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 29, 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;  3,632,603  shares of Voting  Common Stock and
2,591,857 shares of Nonvoting Common Stock outstanding as of June 29, 2002.


                                                                    Page 1 of 18
<PAGE>

OPTICNET, INC. (a development stage company)

INDEX

PART 1. FINANCIAL INFORMATION                                           PAGE
                                                                        ----

Item 1. Financial Statements

         Condensed Balance Sheets-- June 29, 2002 and
         September 29, 2001                                              3

         Condensed Statements of Operations--Quarter and
         Nine Months ended June 29, 2002 and June 30, 2001
         and the period from February 23, 2000 (inception)
         to June 29, 2002                                                4

         Condensed Statements of Cash Flows-- Quarter and
         Nine Months ended June 29, 2002 and June 30, 2001
         and the period from February 23, 2000 (inception)
         to June 29, 2002                                                5

         Notes to Condensed Financial Statements-- June 29, 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                                                    15

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 18
<PAGE>

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

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

                                                   June 29,       September 29,
                                                     2002             2001
                                                 (Unaudited)    (See note below)
--------------------------------------------------------------------------------
ASSETS

Cash and cash equivalents                        $    21,655      $   828,489
Trade receivables, net                                    --           99,720
Inventories                                           26,286               --
Other current assets                                  14,201           80,631
                                                 -----------      -----------
                                                      62,142        1,008,840
      Total current assets

Property and equipment, net                           11,879           17,984
Other assets                                             728           22,025
                                                 -----------      -----------
                                                 $    74,749      $ 1,048,849
                                                 ===========      ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Accounts payable                                 $   138,507      $   132,574
Accrued expenses and other liabilities               360,280          349,174
Note payable to related party                      2,656,338        1,166,608
                                                 -----------      -----------
                                                   3,155,125        1,648,356
      Total current liabilities

Other liabilities                                         --           14,670
Stockholders' deficit                             (3,080,376)        (614,177)
                                                 -----------      -----------
                                                 $    74,749      $ 1,048,849
                                                 ===========      ===========

Note: The balance sheet at September 29, 2001 has been derived from the audited
balance sheet at that date.

See notes to condensed financial statements.


                                                                    Page 3 of 18
<PAGE>

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

<TABLE>
<CAPTION>
                                                                  Quarter Ended               Nine Months Ended
                                                            --------------------------    --------------------------
                                                                                                                       Period from
                                                                                                                       February 23,
                                                                                                                           2000
                                                              June 29,       June 30,       June 29,       June 30,   (inception) to
                                                                2002           2001           2002          2001       June 29, 2002
                                                            --------------------------    --------------------------  -------------
<S>                                                         <C>            <C>            <C>            <C>            <C>
Revenues                                                    $    25,000    $   174,000    $   112,500    $   499,000    $   611,500
Cost of revenues                                                 12,500         64,640         56,252        259,640        315,892
                                                            -----------    -----------    -----------    -----------    -----------
Gross margin                                                     12,500        109,360         56,248        239,360        295,608

Selling, general and administrative expenses                    431,702        291,687      1,199,570        498,603      2,083,339
Research and development expenses                               688,746         55,039      2,409,045        341,052      3,482,561
                                                            -----------    -----------    -----------    -----------    -----------
Loss from operations                                         (1,107,948)      (237,366)    (3,552,367)      (600,295)    (5,270,292)

Interest expense                                                 42,175         10,998         86,742         10,998        110,594
Other income                                                        622          9,000          3,897         37,909         65,173
                                                            -----------    -----------    -----------    -----------    -----------

Deficit accumulated in the development stage                $(1,149,501)   $  (239,364)   $(3,635,212)   $  (573,384)   $(5,315,713)
                                                            ===========    ===========    ===========    ===========    ===========

                         Basic and Diluted Net Loss per Share

Basic and diluted net loss per share                        $     (0.20)   $     (0.05)   $     (0.66)   $     (0.12)   $     (1.31)
                                                            ===========    ===========    ===========    ===========    ===========

Weighted average shares used in computation of
basic and diluted loss per share                              5,622,237      5,015,565      5,519,293      4,861,015      4,051,406
                                                            ===========    ===========    ===========    ===========    ===========
</TABLE>

See notes to condensed financial statements.


                                                                    Page 4 of 18
<PAGE>

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

<TABLE>
<CAPTION>
                                                                   Quarter Ended               Nine Months Ended
                                                            --------------------------    --------------------------
                                                                                                                        Period from
                                                                                                                        February 23,
                                                                                                                            2000
                                                                                                                        (inception)
                                                             June 29,        June 30,      June 29,       June 30,       to June 29,
                                                               2002            2001          2002           2001            2002
                                                            --------------------------    --------------------------    -----------
<S>                                                         <C>            <C>            <C>            <C>            <C>
Cash flows from operating activities:

Deficit accumulated in the development stage                $(1,149,501)   $  (239,364)   $(3,635,212)   $  (573,384)   $(5,315,713)

Adjustments to reconcile net loss to net cash
used by operating activities:
     Depreciation and amortization                                3,775          2,664         18,044          9,105         34,633
     Other                                                     (118,440)      (404,870)       142,233         (1,647)       458,300
                                                            -----------    -----------    -----------    -----------    -----------
Net cash used by operating activities                        (1,264,166)      (641,570)    (3,474,935)      (565,926)    (4,822,780)

Cash flows from investing activities:
     Purchase of property and equipment                              --         (4,434)        (1,158)       (17,920)       (22,406)
     Other                                                       21,297         (1,060)        21,297        (21,297)          (728)
                                                            -----------    -----------    -----------    -----------    -----------
Net cash provided (used) by investing activities                 21,297         (5,494)        20,139        (39,217)       (23,134)

Cash flows from financing activities:
     Proceeds from borrowing on line of credit from
       related party                                                 --        819,737      1,489,730        819,737      2,820,331
     Principal payments on line of credit from related party         --       (163,993)            --       (163,993)      (163,993)
     Proceeds from investment by related party                1,156,903             --      1,156,903             --      1,156,903
     Proceeds from issuance of convertible preferred stock           --             --             --             --      1,000,000
     Proceeds from issuance of common stock                         787             --          1,329          8,000         54,328
                                                            -----------    -----------    -----------    -----------    -----------
Net cash provided by financing activities                     1,157,690        655,744      2,647,962        663,744      4,867,569
                                                            -----------    -----------    -----------    -----------    -----------


Net increase (decrease) in cash and cash equivalents            (85,179)         8,680       (806,834)        58,601         21,655
Cash and cash equivalents at beginning of period                106,834      1,062,724        828,489      1,012,803             --
                                                            -----------    -----------    -----------    -----------    -----------
Cash and cash equivalents at end of period                  $    21,655    $ 1,071,404    $    21,655    $ 1,071,404    $    21,655
                                                            ===========    ===========    ===========    ===========    ===========
</TABLE>

See notes to condensed financial statements.


                                                                    Page 5 of 18
<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 year ending  September  28, 2002.  For further  information,
refer  to the  financial  statements  and  footnotes  thereto  in the  Company's
registration statement on Form 10, as amended April 25, 2002.

OpticNet,  Inc.  ("OpticNet" or the "Company") was  incorporated on February 23,
2000  in  the  State  of  Delaware,  as  a  majority  owned  subsidiary  of  BEI
Technologies, Inc. ("BEI Technologies").  From its inception (February 23, 2000)
through December 30 2000,  OpticNet  operated as a controlled  subsidiary of BEI
Technologies.  BEI Technologies accumulated the costs associated with OpticNet's
operation  in the  period  from  February  23,  2000  through  December  30 2000
including all expenses  directly  attributable  to OpticNet and an allocation of
the costs of  facilities,  salaries  and  employee  benefits  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 in
OpticNet to BEI Technologies'  stockholders (the "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  voting  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 voting common stock,  representing an aggregate direct
ownership  interest  of  approximately  25% in the  Company.  During  the fiscal
quarter  ended  June 29,  2002,  the  Company  continued  negotiations  with BEI
Technologies  regarding  a  further  equity  investment  in the  Company  by BEI
Technologies, contemplated to be in the form of nonvoting preferred stock, when,
and if authorized by the Company for issuance to BEI Technologies.

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 raising  capital to fund  operations.  OpticNet has not
recognized significant revenues since inception.  All revenue recognized to date
relates to engineering agreements funded by unaffiliated customers. As a result,
the accompanying financial statements are presented in accordance with Financial
Accounting  Statement  ("FAS") No. 7,  "Accounting  and Reporting by Development
Stage Enterprises."


                                                                    Page 6 of 18
<PAGE>

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  incurred
recurring  operating  losses and negative cash flows from  operations and has an
accumulated  deficit of $5.3 million at June 29, 2002.  These  conditions  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The 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.

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 will solely support the current customer base. During
the  third  quarter  of  fiscal  2002,  the  Company  remained  unsuccessful  at
attracting  outside  financing  despite  management's   efforts,  and  continued
operations on a reduced basis.

The Company  received  approximately  $1.2 million in cash from BEI Technologies
during the third quarter, used for general operating expenses.  The parties have
been  discussing  the  authorization  by the  Company of a  nonvoting  series of
preferred  stock 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 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.

Allowance for Doubtful Accounts

The Company  continuously  monitors  collections and payments from its customers
and 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.


                                                                    Page 7 of 18
<PAGE>

Revenue Recognition

The Company has not recognized  revenue from  commercial  product sales to date.
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.  Payments,  if  any,  for  prototype
deliveries to customers by the Company are  accounted  for as an offset  against
research and development expense as described below.

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." No prototype  units were delivered  during the
quarter ended June 29, 2002.  Prototype units were delivered  during the quarter
ended June 30, 2001, thus payments or receivables for prototype  deliveries were
offset against research and development  expense in the statements of operations
for the quarter ended June 30, 2001.

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.  These allocations  totaled $25,000 for the quarter ended June
29, 2002. In the current quarter,  BEI Technologies  agreed to suspend these and
future  quarters'  service  charges,  due to the  Company's  inability to obtain
significant strategic partners or third party financing.

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.  In March 2002, BEI Technologies  increased this line of credit by $1.0
million. As of


                                                                    Page 8 of 18
<PAGE>

June 29, 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. To maintain  sufficient  liquidity in
the  future and to fund  operations,  the  Company  may need to enter into a new
credit  agreement in the future with a commercial  lender. A new credit line, if
available,  could include less favorable  terms than the existing line of credit
agreement with BEI Technologies.

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.  Payments
due for the quarter ended June 29, 2002 are approximately $10,000.

The Company  originally  entered into a lease 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 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  fiscal  quarter  ended  June 29,  2002,  BEI  Technologies  advanced  an
additional  $1.2 million to the Company.  The parties have been  discussing  the
authorization  by the  Company  of a  nonvoting  series of  preferred  stock for
issuance to BEI Technologies  representing  this investment.  The final terms of
such an equity investment remain under discussion by the parties and have yet to
be determined.

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.  Borrowings outstanding on the line of credit
were as follows:

                                                   June 29, 2002   June 30, 2001
                                                   -------------   -------------
Unsecured revolving promissory note from BEI
Technologies due 9/28/02, at a rate of prime
plus 1.5%; 6.3% and 8.3% at June 29, 2002 and
June 30, 2001, respectively                         $2,656,338       $655,744
                                                    ----------       --------
                                                    $2,656,338       $655,744
                                                    ==========       ========


                                                                    Page 9 of 18
<PAGE>

No interest  was paid  during the quarter  ended June 29, 2002 or in the quarter
ended June 30, 2001.  Accrued  interest expense was  approximately  $111,000 and
$11,000 at June 29, 2002 and June 30, 2001, respectively.

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 were recorded in the fiscal quarter
ending June 29, 2002.

NOTE 5. SUBSEQUENT EVENTS

During July 2002, a significant  stockholder of the Company  contributed a total
of 420,572  shares of nonvoting  common  stock and a total of 546,484  shares of
voting common stock to the capital of the Company.

NOTE 6. CONTINGENCIES AND LITIGATION

The Company has pending  various legal  actions  arising in the normal course of
business.

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, as amended April
25, 2002, in particular, within the "Risk Factors" section thereof.

Critical Accounting Policy 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  policy
affects its more 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 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,


                                                                   Page 10 of 18
<PAGE>

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.

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 are offset against
research and development expense in the statements of operations.

Quarters ended June 29, 2002 and June 30, 2001

Revenues  during the third  quarter  of fiscal  2002 and 2001 were  $25,000  and
$174,000,  respectively,  reflecting work performed under engineering agreements
with unaffiliated  customers.  The decrease during the current quarter is due to
the slow down of demand for new telecommunications equipment components compared
to prior  periods.  In  addition,  during the third  quarter of fiscal  2001 the
Company recorded payments or receivables for deliveries of prototype products to
five  unaffiliated  customers,  accounted for as an offset against  research and
development expense.

In the third  quarter of fiscal 2002 and 2001,  cost of revenues as a percentage
of revenues was 50% and 37%, resulting in gross profit of approximately  $13,000
and $109,000,  respectively.  The increase as a percentage of revenues is due to
higher direct costs on engineering  agreements in the period just ended. Cost of
revenues includes employee compensation, materials and production overhead.


                                                                   Page 11 of 18
<PAGE>

Selling, general and administrative expenses in the third quarter of fiscal 2002
increased  approximately $140,000 from $292,000 in the same quarter of the prior
fiscal year to $432,000.  The increase was primarily  due to increased  facility
rent and related costs of  approximately  $10,000,  as well as increased  travel
expenses  of   approximately   $9,000.   The  remaining   increase  was  due  to
professional,  consulting and legal fees, and other costs.  In the third quarter
of fiscal 2001, 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.  The cost of these services was established
at $25,000 per fiscal quarter based upon square  footage,  headcount,  usage and
other methods  management  believes to be reasonable.  In the period just ended,
BEI Technologies  agreed to suspend these charges due to the Company's inability
to obtain significant strategic partners or third party financing.

Research and development  expenses in the third quarter of fiscal 2002 increased
approximately $634,000 from $55,000 in the same quarter of the prior fiscal year
to $689,000.  The increase was primarily due to increased gross costs for direct
employee  compensation  expense and related benefits of approximately  $201,000,
and increased gross costs for materials and supplies of  approximately  $85,000.
In  addition,  during the third  quarter  of fiscal  2001 the  Company  recorded
approximately $139,000 for deliveries of prototype products as an offset against
research and development  expense. The remaining increase was due to gross costs
for professional fees, facility rent and operations, and other expenses.

Interest  expense in the third  quarter of fiscal 2002  increased  approximately
$31,000 from $11,000 in the same quarter of the prior fiscal year to $42,000 due
to the  outstanding  balance and additional  borrowings  during the period ended
March 30, 2002, on the Company's line of credit agreement with BEI Technologies.

Nine Months ended June 29, 2002 and June 30, 2001

Revenues  during the first nine months of fiscal 2002  reflected  work performed
under  engineering  agreements  with two  unaffiliated  customers  and decreased
approximately  $386,000  to  $113,000  from  $499,000  during the same period in
fiscal  2001.  The  decrease  is  due  to  the  slow  down  of  demand  for  new
telecommunications  equipment components compared to prior periods. In addition,
during the first nine months of fiscal 2002,  the Company  recorded  payments or
receivables for deliveries of prototype products to two unaffiliated  customers,
accounted for as an offset against research and development expense.

Cost of revenues as a percentage  of revenues in the first nine months of fiscal
2002 decreased 2.0 percentage points to 50% from 52% in the comparable period of
fiscal 2001.  The decrease is due to slightly  lower direct costs on engineering
agreements in the current period.

Selling,  general and  administrative  expenses  during the first nine months of
fiscal 2002  increased  approximately  $701,000 from $499,000 in the  comparable
period of the prior fiscal year to $1,200,000. The increase was primarily due to
increased professional,  consulting and legal fees of approximately $359,000, as
well as increased direct employee  compensation  expense and related benefits of
approximately  $139,000. The remaining increase was due to facility rent, travel
and other costs. Selling,  general and administrative expenses included payments
made to BEI  Technologies  for various  accounting,  human  resources  and other
administrative  services  provided by BEI Technologies  pursuant to the Services
Agreement between the two companies. These payments during the first nine months
of both  fiscal  2002 and 2001  were  $50,000.  The cost of these  services  was
established  at $25,000  per fiscal  quarter  at the time of  entrance  into the
Services Agreement based upon square footage, headcount, usage and other methods
management believes to be reasonable.  In the current quarter,  BEI Technologies
agreed  to  suspend  these  charges  due to the  Company's  inability  to obtain
significant strategic partners or third party financing.


                                                                   Page 12 of 18
<PAGE>

Research and  development  expenses  during the first nine months of fiscal 2002
increased approximately $2,068,000 from $341,000 in the comparable period of the
prior fiscal year to  $2,409,000.  The increase was  primarily  due to increased
gross costs for direct  employee  compensation  expense and related  benefits of
approximately  $806,000,  as well as increased gross costs for facility rent and
operations of  approximately  $583,000,  and increased gross costs for materials
and supplies of approximately  $338,000. The remaining increase was due to gross
costs for professional fees, travel and other costs.

Interest  expense  during  the  first  nine  months  of  fiscal  2002  increased
approximately  $76,000  from $11,000 in the same period of the prior fiscal year
to $87,000 due to the outstanding  balance and additional  borrowings during the
period ended March 30, 2002, on the Company's line of credit  agreement with BEI
Technologies.

Financing from Related Party

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

<TABLE>
<CAPTION>
                                                 Period from                                                         Period from
                                                 February 23,                                                        February 23,
                                                     2000                         Quarter  Ended                         2000
                                                (inception) to     -------------------------------------------      (inception) to
                                                 September 29,     December 29,      March 30,        June 29,         June 29,
                                                     2001             2001             2002             2002             2002
                                                --------------     -----------       --------         --------      --------------
                                                                                    (unaudited)                       (unaudited)
<S>                                                <C>              <C>              <C>              <C>              <C>
Subleases
     Facilities sublease                           $222,055         $ 56,553         $ 56,753         $ 10,132         $345,493
     Equipment sublease                                  --           59,230          340,435          104,172          503,837
                                                   --------         --------         --------         --------         --------

Total amounts financed under subleases              222,055          115,783          397,188          114,304          849,330
Intercompany services charges                        75,000           25,000           25,000               --          125,000
                                                   --------         --------         --------         --------         --------
Total payments due                                 $297,055         $140,783         $422,188         $114,304         $974,330
                                                   ========         ========         ========         ========         ========
</TABLE>

Liquidity and Capital Resources

During the first nine months of fiscal 2002,  total cash used by operations  was
approximately  $3,475,000.  Cash  provided by  operations  included the positive
impact  of  non-cash  charges  from  bad  debt  expense,  and  depreciation  and
amortization of $57,000 and $18,000, respectively. In addition, positive impacts
to cash  resources  resulted from  decreases in other  current  assets and trade
receivables  of $55,000  and  $43,000,  respectively,  as well as  increases  in
accrued  expenses  and other  liabilities  of $36,000,  and other net impacts of
$2,000.  These cash inflows were offset by a net loss of $3,635,000,  as well as
increases in inventory of $26,000 and decreases in customer advances of $25,000.

Cash used by  investing  activities  during the first nine months of fiscal 2002
consisted of a purchase of $1,000 in capital equipment,  offset by a decrease in
other  assets of $21,000.  In  addition,  during the first nine months of fiscal
2002 the Company financed  equipment with a value of approximately  $6.3 million
and  an  initial  lease  term  of  three  years  under  the  equipment  sublease
arrangement with BEI Technologies. The subleased equipment is in addition to the
approximately  $708,000 of equipment  subleased as of fiscal 2001 year end. Rent
expense  related to this equipment  totaled  approximately  $340,000 and $59,000
during the second and first quarters, respectively, of fiscal 2002. Beginning in
the third  quarter of fiscal 2002,  the Company  reduced  operations  due to its
inability to obtain  additional  financing from  unaffiliated  investors to this
date. Thus, due to reduced usage now expected on the subleased  equipment,  past
rent expense on the subleases is not  necessarily  indicative of future results.
Transactions with BEI Technologies, a minority investor and the Company's former
parent company,  are not


                                                                   Page 13 of 18
<PAGE>

necessarily on an  arms-length  basis and the Company may receive more favorable
terms under these arrangements than it would from an unrelated third party.

Cash provided by financing  activities consisted of net proceeds since inception
of $2,656,000 from borrowings on the Company's note payable to BEI  Technologies
under its related  party line of credit  arrangement,  of which  $1,490,000  was
provided  during the first nine months of fiscal 2002. 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.  Also
during the first nine  months of fiscal  2002,  cash from  financing  activities
included an investment of $1,157,000 by BEI  Technologies,  and option exercises
for common stock of $1,000.

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 June 29, 2002,
the  Company  had an  accumulated  deficit  of  $5.3  million.  After  extensive
discussions with prospective  outside investors  throughout the Company's second
fiscal  quarter,  during March 2002 the Company  became aware that none of these
discussions would result in a 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. The Company has been in recent discussions with other prospective
investors  to  obtain  additional  equity  financing,  however  it can  offer no
assurances an investment by outside  investors will be  accomplished in the near
future,  if at all.  During the fiscal  quarter ended June 29, 2002, the Company
continued   negotiations  with  BEI  Technologies  regarding  a  further  equity
investment in the Company by BEI Technologies, contemplated to be in the form of
nonvoting  preferred stock,  when, and if authorized by the Company for issuance
to BEI  Technologies.  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 unless
additional financing was obtained.  In March 2002,  management and the Company's
board of  directors  decided to reduce 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  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 were recorded in the fiscal quarter
ending June 29, 2002.

In the  fiscal  quarter  ended  June 29,  2002,  BEI  Technologies  advanced  an
additional  $1.2 million to the Company.  The parties have been  discussing  the
authorization  by the  Company  of a  nonvoting  series of  preferred  stock for
issuance to BEI Technologies  representing  this investment.  The final terms of
such an equity investment remain under discussion by the parties.

Recent Developments

To further  reduce  costs for the Company in the near term,  during July 2002, a
total  of  15  Company  employees   terminated  their  employment  and  accepted
employment with a subsidiary of BEI Technologies,  as previously had been agreed
to by both companies.  The Company's Chief Executive Officer and Chief Technical
Officer have also become employees of this same subsidiary of BEI  Technologies,
but  continue to serve as  executive  officers


                                                                   Page 14 of 18
<PAGE>

of the Company. The services of certain key individuals, including the Company's
Chief Executive Officer 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.

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, as amended April 25, 2002, under the heading corresponding to that set forth
above.  The  Company's  exposure to market  risk is limited to  interest  income
sensitivity,  which is 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 18
<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

 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
</TABLE>


                                                                   Page 16 of 18
<PAGE>

<TABLE>
<S>                 <C>                                                                <C>
 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               Certification  pursuant to section 906 of the Corporate Fraud
                    Accountability 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.

      (b)   Reports on Form 8-K

            No reports on Form 8-K were filed by the Company  during the quarter
            ended June 29, 2002.


                                                                   Page 17 of 18
<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 August 8, 2002.

                                                 OpticNet, Inc.


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


                                                                   Page 18 of 18