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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

Commission file number 000-27999

Finisar Corporation

Registrant’s telephone number, including area code:

Common Stock, $.001 par value

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o

     At August 18, 2003, there were 212,667,563 shares of the registrant’s common stock, $.001 par value, issued and outstanding.

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INDEX TO QUARTERLY REPORT ON FORM 10-Q

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PART I — FINANCIAL INFORMATION

FINISAR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes.

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FINISAR CORPORATION

See accompanying notes.

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FINISAR CORPORATION

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See accompanying notes.

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FINISAR CORPORATION

1.     Summary of Significant Accounting Policies

      Finisar Corporation was incorporated in the state of California on April 17, 1987. In November 1999, Finisar Corporation reincorporated in the state of Delaware.

      Finisar Corporation designs, manufactures, and markets fiber optic subsystems and components and network test and monitoring systems for high-speed data communications.

      The accompanying unaudited condensed consolidated financial statements as of July 31, 2003, and for the three month periods ended July 31, 2003 and 2002, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission, and include the accounts of Finisar Corporation and its wholly-owned subsidiaries (collectively, “Finisar” or the “Company”). Intercompany accounts and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Company’s financial position at July 31, 2003 and its operating results and cash flows for the three month periods ended July 31, 2003 and 2002. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes for the fiscal year ended April 30, 2003.

      The balance sheet at April 30, 2003 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

      The Company maintains its financial records on the basis of a fiscal year ending on April 30, with fiscal quarters ending on the Sunday closest to the end of the period (thirteen-week periods). For ease of reference, all references to period end dates have been presented as though the period ended on the last day of the calendar month. The first three quarters of fiscal 2003 end on July 28, 2002, October 27, 2002 and January 26, 2003, respectively, and the first three quarters of fiscal 2004 end on July 27, 2003, October 26, 2003 and January 25, 2004, respectively.

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.

      The Company follows SEC Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition in Financial Statements.” Specifically, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Product revenue is generally recorded at the time of shipment when title and risk of loss pass to the customer, unless the Company has future unperformed obligations or customer

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

acceptance is required, in which case revenue is not recorded until such obligations have been satisfied or customer acceptance has been received.

      At the time revenue is recognized, the Company establishes an accrual for estimated warranty expenses associated with sales, recorded as a component of cost of revenues. The Company also provides an allowance for estimated customer returns, which has been netted against revenues.

      Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”) establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS 131 also establishes standards for related disclosures about products and services, geographic areas, and major customers. The Company has determined that it operates in two segments consisting of optical subsystems and components, and network test and monitoring systems.

      Financial instruments which potentially subject Finisar to concentrations of credit risk include cash, cash equivalents, short-term and restricted investments and accounts receivable. Finisar places its cash, cash equivalents and short-term and restricted investments with high-credit quality financial institutions. Such investments are generally in excess of FDIC insurance limits. Concentrations of credit risk, with respect to accounts receivable, exist to the extent of amounts presented in the financial statements. In many instances, the Company sells to contract manufacturers for the ultimate end customer equipment supplier. Generally, Finisar does not require collateral or other security to support customer receivables. Finisar performs periodic credit evaluations of its customers and maintains an allowance for potential credit losses based on historical experience and other information available to management. Losses to date have been within management’s expectations. At April 30, 2003, one optical subsystems and components customer represented 10.3% of total accounts receivable. At July 31, 2003, one optical subsystems and components customer represented 10.0% of total accounts receivable. No other customer represented more than 10.0% of total accounts receivable in either period.

      Finisar sells products primarily to customers located in North America. During the three months ended July 31, 2003, revenues from three optical subsystems and components customers represented 16.3%, 11.2% and 10.4%, respectively, of revenues. During the three months ended July 31, 2002, revenues from one optical subsystems and components customer accounted for 10.1% of net revenues. No other customer accounted for more than 10.0% of revenues in either period.

      The functional currency of our foreign subsidiaries is the local currency. Assets and liabilities denominated in foreign currencies are translated using the exchange rate on the balance sheet dates. Revenues and expenses are translated using average exchange rates prevailing during the year. Any translation adjustments resulting from this process are included as a component of accumulated other comprehensive income. Foreign currency transaction gains and losses are included in the determination of net loss.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Research and development expenditures are charged to operations as incurred.

      Advertising costs are expensed as incurred. Advertising is used infrequently in marketing the Company’s products. Advertising costs were $46,000 and $196,000 in the three months ended July 31, 2003 and 2002, respectively.

      Finisar’s cash equivalents consist of money market funds and highly liquid short-term investments with qualified financial institutions. Finisar considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents.