UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                          ___________________________

                                   FORM 10-Q
(MARK ONE)

{checked-box}QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
       EXCHANGE ACT OF 1934

               FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002, OR

{square}TRANSITION  REPORT  PURSUANT  TO  SECTION 13 OR 15(D) OF THE SECURITIES
       EXCHANGE ACT OF 1934

        FOR THE TRANSITION PERIOD FROM _____________ TO _____________ .

                                   000-21669
                           (Commission File Number)

                          ___________________________

                            DIGITAL LIGHTWAVE, INC.
            (Exact name of Registrant as specified in its charter)

                          ___________________________

           DELAWARE                                   95-4313013
  (State or other jurisdiction of )        (I.R.S. Employer Identification No.)
    incorporation or organization)

            15550 LIGHTWAVE DRIVE                                   33760
             CLEARWATER, FLORIDA                                 (Zip Code)
  (Address of principal executive offices)

                                (727) 442-6677
             (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  {checked-box}  NO  {square}

       The number of shares outstanding of the Registrant's Common  Stock as of
May 6, 2002 was 31,355,579.



                                       #

<PAGE>

                                   DIGITAL LIGHTWAVE, INC.

                                QUARTERLY REPORT ON FORM 10-Q
                             FOR THE PERIOD ENDED MARCH 31, 2002

                                            INDEX


                                                                           PAGE

                        PART I.  FINANCIAL INFORMATION

Item 1.     Consolidated Condensed Financial Statements:

            Consolidated Condensed Balance Sheets--March 31, 2002 (Unaudited)
            and December 31, 2001............................................1

            Consolidated Condensed Statements of Operations (Unaudited) -
            Three Months Ended March 31, 2002 and March 31, 2001.............2

            Consolidated Condensed Statements of Cash Flows  (Unaudited) --
            Three Months Ended March 31, 2002 and March 31, 2001.............3

            Notes to Consolidated Condensed Financial Statements (Unaudited).4

Item 2.     Management's Discussion and Analysis of Financial Condition and
            Results of Operations............................................7

Item 3.     Quantitative and Qualitative Disclosures About Market Risk.......13

                          PART II.  OTHER INFORMATION

Item 1.     Legal Proceedings................................................14

Item 4.     Submission of Matters to a Vote of Security Holders..............14

Item 5.     Other Information ...............................................15

Item 6.     Exhibits and Reports on Form 8-K.................................15

SIGNATURES  .................................................................16

EXHIBIT INDEX................................................................17


                                       #

<PAGE>
      PART I

                              FINANCIAL INFORMATION

ITEM 1.    CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                             DIGITAL LIGHTWAVE, INC.

                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                        MARCH 31,            DECEMBER 31,
<S> <C>          <C>                                                            <C> <C>                   <C> <C>
                                                                                          2002                   2001
                                                                                     --------------         --------------
                                                                                       (UNAUDITED)
                                                    ASSETS
Current assets:
    Cash and cash equivalents                                                         $      45,286          $      51,044
    Accounts receivable, less allowance of $4,202 and $5,900, respectively                    8,158                  7,638
    Inventories, net                                                                         16,420                 16,565
    Prepaid expenses and other current assets                                                 2,736                    895
                                                                                      -------------          -------------
                 Total current assets                                                        72,600                 76,142
Property and equipment, net                                                                   9,272                  9,917
Other assets                                                                                    203                    203
                                                                                      -------------          -------------
                 Total assets                                                         $      82,075          $      86,262
                                                                                      =============          =============
                                            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable and accrued liabilities                                          $       7,901          $       7,287
    Accrued litigation charge                                                                 4,100                  4,100
    Notes payable                                                                               541                     --
                                                                                      -------------          -------------
                 Total current liabilities                                                   12,542                 11,387
    Long-term liabilities                                                                       749                    809
                                                                                      -------------          -------------
                 Total liabilities                                                           13,291                 12,196
                                                                                      -------------          -------------
Stockholders' equity:
    Preferred stock, $.0001 par value; authorized 20,000,000
                 shares; no shares issued or outstanding                                         --                     --
    Common stock, $.0001 par value; authorized 200,000,000
                 shares; issued and outstanding 31,355,579 and
                 31,269,723 shares in 2002 and 2001, respectively                                 3                      3
    Additional paid-in capital                                                               80,776                 80,511
    Accumulated deficit                                                                     (11,995)                (6,448)
                                                                                      -------------          -------------
                  Total stockholders' equity                                                 68,784                 74,066
                                                                                      -------------          -------------
                 Total liabilities and stockholders' equity                           $      82,075          $      86,262
                                                                                      =============          =============
</TABLE>


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


<PAGE>

                            DIGITAL LIGHTWAVE, INC.

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                 (IN THOUSANDS, EXCEPT SHARE AND PER-SHARE DATA)


<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED
<S>  <C>                    <C>                               <C>     <C>                 <C>
                                                                                     MARCH 31,
                                                                               --------------------
                                                                             2002                2001
                                                                         ------------        ------------
Net sales                                                                $      6,299        $     34,418
Cost of goods sold                                                              3,543              10,499
                                                                         ------------        ------------
     Gross profit                                                               2,756              23,919
                                                                         ------------        ------------
Operating expenses:
     Engineering and development                                                3,332               3,638
     Sales and marketing                                                        2,458               5,025
     General and administrative                                                 1,387               1,560
     Restructuring charges                                                      1,300                   -
                                                                         ------------        ------------
                            Total operating expenses                            8,477              10,223
                                                                         ------------        ------------
Operating income (loss)                                                        (5,721)             13,696
Other income, net                                                                 174                 410
                                                                         ------------        ------------
Income (loss) before income taxes                                              (5,547)             14,106
Provision for income taxes                                                          -               1,127
                                                                         ------------        ------------
                            Net income (loss)                            $     (5,547)       $     12,979
                                                                         ============        ============
Per share of common stock:
     Basic net income (loss) per share                                   $      (0.18)       $       0.43
                                                                         ============        ============
     Diluted net income (loss) per share                                 $      (0.18)       $       0.40
                                                                         ============        ============
     Weighted average common shares outstanding                            31,308,798          30,530,827
                                                                         ============        ============
     Weighted average common and common equivalent shares outstanding      31,308,798          32,204,030
                                                                         ============        ============
</TABLE>











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


<PAGE>
                            DIGITAL LIGHTWAVE, INC.

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
<S> <C>    <C>                                                  <C> <C>                <C>
                                                                               MARCH 31,
                                                                         --------------------
                                                                        2002              2001
Cash flows from operating activities:                                ----------        ----------
    Net income (loss)                                                $   (5,547)       $   12,979
    Adjustments to reconcile net income to cash provided (used)
           by operating activities:
           Depreciation and amortization                                    885               779
           Provision for uncollectible accounts                              --               100
           Income tax benefit from stock options                             --             1,127
           Restructuring charges                                          1,300                --
    Changes in operating assets and liabilities:
           Increase in accounts receivable                                 (519)           (1,859)
           Decrease (increase) in inventories                               163            (3,289)
           Increase in prepaid expenses and other assets                 (1,864)             (503)
           Decrease in accounts payable and accrued expenses               (582)           (1,062)
                                                                     ----------        ----------
           Net cash provided (used) by operating activities              (6,164)            8,272
                                                                     ----------        ----------
Cash flows from investing activities:
    Purchases of property and equipment                                    (245)             (169)
    Increase in notes receivable                                             --              (200)
                                                                     ----------        ----------
           Net cash used  by investing activities                          (245)             (369)
                                                                     ----------        ----------
Cash flows from financing activities:
    Proceeds from notes payable                                             811                --
    Principal payments on notes payable                                    (270)               --
    Proceeds from sale of common stock                                      265               561
    Payments received from lease receivables                                 --                23
    Principal payments on capital lease obligations                        (155)             (145)
                                                                     ----------        ----------
           Net cash provided by financing activities                        651               439
                                                                     ----------        ----------
Net (decrease) increase in cash and cash equivalents                     (5,758)            8,342
Cash and cash equivalents at beginning of period                         51,044            30,481
                                                                     ----------        ----------
Cash and cash equivalents at end of period                           $   45,286        $   38,823
                                                                     ==========        ==========
Other supplemental disclosures:
    Cash paid for interest                                           $        9        $       18
</TABLE>




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


<PAGE>

                             DIGITAL LIGHTWAVE, INC.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


1.  BASIS OF PRESENTATION

   The  accompanying  unaudited consolidated condensed financial statements  of
Digital Lightwave, Inc.  and its subsidiary (the "Company", "Digital Lightwave"
," "us," "we," "our," etc.)  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  month
period ended March 31, 2002 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, 2001.


2.  INVENTORIES

   Inventories  at  March 31, 2002 and December  31,  2001  are  summarized  as
follows:


<TABLE>
<CAPTION>
                                                 MARCH 31,        DECEMBER 31,
<S>                     <C>                 <C> <C>              <C>
                                                   2002               2001
                                                ----------         ----------
                                                        (IN THOUSANDS)
Raw materials                                   $    8,512        $     9,341
Work-in-process                                      5,765              6,417
Finished goods                                       5,976              4,640
Provision for excess and obsolete inventory         (3,833)            (3,833)
                                                ----------         ----------
                                                $   16,420         $   16,565
                                                ==========         ==========
</TABLE>


   In December 2001,  the Company signed a manufacturing service agreement with
Jabil Circuit, Inc. ("Jabil"),  a  leading provider of technology manufacturing
services with a customer base of industry-leading  companies.   Under the terms
of   the  agreement,  Jabil  will  serve  as  the  Company's  primary  contract
manufacturer for the Company's circuit board and product assembly and will also
provide  engineering  design  services.   Jabil's cumulative purchases from the
Company have been approximately $8.3 million  through  March  31,  2002.  As of
March 31, 2002, the Company was committed to purchase $8.6 million of  finished
goods  from  Jabil  in future periods.  Under the terms of the agreement, Jabil
will continue to purchase  the  Company's  existing inventory to fulfill orders
until the Company's present inventory is depleted to safety stock levels.

3.  COMPUTATION OF NET INCOME (LOSS) PER SHARE

   Basic income per share is based on the weighted average number of common
shares outstanding during the periods presented. For the three months ended
March 31, 2002, diluted loss per share, which includes the effect of
incremental shares from common stock equivalents using the treasury stock
method, is not included in the calculation of net loss per share as the
inclusion of such equivalents would be anti-dilutive. The table below shows the
calculation  of  basic  weighted  average common  shares  outstanding  and  the
incremental number of shares arising  from  common  stock equivalents under the
treasury stock method:


#


<PAGE>

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
<S> <C>                <C>                             <C> <C>              <C> <C>
                                                                     MARCH 31,
                                                         --------------------------------
                                                             2002              2001
                                                          -----------       -----------
Basic:
    Weighted average common shares outstanding             31,308,798        30,530,827
    Total basic                                            31,308,798        30,530,827
Diluted:
    Incremental shares for common stock equivalents                --         1,673,203
                       Total dilutive                      31,308,798        32,204,030
</TABLE>


4.  LEGAL PROCEEDINGS

   On November 23, 1999, Seth P. Joseph, a former officer  and  director of the
Company  commenced arbitration proceedings against the Company alleging  breach
of his employment  agreement  and  stock  option  agreements,  violation of the
Florida  Whistleblower  statute and breach of an indemnification agreement  and
the Company bylaws. As relief,  Mr.  Joseph  sought  $500,000, attorneys' fees,
interest  and  stock options for 656,666 shares of the Company's  common  stock
exercisable at a  price of $5.25 per share. The Company filed an answer denying
Mr.  Joseph's  allegations  and  alleging  multiple  affirmative  defenses  and
counterclaims. The Company's counterclaims against Mr. Joseph seek repayment of
loans totaling approximately  $113,000  plus interest.  Mr. Joseph subsequently
dismissed without prejudice all of his claims  other  than  his claim under the
Whistleblower  Statute.  The arbitration hearing on Mr. Joseph's  Whistleblower
claim and the Company's counterclaims concluded on October 5, 2001. The parties
submitted proposed findings  to  the arbitrator on October 17, 2001. As part of
his proposed findings, Mr. Joseph sought an award of $48 million and attorneys'
fees  and  costs.   On  November 9, 2001,  the  Company  was  notified  of  the
arbitrator's decision that  awarded  Mr.  Joseph  the sum of approximately $3.7
million and attorneys' fees and costs.  On December  20,  2001,  the arbitrator
issued  a  corrected  award and awarded Mr. Joseph the sum of $3.9 million  and
attorneys' fees and costs  in  amounts  yet  to  be determined.  On January 23,
2002, Mr. Joseph filed a motion seeking the award of $1.1 million in attorneys'
fees, costs and interest thereon.

   On December 26, 2001, the Company filed a petition  to  vacate or modify the
arbitration award in the Circuit Court of the Sixth Judicial  Circuit, Pinellas
County,  Florida,  in  an action entitled Digital Lightwave, Inc.  v.  Seth  P.
Joseph, Case No. 01-9010C1-21.   The  Company  filed  an  amended  petition  on
December  26,  2001,  following the corrected arbitration award.  Subsequently,
Mr.  Joseph  filed a cross-motion  to  confirm  the  arbitration  award.   Oral
argument on the  Company's  petition and Mr. Joseph's cross-motion was heard by
the Court on February 27, 2002.   On  March  26,  2002,  the  Court  denied the
Company's petition to vacate the arbitration award, granted Mr. Joseph's cross-
motion  to confirm the award, and entered a judgment in favor of Mr. Joseph  in
the amount  of  $4.0  million including interest.  The Company is appealing the
decision and judgment of  the  Circuit  Court.   On  April  4, 2002 the Company
posted a civil supersedeas bond in the amount of $4.8 million, which represents
the amount of the judgment plus two times the estimated interest,  to  secure a
stay of enforcement of the Circuit Court judgment pending the Company's appeal.
The Company has recorded an accrual of $4.1 million related to this arbitration
as  of  March  31,  2002.   The  Company believes its appeal is meritorious and
intends to pursue the appeal vigorously.

   In January 2002, an employee terminated  as  part  of  the Company's October
2001  restructuring initiatives, filed a lawsuit claiming the  Company  wrongly
discharged  the  employee and has withheld payments due the employee.  The suit
does not seek a specified  amount  of  damages,  but  does  claim that the 2001
compensation  plan  presented to the employee in October 2001 unfairly  lowered
the employee's salary.  The  plaintiff  seeks  attorneys'  fees,  interest  and
punitive  damages.   The  Company has responded to the complaint and denied the
substantive allegations therein.  The  Company  intends to defend against these
claims vigorously.

   In  March  2002  a  former  employee filed a lawsuit  claiming  the  Company
breached the employee's severance  agreement  by  paying the employee less than
the agreement provided.  The suit seeks damages in  excess  of  $100,000.   The
Company  has  responded to the complaint and denied the substantive allegations
therein. The Company intends to vigorously defend the action.

   The Company  from  time  to  time  is involved in various other lawsuits and
actions  by third parties arising in the  ordinary  course  of  business.   The
Company  is   not  aware  of  any  additional  pending  litigation,  claims  or
assessments that  could  have  a  material  adverse  effect  on  the  Company's
business, financial condition and results of operations.

5.  RESTRUCTURING CHARGES

   In  October  2001, the Company's board of directors approved a reduction  in
force of 38 employees  and  consultants  across  all departments and instituted
temporary executive salary reductions of up to 20%.   The  overall objective of
the  initiative  was  to  lower  operating  costs and improve efficiency.   All
affected employees were terminated in October  2001  and  given severance based
upon years of service with the Company.  The Company recorded  a  restructuring
charge of $500,000 in 2001 related to this cost reduction program.   The  costs
included in a restructuring charge for severance payments to employees included
in  the  reduction  in  force,  legal  costs associated with the cost reduction
program  and remaining lease liabilities  on  the  Company's  facility  in  New
Jersey.  In  January  2002,  the  board  of  directors approved additional cost
reduction initiatives aimed at further reducing operating costs. These included
a second reduction in force of 46 employees and contractors and the outsourcing
of manufacturing and production.  All affected  employees  were  terminated  in
January  2002 and given severance based upon years of service with the Company.
The Company  recorded  a  restructuring  charge  of  $1.3  million in the first
quarter of 2002.

  The costs associated with both of these actions are expected  to  be  paid by
January  2003.   Activity associated with the restructuring charges during  the
quarter ended March 31, 2002 was as follows:

<TABLE>
<CAPTION>
                         	Balance          Additions      Payments/    Balance at March
                              at December 31,                  Reductions       31, 2002
                                 2001
                              ---------------    ---------     ----------    ----------------
<S><C>                          <C> <C> <C>              <C> <C>                  <C> <C>
                                                         (in thousands)
Severance                      $    79          $    1,266      $   (782)        $    563
Legal and other expenses            87                  34            (8)             113
Lease payments                     118                  --           (32)              86
                               -------          ----------      ---------        --------
                               $   284          $    1,300      $   (822)        $    762
                               =======          ==========      =========        ========
</TABLE>

6.  COMMITMENTS

   At March 31, 2002, the Company had outstanding non-cancelable purchase order
commitments to purchase  certain  inventory  items  totaling approximately $8.8
million.   The  majority  of the quantities under order  are  deliverable  upon
demand by the Company or within  thirty (30) days upon written notice of either
party.

7.  SUBSEQUENT EVENTS

   In April 2002, the Company entered  into  a  Revolving  Credit  and Security
Agreement  ("the  Agreement")  with  Wachovia Bank.  The terms of the Agreement
provide the Company with a $27.5 million  line  of  credit  at  LIBOR plus 0.7%
collateralized by the Company's cash and cash equivalents.  An availability fee
of  0.10%  per  annum  is  payable  quarterly  based  on  the Average Available
Principal  Balance  (as defined in the Agreement) for such three  months.   The
Agreement has an initial  term  of  three years.  Approximately $2.3 million of
the $27.5 million available under the  Agreement  collateralizes  a  letter  of
credit  required  by a lease for the Company's office space.  The Company plans
to use the facility  for  short-term  working  capital  and  general  corporate
purposes,  including  potential  acquisitions  of complementary businesses  and
technologies. The Company's previous line of credit with Congress Financial was
terminated  in  April  2002  as  part  of  this transaction.    There  were  no
borrowings under the new or previous line of credit at March 31, 2002.

  In April 2002, an officer of the Company borrowed  $175,000 from the Company.
This note accrues interest at 8.0% with the principal  sum and accrued interest
thereon payable on demand or,  if  earlier, from the proceeds  of  any  sale of
the borrower's stock holdings or on the date  of  termination of the borrower's
employment  with  the  Company.  This note is collateralized by  the borrower's
stock holdings in the Company, future cash bonuses which may become payable and
a second lien on the officer's residence.

  On  April  4,  2002  the Company posted a $4.8 million civil supersedeas bond
with the Circuit Court of  the  Sixth Judicial District in and for the State of
Florida.  The purpose of the bond  was  to secure a stay of the Circuit Court's
judgment pending the Company's appeal of  the Court decision in the Seth Joseph
arbitration more fully described in Note 4  -  Legal  Proceedings.    The  bond
amount  represents  judgment award plus two times the estimated interest.  This
allows the Company to continue its appeal of the Seth Joseph arbitration award.
The Company believes  its  appeal is meritorious and plans to pursue the appeal
vigorously.
#


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

FORWARD LOOKING STATEMENTS

       The following discussion of our financial condition and results of
operations contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934.  These statements relate to future events or our future financial
performance.  In some cases, you can identify forward-looking statements by
terminology such as may, will, should, expect, plan, anticipate, believe,
estimate, predict, potential or continue, the negative of terms like these or
other comparable terminology.  These statements are only predictions.  These
statements involve known and unknown risks and uncertainties and other factors
that may cause actual events or results to differ materially. In evaluating
these statements, you should specifically consider various risks and
uncertainties, including fluctuations in operating results, changes in the
United States and worldwide economy and fluctuations in capital expenditures
within the telecommunications industry, our dependence on a limited number of
products and uncertainties of the market for our current and planned products,
technological change, our dependence on growth of the Internet, competition,
our dependence on a limited number of major customers, our dependence on
contract manufacturers and suppliers, our products may not continue to meet
changing regulatory and industry standards, our ability to achieve sustained
operating profitability, our dependence on key personnel, the significant
influence of our principal stockholder,  our dependence on proprietary
technology, the volatility of our market price, the sale of a significant
number of our shares pursuant to future sales contracts could depress the price
of our stock, the effect that anti-takeover provisions have on the  price of
our common stock and past and future litigation risk, as outlined under the
caption "Factors that May Affect Future Results" set forth at the end of Item 1
in our Annual Report filed on Form 10-K and such other risks and uncertainties
contained from time to time in our other filings with the SEC.  All forward-
looking statements included in this document are based on information available
to us on the date of filing, and we assume no obligation to update any such
forward-looking statements.  We caution investors that our business and
financial performance are subject to substantial risks and uncertainties.


OVERVIEW

  Digital  Lightwave,  Inc.  provides  the  global  fiber-optic  communications
industry  with products and technology  used  to  develop,  install,  maintain,
monitor and  manage  fiber  optic-based  networks.   Telecommunications service
providers and equipment manufacturers deploy the Company's  products to provide
quality   assurance   and  ensure  optimum  performance  of  advanced   optical
communications networks and network equipment.  The Company's products are sold
worldwide  to  leading  and   emerging  telecommunications  service  providers,
telecommunications equipment manufacturers,  equipment  leasing  companies  and
international distributors.

   Fiber  optics  deliver  increased  network bandwidth for the transmission of
voice,  video,  audio,  and  data traffic over  public  and  private  networks,
including the Internet.  The Company's  products  provide  the  capabilities to
cost-effectively  deploy and manage fiber-optic networks to address  increasing
demand for bandwidth.   While  the  technology  of optical networking is highly
advanced,  the  Company's products are used to verify  that  telecommunications
products  and  systems   function  and  perform  properly.   Specific  customer
applications of the Company's diagnostic equipment include the qualification of
products during manufacturing,  the  verification  of  service  during  network
installation and the monitoring and maintenance of deployed networks.

   The  Company's  two  product lines are Network Information Computers ("NIC")
and Network Access Agents  ("NAA").  Network Information Computers are portable
instruments for the installation  and  maintenance  testing  of advanced, high-
speed  networks  and  transmission equipment.  The NIC product family  provides
diagnostic capabilities  for testing the performance of both optical and legacy
electrical networks with an  array of communications standards and transmission
rates.  NAAs are unattended, software-controlled,  performance  monitoring  and
diagnostic  systems  permanently installed within optical-based networks.  NAAs
embed the capabilities  of  our portable Network Information Computers within a
customer's  network  infrastructure,   allowing   centralized   remote  network
management.

   The  Company's  portable  NICs and network-embedded NAAs are software-based,
modular products that combine  a  multitude  of  test  functions  in  a  single
integrated solution, including SONET/SDH, T-carrier/PDH, ATM, and POS analysis.
The recent migration of these products to next-generation platforms has enabled
the accelerated introduction of new modules and product line enhancements. As a
result,  customers utilizing these products are able to enjoy the advanced  and
feature-rich  functionality provided by these new enhancements while protecting
their  original   investment.   These   expanded   diagnostic   and  management
capabilities  are  designed for communications service providers and  equipment
manufacturers, enabling  them  to deploy advanced solutions to markets of their
current focus -- including both  metropolitan  and  long-haul  Dense Wavelength
Division Multiplexing (DWDM) and Internet Protocol (IP) networks.


   During  the  first  quarter  of  2002,  the  Company  announced  significant
enhancements to its NIC and NAA product lines. These enhancements include:

      * A  Gigabit  Ethernet  (GigE)  Module comprised of two fully independent
        ports configurable for LX (single-mode  fiber,  1310  nm) or SX (multi-
        mode  fiber,  850  nm) gigabit network topologies. This module  enables
        packet-level testing  as well as the more traditional bit-error testing
        on GigE traffic. With the  integration  of the GigE module into the NIC
        or NAA, network providers can now test their high-speed optical network
        and IP traffic with a single platform solution.

      * An  eight-port, comprehensive 10-Gbps solution  for  ultra-high-density
        optical  network test and turn-up. This new functionality increases the
        port density  to  up  to  eight channels in a single portable NIC or to
        over  16  channels  in an NAA.  This  expanded  port  capacity  greatly
        decreases  turn-up  time   and   significantly   lowers   the  cost  of
        provisioning high-speed networks.


      * An Optical Spectrum Analyzer (OSA) module with both C & L band (1525 nm
        to  1603  nm),  which  provides  optical  spectrum measurements and  an
        enhanced graphical touch-screen interface,  including  zoom, auto-scan,
        and snapshot-graphic save functionality. When this module is integrated
        into  a NIC or NAA, network technicians can complete a full  complement
        of optical  physical  measurements,  as well as perform a comprehensive
        bit-error-rate analysis with a single solution.


      * An innovative Element Management System  (EMS)  for  the integrated NAA
        platform, which enables concurrent management of multiple NAAs within a
        network. This new Java(TM)-based EMS is a multi-user solution  offering
        remote  dial-in,  network-wide configuration control, test access,  and
        security to protect  and  manage test results. The new EMS was designed
        with an intuitive graphical interface for easy system configuration and
        testing.


   The new modules and add-ons are  expected  to  be generally available in the
second quarter of 2002.


   The Company's net sales are generated from sales  of  its  products  less an
estimate  for  customer  returns.   We  expect  that  the average selling price
("ASP")  of  our  NIC and NAA products will fluctuate based  on  a  variety  of
factors,  including   product  configuration,  potential  volume  discounts  to
customers, the timing of  new  product  introductions  and enhancements and the
introduction of competitive products.  Because the cost  of goods sold tends to
remain relatively stable for any given product, fluctuations  in  the  ASP  may
have a material adverse effect on our business, financial condition and results
of operations.

   The  Company  primarily  sells  its products through a direct sales force to
telecommunications service providers  and  network equipment manufacturers. The
Company  sells  to  international  markets  through  international  distributor
channels with some direct sales and sales support.   Sales of our products have
tended to be concentrated with a few major customers and  we  expect sales will
continue to be concentrated with a few major customers in the future.   For the
three  months  ended  March  31,  2002  our  largest  customer,  Test Equipment
Remarketers, accounted for 18% of total sales.  No other customer accounted for
more than 10%.

   The  Company  has not entered into long-term agreements or blanket  purchase
orders for the sale  of  its products. It generally obtains purchase orders for
immediate shipment. The Company  does  not  expect to carry substantial backlog
from quarter to quarter in the future. Our sales  during  a  particular quarter
are highly dependent upon orders placed by customers during that quarter.  Most
of our operating expenses are fixed and cannot be easily reduced in response to
decreased   revenues.  Variations  in  the  timing  of  revenues  could   cause
significant variations  in  results  of  operations from quarter to quarter and
result in continuing quarterly losses. The deferral of any large order from one
quarter to another would negatively affect  the  results  of operations for the
earlier  quarter.   The  Company  must  obtain orders during each  quarter  for
shipment in that quarter to achieve revenue and profit objectives.

   Reduced customer capital expenditures  and  the  overall  economic  weakness
caused the Company to incur net operating losses beginning in the third quarter
of  2001.   In October 2001 and January 2002, the Company took certain measures
to reduce its  future  operating costs.  These measures included a reduction in
force,  pay cuts for management  and  other  expense  reduction  actions.   The
Company can  give  no  assurance  as  to  whether  its  revenues will return to
previous levels or when it will return to profitability.

#


<PAGE>
BUSINESS OUTLOOK

   Prior to 2001, we had experienced sequential growth over a five-year period.
This growth was attributable primarily to the rapid expansion  and  substantial
installation  of  fiber  optic  networks fueled by an unprecedented demand  for
bandwidth  to  accommodate  exponentially   increasing   Internet  traffic.  We
participated in that growth as a leading supplier of products  that are used in
the  installation,  maintenance  and  management  of  fiber optic communication
networks.

   During 2001, our industry experienced a dramatic economic downturn that was
brought on by a significant decrease in network build-outs and capital spending
by the telecommunications carriers and equipment manufacturers.  Our customers'
declining business resulted in a major decrease in sales of our products.  We
do not anticipate a near-term recovery of the fiber optic test equipment market
and do not expect the overall capital spending by telecommunication carriers
and equipment factors will increase during 2002.

   In  January  2002,  we  announced a program for rescaling  our  business  in
response to the current market  environment.  Specific actions taken as part of
our plan include:

   Reducing Cost.  We have taken  immediate  steps during the last two quarters
of 2001 and in January of 2002 to reduce costs.   These  initiatives included a
reduction  in  workforce  and expenses that we expect will reduce  expenses  by
approximately $14-16 million  on  an  annualized  basis beginning in the second
quarter of 2002.  With the successful migration of our current product lines to
next-generation platforms, we began outsourcing manufacturing  activities  with
Jabil  Circuit,  Inc.  in  January  of  2002.  We expect this to further reduce
operating  expenses  associated  with  manufacturing  overhead  and  lower  the
carrying  risks  of inventory during economically  driven  shifts  in  customer
demand.

   Growing Market  Share.  We are focused on maintaining market leadership with
our  product  lines.    We   have  evaluated  our  sales  efforts  to  identify
opportunities where our account  presence  can  be  improved and are working to
exploit  those  opportunities.  We expect new applications  for  our  installed
product base to be realized with  use  of new modular add-ons and enhancements.
We are expanding our distribution channels to specific global markets.

   Accelerating Product Development.  We  are  escalating  our efforts to bring
products currently under development to market faster.  We are concentrating on
the  products  and  technologies  that  we  believe are most important  to  our
customers.  We plan to introduce enhancements  to  our  product  lines  to meet
growing international needs and global high-speed data service requirements.

   Expanding  into  Additional  Telecommunications Markets.  We are identifying
and pursuing specific telecommunication  market segments, both domestically and
internationally, that we believe will be synergistic  with our current business
and create opportunities for growth.

   We believe that the initiatives outlined will allow  us  to meet our current
customer needs, develop new opportunities and position the Company for a market
recovery.


#


<PAGE>
RESULTS OF OPERATIONS

   The  following  is  a  discussion of significant changes in the  results  of
operations of the Company which  occurred  in  the quarter ended March 31, 2002
compared to the quarter ended March 31, 2001. The  following  table  summarizes
the  approximate  changes  in  selected  operating  items  and  includes dollar
changes,  percentage  changes  and  percent  of  net  sales  to facilitate  the
discussions that follow (in millions).

<TABLE>
<CAPTION>
                                                                      AMOUNT      PERCENT
<S>    <C>                           <C> <C>           <C> <C>        <C> <C>      <C> <C>       <C> <C>          <C> <C>       <C>
                                          QUARTER ENDED               CHANGE       CHANGE                 PERCENT OF
                                         ---------------             --------     --------                NET SALES
                                   MARCH 31,          MARCH 31,        FAV/         FAV/               ---------------
                                      2002              2001          (UNFAV)     (UNFAV)           2002             2001
                                   ----------        ----------     ----------   ----------      ----------       ----------
Net sales                          $      6.3        $     34.4          (28.1)          82 %           100 %            100 %

Cost of goods sold                       (3.5)            (10.5)           7.0           66              56               30
                                   ----------        ----------     ----------                   ----------       ----------

Gross profit                              2.8              23.9          (21.1)         (88)             44               70

Engineering and development              (3.3)             (3.6)           0.3            8              53               11

Sales and marketing                      (2.5)             (5.0)           2.5           51              39               15

General and administrative               (1.4)             (1.6)           0.2           11              22                4

Restructuring charges                    (1.3)               --           (1.3)        (100)             21               --
                                   ----------        ----------     ----------                   ----------       ----------


   Total operating expenses              (8.5)            (10.2)           1.7           17             135               30
                                   ----------        ----------     ----------                   ----------       ----------

Operating income (loss)                  (5.7)             13.7          (19.4)        (142)             91               40

Other income, net                         0.2               0.4           (0.2)         (58)              3                1
                                   ----------        ----------     ----------                   ----------       ----------

Income (loss) before income
taxes                                    (5.5)             14.1          (19.6)        (139)             88               41


Provision for income taxes                 --              (1.1)           1.1          100              --               (3)
                                   ----------        ----------     ----------                   ----------        ----------

Net income (loss)                  $     (5.5)       $     13.0          (18.5) %      (143)             88 %              38 %
                                   ==========        ==========     ==========                   ==========        ==========
</TABLE>


Net Sales

   Net sales for the quarter ended March 31, 2002 decreased $28.1  million,  or
82%,  to  $6.3 million from $34.4 million for the quarter ended March 31, 2001.
Sales to existing customers during the quarter ended March 31, 2002 represented
79% of sales, or $5.0 million as compared to 97% of sales, or $33.2 million for
the quarter  ended  March  31,  2001.   During  the  first quarter of 2002, the
Company shipped 134 total units (including 3 NAA's) at  an  average sales price
("ASP") of $45,498, as compared to 395 total units (including  15  NAA's) at an
ASP of $85,087 during the first quarter of 2001.  The decrease in ASP (which is
shown  gross  of  the estimate for product returns) relates to lower competitor
pricing   caused  by  a   significant   decrease   in   capital   spending   by
telecommunications  carriers  and equipment manufacturers.  International sales
for the quarter ended March 31, 2002, as a percentage of total sales, increased
28% to 43% of total sales as compared  to  15%  of  total sales for the quarter
ended March 31, 2001.

Cost of Goods Sold

   Cost of goods sold for the quarter ended March 31,  2002  decreased  by $7.0
million  to  $3.5  million  as  compared to $10.5 million for the quarter ended
March 31, 2001.  The decrease in  cost  of goods sold was due to a reduction in
volume of units sold offset by a $0.5 million charge related to the outsourcing
of manufacturing operations.

Gross Profit

   Gross profit for the quarter ended March 31, 2002 decreased by $21.1 million
to $2.8 million from $23.9 million for the quarter ended March 31, 2001.  Gross
margin for the first quarter of 2002 decreased to 44% from 70% during the first
quarter of 2001.  The decrease in gross profit was due to a reduction in volume
of units sold and lower ASP, offset by a  $0.5  million  charge  related to the
outsourcing of manufacturing operations.

Engineering and Development

   Engineering  and  development  expenses  principally  include  salaries  for
engineering  and  development  personnel,  depreciation  of  production assets,
outside  consulting  fees  and  other  development  expenses.  Engineering  and
development  expenses  for the quarter ended March 31, 2002 decreased  by  $0.3
million to $3.3 million from $3.6 million for the quarter ended March 31, 2001.
The dollar decrease was  due  to lower salary and other expenses as a result of
the Company's reduction in force  initiatives  implemented  in October 2001 and
January 2002.

Sales and Marketing

   Sales  and  marketing  expenses  principally include salaries,  commissions,
travel, tradeshows, promotional materials  and  warranty  expenses.   Sales and
marketing  expenses  for  the  quarter  ended  March 31, 2002 decreased by $2.5
million to $2.5 million from $5.0 million for the quarter ended March 31, 2001.
The dollar decrease is directly related to lower commissions resulting from the
decreased  sales activity, along with lower salary  and  other  expenses  as  a
result of the  Company's  reduction in force initiatives implemented in October
2001 and January 2002.

General and Administrative

   General   and  administrative   expenses   principally   include   salaries,
professional fees,  facility  rentals,  compensation  and  information  systems
related  to  general management functions.  General and administrative expenses
for the quarter  ended March 31, 2002 decreased by $0.2 million to $1.4 million
from $1.6 million  for  the  quarter ended March 31, 2001.  The dollar decrease
was  due to lower salary and other  expenses  as  a  result  of  the  Company's
reduction in force initiatives implemented in October 2001 and January 2002.

Restructuring Charges

   In  October  2001,  the Company's board of directors approved a reduction in
force of 38 employees and  consultants  across  all  departments and instituted
temporary executive salary reductions of up to 20%.  The  overall  objective of
the  initiative  was  to  lower  operating  costs and improve efficiency.   All
affected employees were terminated in October  2001  and  given severance based
upon years of service with the Company.  The Company recorded  a  restructuring
charge of $500,000 in 2001 related to this cost reduction program.   The  costs
included in a restructuring charge for severance payments to employees included
in  the  reduction  in  force,  legal  costs associated with the cost reduction
program  and remaining lease liabilities  on  the  Company's  facility  in  New
Jersey.  In  January  2002,  the  board  of  directors approved additional cost
reduction initiatives aimed at further reducing operating costs. These included
a second reduction in force of 46 employees and contractors and the outsourcing
of manufacturing and production.  All affected  employees  were  terminated  in
January  2002 and given severance based upon years of service with the Company.
The Company  recorded  a  restructuring  charge  of  $1.3  million in the first
quarter of 2002.

   The costs associated with both of these actions are expected  to  be paid by
January  2003.   Activity associated with the restructuring charges during  the
quarter ended March 31, 2002 was as follows:

<TABLE>
<CAPTION>
                         	Balance          Additions      Payments/    Balance at March
                              at December 31,                  Reductions       31, 2002
                                 2001
                              ---------------    ---------     ----------    ----------------
<S><C>                          <C> <C> <C>              <C> <C>                  <C> <C>
                                                         (in thousands)
Severance                      $    79          $    1,266      $   (782)        $    563
Legal and other expenses            87                  34            (8)             113
Lease payments                     118                  --           (32)              86
                               -------          ----------      ---------        --------
                               $   284          $    1,300      $   (822)        $    762
                               =======          ==========      =========        ========
</TABLE>

Other Income, net

   Other income for  the quarter ended March 31, 2002 decreased by $0.2 million
to $0.2 million from $0.4  million  for the quarter ended March 31, 2001.  This
primarily represents interest earned on invested cash balances partially offset
by fees related to a credit facility  and  interest  expense  on  capital lease
obligations.




Provision for Income Taxes

   No provision for income taxes was made for the quarter ended March  31, 2002
due  to  the   Company's  net  loss of $5.5 million.  The provisions for income
taxes for the quarter ended March  31,  2001  reflected  income  taxes  due  at
federal  statutory  rates  and  state income taxes, net of federal benefit. The
effective income tax rate was 8%  for  the first quarter of 2001. The effective
rates  differ  from  the federal and state  statutory  rates  (net  of  federal
benefit)  due  to  the  recognition  of  deferred  tax  assets  previously  not
recognized due to management's  uncertainty  as to their realization. As of the
first  quarter  of  2001,  the  remaining deferred  tax  asset  was  recognized
resulting in a benefit of $4.3 million  which  offset  the otherwise recognized
tax expense of $5.4 million resulting in a net tax expense  of  $1.1 million or
8%.

Net Income or Loss

   Net loss for the quarter ended March 31, 2002 was $5.5 million  or $0.18 per
diluted  share  compared with net income of $13.0 million or $0.40 per  diluted
share for the quarter ended March 31, 2001 for the reasons discussed above.

LIQUIDITY AND CAPITAL RESOURCES

   As  of  March 31,  2002,  the  Company's  cash  and  cash  equivalents  were
approximately $45.3 million, a decrease of $5.8 million from December 31, 2001.
As of March  31,  2002,  the  Company's working capital was approximately $60.1
million as compared to $64.8 million  at  December  31,  2001. During 2001, the
Company reported net income of $2.8 million and cash flows  from  operations of
$20.8 million. For the quarter ended March 31, 2002 the Company reported  a net
loss of $5.5 million and cash used  by operations of $6.2 million.  The Company
had an accumulated deficit of $12.0 million at March 31, 2002.

   Beginning  in  the third quarter of 2001 through the quarter ended March 31,
2002, the Company experienced  combined operating losses of $31.1 million.  The
Company expects to continue to incur  operating losses through 2002. Management
has taken actions to increase net sales  and significantly reduce cost of goods
sold,  operating  expenses  and  capital expenditures.  These  actions  include
restructuring operations to more closely align operating costs with revenues.

   The Company continues to consider  various financing alternatives, including
other  equity  or  debt  issuances  (the  "Financing   Sources").  The  Company
anticipates that its existing cash and cash equivalents  and  anticipated  cash
flow  from operations together with funds provided from the line of credit with
Wachovia  Bank  will  be  sufficient  to fund the Company's working capital and
capital expenditure requirements for at  least  the  next  twelve  months.  The
anticipated  cash  flow from operations assumes the Company achieves a level of
sales that is sufficient  to  offset  expected operating expenses. In the event
that these sales levels are not attained,  the  Company  may be required to use
its  cash  reserves to fund operations or supplement its working  capital  with
additional funding  or  financing  alternatives.  There  can  be  no assurance,
however, that the Company will achieve sufficient sales levels or that adequate
additional  financing  will be available when needed or if available  on  terms
acceptable to the Company.

Operating Activities

   Net cash used by operating  activities for the three months ending March 31,
2002 was $6.2 million. This was  primarily  the  result of the net loss of $5.5
million,  an  increase  in accounts receivable of $0.5  million,  increases  in
prepaid and other assets of $1.9 million and a decrease in accounts payable and
accrued expenses of $0.6  million.   These  were  partially  offset by non-cash
expenses  consisting  primarily  of  a  restructuring  charge of $1.3  million,
depreciation and amortization of $0.9 million and a $0.2  million  decrease  in
inventory.

   Net  cash  provided by operating activities for the year three months ending
March 31, 2001 was $8.3 million. This was primarily the result of net income of
$13.0 million,  accompanied  by  non-cash  expenses  of income tax benefit from
stock  option exercises of $1.1 million and depreciation  and  amortization  of
$0.8 million.  This was partially offset by increases in accounts receivable of
$1.9 million, inventory  of  $3.3  million and prepaid and other assets of $0.5
million along with a decrease in accounts  payable and accrued expenses of $1.1
million.


Investing Activities

   Net cash used in investing activities for  the  three months ended March 31,
2002  and  2001,  was  $0.2 million and $0.4 million, respectively.   Investing
activities related to purchases of property and equipment.

Financing Activities

   Net cash provided by  financing  activities for the three months ended March
31, 2002 was $0.7 million.  This was  primarily the result of an advance from a
short term note payable related to insurance  premiums  and  net  proceeds from
employee  exercises  of  stock  options. This was partially offset by principal
payments on capital lease obligations.

   Net cash provided by financing  activities  for the three months ended March
31, 2001 was $0.4 million.  This was primarily the  result of net proceeds from
employee exercises of stock options partially offset  by  principal payments on
capital lease obligations.

Line of Credit

   In  April  2002,  the Company entered into a Revolving Credit  and  Security
Agreement ("the Agreement")  with  Wachovia  Bank.   The terms of the Agreement
provide  the Company with a $27.5 million line of credit  at  LIBOR  plus  0.7%
collateralized by the Company's cash and cash equivalents.  An availability fee
of 0.10% per  annum  is  payable  quarterly  based  on  the  Average  Available
Principal  Balance  (as  defined in the Agreement) for such three months.   The
Agreement has an initial term  of  three  years.  Approximately $2.3 million of
the  $27.5 million available under the Agreement  collateralizes  a  letter  of
credit  required  by a lease for the Company's office space.  The Company plans
to use the facility  for  short-term  working  capital  and  general  corporate
purposes,  including  potential  acquisitions  of complementary businesses  and
technologies. The Company's previous line of credit with Congress Financial was
terminated  in  April  2002  as  part  of  this transaction.    There  were  no
borrowings under the new or previous line of credit at March 31, 2002.

Legal Proceedings

   As discussed more fully in the Notes to the Consolidated Condensed Financial
Statements Note 4 - Legal Proceedings, the Company  is  currently appealing the
judgment of the Circuit Court of the Sixth Judicial Circuit,  Pinellas  County,
Florida, that awarded $3.9 million plus attorneys' fees to a former officer and
director of the Company.  As of March 31, 2002 no amounts under this award have
been paid.  On April 4, 2002 the Company posted a civil supersedeas bond in the
amount  of  $4.8  million  to secure a stay of enforcement of the Circuit Court
judgment pending the Company's appeal.


ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

   We are not exposed to fluctuations in currency exchange rates because all of
our sales are invoiced in U.S.  dollars.   We  are  exposed  to  the  impact of
interest  rate  changes on our short-term cash investments, consisting of  U.S.
Treasury obligations  and other investments in respect of institutions with the
highest credit ratings,  all  of which have maturities of three months or less.
These short-term investments carry  a degree of interest rate risk.  We believe
that the impact of a 10% increase or  decline  in  interest  rates would not be
material to our investment income.

                                     PART II

                                OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

   On November 23, 1999, Seth P. Joseph, a former officer and  director  of the
Company  commenced  arbitration proceedings against the Company alleging breach
of his employment agreement  and  stock  option  agreements,  violation  of the
Florida  Whistleblower  statute  and breach of an indemnification agreement and
the Company bylaws. As relief, Mr.  Joseph  sought  $500,000,  attorneys' fees,
interest  and  stock  options for 656,666 shares of the Company's common  stock
exercisable at a price  of $5.25 per share. The Company filed an answer denying
Mr.  Joseph's  allegations  and  alleging  multiple  affirmative  defenses  and
counterclaims. The Company's counterclaims against Mr. Joseph seek repayment of
loans totaling approximately  $113,000  plus interest.  Mr. Joseph subsequently
dismissed without prejudice all of his claims  other  than  his claim under the
Whistleblower  Statute.  The arbitration hearing on Mr. Joseph's  Whistleblower
claim and the Company's counterclaims concluded on October 5, 2001. The parties
submitted proposed findings  to  the arbitrator on October 17, 2001. As part of
his proposed findings, Mr. Joseph sought an award of $48 million and attorneys'
fees  and  costs.   On  November 9, 2001,  the  Company  was  notified  of  the
arbitrator's decision that  awarded  Mr.  Joseph  the sum of approximately $3.7
million and attorneys' fees and costs.  On December  20,  2001,  the arbitrator
issued  a  corrected  award and awarded Mr. Joseph the sum of $3.9 million  and
attorneys' fees and costs  in  amounts  yet  to  be determined.  On January 23,
2002, Mr. Joseph filed a motion seeking the award of $1.1 million in attorneys'
fees, costs and interest thereon.

   On December 26, 2001, the Company filed a petition  to  vacate or modify the
arbitration award in the Circuit Court of the Sixth Judicial  Circuit, Pinellas
County,  Florida,  in  an action entitled Digital Lightwave, Inc.  v.  Seth  P.
Joseph, Case No. 01-9010C1-21.   The  Company  filed  an  amended  petition  on
December  26,  2001,  following the corrected arbitration award.  Subsequently,
Mr.  Joseph  filed a cross-motion  to  confirm  the  arbitration  award.   Oral
argument on the  Company's  petition and Mr. Joseph's cross-motion was heard by
the Court on February 27, 2002.   On  March  26,  2002,  the  Court  denied the
Company's petition to vacate the arbitration award, granted Mr. Joseph's cross-
motion  to confirm the award, and entered a judgment in favor of Mr. Joseph  in
the amount  of  $4.0  million including interest.  The Company is appealing the
decision and judgment of  the  Circuit  Court.    On  April 4, 2002 the Company
posted a civil supersedeas bond in the amount of $4.8 million, which represents
the amount of the judgment plus two times the estimated  interest,  to secure a
stay of enforcement of the Circuit Court judgment pending the Company's appeal.
The Company has recorded an accrual of $4.1 million related to this arbitration
as  of  March  31,  2002.   The Company believes its appeal is meritorious  and
intends to pursue the appeal vigorously.

   In January 2002, an employee  terminated  as  part  of the Company's October
2001 restructuring initiatives, filed a lawsuit claiming  the  Company  wrongly
discharged  the employee and has withheld payments due the employee.  The  suit
does not seek  a  specified  amount  of  damages,  but does claim that the 2001
compensation plan presented to the employee in October  2001  unfairly  lowered
the  employee's  salary.  The  plaintiff  seeks  attorneys'  fees, interest and
punitive damages.  The Company has responded to the complaint  and  denied  the
substantive  allegations  therein.  The Company intends to defend against these
claims vigorously.

   In  March  2002  a former employee filed  a  lawsuit  claiming  the  Company
breached the employee's  severance  agreement  by paying the employee less than
the agreement provided.  The suit seeks damages  in  excess  of  $100,000.  The
Company  has responded to the complaint and denied the substantive  allegations
therein. The Company intends to vigorously defend the action.

   The Company  from  time  to  time  is involved in various other lawsuits and
actions  by third parties arising in the  ordinary  course  of  business.   The
Company  is   not  aware  of  any  additional  pending  litigation,  claims  or
assessments that  could  have  a  material  adverse  effect  on  the  Company's
business, financial condition and results of operations.

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

   None.

ITEM 5.    OTHER INFORMATION

   In  April  2002,  the  Company  entered into a Revolving Credit and Security
Agreement ("the Agreement") with Wachovia  Bank.   The  terms  of the Agreement
provide  the  Company  with a $27.5 million line of credit at LIBOR  plus  0.7%
collateralized by the Company's cash and cash equivalents.  An availability fee
of  0.10%  per  annum is payable  quarterly  based  on  the  Average  Available
Principal Balance  (as  defined  in  the Agreement) for such three months.  The
Agreement has an initial term of three  years.   Approximately  $2.3 million of
the  $27.5  million  available under the Agreement collateralizes a  letter  of
credit required by a lease  for  the Company's office space.  The Company plans
to  use  the facility for short-term  working  capital  and  general  corporate
purposes,  including  potential  acquisitions  of  complementary businesses and
technologies. The Company's previous line of credit with Congress Financial was
terminated in April 2002 as part of this transaction.  There were no borrowings
under the line of credit at March 31, 2002.

       On April 4, 2002 the Company posted a $4.8 million civil supersedeas
bond with the Circuit Court of the Sixth Judicial District in and for the State
of Florida.  The purpose of the bond was to secure a stay of the Circuit
Court's judgment pending the Company's appeal of the Court decision in the Seth
Joseph arbitration more fully described in Part II, Item 1. Legal Proceedings.
The bond amount represents judgment award plus two times the estimated
interest.  This allows the Company to continue its appeal of the Seth Joseph
arbitration award.  The Company believes its appeal is meritorious and plans to
pursue the appeal vigorously.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

   (a) Exhibits

      A list of exhibits is set forth in the Exhibit  Index found on page 17 of
the report.

   (b)  Reports on Form 8-K.

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


                                  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.

                                        By:  /s/   BRYAN J. ZWAN
                                        ---------------------------------------
                                             Bryan J. Zwan
                                             Chairman of the Board,
                                             Chief    Executive   Officer   and
                                             President
                                             (Principal Executive Officer)

                                             Date:  May 7, 2002


                                        By:  /s/   MARK E. SCOTT
                                        ---------------------------------------
                                             Mark E. Scott
                                             Vice President, Finance,
                                             Chief   Financial    Officer   and
                                             Secretary
                                             (Principal Accounting Officer)

                                             Date: May 7, 2002



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<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                    DESCRIPTION
<S>     <C> <C>
10.27+   Revolving Credit and Security Agreement between the Company and Wachovia Bank
10.28+   Form of Revolving Credit Note issued to Wachovia Bank
10.29*+  Agreement between Jim Green and the Company
10.30+   Civil Supersedeas Bond Filed in the Circuit Court of the Sixth Judicial Circuit in and for the State of Florida
</TABLE>
______________
*  Indicates management contract or compensatory plan or arrangement.

+  Indicates such Exhibit is filed herewith.


#