<PAGE>   1
 
================================================================================
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                          ---------------------------
 
                                  FORM 10-Q/A
 
<TABLE>
<C>               <S>
   (MARK ONE)
      [X]         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                  SECURITIES EXCHANGE ACT OF 1934
                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
                                               OR
      [  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
                  SECURITIES EXCHANGE ACT OF 1934
                  FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>
 
                         COMMISSION FILE NO.: 000-21669
 
                            DIGITAL LIGHTWAVE, INC.
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                                            <C>
                  DELAWARE                                      95-4313013
       (State or other jurisdiction of             (I.R.S. Employer Identification No.)
       incorporation or organization)
</TABLE>
 
                       601 CLEVELAND STREET, FIFTH FLOOR
                           CLEARWATER, FLORIDA 33755
                                 (813) 442-6677
 (Address, including zip code, of principal executive offices and Registrant's
                     telephone number, including area code)
 
     Indicate by check mark whether 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 report (s)), and (2) has been subject to
such filing requirements for the past 90 days.
 
                              Yes  [X]     No  [ ]
 
     The number of shares outstanding of the Registrant's Common Stock as of
April 9, 1998 was 26,457,160.
 
================================================================================
<PAGE>   2
 
                            DIGITAL LIGHTWAVE, INC.
 
                         QUARTERLY REPORT ON FORM 10-Q
                       FOR THE PERIOD ENDED JUNE 30, 1997
             THE UNDERSIGNED REGISTRANT HEREBY AMENDS THE FORM 10-Q
     FOR THE PERIOD ENDED JUNE 30, 1997 IN ITS ENTIRETY AS SET FORTH BELOW:
 
                                     INDEX
 
<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<C>       <S>                                                           <C>
                       PART I  FINANCIAL INFORMATION
Item 1.   Financial Statements:
          Comparative Balance Sheets -- June 30, 1997 and December 31,
            1996......................................................    1
          Comparative Statements of Operations -- Three Months Ended
            June 30, 1997 and June 30, 1996...........................    2
          Comparative Statements of Operations -- Six Months Ended
            June 30, 1997 and June 30, 1996...........................    3
          Comparative Statements of Cash Flows -- Six Months Ended
            June 30, 1997 and June 30, 1996...........................    4
          Notes to Comparative Financial Statements...................    5
Item 2.   Management's Discussion and Analysis of Financial Condition
            and Results of Operations.................................    7
 
                         PART II  OTHER INFORMATION
Item 1.   Legal Proceedings...........................................   11
Item 6.   Exhibits and Reports on Form 8-K............................   11
                                                                         12
SIGNATURES............................................................
</TABLE>
 
                                      (ii)
<PAGE>   3
 
                         PART I  FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS
 
                            DIGITAL LIGHTWAVE, INC.
 
                                 BALANCE SHEETS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                               JUNE 30,     DECEMBER 31,
                                                                 1997           1996
                                                              -----------   ------------
                                                              (UNAUDITED)
<S>                                                           <C>           <C>
                                         ASSETS
Current assets:
  Cash and cash equivalents.................................   $ 36,227       $ 1,165
  Accounts receivable.......................................      1,447         2,510
  Inventories...............................................      2,521           850
  Prepaid expenses and other current assets.................        172           516
                                                               --------       -------
          Total current assets..............................     40,367         5,041
Property and equipment, net.................................      2,619         1,292
Other assets................................................         58            41
                                                               --------       -------
          Total assets......................................   $ 43,044       $ 6,374
                                                               ========       =======
                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities..................   $  2,028       $ 1,942
  Notes payable.............................................         --           750
                                                               --------       -------
          Total current liabilities.........................      2,028         2,692
Long-term liabilities.......................................        142           233
                                                               --------       -------
          Total liabilities.................................      2,170         2,925
                                                               --------       -------
Stockholders' equity:
  Preferred stock...........................................         --            --
  Common stock..............................................          3             2
  Additional paid-in capital................................     53,555        14,242
  Accumulated deficit.......................................    (10,984)       (9,095)
                                                               --------       -------
                                                                 42,574         5,149
Note receivable from stockholder............................     (1,700)       (1,700)
                                                               --------       -------
          Total stockholders' equity........................     40,874         3,449
                                                               --------       -------
          Total liabilities and stockholders' equity........   $ 43,044       $ 6,374
                                                               ========       =======
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                        1
<PAGE>   4
 
                            DIGITAL LIGHTWAVE, INC.
 
                            STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                     (IN THOUSANDS, EXCEPT PER-SHARE DATA)
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   JUNE 30,
                                                              -------------------
                                                                1997       1996
                                                              --------   --------
<S>                                                           <C>        <C>
SALES.......................................................  $ 2,601    $ 1,129
Cost of goods sold..........................................      795        397
                                                              -------    -------
  Gross profit..............................................    1,806        732
Operating expenses:
  Engineering and development...............................      948        522
  Sales and marketing.......................................    1,179        374
  General and administrative................................      795        217
                                                              -------    -------
  Total operating expenses..................................    2,922      1,113
                                                              -------    -------
Operating income (loss).....................................   (1,116)      (381)
Other income (expense)......................................      539        (85)
                                                              -------    -------
Income (loss) before income tax.............................     (577)      (466)
Provision for income taxes..................................       --         --
                                                              -------    -------
Net income (loss)...........................................  $  (577)   $  (466)
                                                              =======    =======
Per share of common stock:
  Net income (loss) per share...............................  $ (0.02)   $ (0.02)
                                                              =======    =======
Weighted average common and common equivalent shares
  outstanding...............................................   26,322     21,944
                                                              =======    =======
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                        2
<PAGE>   5
 
                            DIGITAL LIGHTWAVE, INC.
 
                            STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                     (IN THOUSANDS, EXCEPT PER-SHARE DATA)
 
<TABLE>
<CAPTION>
                                                              SIX MONTHS ENDED
                                                                  JUNE 30,
                                                              -----------------
                                                               1997      1996
                                                              -------   -------
<S>                                                           <C>       <C>
SALES.......................................................  $ 4,099   $ 1,314
Cost of goods sold..........................................    1,362       522
                                                              -------   -------
  Gross profit..............................................    2,737       792
Operating expenses:
  Engineering and development...............................    1,826       986
  Sales and marketing.......................................    2,058       460
  General and administrative................................    1,574       552
                                                              -------   -------
Total operating expenses....................................    5,458     1,998
                                                              -------   -------
Operating income (loss).....................................   (2,721)   (1,206)
Other income (expense)......................................      832      (392)
                                                              -------   -------
Income (loss) before income tax.............................   (1,889)   (1,598)
Provision for income taxes..................................       --        --
                                                              -------   -------
Net income (loss)...........................................  $(1,889)  $(1,598)
                                                              =======   =======
Per share of common stock:
  Net income (loss) per share...............................  $ (0.07)  $ (0.08)
                                                              =======   =======
Weighted average common and common equivalent shares
  outstanding...............................................   25,611    21,286
                                                              =======   =======
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                        3
<PAGE>   6
 
                            DIGITAL LIGHTWAVE, INC.
 
                            STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                              FOR THE SIX MONTHS
                                                                ENDED JUNE 30,
                                                              -------------------
                                                                1997       1996
                                                              --------   --------
<S>                                                           <C>        <C>
Cash flows from operating activities:
  Net income (loss).........................................  $(1,889)   $(1,598)
  Adjustments to reconcile net income (loss) due to cash
     used by operating activities:
     Interest expense converted to equity...................       --
     Depreciation and amortization..........................      250         71
  Changes in operating assets and liabilities:
     Increase in accounts receivable........................    1,115       (991)
     Increase in inventories................................   (1,671)        59
     Decrease in deferred offering expenses.................      427         --
     Increase in prepaid expenses and other current
      assets................................................     (152)      (183)
     Increase in accounts payable and accrued expenses......       46       (249)
                                                              -------    -------
          Net cash used in operating activities.............   (1,874)    (2,891)
                                                              -------    -------
Cash flows from investing activities:
  Purchase of property and equipment........................   (1,487)      (218)
                                                              -------    -------
          Net cash used in investing activities.............   (1,487)      (218)
                                                              -------    -------
Cash flows from financing activities:
  Proceeds from notes payable...............................       --      2,295
  Principal payments on notes payable.......................     (750)      (583)
  Principal payments on notes payable, related party........       --       (202)
  Repayment of stockholder receivable.......................       --
  Proceeds from sale of common stock, net of expense........   39,314      2,554
  Cash paid for common stock................................       --
  Principal payments -- capital lease obligation............     (141)       (76)
                                                              -------    -------
          Net cash provided by financing activities.........   38,423      3,988
                                                              -------    -------
Net increase in cash and cash equivalents...................   35,062        879
Cash and cash equivalents at beginning of period............    1,165         72
                                                              -------    -------
Cash and cash equivalents at end of period..................  $36,227    $    51
                                                              =======    =======
Other supplemental disclosures:
  Noncash investing and financing activities:
     Fixed asset additions included in accounts payable.....  $    90    $    10
     Notes payable converted to equity......................       --      5,301
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                        4
<PAGE>   7
 
                            DIGITAL LIGHTWAVE, INC.
 
                   NOTES TO COMPARATIVE FINANCIAL STATEMENTS
 
1.  BASIS OF PRESENTATION:
 
     The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, these statements include all
adjustments, consisting of normal and recurring adjustments, considered
necessary for a fair presentation of results for such periods. The results of
operations for the three and six month periods ended June 30, 1997,
respectively, are not necessarily indicative of results which may be achieved
for the full fiscal year or for any future period. The unaudited interim
financial statements should be read in conjunction with the financial statements
and notes thereto contained in Digital Lightwave's Form 10-K for the period
ended December 31, 1996, File No. 000-21669.
 
     On January 22, 1998, the Company issued a press release and related Form
8-K indicating that the Company would restate its financial results for quarters
ending June 30, 1997 and September 30, 1997, respectively. The Company's
accompanying financial statements give effect to such restatement for the period
ending June 30, 1997.
 
2.  INITIAL PUBLIC OFFERING:
 
     On February 6, 1997, the Company consummated its Initial Public Offering of
3,658,860 shares issued by the Company at a price of $12.00 per share. Aggregate
net proceeds to the Company were approximately $39.6 million. On February 28,
1997, the Company paid off all the then outstanding notes ($750,000 principal
amount) with proceeds from the Initial Public Offering.
 
3.  INVENTORIES:
 
     Inventories at June 30, 1997 and December 31, 1996 are summarized as
follows:
 
<TABLE>
<CAPTION>
                                                              JUNE 30,   DECEMBER 31,
                                                                1997         1996
                                                              --------   ------------
                                                                  (IN THOUSANDS)
<S>                                                           <C>        <C>
Raw materials...............................................   $  694        $336
Work-in-process.............................................      830         339
Finished goods..............................................      997         175
                                                               ------        ----
                                                               $2,521        $850
                                                               ======        ====
</TABLE>
 
4.  COMPUTATION OF NET INCOME (LOSS) PER SHARE:
 
     Net income (loss) per common and common equivalent shares has been computed
using the weighted average number of common and common equivalent shares
outstanding using the treasury stock method for all periods presented. Shares
used in the net income (loss) per share calculation are summarized as follows:
 
<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED         SIX MONTHS ENDED
                                                 JUNE 30,                  JUNE 30,
                                          -----------------------   -----------------------
                                             1997         1996         1997         1996
                                          ----------   ----------   ----------   ----------
<S>                                       <C>          <C>          <C>          <C>
Weighted average common stock
  outstanding...........................  26,177,777   21,235,886   26,466,332   20,577,257
Weighted average common stock
  equivalents outstanding...............     144,213      708,330      144,213      708,330
                                          ----------   ----------   ----------   ----------
Shares used in net income (loss) per
  share calculation.....................  26,321,990   21,944,216   26,610,545   21,285,587
                                          ==========   ==========   ==========   ==========
</TABLE>
 
                                        5
<PAGE>   8
                            DIGITAL LIGHTWAVE, INC.
 
            NOTES TO COMPARATIVE FINANCIAL STATEMENTS -- (CONTINUED)
 
5.  NEW ACCOUNTING PRONOUNCEMENTS:
 
     In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share," which is effective for periods ending after December
15, 1997. This statement establishes standards for computing and presenting
earnings per share data. Management is currently assessing the impact of SFAS
No. 128 on the Company's presentation of earnings per share data in future
periods.
 
6.  COMMITMENTS AND CONTINGENCIES:
 
     The Company from time to time is involved in legal actions arising in the
ordinary course of business. With respect to these matters, management believes
that it has adequate legal defenses and/or provided adequate accruals for
related costs such that the ultimate outcome will not have a material adverse
effect on the Company's future financial position.
 
7.  LEGAL PROCEEDINGS:
 
     As of April 9 1998, 23 class action complaints for violations of the
Federal Securities Laws were filed in the United States District Court for the
Middle District of Florida, on behalf of purchasers of the Company's Common
Stock during certain periods in 1997 and 1998. The complaints named as
defendants the Company, Bryan J. Zwan, the Company's Chairman of the Board,
Chief Executive Officer and President, Beth A. Morris, the Company's Vice
President, Finance and Secretary from January, 1995 to July, 1997, Steven H.
Grant, the Company's Vice President, Finance and Chief Financial Officer, and
other current and former corporate officers. The complaints allege that the
Company and certain officers and directors of the Company during the relevant
time period violated Sections 10(b) and 20(a) of the Securities Exchange Act by,
among other things, issuing to the investing public false and misleading
financial statements and press releases concerning the Company's revenues,
income and earnings, which artificially inflated the price of the Company's
Common Stock. The Company believes that it has meritorious defenses to these
lawsuits and intends to defend them vigorously.
 
     On November 5, 1997, Hugh Brian Haney ("Plaintiff") commenced an action in
the United States District Court for the Southern District of Ohio against Bryan
J. Zwan, the Company's Chief Executive Officer, and the Company ("Defendants").
The complaint alleges violations of Section 10(b) of the Securities Exchange Act
and various common law violations by Defendants in connection with Plaintiff's
sale to the Company's predecessor in November 1995, pursuant to a previously
granted option exercisable by Zwan and/or the Company's predecessor, of 4,900
shares of stock in the Company's predecessor, an amount equivalent to 19,215,686
shares of the Company's common stock. The complaint seeks alternative forms of
relief, including, among others, (1) rescission of the sale of the shares
transferred by Plaintiff or (2) damages of not less than $235 million, together
with interest. The Company believes that it has meritorious defenses to this
lawsuit and intends to defend it vigorously.
 
     There can be no assurance, however, that the Company will prevail in these
lawsuits and any unfavorable ruling or judgment against the Company in these
lawsuits could have a material adverse effect on the Company's business,
financial condition and results of operations.
 
     As of April 9, 1998, the Company was not aware of any additional lawsuits
that were pending that could have a material adverse effect on the Company's
business, financial condition and results of operations.
 
                                        6
<PAGE>   9
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
     This report contains certain statements of a forward-looking nature
relating to future events or the future performance of the Company. Prospective
and current investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements as well as the future prospects of the Company generally, such
investors should specifically consider various factors identified in the
Company's Report on Form 10-K for the period ended December 31, 1996, including
the matters set forth therein under the caption "Risk Factors," which could
cause actual results to differ materially from those indicated by such
forward-looking statements. Factors that may affect the Company's results of
operations include but are not limited to customer concentration, product
certifications, dependence on single product and uncertain market acceptance of
planned products, competition, management of growth, mergers, rapid
technological change and dependence on new product introductions, substantial
increase in manufacturing operations and dependence on contract manufacturing
and limited source suppliers, government regulations, dependence on key
personnel, dependence on proprietary technology, and volatility of stock price.
The Company participates in a highly concentrated industry, and has limited
visibility with regard to customer orders and the timing of such orders. The
Company may also encounter difficulty obtaining sufficient supplies to staff and
meet production schedules. As a result, quarter-to-quarter and year-to-year
financial performance is highly dependent upon the timely receipt of orders from
its customers during fiscal periods.
 
OVERVIEW
 
     The Company manufactures and sells Network Information Computers(TM), and
Remote Access Agents(TM) and has other products in design and development. The
Company's products are based on the Company's core software, firmware and
hardware technology which was developed over a five year period. In February
1996, the Company commenced sales of the ASA 312. To date, the Company has not
entered into long-term agreements or blanket purchase orders for the sale of its
products, but generally obtains purchase orders for immediate shipment and other
cancelable purchase commitments. The Company's sales during a particular quarter
are, therefore, highly dependent upon orders placed by customers during the
quarter. Consequently, sales may fluctuate significantly from quarter to quarter
due to the timing and amount of orders from customers, among other factors.
While the Company believes it is properly positioned to garner additional
customers and market share for the ASA 312 and its derivative products, there
can be no assurance the Company will gain further product acceptance or that
additional revenue will materialize from current or future customers.
 
     Gross profit may be affected in the future by the introduction of new
products which generate differing gross margins and by the sales mix during a
given period. The Company plans to pursue Original Equipment Manufacturer (OEM)
relationships with respect to the sale of Remote Access Agents. The Company has
not negotiated any such arrangements but anticipates that its pricing to OEMs
would be less than with respect to direct sales resulting in lower gross margins
in connection with these arrangements. However, sales and marketing expenses are
generally lower in the case of sales to OEMs.
 
     The Company believes that its operating expenses will continue to increase
as a result of a variety of factors including: (i) increased research and
development expenses associated with the completion of the products in
development and the continued enhancement of existing products; and (ii)
increased selling, general and administrative expenses associated with continued
expansion of sales and marketing capabilities, product advertising and
promotion. The Company recognizes research and development expenses when
incurred.
 
RESULTS OF OPERATIONS
 
     The following is a discussion of significant changes in the results of
operations of the Company which occurred in the quarter and six months ended
June 30, 1997 compared to the quarter and six months ended June 30, 1996. The
following tables summarize the approximate changes in selected operating items
and include dollar changes, percentage changes and percent of net sales to
facilitate the discussions that follow.
 
                                        7
<PAGE>   10
 
The tables compare the quarter ended June 30, 1997 to the quarter ended June 30,
1996 and the six months ended June 30, 1997 to the six months ended June 30,
1996, respectively:
 
<TABLE>
<CAPTION>
                                      QUARTER ENDED
                                   -------------------                               PERCENT OF NET
                                                           AMOUNT        PERCENT          SALES
                                   JUNE 30,   JUNE 30,     CHANGE        CHANGE      ---------------
                                     1997       1996     FAV/(UNFAV)   FAV/(UNFAV)   1997      1996
                                   --------   --------   -----------   -----------   -----     -----
                                                        (IN MILLIONS, EXCEPT %)
<S>                                <C>        <C>        <C>           <C>           <C>       <C>
Net sales........................    $2.6       $1.1        $1.5            136%      100%      100%
Cost of goods sold...............     (.8)       (.4)        (.4)          (100)      (31)      (36)
                                     ----       ----        ----                      ---       ---
Gross profit.....................     1.8         .7         1.1            157        69        64
Engineering and development
  expenses.......................     (.9)       (.5)        (.4)           (80)      (35)      (45)
Sales and marketing expenses.....    (1.2)       (.4)        (.8)          (200)      (46)      (36)
General and administrative
  expenses.......................     (.8)       (.2)        (.6)          (300)      (31)      (18)
Other income (expense)...........      .5        (.1)         .6            600        19        (9)
                                     ----       ----        ----                      ---       ---
Net income (loss)................    $(.6)      $(.5)       $(.1)           (20)      (24)%     (44)%
                                     ====       ====        ====                      ===       ===
</TABLE>
 
<TABLE>
<CAPTION>
                                   SIX MONTHS ENDED
                                  -------------------                               PERCENT OF NET
                                                          AMOUNT        PERCENT          SALES
                                  JUNE 30,   JUNE 30,     CHANGE        CHANGE      ---------------
                                    1997       1996     FAV/(UNFAV)   FAV/(UNFAV)   1997      1996
                                  --------   --------   -----------   -----------   -----     -----
                                                       (IN MILLIONS, EXCEPT %)
<S>                               <C>        <C>        <C>           <C>           <C>       <C>
Net sales.......................   $ 4.1      $ 1.3        $2.8            215%      100%      100%
Cost of goods sold..............    (1.4)       (.5)        (.9)          (180)      (34)      (38)
                                   -----      -----        ----                      ---      ----
Gross profit....................     2.7         .8         1.9            238        66        62
Engineering and development
  expenses......................    (1.8)      (1.0)        (.8)           (80)      (44)      (77)
Sales and marketing expenses....    (2.0)       (.5)       (1.5)          (300)      (49)      (38)
General and administrative
  expenses......................    (1.6)       (.5)       (1.1)          (220)      (39)      (38)
Other income (expense)..........      .8        (.4)        1.2            300        20       (31)
                                   -----      -----        ----                      ---      ----
Net income (loss)...............   $(1.9)     $(1.6)       $(.3)           (18)      (46)%    (122)%
                                   =====      =====        ====                      ===      ====
</TABLE>
 
  Sales
 
     Sales for the quarter increased $1.5 million to $2.6 million from $1.1
million in the year ago quarter. Sales to existing customers during the quarter
represented 88% of sales, or $2.3 million as compared to 24% of sales, or $.3
million in the year ago quarter. During the quarter, the Company shipped 76
units in varying configurations of the ASA 312 to a total of 14 customers
(including 4 new customers) at an average selling price ("ASP") of $34,223, as
compared to 33 units to a total of 6 customers (including 5 new customers) at an
ASP of $34,206 in the year ago quarter.
 
     Sales for the six months ended June 30, 1997, increased by $2.8 million to
$4.1 million from $1.3 million in the same period last year. Sales to existing
customers for the period represented 69% of sales, or $2.8 million as compared
to 21% of sales, or $.3 million for the same period last year. During the
period, the Company shipped 117 units in varying configurations at an ASP of
$35,035 compared with 38 units at an ASP of $34,578 for the same period last
year.
 
     The Company believes repeat sales to an existing customer is an important
measure of growing product acceptance in the highly concentrated
telecommunication industry. While there can be no assurance that this
longer-term trend will continue, management believes that new product offerings
including upgrades of existing products offers the Company's existing customers
an opportunity to continue to extend the life of their initial investment in the
Company's products.
 
                                        8
<PAGE>   11
 
  Cost of Goods Sold
 
     Cost of goods sold for the quarter increased by $.4 million to $.8 million
from $.4 million in the year ago quarter.
 
     Cost of goods sold for the six months ended June 30, 1997, increased by $.9
million to $1.4 million from $.5 million in the year ago period.
 
     The primary reasons for the increase in cost of goods sold is the increase
in volume of units produced and the increased infrastructure and manufacturing
costs incurred in support of these efforts. These costs include management,
indirect labor, facility rental, depreciation of equipment, and other operating
expenses. While the overall cost of good sold has increased, the average cost of
goods sold per unit has declined as a result of allocating fixed production
costs over a larger volume of units produced and the component cost reductions
associated with the purchase of larger lot sizes.
 
  Gross Profit
 
     Gross profit for the quarter increased by $1.1 million to $1.8 million from
$.7 million in the year ago quarter. As a percentage of sales, gross margin for
the quarter increased to 69.4% from 64.8%.
 
     Gross profit for the six months ended June 30, 1997, increased by $1.9
million to $2.7 million from $.8 million in the year ago period. As a percentage
of sales, gross margin for the six months ended June 30, 1997 increased to 66.8%
from 60.3%.
 
     The increase in gross profit and gross margin percentage, are related to
the increase in net sales, the allocation of fixed production costs over larger
unit sales volumes, and the purchase of larger lot sizes as previously
discussed.
 
  Engineering and Development
 
     Engineering and development expenses for the quarter increased by $.4
million to $.9 million from $.5 million in the year ago quarter.
 
     Engineering and development expenses for the six months ended June 30,
1997, increased by $.8 million to $1.8 million from $1.0 million in the year ago
period.
 
     The increase in both periods is primarily related to the addition of
engineering, and quality control personnel and the other expenses associated
with the Company's ongoing research and development efforts on products like the
Remote Access Agents, and enhancements to the Company's Network Information
Computers. The Company intends to hire additional personnel and expand the
infrastructure to support these ongoing research and development efforts, and
does not anticipate the rate of growth in dollar terms will subside during the
next several quarters.
 
  Sales and Marketing
 
     Sales and marketing expenses for the quarter increased by $.8 million to
$1.2 million from $.4 million in the year ago quarter.
 
     Sales and marketing expenses for the six months ended June 30, 1997,
increased by $1.5 million to $2.0 million from $.5 million in the year ago
period.
 
     The increase in both periods is related to the addition of personnel for
the Company's direct sales force and marketing functions, an increase in
commissions related to the increase in sales activity, an increase in trade show
appearances, and other customer incentives. The Company intends to hire
additional personnel to support the expansion of the existing sales channels and
the development of additional sales channels for its products, and does not
anticipate the rate of growth in dollar terms or as a percentage of sales will
diminish.
 
                                        9
<PAGE>   12
 
  General and Administrative
 
     General and administrative expenses for the quarter increased by $.6
million to $.8 million from $.2 million in the year ago quarter.
 
     General and administrative expenses for the six months ended June 30, 1997,
increased by $1.1 million to $1.6 million from $.5 million in the year ago
period.
 
     The increase in both periods is due to the expansion of facilities,
personnel, and information systems to support the growth of the Company's
business. The Company believes these expenses generally have a large fixed
component, and anticipates the rate of growth in percentage terms will subside
over the next twelve months.
 
  Other Income or Expense
 
     Other income for the quarter increased by $.6 million to an income of $.5
million from an expense of $.1 million.
 
     Other income for the six months ended June 30, 1997 increased by $1.2
million to an income of $.8 million from an expense of $.4 million.
 
     The increase in both periods primarily relates to interest income generated
from the investment of proceeds from the Company's Initial Public Offering
("IPO").
 
  Net Income or Loss
 
     Net loss for the quarter increased $.1 million to a net loss of $.6 million
or $.02 per share, from a net loss of $.5 million or $.02 per share.
 
     Net loss for the six months ended June 30, 1997 increased $.3 million to a
net loss of $1.9 million or $.07 per share, to net loss of $1.6 million or $.08
per share.
 
     The computation of weighted shares outstanding for the 1997 periods reflect
a higher number of shares outstanding as a result of the completion of the
Company's IPO.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Cash and cash equivalents at June 30, 1997 were approximately $36.2 million
compared to approximately $1.2 million at December 31, 1996. The increase was
due primarily to the receipt of approximately $39.6 million from the completion
of the Company's IPO on February 6, 1997.
 
     As of June 30, 1997, the Company's working capital was approximately $38.3
million. For the six months ended June 30, 1997, capital expenditures were
approximately $1.5 million. Future capital expenditures will depend on several
factors including timing of introductions of new products and enhancements to
existing products as well as continued product development efforts. The Company
believes that its available funds and anticipated cash flows from its operations
will satisfy the Company's projected working capital and capital expenditure
requirements for at least the next 12 months.
 
                                       10
<PAGE>   13
 
                           PART II  OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS:
 
     As of April 9, 1998, 23 class action complaints for violations of the
Federal Securities Laws were filed in the United States District Court for the
Middle District of Florida, on behalf of purchasers of the Company's Common
Stock during certain periods in 1997 and 1998. The complaints named as
defendants the Company, Bryan J. Zwan, the Company's Chairman of the Board,
Chief Executive Officer and President, Beth A. Morris, the Company's Vice
President, Finance and Secretary from January, 1995 to July, 1997, Steven H.
Grant, the Company's Vice President, Finance and Chief Executive Officer, and
other current and former corporate officers. The complaints allege that the
Company and certain officers and directors of the Company during the relevant
time period violated Sections 10(b) and 20(a) of the Securities Exchange Act by,
among other things, issuing to the investing public false and misleading
financial statements and press releases concerning the Company's revenues,
income and earnings, which artificially inflated the price of the Company's
Common Stock. The Company believes that it has meritorious defenses to these
lawsuits and intends to defend them vigorously.
 
     On November 5, 1997, Hugh Brian Haney ("Plaintiff") commenced an action in
the United States District Court for the Southern District of Ohio against Bryan
J. Zwan, the Company's Chief Executive Officer, and the Company ("Defendants").
The complaint alleges violations of Section 10(b) of the Securities Exchange Act
and various common law violations by Defendants in connection with Plaintiff's
sale to the Company's predecessor in November 1995, pursuant to a previously
granted option exercisable by Zwan and/or the Company's predecessor, of 4,900
shares of stock in the Company's predecessor, an amount equivalent to 19,215,686
shares of the Company's common stock. The complaint seeks alternative forms of
relief, including, among others, (1) rescission of the sale of the shares
transferred by Plaintiff or (2) damages of not less than $235 million, together
with interest. The Company believes that it has meritorious defenses to this
lawsuit and intends to defend it vigorously.
 
     There can be no assurance, however, that the Company will prevail in these
lawsuits and any unfavorable ruling or judgment against the Company in these
lawsuits could have a material adverse effect on the Company's business,
financial condition and results of operations.
 
     As of April 9, 1998, the Company was not aware of any additional lawsuits
that were pending that could have a material adverse effect on the Company's
business, financial condition and results of operations.
 
ITEM 6.  EXHIBIT AND REPORTS ON FORM 8-K
 
     (a) Exhibit
 
<TABLE>
<CAPTION>
  EXHIBIT                           DESCRIPTION
  -------                           -----------
  <C>       <S>
    27      Financial Data Schedule (for SEC use only).
</TABLE>
 
     (b) Reports on Form 8-K
 
     No reports on Form 8-K were filed by Digital Lightwave during the quarter
ended June 30, 1997.
 
                                       11
<PAGE>   14
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
 
                                                  DIGITAL LIGHTWAVE, INC.
 
Date: April 15, 1998                      By:       /s/ BRYAN J. ZWAN
                                            ------------------------------------
                                                       Bryan J. Zwan
                                             Chairman, Chief Executive Officer
                                                        and President
                                               (Principal Executive Officer)
 
Date: April 15, 1998                      By:      /s/ STEVEN H. GRANT
                                            ------------------------------------
                                                      Steven H. Grant
                                            Executive Vice President -- Finance,
                                                Chief Financial Officer and
                                                          Secretary
                                            (Principal Financial and Accounting
                                                           Officer)
 
                                       12