================================================================================



                                  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 March 31, 2006

                                       or

                        [ ] TRANSITION REPORT PURSUANT TO
           SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   For the transition period from ____________________ to ____________________


                        Commission file number 000-31861


                      OPTICAL COMMUNICATION PRODUCTS, INC.
             (Exact Name of Registrant as Specified in Its Charter)
                              --------------------





Delaware                                                             95-4344224
(State or Other Jurisdiction                                   (I.R.S. Employer
of Incorporation or Organization)                           Identification No.)

                               6101 Variel Avenue
                        Woodland Hills, California 91367
                    (Address of principal executive offices,
                               including zip code)

       Registrant's Telephone Number, Including Area Code: (818) 251-7100


         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 by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. (See definition of
"accelerated filer" and "large accelerated filer' in Rule 12b-2 of the Exchange
Act).

Large Accelerated Filer |_|   Accelerated Filer |_|   Non-Accelerated Filer  |X|

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

         Yes |_|  No |X|

         The registrant has two classes of common stock authorized, Class A
Common Stock and Class B Common Stock. The rights, preferences and privileges of
each class of common stock are identical except for voting rights. The holders
of Class A Common Stock are entitled to one vote per share while holders of
Class B Common Stock are entitled to ten votes per share on matters to be voted
on by stockholders. As of April 28, 2006, there were approximately 47,320,000
shares of Class A common stock outstanding and 66,000,000 shares of Class B
Common Stock outstanding.

================================================================================


<PAGE>


                      OPTICAL COMMUNICATION PRODUCTS, INC.

                           INDEX TO FORM 10-Q FOR THE
                      QUARTERLY PERIOD ENDED MARCH 31, 2006

<TABLE>
<CAPTION>

                                                                                                  PAGE
                                       PART I. FINANCIAL INFORMATION
<S>                                                                                               <C>

Item 1.      Financial Statements (unaudited)

             Balance Sheets as of March 31, 2006 and September 30, 2005                              1

             Statements of Operations for the Three Months and Six Months Ended March 31, 2006
             and 2005                                                                                2

             Statements of Cash Flows for the Six Months Ended March 31, 2006 and 2005               3

             Notes to Financial Statements                                                           4

Item 2.      Management's Discussion and Analysis of Financial Condition and Results of
             Operations                                                                             12

Item 3.      Quantitative and Qualitative Disclosure about Market Risk                              22

Item 4.      Controls and Procedures                                                                23

                           PART II. OTHER INFORMATION AND SIGNATURES

Item 1.      Legal Proceedings                                                                      23
Item 1A.     Risk Factors                                                                           24
Item 4.      Submission of Matters to a Vote of Security Holders                                    36
Item 6.      Exhibits                                                                               37

SIGNATURES                                                                                          38
</TABLE>


<PAGE>


                                     PART I.
                              FINANCIAL INFORMATION

ITEM 1.         FINANCIAL STATEMENTS


OPTICAL COMMUNICATION PRODUCTS, INC.

BALANCE SHEETS
(Dollars in thousands)
(Unaudited)

<TABLE>
<CAPTION>


                                                                                       March 31,        September 30,
                                                                                        2006                 2005
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                 <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                                          $       83,713      $       83,975
  Marketable securities                                                                      64,615              64,645
  Accounts receivable less allowance for doubtful accounts and sales
    returns of $418 at March 31, 2006 and $426 at September 30, 2005                         11,468               9,481
  Inventories                                                                                19,951              15,318
  Deferred income taxes                                                                         735                   -
  Prepaid expenses and other current assets                                                     574               1,017
                                                                                     --------------      --------------
           Total current assets                                                             181,056             174,436

Property, plant and equipment, net                                                           23,440              24,914
Intangible assets, net                                                                          686                 902
                                                                                     --------------      --------------
TOTAL ASSETS                                                                         $      205,182      $      200,252
                                                                                     ==============      ==============


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                   $        3,038      $        3,169
  Accounts payable to related parties                                                         5,027               4,095
  Accrued payroll and benefits                                                                1,139               1,112
  Accrued bonus                                                                               1,319               1,916
  Other accrued expenses                                                                      1,019               1,322
  Income taxes payable                                                                          306                 130
                                                                                     --------------      --------------
           Total current liabilities                                                         11,848              11,744
                                                                                     --------------      --------------
OTHER LONG-TERM LIABILITIES                                                                     200                 200
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Class A common stock, $0.001 par value; 200,000,000 shares authorized,
    47,307,531 and 46,903,871 shares outstanding at March 31, 2006
    and September 30, 2005, respectively.                                                        47                  47
  Class B common stock $0.001 par value; 66,000,000 shares
    authorized, 66,000,000 shares issued and outstanding at
    March 31, 2006 and September 30, 2005                                                        66                  66
  Additional paid-in-capital                                                                134,621             133,024
  Retained earnings                                                                          58,400              55,171
                                                                                     --------------      --------------
           Total stockholders' equity                                                       193,134             188,308
                                                                                     --------------      --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                           $      205,182      $      200,252
                                                                                     ==============      ==============
</TABLE>


                        See Notes to Financial Statements



                                       1
<PAGE>



OPTICAL COMMUNICATION PRODUCTS, INC.

STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

<TABLE>
<CAPTION>

                                      Three Months Ended March 31,                    Six Months Ended March 31,
                                      ----------------------------                    --------------------------

                                       2006                   2005                   2006                 2005
-----------------------------------------------------------------------------------------------------------------
<S>                                 <C>                   <C>                    <C>                   <C>
REVENUE                             $     18,342          $     13,527           $     36,090          $    27,551

COST OF REVENUE                           11,969                 8,991                 23,408               17,550
                                    ------------          ------------           ------------          -----------
GROSS PROFIT                               6,373                 4,536                 12,682               10,001
                                    ------------          ------------           ------------          -----------
EXPENSES:
  Research and development                 2,497                 3,918                  5,759                7,645
  Selling and marketing                    1,313                 1,252                  2,502                2,454
  General and administrative               1,826                 1,248                  3,939                2,441
                                    ------------          ------------           ------------          -----------
    Total expenses                         5,636                 6,418                 12,200               12,540
                                    ------------          ------------           ------------          -----------
INCOME (LOSS) FROM OPERATIONS                737                (1,882)                   482               (2,539)

OTHER INCOME, Net                          1,504                   811                  2,887                1,437
                                    ------------          ------------           ------------          -----------
INCOME (LOSS) BEFORE INCOME TAXES          2,241                (1,071)                 3,369               (1,102)

INCOME TAX PROVISION                         105                    --                    140                   --
                                    ------------          ------------           ------------          -----------
NET INCOME (LOSS)                   $      2,136          $     (1,071)          $      3,229          $    (1,102)
                                    ============          ============           ============          ===========
BASIC EARNINGS (LOSS) PER SHARE     $       0.02          $      (0.01)          $       0.03          $     (0.01)
                                    ============          ============           ============          ===========

DILUTED EARNINGS (LOSS) PER SHARE   $       0.02          $      (0.01)          $       0.03          $     (0.01)
                                    ============          ============           ============          ===========
BASIC SHARES OUTSTANDING                 113,193               112,861                113,107              112,838
                                    ============          ============           ============          ===========
DILUTED SHARES OUTSTANDING               114,144               112,861                113,995              112,838
                                    ============          ============           ============          ===========
</TABLE>


                       See Notes to Financial Statements


                                       2
<PAGE>


OPTICAL COMMUNICATION PRODUCTS, INC

STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

<TABLE>
<CAPTION>

                                                                                      Six Months Ended March 31,
                                                                                    ------------------------------
                                                                                         2006            2005
------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>            <C>
Operating Activities:
  Net income (loss)                                                                 $     3,229    $    (1,102)
  Adjustments to reconcile net income (loss) to net cash from operating activities:
    Depreciation and amortization of property, plant and equipment                        1,606          2,515
    Amortization of intangibles                                                             217            450
    Amortization of (discount) premiums on marketable securities                           (410)           131
    Stock-based compensation expense                                                        488           --
  Changes in operating assets and liabilities:
    Accounts receivable, net                                                             (1,987)           422
    inventories                                                                          (4,633)        (1,301)
    Prepaid expense and other assets                                                        443            271
    Accounts payable                                                                       (245)           451
    Accounts payable to related parties                                                     932            327
    Accrued payroll and benefits                                                             27           (920)
    Accrued bonuses                                                                        (597)        (2,567)
    Other accrued expenses and income taxes                                              (1,016)          (159)
                                                                                    -----------    -----------

Net cash used in operating activities                                                    (1,946)        (1,482)
                                                                                    -----------    -----------

Investing Activities:
    Purchase of marketable securities                                                   (29,560)       (24,945)
    Maturities of marketable securities                                                  30,000         35,000
    Sale of assets to related party                                                       1,000           --
    Purchase of property, plant and equipment                                              (139)          (187)
                                                                                    -----------    -----------
  Net cash provided by investing activities                                               1,301          9,868
                                                                                    -----------    -----------

Financing Activities:
    Proceeds from the exercise of stock options                                             383             83
                                                                                    -----------    -----------
  Net cash provided by financing activities                                                 383             83
                                                                                    -----------    -----------
(Decrease) increase in cash and cash equivalents                                           (262)         8,469


Cash and cash equivalents, beginning of period                                           83,975    $    75,423
                                                                                    -----------    -----------
Cash and cash equivalents end of period                                             $    83,713    $    83,892
                                                                                    ===========    ===========

Supplemental disclosures of cash flow information:
  Cash paid during period for:
    Interest                                                                        $         0    $         0
    Income taxes                                                                    $       806    $         0
  Supplemental disclosure of non-cash transactions:
    Purchase of property, plant and equipment through accounts payable              $       114    $         0
</TABLE>



                       See Notes to Financial Statements


                                       3
<PAGE>


Optical Communication Products, Inc
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

1. BASIS OF PRESENTATION

         The accompanying unaudited interim financial statements of Optical
         Communication Products, Inc., a Delaware corporation (the "Company"),
         have been prepared in accordance with accounting principles generally
         accepted in the United States of America and Article 10 of the
         Securities and Exchange Commission's Regulation S-X. Accordingly, they
         do not include all of the information and footnotes required by
         accounting principles generally accepted in the United States of
         America for complete financial statements. In management's opinion, the
         unaudited financial statements contain all adjustments, consisting of
         normal recurring adjustments, necessary to present fairly the Company's
         financial statements as of March 31, 2006 and for all interim periods
         presented. The financial statements should be read in conjunction with
         the audited financial statements included in the annual report of the
         Company filed on Form 10-K with the Securities and Exchange Commission
         for the year ended September 30, 2005. The results of operations for
         the period ended March 31, 2006 are not necessarily indicative of the
         results that may be expected for the fiscal year ending September 30,
         2006. The Company's operations are primarily located in Woodland Hills,
         California. The Company is a majority-owned subsidiary of The Furukawa
         Electric Company, Ltd. of Japan ("Furukawa"). Furukawa beneficially
         owned 58.3% of the Company's common stock at March 31, 2006, which
         accounts for 93.3% of the combined voting power of all of the Company's
         outstanding stock.

         Recent Accounting Pronouncements

         On November 2005, the FASB issued Staff Position 115-1 and 124-1, "The
         Meaning of Other-Than-Temporary Impairment and its Application to
         Certain Investments" ("FSP 115-1"), which provides guidance on
         determining when investments in certain debt and equity securities are
         considered impaired, whether that impairment is other-than-temporary,
         and on measuring such impairment loss. FSP 115-1 also includes
         accounting considerations subsequent to the recognition of an
         other-than-temporary impairment and requires certain disclosures about
         unrealized losses that have not been recognized as other-than-temporary
         impairments. FSP 115-1 is required to be applied to reporting periods
         beginning after December 15, 2005. The Company implemented FSP 115-1
         during the quarter ended March 31, 2006 and the adoption of FSP 115-1
         did not have a material impact on our financial position or results of
         operations.

2. COLORADO FACILITY CLOSURE AND ASSET TRANSER TO FURUKAWA

         The Company permanently ceased the operations of its Broomfield,
         Colorado facility, a research and design facility where the Company had
         been focused on creating VCSEL technology for fiber optic communication
         networks, on January 31, 2006. The Company decided to cease the
         operation of its Colorado facility because the cost of Fabry-Perot
         lasers has been decreasing, making 1300 nm VCSEL technology less
         attractive as a cost-effective replacement, and because of the delay in
         development of the market for the next generation of optical modules.
         The Company does not plan to continue development of the technology,
         however, will use the technology as it exists in manufacturing
         operations.

         On February 10, 2006, the Company entered into an agreement with The
         Furukawa Electric Co., Ltd., the Company's majority stockholder, to
         sell certain assets located at the Colorado facility related to VCSEL
         technology. The Company also granted Furukawa a non-exclusive,
         royalty-bearing license to use and exploit intellectual property
         related to the VCSEL technology. Under


                                       4
<PAGE>


         the terms of the license, Furukawa is required to pay the Company a
         royalty on sales of certain products utilizing the 1300nm VCSEL chip
         technology. Total cash consideration in the transaction was $1 million,
         in addition to the potential royalty payments. Because the sale
         involved the transfer of assets between two parties under common
         control, the proceeds in excess of the approximate $121,000 book value
         of the assets was credited to Additional Paid In Capital.

3. STOCK BASED COMPENSATION

         On December 16, 2004, the FASB issued Statement of Financial Accounting
         Standards ("SFAS") 123 (revised 2004), "Share-Based Payment", which
         requires compensation costs related to share-based payment transactions
         to be recognized in the financial statements. With limited exceptions,
         the amount of compensation cost is measured based on the grant-date
         fair value of the equity or liability instruments issued. In addition,
         liability awards are remeasured each reporting period. Compensation
         cost is recognized over the period that an employee provides service in
         exchange for the award. SFAS 123(R) replaces SFAS 123, "Accounting for
         Stock-Based Compensation", and supersedes APB Opinion No. 25,
         "Accounting for Stock Issued to Employees". SFAS 123(R) is effective as
         of the first interim or annual reporting period that begins after June
         15, 2005. The Company implemented SFAS 123(R) as of October 1, 2005.

         The Company adopted SFAS 123(R) using the
         modified-prospective-transition method. Under this transition method,
         compensation cost recognized in the quarter ended March 31, 2006
         includes: a) compensation cost for all share-based payments granted
         prior to October 1, 2005, but not yet vested, based on the grant-date
         fair value estimated in accordance with the original provisions of SFAS
         123, and b) compensation cost for all share-based payments granted
         subsequent to September 30, 2005, based on the grant-date fair value
         estimated in accordance with the provisions of SFAS 123(R). The results
         for the prior periods have not been restated.

         Periods prior to the adoption of SFAS 123(R)

         Prior to the adoption of SFAS 123(R), the Company provided the
         disclosure required under SFAS 123 as amended by SFAS 148, "Accounting
         for Stock-Based Compensation - Transition and Disclosures." The Company
         generally did not recognize stock-based compensation expense in its
         statements of operations for periods prior to the adoption of SFAS
         123(R) as options are generally granted at an exercise price equal to
         the market value of the underlying stock on the date of grant.

         The following table illustrates the effect on net loss and net loss per
         share as if the Company had applied the fair value recognition
         provisions of SFAS 123(R) to options granted under the Company's
         stock-based compensation plans prior to the adoption date. For purposes
         of this pro forma disclosure, the value of options was estimated using
         a Black-Scholes option pricing formula and amortized on a straight-line
         basis over the respective vesting periods of the awards. Disclosures
         for the three and six months ended March 31, 2006 are not presented
         because stock-based compensation was accounted for under SFAS 123(R)'s
         fair-value method during this current period.


                                       5
<PAGE>


                                        Three Months Ended     Six Months Ended
                                           March 31, 2005       March 31, 2005
                                         (in thousands except per share amounts)
Net loss:
  As reported:                            $    (1,071)         $    (1,102)
  Deduct total stock-based employee
  compensation expense determined
  under value based method for
  all awards, net of related tax
  effects:                                       (252)                (501)
                                         ---------------------------------------
  Pro forma                               $    (1,323)         $    (1,603)
                                         =======================================
Basic loss per share
  As reported                             $     (0.01)         $     (0.01)
  Pro forma                               $     (0.01)         $     (0.01)

Diluted loss per share
  As reported                             $     (0.01)         $     (0.01)
  Pro forma                               $     (0.01)         $     (0.01)



         Adoption of SFAS 123(R)

         During the three months and six months ended March 31, 2006, the
         Company recorded stock-based compensation expense in accordance with
         SFAS 123(R), adopted on October 1, 2005. The current period stock-based
         compensation recognized is based on the amortization of the fair value
         of stock options on their date of grant using a Black-Scholes fair
         value model amortized on a straight-line basis over the vesting period
         of the options. The effect of recording stock-based compensation for
         the three and six months ended March 31, 2006 was as follows:


<TABLE>
<CAPTION>

                                                         Three Months Ended     Six Months Ended
                                                           March 31, 2006        March 31, 2006
                                                       (in thousands except per share amounts)
<S>                                                     <C>                     <C>
Stock-based compensation expense by type of award
   Employee stock options                               $         233           $        465
   Employee stock purchase plan                                    15                     23
                                                       ---------------------------------------
Total stock-based compensation expense                  $         248           $        488
Tax effect on stock-based compensation expense                      0                      0
                                                       ---------------------------------------
Net effect on net income                                $         248           $        488

Effect on earnings per share
   Basic earnings per share                             $         0.00          $       0.00
   Diluted earnings per share                           $         0.00          $       0.00
</TABLE>

         As required by SFAS 123(R), management has estimated expected
         forfeitures and is recognizing compensation costs only for those equity
         awards expected to vest based on a 25% estimated forfeiture rate.

         During the six months ended March 31, 2006, the Company accelerated
         vesting of unvested stock options for 13 employees as part of the
         severance arrangements related to the closure of our


                                       6
<PAGE>


         Colorado facility. We recognized approximately $52,000 of stock-based
         compensation expense related to this modification of terms.

         Stock Options

         The Company's 2000 Stock Incentive Plan authorizes 12,121,680 options
         for grant and provides that options may have a maximum contractual term
         of 10 years, and become exercisable and vest in increments. The normal
         vesting is 25% per year. All options under this plan are granted with
         the exercise price equal to the fair market value of the Company's
         common stock on the date of grant. During the three and six months
         ended March 31, 2006, the Company granted 46,000 and 241,228 stock
         options, respectively, with an estimated total grant-date fair market
         value of approximately $94,000 and $312,000, respectively. During the
         three and six months ended March 31, 2006, the Company recorded
         stock-based compensation related to stock options of $233,000 and
         $465,000, respectively, for all unvested options granted prior to and
         all options granted after the adoption of SFAS 123(R).

         Employee Stock Purchase Plan (ESPP)

         The Company has an Employee Stock Purchase Plan that allows employees
         to purchase a limited amount of the Company's common stock at a 15%
         discount to a defined fair market value. The stock-based compensation
         cost related to the plan for the three and six months ended March 31,
         2006 was $15,000 and $23,000, respectively. This cost is amortized on a
         straight-line basis over a weighted-average period of approximately 1
         year.

         Valuation assumptions

<TABLE>
<CAPTION>

                               Three months ended March 31,            Six months ended March 31,
                                  2006              2005                 2006             2005
                                  ----              ----                 ----             ----
<S>                               <C>               <C>                  <C>              <C>

Dividend yield                     0%                0%                   0%               0%
Expected volatility                88%              94.2%                88%              94.2%
Risk-free rate of return          4.5%              4.4%                 4.5%             4.3%
Expected life (years)              8.0               8.0                 8.0               8.0
</TABLE>



         Expected Volatility: The fair value of stock-based awards made through
         the three and six month periods ended March 31, 2006 were valued using
         the Black-Scholes valuation method with a volatility factor based on
         the Company's historical stock prices.

         Risk-free Rate of Return: The Company based the risk-free interest rate
         used in the Black-Scholes valuation method on the implied yield
         currently available on U.S. Treasury zero-coupon issues with an
         equivalent expected life.

         Expected Life: The Company's expected life represents the period that
         the Company's stock-based awards are expected to be outstanding and was
         determined based on historical experience of similar awards.

         Estimating Forfeitures: The Company uses historical forfeiture
         experience to derive an estimated rate of forfeiture. Compensation
         expense for any period, as derived using the Black-Scholes valuation
         method, is adjusted based on this estimated rate of forfeiture.

         The Black-Scholes option valuation model requires the input of highly
         subjective assumptions, including the expected life of the stock-based
         award and stock price volatility. The assumptions


                                       7
<PAGE>


         listed above represent management's best estimates, but these estimates
         involve inherent uncertainties and the application of management
         judgment. As a result, if other assumptions had been used, our recorded
         and pro forma stock-based compensation expense could have been
         materially different from that depicted above. In addition, we are
         required to estimate the expected forfeiture rate and only recognize
         expense for those shares expected to vest. If our actual forfeiture
         rate is materially different from our estimate, the share-based
         compensation expense could be materially different.

         Stock Option Activity

         The following is a summary of stock option activity during the three
         and six months ended March 31, 2006:

<TABLE>
<CAPTION>

                                                                   Options Outstanding
                                                                   -------------------
                                             Options
                                           Available for                          Weighted Average
                                              Grant         Number of Options      Exercise Price

<S>                                        <C>                  <C>                 <C>
Balance as of September 30, 2005           5,739,146            7,991,882           $   8.49
Options granted                             (195,228)             195,228               1.94
Options exercised                               --                (63,024)              1.02
Options forfeited                            120,440             (120,440)              2.09
Options canceled                             106,855             (106,855)              8.81
                                         -----------        --------------------  ----------
Balance as of December 31, 2005            5,771,213            7,896,791           $   8.49
Options granted                              (46,000)              46,000               3.18
Options exercised                               --               (230,083)              1.18
Options forfeited                             24,589              (24,589)              1.78
Options canceled                              70,005              (70,005)              7.65
                                         -----------        --------------------  ----------
Balance as of March 31, 2006               5,819,807            7,618,114           $   8.70
                                         ===========  ==========================  ==========
</TABLE>

         The following table summarizes information regarding options
         outstanding at March 31, 2006:

<TABLE>
<CAPTION>

                              Options Outstanding                                       Options Exercisable

                     -------------------------------------------------------------------------------------------------
                                         Weighted                                     Weighted
                                          Average      Weighted                        Average
                                        Remaining      Average                        Remaining
 Range of Exercise        Number        Contractual    Exercise        Shares        Contractual    Weighted Average
      Prices            Outstanding        Life         Price        Exercisable        Life         Exercise Price
                     -------------------------------------------------------------------------------------------------
<S>                       <C>              <C>       <C>            <C>                 <C>          <C>
$0.00- $1.69*             1,002,662        4.2       $    0.59        882,174           3.9          $       0.52
$1.81- $3.31*             1,533,217        8.1       $    2.23        532,177           6.2          $       2.32
$3.56- $4.55                 30,400        8.6       $    3.66          9,000           7.0          $       3.97
$8.05- $9.72                 48,580        5.2       $    8.33         48,580           5.2          $       8.33
$11.00-$17.38             5,003,255        4.5       $   12.35      5,003,255           4.5          $      12.35
                       ------------      -----      ------------    ---------      ---------       --------------
                          7,618,114        5.2       $    8.70      6,475,186           4.6          $       9.87
                       ============      =====      ============    =========      ==========      ==============
</TABLE>

         * The aggregate intrinsic value for options outstanding and exercisable
         options outstanding at March 31, 2006 was $3,665,918 and $2,580,666,
         respectively.


                                       8
<PAGE>

         The weighted average estimated grant date fair value per share of
         options granted during the three and six months ended March 31, 2006
         was $2.62 and $1.76, respectively. The total intrinsic value of options
         exercised during the three and six months ended March 31, 2006 was
         $167,000 and $247,000, respectively.

         ESPP Activity

         There were a total of 33,017 shares of the Company's common stock
         issued at a weighted average purchase price of $1.41 pursuant to the
         employee stock purchase plan during the three and six months ended
         March 31, 2006. There are a total of 76,449 shares available for future
         issuance under the plan at March 31, 2006.

         Non-vested  Options

         As of March 31, 2006, there was approximately $1.6 million of total
         unrecognized compensation cost related to non-vested share-based
         compensation arrangements that is expected to be substantially
         amortized in full by December 31, 2009.


4. INVENTORIES

         Inventories consist of the following (in thousands):

                                       March 31, 2006       September 30, 2005
         -----------------------------------------------------------------------
              Raw materials            $      11,433         $           8,393
              Work-in-process                  6,557                     5,094
              Finished goods                   1,961                     1,831
                                      ---------------       --------------------
            Total inventories          $      19,951         $          15,318
                                      ===============       ====================

5.    PROPERTY, PLANT AND EQUIPMENT

         Property, plant and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>

                                                  March 31, 2006           September 30, 2005      Useful Life
         -------------------------------------------------------------------------------------------------------
<S>                                               <C>                      <C>                         <C>
              Land                                $            6,729       $              6,729
              Building improvements                           14,949                     14,949        39 years
              Machinery and equipment                         19,124                     20,419         5 years
              Computer hardware and software                   1,692                      1,681         3 years
              Furniture and fixtures                             382                        382         5 years
              Leasehold improvements                             181                        181         9 years
                                                ---------------------  --------------------------
                                                              43,057                     44,341
            Less accumulated depreciation                     19,617                     19,427
                                                ---------------------  --------------------------
                                                  $           23,440       $             24,914
                                                =====================  ==========================
</TABLE>

         As detailed above in Note 2, the Company permanently ceased the
         operations of its Broomfield, Colorado facility, a research and design
         facility where the Company had been focused on creating VCSEL
         technology for fiber optic communication networks, on January, 31,
         2006. On February 10, 2006, the Company entered into an agreement with
         The Furukawa Electric Co., Ltd., the Company's majority stockholder, to
         sell certain assets located at the Colorado facility related to


                                       9
<PAGE>


         the VCSEL technology. These assets consisted primarily of fully
         depreciated machinery and equipment and also included assets with a net
         book value at the time of the transaction of approximately $228,000.

6. INTANGIBLE ASSETS

         The Company's intangible assets by major asset class are as follows:

<TABLE>
<CAPTION>

                                                                                  Weighted Average
                                         March 31, 2006    September 30, 200O    Amortization Period
                                         -----------------------------------------------------------
                                                (in thousands)                       (Years)

<S>                                     <C>                 <C>                        <C>
Patents                                              950                950            5.0
   Accumulated Amortization                         (649)              (554)

Acquired Technology                                1,216              1,216            5.0
   Accumulated Amortization                         (831)              (710)
                                       ------------------  ------------------
Total intangible assets, net            $            686    $           902
                                       ==================  ==================
</TABLE>

         Aggregate amortization expense related to intangible assets was
         approximately $108,000 and $225,000 for the three months ended March
         31, 2006 and 2005, respectively and $216,000 and $450,000 for the six
         months ended March 31, 2006 and 2005, respectively.

         Following is a summary of future amortization expense in each of the
         next three fiscal years.


                                                  (in thousands)

Remaining six months fiscal 2006                   $       218
fiscal 2007                                                432
fiscal 2008                                                 36
                                                   ------------

                                                   $       686
                                                   ============

                                       10
<PAGE>


7. EARNINGS (LOSS) PER SHARE

         The following is a calculation of basic and diluted loss per share
         ("EPS"):

<TABLE>
<CAPTION>

                                                 Three Months Ended          Six Months Ended
                                                     March 31,                   March 31,
                                                 ------------------          ----------------
                                                 2006          2005        2006          2005
                                                       (in thousands, except per share data)
------------------------------------------------------------------------------------------------
<S>                                            <C>         <C>          <C>         <C>
BASIC EPS COMPUTATION
  Net income (loss) applicable to common stock $   2,136   $  (1,071)   $   3,229   $  (1,102)
  Weighted average common shares outstanding     113,193     112,861      113,107     112,838
                                               ---------   ---------    ---------   ---------
  Basic earnings (loss) per share              $    0.02   $   (0.01)   $    0.03   $   (0.01)
                                               =========   =========    =========   =========

DILUTED EPS COMPUTATION
  Net income (loss) applicable to common stock $   2,136   $  (1,071)   $   3,229   $  (1,102)
  Weighted average common shares
  outstanding and common share equivalents       114,144      112,861     113,995     112,838
                                               ---------   ---------    ---------   ---------
  Diluted earnings (loss) per share            $    0.02   $   (0.01)   $    0.03   $   (0.01)
                                               =========   =========    =========   =========
</TABLE>

         The weighted average diluted common shares outstanding for the three
         months ended March 31, 2006 and March 31, 2005 excludes the dilutive
         effect of approximately 6,149,014 and 7,146,607 options, respectively.
         The weighted average diluted common shares outstanding for the six
         months ended March 31, 2006 and March 31, 2005 excludes the dilutive
         effect of approximately and 6,242,002 and 7,012,782 options,
         respectively. The options are excluded when the options have an
         exercise price in excess of the average market value of the Company's
         Common Stock during the period or due to a net operating loss.

8. COMMITMENTS AND CONTINGENCIES

         Operating Leases

         The Company has operating leases for certain facilities. Lease payments
         are made monthly. The Company's leases are renewable monthly,
         semiannually, annually or for five years. Rent expense for these leases
         for the three months ended March 31, 2006 and 2005 was $73,000 and
         $131,000, respectively and for the six months ended March 31, 2006 and
         2005 was $212,000 and $266,000, respectively.

         Following is a summary of future minimum payments due under operating
         leases that have initial or remaining noncancelable lease terms in
         excess of one year at March 31, 2006:

(in thousands)
---------------------------------------------------------------------
     Remaining six months fiscal 2006                          $ 79
     2007                                                        57
     2008                                                        42
     2009                                                        42
     2010                                                        42
     Thereafter                                                  36
---------------------------------------------------------------------
     Total minimum lease payments                             $ 298
     ----------------------------------------------------------------


                                       11
<PAGE>


         Warranty Accruals

         The Company provides a standard warranty of its products from defects
         in materials and workmanship. The warranty is limited to repair or
         replacement, at the Company's option, of defective items authorized for
         return within one year from the date of the sale. The table below sets
         forth the activity of the Company's warranty reserve (in thousands):

<TABLE>
<CAPTION>

                                                           Three Months Ended             Six Months Ended
        -------------------------------------------------------------------------------------------------------
                                                         March 31,     March 31,    March 31,    March 31,
        -------------------------------------------------------------------------------------------------------
                                                             2006          2005         2006         2005
                                                             ----          ----         ----         ----
<S>                                                           <C>            <C>         <C>          <C>
        -------------------------------------------------------------------------------------------------------
        Balance at beginning of period                         40            26          14           31
        -------------------------------------------------------------------------------------------------------
        Additions charged to expense                          (19)           22          17           25
        -------------------------------------------------------------------------------------------------------
        Deductions                                             (6)           (9)        (16)         (17)
        -------------------------------------------------------------------------------------------------------
        Balance at end of period                               15            39          15           39
        -------------------------------------------------------------------------------------------------------

        -------------------------------------------------------------------------------------------------------
</TABLE>


         Contingency

         The landlord of our former Colorado facility has contacted us claiming
         that the Company is responsible for approximately $500,000 in
         environmental clean-up costs at that location. The Company disputes the
         landlord's allegations and intends to contest any claims that may be
         asserted.



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

         The following discussion of our financial condition and results of
operations should be read in conjunction with our financial statements and the
related notes to such financial statements included elsewhere in this Report.
The following discussion contains forward-looking statements that involve risks
and uncertainties. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "may," "will" or similar expressions are intended to identify
forward-looking statements. The statements are based on current expectations and
actual results could differ materially from those discussed herein. Factors that
could cause or contribute to the differences are discussed below in this Report
under "Risk Factors" and elsewhere in this Report, and in our Annual Report on
Form 10-K filed with the Securities and Exchange Commission ("SEC") for the year
ended September 30, 2005.


Critical Accounting Policies

         The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires management to make judgments, assumptions and estimates that affect the
amounts reported in the Financial Statements and accompanying notes. Note 2 to
the Financial Statements in the Annual Report on Form 10-K for the fiscal year
ended September 30, 2005 describes the significant accounting policies and
methods used in the preparation of the Financial Statements. Estimates are used
for, but not limited to, the accounting for the allowance for doubtful accounts
and sales returns, valuation of excess and obsolete inventory, warranty
accruals, long-lived assets, SFAS 123(R) fair market value calculations for
stock-based compensation and income taxes.


                                       12
<PAGE>


Actual results could differ from these estimates. The following critical
accounting policies are impacted significantly by judgments, assumptions and
estimates used in the preparation of our Financial Statements.

Allowance for Doubtful Accounts and Sales Returns

         Our accounts receivable balance, net of allowance for doubtful accounts
and sales returns, was $11.5 million and $9.5 million as of March 31, 2006 and
September 30, 2005, respectively. The allowance for doubtful accounts and sales
returns as of March 31, 2006 was $418,000, compared with $426,000 as of
September 30, 2005. The allowance is based on our assessment of the
collectability of customer accounts and potential returns. We regularly review
the allowance by considering factors such as historical experience, credit
quality, age of the accounts receivable balances, current economic conditions
that may affect a customer's ability to pay and historical customer returns. If
a major customer's creditworthiness deteriorates, or if actual defaults are
higher than our historical experience, or if actual future customer returns were
to deviate from our expectations, our estimates of the recoverability of amounts
due to us could be overstated, and additional allowances could be required,
which could have an adverse impact on our operations.

Inventory Write-downs

         Our inventory balance was $19.9 million as of March 31, 2006, compared
with $15.3 million as of September 30, 2005. At March 31, 2006 and September 30,
2005, inventory with a historical cost of $8.2 million and $9.0 million,
respectively, was written down as excess and obsolete inventory. We estimate our
excess and obsolete inventory primarily through reference to historical usage
and future demand forecasts. We operate in a highly-volatile industry with high
and unpredictable rates of inventory obsolescence. At the point of write down, a
new, lower-cost basis for that inventory is established, and subsequent changes
in facts and circumstances do not result in the restoration or increase in that
newly established cost basis. We do not necessarily discard written down
inventory and have, periodically, discovered that written down inventory was not
obsolete or excess, as previously estimated. In those situations, the written
down inventory is sold and reflected in cost of sales at the new written down
basis. If there were to be a sudden and significant decrease in demand for our
products, or if there were a higher incidence of inventory obsolescence because
of rapidly changing technology and customer requirements, we could be required
to increase inventory write-downs, and our gross margin could be adversely
affected.

Long-Lived Assets

         We monitor and evaluate the recoverability of our long-lived assets
whenever events or changes in circumstances indicate that the carrying value of
an asset may no longer be recoverable. If the carrying amount of a long-lived
asset exceeds the expected future cash flows (undiscounted and without interest
charges) from the use of the asset, we recognize an impairment loss in the
amount of the difference between the carrying amount and the fair value of the
asset. Our long-lived assets subject to impairment are our property, plant and
equipment and our intangible assets which had net carrying values of $23.4
million and $686,000, respectively, at March 31, 2006. At our September 30, 2005
year-end, we estimated that undiscounted future cash flows would be sufficient
to recover the value of our long-lived assets. However, these estimates of
future cash flows are subject to change. Should these estimates of future
undiscounted cash flows indicate that the carrying value of our long-lived
assets may not be recoverable, we would be required to determine the fair value
of those assets and record a loss for the difference, if any, between the
carrying value and the fair value of those assets. There were no indicators of
long-lived asset impairment at March 31, 2006.




                                       13
<PAGE>


Stock-based Compensation

         During the three and six months ended March 31, 2006, the Company
recorded stock-based compensation expense of $248,000 and $488,000,
respectively, in accordance with SFAS 123(R), adopted on October 1, 2005. As
described in Note 2 to the financial statements, this expense includes
compensation expense related to the Company's Employee Stock Purchase Plan. The
current period stock-based compensation recognized is based on the amortization
of the fair value of stock options on their date of grant using a Black-Scholes
option valuation model. The Black-Scholes option valuation model requires the
input of highly subjective assumptions, including the expected life of the
stock-based award and stock price volatility. In addition, management has made
an estimate of expected forfeitures and is recognizing compensation costs only
for those equity awards expected to vest based on a 25% estimated forfeiture
rate. These assumptions represent management's best estimates, but these
estimates involve inherent uncertainties and the application of management
judgment. As a result, if other assumptions had been used, our recorded and pro
forma stock-based compensation expense could have been materially different from
that depicted above. In addition, we are required to estimate the expected
forfeiture rate and only recognize expense for those shares expected to vest. If
our actual forfeiture rate is materially different from our estimate, the
share-based compensation expense could be materially different.

Income Taxes

         At March 31, 2006, the unadjusted net book value of our deferred income
tax assets totaled approximately $4.9 million, which was principally comprised
of federal and state net operating loss carry-forwards and/or credit
carry-forwards and differences between the book and tax bases of our
inventories. The provisions of SFAS No. 109 "Accounting for Income Taxes,"
require a valuation allowance when, based upon currently available information
and other factors, it is more likely than not that all or a portion of the
deferred income tax asset will not be realized. During the quarter ended March
31, 2006, we released valuation allowance to the extent of our quarterly federal
tax expense, as it is more likely than not that a portion of our deferred income
tax assets attributable to federal credits and federal book-tax differences will
be realized. We expect to continue releasing the valuation allowance
attributable to federal tax-based deferred tax assets on a quarterly basis to
the extent of our federal tax expense and maintain the remaining valuation
allowance until sufficient evidence exists to support full reversal of the
valuation allowance on all deferred tax assets.


Overview

         We design, manufacture and sell a comprehensive line of high
performance, highly reliable fiber optic subsystems and modules for fiber optic
transmission systems that are used to address the bandwidth limitations in the
metropolitan area network, or MAN, local area network, or LAN, and storage area
network, or SAN, markets. Our subsystems and modules include optical
transmitters, receivers, transceivers and transponders that convert electronic
signals into optical signals and back to electronic signals, enabling high-speed
communication of voice and data traffic over public and private networks. We
began our operations and shipped our first products in November of 1991.

         Furukawa beneficially owns all of our outstanding Class B common stock,
representing 58.3% of our outstanding shares of common stock and 93.3% of the
combined voting power of all of our outstanding common stock as of the fiscal
quarter ended March 31, 2006. Since our inception, we have purchased
substantially all of our lasers and the majority of our other fiber optic
components from Furukawa. We have relied on Furukawa's research and development
capabilities to provide us with technologically advanced lasers and fiber optic
components that we purchase from Furukawa for inclusion in our products. We
currently purchase the majority of lasers from Furukawa under a one-year Master
Purchase Agreement, which we entered into with Furukawa on October 1, 2003. This
Agreement


                                       14
<PAGE>


renews automatically on October 1 of each year unless it is terminated upon
written notice by either Furukawa or us prior to renewal. This agreement was
automatically renewed on October 1, 2005.

         In the last two years, we have negotiated price reductions for the
lasers we purchase from Furukawa. However, the laser price reductions that we
have been able to obtain from Furukawa have been less than the price reductions
for the associated products that we have given our customers in response to
market conditions. As a result, our gross margins have been negatively impacted,
and may be negatively impacted in the future. While we continue to negotiate
with Furukawa with respect to the pricing of the lasers we purchase from them,
and while we are exploring alternative sources of supply for the lasers we
purchase from Furukawa, there can be no assurance that these efforts will be
successful in addressing this negative impact on our gross margins.

         We operate in one industry segment, the design and manufacture of fiber
optic subsystems and modules. We sell our products to communication equipment
manufacturers, or CEMs, their contract manufacturers, or CMs, who incorporate
them into systems they assemble for CEMs, and to distributors. We define our
customers as CEMs who have purchased our products directly or indirectly through
CMs and distributors. We recognize revenue upon product shipment, and sales
returns and allowances have been insignificant. Historically, a relatively small
number of customers have accounted for a significant percentage of our revenue.
Our 10 largest customers accounted for approximately 70.7% and 68.4% of our
total revenue for the six months ended March 31, 2006 and 2005, respectively.
Alcatel, Huawei and Cisco Systems (including sales to each of their CMs)
accounted for approximately 17.9%, 13.3% and 11.7%, respectively, of our total
revenue for the six months ended March 31, 2006. Cisco Systems and Alcatel
(including sales to each of their CMs) accounted for approximately 21.2% and
13.3%, respectively, of our total revenue for the six months ended March 31,
2005. No other end-user customer accounted for more than 10.0% of our total
revenue for the quarters ended March 31, 2006 or 2005.

         We also ship directly to CMs who place purchase orders with us
directly. No such direct customer accounted for more than 10.0% of our total
revenue for the three months or six months ended March 31, 2006 or 2005.
Although our revenue from sales to our other customers continues to increase, we
expect that significant customer concentration will continue for the foreseeable
future. Our sales are made on a purchase order basis rather than by long-term
purchase commitments. Our customers may cancel or defer purchase orders without
penalty on short notice.

         The unfavorable economic conditions in the United States that began in
2001 detrimentally affected the U.S. manufacturing industry, particularly sales
of fiber optics equipment to service providers and communication equipment
companies. Announcements by fiber optics equipment manufacturers and their
customers at the time indicated that there was a reduction in spending for fiber
optic equipment as a result of the economic slowdown and efforts to reduce
then-existing inventories. Based on these and other factors, some of our
customers reduced, modified, cancelled or rescheduled orders for our products
and expressed uncertainty as to their future requirements. Despite an
improvement in general economic conditions in the United States since that time,
capital spending by service providers in the fiber optic communications industry
on network infrastructure has remained substantially below pre-2001 levels.
During the six months ended March 31, 2006, we have seen a higher level of
activity from our customers which resulted in an increase in new orders compared
to previous quarters. We cannot provide any assurance that the increase in
customer activity will continue or that our business will not be negatively
impacted in the future as a result of our customers' declining business
activities.

         The average selling prices of our products generally decrease as the
products mature from factors such as increased competition, the introduction of
new products or technology, increased unit volumes, and price concessions
required by our customers. We anticipate that average selling prices of our
existing products will continue to decline in future periods although the timing
and degree of the declines cannot


                                       15
<PAGE>


be predicted with any certainty. We must continue to develop and introduce, on a
timely basis, new products that incorporate features that can be sold at higher
average selling prices.

         Our cost of revenue consists principally of materials, as well as
salaries and related expenses for manufacturing personnel, and other production.
Our materials include the purchase of several key components from a limited
number of suppliers, or from a single supplier.

         Our research and development expenses consist primarily of salaries and
related expenses for design engineers and other technical personnel, the cost of
developing prototypes, and depreciation of test and prototyping equipment. Our
research and development expenses also consist of materials and overhead costs
related to major product development projects. We charge all research and
development expenses to operations as incurred. We believe that continued
investment in research and development is critical to our future success.
Accordingly, we may continue to expand our internal research and development
capabilities in the future to develop new technology or products and as a
result, our research and development expenses in absolute dollar amounts may
increase in future periods.

         Sales and marketing expenses consist primarily of salaries and related
expenses for sales and marketing personnel, commissions paid to sales personnel
and independent manufacturers' representatives, marketing and promotion costs.
We believe that investment in sales and marketing is critical to our success. As
a result, we may expand our sales and marketing operations and efforts in order
to increase sales and market awareness of our products and these expenses may
increase in future periods.

         General and administrative expenses consist primarily of salaries,
stock compensation and related expenses for our administrative, finance,
information systems and human resources personnel, professional fees and other
corporate expenses. Our legal and consulting fees include fees associated with
our analysis of strategic alternatives, including future business opportunities
that may be evaluated and pursued by our management and board of directors. Our
financial expenses include internal expenses and consulting fees associated with
our compliance to new rules and regulations associated with the Sarbanes-Oxley
legislation, as well as other new or modified accounting rules and regulations.
As a result, our general and administrative expenses in absolute dollars may
continue to increase in future periods.


Results of Operations - Comparison of Three Months Ended March 31, 2006 and 2005

         The following table sets forth statement of operations data and
percentage of change for the periods indicated:


<TABLE>
<CAPTION>

                                     Three Months Ended March, 31
                                    -------------------------------                            %
                                      2006                2005               Change          Change
---------------------------------------------------------------------------------------------------

<S>                                 <C>         <C>    <C>            <C>      <C>           <C>
REVENUE                             $18,342     100.0% $ 13,527       100.0%   4,815         35.6%
COST OF REVENUE                      11,969      65.3%    8,991        66.5%   2,978         33.1%
                                    -------             -------

GROSS PROFIT                          6,373      34.7%    4,536        33.5%   1,837         40.5%
                                    -------             -------
EXPENSES:
    Research and development          2,497      13.6%    3,918        29.0%  (1,421)       -36.3%
    Selling and marketing             1,313       7.2%    1,252         9.3%      61          4.9%
    General and administritive        1,826      10.0%    1,248         9.2%     578         46.3%
                                    -------             -------
Total expenses                        5,636      30.7%    6,418        47.4%    (782)       -12.2%
                                    -------             -------

                                       16
<PAGE>


INCOME (LOSS) FROM OPERATIONS           737       4.0%   (1,882)      -13.9%   2,619        139.2%
                                    -------             -------


OTHER INCOME, Net                     1,504       8.2%      811         6.0%     693         85.5%
                                    -------             -------

INCOME (LOSS) BEFORE INCOME TAXES     2,241      12.2%   (1,071)       -7.9%   3,312

INCOME TAXES                            105       0.6%       --         0.0      105
                                    -------             -------

NET INCOME (LOSS)                   $ 2,136      11.6%  $(1,071)       -7.9%   3,207
                                    =======             =======
</TABLE>

         Revenue - Revenue increased 35.6% to $18.3 million in the quarter ended
March 31, 2006 from $13.5 million in the quarter ended March 31, 2005. This
increase was due predominantly to an increase in demand from our existing
customers. Revenue attributable to our top ten customers was approximately $3.7
million more in the quarter ended March 31, 2006 as compared to the quarter
ended March 31, 2005. The most significant product increase in absolute dollars
was in Transceivers.

         The following table sets forth revenue attributable to each of our
product groups for the periods presented (in thousands).

                                    Three months ended March 31,
                          --------------------------------------------------
                                    2006                     2005
                          --------------------------  ----------------------

         Transceivers       $16,156           88.1%     $12,099       89.4%
         Transmitters         1,408            7.7%         623        4.6%
         Receivers              721            3.9%         569        4.2%
         Other                   57            0.3%         236        1.8%
                          --------------------------  ----------------------
                            $18,342          100.0%     $13,527      100.0%
                          ==========         ======     =======      ======

         We cannot assure you that our increase in revenue will continue in
future periods, and we expect lower revenue in the third quarter ending June 30,
2006, within the range of $14 million to $16 million. We believe that this
reduction in revenue results from a combination of factors, including (a) a
shift in the mix of products sold by OCP, and (b) a reduction in the number of
orders from some of our customers for reasons that appear to be specific to
their business, including their inventory requirements. Additionally, we
continue to experience pressure from customers to make price reductions and the
average selling prices for existing products may continue to decline in response
to product introductions by competitors or us, or other factors, including the
reduction of customer demand for our products.

         Cost of Revenue - Cost of revenue increased 33.1% to $12.0 million in
the quarter ended March 31, 2006 from $9.0 million in the quarter ended March
31, 2005. Gross margin increased to 34.7% from 33.5% in the quarters ended March
31, 2006 and 2005, respectively. Overhead decreased as a percentage of revenues
to 13.2% in the quarter ended March 31, 2006 from 19.3% in the quarter ended
March 31, 2005 representing more complete use of the Company's manufacturing
capacity as production increased. Offsetting this decrease in overhead cost,
material costs increased as a percentage of sales to 47.0% from 42.9%, in the
quarters ended March 31, 2006 and 2005, respectively. Changes in product mix,
increased raw material costs as a percentage of revenue and a decrease in
average selling price for products sold are the primary factors in the increase
in material costs as a percentage of revenue and such factors may continue to
impact gross margin in the future. In addition, the usage of previously written
down inventory decreased to $582,000 in the quarter ended March 31, 2006 from
$875,000 in the quarter ended March 31, 2005.

                                       17
<PAGE>


         Research and Development - Research and development expenses decreased
$1.4 million or 36.3% to $2.5 million in the quarter ended March 31, 2006 from
$3.9 million in the quarter ended March 31, 2005. The closure of the Colorado
facility represents approximately $600,000 or 42.9% of the decrease. The other
primary factors were an approximate $230,000 decrease in depreciation expense
for engineering equipment at our Colorado facility that became fully depreciated
in the first quarter of fiscal 2006 and an approximate 13% reduction in
engineering staff from March 31, 2005 to March 31, 2006 at other facilities.
Although we do not expect that the decrease in research and development expenses
will have a material impact on our research and development efforts in the near
future, we cannot be certain of its potential impact on a longer term basis. We
believe that continued investment in research and development is critical to our
future success and these expenses may increase in absolute dollars in the
future.

         Sales and Marketing - Sales and marketing expenses increased $61,000 or
4.9% to $1,313,000 for the quarter ended March 31, 2006 from $1,252,000 in the
quarter ended March 31, 2005. The increase was primarily related to an increase
in commissions paid to outside sales representatives. We believe that investment
in sales and marketing is critical to our success and these expenses may
increase in absolute dollars in the future.

         General and Administrative - General and administrative expenses
increased $578,000 or 46.3% to $1.8 million in the quarter ended March 31, 2006
from $1.2 million in the quarter ended March 31, 2005. Professional services
increased by $591,000. Our legal and consulting fees include fees associated
with our analysis of strategic alternatives, including future business
opportunities that may be evaluated and pursued by our management and board of
directors. Our financial expenses include internal expenses and consulting fees
associated with our compliance to new rules and regulations associated with the
Sarbanes-Oxley legislation, as well as other new or modified accounting rules
and regulations.

         Other Income, net - Other income, net increased $693,000 or 85.5% to
$1.5 million in the quarter ended March 31, 2006 from $811,000 in the quarter
ended March 31, 2005. This increase was primarily due to the increase in
investment income as the result of rising interest rates.

         Income Taxes - Income tax expense was $105,000 for the quarter ended
March 31, 2006 and was comprised of foreign taxes in the amount of $93,000 and
state income taxes of $12,000. There was no income tax provision recorded for
the quarter ended March 31, 2005 due to the loss position and valuation
allowance recorded against net deferred tax assets. There is no federal tax
expense recorded during the quarter ended March 31, 2006 as we released
valuation allowance to the extent of our quarterly federal tax expense, as it is
more likely than not that a portion of our deferred income tax assets
attributable to federal credits and federal book-tax differences will be
realized.


Results of Operations - Comparison of Six Months Ended March 31, 2006 and 2005

         The following table sets forth statement of operations data and
percentage of change for the periods indicated:

<TABLE>
<CAPTION>

                                    Six Months Ended March, 31
                                   ----------------------------                              %
                                     2006                2005                  Change      Change
---------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>    <C>            <C>      <C>           <C>

REVENUE                             $36,090     100.0% $ 27,511       100.0%   $8,539        31.0%
COST OF REVENUE                      23,408      64.9%   17,550        63.7%    5,858        33.4%
                                   --------              ------

GROSS PROFIT                         12,682      35.1%   10,001        36.3%    2,681        26.8%
                                   --------              ------

                                       18
<PAGE>

EXPENSES:
   Research and development           5,759      16.0%    7,645        27.7%   (1,886)      -24.7%
   Selling and marketing              2,502       6.9%    2,454         8.9%       48         2.0%
   General and administritive         3,939      10.9%    2,441         8.9%    1,498        61.4%
                                   --------              -------

Total expenses                       12,200      33.8%   12,540        45.5%     (340)        -2.7%
                                   --------              -------

INCOME (LOSS) FROM OPERATIONS           482       1.3%   (2,539)       -9.2%    3,021       119.0%
                                   --------              -------


OTHER INCOME, Net                     2,887       8.0%    1,437         5.2%    1,450       100.9%
                                   --------              -------

INCOME (LOSS) BEFORE INCOME TAXES     3,369       9.3%   (1,102)       -4.0%    4,471

INCOME TAXES                            140       0.4%       --         0.0%      140
                                   --------              -------

NET INCOME (LOSS)                   $ 3,229       8.9% $ (1,102)       -4.0%    4,331
                                   ========            ========
</TABLE>


         Revenue - Revenue increased 31.0% to $36.1 million in the six months
ended March 31, 2006 from $27.6 million in the six months ended March 31, 2005.
This increase was due predominantly to an increase in demand from our existing
customers. Revenue attributable to our top ten customers was approximately $6.7
million more in the six months ended March 31, 2006 as compared to the six
months ended March 31, 2005. The most significant product increase in absolute
dollars was in Transceivers.

         The following table sets forth revenue attributable to each of our
product groups for the periods presented (in thousands).

                                        Six months ended March 31,
                             --------------------------------------------------
                                       2006                     2005
                             --------------------------------------------------

            Transceivers      $ 31,510          87.3%  $   23,744        86.2%
            Transmitters         2,778           7.7%       1,868         6.8%
            Receivers            1,654           4.6%       1,602         5.8%
            Other                  148           0.4%         337         1.2%
                             --------------------------------------------------
                              $ 36,090         100.0%  $   27,551       100.0%
                             ==========        ======  ==========       ======


         We cannot assure you that our increase in revenue will continue in
future periods, and we expect lower revenue in the third quarter ending June 30,
2006, within the range of $14 million to $16 million. We believe that this
reduction in revenue results from a combination of factors, including (a) a
shift in the mix of products sold by OCP, (b) a reduction in the number of
orders from some of our customers for reasons that appear to be specific to
their business, and (c) an historical pattern of low or even slightly negative
revenue growth in our fiscal third quarters (which may occur because of
inventory requirements of our customers). Additionally, we continue to
experience pressure from customers to make price reductions and the average
selling prices for existing products may continue to decline in response to
product introductions by competitors or us, or other factors, including the
reduction of customer demand for our products.


                                       19
<PAGE>


         Cost of Revenue - Cost of revenue increased 33.4% to $23.4 million in
the six months ended March 31, 2006 from $17.6 million in the six months ended
March 31, 2005. Gross margin decreased to 35.1% from 36.3% in the six months
ended March 31, 2006 and 2005, respectively. The decrease in gross margin was
primarily due to an increase in material costs as a percent of revenue to 44.8%
from 40.9% for the six months ended March 31, 2006 and 2005, respectively.
Changes in product mix, increased raw material costs as a percentage of revenue
and decrease in average selling price of our products sold are the primary
factors contributing to increases in material cost as a percentage of revenue
and such factors may continue to impact gross margin in the future. This
increase was partially offset by a decrease in overhead as a percentage of
revenues to 15.1% from 18.6% representing more complete use of the Company's
manufacturing capacity as production increased.

         Research and Development - Research and development expenses decreased
$1.9 million or 24.7% to $5.8 million in the six months ended March 31, 2006
from $7.6 million in the six months ended March 31, 2005. The closure of the
Colorado facility represents approximately $600,000 or 31.6% of the decrease.
The other primary factors were an approximate $395,000 decrease in depreciation
expense for engineering equipment at our Colorado facility that became fully
depreciated in the first quarter of fiscal 2006 and an approximate 13% reduction
in engineering staff from March 31, 2005 to March 31, 2006 at other facilities.
Although we do not expect that the decrease in research and development expenses
will have a material impact on our research and development efforts in the near
future, we cannot be certain of its potential impact on a longer term basis. We
believe that continued investment in research and development is critical to our
future success and these expenses may increase in absolute dollars in the
future.

         Sales and Marketing - Sales and marketing expenses increased marginally
$48,000 or 2.0% to $2,502,000 for the six months ended March 31, 2006 from
$2,454,000 in the six months ended March 31, 2005. The increase was primarily
related to an increase in commissions paid to outside sales representatives. We
believe that investment in sales and marketing is critical to our success and
these expenses may increase in absolute dollars in the future.

         General and Administrative - General and administrative expenses
increased $1.5 million or 61.4% to $3.9 million in the six months ended March
31, 2006 from $2.4 million in the six months ended March 31, 2005. Professional
services increased by $1.2 million. Our legal and consulting fees include fees
associated with our analysis of strategic alternatives, including future
business opportunities that may be evaluated and pursued by our management and
board of directors. Our financial expenses include internal expenses and
consulting fees associated with our compliance to new rules and regulations
associated with the Sarbanes-Oxley legislation, as well as other new or modified
accounting rules and regulations. Compensation expense increased approximately
$300,000 of which $214,000 was attributable to stock-based compensation costs
recorded in accordance with SFAS 123(R).

         Other Income, net - Other income, net increased $1.5 million or 100.9%
to $2.9 million in the six months ended March 31, 2006 from $1.4 million in the
six months ended March 31, 2005. This increase was primarily due to the increase
in investment income as the result of rising interest rates.

         Income Taxes - Income tax expense was $140,000 for the six months ended
March 31, 2006 and was comprised of foreign taxes in the amount of $121,000 and
state income taxes of $19,000. There was no income tax provision recorded for
the six months ended March 31, 2005 due to the loss position and valuation
allowance recorded against net deferred tax assets. There is no federal tax
expense recorded during the six months ended March 31, 2006 as we released
valuation allowance to the extent of our six month federal tax expense, as it is
more likely than not that a portion of our deferred income tax assets
attributable to federal credits and federal book-tax differences will be
realized.


                                       20
<PAGE>


Liquidity and Capital Resources

         As of March 31, 2006, our primary source of liquidity was our cash and
cash equivalents balance of $83.7 million and our marketable securities balance
of $64.6 million, which consists primarily of United States Treasury notes and
bonds. At September 30, 2005, we had $84.0 million in cash and cash equivalents
and $64.6 million in current marketable securities.

         Current assets and current liabilities

Since inception, we have financed our operations primarily with cash generated
from operations. Additional financing has been generated through lines of credit
and term loans, and through our initial public offering of our Class A common
stock, which we completed on November 3, 2000. As of March 31, 2006, our working
capital was $169.3 million with a current ratio of 15.5:1 compared to our
working capital of $163 million with a current ratio of 15:1 as of September 30,
2005. Inventory and accounts receivables were the main components of the
increase in working capital and increasing revenues allowed us to increase these
current assets without increasing current liabilities. We believe that
additional cash could be borrowed if necessary; however, cash flow from
operations, cash and equivalents, and marketable securities are expected to be
sufficient to fund operations for the next twelve months.

         Cash flows provided by/ (used in)

         The following table sets forth, for the periods indicated, selected
cash flow information (dollars in thousands):

                                                            Six months Ended
                                                                 March 31
                                                            ----------------
                                                            2006          2005
                                                            ----          ----
  Operating Activities                                    $(1,946)     $(1,482)
  Investing Activities                                      1,301        9,868
  Financing Activities                                        383           83
                                                          -------      -------
  Net (decrease) increase in cash and cash equivalents     $ (262)     $ 8,469


         During the six months ended March 31, 2006, cash used in operating
activities was primarily the result of increases in accounts receivable and
inventory which more than offset net income. During the six months ended March
31, 2005, cash used by operations was the result of a net loss and a significant
payout of accrued bonuses. There was also an increase in inventories during that
period.

         During the six months ended March 31, 2006, cash provided by investing
activities included $1 million attributable to the sale of assets to The
Furukawa Electric Co., Ltd., the Company's majority stockholder (see Note 2 to
Financial Statements). The maturation of marketable securities net of the
conversion of cash and cash equivalents to marketable securities provided cash
of $440,000. Purchases of property, plant and equipment were $139,000. During
the six months ended March 31, 2005, cash provided by investing activities was
primarily the result of the maturation of marketable securities net of the
conversion of cash and cash equivalents to marketable securities for a net cash
provided of $10.1 million.

         During the six months ended March 31, 2006 and 2005 cash provided by
financing activities was from the exercise of stock options.

         We believe that our existing cash, cash equivalents and marketable
securities on hand, together with cash that we expect to generate from our
operations, will be sufficient to meet our capital needs for at least the next
twelve months. However, it is possible that we may need or elect to raise
additional funds


                                       21
<PAGE>


to fund our activities beyond the next year or to consummate acquisitions of
other businesses, products or technologies. We might raise such funds by selling
more stock to the public or to selected investors, or by borrowing money. We
cannot assure you that we will be able to obtain additional funds on
commercially favorable terms, or at all. If we raise additional funds by issuing
additional equity or convertible debt securities, the ownership percentages of
existing stockholders would be reduced. In addition, the equity or debt
securities that we issue may have rights, preferences or privileges senior to
those of the holders of our common stock.

     Although we believe we have sufficient capital to fund our activities for
at least the next twelve months, our future capital requirements may vary
materially from those now planned. The amount of capital that we will need in
the future will depend on many factors, including:

o  the market acceptance of our products;
o  the levels of promotion and advertising that will be required to launch our
   new products and achieve and maintain a competitive position in the
   marketplace;
o  price discounts on our products to our customers;
o  our business, product, capital expenditure and research and development plans
   and product and technology roadmaps;
o  the levels of inventory and accounts receivable that we maintain;
o  capital improvements to new and existing facilities;
o  technological advances;
o  our competitors' response to our products;
o  our pursuit of strategic alternatives, including future market opportunities;
   and
o  our relationships with suppliers and customers.

         In addition, we may require additional capital to accommodate planned
growth, hiring, infrastructure and facility needs or to consummate acquisitions
of other businesses, products or technologies.


Inflation

         Inflation has not had a material adverse effect on our results of
operations, however, our results of operations may be materially and adversely
affected by inflation in the future.

Off-Balance Sheet Arrangements

         We do not have any off-balance sheet arrangements, as such term is
defined in rules promulgated by the Securities and Exchange Commission, that
have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to investors.

Contractual Obligations

         There have been no material changes to the contractual obligations as
of September 30, 2005 disclosed in our Form 10-K filed with the SEC on December
29, 2005.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are currently exposed to interest rate risk on our investment
portfolio. We do not have any term loan debt as of March 31, 2006.


                                       22
<PAGE>


         The primary objective of our investment activities is to preserve
capital. We have not used derivative financial instruments in our investment
portfolio. Our cash and cash equivalents includes $83.7 million the majority of
which is invested in money market and other interest bearing accounts. In
addition, we have $64.6 million invested in marketable securities, which
represents investments in United States treasury notes and treasury bonds.

         As of March 31, 2006, our investment in marketable securities had a
weighted-average time to maturity of approximately 157 days. Marketable
securities represent United States treasury notes and treasury bonds with
maturity on the date purchased of greater than three months. These securities
are classified as held to maturity because we have the intention and ability to
hold the securities to maturity. Gross unrealized gains and losses on
held-to-maturity marketable securities have historically not been material.
Maturities on the date purchased of held-to-maturity marketable debt securities
can range from three months to two years.

         If interest rates were to increase or decrease 1%, the result would be
an annual increase or decrease of interest income of $1.5 million on our
investment portfolio. However, due to the uncertainty of the actions that would
be taken and their possible effects, this analysis assumes no such action.
Further, this analysis does not consider the effect of the change in the level
of overall economic activity that could exist in such an environment. Sales to
foreign customers are denominated in U.S. dollars and as such we have no foreign
currency fluctuation risk.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer have concluded
that our disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")) are
effective as of the end of the period covered by this quarterly report based on
their evaluation of these controls and procedures required by paragraph (b) of
Rules 13a-15 or 15d-15 under the Exchange Act.

Changes in Internal Control

There were no changes in our internal control over financial reporting
identified in connection with the evaluation required by paragraph (d) of Rules
13a-15 or 15d-15 under the Exchange Act that occurred during our last fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

                                    PART II.
                        OTHER INFORMATION AND SIGNATURES

ITEM 1.  LEGAL PROCEEDINGS

         We are not currently involved in any material legal proceedings. We are
not aware of any other material legal proceedings threatened or pending against
us. From time to time, however, we may become subject to additional legal
proceedings, claims, and litigation arising in the ordinary course of business.
In addition, in the past we have received, and we may continue to receive in the
future, letters alleging infringement of patent or other intellectual property
rights. Our management believes that these letters generally are without merit
and intend to contest them vigorously.



                                       23
<PAGE>


ITEM 1A. RISK FACTORS

         This Report contains forward-looking statements based on the current
expectations, assumptions, estimates and projections about us and our industry.
Our actual results could differ materially from those discussed in these
forward-looking statements as a result of certain factors, as more fully
described in this section and elsewhere in this Report. These forward-looking
statements involve risks and uncertainties. You should carefully consider the
following risks before you decide to buy shares of our Class A common stock. The
risks and uncertainties described below are not the only ones facing us.
Additional risks and uncertainties, including those risks set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this Report, may also adversely impact and impair
our business. If any of the following risks actually occur, our business,
results of operations or financial condition would likely suffer. In such case,
the trading price of our Class A common stock could decline, and you may lose
all or part of the money you paid to buy our stock. We do not undertake to
update publicly any forward-looking statements for any reason, even if new
information becomes available or other events occur in the future.

Our continued success in generating revenue depends on growth in construction of
fiber optic MANs, LANs, and SANs.

         Our fiber optic subsystems and modules are used primarily in MAN, LAN,
and SAN applications. These markets are rapidly evolving, and it is difficult to
predict their potential size or future growth rate. In addition, we are
uncertain as to the extent to which fiber optic technologies will be used in
these markets. Our success in generating revenue will depend on the growth of
these markets and their adoption of fiber optic technologies. A substantial
portion of our revenue is derived from sales of our product in the MAN market.
Sales of our products for the MAN market represented approximately 90%, and 89%
of our revenue for the six months ended March 31, 2006, and 2005, respectively.

         As the result of currently uncertain economic and market conditions,
(a) our revenue may decline, (b) we may be unable to predict future revenue
accurately, and (c) we are currently unable to provide long-term guidance for
future financial performance. The conditions contributing to this difficulty
include:

    o    lower near term revenue visibility; and
    o    general market and economic uncertainty.

         Based on these and other factors, major customers may reduce orders for
our products and, as a result, our revenue in future periods may decline. In
addition, our ability to meet financial expectations for future periods may be
harmed.

We derive a significant portion of our total revenue from a few significant
customers, and our total revenue may decline significantly if any of these
customers cancels, reduces or delays purchases of our products or extracts price
concessions from us.

         Our success depends on our continued ability to develop and maintain
relationships with a limited number of significant customers. We sell our
products into markets dominated by a relatively small number of systems
manufacturers, a fact that limits the number of our potential customers. Our
dependence on orders from a relatively small number of customers makes our
relationship with each customer critical to our business.

         We do not have long-term sales contracts with our customers. Instead,
sales to our customers are made on the basis of individual purchase orders that
our customers may cancel or defer on short notice without significant penalty.
In the past, some of our major customers canceled, delayed or significantly

                                       24
<PAGE>


accelerated orders in response to changes in the manufacturing schedules for
their systems, and they are likely to do so in the future. The reduction,
cancellation or delay of individual customer purchase orders would cause our
revenue to decline. Moreover, these uncertainties complicate our ability to
accurately plan our manufacturing schedule. Additionally, if any of our
customers cancel or defer orders, our operating expenses may increase as a
percentage of revenue.

         In the past, our customers have sought price concessions from us, and
they are likely to continue to do so in the future. In addition, some of our
customers may shift their purchases of products from us to our competitors. The
loss of one or more of our significant customers, our inability to successfully
develop relationships with additional customers or future price concessions
could cause our revenue to decline significantly.

We are dependent on a limited number of suppliers for most of our key
components. If these suppliers are unable or unwilling to meet our manufacturing
requirements, if they raise prices of their products, or if they discontinue
certain key components, we may experience production delays leading to delays in
shipments, increased costs and cancellation of orders for our products.

         We purchase several key components that we incorporate into our
products from a limited number of suppliers. We also purchase the majority of
our lasers from Furukawa under a Master Purchase Agreement. We do not have
long-term supply contracts with any of our other key suppliers and our agreement
with Furukawa is only for one year. Our dependence on a small number of
suppliers and our lack of longer term supply contracts exposes us to several
risks, including our potential inability to obtain an adequate supply of quality
components, the discontinuance of key components from our suppliers, price
increases and late deliveries. For example, we face the risk that price
increases imposed on us by our suppliers will be higher than the price increases
(or cost increases) imposed on our competitors when they purchase (or
manufacture) similar components; and we face a corresponding risk that any price
decreases that we are able to obtain from our suppliers will be less than the
price decreases (or cost reductions) that our competitor's obtain when they
purchase (or manufacture) similar components. We have experienced shortages and
delays in obtaining, and the discontinuation of key components in the past and
expect to experience shortages, delays, and the discontinuation of key
components in the future.

         In the past, industry capacity has been constrained and some of our
component suppliers placed limits on the number of components sold to us. If
industry capacity becomes constrained in the future, our component suppliers may
place similar limits on us. We do not have any control over these limits, and
our suppliers may choose to allocate more of their production to our
competitors.

         A disruption in, or termination of, our supply relationship with
Furukawa or any of our other key suppliers, or our inability to develop
relationships with new suppliers would interrupt and delay the manufacturing of
our products, which could result in delays in our revenue, or the cancellation
of orders for our products. We may not be able to identify and integrate
alternative suppliers in a timely fashion, or at all. Any transition to
alternative suppliers would likely result in delays in shipment, quality control
issues and increased expenses, any of which would limit our ability to deliver
products to our customers. Furthermore, if we are unable to identify an
alternative source of supply, we may have to redesign or modify our products,
which would cause delays in shipments, increase design and manufacturing costs
and require us to increase the prices of our products.

         In the last two years, we have negotiated price reductions for the
lasers we purchase from Furukawa. However, on a percentage basis, those price
reductions have been significantly less than the price reductions we have
offered our customers, on products that incorporate these lasers, in response to
competitive pressures and associated customer demands. As a result, our gross
margins have been unfavorably impacted. While we continue to negotiate with
Furukawa with respect to the pricing of the lasers we purchase from them, and
while we are exploring alternative sources of supply for the lasers we


                                       25
<PAGE>


purchase from Furukawa, we cannot assure you that these efforts will be
successful in addressing and/or reversing this erosion in our gross margins.

Our future operating results are likely to fluctuate from quarter to quarter,
and if we fail to meet the expectations of securities analysts or investors, our
stock price could decline significantly.

         Our historical quarterly operating results have varied significantly,
and our future quarterly operating results are likely to continue to vary
significantly from period to period. As a result, we believe that
period-to-period comparisons of our operating results should not be relied upon
as an indicator of our future performance. Some of the factors that could cause
our operating results to vary include:

o  fluctuations in demand for, and sales of, our products, which is dependent on
   the implementation of fiber optic networks;
o  the timing of customer orders, particularly from our significant customers;
o  competitive factors, including introductions of new products, product
   enhancements and the introduction of new technologies by our competitors, the
   entry of new competitors into the fiber optic subsystems and modules market
   and pricing pressures;
o  our ability to control expenses;
o  the mix of our products sold; and
o  economic conditions specific to the communications and related industries.

         We incur expenses from time to time that may not generate revenue until
subsequent quarters. In addition, in connection with new product introductions,
we incur research and development expenses and sales and marketing expenses that
are not matched with revenue until a subsequent quarter when the new product is
introduced. We cannot assure you that our expenditures on manufacturing capacity
will generate increased revenue in subsequent quarters or that new product
introductions will generate sufficient revenue in subsequent quarters to recover
our research and development expenditures. If growth in our revenue does not
outpace the increase in our expenses, our quarterly operating results may fall
below expectations and cause our stock price to decline significantly.

         Due to these and other factors, we believe that our quarterly operating
results are not an indicator of our future performance. If our operating results
are below the expectations of public market analysts or investors in future
quarters, the trading price of our Class A common stock would be likely to
decrease significantly.

General economic factors could negatively impact our growth plan.

         The unfavorable economic conditions in the United States that began in
2001 detrimentally affected the U.S. manufacturing industry, particularly sales
of fiber optics equipment to service providers and communication equipment
companies. Announcements by fiber optics equipment manufacturers and their
customers at the time indicated that there was a reduction in spending for fiber
optic equipment as a result of the economic slowdown and efforts to reduce
then-existing inventories. Based on these and other factors, some of our
customers reduced, modified, cancelled or rescheduled orders for our products
and expressed uncertainty as to their future requirements. Despite an
improvement in general economic conditions in the United States since that time,
capital spending by service providers in the fiber optic communications industry
on network infrastructure has remained substantially below pre-2001 levels. Our
business, operating results and financial condition are likely to suffer if the
global economy, or economic conditions in the United States, experiences another
downturn.

If we do not develop and introduce new products with higher average selling
prices in a timely manner, the overall average selling prices of our products
will decrease.


                                       26
<PAGE>


         The market for fiber optic subsystems and modules is characterized by
declining average selling prices for existing products due to increased
competition, the introduction of new products, product obsolescence and
increased unit volumes as manufacturers deploy new network equipment. We have in
the past experienced, and in the future may experience, period-to-period
fluctuations in operating results due to declines in our overall average selling
prices. We anticipate that the selling prices for our existing products will
decrease in the future in response to product introductions by competitors or
us, or other factors, including pressure from significant customers for price
concessions. Therefore, we must continue to develop and introduce new products,
on a timely basis, that can be sold at higher prices to maintain our overall
average selling prices. Failure to do so could cause our revenue and gross
margins to decline.

If our customers do not approve our manufacturing processes and qualify our
products, we will lose significant customer sales and opportunities.

         Customers generally will not purchase any of our products before they
qualify them and approve our manufacturing processes and quality control system.
Our customers may require us to register under international quality standards,
such as ISO 9001. We are currently registered under ISO 9001:2000. Delays in
product qualification or loss of ISO 9001 certification may cause a product to
be dropped from a long-term supply program and result in a significant lost
revenue opportunity. If particular customers do not approve of our manufacturing
processes, we will lose the sales opportunities with those customers.

If we fail to predict our manufacturing requirements accurately, we could incur
additional carrying costs and have excess and obsolete inventory or we could
experience manufacturing delays, which could cause us to lose orders or
customers.

         We currently use historical data, a backlog of orders and estimates of
future requirements to determine our demand for components and materials. We
must accurately predict both the demand for our products and the lead-time
required to obtain the necessary components and materials. Lead times for
components and materials vary significantly depending on factors such as the
specific supplier, the size of the order, contract terms and demand for each
component at a given time. We generally maintain levels of inventories that
increase our inventory carrying costs and periodically cause us to have excess
and obsolete inventory. However, if we were to underestimate our purchasing
requirements, manufacturing could be interrupted, resulting in delays in
shipments.

Our markets are highly competitive, some of our customers are also our
competitors, and our other customers may choose to purchase our competitors'
products rather than our products or develop internal capabilities to produce
their own fiber optic subsystems and modules.

         The market for fiber optic subsystems and modules is highly competitive
and we expect competition to intensify in the future. Our primary competitors
include Avago Technologies, ExceLight Communications, Finisar, JDSU, MRV
Communications, OpNext, Picolight, and Stratos Lightwave. We also face indirect
competition from public and private companies providing products that address
the same networking needs that our products address, and which are based on
non-fiber-optic technologies. The development of alternative solutions to fiber
optic transmission problems by our competitors, particularly systems companies
that also manufacture modules, such as Fujitsu and JDSU, could significantly
limit our growth and harm our competitive position.

         Many of our current competitors and potential competitors have longer
operating histories and significantly greater financial, technical, sales and
marketing resources than we do. As a result, these competitors are able to
devote greater resources to the development, promotion, sale and support of
their products. In addition, our competitors that have large market
capitalization or cash reserves are in a much better position to acquire other
companies in order to gain new technologies or products that may displace our
products. Any of these potential acquisitions could give our competitors a
strategic advantage. In addition, many of our competitors have much greater
brand name recognition, more extensive customer


                                       27
<PAGE>


bases, more developed distribution channels and broader product offerings than
we do. These companies can use their broader customer bases and product
offerings and adopt aggressive pricing policies to gain market share.

         In addition, existing and potential customers, especially in Japan and
other international markets, may also become competitors. These customers have
the internal capabilities to integrate their operations by producing their own
optical subsystems and modules or by acquiring our competitors or the rights to
produce competitive products or technologies, which may allow them to reduce
their purchases or cease purchasing from us.

         We expect our competitors to introduce new and improved products with
lower prices, and we will need to do the same to remain competitive. We may not
be able to compete successfully against either current or future competitors
with respect to new products. We believe that competitive pressures may result
in price reductions, reduced margins and our loss of market share.

Our sales cycle runs from our customers' initial design to production for
commercial sale. This cycle is long and unpredictable and may cause our revenue
and operating results to vary from our forecasts.

         The period of time between our initial contact with a customer and the
receipt of a purchase order from that customer may span more than a year and
varies by product and customer. During this time, customers may perform or
require us to perform extensive evaluation and qualification testing of our
products. Generally, they consider a wide range of issues before purchasing our
products, including interoperation with other subsystems and components, product
performance and reliability. We may incur substantial sales and marketing
expenses and expend significant management effort while potential customers are
qualifying our products. Even after incurring these costs, we ultimately may not
sell any or sell only small amounts of our products to a potential customer. If
sales forecasts to specific customers are not realized, our revenue and results
of operations may be negatively impacted.

If we do not achieve acceptable manufacturing yields in a cost-effective manner,
or we are required to develop new manufacturing processes to improve our yields,
our operating results would be impaired.

         The manufacture of our products involves complex and precise processes.
As a result, it may be difficult to cost-effectively meet our production goals.
In addition, changes in our manufacturing processes or those of our suppliers,
or our suppliers' inadvertent use of defective materials, could significantly
reduce our manufacturing yields, increase our costs and reduce our product
shipments. To increase our gross margin, while offering products at prices
acceptable to customers, we will need to develop new manufacturing processes and
techniques that will involve higher levels of automation.

We could be subjected to litigation regarding intellectual property rights,
which may divert management attention, cause us to incur significant costs or
prevent us from selling our products.

         In recent years, there has been significant litigation in the United
States involving patents and other intellectual property rights in the
networking technologies industry. Many companies aggressively use their patent
portfolios to bring infringement claims against competitors. As a result, we may
be a party to litigation or be involved in disputes over our alleged
infringement of others' intellectual property in the future. These claims and
any resulting lawsuit, if successful, could subject us to significant liability
for damages and prevent us from making or selling some of our products. These
lawsuits, regardless of their merit, would likely be time-consuming and
expensive to resolve and would divert management's time and attention. Any
potential intellectual property litigation also could force us to do one or more
of the following:


                                       28
<PAGE>

o  stop selling, incorporating or using our products that use the infringed
   intellectual property;
o  obtain a license to make, sell or use the relevant technology from the owner
   of the infringed intellectual property, which license may not be available on
   commercially reasonable terms, if at all; or
o  redesign the products to not use the infringed intellectual property, which
   may not be technically or commercially feasible.

         If we are forced to take any of these actions, we may be limited in our
ability to execute our business plan.

         We may in the future initiate claims or litigation against third
parties for infringement of our proprietary rights. These claims could result in
costly litigation and the diversion of our technical and management personnel.
In the process of asserting our intellectual property rights, these rights could
be found to be invalid, unenforceable or not infringed. Failure to successfully
assert our intellectual property rights could result in our inability to prevent
our competitors from utilizing our proprietary rights.

If we are unable to protect our proprietary technology, this technology could be
appropriated by others, which would make it difficult for us to compete in our
industry.

         Our success and ability to compete is dependent in part on our
proprietary technology. We rely primarily on patent, copyright, trademark and
trade secret laws, as well as confidentiality agreements and other methods, to
establish and protect our proprietary rights. Existing patent, copyright,
trademark and trade secret laws afford only limited protection. While we are
pursuing foreign patent protections, the laws of some foreign countries do not
protect the unauthorized use of our proprietary technology and processes to the
same extent as do the laws of the United States, and policing the unauthorized
use of our products is difficult. Many U.S. companies have encountered
substantial infringement problems in some foreign countries. Because we sell
some of our products overseas, we have exposure to foreign intellectual property
risks. Any infringement of our proprietary rights could result in costly
litigation, and any failure to adequately protect our proprietary rights could
result in our competitors offering similar products, potentially resulting in
the loss of some of our competitive advantage and a decrease in our revenue.

If we are unable to generate adequate additional revenue as a result of the
expansion of our sales operations, our competitive position may be harmed and
our revenue or margins may decline.

         Historically, we have relied primarily on a limited direct sales force,
supported by third party manufacturers' representatives and distributors, to
sell our products. Our sales strategy focuses primarily on developing and
expanding our direct sales force, manufacturers' representatives and
distributors. We have incurred and may continue to incur significant costs
related to the expansion of our sales operations. If the expansion of our sales
operations does not generate adequate additional revenue, our operating margins
may decline. To the extent we are unsuccessful in developing our direct sales
force, we will likely be unable to compete successfully against the
significantly larger and well-funded sales and marketing operations of many of
our current or potential competitors. In addition, if we fail to develop
relationships with significant manufacturers' representatives or distributors,
or if these representatives or distributors are not successful in their sales or
marketing efforts, sales of our products may decrease and our competitive
position would be harmed. Our representatives or distributors may not market our
products effectively or may not continue to devote the resources necessary to
provide us with effective sales, marketing and technical support. Our inability
to effectively manage our domestic and foreign sales and support staff or
maintain existing or establish new relationships with manufacturer
representatives and distributors would harm our revenue and result in declining
margins.



                                       29
<PAGE>


The market for our products is new and is characterized by rapid technological
changes and evolving industry standards. If we do not respond to the changes in
a timely manner, our products likely will not achieve market acceptance.

         The market for our products is characterized by rapid technological
change, new and improved product introductions, changes in customer requirements
and evolving industry standards. Our future success will depend to a substantial
extent on our ability to develop, introduce and support cost-effective new
products and technology on a successful and timely basis. Because the costs for
research and development of new products and technology are expensed as
incurred, we expect a negative impact on our reported net operating results. If
we fail to develop and deploy new cost-effective products and technologies or
enhancements of existing products on a timely basis, or if we experience delays
in the development, introduction or enhancement of our products and
technologies, our products will no longer be competitive and our revenue will
decline.

         The development of new, technologically advanced products is a complex
and uncertain process requiring high levels of innovation and highly skilled
engineering and development personnel, as well as the accurate anticipation of
technological and market trends. We cannot assure you that we will be able to
identify, develop, manufacture, market or support new or enhanced products on a
timely basis, if at all. Furthermore, we cannot assure you that our new products
will gain market acceptance or that we will be able to respond effectively to
product announcements by competitors, technological changes or emerging industry
standards. Our failure to respond to product announcements, technological
changes or industry changes in standards would likely prevent our products from
gaining market acceptance and harm our competitive position.

Terrorist activities and resulting military and other actions and the potential
outbreak of Avian Flu could adversely affect our business.

         The September 11, 2001 terrorist attacks in the United States and
recent terrorist attacks in other parts of the world, as well as continued
threats of global terrorism, current and future military response to them, the
United States military action in Iraq, and the potential outbreak of Avian Flu
have created many economic and political uncertainties that make it extremely
difficult for us, our customers and our suppliers to accurately forecast and
plan future business activities. The potential outbreak of Avian Flu, especially
in China, where we have significant customer and supply relationships, could
also disrupt our operations, sales, and supply chain or those of our customers,
which has made it more difficult to predict and plan for future business
activities. This reduced predictability challenges our ability to operate
profitably or to grow our business. In particular, it is difficult to develop
and implement strategies, sustainable business models and efficient operations,
and effectively manage contract manufacturing and supply chain relationships. In
addition, the continued threats of terrorism, the heightened security measures
in response to such threats, and the potential outbreak of Avian Flu have caused
and may continue to cause significant disruption to commerce throughout the
world. Disruption in air transportation in response to these threats or future
attacks, or Avian Flu, may result in transportation and supply-chain
disruptions, increase our costs for both receipt of inventory and shipment of
products to our customers, and cause customers to defer their purchasing
decisions. Disruptions in commerce could also cause consumer confidence and
spending to decrease or result in increased volatility in the U.S. and worldwide
financial markets and economy. They also could result in economic recession in
the U.S. or abroad. Any of these occurrences could have a significant impact on
our operating results, revenue and costs and may result in the volatility of the
market price for our Class A common stock and on the future price of our Class A
common stock.

Our success depends on our key personnel, including our executive officers, the
loss of any of whom could harm our business.


                                       30
<PAGE>


         Our success depends on the continued contributions of our senior
management and other key research and development, sales and marketing and
operations personnel, including Muoi Van Tran, our Chief Executive Officer and
President, Susie Nemeti, our Chief Financial Officer and Vice President of
Finance and Administration, and Mohammad Ghorbanali, our Chief Operating Officer
and Vice President of Technical Operations. Competition for employees in our
industry is intense. We do not have life insurance policies covering any of our
executives. There can be no assurance that we will be successful in retaining
such key personnel, or that we will be successful in hiring replacements or
additional key personnel. Our loss of any key employee, the failure of any key
employee to perform in his or her current position, or the inability of our
officers and key employees to expand, train and manage our employee base may
prevent us from executing our growth strategy.

         We will need to attract and retain highly qualified managers, sales and
marketing and technical support personnel. We have had difficulty hiring the
necessary engineering, sales and marketing and management personnel in the past.
If we fail to hire and retain qualified personnel when needed, our product
development efforts and customer relations will suffer. Our key management
personnel have limited experience in managing the growth of technologically
complex businesses in a rapidly evolving environment. If we are unable to manage
our growth effectively, we will incur additional expenses that will negatively
impact our operating results.

Our products may have defects that are not detected until full deployment of a
customer's system. Any of these defects could result in a loss of customers,
damage to our reputation and substantial costs.

         We design our products for large and complex fiber optic networks, and
our products must be compatible with other components of the network system,
both current and future. We have experienced in the past, and may continue to
experience in the future, defects in our products. Defects in our products or
incompatibilities in our products may appear only when deployed in networks for
an extended period of time. In addition, our products may fail to meet our
customers' design specifications, or our customers may change their design
specifications after the production of our product. A failure to meet our
customers' design specifications often results in a loss of the sale due to the
length of time required to redesign the product. We may also experience defects
in third party components that we incorporate into our products. We have
experienced and may continue to experience the following due to our inability to
detect or fix errors:

         o     increased costs associated with the replacement of defective
               products, redesign of products to meet customer design
               specifications and/or refund of the purchase price;
         o     diversion of development resources; and
         o     increased service and warranty costs.

Our products and the systems into which our products are incorporated must
comply with domestic and international governmental regulations, and if our
products do not meet these regulations, our ability to sell our products will be
restricted.

         Our products are subject to various regulations of U.S. and foreign
governmental authorities principally in the areas of radio frequency emission
standards and eye safety. Radio frequency emission standards govern allowable
radio interference with other services. Eye safety standards govern the labeling
and certification of laser products to ensure that they are used in a way that
does not create a hazard to the human eye. Our products and the systems into
which they are incorporated must also comply with international standards and
governmental standards of the foreign countries where our products are used. Our
inability, or the inability of our customers, to comply with existing or
evolving standards established by regulatory authorities, or to obtain timely
domestic or foreign regulatory approvals or certificates will restrict our
ability to sell our products.


                                       31
<PAGE>


We are subject to environmental laws and other legal requirements that have the
potential to subject us to substantial liability and increase our cost of doing
business.

         Our properties and business operations are subject to a wide variety of
federal, state and local environmental, health and safety laws and other legal
requirements, including those relating to the storage, use, discharge and
disposal of toxic, volatile or otherwise hazardous substances. We may be
required to incur substantial costs to comply with current or future legal
requirements. In addition, if we fail to obtain required permits or otherwise
fail to operate within these or future legal requirements, we may be required to
pay substantial penalties, suspend our operations or make costly changes to our
manufacturing processes or facilities. We believe our properties and business
operations are in compliance with applicable environmental laws. We do not
anticipate any material capital expenditures for environmental control
activities for the 2006 fiscal year.

         However, the landlord of our former Colorado facility has contacted us
claiming that the Company is responsible for approximately $500,000 in
environmental clean-up costs at that location. The Company disputes the
landlord's allegations and intends to contest any claims that may be asserted.
However, we cannot assure you that we will be able to resolve this dispute
without litigation or, if we are able to do so, that the resolution will be
favorable to us. Further, any litigation resulting from this dispute could
result in substantial costs and divert our management's attention and resources.


We face risks associated with our international operations that could prevent us
from marketing and distributing our products internationally.

         Although a significant portion of our sales has historically been in
North America, a growing percentage of our revenue is generated from sales
outside North America. Sales of our products outside North America accounted for
approximately 50.5%, and 42.1% of our revenue for the six months ended March 31,
2006, and 2005, respectively. We expect that our sales outside of North America
will continue to contribute materially to our revenue. We have limited
experience in marketing and distributing our products internationally. One of
our objectives is to expand our international operations in the future.
Significant management attention and financial resources are needed to develop
our international sales, support and distribution channels and manufacturing. We
may not be able to establish or maintain international market demand for our
products.

         In addition, international operations are subject to other risks,
including:

         o     greater difficulty in accounts receivable collection and longer
               collection periods;
         o     difficulties and costs of staffing and managing foreign
               operations with personnel who have expertise in fiber optic
               technology;
         o     unexpected changes in regulatory or certification requirements
               for optical networks; and
         o     political or economic instability.

         A portion of our international revenue and expenses may be denominated
in foreign currencies in the future. Accordingly, we could experience the risks
of fluctuating currencies and may choose to engage in currency hedging
activities. These factors could adversely impact our international sales or
increase our costs of doing business abroad or impair our ability to expand into
international markets, and therefore could significantly harm our business.

Disruption of our operations at our Woodland Hills, California manufacturing
facility could require us to lease alternative manufacturing facilities or limit
our manufacturing operations.

         In August 2003, we relocated our headquarters from Chatsworth,
California to Woodland Hills, California. All of our manufacturing operations
are conducted in our Woodland Hills, California


                                       32
<PAGE>


headquarters. Due to this geographic concentration, a disruption of our
manufacturing operations, resulting from sustained process abnormalities, human
error, government intervention or natural disasters, such as earthquakes, fires
or floods, or other causes, could require us to cease or limit our manufacturing
operations.

Our limited experience in acquiring other businesses, product lines and
technologies may make it difficult for us to overcome problems encountered in
connection with any acquisition we may undertake.

         We expect to review opportunities to buy other businesses, products or
technologies that would enhance our technical capabilities, complement our
current products or expand the breadth of our markets or which may otherwise
offer growth opportunities. Our acquisition of businesses or technologies will
require significant commitment of resources. We may be required to pay for any
acquisition with cash, but we cannot be certain that additional capital will be
available to us on favorable terms, if at all. In lieu of paying cash, we could
issue stock as consideration for an acquisition that would dilute existing
stockholders' percentage ownership, incur substantial debt or assume contingent
liabilities. We have little experience in acquiring other businesses and
technologies. Potential acquisitions also involve numerous risks, including:

         o     problems assimilating the purchased operations, technologies or
               products;
         o     unanticipated costs associated with the acquisition;
         o     diversion of management's attention from our core business;
         o     adverse effects on existing business relationships with suppliers
               and customers;
         o     risks associated with entering markets in which we have no or
               limited prior experience; and
         o     potential loss of key employees of purchased organizations.

Our stock price is likely to be volatile and could drop unexpectedly.

         Our Class A common stock has been publicly traded since November 3,
2000. The market price of our Class A common stock has been subject to
significant fluctuations since the date of our initial public offering. The
stock market has from time to time experienced significant price and volume
fluctuations that have affected the market prices of securities, particularly
securities of telecommunications and fiber optic companies. As a result, the
market price of our Class A common stock may materially decline, regardless of
our operating performance. In the past, following periods of volatility in the
market price of a particular company's securities, securities class action
litigation has often been brought against that company. We may become involved
in this type of litigation in the future. Litigation of this type is often
expensive and diverts management's attention and resources.

We may not be able to maintain our listing on the Nasdaq National Market and if
we fail to do so, the price and liquidity of our Class A common stock may
decline.

         The Nasdaq Stock Market has quantitative maintenance criteria for the
continued listing of securities on the Nasdaq National Market. The current
requirements affecting us include maintaining a minimum bid price per share of
$1. Our bid price has been below $1 in the past. If the bid price of our Class A
common stock drops below $1 per share and remains at that level for more than 30
consecutive trading days, we will be in violation of Nasdaq's listing standards.
If within 90 days thereafter, our Class A common stock does not have a minimum
bid price of $1 per share for 10 consecutive trading days, Nasdaq will commence
proceedings to delist our Class A common stock from the Nasdaq National Market.
If we fail to maintain continued listing on the Nasdaq National Market and must
move to a market with less liquidity, our stock price would likely decline. If
we are delisted, it could have a material adverse effect on the market price of,
and the liquidity of the trading market for, our Class A common stock.


                                       33
<PAGE>


We have potential business conflicts of interest with Furukawa, the resolution
of which may not be as favorable to us as if we were dealing with an
unaffiliated third party.

         We have historically relied on Furukawa's research and development
capabilities to provide us with technologically advanced lasers and fiber optic
components that we purchase from Furukawa for inclusion in our products, and we
expect to continue to rely on Furukawa in this manner in the future. We
currently purchase the majority of lasers from Furukawa under a Master Purchase
Agreement. We cannot assure you that Furukawa will renew the Agreement upon its
expiration on September 30, 2006 or whether it will continue to provide services
and components to us, and if not, whether or on what terms we could find
adequate alternative sources for these services and components.

         In the last two years, we have negotiated price reductions for the
lasers we purchase from Furukawa. However, the laser price reductions that we
have been able to obtain from Furukawa have been less than the price reductions
for the associated products that we have given our customers in response to
market conditions. As a result, our gross margins have been negatively impacted,
and may be negatively impacted in the future. While we continue to negotiate
with Furukawa with respect to the pricing of the lasers we purchase from them,
and while we are exploring alternative sources of supply for the lasers we
purchase from Furukawa, we cannot assure you that these efforts will be
successful in addressing this negative impact on our gross margins.

         Furukawa can control the outcome of any stockholder votes, as discussed
below. The terms of future transactions with Furukawa may or may not be
comparable to those that would be available from unaffiliated third parties.

         Potential conflicts of interest exist between Furukawa and us in a
number of areas, including the nature and quality of services rendered by
Furukawa to us, potential competitive business activities, sales or
distributions by Furukawa of all or any portion of its ownership interest in us,
or Furukawa's ability to control our management and affairs. It is possible that
business decisions made by management that are in the best interest of our
stockholders may conflict with Furukawa's interests. For example, we may decide
to enter into or acquire a line of business competitive with Furukawa, or
Furukawa may decide to enter into or acquire a line of business competitive with
us. Any of these events may alter or eliminate our ability to rely on Furukawa
to supply key components to us in the future, increase our costs of producing
our products and result in increased competition in our markets. We cannot
assure you that we will be able to resolve any conflicts we may have with
Furukawa or, if we are able to do so, that the resolution will be favorable to
us.

Furukawa will control the outcome of stockholder voting and there may be an
adverse effect on the price of our Class A common stock due to disparate voting
rights of our Class A common stock and our Class B common stock.

         Furukawa beneficially owns all of our outstanding shares of Class B
common stock, which as of March 31, 2006 represented 93.3% voting control over
all stockholder issues. The holders of our Class A common stock and Class B
common stock have identical rights except that holders of our Class A common
stock are entitled to one vote per share while holders of our Class B common
stock are entitled to ten votes per share on matters to be voted on by
stockholders. The differential in the voting rights of our Class A common stock
and Class B common stock could adversely affect the price of our Class A common
stock to the extent that investors or any potential future purchaser of our
shares of Class A common stock give greater value to the superior voting rights
of our Class B common stock. Each share of our Class B common stock will
automatically convert into one share of Class A common stock if it is
transferred to any entity, other than an entity controlling, controlled by or
under common control with Furukawa. In addition, our Class B common stock will
automatically convert into shares of our Class A common stock if the total
number of outstanding shares of Class B common stock falls below 20% of


                                       34
<PAGE>


total number of outstanding shares of our common stock. As long as Furukawa has
a controlling interest, it will continue to be able to elect our entire board of
directors and generally be able to determine the outcome of all corporate
actions requiring stockholder approval. As a result, Furukawa will be in a
position to continue to control all matters affecting us, including:

     o   a change of control, including a merger;
     o   our acquisition or disposition of assets;
     o   our future issuances of common stock or other securities;
     o   our incurrence of debt; and
     o   our payment of dividends on our common stock.

         Three members of our board of directors are also executives of
Furukawa. These individuals have obligations to both our Company and Furukawa
and may have conflicts of interest with respect to matters potentially or
actually involving or affecting us, such as acquisitions and other corporate
opportunities that may be suitable for both Furukawa and us.

Our exploration of strategic alternatives may not be successful.

         We have a special committee of our board of directors that evaluates
strategic alternatives. The special committee, which is comprised of our three
independent directors, has retained Bear, Stearns & Co. Inc. to advise it in
evaluating strategic alternatives, including a special dividend, share
repurchase, strategic merger or sale of the Company.

         We are uncertain as to what strategic alternatives may be available to
us or what impact any particular strategic alternative will have on our stock
price if accomplished. Uncertainties and risks relating to our exploration of
strategic alternatives include:

     o   the exploration of strategic alternatives may disrupt operations and
         distract management, which could have a material adverse effect on our
         operating results;
     o   the process of exploring strategic alternatives may be more time
         consuming and expensive than we currently anticipate;
     o   we may not be able to successfully achieve the benefits of the
         strategic alternative undertaken by us; and
     o   perceived uncertainties as to the future direction of the Company may
         result in the loss of employees or business partners.

The current audit by the Internal Revenue Service of our federal tax returns
could result in adverse adjustments to our financial statements.

         In March 2005, the Internal Revenue Service commenced an audit of our
federal tax returns for our 2001 and 2003 fiscal years. At the current stage of
the audit, we are unable to predict whether any adjustments to our tax returns
will be required, and if so, whether these adjustments will be adverse or in
favor of us. In addition, we cannot predict whether any adjustment resulting
from the IRS audit will be material, or whether such an adjustment will require
us to change our previously reported financial results.

Our internal controls over financial reporting may not be adequate and our
independent auditors may not be able to certify as to their adequacy, which
could have a significant and adverse effect on our business and reputation.

         We are evaluating our internal controls over financial reporting in
order to allow management to report on, and our independent auditors to attest
to, our internal controls over financial reporting, as required by Section 404
of the Sarbanes-Oxley Act of 2002 and rules and regulations of the SEC
there-


                                       35
<PAGE>


under, which we refer to as Section 404. Section 404 requires a reporting
company such as ours to, among other things, annually review and report on its
internal controls over financial reporting, and evaluate and disclose changes in
its internal controls over financial reporting quarterly. We will be required to
comply with Section 404 as of September 30, 2007. We are currently performing
the system and process evaluation and testing required (and any necessary
remediation) in an effort to comply with management certification and auditor
attestation requirements of Section 404. In the course of our ongoing
evaluation, we have identified areas of our internal controls requiring
improvement, and plan to design enhanced processes and controls to address these
and any other issues that might be identified through this review. As a result,
we expect to incur additional expenses and diversion of management's time. We
cannot be certain as to the timing of completion of our evaluation, testing and
remediation actions or the impact of the same on our operations and may not be
able to ensure that the process is effective or that the internal controls are
or will be effective in a timely manner. If we are not able to implement the
requirements of Section 404 in a timely manner or with adequate compliance, our
independent auditors may not be able to certify as to the effectiveness of our
internal control over financial reporting and we may be subject to sanctions or
investigation by regulatory authorities, including the SEC. As a result, there
could be an adverse reaction in the financial markets due to a loss of
confidence in the reliability of our financial statements. In addition, we may
be required to incur costs in improving our internal control system and the
hiring of additional personnel. Any such action could have an adverse effect on
our business, results of operations and financial condition.


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

         We held our 2006 Annual Meeting of Stockholders as further discussed
below:

         (a) Our 2006 Annual Meeting of Stockholders was held on February 22,
2006 in Woodland Hills, California.

         (b) Proxies for the Annual Meeting were solicited pursuant to
Regulation 14 under the Securities Exchange Act of 1934, as amended, there was
no solicitation in opposition to the management's nominees as listed in the
proxy statement, and all of such nominees were elected.

         (c) At the Annual Meeting, the following matters were considered and
voted upon:

         (i)      The election of seven directors to our board of directors. At
                  the Annual Meeting, our stockholders elected each of the
                  following director nominees as directors, to serve on our
                  board of directors until the next Annual Meeting of
                  Stockholders or until their successors are duly elected and
                  qualified. The vote for each director was as follows:

<TABLE>
<CAPTION>

                                                 Class A                      Class B
                                    Class A      Shares         Class B        Shares         Class B
             Name                   Votes        Withheld       Shares       Withheld         Votes        Total Votes
             ----                   -----        --------       ------       --------         -----        -----------
<S>                                <C>            <C>          <C>                    <C>    <C>             <C>
Muoi Van Tran                      27,725,577     2,587,907    66,000,000             0      660,000,000     687,725,577
Stewart D. Personick               29,398,970       914,514    66,000,000             0      660,000,000     689,398,970
Hobart Birmingham                  29,399,770       913,714    66,000,000             0      660,000,000     689,399,770
David Warnes                       29,396,107       917,377    66,000,000             0      660,000,000     689,396,107
Yukimasa Shiga                     26,744,501     3,568,983    66,000,000             0      660,000,000     686,744,501
Haruki Ogoshi                      27,729,395     2,584,089    66,000,000             0      660,000,000     687,729,395
Arinobu Sato                       27,729,756     2,583,728    66,000,000             0      660,000,000     687,729,756
</TABLE>

         (ii)     To ratify the appointment of Deloitte & Touche LLP as our
                  independent auditors for the fiscal year ending September 30,
                  2006. At the Annual Meeting, our stockholders approved this
                  proposal by the votes indicated below:


                                       36
<PAGE>

<TABLE>
<CAPTION>

                                  Class A Votes          Class B Shares         Class B  Votes           Total Votes
                               ----------------     -------------------    -------------------  ---------------------
<S>                                  <C>                     <C>                   <C>                    <C>
For                                  30,152,602              66,000,000            660,000,000            690,152,602
Against                                 139,383                       0                      0                139,383
Abstain                                  21,499                       0                      0                 21,499
</TABLE>



ITEM 6.           EXHIBITS

Exhibit Number  Description
--------------  ----------------------------------------------------------------

10.1*           Employment Agreement by and between Philip F. Otto and the
                Company dated as of April 26, 2006.

10.2*           Amendment No. 1 to Employment Agreement by and between Susie L.
                Nemeti and the Company dated as of April 26, 2006.

31.1            Certification of Chief Executive Officer pursuant to 18 U.S.C.
                Section 1350, as adopted pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.

31.2            Certification of Chief Financial Officer pursuant to 18 U.S.C.
                Section 1350, as adopted pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.

32.1            Certification of Chief Executive Officer and Chief Financial
                Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
                to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed as an exhibit to the Current Report on Form 8-K dated April 27, 2006 and
incorporated herein by reference.



                                       37
<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.


                                 OPTICAL COMMUNICATION PRODUCTS, INC.,
                                 a Delaware corporation


Date:     May 12, 2006           By:  /s/ Muoi Van Tran
         -------------                ------------------
                                      Name:    Muoi Van Tran
                                      Title:   Chairman of the Board,
                                               Chief Executive Officer and
                                               President


Date:     May 12, 2006           BY:  /s/ Susie Nemeti
         -------------                --------------------------
                                      Name:    Susie Nemeti
                                      Title:   Chief Financial Officer
                                               (PrincipalFinancial and
                                               Accounting Officer)



                                       38
<PAGE>


                                  EXHIBIT INDEX


Exhibit Number   Description
--------------   -----------

10.1*           Employment Agreement by and between Philip F. Otto and the
                Company dated as of April 26, 2006.

10.2*           Amendment No. 1 to Employment Agreement by and between Susie L.
                Nemeti and the Company dated as of April 26, 2006.

31.1            Certification of Chief Executive Officer pursuant to 18 U.S.C.
                Section 1350, as adopted pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.

31.2            Certification of Chief Financial Officer pursuant to 18 U.S.C.
                Section 1350, as adopted pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.

32.1            Certification of Chief Executive Officer and Chief Financial
                Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
                to Section 906 of the Sarbanes-Oxley Act of 2002.


* Filed as an exhibit to the Current Report on Form 8-K dated April 27, 2006 and
incorporated herein by reference.