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 December 28, 2002 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 0-31162
                             O P T I C N E T, I N C.
             (Exact name of Registrant as specified in its charter)

        Delaware                                        94-3368561
------------------------                    ------------------------------------
(State of incorporation)                    (I.R.S. Employer Identification No.)


                           One Post Street, Suite 2500
                         San Francisco, California 94104
                    ----------------------------------------
                    (Address of principal executive offices)

                                 (415) 956-4477
                         -------------------------------
                         (Registrant's telephone number)

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 |_|

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

Common  Stock:  $.0001 Par Value;  3,093,202  shares of Voting  Common Stock and
2,998,902 shares of Nonvoting Common Stock outstanding as of December 28, 2002.

Page 1 of 23

<PAGE>

OPTICNET, INC.
(a development stage company)

INDEX

PART 1.    FINANCIAL INFORMATION                                            PAGE
           ---------------------                                            ----

Item 1.    Financial Statements

                     Condensed Balance Sheets--December 28, 2002 and
                       September 28, 2002                                    3

                     Condensed Statements of Operations--Quarters
                       ended December 28, 2002 and December 29, 2001
                       and the period from February 23, 2000
                       (inception) to December 28, 2002                      4

                     Condensed Statements of Cash Flows-- Quarters
                       ended December 28, 2002 and December 29, 2001
                       and the period from February 23, 2000
                       (inception) to December 28, 2002                      5

                     Notes to Condensed Financial Statements--
                       December 28, 2002                                     6

Item 2.    Management's Discussion and Analysis of Financial
             Condition and Results of Operations                            10

Item 3.    Quantitative and Qualitative Disclosure About Market
             Risk                                                           14


PART II.   OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K                                 16

                     (a) Exhibits

                     (b) Reports on Form 8-K

          SIGNATURES                                                        18

Page 2 of 23

<PAGE>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OPTICNET, INC.
(a development stage company)
CONDENSED BALANCE SHEETS

                                                   December 28,    September 28,
                                                      2002            2002
                                                   (Unaudited)  (See note below)
                                                   -----------   --------------

ASSETS

Cash and cash equivalents                           $    57,945      $     4,881
Prepaid expenses                                          9,114            3,263
Other current assets                                        324              324
                                                    -----------      -----------
      Total current assets                               67,383            8,468

Other assets                                                728              728
                                                    -----------      -----------
                                                    $    68,111      $     9,196
                                                    ===========      ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable                                    $      --        $   13,713
Accrued expenses and other liabilities                   12,707          40,394
Other related party liability                           244,577         214,078
Note payable to related party                         2,656,338       2,656,338
Customer funded research and development liability       70,500             --
                                                    -----------      -----------
      Total current liabilities                       2,984,122       2,924,523

Stockholders' deficit                                (2,916,011)     (2,915,327)
                                                    -----------      -----------
                                                    $    68,111      $    9,196
                                                    ===========      ===========

Note:  The balance sheet at September 28, 2002 has been derived from the audited
balance sheet at that date.

See notes to condensed financial statements.

Page 3 of 23

<PAGE>


OPTICNET, INC.
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)


<TABLE>
<CAPTION>
                                                                                      Quarters Ended
                                                                            ---------------------------------
                                                                                                                       Period from
                                                                                                                        February 23,
                                                                                                                           2000
                                                                                                                      (inception) to
                                                                             December 28,         December 29,          December 28,
                                                                                2002                 2001                  2002
                                                                            -----------           -----------           -----------
<S>                                                                         <C>                   <C>                   <C>
Revenues                                                                    $      --             $    87,500           $   611,500
Cost of revenues                                                                   --                  43,752               343,441
                                                                            -----------           -----------           -----------
Gross margin                                                                       --                  43,748               268,059

Selling, general and administrative expenses                                     59,011               288,342             2,222,019
Research and development expenses                                                63,124               463,566             3,895,963
                                                                            -----------           -----------           -----------
Loss from operations                                                           (122,135)             (708,160)           (5,849,923)

Interest expense                                                                 39,623                18,780               188,938
Other income                                                                       --                   9,000                65,173
                                                                            -----------           -----------           -----------

Deficit accumulated in the development stage                                $  (161,758)          $  (717,940)          $(5,973,688)
                                                                            ===========           ===========           ===========
Basic and diluted net loss per share                                        $     (0.03)          $     (0.13)          $     (1.33)
                                                                            ===========           ===========           ===========

Weighted average shares used in computation of
  basic and diluted loss per share                                            5,857,331             5,433,406             4,505,524
                                                                            ===========           ===========           ===========
</TABLE>

See notes to condensed financial statements.

Page 4 of 23

<PAGE>

OPTICNET, INC.
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

<TABLE>
<CAPTION>
                                                                                           Quarters Ended
                                                                                    -----------------------------
                                                                                                                       Period from
                                                                                                                       February 23,
                                                                                                                           2000
                                                                                                                      (inception) to
                                                                                    December 28,      December 29,      December 28,
                                                                                        2002              2001             2002
                                                                                    -----------       -----------       -----------
<S>                                                                                 <C>               <C>               <C>
Cash flows from operating activities:
Deficit accumulated in the development stage                                        $  (161,758)      $  (717,940)      $(5,973,688)
Adjustments to reconcile net loss to net cash
  used by operating activities:
    Depreciation and amortization                                                         5,091             7,879            56,650
    Other                                                                                53,748          (148,773)          318,346
                                                                                    -----------       -----------       -----------
Net cash used by operating activities                                                  (102,919)          (858,834)      (5,598,692)

Cash flows from investing activities:
    Purchase of property and equipment                                                     --              (1,158)          (24,492)
    Other                                                                                  --                --                (728)
                                                                                    -----------       -----------       -----------
Net cash used by investing activities                                                      --              (1,158)          (25,220)

Cash flows from financing activities:
     Proceeds from borrowing on line of credit from related party                          --             562,396         2,820,331
     Principal payments on line of credit from related party                               --                --            (163,993)
     Proceeds from equity funding from a related party                                  155,983              --           1,970,625
     Proceeds from issuance of convertible preferred stock, net                            --                --           1,000,000
     Proceeds from issuance of common stock                                                --                --              54,894
                                                                                    -----------       -----------       -----------
Net cash provided by financing activities                                               155,983            562,396        5,681,857
                                                                                    -----------       -----------       -----------

Net increase (decrease) in cash and cash equivalents                                     53,064          (297,596)           57,945
Cash and cash equivalents at beginning of period                                          4,881           828,489              --
                                                                                    -----------       -----------       -----------
Cash and cash equivalents at end of period                                          $    57,945       $   530,893       $    57,945
                                                                                    ===========       ===========       ===========

Supplemental Disclosure of Non Cash Items:

Grants of restricted stock                                                          $      --         $      --         $    95,040
Contribution of treasury stock                                                             --                --              14,720
Repurchase of restricted stock                                                             --                --              19,208
Conversion of equity funding to preferred stock                                       1,814,642              --           1,814,642
Reclassification of prior period funding                                            $    33,062       $      --         $    33,062
</TABLE>

See notes to condensed financial statements.

Page 5 of 23

<PAGE>

OPTICNET, INC.
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The accompanying  unaudited condensed financial statements have been prepared in
accordance with accounting  principles  generally  accepted in the United States
for interim  financial  information  and with the  instructions to Form 10-Q and
Article  10 of  Regulation  S-X.  Accordingly,  they do not  include  all of the
information and footnotes required by accounting  principles  generally accepted
in the United  States  for  complete  financial  statements.  In the  opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.  Operating results for the
interim periods presented are not necessarily indicative of the results that may
be  expected  for the  fiscal  year  ending  September  27,  2003.  For  further
information,  refer to the financial  statements  and  footnotes  thereto in the
Company's annual report on Form 10-K, as amended January 24, 2003.

OpticNet,  Inc.  ("OpticNet" or the "Company") was  incorporated on February 23,
2000 in the State of Delaware.  From its  inception  (February 23, 2000) through
December  31,  2000,  OpticNet  operated  as  a  controlled  subsidiary  of  BEI
Technologies, Inc. ("BEI Technologies").  BEI Technologies accumulated the costs
associated  with  OpticNet's  operations  in the period from  February  23, 2000
through  December 31, 2000  including  all  expenses  directly  attributable  to
OpticNet  and an  allocation  of the costs of shared  facilities,  salaries  and
employee benefits  attributable to OpticNet based on relative  headcount.  These
allocations  were based on assumptions  that management  believes are reasonable
under the  circumstances.  However,  these  allocations  and  estimates  are not
necessarily  indicative  of the costs that would have  resulted if OpticNet  had
been operated on a stand-alone basis during this period.

As of October 30, 2000, BEI  Technologies  distributed  3,578,387  shares to BEI
Technologies' stockholders ("Distribution"),  substantially all of the Company's
voting common stock held by BEI Technologies.  In the Distribution,  each holder
of record of BEI  Technologies  common stock as of October 30, 2000 received one
share of OpticNet common stock for every two shares of BEI  Technologies  common
stock held, and cash in lieu of any fractional  share of OpticNet  common stock.
After the  Distribution,  BEI  Technologies  continued to hold securities of the
Company in the form of convertible  preferred and common stock,  representing an
aggregate  ownership  interest of approximately  25% in the Company up until the
issuance  of the  Company's  Series  B  nonconvertible  preferred  stock  to BEI
Technologies during the first quarter of fiscal 2003.

The principal  focus of the Company's  business is to develop,  manufacture  and
market fiber optic components and subsystems for the telecommunications market.

OpticNet's  primary  activities  since inception have been devoted to developing
its product  offerings and related  technologies,  recruiting key management and
technical personnel and attempting to raise capital to fund operations. OpticNet
has not recognized significant revenues since inception.  All revenue recognized
to date consisted of engineering  work performed  under  engineering  agreements
with unaffiliated  customers and not from the sale of fiber optic components and
subsystems.  As a result, the accompanying financial statements are presented in
accordance with Financial  Accounting  Standards  ("FAS") No. 7, "Accounting and
Reporting by Development Stage Enterprises."

OpticNet's  operations  are  subject  to  significant  risks and  uncertainties,
including  competitive,  financial,   developmental,   operational,  growth  and
expansion, technological, regulatory and other risks associated with an emerging
business.

These  financial  statements  have been prepared  assuming that the Company will
continue as a going concern. Since its inception,  the Company has had recurring
operating  losses and negative cash flows from operations and has an accumulated
deficit of $6.0 million at December 28, 2002. These conditions raise substantial
doubt about the

Page 6 of 23
<PAGE>

Company's ability to continue as a going concern.

During fiscal 2002 and the first quarter of fiscal 2003,  the Company  continued
to be unsuccessful in attracting outside financing despite  management's efforts
and continued operations on a reduced basis.  Management and the Company's board
of directors  decided in March 2002 to reduce the level of incremental  spending
for  research and  development  and to reduce  operations  to a level that would
solely  support  the  current  customer  base.  Management's  plan to enable the
Company to continue as a going concern calls for the Company's  operations to be
frozen at a minimal  level,  sufficient  to  support  current  product  delivery
commitments.  The Company reduced its fixed cost base to an absolute minimum and
no longer maintains any employees of its own other than officers of the Company,
each of whom provide  services to the Company on a part time basis. The majority
of  OpticNet's  operating  costs are paid by BEI  Technologies,  who  shares the
Hayward  facility and from whom  engineering and other services are rented on an
as-required  basis. The cash outlay for the Company's portion of these costs are
recorded as  additional  investment in the Company by BEI  Technologies.  Future
operating  expenses are expected to be funded by product and  prototype  revenue
under existing contracts.  In addition,  new prototype or product contracts will
not be initiated if these contracts  cannot generate  positive cash flows within
the next 12 months.  Management  believes that  additional  funding of less than
$1.0 million  will enable the Company to continue on a reduced  basis as a going
concern through  September 30, 2003 and that such funding will be available from
BEI  Technologies,  if  required.  However,  management  cannot be certain  such
additional  funding will be on desirable,  or acceptable,  terms to the Company.
Management  continues to seek additional  equity financing from existing sources
on  an  opportunistic  and  as-available   basis.   Management  plans  to  defer
substantially all research and development activity in the absence of additional
equity financing.

These  financial  statements  do not  include  any  adjustments  to reflect  the
possible future effects on the  recoverability  and  classification of assets or
the amounts and  classification  of liabilities that may result from the outcome
of this uncertainty.

During the third and fourth quarters of fiscal 2002, BEI  Technologies  provided
the Company with  approximately  $1.8 million in  financing,  which was advanced
with the  understanding  that  such  amount  would be  converted  into a form of
nonvoting equity in the Company.  Effective  September 28, 2002, the Company and
BEI  Technologies  determined  the  Company  would  authorize  and  issue to BEI
Technologies  a series of  nonvoting  preferred  stock.  In November  2002,  the
Company issued a total of 18,146,420  shares of the Company's  newly  authorized
nonvoting Series B Preferred Stock to BEI Technologies,  in consideration of the
approximately $1.8 million advanced.

The  Company  received   approximatley  $190,000  in  equity  funding  from  BEI
Technologies during the first quarter of fiscal 2003, used for general operating
expenses.  The parties have been discussing the  authorization by the Company of
additional equity securities for issuance to BEI Technologies  representing this
sum. The final terms of such an equity  investment would be determined when, and
if, such an equity investment is consummated.

Use of Estimates

The  preparation  of the  Company's  financial  statements  in  conformity  with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make estimates and  assumptions  that affect the amounts
reported in the financial  statements  and  accompanying  notes.  Actual results
could differ materially from those estimates. The judgments and assumptions used
by management are based on historical  experience  and other factors,  which are
believed to be reasonable under the circumstances.

Long-Lived Assets

The  Company  recognizes  impairment  losses  in  accordance  with FAS No.  121,
"Accounting for the Impairment of Long-Lived  Assets and Long-Lived Assets to be
Disposed  of."  Long-lived  assets,  including  property and equipment and other
assets, are reviewed and impairment recognized when indicators of impairment are
present and  undiscounted  cash flows  estimated to be generated by those assets
are less than the carrying amounts of the assets.  Indicators of impairment were
present during the periods  presented.  Total net  realizable  fair value of all
long-lived assets at December 28, 2002 was $728.

Page 7 of 23
<PAGE>

NOTE 2. TRANSACTIONS WITH RELATED PARTIES

On October 6, 2000, the Company and BEI  Technologies  entered into a Technology
Transfer and Distribution  Agreement (the "Distribution  Agreement") whereby BEI
Technologies contributed to the Company certain assets and intellectual property
related to the fiber optic components  technology  developed by BEI Technologies
and BEI  Technologies'  majority-owned  subsidiary,  SiTek,  Inc.  ("SiTek")  in
exchange for 3,616,000  shares of the Company's  common stock.  BEI Technologies
later distributed  3,578,387 of these shares to its stockholders on November 21,
2000 in connection with the Company's separation from BEI Technologies.

In connection with the Distribution  Agreement,  on October 6, 2000, the Company
and SiTek  entered into a License and  Technical  Assistance  Agreement  whereby
Sitek agreed to license certain technology to the Company, assist the Company in
certain  research and development  efforts  following the  Distribution and also
fabricate and supply  certain  components  utilized in the  Company's  products.
Further,  Sitek  granted to the Company a perpetual,  royalty  free,  worldwide,
exclusive  license to develop,  make, use and sell products  within the field of
telecommunications data transmission utilizing technology now possessed or later
developed  by  SiTek,  and the  Company  has  granted  to SiTek a  corresponding
perpetual, royalty free, worldwide,  exclusive license to develop, make, use and
sell products outside of the Company's  defined market utilizing  technology now
possessed or later  developed by the Company.  This agreement  shall continue in
effect  for five  years  and  automatically  renew  thereafter  for  consecutive
one-year terms unless either party gives written notice of termination.

On  October  27,  2000,  the  Company  and  BEI  Technologies  entered  into  an
InterCompany   Services  Agreement  (the  "Services   Agreement")   whereby  BEI
Technologies agreed to make available to the Company certain office and facility
space, personnel support and supervision, financial and administrative services,
record-keeping  functions  and other  assistance,  with BEI  Technologies  being
reimbursed for the costs and expenses  incurred in connection with the provision
of these services to OpticNet.  Charges for these services were allocated to the
Company based upon usage,  headcount and other methods that management  believes
to be reasonable.  In the fiscal  quarter ended June 29, 2002, BEI  Technologies
agreed to suspend  charges for the third and fourth  quarters of fiscal 2002 and
future  quarters'  service  charges,  due to the  Company's  inability to obtain
significant  strategic partners or third party financing and reduced services to
a minimal level.

The  Services  Agreement  further  provided  for  a  line  of  credit  from  BEI
Technologies  to the Company for up to $2.0 million with  interest at prime plus
1.5%, expiring on September 28, 2002, unless extended by mutual agreement of the
parties.  During fiscal 2002, BEI Technologies  increased this line of credit by
$1.0 million.  As of September  28, 2002 and December 28, 2002,  the Company had
outstanding  borrowings  totaling  approximately  $2.7  million  on this line of
credit.  During the fiscal quarter ended June 29, 2002, the Company was informed
by BEI Technologies  that no further advances would be made to the Company under
this line of credit beyond the approximately $2.7 million funded as of March 30,
2002.  During October 2002, BEI  Technologies  extended the maturity date of the
line of credit to December 31, 2002.  The parties  intend to extend the maturity
date of the  line of  credit.  The  final  terms of such an  extension  would be
determined  when,  and  if,  such  an  extension  is  consummated.  To  maintain
sufficient liquidity in the future and to fund operations, the Company will need
to obtain  additional  financing,  which may be on unfavorable terms in light of
the Company's credit position.

On  September  28, 2001 the Company  entered into a general  equipment  sublease
agreement with BEI Technologies as the lessor,  which is subordinate to a master
lease agreement entered into by BEI Technologies as the lessee. On September 28,
2001, December 20, 2001 and March 28, 2002, the Company executed equipment lease
schedules under the general equipment sublease with BEI Technologies.  The total
value of the scheduled  equipment under the sublease agreement was approximately
$7.0 million,  with an initial lease term of 36 months.  Rental payments are due
on a quarterly  basis and the amount  determined by the Company's level of usage
of the equipment, the cost of the equipment and applicable interest. Payment due
for the quarter ended December 28, 2002 was approximately $46,000.

The Company  originally  entered into a sublease  agreement in October 2001 with
BEI Technologies for a 15,571 square feet facility for administration,  research
and development and manufacturing  activities in Hayward,  California,  expiring
December  2005.  As of March  30,  2002,  the  Company,  in  recognition  of its
inability to obtain  significant  strategic  partners or third party  financing,
concluded it was necessary to reduce  operating  costs.  The

Page 8 of 23
<PAGE>

Company agreed with BEI  Technologies  that this  reduction in operations  would
lower usage of the  equipment  and the  subleased  facilities  described  above.
Accordingly,  the annual lease payments to BEI  Technologies  have been prorated
beginning  March 31, 2002,  based on the portion of the  facilities  the Company
requires to support its current customers.

In the six months  ended  September  28,  2002,  BEI  Technologies  advanced  an
additional  $1.8  million to the Company.  Effective  September  28,  2002,  the
Company and BEI  Technologies  had  determined  the Company would  authorize and
issue to BEI  Technologies a series of nonvoting  preferred  stock.  In November
2002,  the Company  issued a total of 18,146,420  shares of the Company's  newly
authorized   nonvoting  Series  B  Preferred  Stock  to  BEI  Technologies,   in
consideration of the approximately $1.8 million advanced noted above.

The  Company  received   approximately  $190,000  in  equity  funding  from  BEI
Technologies during the first quarter of fiscal 2003, used for general operating
expenses.  The parties have been discussing the  authorization by the Company of
additional equity securities for issuance to BEI Technologies  representing this
sum. The final terms of such an equity  investment would be determined when, and
if, such an equity investment is consummated.

All of the  arrangements  outlined above were  negotiated by related parties and
may not represent transactions at arms length and the Company may not be able to
obtain terms as favorable with third parties if and when the  arrangements  with
BEI Technologies come to an end.


NOTE 3. NOTE PAYABLE TO RELATED PARTY

During fiscal 2001, the Company entered into a line of credit agreement with BEI
Technologies,  a  minority  investor.  Under  the  terms of the  agreement,  BEI
Technologies  has made available to the Company from time to time until December
31, 2002, an amount not to exceed at any time the aggregate  principle amount of
$3.0  million,  as  amended.   The  Company's  obligation  to  repay  the  loans
outstanding  is due in full on  December  31,  2002,  unless  extended by mutual
agreement of the parties.  The parties intend to extend the maturity date of the
line of credit.  The final terms of such an extension would be determined  when,
and if, such an extension is  consummated.  During the fiscal quarter ended June
29, 2002, the Company was informed by BEI Technologies  that no further advances
would be made to the Company under this line of credit beyond the  approximately
$2.7 million  funded as of March 30, 2002 in view of the Company's  inability to
obtain  outside  financing  to date and other  general  indications  of investor
disaffection  with  businesses  in  the  telecommunications  market.  Borrowings
outstanding on the line of credit were as follows:


                                                    December 28,    December 29,
                                                        2002           2001
                                                     ----------     ----------
Unsecured revolving promissory note from BEI
  Technologies due 12/31/02, at a rate of prime
  plus 1.5%; 6.25% and 5.75% at December 28, 2002
  and December 29, 2001, respectively                $2,656,338     $1,729,004
                                                     ----------     ----------
                                                     $2,656,338     $1,729,004
                                                     ==========     ==========

No  interest  was paid  during the  quarter  ended  December  28, 2002 or in the
quarter ended  December 29, 2001.  Accrued  interest  expense was  approximately
$189,000 and $19,000 at December  28, 2002 and December 29, 2001,  respectively.
The interest payable of approximately $189,000 at December 28, 2002 was recorded
as an other related party liability.


NOTE 4. REDUCTION IN FORCE

In April 2002,  the Company  underwent a reduction  in force  resulting in eight
individuals  departing  employment  with  the  Company,  including  engineering,
manufacturing  and marketing  personnel.  Severance pay for affected persons was
per Company policy,  including cash payment and the  acceleration of the vesting
of options for certain  affected  individuals.  Total cash costs  related to the
reduction in force of  approximately  $86,000 was recorded in the fiscal quarter
ending June 29, 2002 within research and development expenses.

Page 9 of 23
<PAGE>

To further reduce costs for the Company in the near term,  during July 2002, all
of the Company's remaining 15 employees were released from their employment with
the Company and accepted  employment with a subsidiary of BEI  Technologies,  as
agreed to by both  companies,  but still  perform  services  for  OpticNet.  The
Company's newly appointed President and Chief Technical Officer have also become
employees of this same subsidiary of BEI Technologies,  but continue to serve as
executive  officers of the  Company.  The  services of certain key  individuals,
including the Company's newly appointed  President and Chief Technical  Officer,
are expected to continue to be  available to the Company on an as needed  basis,
with  reimbursement  by the Company to their present employer for the time value
of their services.

NOTE 5. CONTINGENCIES AND LITIGATION

The Company has pending  various legal  actions  arising in the normal course of
business.  Management believes that none of these legal actions, individually or
in the  aggregate,  will  have a  material  impact  on the  Company's  business,
financial  condition or operating  results.  The Company is a  codefendant  in a
dispute with a former employee, which at December 28, 2002, cannot be reasonably
estimated to the future financial impact. The Company believes this claim has no
merit and is defending the allegation.

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

Except for the historical information contained herein, the following discussion
contains  forward-looking  statements that involve risks and uncertainties.  The
Company's  actual results could differ  materially  from those  expressed in, or
implied  by,  such  forward-looking  statements.  Factors  that  could  cause or
contribute to such differences  include, but are not limited to, those discussed
in this  section,  and those  discussed  in the  Company's Form 10-K, as amended
January 24, 2003, in particular, within the "Risk Factors" section thereof.

See "Critical accounting policies and the use of estimates" for a description of
the Company's critical accounting policies.

Quarters ended December 28, 2002 and December 29, 2001

Revenues  during the first quarter of fiscal 2002 were $87,500,  reflecting work
performed under engineering agreements with unaffiliated  customers.  There were
no revenues  during the first quarter of fiscal 2003.  The decrease is primarily
due to the continued  slow down of demand for new  telecommunications  equipment
components compared to prior periods.

In addition, during the first quarters of fiscal 2002 and 2003, the Company made
prototype deliveries to one customer.  In the first quarter of fiscal 2002, cost
of revenues as a percentage  of revenues  was 50%,  resulting in gross profit of
approximately  $44,000.  Cost  of  revenues  includes  salaries,  materials  and
production overhead.

Selling, general and administrative expenses in the first quarter of fiscal 2003
decreased  approximately $229,000 from $288,000 in the same quarter of the prior
fiscal year to $59,000.  During fiscal 2002, the Company,  in recognition of its
inability to obtain  significant  strategic  partners or third party  financing,
concluded it was necessary to reduce  operating  costs.  The Company agreed with
BEI  Technologies  that this  reduction in  operations  would lower usage of the
subleased facilities. Accordingly, the annual lease payments to BEI Technologies
are now prorated based on the portion of the facilities the Company  requires to
support its current  customers.  In the first  quarter of fiscal 2002,  selling,
general and  administrative  expenses  included a payment of $25,000 made to BEI
Technologies for accounting,  human resources and other administrative  services
provided by BEI Technologies  pursuant to the Services Agreement between the two
companies. Commencing with the second fiscal quarter of 2002, these charges have
been waived in light of the Company's financial position.

Page 10 of 23
<PAGE>

Research and development  expenses in the first quarter of fiscal 2003 decreased
approximately  $401,000  from  $464,000 in the same  quarter of the prior fiscal
year to $63,000.  The decrease was primarily  due to the  Company's  decision to
significantly  reduce  operations to support its current  customers.  During the
first  quarter  of  fiscal  2002 the  Company  recorded  approximately  $900 for
deliveries of prototype  products as an offset against  research and development
expense.

Interest  expense in the first  quarter of fiscal 2003  increased  approximately
$21,000 from $19,000 in the same quarter of the prior fiscal year to $40,000 due
to the increased  outstanding  balance on the Company's line of credit agreement
with BEI Technologies.

Financing from Related Party

Since inception,  all operating  capital of the Company has been provided by BEI
Technologies  as debt or equity  financing.  The Company has been unable to gain
outside  financing  from  independent  parties  to date,  in light of the severe
downturn in the optical networking industry.

In October  2000,  BEI  Technologies  agreed to provide  OpticNet with a line of
credit  originally  established for up to $2.0 million.  During fiscal 2002, the
line of credit was amended to allow for  borrowings up to $3.0  million.  During
the  fiscal  quarter  ended  June  29,  2002,  BEI  Technologies  suspended  the
availability  of advances to the Company  under the line of credit,  under which
amounts outstanding at such time totaled approximately $2.7 million in principal
amount. As of March 30, 2002, the Company was advised by BEI Technologies  that,
in view of the Company's inability to obtain outside financing to date and other
general  indications  of  investor   dissatisfaction   with  businesses  in  the
telecommunications  market,  further debt financing would not be provided by BEI
Technologies.  During October 2002, BEI Technologies  extended the maturity date
of the line of credit to December  31,  2002.  The parties  intend to extend the
maturity date of the line of credit.  The final terms of such an extension would
be determined when, and if, such an extension is consummated.  In the six months
ending September 28, 2002, BEI Technologies provided an additional $1.8 million,
approximately,  of financing to the Company,  which was advanced with the intent
to convert such cash advances into additional  equity.  Effective  September 28,
2002,  the  Company  and BEI  Technologies  had  determined  the  Company  would
authorize and issue to BEI  Technologies a series of nonvoting  preferred stock.
In November 2002,  the Company issued a total of 18,146,420  shares of nonvoting
and   nonconvertible   Series  B  Preferred  Stock  to  BEI   Technologies,   in
consideration of the $1.8 million advanced during the third and fourth quarters

In the quarter ended December 28, 2002,  BEI  Technologies  provided  additional
funding of approximately $190,000 to the Company for general operating expenses.
The parties have been discussing the  authorization by the Company of additional
equity  securities for issuance to BEI Technologies  representing  this sum. The
final terms of such an equity  investment would be determined when, and if, such
an equity investment is consummated.

Pursuant to the facilities sublease agreement,  equipment sublease agreement and
the Services Agreement described above, payments due to BEI Technologies were as
follows:

Page 11 of 23
<PAGE>


<TABLE>
<CAPTION>
                                                                                                                   Period from
                                                                                                                   February 23,
                                                                            Fiscal Year          Quarter              2000
                                                                               Ended              Ended           (inception) to
                                                                            September 28,      December 28,        December 28,
                                                                                2002               2002               2002
                                                                             ----------            ----            ----------
                                                                                                                   (unaudited)
<S>                                                                          <C>                   <C>             <C>
Subleases
      Facilities sublease                                                    $  134,585          $ 4,477             $361,117
      Equipment sublease                                                        660,449           46,009              706,458
                                                                             ----------           ------           ----------

      Total amounts financed under subleases                                    795,034           50,486            1,067,575
        Intercompany services charges                                            50,000              --               125,000
                                                                             ----------          -------           ----------
        Total payments due                                                   $  845,034          $50,486           $1,192,575
                                                                             ==========          =======           ==========
</TABLE>


Liquidity and Capital Resources

During the first  quarter of fiscal  2003,  total  cash used by  operations  was
approximately $103,000. Cash provided by operations included the positive impact
of non-cash charges from  depreciation and amortization of $5,000.  In addition,
positive  impacts to cash resources  resulted from increases in customer  funded
research and development  liabilty and accrued expenses and other liabilities of
approximately $71,000 and $3,000,  respectively.  These cash inflows were offset
by an  increase  in prepaid  expenses  of  approximately  $6,000,  a decrease in
accounts  payable of  approximately  $14,000  and a net loss of  $161,758.  Cash
provided by financing  activities  consisted of net proceeds since  inception of
approximately  $2,656,000  from  borrowings on the Company's note payable to BEI
Technologies under its related party line of credit arrangement.  The borrowings
were used to fund daily operations, capital investments and product development.
In March 2002,  BEI  Technologies  increased this line of credit by $1.0 million
and in October 2002,  the maturity date was extended to December 31, 2002.  Also
during the first quarter of fiscal 2003, cash from financing activities included
an investment of approximately $190,000 by BEI Technologies.

If the Company continues as a going concern,  the Company anticipates  incurring
substantial  additional  losses  over at least  the next  several  years.  Since
inception, the Company has incurred recurring operating losses and negative cash
flows from  operations.  As of December 28, 2002, the Company had an accumulated
deficit of $6.0 million.  After extensive  discussions with prospective  outside
investors  throughout  fiscal 2002,  during March 2002 the Company  became aware
that none of these  discussions  would result in near term equity  financing for
the Company.  As of March 30, 2002, the Company was advised by BEI  Technologies
that, in view of the Company's inability to obtain outside financing to date and
other  general  indications  of investor  disaffection  with  businesses  in the
telecommunications  market,  further debt financing would not be provided by BEI
Technologies.  These  conditions  raise  substantial  doubt about the  Company's
ability to continue as a going concern. In the first quarter of fiscal 2003, the
Company issued nonvoting preferred stock to BEI Technologies in consideration of
amounts  received in the third and fourth quarters of fiscal 2002. As of the end
of the Company's March 30, 2002 fiscal quarter,  management  determined that the
Company would not have sufficient financing for the remainder of its 2002 fiscal
year  without  modifying  the  Company's  business  plan,   implementing  strict
cost-cutting   measures  and  obtaining   additional   financing  was  obtained.
Therefore,  management and the Company's board of directors reduced the level of
spending by the Company for research and  development and facility and equipment
expenditures  and to reduce  operations to a level that will solely  support the
current  customer  base.  The  Company  intends to continue to operate in such a
scaled back manner  until  additional  outside  financing  is available or other
prospects are realized by the Company.

In April 2002,  the Company  underwent a reduction  in force  resulting in eight
individuals  terminating  employment  with the Company,  including  engineering,
manufacturing  and marketing  personnel.  Severance pay for affected persons was
per Company policy,  including cash payment and the  acceleration of the vesting
of options for certain  affected  individuals.  Total cash costs  related to the
reduction in force of  approximately  $86,000 was recorded in the fiscal quarter
ending June 29, 2002. No costs related to the reduction in force was recorded in
the first quarter of fiscal 2003.

Page 12 of 23
<PAGE>

To further reduce costs for the Company in the near term,  during July 2002, all
of the Company's remaining 15 employees were released from their employment with
the Company and accepted  employment with a subsidiary of BEI  Technologies,  as
agreed to by both companies.  The Company's newly appointed  President and Chief
Technical  Officer  have also become  employees of this same  subsidiary  of BEI
Technologies,  but continue to serve as executive  officers of the Company.  The
services of certain key  individuals,  including the Company's  newly  appointed
President and Chief Technical Officer,  are expected to continue to be available
to the Company on an as needed basis, with reimbursement by the Company to their
present employer for the time value of their services.

Effects of Inflation

Management  believes  that, for the periods  presented,  inflation has not had a
material effect on the Company's operations.

Critical Accounting Policies and the Use of Estimates

Management's  discussion  and  analysis of  financial  condition  and results of
operations is based upon the  Company's  financial  statements,  which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America.  The Company  reviews the accounting  policies used in
reporting its financial  results on a regular  basis.  The  preparation of these
financial  statements  requires  management to make estimates and judgments that
affect the reported  amounts of assets,  liabilities,  revenues and expenses and
related disclosure of contingent assets and liabilities. The estimates are based
on  historical  experience  and on various  other  assumptions  that  management
believes to be reasonable  under the  circumstances.  On an ongoing  basis,  the
Company evaluates its estimates.  Results may differ from these estimates due to
actual  outcomes  being  different  from  those on which the  Company  based its
assumptions.  The Company believes the following  critical  accounting  policies
affect  significant  judgments  and  estimates  used in the  preparation  of its
financial statements.

Allowance for Doubtful Accounts

The Company  continuously  monitors  collections and payments from its customers
and from time to time  maintains  allowances  for doubtful  accounts  based upon
historical  experience  and any  specific  customer  collection  issues that the
Company has identified.  While such credit losses have  historically been within
management's  expectations,  there can be no  assurance  that the  Company  will
continue to experience  the same relative  level of credit losses that it has in
the past.  In addition,  the  Company's  revenues and  accounts  receivable  are
concentrated  in a relatively few number of customers.  A significant  change in
the liquidity or financial  position of any one of these  customers or a further
deterioration in the economic  environment or  telecommunications  industry,  in
general,  could  have a material  adverse  impact on the  collectability  of the
Company's  accounts  receivable  and  future  operating  results,   including  a
reduction in future  revenues and additional  allowances for doubtful  accounts.
If, at the time revenue is recognized, the Company determines that collection of
a receivable is not reasonably  assured,  the revenue is deferred and recognized
at the time  collection  becomes  reasonably  assured,  which is generally  upon
receipt of payment.

Litigation

The Company  reserves for legal claims when payments  associated with the claims
become  probable  and can be  reasonably  estimated.  Due to the  difficulty  in
estimating  costs of resolving legal claims,  actual costs may be  substantially
higher than the amounts reserved.

Environmental Matters

The Company reserves for known environmental  claims, of which there are none in
the quarter ended December 28, 2002,  when payments  associated  with the claims
become  probable  and the  costs  can be  reasonably  estimated.  The  Company's
environmental reserves, for all periods presented,  are recorded at the expected
payment amount. The actual cost of resolving  environmental issues may be higher
than that reserved  primarily  due to  difficulty  in

Page 13 of 23

<PAGE>

estimating  such  costs  and  potential  changes  in the  status  of  government
regulations.

Significant Accounting Policies

Revenue Recognition

The Company  recognizes  revenue  using the guidance  from SEC Staff  Accounting
Bulletin No. 101 "Revenue  Recognition  in  Financial  Statements."  Under these
guidelines, revenue recognition is deferred on transactions where (i) persuasive
evidence  of  an  arrangement  does  not  exist,  (ii)  revenue  recognition  is
contingent upon performance of one or more obligations of the Company, (iii) the
price is not fixed or determinable or (iv) payment is not reasonably assured.

To date, the Company has not recognized revenue related to non-prototype product
offerings.  All  revenue  recognized  to  date  consisted  of  engineering  work
performed under engineering agreements with unaffiliated customers.  Revenue for
this  engineering work is recognized  based on customer  acknowledgement  of the
achievement of milestones in the engineering agreement.

Research and Development Expense

The Company's  products are highly technical in nature and require a significant
level of research and development  effort.  Research and  development  costs are
charged to expense as incurred in  accordance  with FAS No. 2,  "Accounting  for
Research  and  Development  Costs."  Payments  and  receivables   recorded  from
customers for the delivery under contracts of prototype  units of  approximately
$187,000, $900 and $398,000 were offset against research and development expense
in the  statements  of  operations  for the  quarters  ended  December 29, 2001,
December 28, 2002,  and from  inception  through the quarters ended December 28,
2002,  respectively.  Eight  prototype  units were delivered  during the quarter
ended December 28, 2002.

Property, Plant and Equipment and Related Depreciation

The Company records property,  plant and equipment at cost, which is depreciated
using the  straight-line  method for structures and accelerated or straight-line
methods for equipment over their estimated useful lives.  Leasehold improvements
and assets  acquired  under capital leases are amortized over the shorter of the
lease term or their  estimated  useful lives.  Management  reviews the estimated
useful  lives of  property,  plant and  equipment  to verify that the assets are
being  depreciated  in  accordance  with their usage and all assets no longer in
service are fully depreciated.

Accrued Expenses and Other Liabilities

The Company records  liabilities for services or products received in the period
in which the benefit was recognized.  Due to the difficulty in estimating  costs
of these services or products received, actual costs may be substantially higher
than the amounts recorded.


Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The  Company  was  incorporated  in  February  2000  and  commenced  independent
operations in November  2000.  The Company has not yet  generated  revenues from
sales of its  products  but only  from  engineering  work  performed  for  three
customers to date. The Company  expects to incur net losses for the  foreseeable
future.  The Company may never  achieve  profitability  and may not succeed as a
going  concern  and its  independent  auditor has  included a statement  to this
effect in their most recently issued audit report.

The Company  believes  that there have been no material  changes in the reported
market risks faced by the Company since those  discussed in the  Company's  Form
10-K, as amended January 24, 2003,  under the heading  corresponding to that set
forth above. The Company's exposure to market risk is limited to interest income
sensitivity, which is

Page 14 of 23
<PAGE>

affected by changes in the general level of U.S. interest rates, as a portion of
the Company's  cash  equivalents  are in short-term  debt  securities  issued by
corporations.  The  Company's  cash  equivalents  are placed  with  high-quality
issuers and the Company  attempts to limit the amount of credit  exposure to any
one  issuer.  Due to the nature of the  Company's  short-term  investments,  the
Company  believes that it is not subject to any material  market risk  exposure.
The Company  does not have any foreign  currency or other  derivative  financial
instruments.

Page 15 of 23
<PAGE>

OPTICNET, INC.
(a development stage company)

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

        (a) Listing of Exhibits


<TABLE>
<CAPTION>
Exhibit
Numbers                      Description                                                            Footnote
-------                      -----------                                                            --------
<S>      <C>                                                                                          <C>
 2.1     Technology Transfer and Distribution Agreement between BEI Technologies, Inc. and
         the registrant                                                                                 i

 3.1     Amended and Restated Certificate of Incorporation                                             ii

 3.2     Bylaws                                                                                         i

 3.3     Certificate of Designation of Powers, Preferences and Rights of Series B Preferred
         Stock                                                                                         iv

 4.1     Specimen Voting Common Stock certificate                                                       i

 4.2     Bylaws (see Exhibit 3.2)                                                                       i

 4.3     Amendment to Preferred Stock Purchase Agreement between BEI Technologies, Inc. and
         the registrant                                                                                 i

10.1     InterCompany Agreement between BEI Technologies, Inc. and the registrant                       i

10.2     License and Technical Assistance Agreement between BEI Technologies, Inc. and the
         registrant                                                                                     i

10.3     Sublease Agreement between BEI Technologies, Inc. and the registrant                          ii

10.4     Equipment Sublease Agreement between BEI Technologies, Inc. and the registrant                 i

10.5     Amended and Restated 2000 Equity Incentive Plan of the registrant                              i

10.6     Form of option agreement under 2000 Equity Incentive Plan                                      i

10.7     Form of Leave of Absence Agreements between BEI Technologies, Inc. and Certain
         Named Executive Officers of the registrant                                                     i

Page 16 of 23
<PAGE>

10.8     Revolving Line of Credit Note executed by the registrant in favor of BEI
         Technologies, Inc.                                                                             i

10.9     Form of Indemnity Agreement to be entered into by the registrant with each of its
         directors and executive officers                                                              ii

10.10    Consulting Agreement between Danforth Joslyn and the registrant                               ii

10.11    Consulting Agreement between Gary D. Wrench and BEI Technologies, Inc.                       iii

10.12    Amendment No. 1 to License and Technical Assistance Agreement between the
         registrant and SiTek, Inc.                                                                   iii

99.1     Preliminary Information Statement of BEI Technologies, Inc. dated September 30, 2000           i

99.2     Final Information Statement of BEI Technologies, Inc. dated November 17, 2000                  i

99.3     President  Certification Pursuant to 18 U.S.C. as adopted Pursuant to Section 906 of
         the Sarbanes - Oxley Act of 2002

99.4     CFO  Certification  Pursuant to 18 U.S.C. as adopted  Pursuant to Section 906 of the
         Sarbanes - Oxley Act of 2002
</TABLE>

(i)      Incorporated  by  reference.  Previously  filed  as an  exhibit  to the
         Registrant's  Information  Statement  on Form 10 (file no.  0-31162) as
         filed on January 25, 2002.

(ii)     Incorporated by reference.  Previously filed as an exhibit to Amendment
         No. 1 to the  Registrant's  Information  Statement on Form 10 (file no.
         0-31162) as filed on March 22, 2002.

(iii)    Incorporated by reference.  Previously filed as an exhibit to Amendment
         No. 2 to the  Registrant's  Information  Statement on Form 10 (file no.
         0-31162) as filed on April 25, 2002.

(iv)     Incorporated by reference.  Previously filed as an exhibit to Form 10-K
         (file no. 0-31162) as filed on January 10, 2003.

         (b)      Reports on Form 8-K

                  No reports on Form 8-K were filed by the Company during fiscal
                  quarter ended December 28, 2002

Page 17 of 23
<PAGE>

SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  Report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized on February 10, 2003.


                                                       OpticNet, Inc.

                                                       By: /s/ Gary D. Wrench
                                                           ---------------------
                                                           Gary D. Wrench
                                                           Chief Financial
                                                           Officer

Page 18 of 23
<PAGE>

                                CERTIFICATION OF
                                    PRESIDENT

I, Gerald D. Brasuell, certify that:

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

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

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

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

         a)       designed  such  disclosure  controls and  procedures to ensure
                  that  material   information   relating  to  the   registrant,
                  including its consolidated  subsidiaries,  is made known to us
                  by others  within  those  entities,  particularly  during  the
                  period in which this quarterly report is being prepared;

         b)       evaluated the  effectiveness  of the  registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing  date of this  quarterly  report  (the  "Evaluation
                  Date"); and

         c)       presented  in this  quarterly  report  our  conclusions  about
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;

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

         a)       all  significant  deficiencies  in the design or  operation of
                  internal   controls   which   could   adversely   affect   the
                  registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  registrant's
                  auditors and material weakness in internal controls; and

         b)       any fraud,  whether or not material,  that involves management
                  or  other  employees  who  have  a  significant  role  in  the
                  registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         quarterly  report  whether there were  significant  changes in internal
         controls or in other factors that could  significantly  affect internal
         controls  subsequent  to  the  date  of  our  most  recent  evaluation,
         including   any   corrective   actions   with  regard  to   significant
         deficiencies and material weaknesses.

         Dated February 10, 2003
               -------------------

         /s/ Gerald D. Brasuell
         -------------------------
         Gerald D. Brasuell
         President

Page 19 of 23
<PAGE>

                                CERTIFICATION OF
                             CHIEF FINANCIAL OFFICER

I, Gary D. Wrench, certify that:

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

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

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

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

         a)       designed  such  disclosure  controls and  procedures to ensure
                  that  material   information   relating  to  the   registrant,
                  including its consolidated  subsidiaries,  is made known to us
                  by others  within  those  entities,  particularly  during  the
                  period in which this quarterly report is being prepared;

         b)       evaluated the  effectiveness  of the  registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing  date of this  quarterly  report  (the  "Evaluation
                  Date"); and

         c)       presented  in this  quarterly  report  our  conclusions  about
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;

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

         a)       all  significant  deficiencies  in the design or  operation of
                  internal   controls   which   could   adversely   affect   the
                  registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  registrant's
                  auditors and material weakness in internal controls; and

         b)       any fraud,  whether or not material,  that involves management
                  or  other  employees  who  have  a  significant  role  in  the
                  registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         quarterly  report  whether there were  significant  changes in internal
         controls or in other factors that could  significantly  affect internal
         controls  subsequent  to  the  date  of  our  most  recent  evaluation,
         including   any   corrective   actions   with  regard  to   significant
         deficiencies and material weaknesses.

         Dated February 10, 2003
               -------------------

         /s/ Gary D. Wrench
         -------------------------
         Gary D. Wrench
         Chief Financial Officer

Page 20 of 23
<PAGE>

INDEX TO EXHIBITS


Exhibit
Number            Description
------            -----------
99.3              President  Certification  Pursuant  to  18  U.S.C  as  adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.4              CFO Certification  Pursuant to 18 U.S.C as adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002


Page 21 of 23