are based on
relative revenues, head counts or square footage. However, the financial
information included herein may not reflect the consolidated financial position,
operating results, changes in parent company investment and cash flows of
Luminent in the future or what they would have been had Luminent been a
separate, stand-alone entity during the periods presented.

Luminent faces numerous risks related to the fact that it has no history as an
independent company. In addition, Luminent faces risks common to many technology
companies including but not limited to operating in a sector that is new and
characterized by rapid technological change, evolving industry standards, the
need to generate capital to fund operations and uncertainty regarding market
acceptance of its products and products under development.

Basis of Presentation

The accompanying consolidated condensed financial statements have been prepared
by the Company, in accordance with accounting principles generally accepted in
the United States for interim financial information and pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are adequate to
make the information presented not misleading. These consolidated condensed
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000.

In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary to present a fair presentation have been
included. The operating results for the three months and six months ended June
30, 2001 are not necessarily indicative of the results that may be expected for
the fiscal year ended December 31, 2001.

Earnings per share

Basic and diluted earnings (loss) per common share are computed using the
weighted average number of common shares outstanding. All share and per share
amounts have been retroactively restated to give effect to the Company's
144,000-for-one stock split that occurred on July 25, 2000. The weighted average
number of shares used for computation of basic and diluted earnings (loss) per
share were 156,000,000 for June 30, 2001, and 144,000,000 for June 30, 2000. The
13.4 million stock options outstanding and 75,000 warrants outstanding have been
excluded from the diluted computations of loss per share as of June 30, 2001 as
their effect would be anti-dilutive. There were no options or warrants
outstanding as of June 30, 2000.

2. BUSINESS ACQUISITIONS

On April 24, 2000, MRV completed the acquisition of approximately 97% of the
outstanding capital stock of Fiber Optic Communications, Inc., a Republic of
China corporation. Fiber Optic Communications is a manufacturer of passive fiber
optic components for Wavelength Division Multiplexing. Under the terms of the
purchase agreement, Fiber Optic Communications shareholders received
approximately $48.6 million in cash and approximately 4.7 million shares of MRV
common stock and options to purchase 680,000 shares of MRV common stock for a
total purchase price of approximately $310.4 million. The issuance price of the
MRV common stock was approximately $53 per share, which was determined based on
the average market price five days before and after the terms were agreed upon.
The options to purchase MRV common stock are exercisable at


                                       5
<PAGE>   8

$3.00 per share, have an aggregate intrinsic value of $14.1 million at the
acquisition date, and vest over a four-year period. The acquisition is being
accounted for using the purchase method of accounting. The assets and
liabilities of the acquired entity have been "pushed down" to Luminent. The
excess purchase price paid over the fair value of the net identifiable assets
acquired of $261.6 million has been recorded as goodwill and is being amortized
on a straight-line basis over 5 years. The deferred compensation is being
amortized using the graded vesting method over 4 years.

On July 12, 2000, MRV completed the acquisition of all of the outstanding
capital stock of Quantum Optech Inc., a Republic of China corporation. Quantum
Optech is a manufacturer of optical thin film coating and filters for Dense
Wavelength Division Multiplexing. Under the terms of the purchase agreement,
Quantum Optech shareholders received approximately 1.0 million shares of MRV
common stock and options to purchase approximately 160,000 shares of MRV common
stock for a total purchase price of approximately $36.2 million. The issuance
price of the MRV common stock was approximately $30 per share, which was
determined based on the average market price five days before and after the
terms were agreed upon. The options to purchase MRV common stock are exercisable
at $3.00 per share, have an aggregate intrinsic value of $4.0 million at the
acquisition date, of which $1.3 million is vested, and the remaining vest over a
four-year period. The acquisition is being accounted for using the purchase
method of accounting. The assets and liabilities of the acquired entity have
been "pushed down" to Luminent. The excess purchase price paid over the fair
value of the net identifiable assets acquired of $27.9 million has been recorded
as goodwill and is being amortized on a straight-line basis over 5 years. The
deferred compensation is being amortized using the graded vesting method over 4
years.

On July 21, 2000, MRV completed the acquisition of approximately 99% of the
outstanding capital stock of Optronics International Corp., a Republic of China
corporation. Optronics International is a manufacturer of high temperature
semiconductor lasers, transceivers and detectors for optical networks. Under the
terms of the purchase agreement, Optronics International shareholders received
approximately 3.4 million shares of MRV common stock and options to purchase
approximately 800,000 shares of MRV common stock for a total purchase price of
approximately $124.3 million. The issuance price of the MRV common stock was
approximately $30 per share, which was determined based on the average market
price five days before and after the terms were agreed upon. The options to
purchase MRV common stock are exercisable at $3.00 per share, have an aggregate
intrinsic value of $20.0 million at the acquisition date, of which $6.6 million
is vested, and the remaining vest over a four-year period. The acquisition is
being accounted for using the purchase method of accounting. The assets and
liabilities of the acquired entity have been "pushed down" to Luminent. The
excess purchase price paid over the fair value of the net identifiable assets
acquired of $99.5 million has been recorded as goodwill and is being amortized
on a straight-line basis over 5 years. The deferred compensation is being
amortized using the graded vesting method over 4 years.

The purchase price of Fiber Optic Communications, Quantum Optech and Optronics
International in the aggregate were allocated as follows (in thousands,
unaudited):

<TABLE>
<S>                                                          <C>
          Purchase price                                     $420,861
          Allocation of purchase price
              Net tangible assets                               1,750
              Deferred stock compensation                      30,150
              Goodwill                                        388,961
</TABLE>

The outstanding capital stock of Fiber Optic Communications, Quantum Optech and
Optronics International, purchased by MRV, has been contributed to Luminent. The
results of operations of these acquisitions have been included in Luminent's
consolidated financial statements from the date of acquisition. The following
unaudited pro forma financial information presents the combined results of
operations of Luminent, Fiber Optic Communications, Quantum Optech and Optronics
International as if the acquisitions had occurred as of January 1, 2000, giving
effect to certain adjustments, including amortization of goodwill and other
intangibles and deferred compensation charges.

<TABLE>
<CAPTION>
                                                 Three Months Ending June 30,    Six Months Ending June 30,
                                                   ----------------------          ----------------------
                                                     2000           2001             2000          2001
                                                   --------      --------          --------      --------
                                                        (unaudited)                      (unaudited)
<S>                                                <C>           <C>               <C>           <C>
Pro forma net sales                                $ 32,348      $ 41,103          $ 55,575      $ 89,344
Pro forma net loss                                 $ (1,056)     $(65,327)         $(48,743)     $(86,820)
Pro forma basic and diluted net loss per share     $  (0.01)     $  (0.42)         $  (0.34)     $  (0.56)
</TABLE>

3. INVENTORIES

Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                   December 31,          June 30,
                                                       2000                2001
                                                     -------             -------
                                                                       (unaudited)
<S>                                                  <C>                 <C>
Raw materials                                        $22,896             $18,130
Work in process                                       12,402               8,832
Finished goods                                         4,130               2,924
                                                     -------             -------

  Total inventories                                  $39,428             $29,886
                                                     =======             =======
</TABLE>

4. BUSINESS SEGMENTS AND CONCENTRATIONS OF RISK


                                       6
<PAGE>   9
Luminent operates under one reportable segment: fiber optic components and
modules. Fiber optic components and modules include discrete components such as
laser diodes and light emitting diodes and integrated components such as
transmitters, receivers and transceivers. These products are sold primarily to
original-equipment manufacturers and through distributors.

The Company depends on single or limited source suppliers for some of the key
components and materials in its products, which makes Luminent susceptible to
supply shortages or price fluctuations that could adversely affect operating
results. Management believes this will not have a significant impact on
operations.

For the three months ended June 30, 2001, the Company had one customer that
accounted for approximately 13% of net sales. For the six months ended June 30,
2001, the Company had two customers that accounted for approximately 24% of net
sales. As of June 30, 2001, one customer accounted for approximately 25% of
total accounts receivable. Certain geographical area information follows (in
thousands).

Geographical Area Net Sales (in thousands):

<TABLE>
<CAPTION>
                            Three Months Ending June 30,   Six Months Ending June 30,
                               ---------------------         ---------------------
                                 2000          2001            2000          2001
                               -------       -------         -------       -------
                                    (unaudited)                   (unaudited)
<S>                            <C>           <C>             <C>           <C>
  North America                $18,350       $23,633         $28,754       $54,223
  Asia-Pacific                   5,697        10,531           7,630        21,092
  Europe and others              4,060         6,939           6,622        14,029
                               -------       -------         -------       -------

    Total net sales            $28,107       $41,103         $43,006       $89,344
                               =======       =======         =======       =======
</TABLE>

5. RESTRUCTURING AND OTHER ONE-TIME CHARGES

In the second quarter of 2001, the Company's management approved and implemented
a restructuring plan and other actions in order to adjust operations and
administration due to the dramatic slowdown in demand for communications
equipment. During the three months ended June 30, 2001, the Company recorded
restructure and other one-time charges totaling $41.2 million resulting from the
lower demand for our products and pricing pressures stemming from the continuing
downturn in the communications equipment industry generally and the optical
components sector in particular.

The Company's restructuring activities primarily involve employee severance
costs, abandonment and non-utilization of assets and other similar actions.
Costs for restructuring activities are limited to either incremental costs that
directly result from the restructuring activities and provide no future benefit
or costs incurred under contractual obligations that existed before the
restructuring plan and will continue with either no future benefit or become a
penalty incurred for termination of the obligation.

Restructuring costs totaling $14.5 million consisting of severance and
outplacement of terminated employees and exit costs are included in the results
of operations. The restructuring activities as described above, results in
approximately 100 layoffs during the three months ended June 30, 2001 and will
result in additional layoffs of approximately 500 personnel, bringing the
Company's total workforce to approximately 1,200 employees. Affected employees
will come from all divisions and areas of the Company. The majority of affected
employees will be in the manufacturing group.

A summary of the restructuring costs consist of the following:

<TABLE>
<CAPTION>
                                                                       Remaining
                                       Provision        Utilized        Balance
                                      -----------     -----------     -----------
<S>                                   <C>             <C>          <C>
 Exit costs
  Asset impairment                    $ 8,904,000     $ 8,904,000  $           --
  Closed and abandoned facilities       1,108,000              --       1,108,000
  Other commitments                     2,402,000              --       2,402,000
  Other                                   991,000              --         991,000
                                      -----------     -----------     -----------

                                       13,405,000       8,904,000       4,501,000
Employee severance costs                1,072,000         196,000         876,000
                                      -----------     -----------     -----------

                                      $14,477,000     $ 9,100,000     $ 5,377,000
                                      ===========     ===========     ===========
</TABLE>

In addition to the costs associated with the restructuring plan, the Company
also recorded a one-time $26.1 million charge to write-down inventory to
realizable value and an additional $598,000 charge to bad debt. Furthermore, the
Company is undertaking a formal review of the goodwill generated in its
acquisitions and it may record additional impairment charges when the review is
completed in the fourth quarter of 2001.

6. SEPARATION FROM MRV COMMUNICATIONS, INC.

                                       7
<PAGE>   10

For purposes of governing the ongoing relationships between Luminent and MRV at
and after the separation and to provide for an orderly transition, Luminent and
MRV have entered into various agreements. A brief description of each of the
agreements follows.

Master Separation and Distribution Agreement

MRV and Luminent have entered into a Master Separation Agreement, which contains
key provisions relating to the separation, Luminent's initial funding, initial
public offering and the distribution of Luminent's common stock to MRV's
stockholders. The Master Separation and Distribution Agreement lists the
documents and items that the parties must deliver in order to accomplish the
transfer of assets and liabilities from MRV to Luminent, effective on the
separation date. The Master Separation and Distribution Agreement also contains
conditions that must occur prior to the distribution. The parties also entered
into ongoing covenants that survive the transactions, including covenants to
establish interim service level agreements, exchange information, engage in
certain auditing practices and resolve disputes in particular ways.

General Assignment and Assumption Agreement

The General Assignment and Assumption Agreement identifies the assets and
certain capital stock that MRV has transferred to Luminent and the liabilities
that Luminent has assumed from MRV in the separation. The General Assignment and
Assumption Agreement also describes when and how these transfers and assumptions
occurred. In general, these assets and liabilities were those that appeared in
the consolidated balance sheet as of September 30, 2000.

Intellectual Property Agreements

The Master Technology Ownership and License Agreement, the Master Patent
Ownership and License Agreement and the Master Trademark Ownership and License
Agreement collectively are referred to as the Intellectual Property Agreements.
Under the Intellectual Property Agreements, MRV confirmed that Luminent owns or
MRV transferred to Luminent certain rights in specified patents, patent
applications, invention disclosures, specified trademarks and other intellectual
property related to Luminent's current business, research and development
efforts.

Employee Matters Agreement

The Employee Matters Agreement outlines how MRV and Luminent allocated assets,
liabilities and responsibilities relating to current and former employees of
Luminent and their participation in the benefits plans, including stock plans,
that MRV currently sponsors and maintains. The Employee Matters Agreement also
contains provisions describing some of Luminent's employee benefit and employee
stock plans.

All eligible Luminent employees continue to participate in the MRV benefits
plans on comparable terms and conditions to those for MRV employees until the
distribution date or until Luminent establishes benefit plans for its employees,
or elects not to establish comparable plans if it is not legally or financially
practical. Luminent intends to establish its own benefit program no later than
the time of distribution.

Once Luminent establishes it own benefits plans, it may modify or terminate each
plan in accordance with the terms of that plan and its policies. No Luminent
benefit plan will provide benefits that overlap benefits under the corresponding
MRV benefit plan at the time of the distribution. Each Luminent benefit plan
will provide that all service, compensation and other benefit determinations
that, as of the distribution, were recognized under the corresponding MRV
benefits plan, will be taken into account under that Luminent benefit plan.

Following the date of MRV's distribution of its Luminent common stock to its
stockholders, Luminent will be under no obligation to maintain these plans in
the form in which they were established or at all. The transfer to Luminent of
employees at certain of MRV's international operations, and of certain employee
benefit plans, may not take place until Luminent receives consents or approvals
or has satisfied other applicable requirements.

Tax Sharing and Indemnification Agreement

The Tax Sharing and Indemnification Agreement allocates MRV's and Luminent's
responsibilities and rights for certain tax matters. The agreement requires
Luminent to pay MRV for the incremental tax costs of Luminent's inclusion in
consolidated, combined or unitary tax returns with affiliated corporations. In
determining these incremental costs, the Tax Sharing and Indemnification
Agreement takes into account not only the group's incremental tax payments to
the Internal Revenue Service or other taxing authorities, but also the
incremental use of tax losses of affiliates to offset Luminent's taxable income,
and the incremental use of tax credits of affiliates to offset the tax on
Luminent's income. The Tax Sharing and Indemnification Agreement also provides
for compensation or reimbursement as appropriate to reflect redeterminations of
Luminent's tax liability for periods during which Luminent joined in filing
consolidated, combined or unitary tax returns.

The Tax Sharing and Indemnification Agreement also requires Luminent to
indemnify MRV for certain taxes and similar obligations, including (a) sales
taxes on the sale of products purchased by MRV from Luminent before the
distribution, (b) customs duties or harbor maintenance fees on products exported
or imported by MRV on behalf of Luminent, (c) the additional taxes that would
result if an acquisition of a controlling interest in Luminent's stock after the
distribution causes the distribution not to qualify for tax-free treatment to
MRV, and (d) any taxes resulting from transactions undertaken in preparation for
the distribution.

Luminent's indemnity obligations include any interest penalties on taxes, duties
or fees for which Luminent must indemnify MRV.

Each member of a consolidated group for U.S. federal income tax purposes is
jointly and severally liable for the group's federal income tax liability.
Accordingly, Luminent could be required to pay a deficiency in the group's
federal income tax liability for a period during which Luminent was a member of
the group even if the Tax Sharing and Indemnification Agreement allocates that
liability to MRV or another member.


                                       8
<PAGE>   11

Master Transitional Services Agreement

The Master Transitional Service Agreement governs the individual transitional
services as requested by Luminent and provided by MRV, on an interim basis, for
one year from the date of separation, unless extended for specific services or
otherwise indicated in the agreement. The services include data processing and
telecommunications services, such as voice telecommunications and data
transmission, and information technology support services, for functions
including accounting, financial management, tax, payroll, stockholder and public
relations, legal, procurement, and other administrative functions. Specified
charges for such services are generally intended to allow the providing company
to recover the direct and indirect costs of providing the services. The Master
Transitional Services Agreement also will cover the provision of certain
additional transitional services identified from time to time after the
Separation Date that were inadvertently or unintentionally omitted from the
specified services, or that are essential to effectuate an orderly transition
under the Master Separation and Distribution Agreement, so long as the provision
of such services would not significantly disrupt MRV's operations or
significantly increase the scope of its responsibility under the agreement.

In addition, the Master Transitional Services Agreement will provide for the
replication of some computer systems, including hardware, software, data storage
or maintenance and support components. Generally, the party needing the
replicated system will bear the costs and expenses of replication. Generally,
the party purchasing new hardware or licensing new software will bear the costs
and expenses of purchasing the new hardware or obtaining the new software
licenses.

Real Estate Matters Agreement

The Real Estate Matters Agreement addresses real estate matters relating to
certain MRV leased and owned properties that MRV will transfer to or share with
Luminent. The Real Estate Matters Agreement describes the manner in which MRV
will transfer to or share with Luminent various leased and owned properties. The
Real Estate Matters Agreement provides that Luminent will be required to accept
the transfer of all sites allocated to Luminent, even if a site has been damaged
by a casualty before the separation date. The Real Estate Matters Agreement also
provides that all reasonable costs required to effect the transfers, including
landlord consent fees and landlord attorney's fees will be paid by MRV.

Indemnification and Insurance Matters Agreement

Effective as of the separation date, subject to specified exceptions, Luminent
and MRV released the other from any liabilities arising from events occurring on
or before the separation date, including events occurring in connection with the
activities to implement the separation, the initial public offering and the
distribution. The Indemnification and Insurance Matters Agreement also contains
provisions governing indemnification. In general, Luminent and MRV will each
indemnify the other from all liabilities arising from their respective
businesses or contracts, as well as liabilities arising from a breach of the
Master Separation and Distribution Agreement or any ancillary agreement. In
addition, MRV and Luminent will each indemnify the other against liability for
specified environmental conditions. Luminent will reimburse MRV for the cost of
any insurance coverage from the separation date to the distribution date.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

All statements contained in this Report that are not historical facts, including
but not limited to, statements regarding our business strategies and
expectations concerning future operations, margins, profitability, liquidity,
capital expenditures and capital resources, are based on current expectations.
These statements are forward-looking in nature and involve a number of risks and
uncertainties. Generally, words including but not limited to "anticipates,"
"believes," "estimates," "expects" and similar expressions as they relate to the
Company and its management are intended to identify forward-looking statements.
Although management believes that the expectations in such forward-looking
statements are reasonable, it can give no assurance that any forward-looking
statement will prove to be correct and actual results may differ materially. We
caution readers not to place undue reliance on any forward-looking statements,
which statements are made pursuant to the Private Litigation Reform Act of 1995.
The factors identified under "Risk Factors" below and elsewhere in this Report
are among the factors that could cause actual results to differ materially from
the forward-looking statements. The forward-looking statements contained in this
Report speak only as of the date that we have filed this Report. We expressly
disclaim any obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained in this Report, including to reflect
any change in our expectations with regard to that forward-looking statement or
any change in events, conditions or circumstances on which that forward-looking
statement is based.

MARKET CONDITIONS AND CURRENT OUTLOOK

Macroeconomic factors, such as an economic slowdown in the U.S. and abroad, have
detrimentally impacted demand for communications products, thereby resulting in
reduced demand for optical components in general. The unfavorable economic
conditions and reduced capital spending detrimentally affected sales to service
providers, network equipment companies, e-commerce and Internet businesses, and
the manufacturing industry in the United States during the last six months, and
appear to continue to affect these industries in the second quarter of 2001 and
may affect them beyond the second quarter. Announcements by industry
participants and observers indicate there is a slowdown in industry spending and
participants are seeking to reduce existing inventories.

Our two largest customers, Cisco and Marconi, have recently announced that they
expect declining revenues and profitability in the near term due to softening
demand for telecommunications and networking equipment. This has resulted in
reductions and rescheduling by Cisco and Marconi in purchases from their
suppliers such as us as they seek to reduce their existing inventories and
adjust to reduced demand in the market. This will likely result in lower sales
to Cisco and Marconi, and could result in lower revenues overall. Our sales may
decline significantly with resulting fluctuations or harm to our operating
results and financial condition if either Cisco or Marconi cancels, reduces or
delays purchases of our products or unduly delays qualifying them.


                                       9
<PAGE>   12

During the three months ended June 30, 2001, we recorded restructuring and
other one-time charges totaling $41.2 million, resulting from the lower demand
for our products and pricing pressures stemming from the continuing downturn in
the communications equipment industry generally and the optical components
sector in particular. These charges include the write-down of inventory of $26.1
million, asset impairment charges of $8.9 million, and other restructuring and
non-recurring items related to the recent market conditions of $6.2 million.
Additionally, during the quarter ended June 30, 2001, we began to reduce our
workforce, which we expect will result in layoffs of approximately 600 people,
bringing our total workforce to approximately 1,200 employees.

Furthermore, the Company is undertaking a formal review of the goodwill
generated in its acquisitions and it may record additional impairment charges
when the review is completed in the fourth quarter of 2001.

OVERVIEW

We design, manufacture and sell a comprehensive line of fiber optic components
that enable communications equipment manufacturers to provide optical networking
equipment for the rapidly growing metropolitan and access segments of the
communications network. Directly and through its subsidiaries, MRV designs,
manufactures and sells data networking products, including networking and
Internet infrastructure products such as switching and router management
systems, and through Luminent, MRV was engaged in the fiber optics components
business. Our fiber optic components business was the original business of MRV
when MRV began operations in July 1988. From inception in 1988 until our
separation on September 8, 2000, when MRV completed the contribution and
transfer to us of our business, we operated as a division of MRV and conducted
business using MRV's trade name. In March 2000, we were incorporated in Delaware
as a wholly owned subsidiary of MRV. In April 2000, we began operating under the
Luminent trade name.

As of June 30, 2001, MRV owned approximately 92% of the outstanding shares of
our common stock. MRV has announced its intention to divest its remaining equity
interest in us by selling up to 18,720,000 shares of our common stock to the
public and distributing the remainder of its shares of our common stock to the
holders of MRV's common stock, although it is not obligated to do so. In August
2001, we registered 18,720,000 shares of our common stock on behalf of MRV in a
prospectus dated August 8, 2001. In May 2001, MRV received a private letter
ruling from the Internal Revenue Service that MRV's distribution of their shares
of Luminent common stock to the holders of MRV common stock will be tax-free to
its stockholders and MRV for United States federal income tax purposes if the
distribution occurs within one year of the IPO, i.e., by November 8, 2001.
According to MRV's public disclosures, there are other conditions that must be
satisfied or waived by MRV, in their sole discretion, prior to the distribution
of our common stock. These conditions include, among other things:

        -   all required government approvals must be in effect;

        -   MRV's redemption or repayment of their outstanding convertible
            subordinated debentures;

        -   no legal restraints must exist preventing this distribution; and

        -   nothing must have happened in the intervening time between the
            offering and the distribution, including a future change in market
            or economic conditions or in our or MRV's business and financial
            condition, that causes the MRV board of directors to conclude that
            the distribution is not in MRV's best interest or the best interest
            of MRV's stockholders.

The exact distribution formula and record date to qualify for any distribution
will be determined at a future date.

On April 24, 2000, MRV acquired approximately 97% of the outstanding capital
stock of Fiber Optic Communications, a Taiwanese manufacturer of passive fiber
optic components with facilities in both Taiwan and the People's Republic of
China. The purchase price paid was approximately $310.4 million in cash, common
stock and options to purchase common stock of MRV, including amounts recorded as
deferred stock compensation. On July 12, 2000, MRV acquired all of the
outstanding capital stock of Quantum, a Taiwanese manufacturer of active and
passive fiber optic components. The purchase price paid was approximately $36.2
million in common stock and options to purchase common stock of MRV, including
amounts recorded as deferred stock compensation. On July 21, 2000, MRV acquired
approximately 99% of the outstanding capital stock of Optronics, a Taiwanese
manufacturer of active fiber optic components. The purchase price paid was
approximately $124.3 million in common stock and options to purchase common
stock of MRV, including amounts recorded as deferred stock compensation. The
acquisitions were made to expand our product offerings, enhance our technology
expertise and expand our manufacturing capabilities.

These acquisitions were accounted for using the purchase method and the
outstanding capital stock purchased by MRV in each of the acquisitions has been
contributed to us as of the dates of acquisition. Therefore, the results of
operations of Fiber Optic Communications, Optronics and Quantum have been
included in our consolidated financial statements from April 25, 2000, July 13,
2000 and July 22, 2000, respectively.

In connection with the acquisitions of Fiber Optic Communications, Optronics and
Quantum, a portion of the purchase prices paid represented deferred stock
compensation relating to options to purchase the common stock of MRV. These
options had fair values of approximately $14.1 million, $13.4 million and $2.7
million for Fiber Optic Communications, Optronics and Quantum, respectively.
Deferred stock compensation amortization expense for the three months and six
months ended June 30, 2001 relating to these stock options was approximately
$2.7 million and $5.9 million, respectively. In connection with these
acquisitions, we expect to incur an additional $11.7 million of deferred stock
compensation until fully amortized in 2004. Deferred stock compensation is
amortized using the graded method over a four-year period.

Goodwill resulting from the Fiber Optic Communications, Optronics and Quantum
acquisitions totaled $261.6 million, $99.5 million and $27.9 million,
respectively. For the three months and six months ended June 30, 2001, we
recorded amortization of goodwill of approximately $19.5 million and $39.0
million, respectively, relating to these acquisitions. We expect to record
amortization of goodwill for Fiber Optic Communications,


                                       10
<PAGE>   13

Optronics and Quantum of approximately $19.5 million per quarter until December
31, 2001. At January 1, 2002 we intend to implement SFAS No. 142. (see RECENT
ACCOUNTING PRONOUNCEMENTS, below) Fiber Optic Communications was the largest and
most significant of the acquisitions.

Fiber Optic Communications produces margins similar to us; however, it has not
experienced the growth in net sales or operating income that we have experienced
during the last three fiscal years. We are not aware of any unusual trends
specific to the businesses of our acquired companies, except that they are
experiencing the same softness in demand and pricing that we and the rest of our
industry are experiencing.

In July 2000, MRV and the Company entered into four-year employment agreements
with our President and Chief Executive Officer and Vice President of Finance and
Chief Financial Officer. The agreements provide for annual salaries, performance
bonuses and combinations of stock options to purchase shares of MRV's common
stock and Luminent's common stock. The options to purchase MRV's common stock
are immediately exercisable. The options to purchase Luminent's common stock
vest over four years. These options were granted to our President and Chief
Executive Officer and Vice President of Finance and Chief Financial Officer at
exercise prices below market value, resulting in deferred stock compensation.
Deferred stock compensation reported for the three months and six months ended
June 30, 2001 was $5.8 million and $13.0 million, respectively, and we will
incur additional deferred stock compensation of approximately $25.0 million
through 2004.

We reported a net loss of approximately $66.0 million and $88.3 million for the
three months and six months ended June 30, 2001, respectively. The net loss was
primarily due to amortization of goodwill and deferred stock compensation
related to the acquisitions of Fiber Optic Communications, Optronics and Quantum
for the three months and six months ended June 30, 2001, our employment
arrangements with our President and Chief Executive Officer and Vice President
of Finance and Chief Financial Officer for the three months and six months ended
June 30, 2001 and recording restructuring and other one-time charges totaling
$41.2 million resulting from the lower demand for our products and pricing
pressures stemming from the continuing downturn in the communications equipment
industry generally and the optical components sector in particular for the three
months ended June 30, 2001. These one-time charges include the write-down of
inventory of $26.1 million, asset impairment of $8.9 million, and other
restructuring and non-recurring items related to the recent market conditions of
$6.2 million. See RESULTS OF OPERATIONS section, below, for more discussion. In
addition, we will record amortization of goodwill or other intangible assets and
deferred stock compensation relating to the Fiber Optic Communications,
Optronics and Quantum acquisitions and our employment arrangements going
forward. As a consequence of these amortization charges, we do not expect to
report net income in the foreseeable future.

We have entered into various agreements related to interim and ongoing
relationships with MRV. These agreements provide for transitional services and
support in the areas of data processing and telecommunications services (such as
voice telecommunications and data transmission and information technology
support services) for functions including accounting, financial management, tax,
payroll, stockholder and public relations, legal, procurement and other
administrative functions. Services are generally cost plus 5%, but may increase
to cost plus 10% if the services extend beyond a one year period. Subsequent to
the Separation Date, certain of these services were discontinued, including
accounting, financial management, payroll, legal, procurement and other
administrative functions. The transition period varies depending on the
agreement but is generally one year. Although the fees provided for in the
agreements are intended to represent the fair market value of these services, we
cannot assure that these fees necessarily reflect the costs of obtaining the
services from unrelated third parties or of our providing these services
internally. However, we believe that purchasing these services from MRV provides
an efficient means of obtaining these services during the transition period. We
must also negotiate new or revised agreements with various third parties as a
separate, stand-alone entity. We cannot assure that the terms we will be able to
negotiate will be as favorable as those that we enjoyed as part of MRV. In
addition, as part of MRV, we benefited from various economies of scale including
shared global administrative functions, facilities and volume purchase
discounts. We expect our costs will increase as a result of the loss or
renegotiation of these arrangements, although the amount of the cost increase is
not determinable at this time.

BASIS OF PRESENTATION

Our consolidated financial statements have been carved out from the consolidated
financial statements of MRV using the historical results of operations and
historical bases of the assets and liabilities of the MRV businesses that our
company comprises. The consolidated condensed financial statements through June
30, 2001 also include allocations to us of certain MRV corporate assets,
liabilities and expenses, including centralized legal, accounting, employee
benefits, real estate, insurance services, information technology services,
treasury and other MRV corporate and infrastructure costs. The expense
allocations have been determined on bases that MRV and we considered to be a
reasonable reflection of the utilization of the services provided to us or the
benefit received by us. The expense allocation methods included relative sales,
headcount, square footage, transaction processing costs and adjusted operating
expenses. No intercompany interest income or expense has been allocated to, or
included in, our consolidated financial statements.

The financial information presented in this Report is not indicative of our
financial position, results of operations or cash flows in the future nor is it
necessarily indicative of what our financial position, results of operations or
cash flows would have been had we been a separate, stand-alone entity for the
periods presented. The financial information presented in this Report does not
reflect many of the significant changes that will occur in our funding and
operations as a result of our becoming a stand-alone entity and the
distribution.

RESULTS OF OPERATIONS

The following table sets forth selected consolidated historical financial data
for the periods indicated, expressed as a percentage of net sales.

<TABLE>
<CAPTION>
                                        Three Months Ending June 30,   Six Months Ending June 30,
                                             -----------------              ----------------
                                              2000       2001                2000      2001
                                             ------     ------              ------    ------
                                                (unaudited)                   (unaudited)
<S>                                           <C>        <C>                 <C>        <C>
Net sales                                     100%       100%                100%       100%
Cost of sales                                  65        141                  65        101
</TABLE>


                                       11
<PAGE>   14

<TABLE>
<S>                                           <C>        <C>                 <C>        <C>
  Gross profit                                 35        (41)                 35         (1)
Operating costs and expenses:
  Selling, general and administrative          21         59                  19         44
  Research and development                     15         12                  15         11
  Amortization of goodwill                     34         47                  22         44
    Total operating costs                      70        118                  56         99
Operating loss                                (35)      (159)                (21)      (100)
Other income, net                               1          2                   0          3
  Loss before provision for income taxes      (34)      (157)                (21)       (97)
Provision for income taxes                      4          4                   3          2
Minority interest                               1          0                   1          0
  Net income (loss)                           (39)%     (161)%               (25)%      (99)%
</TABLE>

Net Sales

We recognize revenue upon shipment of our products, at which time, customer
acceptance of the products has been attained and collection is considered
probable. Net sales for the three months ended June 30, 2001 increased 46%, to
$41.1 million from $28.1 million for the three months ended June 30, 2000. Net
sales for the six months ended June 30, 2001 increased 108%, to $89.3 million
from $43.0 million for the six months ended June 30, 2000. Our increase in net
sales is primarily a result of the growth of the Internet and e-commerce and the
corresponding increased bandwidth requirements.

The following table sets forth our net sales to certain customers as a
percentage of our total net sales:

<TABLE>
<CAPTION>
                          Three Months Ending June 30,      Six Months Ending June 30,
                               ----------------                 ----------------
                               2000         2001                2000         2001
                               ----         ----                ----         ----
                                  (unaudited)                      (unaudited)
<S>                             <C>          <C>                 <C>          <C>
Marconi Communications          21%          13%                 17%          13%
Cisco Systems                   12%           9%                 14%          11%
Other                           67%          78%                 69%          76%
                               ---          ---                 ---          ---

  Net sales                    100%         100%                100%         100%
                               ===          ===                 ===          ===
</TABLE>

We rely on one-time purchase orders rather than long-term contracts with both
Cisco and Marconi, and, as a result, we cannot predict the size, timing or terms
of their incoming orders. We have experienced variations in the purchase
patterns of Marconi and Cisco in the past, and we may experience continued
variation in the future. Material reasons for historic variations in the
purchase patterns of these customers, particularly Marconi, have included
weather patterns that have delayed field installations of systems that
incorporate our products and delays by our customers in qualifying our products
that employ new components or features to assure compatibility with the
components of other suppliers that are integrated with our products into our
customers' systems. The timing of this qualification process is totally within
the control of these customers. Thus, even when our products prove compatible
with the components of other suppliers, as has typically been the case in the
past, delays by our customers in completing the qualification process has
resulted in corresponding delays in our receipt of orders for them.

Cisco and Marconi have recently announced that they expect declining revenues
and profitability in the near term due to softening demand for
telecommunications and networking equipment. This has resulted in reductions and
rescheduling by Cisco and Marconi in purchases from their suppliers such as us
as they seek to reduce their existing inventories and adjust to reduced demand
in the market. This will likely result in lower sales to Cisco and Marconi, and
could result in lower revenues overall. Our sales may decline significantly with
resulting fluctuations or harm to our operating results and financial condition
if either Cisco, Marconi or other material customers cancel, reduce or delay
purchases of our products or unduly delays qualifying them.

Gross Profit

Gross profit is equal to our net sales less our cost of sales. Our cost of sales
includes materials, direct labor and overhead. Cost of inventory is determined
by the first-in, first-out method. Gross profit for the three months ended June
30, 2001, decreased 269%, down to a loss of $16.8 million from a profit of $10.0
million for the three months ended June 30, 2000. Gross profit for the six
months ended June 30, 2001, decreased 105%, down to a loss of $802,000 from
$15.2 million for the six months ended June 30, 2000. Pro forma gross profit for
the three months ended June 30, 2001, before restructuring charges, inventory
write-downs and other market-related one-time charges of $29.3 million for the
three months ended June 30, 2001, and deferred compensation amortization expense
of $744,000 and $566,000 for the three months ended June 30, 2000 and 2001,
respectively, would have increased 22%, to $13.1 million. Pro forma gross profit
for the six months ended June 30, 2001, before inventory write-downs and other
market-related one-time charges of $29.3 million for the three months ended June
30, 2001, and deferred compensation amortization expense of $744,000 and $1.2
million for the six months ended June 30, 2000 and 2001, respectively, would
have increased 87%, to $29.8 million.

Our pro forma gross margin, before restructuring charges, inventory write-downs
and other market-related one-time charges for the three months ended June 30,
2001, and deferred compensation amortization expense for the three months and
six months ended June 30, 2000 and 2001, decreased to 32% for the three months
ended June 30, 2001, from 38% for the three months ended June 30, 2000 and
decreased to 33% for the six months ended June 30, 2001, from 37% for the six
months ended June 30, 2000. Our gross margins (defined as gross profit as a
percentage of net sales) are generally affected by price changes over the life
of the products and improved production efficiencies as a result of increased
utilization. The former effect will generally decrease gross margins over the
products' respective life cycles, whereas as the latter effect typically
increases gross margins. Prices for existing products are generally expected to
continue to decrease over their respective life cycles. Our lower margin
customers typically operate in highly competitive markets where the price of our
products is a key factor. Although we sacrifice margins to these customers, our
volumes are typically


                                       12
<PAGE>   15

greater than the volumes achieved with higher margin customers. As we seek to
continue to diversify our customer base, we plan to target markets with improved
margins and less competitive end-markets. In the short term, we expect margins
to remain constant or decline slightly due to the integration of the acquired
companies with historically lower margins. In the mid- to long term, we expect
margins to improve due to increased operating efficiencies associated with
capacity utilization in Taiwan and People's Republic of China, diversification
of sales to higher margin customers, and a favorable shift towards a higher
margin customer base.

Operating Costs and Expenses

Operating costs and expenses consist of selling, general and administrative,
research and development costs, costs associated with acquisitions, and other
operating related charges. Operating costs and expenses, increased to 118% of
net sales, or $48.5 million, for the three months ended June 30, 2001, from 70%
of net sales, or $19.7 million, for the three months ended June 30, 2000.
Operating costs and expenses, increased to 99% of net sales, or $88.5 million,
for the six months ended June 30, 2001, from 56% of net sales, or $24.3 million,
for the six months ended June 30, 2000. Pro forma operating costs and expenses
for the three months ended June 30, 2001, before restructuring and other
one-time charges of $11.9 million for the three months ended June 30, 2001,
goodwill amortization of $9.6 million and $19.5 million and deferred
compensation amortization expense of $2.2 million and $7.9 million for the three
months ended June 30, 2000 and 2001, respectively, would have increased 17%, to
$9.2 million. Pro forma operating costs and expenses for the six months ended
June 30, 2001, before market-related one-time charges of $11.9 million for the
three months ended June 30, 2001, goodwill amortization of $9.6 million and
$39.0 million and deferred compensation amortization expense of $2.2 million and
$17.7 million for the six months ended June 30, 2000 and 2001, respectively,
would have increased 60%, to $20.0 million. Pro forma operating costs and
expenses, as a percentage of net sales, are lower for the three months and six
months ended June 30, 2001 than the three months and six months ending June 30,
2000 due to an effort to realize greater efficiencies in the current down
market.

Selling, general and administrative expenses for the three months ended June 30,
2001, increased to 59% of net sales, or $24.2 million, from 21% of net sales, or
$5.9 million, for the three months ended June 30, 2000. Selling, general and
administrative expenses for the six months ended June 30, 2001, increased to 44%
of net sales, or $39.5 million, from 19% of net sales, or $8.1 million, for the
six months ended June 30, 2000. Pro forma selling, general and administrative
expenses for the three months ended June 30, 2001, before market-related
one-time charges of $11.4 million for the three months ended June 30, 2001,
deferred stock compensation expense of $1.1 million and $7.0 million for the
three months ended June 30, 2000 and 2001, respectively, would have been 14% of
net sales, or $5.8 million, an increase over the same period in the prior year
by $920,000. Pro forma selling, general and administrative expenses for the six
months ended June 30, 2001, before market-related one-time charges of $11.4
million for the three months ended June 30, 2001, deferred stock compensation
expense of $1.1 million and $15.7 million for the six months ended June 30, 2000
and 2001, respectively, would have been 14% of net sales, or $12.4 million, an
increase over the same period in the prior year by $5.4 million. The main reason
for the increases is the inclusion of the new acquisitions of Fiber Optic
Communications, Optronics and Quantum.

Research and development expenses, decreased as a percentage of net sales from
15% to 12% and from 15% to 11% of net sales during the three months and six
months ended June 30, 2001, respectively, from the same periods in 2000.
However, in terms of absolute dollars, research and development expenses
increased from the three months and six months ended June 30, 2000 to the three
months and six months ended June 30, 2001, from $2.4 million to $5.2 million and
from $6.6 million to $10.0 million, respectively. Pro forma research and
development expenses for the three months ended June 30, 2001, before
market-related one-time charges of $501,000 for the three months ended June 30,
2001, and deferred stock compensation of $1.2 million and $890,000 for the three
months ended June 30, 2000 and 2001, respectively, would have increased to $3.4
million from $3.0 million from the same period in 2000. Pro forma research and
development expenses for the six months ended June 30, 2001, before
market-related one-time charges of $501,000 for the three months ended June 30,
2001, and deferred stock compensation of $1.2 million and 2.0 million for the
six months ended June 30, 2000 and 2001, respectively, would have increased to
$7.6 million from $5.5 million from the same period in 2000. Research and
development expenses increased primarily due to the addition of Fiber Optics
Communications, Optronics and Quantum. During the year ended December 31, 2000
we began development of our next generation products for applications such as
fiber-to-the-home and fiber-to-the-curb. Fiber-to-the-home and fiber-to-the-curb
are industry terms referring to the deployment of fiber optic cable for
residential access to communications networks. Research and development
expenditures also included additional development of our duplexers, triplexers
and high-speed transceivers. We continue to invest heavily in areas targeted at
broadening our customer base, product lines and end-product applications. We
expect absolute dollars spent on research and development to continue to
increase as we invest in key technical personnel, expand our current product
lines and develop new product offerings.

During the three months ended June 30, 2001, we incurred amortization of
goodwill and deferred stock compensation of $19.5 million and $2.7 million,
respectively, relating to the acquisitions of Fiber Optic Communications,
Optronics and Quantum. During the six months ended June 30, 2001, we incurred
amortization of goodwill and deferred stock compensation of $39.0 million and
$5.9 million, respectively, relating to these acquisitions. We expect to incur
additional amortization of goodwill from these acquisitions of approximately
$19.5 million each quarter through December 31, 2001. At January 1, 2002 we
intend to implement SFAS No. 142 (see RECENT ACCOUNTING PRONOUNCEMENTS, below).
Deferred stock compensation charges from these acquisitions will generate an
additional $11.7 million of expense through 2004. Deferred stock compensation is
amortized using the graded method over the related expected employee service
period, in this case four years.

Provision for Income Taxes

The provision for income taxes was $1.8 million and $1.9 million for the three
months and six months ended June 30, 2001, respectively. The effective tax rate
for the three months and six months ended June 30, 2001 was (2.1%), resulting
from a tax provision computed based on a net loss position. The rate was
negatively impacted by the amortization of goodwill and certain deferred stock
compensation, which are not tax deductible. Our effective tax rates in future
years may fluctuate due to amortization of goodwill and deferred stock
compensation partially offset by favorable tax programs available in certain
foreign tax jurisdictions where we currently have operating facilities.

LIQUIDITY AND CAPITAL RESOURCES


                                       13
<PAGE>   16

We received $132.3 million in net proceeds from the sale of 12,000,000 shares of
our common stock in our initial public offering completed in November 2000.

On June 30, 2001, we had working capital of $123.0 million, compared with $161.7
million at December 31, 2000. The ratio of current assets to current liabilities
at June 30, 2001 was 3.2 to 1, compared to 4.4 to 1 at December 31, 2000.

Cash used by operating activities was $3.5 million and $23.0 million for the
three months and six months ended June 30, 2001, respectively. Cash flows from
operating activities was adversely affected by our net loss of $66.0 million and
$88.3 million for the three months and six months ended June 30, 2001,
respectively, increase in inventory for the three months ended March 31, 2001,
increase in accounts receivable and deferred income taxes, payment of accounts
payables, and establishing short-term deposits for capital acquisitions, all
offset by non-cash charges for the amortization of goodwill of $19.5 million and
$39.0 million for the three months and six months ended June 30, 2001,
respectively, deferred stock compensation of $8.9 million and $18.9 million for
the three months and six months ended June 30, 2001, respectively, and
restructure and other one-time charges incurred as a result of the current
slowdown in the communication industry for the three months ended June 30, 2001.
Inventory levels increased during the three months ended March 31, 2001 in
anticipation of increased sales. However, due to the dramatic downturn in demand
for communications equipment, we wrote-off $26.2 million of inventory during the
next three months ended June 30, 2001. The increase in accounts receivable was
due primarily to increased sales. Capital expenditures for property and
equipment represent the majority of cash used in investing activities. The
capital expenditures for the three months and six months ended June 30, 2001 of
$7.3 million and $17.2 million, respectively, plus another $3.0 million and $9.0
million, respectively, in short-term deposits for the acquisition of capital
assets, reflect our investment in expanding production and research and
development capacity.

We believe that cash on hand, along with our cash flows from operations, will be
sufficient to satisfy our working capital, capital expenditure and research and
development requirements for at least the next 12 months. However, we may
require or choose to obtain additional debt or equity financing in order to
finance acquisitions or other investments in our business. We expect to continue
to devote resources to purchases of capital equipment as we continue to build
and relocate our manufacturing capabilities and continue to expand our research
and development programs. Our future capital requirements will depend on many
factors, including our rate of revenue growth, the timing and extent of spending
to support development of new products and expansion of sales and marketing, the
timing of new product introductions and enhancements to existing products and
market acceptance of our products.

FOREIGN CURRENCY

We operate on an international basis. A significant portion of our revenues and
cost of sales are incurred in U.S. dollars. For the three months and six months
ended June 30, 2001, approximately 52% and 43%, respectively, of our revenues
and 50% and 43%, respectively, of our cost of sales were incurred in currencies
other than the U.S. dollar. For the three months and six months ended June 30,
2001, approximately 71% and 68%, respectively, of our operating expenses were
incurred in currencies other than the U.S. dollar, including the non-cash
charges for deferred compensation expense and goodwill amortization incurred
with the foreign subsidiary acquisitions. For the three months ended June 30,
2001, the New Taiwan dollar is the most significant of such currencies.

The New Taiwan dollar has been relatively stable in relation to the U.S. dollar
in recent years, and accordingly, we have not experienced any significant
fluctuations in operating results due to exchange rate fluctuations in the New
Taiwan dollar in relation to the U.S. dollar.

Fluctuations in the value of the currencies in which we conduct our business
relative to the U.S. dollar will cause U.S. dollar translation of such
currencies to vary from one period to another. We cannot predict the effect of
exchange rate fluctuations upon future operating results. However, because we
have expenses as well as revenues in each of the principal functional
currencies, the exposure to our financial results to currency fluctuations is
reduced. We have not historically attempted to reduce our currency risks through
hedging instruments, however, we may do so in the future.

INFLATION

We believe that our revenue and results of operations have not been
significantly impacted by inflation during the last three years.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998 and June 1999, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Investments and Hedging Activities," and SFAS No. 137, which
delayed the effective date of SFAS No. 133. In June 2000, the FASB issued SFAS
No. 138 which provides additional guidance for the application of SFAS No. 133
for certain transactions. We adopted this statement on January 1, 2001 and the
adoption of this statement did not have a material impact on our financial
position or results of operations.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 "Revenue Recognition in Financial Statements," as amended. SAB
101 summarizes certain of the Securities and Exchange Commission's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. We have applied the provisions of SAB 101 in the
consolidated financial statements. The adoption of SAB 101 did not have a
material impact on our financial condition or results of operations.

In March 2000, the FASB issued interpretation No. 44 (FIN 44), "Accounting for
Certain Transactions involving Stock Compensation, an interpretation of APB
Opinion No. 25." FIN 44 clarifies the application of APB No. 25 for certain
issues, including the definition of an employee, the treatment of the
acceleration of stock options and the accounting treatment for options assumed
in business combinations. FIN 44 became effective


                                       14
<PAGE>   17

on July 1, 2000, but is applicable for certain transactions dating back to
December 1998. The adoption of FIN 44 did not have a significant impact on our
financial position or results of operations.

The FASB recently approved two statements: SFAS No. 141, "Business Combinations"
and SFAS No. 142, "Goodwill and Other Intangible Assets", which provide guidance
on the accounting for business combinations, requires all future business
combinations to be accounted for using the purchase method, discontinues
amortization of goodwill, defines when and how intangible assets are amortized,
and requires an annual impairment test for goodwill. We plan to adopt these
statements effective January 1, 2002. We are currently reviewing these standards
to determine the impact on our results of operation and financial position. The
most significant anticipated effect on our financial statements on adoption
would be discontinuing goodwill amortization and the possible recording of a
goodwill impairment loss measured as of the date of adoption.

RISK FACTORS

Set forth below and elsewhere in this Report and in other documents we file with
the SEC are risks and uncertainties that could cause actual results to differ
materially from the results contemplated by the forward-looking statements
contained in this Report and in public statements and press releases we make
from time to time.

WE CURRENTLY DERIVE A SIGNIFICANT PORTION OF OUR NET SALES FROM TWO CUSTOMERS,
AND OUR NET SALES MAY DECLINE SIGNIFICANTLY IF EITHER OF THESE CUSTOMERS
CANCELS, REDUCES OR DELAYS PURCHASES OF OUR PRODUCTS.

        Our future success depends on our ability to develop and manage
relationships with significant customers. For the year ended December 31, 2000,
our two largest customers, Marconi Communications and Cisco Systems, together
accounted for approximately 29% of our net sales, with Marconi accounting for
18% and Cisco accounting for 11% of our net sales. For the six months and three
months ended June 30, 2001, Marconi and Cisco, together accounted for
approximately 24% and 22%, respectively, of our net sales, with Marconi
accounting for 13% for each period and Cisco accounting for 11% and 9%,
respectively, of our net sales. We rely on one-time purchase orders rather than
long-term contracts with both Cisco and Marconi, and, as a result, we cannot
predict the size, timing or terms of their incoming orders. We have experienced
variations in the purchase patterns of Marconi and Cisco in the past, and we may
experience continued variation in the future. Material reasons for historic
variations in the purchase patterns of these customers, particularly by Marconi,
have included weather patterns that have delayed field installations of systems
that incorporate our products and delays by our customers in qualifying our
products that employ new components or features to assure compatibility with the
components of other suppliers that our customers integrate with our products
into our customers' systems. The timing of this qualification process is totally
within the control of these customers. Thus, even when our products prove
compatible with the components of other suppliers, as has typically been the
case in the past, delays by our customers in completing the qualification
process has resulted in corresponding delays in our receipt of orders for them.
Both Cisco and Marconi have recently announced that they expect declining
revenues and profitability in the near term due to softening demand for
telecommunications and networking equipment. This has resulted in reductions and
rescheduling by Cisco and Marconi in purchases from their suppliers such as us
as they seek to reduce their existing inventories and adjust to reduced demand
in the market. This will likely result in lower sales to Cisco and Marconi, and
could result in lower revenues overall. Our sales may decline significantly with
resulting fluctuations or harm to our operating results and financial condition
if either Cisco or Marconi cancels, reduces or delays purchases of our products
or unduly delays qualifying them.

WE INCURRED A NET LOSS IN THE YEAR ENDED DECEMBER 31, 2000 AND THE SIX MONTHS
ENDED JUNE 30, 2001 AS A RESULT OF THE AMORTIZATION OF GOODWILL AND DEFERRED
STOCK COMPENSATION FROM RECENT ACQUISITIONS AND EXECUTIVE EMPLOYMENT
ARRANGEMENTS, AND AS A RESULT OF ONE-TIME CHARGES RECORDED TO REFLECT CURRENT
MARKET CONDITIONS. DUE TO THE AMORTIZATION OF INTANGIBLE ASSETS AND DEFERRED
STOCK COMPENSATION WE EXPECT TO CONTINUE TO INCUR NET LOSSES FOR THE FORESEEABLE
FUTURE.

        Although we reported net income of $3.5 million and $4.2 million for the
years ended December 31, 1998 and 1999, respectively, we reported a net loss of
$65.0 million for the year ended December 31, 2000 and a net loss of $22.3
million for the quarter ended March 31, 2001. The net losses are due to
amortization of goodwill and deferred stock compensation related to the
acquisitions of Fiber Optic Communications, Optronics International and Quantum
Optech and our employment arrangements with our President and Chief Executive
Officer and Vice President of Finance and Chief Financial Officer. We will
record amortization of intangibles, such as goodwill, and deferred stock
compensation expenses relating to our acquisitions of Fiber Optic
Communications, Optronics and Quantum going forward. As a consequence of these
intangibles amortization charges and compensation expenses, we do not expect to
report net income in the foreseeable future.

        In connection with the acquisitions of Fiber Optic Communications,
Optronics and Quantum, we recorded a significant amount of goodwill, the
amortization of which has significantly and adversely affected our operating
results, which is being amortized over a five-year period. To the extent that we
can not generate sufficient cash flow to recover the amount of the investment
recorded, the investment may be considered impaired and could be subject to an
immediate write-down of up to the full amount of the investment. In this event,
our net loss in any given period could be greater than anticipated and the
market price of our stock could be adversely affected.

        We incurred a net loss for the second quarter ended June 30, 2001 of
approximately $66.0 million, which includes one-time charges totaling $41.2
million. The charges are the result of the lower demand for our products and
pricing pressures stemming from the continuing downturn in the communications
equipment industry generally and the optical components sector in particular.
These charges include the write-down of inventory of $26.1 million, asset
impairment of $8.9 million, and other restructuring and non-recurring items
related to the recent market conditions of $6.2 million.

        Furthermore, we are undertaking a formal review of the goodwill
generated in our acquisitions and we may record additional impairment charges
when the review is completed in the forth quarter of 2001.


                                       15
<PAGE>   18

OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS, AND YOU
SHOULD NOT RELY ON THEM AS AN INDICATION OF OUR FUTURE PERFORMANCE.

        Our net sales and operating results have fluctuated significantly from
quarter-to-quarter in the past and may fluctuate significantly in the future as
a result of several factors, some of which are outside of our control. These
factors include:

    -   changes in our product mix, such as resulting from sales of passive
        components which typically have lower margins than active components;
        and

    -   seasonality of customer demand typically resulting in lower demand in
        winter months and the observance of the Chinese New Year.

    -   The level of demand for our customers' products

        Because of these and other factors, you should not rely on
quarter-to-quarter comparisons of our results of operations as an indication of
our future performance. It is possible that, in future periods, our results of
operations may be below the expectations of public market analysts and
investors. This failure to meet expectations could cause the trading price of
our common stock to decline. Similarly, the failure by our competitors or
customers to meet or exceed the results expected by their analysts or investors
could have a ripple effect on us and cause our stock price to decline.

THE LONG SALES CYCLES FOR OUR PRODUCTS MAY CAUSE NET SALES AND OPERATING RESULTS
TO VARY FROM QUARTER TO QUARTER, WHICH COULD CAUSE VOLATILITY IN OUR STOCK
PRICE.

        The timing of our revenue is difficult to predict because of the length
and variability of the sales and implementation cycles for our products. We do
not recognize revenue until a product has been shipped to a customer, all
significant vendor obligations have been performed and collection is considered
probable. Customers often view the purchase of our products as a significant and
strategic decision. As a result, customers typically expend significant effort
in evaluating, testing and qualifying our products and our manufacturing
process. This customer evaluation and qualification process frequently results
in a lengthy initial sales cycle of up to one year or more. In addition, some of
our customers require that our products be subjected to life-time and
reliability testing, which can take up to nine months or more. While our
customers are evaluating our products and before they place an order with us, we
may incur substantial sales and marketing and research and development expenses
to customize our products to the customer's needs. We may also expend
significant management efforts, increase manufacturing capacity and order long
lead-time components or materials prior to receiving an order. Even after this
evaluation process, a potential customer may not purchase our products. Even
after acceptance of orders, our customers often change the scheduled delivery
dates of their orders or even cancel them. Because of the evolving nature of the
optical networking market, we cannot predict the length of these sales,
development or delivery cycles. As a result, these long sales cycles may cause
our net sales and operating results to vary significantly and unexpectedly from
quarter-to-quarter, which could cause volatility in our stock price.

WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL SALES AND OPERATIONS THAT COULD
HARM OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

        For the year ended December 31, 2000 and the quarters ended March 31 and
June 30, 2001, sales to customers located outside of the North America were 38%,
37% and 43%, respectfully, of our net sales. We expect that sales to customers
located outside of the United States will increase in the future. Our
international sales will be limited if we cannot establish relationships with
international distributors, establish additional foreign operations, expand
international sales channels, hire additional personnel and develop
relationships with international service providers. Even if we are able to
successfully continue international operations, we may not be able to maintain
or increase international market demand for our products.

        In addition, the recent acquisition of our operations in Taiwan and
People's Republic of China has increased both the administrative complications
we must manage and our exposure to political, economic and other conditions
affecting Taiwan and People's Republic of China. There has been significant
political tension between Taiwan and People's Republic of China, which, if
exacerbated, could lead to hostilities.

Risks we face due to international sales and the use of overseas manufacturing
include:

    -   greater difficulty in accounts receivable collection and longer
        collection periods;

    -   the impact of recessions in economies outside the United States;

    -   unexpected changes in regulatory requirements;

    -   seasonal reductions in business activities in some parts of the world,
        such as during the summer months in Europe or in the winter months in
        Asia when the Chinese New Year is celebrated;

    -   certification requirements;

    -   potentially adverse tax consequences;

    -   unanticipated cost increases;


                                       16
<PAGE>   19

    -   unavailability or late delivery of equipment;

    -   trade restrictions;

    -   limited protection of intellectual property rights;

    -   unforeseen environmental or engineering problems; and

    -   personnel recruitment delays.

        In addition, a portion of our international sales and expenses may be
denominated in foreign currencies in the future. Accordingly, we could
experience the risks of fluctuating currencies and may choose to engage in
hedging activities to reduce these risks.

WE HAVE ONLY BEEN AN INDEPENDENT COMPANY FOR A SHORT WHILE AND HAVE A LIMITED
HISTORY IN THE PASSIVE OPTICAL COMPONENTS MARKETS. THESE FACTORS MAY MAKE OUR
BUSINESS MORE DIFFICULT TO EVALUATE AND HINDER OUR ABILITY TO IMPLEMENT OUR
BUSINESS PLAN SUCCESSFULLY.

        From 1988 until our separation from MRV in September 2000, we operated
as a division of MRV and conducted business using MRV's trade name. In March
2000, we were incorporated in Delaware as a wholly owned subsidiary of MRV. We
formally separated from MRV in September 2000 and as a result of our IPO in
November 2000, we became a public company. Our entire line of passive optical
components was obtained through our acquisitions of Fiber Optic Communications
and Quantum in April and July 2000. We expect that sales of our passive optical
components will constitute a significant part of our future business. We have no
history as an independent company or in operating in the passive components
markets. Our lack of independence and our limited operating history in the
passive optical components markets may limit your ability to evaluate our
prospects due to:

    -   our lack of historical financial data; and

    -   our limited experience in addressing emerging trends that may affect our
        business.

        As a newly independent company with new product lines, we face risks and
uncertainties relating to our ability to implement our business plan
successfully.

IF THE OPTICAL NETWORKING MARKET DOES NOT DEVELOP AND EXPAND AS WE ANTICIPATE,
DEMAND FOR OUR PRODUCTS MAY DECLINE, WHICH WOULD NEGATIVELY IMPACT OUR NET
SALES.

        Our business is completely dependent on the deployment of our optical
component products. Our future success depends on the continued deployment of
the optical networks in the metropolitan and access markets, the continuing
increase in the amount of data transmitted over communications networks, or
bandwidth, and the growth of optical networks to meet the increased demand for
bandwidth. If the deployment of optical networks in the metropolitan and access
markets does not continue to expand, the market for optical networking products
may not continue to develop. Future demand for our products is uncertain and
will depend to a great degree on the speed of the widespread adoption and
upgrading of optical networks. If the transition to optical networks occurs too
slowly, the market for our products and the growth of our business will be
significantly limited.

        The optical networking market is new and characterized by rapid
technological change, frequent new product introductions, changes in customer
requirements, unpredictable rates of product deployment and evolving industry
standards. Because this market is new, it is difficult to predict its potential
size or future growth rate. Widespread adoption of optical networks is critical
to our future success. Potential end-user customers who have invested
substantial resources in their existing copper lines or other systems may be
reluctant or slow to adopt a new approach, like optical networks. Our success in
generating net sales in this emerging market will depend on:

    -   maintaining and enhancing our relationships with our customers;

    -   the awareness of potential end-user customers and network service
        providers about the benefits of optical networks; and

    -   our ability to accurately predict and develop our products to meet
        industry standards.

        If we fail to address changing market conditions, the sales of our
products may decline, which would harm our net sales and operating results.

MACROECONOMIC FACTORS COULD AND HAVE NEGATIVELY IMPACTED OUR GROWTH PLAN.

        Macroeconomic factors, such as an economic slowdown in the U.S. and
abroad, have detrimentally impacted demand for communications products, thereby
resulting in reduced demand for optical components in general. If recent trends
continue, these factors could negatively affect our ability to execute our
growth plan.

        The unfavorable economic conditions and reduced capital spending
detrimentally affected sales to service providers, network equipment companies,
e-commerce and Internet businesses, and the manufacturing industry in the United
States, during the last six months, and appear to


                                       17
<PAGE>   20

continue to affect these industries in the third quarter of 2001 and may affect
them beyond the third quarter. Announcements by industry participants and
observers indicate there is a slowdown in industry spending and participants are
seeking to reduce existing inventories and we are experiencing such reductions
in our business. This has resulted in lower demand for our products and
pressures to reduce prices. As a result of these factors, our results for the
quarter ended June 30, 2001 include one-time charges totaling $41.2 million,
which include the write-off of inventory, purchase commitments, asset
impairment, workforce reduction, restructuring costs and other non-recurring
items. These charges are the result of the lower demand for our products and
pricing pressures stemming from the continuing downturn in the communications
equipment industry generally and the optical components sector in particular.

        If the economic conditions in the United States continue to worsen
generally or in the fiber optics equipment business particularly, or if a wider
or global economic slowdown occurs, we may experience a longer-term material
adverse impact on our business, operating results, and financial condition.

IF WE FAIL TO MANAGE OUR GEOGRAPHICALLY DISPERSED OPERATIONS, OUR BUSINESS MAY
NOT SUCCEED.

Our ability to successfully offer our products and implement our business plan
in a rapidly evolving market requires an effective planning and management
process. We currently operate facilities in Chatsworth, California, Hsinchu,
Taiwan and Shanghai, People's Republic of China. The challenges of managing
geographically dispersed operations, has placed, and will continue to place, a
significant strain on our management systems and resources. We expect that we
will need to continue to improve our financial and managerial controls,
reporting systems and procedures and continue to expand, train and manage our
work force worldwide. While we are currently implementing stand-alone versions
of most of the systems historically used by MRV, in some cases we have decided
to purchase new systems that more closely match our business needs and have
incurred some additional expense, and may incur significant additional expense,
as well as diversion of management attention in connection with implementing
those systems. In addition, difficulties in implementing those systems could
disrupt our business and could result in an adverse impact on our business
results. The failure to effectively manage our geographically dispersed
operations could adversely impact our ability to manufacture and sell our
products, which could reduce our net sales.

OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO SUCCESSFULLY DEVELOP AND INTRODUCE
NEW AND ENHANCED PRODUCTS THAT MEET THE NEEDS OF OUR CUSTOMERS.

        Our future success depends on our ability to anticipate our customers'
needs and develop products that address those needs. Introduction of new
products and product enhancements will require that we effectively transfer
production processes from research and development to manufacturing and
coordinate our efforts with those of our suppliers to rapidly achieve volume
production. If we fail to effectively transfer production processes, develop
product enhancements or introduce new products that meet the needs of our
customers as scheduled, our net sales may decline.

COMPETITION IN THE OPTICAL NETWORKING MARKET MAY INCREASE, WHICH COULD REDUCE
OUR NET SALES AND GROSS MARGINS OR CAUSE US TO LOSE MARKET SHARE.

        Competition in the optical networking market in which we compete is
intense. We face competition from several companies, including Agilent
Technologies, Corning Incorporated, Finisar Corporation, Fujitsu, Infineon AG,
International Business Machines Corporation, JDS Uniphase Corporation, Lucent
Technologies, Inc., Sumitomo and Tyco International, Ltd. Many of our
competitors are larger than we are and have longer operating histories and
significantly greater financial, technical, marketing and other resources than
we have. As a result, these competitors are able to devote greater resources
than we can to the development, promotion, sale and support of their products.
In addition, several of our competitors have large market capitalizations or
cash reserves, and are much better positioned than we are to acquire other
companies in order to gain new technologies or products that may displace our
product lines. Any of these acquisitions could give our competitors a strategic
advantage. Virtually all of our competitors have significantly more established
sales and customer support organizations than we do. In addition, many of our
competitors have much greater name recognition, more extensive customer bases,
better-developed distribution channels and broader product offerings than we
have. These companies can leverage their customer bases and broader product
offerings and adopt aggressive pricing policies to gain market share. Additional
competitors may enter the market, and we are likely to compete with new
companies in the future. We expect to encounter potential customers that, due to
existing relationships with our competitors, are committed to the products
offered by these competitors. As a result of the foregoing factors, as well as
weakening demand, we expect that competitive pressures may result in price
reductions, reduced margins and loss of market share.

        In addition, the fiber optics networking industry is dominated by a
small number of large companies and is currently consolidating. Consolidation
reduces the number of potential customers in the industry, and may increase our
dependence on a small number of customers.

WE MUST CONTINUE TO GROW AND MAINTAIN OUR SALES ORGANIZATION IN ORDER TO
INCREASE MARKET AWARENESS AND SALES OF OUR PRODUCTS OR OUR NET SALES MAY NOT
INCREASE.

        The sale of our products requires long and involved efforts targeted at
several key departments within our prospective customers' organizations. Sales
of our products require the prolonged efforts of executive personnel and
specialized systems and applications engineers working together with a small
number of dedicated salespersons. Currently, our sales organization is limited.
We will need to grow our sales force in order to increase market awareness and
sales of our products, although we have no plans to do so in the short term.
Competition for these individuals is intense, and we might not be able to hire
the kind and number of sales personnel and applications engineers we need. If we
are unable to expand our sales operations in the mid-to-long term, we may not be
able to increase market awareness or sales of our products, which would prevent
us from increasing our net sales.


                                       18
<PAGE>   21

OUR PRODUCTS ARE DEPLOYED IN LARGE AND COMPLEX SYSTEMS AND MAY CONTAIN DEFECTS
THAT ARE NOT DETECTED UNTIL AFTER OUR PRODUCTS HAVE BEEN INSTALLED, WHICH COULD
DAMAGE OUR REPUTATION AND CAUSE US TO LOSE CUSTOMERS.

We design some of our products for deployment in large and complex optical
networks. Because of the nature of these products, they can only be fully tested
for reliability when deployed in networks for long periods of time. Our fiber
optic products may contain undetected defects when first introduced or as new
versions are released, and our customers may discover defects in our products
only after they have been fully deployed and operated under peak stress
conditions. In addition, our products are combined with products from other
vendors. As a result, should problems occur, it may be difficult to identify the
source of the problem. If we are unable to fix defects or other problems, we
could experience, among other things:

    -   loss of customers;

    -   damage to our brand reputation;

    -   failure to attract new customers or achieve market acceptance;

    -   diversion of development and engineering resources; and

    -   legal actions by our customers.

The occurrence of any one or more of the foregoing factors could cause our net
sales to decline.

BECAUSE WE DO NOT HAVE LONG-TERM CONTRACTS WITH OUR CUSTOMERS, OUR CUSTOMERS MAY
CEASE PURCHASING OUR PRODUCTS AT ANY TIME.

        We sell our products based on individual purchase orders, rather than
long-term contracts. Our customers can generally cancel or reschedule orders on
short or no notice and discontinue purchasing our products at any time. In
addition, a number of our current customers were acquired through the
acquisitions of Fiber Optic Communications, Optronics and Quantum, and we have
only a limited history with these new customers. We cannot assure you that these
customers will continue to purchase optical components from us. Because we
cannot predict the size, timing or terms of incoming purchase orders, decreases
in orders or failure to fulfill orders may cause our operating results to
suffer.

IF OUR SENIOR MANAGEMENT TEAM IS UNABLE TO WORK TOGETHER EFFECTIVELY, OUR
BUSINESS MAY BE SERIOUSLY HARMED.

        Some of our senior management personnel only recently joined the
Company. As a result, our senior management team has had limited time to work
together. If they are unable to work together effectively to manage our
organization as a public company, our business may be seriously harmed.

WE DEPEND ON KEY PERSONNEL TO MANAGE OUR BUSINESS EFFECTIVELY IN A RAPIDLY
CHANGING MARKET, AND IF WE ARE UNABLE TO HIRE ADDITIONAL QUALIFIED PERSONNEL OR
RETAIN EXISTING PERSONNEL, OUR ABILITY TO SELL OUR PRODUCTS COULD BE HARMED.

        Our future success depends upon the continued services of our executive
officers and other key engineering, sales, marketing, manufacturing and support
personnel. Any of our key employees, including our President and Chief Executive
Officer and our Vice President of Finance and Chief Financial Officer may
terminate his or her employment at any time. In addition, we do not have key
person life insurance policies covering any of our employees.

FUTURE ACQUISITIONS MAY HAVE AN ADVERSE EFFECT ON OUR FINANCIAL RESULTS OR COULD
OTHERWISE HARM OUR BUSINESS.

        Our business has grown because of acquisitions of fiber optic components
manufacturers Fiber Optic Communications in April 2000 and Optronics and Quantum
in July 2000. In the event we make future acquisitions, we could:

    -   issue stock that would dilute our current stockholders' percentage
        ownership;

    -   incur debt such as the $12.6 million of consolidated debt incurred in
        connection with the acquisitions of Fiber Optic Communications,
        Optronics and Quantum;

    -   incur additional liabilities such as the $21.2 million of additional
        consolidated liabilities incurred in connection with the acquisitions of
        Fiber Optic Communications, Optronics and Quantum; or

    -   incur expenses related to the amortization of intangible assets and
        deferred compensation, like the expenses related to goodwill and other
        intangible assets aggregating $389.0 million and deferred compensation
        charges aggregating $30.2 million incurred in connection with the
        acquisitions of Fiber Optic Communications, Optronics and Quantum.

        Future acquisitions also involve numerous risks that could adversely
affect our business, including:


                                       19
<PAGE>   22

    -   problems integrating the acquired operations, technologies or products;

    -   unanticipated costs, capital expenditures or liabilities or changes
        related to in process research and development;

    -   diversion of management's attention from our core business;

    -   harm to our existing business relationships with suppliers and
        customers;

    -   risks associated with entering markets in which we have no or limited
        prior experience; and

    -   potential loss of key employees, particularly those of the acquired
        organizations.

        We face all of the above-mentioned risks related to the acquisitions of
Fiber Optic Components, Optronics and Quantum. In particular, these acquisitions
have brought large new manufacturing facilities and we face significant
challenges in integrating these facilities before we can realize benefits from
these acquisitions. Our entire line of passive optical components was
established through our recent acquisitions of Fiber Optic Communications and
Quantum and successful integration of that product line and the associated
manufacturing facilities is essential to our business. We cannot assure that we
will be able to successfully integrate any businesses, products, technologies or
personnel that we might acquire in the future, and failure to successfully
integrate them may harm our business.

IF WE ARE UNABLE TO EXPAND OUR MANUFACTURING CAPACITY, EXPERIENCE DIFFICULTIES
AND DISRUPTIONS IN THE MANUFACTURE OF OUR PRODUCTS, ARE UNABLE TO OBTAIN NEEDED
CAPITAL EQUIPMENT, EXPERIENCE SHORTAGES IN RAW MATERIALS OR MANUFACTURING
PERSONNEL OR FACE OTHER PROBLEMS OR DELAYS IN MANUFACTURING, WE MAY NOT BE ABLE
TO MEET ORDERS TIMELY WHICH COULD ADVERSELY AFFECT SALES, GROSS MARGINS AND THE
RESULTS OF OUR OPERATIONS.

        We currently manufacture a significant portion of our products in our
facilities located in Chatsworth, California. We also conduct manufacturing at
our facilities in Hsinchu, Taiwan and Shanghai, People's Republic of China. We
could experience difficulties and disruptions in the manufacture of our
products, which could prevent us from achieving timely delivery of products and
could result in lost sales. We could also face the inability to procure and
install additional capital equipment, a shortage of raw materials we use in our
products, a lack of availability of manufacturing personnel to work in our
facilities, difficulties in achieving adequate yields from new manufacturing
lines and an inability to predict future order volumes. We may experience
delays, disruptions, capacity constraints or quality control problems in our
manufacturing operations, and, as a result, product shipments to our customers
could be delayed, which would negatively impact our net sales, competitive
position and reputation. If we experience disruptions in the future, it may
result in lower yields or delays of our product shipments, which could adversely
affect our sales, gross margins and results of operations. If we are unable to
expand our manufacturing capacity in a timely manner, we will have insufficient
capacity, which could seriously harm our results of operations.

THE LOCATION OF OUR MANUFACTURING FACILITIES IN SOUTHERN CALIFORNIA AND TAIWAN
SUBJECTS US TO INCREASED RISK THAT A NATURAL DISASTER COULD DISRUPT OUR
OPERATIONS.

        Substantially all of our products are manufactured at our facilities in
Chatsworth, California and Hsinchu, Taiwan. The risk of earthquakes in Southern
California and Taiwan is significant due to the proximity of major earthquake
fault lines to these manufacturing facilities. In January 1994 and September
1999, major earthquakes near Chatsworth and in Taiwan, respectively, affected
the facilities of manufacturers in these areas including ours, causing power and
communications outages and disruptions that impaired production capacity. While
our facilities did not suffer material damage and these earthquakes did not
materially disrupt our business, the occurrence of an earthquake or other
natural disaster could result in the disruption of our manufacturing facilities.
Any disruption in our manufacturing facilities arising from such events could
cause significant delays in the production or shipment of our products until we
are able to shift production to different facilities or arrange for third
parties to manufacture our products. We may not be able to obtain alternate
capacity on favorable terms or at all.

ENVIRONMENTAL REGULATIONS APPLICABLE TO OUR MANUFACTURING OPERATIONS COULD LIMIT
OUR ABILITY TO EXPAND OR SUBJECT US TO SUBSTANTIAL COSTS.

        We are subject to a variety of environmental regulations relating to the
use, storage, discharge and disposal of hazardous chemicals used during our
manufacturing processes. Further, we are subject to other safety, labeling and
training regulations as required by local, state and federal law. Any failure by
us to comply with present and future regulations could subject us to future
liabilities or the suspension of production. In addition, such regulations could
restrict our ability to expand our facilities or could require us to acquire
costly equipment or to incur other significant expenses to comply with
environmental regulations. We cannot assure you that these legal requirements
will not impose on us the need for additional capital expenditures or other
requirements. If we fail to obtain required permits or otherwise fail to operate
within these or future legal requirements, we may be required to pay substantial
penalties, suspend our operations or make costly changes to our manufacturing
processes or facilities.

IF WE FAIL TO ACCURATELY FORECAST COMPONENT AND MATERIAL REQUIREMENTS FOR OUR
MANUFACTURING FACILITIES, WE COULD INCUR ADDITIONAL COSTS OR EXPERIENCE
MANUFACTURING DELAYS.

        We use rolling forecasts based on anticipated product orders to
determine our component requirements. It is very important that we accurately
predict both the demand for our products and the lead times required to obtain
the necessary components and materials. Lead times for components and materials
that we order vary significantly and depend on factors such as specific supplier
requirements, the size of the order, contract terms and current market demand
for the components. For substantial increases in production levels, some
suppliers may need six months or more lead time. If we overestimate our
component and material requirements, we may have excess inventory, which would
increase our costs. If we


                                       20
<PAGE>   23

underestimate our component and material requirements, we may have inadequate
inventory, which could interrupt our manufacturing and delay delivery of our
products to our customers. Any of these occurrences would negatively impact our
net sales.

        Current softness in demand and pricing in the communications market have
necessitated a review of our inventory, facilities and headcount. As a result,
we recorded in the second quarter of 2001 one-time charges for the write down of
inventory and inventory purchase commitments, among other things, of $41.2
million.

IF WE CANNOT INCREASE OUR SALES VOLUMES, REDUCE OUR COSTS OR INTRODUCE HIGHER
MARGIN PRODUCTS TO OFFSET ANTICIPATED REDUCTIONS IN THE AVERAGE SELLING PRICE OF
OUR PRODUCTS, OUR OPERATING RESULTS WILL SUFFER.

        We have experienced decreases in the average selling prices of some of
our products. We anticipate that as products in the optical networking market
become more of a commodity, the average selling price of our products may
decrease in response to competitive pricing pressures, new product introductions
by us or our competitors or other factors. In addition, the current softness in
the market could detrimentally affect our selling prices. If we are unable to
offset the anticipated decrease in our average selling prices by increasing our
sales volumes or product mix, our net sales and gross margins will decline. In
addition, to maintain our gross margins, we must continue to reduce the
manufacturing cost of our products and we must develop and introduce new
products and product enhancements with higher margins. If we cannot maintain our
gross margins, our financial position may be harmed and our stock price may
decline.

WE DEPEND ON SINGLE OR LIMITED SOURCE SUPPLIERS FOR SOME OF THE KEY COMPONENTS
AND MATERIALS IN OUR PRODUCTS, WHICH MAKES US SUSCEPTIBLE TO SUPPLY SHORTAGES OR
PRICE FLUCTUATIONS THAT COULD ADVERSELY AFFECT OUR OPERATING RESULTS.

        We typically purchase our components and materials through purchase
orders, and in general we have no guaranteed supply arrangements with any of our
suppliers. We currently purchase several key components and materials used in
the manufacture of our products from single or limited source suppliers,
including Corning Incorporated, Mitsubishi Electric, Nippon Sheet Glass,
Phillips Semiconductor and Sumitomo. If our relationship with any of these key
suppliers terminates, we may not be able to find another manufacturer that can
meet our specifications and anticipated supply requirements. We may fail to
obtain required components in a timely manner in the future. We may experience
difficulty identifying alternative sources of supply for certain components used
in our products. We would experience further delays from evaluating and testing
the products of these potential alternative suppliers. Furthermore, financial or
other difficulties faced by these suppliers or significant changes in demand for
these components or materials could limit the availability of these components.
Any interruption or delay in the supply of any of these components or materials,
or the inability to obtain these components and materials from alternate sources
at acceptable prices and within a reasonable amount of time, would impair our
ability to meet scheduled product deliveries to our customers and could cause
customers to cancel orders.

IF WE DO NOT ACHIEVE ACCEPTABLE MANUFACTURING YIELDS OR SUFFICIENT PRODUCT
RELIABILITY, OUR ABILITY TO SHIP PRODUCTS TO OUR CUSTOMERS COULD BE AFFECTED AND
OUR NET SALES MAY SUFFER.

        The manufacture of our products involves complex and precise processes.
Changes in our manufacturing processes or those of our suppliers, or the use of
defective components or materials, could significantly reduce our manufacturing
yields and product reliability. Our manufacturing costs are relatively fixed,
and, thus, manufacturing yields are critical to our results of operations. We
may experience manufacturing problems in the future, which could result in lower
than expected production yields, delayed product shipments and impaired gross
margins. In some cases, existing manufacturing techniques involve substantial
manual labor. In addition, we may experience manufacturing delays and reduced
manufacturing yields upon introducing new products to our manufacturing lines.
In order to improve our gross margins, we may need to develop new, more
cost-effective manufacturing processes and techniques, and if we fail to do so,
our gross margins may be adversely affected.

IF OUR CUSTOMERS DO NOT QUALIFY OUR MANUFACTURING LINES FOR VOLUME SHIPMENTS,
OUR OPERATING RESULTS COULD SUFFER.

        Generally, customers do not purchase our products, other than limited
numbers of evaluation units, prior to qualification of the manufacturing line
for volume production. Our existing manufacturing lines, as well as each new
manufacturing line, must pass through varying levels of qualification with our
customers. This customer qualification process determines whether our
manufacturing lines meet the customers' quality, performance and reliability
standards. If there are delays in qualification of our products, our customers
may drop the product from a long-term supply program, which would result in
significant lost revenue opportunity over the term of that program. Moreover,
customers may require that we be registered under international quality
standards, such as ISO 9000. Our Taiwan facilities have received ISO 9001
certification and our facilities in the People's Republic of China are certified
ISO 9002. Our Chatsworth facilities have no ISO certification and we do not
expect to receive ISO 9000 certification until sometime in 2002, at the
earliest.

WE WILL LOSE SIGNIFICANT CUSTOMER SALES AND OPPORTUNITIES AND MAY NOT BE
SUCCESSFUL IF OUR CUSTOMERS DO NOT QUALIFY OUR PRODUCTS TO BE DESIGNED INTO
THEIR PRODUCTS AND SYSTEMS.

        In the communications industry, service providers and communications
equipment manufacturers often undertake extensive qualification processes prior
to placing orders for large quantities of products such as ours, because these
products must function as part of a larger system or network. Once they decide
to use a particular supplier's product or component, these potential customers
design the product into their system, which is known as a design-in win.
Suppliers whose products or components are not designed in are unlikely to make
sales to that company until at least the adoption of a future redesigned system.
Even then, many companies may be reluctant to design entirely new products into
their new systems, as it could involve significant additional redesign efforts.
If we fail to achieve design-in wins in our potential customer's qualification
process, we will lose the opportunity for significant sales to that customer for
a lengthy period of time.


                                       21
<PAGE>   24

THE ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS MAY BE EXPENSIVE AND COULD
DIVERT VALUABLE RESOURCES.

        We rely on a combination of trade secret laws and restrictions on
disclosure and patents, copyrights and trademarks to protect our intellectual
property rights. We may need to engage in litigation to enforce our intellectual
property rights, protect our trade secrets and determine the validity and scope
of proprietary rights of others. Any such litigation, regardless of outcome,
could be expensive and time consuming, and adverse determinations in any such
litigation could seriously harm our business.

WE COULD BECOME SUBJECT TO LITIGATION REGARDING INTELLECTUAL PROPERTY RIGHTS,
WHICH COULD BE COSTLY AND SUBJECT US TO SIGNIFICANT LIABILITY.

        From time to time, third parties, including our competitors, may assert
patent, copyright and other intellectual property rights to technologies that
are important to us. We expect we will increasingly be subject to infringement
claims as the number of products and competitors in our market grows and the
functioning of products overlaps. In this regard, in early 1999, we received a
written notice from Rockwell Corporation in which Rockwell claimed to have
patent rights in certain technology related to our metal organic chemical vapor
deposition processes. Rockwell requested that we review our processes in light
of one of Rockwell's issued patents, which we have done and determined that the
cited patent has expired. We believe that none of our product sales relates to
the Rockwell claim. In October 1999, we received a written notice from Ortel
Corporation, which has since been acquired by Lucent Technologies, Inc., in
which Ortel claimed to have patent rights in certain technology related to our
triplexer and duplexer products. Ortel requested that we review our products in
connection with one of Ortel's issued patents. We are evaluating the information
provided to us thus far by Ortel and are also evaluating the validity of Ortel's
patent noted in Ortel's letter. In January 2001, we were advised that Lucent had
assigned certain of its rights and claims to Agere Systems, Inc., including the
claim made on the Ortel patent. To date, we have not been contacted by Agere
regarding this patent claim. We are presently seeking to determine whether we
may have violated and the extent of our usage of, and related revenues from,
technology covered by this patent. Based on our evaluation to date, we have
concluded that the Ortel claim (evidently now the property of Agere) relates to
an aspect of our triplexers. Net sales of our triplexers accounted for
approximately 5% of total net sales during the year ended December 31, 2000. In
May 2001, we received written notice from IBM, which claims that several of our
optical components make use of inventions covered by certain patents claimed by
IBM. We are presently seeking to determine whether we may have violated and the
extent of our usage of, and related revenues from, technology covered by the IBM
patents. Based on our evaluation to date, we have concluded that the IBM claim
relates to certain of our transceivers. Net sales of the transceivers in
question accounted for approximately 25% of total net sales during the year
ended December 31, 2000. The patents of Ortel and IBM and other patents of which
we are not presently aware that may relate to our products may be determined to
be valid, or some of our products may ultimately be determined to infringe these
patent, or those of other companies. Agere, IBM or other companies may pursue
litigation with respect to these or other claims. The results of any litigation
are inherently uncertain. In the event of an adverse result in any litigation
with respect to intellectual property rights relevant to our products that could
arise in the future, to pay substantial damages under applicable law, to cease
the manufacture, use and sale of infringing products or to expend significant
resources to develop non-infringing technology. In addition, litigation
frequently involves substantial expenditures and can require significant
management attention, even if we ultimately prevail. Accordingly, any
infringement claim or litigation against us could significantly harm our
business, operating results and financial condition.

        In the future, we may initiate claims or litigation against third
parties for infringement of our proprietary rights to protect these rights or to
determine the scope and validity of our proprietary rights or the proprietary
rights of competitors. These claims could result in costly litigation and the
diversion of our technical and management personnel.

NECESSARY LICENSES OF THIRD-PARTY TECHNOLOGY MAY NOT BE AVAILABLE TO US OR MAY
BE VERY EXPENSIVE, WHICH COULD ADVERSELY AFFECT OUR ABILITY TO MANUFACTURE AND
SELL OUR PRODUCTS.

        From time to time we may be required to license technology from third
parties to develop new products or product enhancements or to resolve
infringement claims with respect to intellectual property rights in our existing
products. We cannot assure you that third-party licenses such as from Rockwell,
Agere or IBM will be available to us on commercially reasonable terms, if at
all. The inability to obtain any third-party license required to develop new
products and product enhancements or to resolve infringement claims on our
existing products could require us to obtain substitute technology of lower
quality or performance standards or at greater cost, either of which could
seriously harm our ability to manufacture and sell our products.

WE ARE NO LONGER ABLE TO RELY ON MRV TO FUND OUR FUTURE CAPITAL REQUIREMENTS,
AND FINANCINGS FROM OTHER SOURCES MAY NOT BE AVAILABLE ON FAVORABLE TERMS OR AT
ALL.

        In the past, our capital needs were satisfied by MRV. However, as a
result of our separation, MRV no longer provides funds to finance our working
capital or other cash requirements. We cannot assure you that financing from
other sources, if needed, will be available on favorable terms or at all.

        We believe our capital requirements will vary greatly from quarter to
quarter, depending on, among other things, capital expenditures, fluctuations in
our operating results, financing activities, acquisitions and investments and
inventory and receivables management. We believe that our cash on hand and other
working capital, along with cash flow from operations, will be sufficient to
satisfy our working capital, capital expenditure and research and development
requirements for at least the next 12 months. However, we may require or choose
to obtain additional debt or equity financing in order to finance acquisitions
or other investments in our business. Future equity financings would be dilutive
to the existing holders of our common stock. Future debt financings could
involve restrictive covenants. It is not likely that we will be able to obtain
financing with interest rates as favorable as those that MRV could obtain.


                                       22
<PAGE>   25

OUR BUSINESS MAY SUFFER IF MRV DOES NOT COMPLETE ITS DISTRIBUTION OF OUR COMMON
STOCK.

        MRV has announced its intention to divest its remaining equity interest
in us by selling up to 18,720,000 shares of our common stock to the public and
distributing the remainder of its shares of our common stock to the holders of
MRV's common stock, although it is not obligated to do so. In August 2001, we
registered 18,720,000 shares of our common stock on behalf of MRV in a
prospectus dated August 8, 2001.. In May 2001, MRV received a private letter
ruling from the Internal Revenue Service that MRV's distribution of their shares
of Luminent common stock to the holders of MRV common stock will be tax-free to
its stockholders and MRV for United States federal income tax purposes if the
distribution occurs within one year of the IPO, i.e., by November 8, 2001. There
are various conditions to the completion of the distribution, including various
conditions that must be satisfied or waived by MRV, in its sole discretion, and
we cannot assure you as to whether or when the distribution will occur. As
described in MRV's public disclosures, these conditions include, among other
things:

    -   all required government approvals must be in effect;

    -   MRV's redemption or repayment of its outstanding convertible
        subordinated notes;

    -   no legal restraints must exist preventing this distribution; and

    -   nothing must have happened in the intervening time between the time of
        our IPO and the distribution, including changes in market or economic
        conditions or in our or MRV's business and financial condition, that
        causes MRV's board of directors to conclude that the distribution is not
        in MRV's best interest or the best interest of MRV's stockholders.

        The exact distribution formula and record date to qualify for any
distribution will be determined at a future date.

        If the distribution does occur, we may not obtain the benefits we expect
as a result of this distribution, including direct access to capital markets,
better incentives for employees, greater strategic focus, facilitated customer
relationships and future partnerships and increased speed and responsiveness. In
addition, until this distribution occurs, the risks discussed below relating to
MRV's control of us and the potential business conflicts of interest between MRV
and us will continue to be relevant to our stockholders.

        We will be controlled by MRV as long as it owns a majority of our common
stock, and our other stockholders will be unable to affect the outcome of
stockholder voting during such time.

        As a result of our IPO, MRV ownership of our shares was reduced to
approximately 92% of our outstanding common stock. If MRV sells all of the
shares of Luminent common stock that are the subject of a registration statement
filed on behalf of MRV, MRV will own approximately 80.3% of our outstanding
shares. As long as MRV owns a majority of our outstanding common stock, MRV will
continue to be able to elect our entire board of directors and to remove any
director, with or without cause, without calling a special meeting. Investors
will not be able to affect the outcome of any stockholder vote prior to the
planned distribution of our stock to the MRV stockholders. As a result, MRV will
control all matters affecting us, including:

    -   the composition of our board of directors and, through it, any
        determination with respect to our business direction and policies,
        including the appointment and removal of officers;

    -   the allocation of business opportunities that may be suitable for us and
        MRV;

    -   any determinations with respect to mergers or other business
        combinations;

    -   our acquisition or disposition of assets;

    -   our financing;

    -   changes to the agreements providing for our separation from MRV;

    -   the payment of dividends on our common stock; and

    -   determinations with respect to our tax returns.


                                       23
<PAGE>   26

SALES OF A CONTROLLING INTEREST IN US BY MRV, OR SALES OF OUR SHARES BY MRV
WHICH REDUCES ITS OWNERSHIP INTEREST IN US TO BELOW 80%, WOULD PREVENT THE
PLANNED DISTRIBUTION OF OUR COMMON STOCK.

        MRV is not prohibited from selling any or a controlling interest in us
to a third party. A sale of a controlling interest in us by MRV or sales of our
shares by MRV or us which reduces MRV's ownership interest in us to below 80%
(the minimum threshold to effect a tax free distribution) would prevent the
distribution of our shares to MRV's shareholders as announced. Any such sales
could have a depressive effect of the market price of our common stock.
Moreover, because MRV can dispose of all or a portion of its ownership of our
common stock at some future date, it may transfer a controlling interest in us
without allowing you to participate or realize a premium.

SALES OF SUBSTANTIAL AMOUNTS OF OUR SHARES BY MRV, OR EVEN THE AVAILABILITY OF
SUCH SHARES FOR SALE, COULD CAUSE THE MARKET PRICE OF OUR SHARES TO DECLINE.

        MRV intends to offer for resale 18,720,000 of our common shares after
the registration statement filed on MRV's behalf is declared effective. This
represents approximately 12% of our outstanding shares as of the date of this
report . Sales of substantial amounts of these shares at any one time or from
time to time, or even the availability of these shares for sale, could adversely
affect the market price of our shares.

SO LONG AS MRV CONTINUES TO OWN MORE THAN 90 PERCENT OF OUR OUTSTANDING CAPITAL
STOCK, IT MAY MERGE US INTO MRV AT ANY TIME.

        Because MRV may offer all or some of the shares pursuant to this
prospectus, and, to our knowledge there are currently no agreements,
arrangements or understandings with respect to the sale of any of the shares
offered by this prospectus, we can provide no estimate as to the amount of
shares that will be held by MRV after completion of this offering and MRV may
continue to hold over 90 percent of our outstanding shares. Although MRV has
announced plans to distribute our common stock that it owns to the holders of
MRV common stock, it is not obligated to do so. It is possible that MRV may
decide not to complete the distribution. Further, MRV may not sell sufficient
shares pursuant to this prospectus to reduce its ownership to below 90 percent
of our outstanding shares. Under Delaware law, a parent corporation that owns at
least 90 percent of the outstanding capital stock of a subsidiary corporation
may merge the subsidiary into the parent without the vote of the subsidiary's
stockholders. Therefore, in the event MRV elects not to complete the
distribution, it may merge us into itself without the vote of our stockholders.
In such event, our outstanding shares of common stock would be converted into
shares of common stock of MRV at an exchange ratio to be determined at the time
of the transaction. Our stockholders would be entitled to appraisal rights under
Delaware law, but these rights may not entitle our stockholders to receive
consideration equivalent to the price they paid for our common stock.

SUBSTANTIAL SALES OF COMMON STOCK MAY OCCUR IN CONNECTION WITH THE DISTRIBUTION
OR OTHERWISE, WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE.

        MRV has announced plans to distribute to its stockholders all of the
shares of our common stock it owns by November 8, 2001, although it is not
obligated to do so. If MRV completes the distribution, all of these shares would
be eligible for immediate resale in the public market. Any sales of substantial
amounts of common stock in the public market, or the perception that such sales
might occur, whether as a result of this distribution or otherwise, could harm
the market price of our common stock. We are unable to predict whether
significant amounts of common stock will be sold in the open market in
anticipation of, or following, this distribution or whether a sufficient number
of buyers will be in the market at that time.

AT THE TIME OF THE DISTRIBUTION BY MRV OF ITS LUMINENT COMMON STOCK, WE PLAN TO
GRANT TO MRV OPTION HOLDERS OPTIONS TO PURCHASE A SUBSTANTIAL AMOUNT OF LUMINENT
COMMON STOCK, WHICH WILL CAUSE DILUTION TO THE INTERESTS OF EXISTING LUMINENT
STOCKHOLDERS AND MAY HAVE A DEPRESSIVE EFFECT ON THE MARKET PRICE OF LUMINENT'S
COMMON STOCK.

        Concurrently with MRV's distribution of shares of our common stock to
its stockholders, we intend to grant stock options to substantially all of the
eligible employees, directors, or consultants of Luminent or MRV who hold an
option to purchase MRV common stock granted prior to September 8, 2000 by MRV.
We understand that MRV intends to simultaneously adjust options to purchase MRV
stock to these same individuals. The MRV adjustment and our grant are intended,
in the aggregate, to be in a number and at prices that will preserve the
pre-distribution economic position of the options to purchase MRV stock held by
these individuals on September 8, 2000.

        The number and exercise price of the new Luminent options to be issued
will depend on the market prices of MRV's and our shares at the time of the
distribution. The full exercise of these new Luminent options will dilute equity
ownership of Luminent's stockholders. Further, the exercise, and even the
existence of these options, could have an adverse effect on the market price of
our shares.

OUR HISTORICAL FINANCIAL INFORMATION MAY NOT BE REPRESENTATIVE OF OUR RESULTS AS
A SEPARATE COMPANY.

        The historical financial information we have included herein for periods
prior to January 1, 2001 has been carved out from MRV's consolidated financial
statements and may not accurately reflect what our financial position, results
of operations and cash flows would have been, had we been a separate,
stand-alone entity during the periods presented. MRV did not account for us as,
and we were not operated as, a single stand-alone entity for the periods
presented prior to January 1, 2001. In addition, the historical information is
not necessarily indicative of what our results of operations, financial position
and cash flows will be in the future. We have not made adjustments to reflect
many significant changes that will occur in our cost structure, funding and
operations as a result of our separation from MRV, including changes in our
employee base, changes in our tax structure, increased costs associated with
reduced economies of scale, increased marketing expenses related to establishing
a new brand identity and increased costs associated with being a public,
stand-alone company.


                                       24
<PAGE>   27

WE MAY HAVE POTENTIAL BUSINESS CONFLICTS OF INTEREST WITH MRV WITH RESPECT TO
OUR PAST AND ONGOING RELATIONSHIPS THAT COULD HARM OUR BUSINESS OPERATIONS.

        Conflicts of interest may arise between MRV and us in a number of areas
relating to our past and ongoing relationships, including:

    -   labor, tax, employee benefit, indemnification and other matters arising
        from our separation from MRV;

    -   intellectual property matters;

    -   employee retention and recruiting;

    -   major business combinations involving us;

    -   sales or distributions by MRV of all or any portion of its ownership
        interest in us;

    -   the nature, quality and pricing of transitional services MRV has agreed
        to provide us; and

    -   business opportunities that may be attractive to both MRV and us.

        In addition to the conflicts of interests relating to the separation of
our operations from MRV as described above, we also may face business conflicts
of interest with MRV because MRV and certain of its other subsidiaries are our
customers. Like other customers, we do not have long-term contracts with MRV or
its other subsidiaries for the purchase of our components. Because MRV controls
all matters relating to us, MRV may be able to require us to enter into customer
relationships with it or its other subsidiaries on terms that are less favorable
to us than those we could negotiate with an unrelated customer. Nothing
restricts MRV from competing with us.

        We may not be able to resolve any potential conflicts, and even if we
do, the resolution may be less favorable than if we were dealing with an
unaffiliated party. The agreements we have entered into with MRV may be amended
upon agreement between the parties. While we are controlled by MRV, MRV may be
able to require us to agree to amendments to these agreements that may be less
favorable to us than the current terms of the agreement.

OUR DIRECTORS AND EXECUTIVE OFFICERS MAY HAVE CONFLICTS OF INTEREST BECAUSE OF
THEIR OWNERSHIP OF MRV COMMON STOCK.

        Some of our directors and executive officers have a substantial amount
of their personal financial portfolios in MRV common stock and options to
purchase MRV common stock. Ownership of MRV common stock by our directors and
officers after our separation from MRV could create, or appear to create,
potential conflicts of interest when directors and officers are faced with
decisions that could have different implications for MRV and us.

IF MRV'S PROPOSED DISTRIBUTION OF OUR COMMON STOCK IS NOT TAX-FREE, WE COULD BE
LIABLE TO MRV FOR THE RESULTING TAXES, WHICH WOULD SIGNIFICANTLY HARM OUR
BUSINESS.

        MRV currently plans to distribute to its stockholders the shares of our
common stock that it owns by November 8, 2001. We have agreed to indemnify MRV
in the event the distribution is not tax-free to MRV or its stockholders because
of actions taken by us or our failure to take various actions, all as set forth
in our tax sharing agreement with MRV. We may not be able to control some of the
events that could trigger this liability. In particular, certain acquisitions of
us by a third party within two years of the distribution could result in the
distribution not being tax-free and therefore give rise to our obligation to
indemnify MRV for any resulting tax or other liability. If we were to become
obligated to indemnify MRV for this liability, our financial condition and
business would be significantly harmed.

WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION THAT COULD RESULT IN
SUBSTANTIAL COSTS AND DIVERT MANAGEMENT'S ATTENTION AND RESOURCES.

        In the past, securities class action litigation has been brought against
a company following periods of volatility in the market price of its securities.
Due to the potential volatility of our stock price, we may be the target of
securities litigation in the future. Securities litigation could result in
substantial costs and divert management's attention and resources.

DELAWARE LAW AND OUR ABILITY TO ISSUE PREFERRED STOCK MAY HAVE ANTI-TAKEOVER
EFFECTS THAT COULD PREVENT A CHANGE IN CONTROL, WHICH MAY CAUSE OUR STOCK PRICE
TO DECLINE.

        We are authorized to issue up to 30,000,000 shares of preferred stock.
This preferred stock may be issued in one or more series, the terms of which may
be determined at the time of issuance by the board of directors without further
action by stockholders. The terms of any such series of preferred stock may
include voting rights (including the right to vote as a series on particular
matters), preferences as to dividend, liquidation, conversion and redemption
rights and sinking fund provisions. No preferred stock is currently outstanding.
The issuance of any such preferred stock could materially adversely affect the
rights of the holders of our common stock, and therefore, reduce the value of
our common stock. In particular, specific rights granted to future holders of
preferred stock could be used to restrict our ability to merge with, or sell our
assets to, a third party and thereby preserve control by the present management.


                                       25
<PAGE>   28

Certain provisions of Delaware law also may discourage, delay or prevent someone
from acquiring or merging with us, which may cause the market price of our
common stock to decline.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold any derivative securities. The majority of our net proceeds from
the initial public offering are currently maintained by leading investment
management firms in high-grade, short-term instruments that have maturities no
longer than 14 months, and an average maturity of six months or less. While we
believe such high-grade investments contain limited risk of loss of principal,
we recognize the yield on these funds could vary depending upon market
conditions.

We operate on an international basis. A majority of our revenues and cost of
sales are incurred in U.S. dollars. For the year ended December 31, 2000,
approximately 31% and 29% of our revenues and cost of sales, respectively, were
incurred in currencies other than the U.S. dollar. For the six months ended June
30, 2001, approximately 36% and 39% of our revenues and cost of sales,
respectively, were incurred in currencies other than the U.S. dollar. For the
year ended December 31, 2000 and the six months ended June 30, 2001,
approximately 63% and 65%, respectively, of our operating expenses were incurred
in currencies other than the U.S. dollar, including the non-cash charges for
deferred compensation expense and goodwill amortization incurred with the
foreign subsidiary acquisitions. For the year ended December 31, 2000 the New
Taiwan dollar represented 87% of revenues, 88% of cost of sales, and 99% of
operating expenses incurred in currencies other than the U.S. dollar. For the
six months ended June 30, 2001 the New Taiwan dollar represented 97% of revenues
and cost of sales, and 99% of operating expenses incurred in currencies other
than the U.S. dollar.

The New Taiwan dollar has been relatively stable in relation to the U.S. dollar
in recent years, and accordingly, we have not experienced any significant
fluctuations in operating results due to exchange rate fluctuations in the New
Taiwan dollar in relation to the U.S. dollar, however, we cannot guarantee the
same stability in the future. The following provides an example of how
fluctuations in the New Taiwan dollar would affect our overall revenues and cost
of sales based on the December 30, 2000 U.S. to New Taiwan dollar exchange rate
of 33.17. We estimate that a hypothetical 10% decrease in the New Taiwan dollar
exchange rate would result in our recognizing an increase of $3.4 million in our
total revenues and an increase of $2.5 in our total cost of sales. We estimate
that a hypothetical increase of 10% in the New Taiwan dollar exchange rate would
result in our recognizing a decrease of $3.1 million in our total revenues and a
decrease of $2.3 million in our total cost of sales.

Fluctuations in the value of the currencies in which we conduct our business
relative to the U.S. dollar will cause U.S. dollar translation of such
currencies to vary from one period to another. We cannot predict the effect of
exchange rate fluctuations upon future operating results. However, because we
have expenses as well as revenues in each of the principal functional
currencies, the exposure to our financial results to currency fluctuations is
reduced. We have not historically attempted to reduce our currency risks through
hedging instruments, however, we may do so in the future.

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the future, we may become involved in litigation relating to claims arising
from our ordinary course of business which could have a material adverse effect
on our business or results of operations. Other than the legal proceedings
described below, we are currently not a party to any legal proceedings we
reasonably expect could have a material adverse effect on our business or
results of operations.

From time to time, however, third parties, including our competitors, may assert
patent, copyright and other intellectual property rights to technologies that
are important to us. In early 1999, we received a written notice from Rockwell
Corporation in which Rockwell claimed to have patent rights in certain
technology related to metal organic chemical vapor deposition processes.
Rockwell requested that we review our processes in light of one of Rockwell's
issued patents. In the spring of 2000, we began to review Rockwell's claim in
detail and thereafter determined that the patent upon which Rockwell based its
claim expired in January 2000. This limits the scope of Rockwell's claim to
damages, if any, for matters arising prior to expiration of the patent. MRV has
agreed to indemnify us from any damages resulting from such claims. We are
presently seeking to determine the validity of Rockwell's patent, whether the
processes we have employed violated the patent, if valid, and the extent of our
usage of, and related revenues derived from, the process covered.

In October 1999, we received a written notice from Ortel Corporation, which has
since been acquired by Lucent Technologies, Inc., in which Ortel claimed to have
patent rights in certain technology related to our triplexer and duplexer
products. Ortel requested that we review our products in connection with one of
Ortel's issued patents. In August 2000, Lucent provided us the first detailed
information concerning the basis of Ortel's patent claim and is continuing to
provide follow-up information on the claim. We are also evaluating the validity
of Ortel's patent and claim. We are presently seeking to determine whether we
may have violated the patent and the extent of our usage of, and related
revenues derived from, technology covered by Ortel's patents.

See WE COULD BECOME SUBJECT TO LITIGATION REGARDING INTELLECTUAL PROPERTY
RIGHTS, WHICH COULD BE COSTLY AND SUBJECT US TO SIGNIFICANT LIABILITY under the
RISK FACTORS section, above.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

RECENT SALES OF UNREGISTERED SECURITIES

In connection with our incorporation and organization, in March 2000, we issued
1,000 shares of common stock to MRV for an aggregate offering price of $1,000.
In July 2000, we effected a 144,000-for-one stock split of our outstanding
common stock. We believe that the initial issuance was exempt under Section 4(2)
of the Securities Act as a transaction not involving any public offering. We
believe that the stock split was either not a "sale" of securities pursuant to
the Securities or exempt under Section 3(a)(9) of the Securities Act.

No underwriters were involved in connection with the sale of securities referred
to in the paragraph above. MRV represented its intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof, and appropriate legends were affixed to the share
certificates and instruments issued. MRV had adequate access, through its
relationships with us, to information about us.

USE OF PROCEEDS


                                       26
<PAGE>   29

Our registration statement on Form S-1 filed under the Securities Act of 1933,
Commission File No. 333-42238, was declared effective by the Commission on
November 9, 2000. A total of 13,800,000 shares of our common stock were
registered pursuant to this registration statement, including 1,800,000 that
were subject to the underwriters' over allotment option which was not exercised.
The aggregate price of the offering amount registered was $207,000,000. The
managing underwriters for the offering were Credit Suisse First Boston
Corporation, CIBC World Markets Corp., Robertson Stephens, Inc., U. S. Bancorp
Piper Jaffray, Inc. and First Security Van Kasper, Inc.

The offering was completed on November 9, 2000. We sold 12,000,000 registered
shares at an initial public offering at an aggregate offering price of
$144,000,000 or $12.00 per share. From November 9, 2000 to June 30, 2001, the
aggregate underwriting discounts paid in connection with the offering was $10.1
million. We estimate that other expenses of the offering total $1.6 million.

The net proceeds from the offering, after deducting the underwriting discount
and the estimated offering expenses to be paid by us, were approximately $132.3
million. The net proceeds will be used for general corporate purposes, including
capital expenditures and working capital. Pending these uses, the net proceeds
have been invested in interest bearing, investment grade securities.

None of the net proceeds of the offering have been paid, directly or indirectly,
to any of our directors or officers or any of their associates, to any persons
owning 10% or more of our common stock, or to any of our affiliates.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

NONE.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


                                       27
<PAGE>   30

ITEM 5. OTHER INFORMATION

                                 LUMINENT, INC.
          PRO FORMA(1) CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                      Three Months Ended June 30,
                                                                                       -------------------------
                                                                                          2000           2001
                                                                                       ---------       ---------
<S>                                                                                    <C>             <C>
Net Sales                                                                              $  28,107       $  41,103
Cost of sales                                                                             17,403          28,042
                                                                                       ---------       ---------
       Gross Profit                                                                       10,704          13,061
Operating costs and expenses
       Selling, general and administrative                                                 4,836           5,756
       Research and development                                                            3,016           3,443
                                                                                       ---------       ---------
                                                                                           7,852           9,199

            Operating income                                                               2,852           3,862
Other income, net                                                                            192             988
                                                                                       ---------       ---------
       Income before provision for income taxes
            and minority interest                                                          3,044           4,850

Provision for income taxes                                                                 1,223           1,494
Minority interest                                                                            128            (136)

                                                                                       ---------       ---------
       Pro forma net income                                                            $   1,693       $   3,492
                                                                                       =========       =========

Net income per share, basic                                                                 0.01            0.02
Net income per share, diluted                                                               0.01            0.02
Shares used in per-share calculation, basic                                              144,000         156,000
Shares used in per-share calculation, diluted                                            144,000         157,070

Reconciliation of pro forma net income to net income (loss)
                                                                                                       ---------
Pro forma net income                                                                       1,693           3,492
Restructure & other one-time charges charged to cost of sales                                  -         (29,326)
Restructure & other one-time charges charged to selling, general & administrative              -         (11,390)
Restructure & other one-time charges charged to research and development                       -            (501)
Restructure & other one-time charges charged to other income                                   -             (16)
Deferred stock compensation charged to cost of sales                                        (744)           (566)
Deferred stock compensation charged to selling, general and administrative                (1,070)         (7,010)
Deferred stock compensation charged to research and development                           (1,159)           (890)
Amortization of goodwill charged to operating costs and expenses                          (9,580)        (19,488)
Adjustment to provision for income taxes in applying statutory rates                           -            (260)
                                                                                       ---------       ---------
       Net income (loss)                                                                 (10,860)        (65,955)
                                                                                       =========       =========
</TABLE>
---------------------

(1)    Pro forma statements exclude the non-cash charges recorded for the
       amortization of goodwill and deferred stock compensation related to the
       acquisitions of Fiber Optic Communications, Optronics, and Quantum; our
       employment arrangements with two of our executives; and the one-time
       restructure and other charges recorded as a result of the lower demand
       for our products and pricing pressures stemming from the continuing
       downturn in the communications equipment industry generally and the
       optical components sector in particular. The provision for income tax is
       computed using the statutory rates for each entity.


                                       28
<PAGE>   31

ITEM 6. EXHIBITS AND REPORTS ON FORM 8K

(a)     Exhibits. The following Exhibits are included as part of this report.

<TABLE>
<CAPTION>
     Exhibit
      Number
     -------
<S>                   <C>
       3.1            Amended and Restated Certificate of Incorporation
                      (incorporated by reference to Exhibit 3.1 filed with our
                      10-K, File No. 000-31393, on April 2, 2001).

       3.2            Amended and Restated Bylaws of the Registrant
                      (incorporated by reference to Exhibit 3.2 filed with our
                      Registration Statement on Form S-1, File No. 333-42238, on
                      July 26, 2000).

       4.1            Specimen Common Stock Certificate (incorporated by
                      reference to Exhibit 4.1 filed with our Registration
                      Statement on Form S-1, File No. 333-42238, on September
                      13, 2000).

       10.1           Amended and Restated 2000 Stock Option Plan (incorporated
                      by reference to Exhibit 10.1 filed with our Registration
                      Statement on Form S-1, File No. 333-42238, on September
                      13, 2000).

       10.2           Employment Agreement dated as of July 11, 2000 between
                      William R. Spivey and the Registrant (incorporated by
                      reference to Exhibit 10.2 filed with our Registration
                      Statement on Form S-1, File No. 333-42238, on July 26,
                      2000).

       10.3           Stock Option Agreement dated July 11, 2000 between William
                      R. Spivey and the Registrant (incorporated by reference to
                      Exhibit 10.3 filed with our Registration Statement on Form
                      S-1, File No. 333-42238, on September 13, 2000).

       10.4           Stock Option Agreement dated July 11, 2000 between William
                      R. Spivey and MRV (incorporated by reference to Exhibit
                      10.4 filed with our Registration Statement on Form S-1,
                      File No. 333-42238, on July 26, 2000).

       10.5           Employment Agreement dated as of July 12, 2000 between
                      Eric Blachno and the Registrant (incorporated by reference
                      to Exhibit 10.5 filed with our Registration Statement on
                      Form S-1, File No. 333-42238, on July 26, 2000).

       10.6           Stock Option Agreement dated July 12, 2000 between Eric
                      Blachno and the Registrant (incorporated by reference to
                      Exhibit 10.6 filed with our Registration Statement on Form
                      S-1, File No. 333-42238, on October 5, 2000).

       10.7           Stock Option Agreement dated July 12, 2000 between Eric
                      Blachno and MRV (incorporated by reference to Exhibit 10.7
                      filed with our Registration Statement on Form S-1, File
                      No. 333-42238, on October 5, 2000).

       10.8           Real Property Lease for Registrant's headquarters at 20550
                      Nordhoff in Chatsworth, CA dated July 13, 1999 and
                      expiring July 13, 2004 (incorporated by reference to
                      Exhibit 10.8 filed with our Registration Statement on Form
                      S-1, File No. 333-42238, on July 26, 2000).

       10.9           Real Property Lease for Registrant's foundry at 8917
                      Fullbright in Chatsworth, CA dated November 14, 1997 and
                      expiring December 31, 2002 (incorporated by reference to
                      Exhibit 10.9 filed with our Registration Statement on Form
</TABLE>

                                       29
<PAGE>   32
<TABLE>
<S>                   <C>
                      S-1, File No. 333-42238, on July 26, 2000).

       10.10          First Amendment to Employment Agreement dated as of July
                      11, 2000 between William R. Spivey and the Registrant
                      (incorporated by reference to Exhibit 10.10 filed with our
                      Registration Statement on Form S-1, File No. 333-42238, on
                      September 13, 2000).

       10.11          Form of Indemnification Agreement (incorporated by
                      reference to Exhibit 10.11 filed with our Registration
                      Statement on Form S-1, File No. 333-42238, on September
                      13, 2000).

       10.12          Stock Purchase Agreement by and between MRV
                      Communications, Inc. ("MRV") and the shareholders of Fiber
                      Optic Communications, Inc. ("FOCI"), dated February 21,
                      2000 (incorporated by reference to Exhibit 2.1(a) of the
                      Form 8-K of MRV filed with the SEC, File No. 001-11174, on
                      May 9, 2000).

       10.13          Escrow Agreement dated as of 21st day of February, 2000,
                      by and among MRV, the Selling Shareholders of FOCI and the
                      law firm of Baker & McKenzie, Taipei Office (incorporated
                      by reference to Exhibit 2.1(b) of the Form 8-K of MRV
                      filed with the SEC, File No. 001-11174, on May 9, 2000).

       10.14          Addendum to Stock Purchase Agreement dated as of April 14,
                      2000 by and among FOCI, Registrant and the selling
                      shareholders of FOCI (incorporated by reference to Exhibit
                      2.1(c) of the Form 8-K of MRV filed with the SEC, File No.
                      001-11174, on May 9, 2000).

       10.15          Addendum to Escrow Agreement dated as of April 14, 2000 by
                      and among FOCI, Registrant and the selling shareholders of
                      FOCI (incorporated by reference to Exhibit 2.1(d) of the
                      Form 8-K of MRV filed with the SEC, File No. 001-11174, on
                      May 9, 2000).

       10.16          Addendum No. 2 to Escrow Agreement dated as of June 26,
                      2000 by and among FOCI, MRV and the selling shareholders
                      of FOCI (incorporated by reference to Exhibit 2.1(d) of
                      the Form 8-K/A of MRV filed with the SEC, File No.
                      001-11174, on July 7, 2000).

       10.17          Addendum No. 2 to Stock Purchase Agreement dated as of
                      June 26, 2000 by and among FOCI, MRV and the selling
                      shareholders of FOCI (incorporated by reference to Exhibit
                      2.1(e) of the Form 8-K/A of MRV filed with the SEC, File
                      No. 001-11174, on July 7, 2000).

       10.18          Memorandum of Understanding dated as of June 26, 2000
                      between MRV and the remaining shareholders of FOCI
                      (incorporated by reference to Exhibit 2.1(f) of the Form
                      8-K/A of MRV filed with the SEC, File No. 001-11174, on
                      July 7, 2000).

       10.19          Stock Purchase Agreement by and between MRV and the
                      shareholders of Optronics International Corp. ("OIC")
                      dated April 23, 2000 (incorporated by reference to Exhibit
                      10.19 filed with our Registration Statement on Form S-1,
                      File No. 333-42238, on July 26, 2000).

       10.20          Escrow Agreement, dated as of the 23rd day of April 2000,
                      by and among MRV, the selling shareholders of OIC and the
                      law firm of Baker & McKenzie, Taipei Office (incorporated
                      by reference to Exhibit 10.20 filed with our Registration
                      Statement on Form S-1, File No. 333-42238, on July 26,
</TABLE>


                                       30
<PAGE>   33

<TABLE>
<S>                   <C>
                      2000).

       10.21          Stock Purchase Agreement by and between MRV and the
                      shareholders of Quantum Optech Inc. ("QOI") dated April
                      26, 2000 (incorporated by reference to Exhibit 10.21 filed
                      with our Registration Statement on Form S-1, File No.
                      333-42238, on July 26, 2000).

       10.22          Escrow and Stock Pledge Agreement dated as of April 26,
                      2000 by and between MRV and certain shareholders of QOI
                      (incorporated by reference to Exhibit 10.22 filed with our
                      Registration Statement on Form S-1, File No. 333-42238, on
                      July 26, 2000).

       10.23          Addendum to Stock Purchase Agreement made as of June 16th,
                      2000 by and among MRV, QOI and shareholders of QOI
                      (incorporated by reference to Exhibit 10.23 filed with our
                      Registration Statement on Form S-1, File No. 333-42238,on
                      July 26, 2000).

       10.24          Addendum to Escrow and Stock Pledge Agreement dated as of
                      June 16, 2000 by and between MRV and certain shareholders
                      of QOI (incorporated by reference to Exhibit 10.24 filed with our
                      Registration Statement on Form S-1, File No. 333-42238,
                      on July 26,2000).

       10.25          Underwriting Agreement dated as of November 9, 2000 by and
                      between MRV, the Registrant and Credit Suisse First Boston
                      Corporation, acting on behalf of themselves and as the
                      Representatives of the several Underwriters (incorporated
                      by reference to Exhibit 10.25 filed with our 10-K, File
                      No. 000-31393, on April 2, 2001).

       10.26          Master Separation and Distribution Agreement dated as of
                      July 25, 2000 between MRV and the Registrant (incorporated
                      by reference to Exhibit 2.1 filed with out Registration
                      Statement on Form S-1, File No. 333-42238, on July 26,
                      2000).

       10.27          Amendment to Master Separation and Distribution Agreement
                      dated as of September 8, 2000, between MRV and the
                      Registrant (incorporated by reference to Exhibit 10.27
                      filed with our 10-K, File No. 000-31393, on April 2,
                      2001).

       10.28          General Assignment and Assumption Agreement dated as of
                      September 8, 2000 between MRV and the Registrant
                      (incorporated by reference to Exhibit 10.28 filed with our
                      10-K, File No. 000-31393, on April 2, 2001).

       10.29          Master Technology Ownership and License Agreement dated as
                      of September 8, 2000 between MRV and the Registrant
                      (incorporated by reference to Exhibit 10.29 filed with our
                      10-K, File No. 000-31393, on April 2, 2001).

       10.30          Employee Matters Agreement dated as of September 8, 2000
                      between MRV and the Registrant (incorporated by reference
                      to Exhibit 10.30 filed with our 10-K, File No. 000-31393,
                      on April 2, 2001).

       10.31          Real Estate Matters Agreement dated as of September 8,
                      2000 between MRV and the Registrant (incorporated by
                      reference to Exhibit 10.31 filed with our 10-K, File No.
                      000-31393, on April 2, 2001).

       10.32          Master Transitional Services Agreement dated as of
                      September 8, 2000 between MRV and the Registrant
</TABLE>


                                       31
<PAGE>   34

<TABLE>
<S>                   <C>
                      (incorporated by reference to Exhibit 10.32 filed with our
                      10-K, File No. 000-31393, on April 2, 2001).

       10.33          Master Trademark Ownership and License Agreement dated as
                      of September 8, 2000 between MRV and the Registrant
                      (incorporated by reference to Exhibit 10.33 filed with our
                      10-K, File No. 000-31393, on April 2, 2001).

       10.34          Master Patent Ownership and License Agreement dated as of
                      September 8, 2000 between MRV and the Registrant
                      (incorporated by reference to Exhibit 10.34 filed with our
                      10-K, File No. 000-31393, on April 2, 2001).

       10.35          Indemnification and Insurance Matters Agreement dated as
                      of September 8, 2000 between MRV and the Registrant
                      (incorporated by reference to Exhibit 10.35 filed with our
                      10-K, File No. 000-31393, on April 2, 2001).

       10.36          Master Confidential Disclosure Agreement dated as of
                      September 8, 2000 between MRV and the Registrant
                      (incorporated by reference to Exhibit 10.36 filed with our
                      10-K, File No. 000-31393, on April 2, 2001).

       10.37          Tax Sharing Agreement dated as of September 8, 2000
                      between MRV and the Registrant (incorporated by reference
                      to Exhibit 10.37 filed with our 10-K, File No. 000-31393,
                      on April 2, 2001).

       10.38          Employment Agreement dated September 25, 2000 between
                      James S. Locke and the Registrant (incorporated by
                      reference to Exhibit 10.38 filed with our 10-K, File No.
                      000-31393, on April 2, 2001).

       10.39          Employment Agreement dated October 16, 2000 between Monika
                      Arboles, Esq. and the Registrant (incorporated by
                      reference to Exhibit 10.39 filed with our 10-K, File No.
                      000-31393, on April 2, 2001).

       10.40          Employment Agreement dated November 9, 2000 between Glenn
                      A. Weinman, Esq. and the Registrant (incorporated by
                      reference to Exhibit 10.40 filed with our 10-K, File No.
                      000-31393, on April 2, 2001).

       10.41          Employment Agreement dated April 23, 2001 between Aaron
                      Uri Levy and the Registrant (incorporated by
                      reference to Exhibit 10.41 filed with our 10-Q, File No.
                      000-31393, on May 15, 2001).


       10.42          Lease Agreement dated January 30, 2001 between Abronson,
                      Cole & Eisele, a California General Partnership and the
                      Registrant (incorporated by reference to Exhibit 10.42
                      filed with our 10-Q, File No. 000-31393, on May 15, 2001).

       21.1           List of Registrant's Subsidiaries (incorporated by
                      reference to Exhibit 21.1 filed with our Registration
                      Statement on Form S-1, File No. 333-42238, on September
                      13, 2000).
</TABLE>

(b)     Reports on Form 8-K.

No reports on Form 8-K were filed by the Registrant during the last quarter of
the period covered by this Report.


                                       32
<PAGE>   35

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934
(the "Exchange Act"), the Registrant caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chatsworth,
State of California, on August 14, 2001.

                                     LUMINENT, INC.

                                     By: /s/ WILLIAM R. SPIVEY
                                        ----------------------------------
                                        William R. Spivey, President
                                        and Chief Executive Officer


                                     By: /s/ ERIC I. BLACHNO
                                        ----------------------------------
                                        Eric I. Blachno, Vice President, Finance
                                        and Chief Financial Officer


                                       33