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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

OR

FOR THE TRANSITION PERIOD FROM                          TO

COMMISSION FILE NUMBER 000-31851

MULTILINK TECHNOLOGY CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

          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 filing requirements for the past 90 days.

          Indicate by check mark that disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    o

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

          The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the average closing bid and asked prices of such stock, as of June 28, 2002 was approximately $14,205,709. (All officers and directors of the registrant are considered affiliates.)

          At March 18, 2003 the registrant had 5,098,314 shares of Class A Common Stock issued and outstanding and 2,600,000 shares of Class B Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

          Portions of the registrant’s definitive proxy statement for its Annual Meeting of Shareholders to be filed with the Commission within 120 days after the close of its fiscal year are incorporated by reference into Part III of this Form 10-K.

MULTILINK TECHNOLOGY CORPORATION

FORM 10-K ANNUAL REPORT

FISCAL YEAR ENDED DECEMBER 31, 2002

TABLE OF CONTENTS

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CAUTIONARY STATEMENT

          This Report contains forward-looking statements which include, but are not limited to, statements concerning projected revenues, expenses, gross profit and income (loss), the need for additional capital, market acceptance of our products, the competitive and cyclical nature of  our markets, our ability to achieve further product integration, the status of evolving technologies and their growth potential, the timing of new product introductions, the adoption of future industry standards,  our ability to migrate to smaller process geometries and new technologies. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs, and certain assumptions made by us. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will” and variations of these words or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors, some of which are listed under the section “Risk Factors” at the end of Item 7 of this Report. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

          As used in this Form 10-K, “company,” “we,” “us,” “our,” “Multilink” and “Multilink Technology” refer to Multilink Technology Corporation and its subsidiary companies. We were incorporated in California in July 1994.

PART I.

Item 1.      BUSINESS

          We design, develop and market advanced integrated circuits, modules and higher-level assemblies that enable next generation optical networking systems. Our current products address the markets for DWDM and SONET/SDH optical networking equipment. We focus on the fastest commercially available speeds of OC-192, or 10 gigabits per second, or higher, and are developing products that are designed to address systems for the Metro/Access and Enterprise markets. We seek to be first to develop innovative products with system functions that allow communications equipment manufacturers to rapidly build and deliver high performance fiber optic systems ahead of their competitors.

Realignment Plan

          In August 2002, we announced a corporate realignment plan to create a more efficient cost structure and realign our business to reflect the current telecommunication market environment, which will permit us to focus our employees on our key business strategies.  The major initiatives of the plan include a reduction of 40 to 45 percent in our worldwide headcount, the consolidation of facilities through the closure of certain locations and the reduction in the level of activity at other locations. During 2002, we recorded an $11.0 million charge in connection with this plan.  During the three months ended December 31, 2002, we expanded the plan by deciding to close facilities in addition to those already included in the charge recorded during the third quarter of 2002.

          Upon completion of the plan, we anticipate that our worldwide headcount will decrease to approximately 150 people as compared to 382 at December 31, 2001.  The headcount reduction portion of the plan was substantially completed by December 2002 and is expected to be fully completed by April 2003.  The headcount reductions have occurred at all of our locations in Europe, Israel and the United States.  We have estimated that the total cash cost of the realignment plan is approximately $4.7 million and that the plan, combined with our other cost saving initiatives, will contribute approximately $35.0 million of annual cash savings.  The estimated remaining cash outflows related to the plan are expected to be $2.2 million in 2003, less than $0.6 million in 2004 and $0.7 million thereafter. The estimated cash outflow and annual cash savings related to the plan will, however, be negatively impacted if it takes us longer than anticipated to sublease some of our closed facilities or if our planned further headcount reductions are delayed. 

          Although we undertook cost reduction programs and initiated our corporate realignment plan during 2002 to reduce expenses, we cannot assure that our realignment plan will be successful, and we may need to restructure further, or raise additional capital.  As another alternative to raising capital, we may need to explore the opportunity to merge with or be acquired by another company.

Background

          The volume of data traffic across communications networks has grown rapidly over the past decade. This growth has been driven by the increased use of data-intensive applications such as electronic commerce, Internet access, e-mail, streaming audio and video, remote access and other new applications.  Data traffic currently exceeds voice traffic in communicating networks and, despite the current downturn in the telecommunications market, should be the key driver for growth in the coming years.   

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     Development of Fiber Optic Networks

          Much of the public network’s infrastructure was originally designed to transmit voice communications utilizing copper wire as the primary transmission medium. This copper wire-based infrastructure is ill-suited for high-speed data transmission due to bandwidth limitations and high maintenance and administration costs. Communications service providers will need to upgrade their network architectures by increasing bandwidth and switching capabilities for high-speed data and voice transmissions and are replacing conventional copper wire technology with fiber optic technology. Fiber optics offers substantially greater capacity than copper wire and is less error-prone and, as a result has become the transmission medium of choice for both incumbent and emerging service providers. SONET/SDH, or Synchronous Optical Network/Synchromous Digital Hierarchy, are the standards, or protocols, for the transmission of communications traffic over optical fiber. SONET and SDH facilitate high data integrity and improve network reliability at the higher transmission rates demanded in newly developed optical networking systems.

     Innovations in Optical Networking Systems

          The two primary approaches for increasing bandwidth capacity are higher transmission speeds and higher channel density. The majority of new optical networking systems deployed by service providers addressing the network core operate at 10 gigabits per second, or Gb/s. We believe future network deployments will incorporate systems that operate at 40 Gb/s or faster when the technology becomes commercially available. DWDM, or dense wavelength division multiplexing, is a technology development that increases the capacity of existing fiber optic networks by combining multiple light beams of information, each at a different wavelength, or channel, onto a single strand of optical fiber. Higher transmission speeds and increased deployments of DWDM technology have significantly increased the complexity of optical networking systems. In addition, we believe that next generation optical networks will add substantial functionality and innovations to the optical transport layer to further optimize available capacity.

     Components for Optical Networking Systems

          As communications equipment manufacturers develop systems that enable higher transmission speeds and deploy DWDM technology to increase bandwidth, they must integrate a greater number of complex components that generate, manipulate, transmit and receive electrical and optical signals. The complexities associated with the design and development of state-of-the-art components have caused communications equipment manufacturers to rely upon sophisticated component suppliers.

     Requirements for Supplying Components in Optical Networking Systems

          To meet the performance and functionality requirements of optical networking systems, communications equipment manufacturers often seek suppliers that can deliver increasingly sophisticated component solutions. These component suppliers must provide each of the following:

          Systems Level Expertise. Component suppliers must understand the performance, functionality and integration requirements of the system into which their components are incorporated. Without this critical systems knowledge, a component supplier will have difficulty meeting the time-to-market and functionality requirements of the communications equipment manufacturers, thereby resulting in costly delays and missed revenue opportunities.

          Advanced Technologies and Processes that Enable High-Speed Transmission. Building high-speed integrated circuits requires access to specialized process technologies and advanced circuit design approaches. The vast majority of the semiconductor industry employs a Complementary Metal Oxide Semiconductor, or CMOS, transistor built on silicon material. Because of demanding performance requirements, alternatives to traditional CMOS have emerged in the communications industry. Specifically, Gallium Arsenide, or GaAs, and Silicon Germanium, or SiGe, as well as new CMOS processes have emerged as semiconductor technologies that are effective in addressing high-speed optical communications requirements. Component suppliers are also exploring other semiconductor technologies, such as Indium Phosphide, or InP, as well as new generations of GaAs, SiGe and CMOS, to address the requirements of future, higher speed communications systems. Each of these processes poses significant challenges and has distinct characteristics that require extensive knowledge and expertise. Communications equipment manufacturers often seek component suppliers that have the necessary expertise to use the optimal processes in order to provide next generation optical systems solutions for their customers.

          Highly Integrated Product Solutions. In order to rapidly and cost effectively introduce new products and simplify the design and manufacture of optical networking systems, communications equipment manufacturers often seek component suppliers that can provide highly integrated solutions, thereby eliminating the time and expense associated with sourcing and integrating components from multiple manufacturers. These integrated solutions are modules or higher-level assemblies that combine numerous discrete components into a package or board to be sold as a single product, which eliminates the time and expense associated with sourcing and integrating components from multiple suppliers. As systems are manufactured in greater volumes, communications equipment manufacturers require that modules and higher-level assemblies be integrated further into multi-chip or single- chip solutions. This integration provides for faster and more efficient production, reduced part count and smaller design for placement into the network equipment, significantly reducing manufacturing costs for communications equipment manufacturers.

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Strategy

          Our goal is to become a global supplier of high value component solutions for optical networking systems. Key elements of our strategy include:

     Leveraging Core Competencies to Rapidly Introduce Products that Enable Next Generation Optical Systems

          We have developed substantial competencies in mixed-signal circuit and module design and advanced semiconductor process technologies. We have also developed core competencies in Very Large Scale Integration, or VLSI, circuit architecture and design including forward error correction, or FEC, framer/mapper and data encapsulation/aggregation technologies.  We intend to continue providing sophisticated products that meet the requirements of next generation optical networking systems. We will continue to capitalize on our design competencies and our integration capabilities to provide our customers with new modules and higher-level assemblies so they can quickly and cost-effectively introduce new systems with greater functionality. We intend to develop new products using leading-edge technologies that allow us to transition these modules and higher-level assemblies into highly integrated, multi-chip or single-chip solutions, enabling us to address our customers’ production requirements.

     Expanding Our Customer Relationships and the Breadth of Our Customer Base

          We seek to strengthen our existing customer relationships and expand our customer base by targeting leading edge communications equipment manufacturers, anticipating their needs through a collaborative design and development process and providing ongoing, in-depth customer support. We participate early in the design process of our customers’ potential products and aid in the design of their future systems architecture. Our application engineers and marketing personnel work closely with our customers to define and implement the appropriate solution and to provide continuous support. This extensive customer interaction allows us to further develop our systems expertise and to expand the functionality of our products in our customers’ optical networking systems.

     Maintaining Technology Leadership

          We seek to maintain our technological advantage in the design and development of components for next generation optical networking systems by further investing in research and development, focusing on high bit rate component solutions and vigorously recruiting and retaining talented engineers. We will also continue to work closely with our foundry and technology partners to drive the development of future generation process technologies.

     Pursuing Strategic Relationships

          We seek to continue to establish strategic relationships to expand our technology leadership and secure access to advanced process technologies. We believe that establishing strategic relationships with companies with products or technologies that we deem complementary to our current and future offerings will enable us to more effectively penetrate new and existing market segments and offer our customers additional high value solutions.

     OEM and Licensing

          We may pursue relationships with other vendors of semiconductor products in which they will market and sell Multilink-designed products.  We may also pursue relationships wherein an integrated circuit designer will license Multilink-developed intellectual property for incorporation into application specific integrated circuits, or ASICs, being developed by that partner.

     Addressing the Core and Metropolitan Portions of the Optical Transport Network, while Expanding into the Access and Enterprise Markets

          We provide product solutions for optical networking systems in the innovative network core market. We will continue to build on our expertise in DWDM and long-haul applications for the core of the network. We have also leveraged this expertise and seek to provide  product solutions for emerging metropolitan or regional optical networking systems as OC-192 is beginning to be deployed in this portion of the network.  We are expanding into the Access and Enterprise markets by leveraging our intellectual property portfolio of mixed-signal, analog and digital signal processing technologies. During the past two years, we have made significant research and development investments in developing mixed-signal products that utilize 0.13um CMOS technology. We expect to announce products related to a new family of Serialization/De-serialization, or SerDes devices targeted at local area and storage area networks that can utilize our mixed-signal expertise.

Products

          We design and develop advanced products targeted for use in high bandwidth optical networking systems. These products consist of integrated circuits, modules and higher-level assemblies that generate, manipulate, transmit and receive electrical and optical signals.

          Our products focus on three segments of optical networking systems: the physical media dependent layer, or PMD, the physical

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layer and the datalink layer. Collectively, the products within these segments connect data processing devices to optical fiber and constitute an integral part of optical networking systems.

          The following is a diagram that shows the different functions required for fiber optic transmission systems:

          PMD devices perform the conversion between electrical and optical signals and can be categorized as either transmitters or receivers. Transmitters convert voice and data transmissions carried as electrical signals into optical signals for transmission over optical fiber, while receivers convert optical signals into electrical signals. Transmitters are composed of an electrical-to-optical, or E/O, converter, which converts electrical signals to optical pulses, and a driver, which amplifies and conditions signals for use by the E/O converter. E/O converters are composed of a light source, or laser, and an external modulator, which creates individual pulses of light, or optical signals. Receivers consist of a semiconductor device that converts an optical signal into electrical pulses, an optical-to-electrical, or O/E, converter, and a transimpedance amplifier, or TIA, which amplifies these electrical pulses.

          The physical layer is composed of mixed-signal devices, which include both digital and analog circuits and can be categorized as either multiplexers or demultiplexers. Multiplexers combine multiple slower signals into a single high-speed signal, while demultiplexers perform the reverse function.

          Datalink layer devices connect the physical layer to networking equipment. Datalink layer devices have three primary functions: framing, mapping and forward error correction, or FEC. In framing and mapping, which generally occur simultaneously, data is placed in formatted frames, prior to being transmitted over fiber, to make the data recognizable at the receiving end of the transmission. In FEC, data is placed in special frames that can be used to correct errors that occur during transmission.

     Our PMD Products

          There are two primary types of modulators: crystal-based modulators, which offer optimal performance for long-haul systems but consume significant power and cannot be integrated with lasers; and semiconductor-based modulators, which use less power and can feature on-chip integration with lasers. We currently produce several drivers for crystal-based modulators. These products have been designed to improve signal quality and system efficiency. We have developed Micro-Module^TM technology that allows us to integrate several high-speed devices into a single Ball Grid Array, or BGA, package, which is used in our next generation of PMD devices.  This technology provides a dramatic reduction in size and cost for this type of product.  We are investing in development of future versions of these drivers, integrating more functions and improving performance.

     Our Physical Layer Products

          We have broad experience in the production of physical layer products. We have designed our multiplexers with exceptionally low jitter, which is a type of noise in optical channels, directly improving signal quality and transmission distance. We have designed our demultiplexers with highly sensitive signal processing that eliminates the need for additional components to perform the same function. Our demultiplexers are highly insensitive to jitter, allowing for longer optical transmission distances. We are currently broadening our portfolio of multiplexers and demultiplexers to include product offerings that incorporate greater functionality, higher levels of integration, smaller physical size, lower power consumption and tighter integration with our datalink layer components.

          Our physical layer products can incorporate the following functions:

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     Datalink Layer Products

          We are currently investing in the development of numerous datalink layer products, including FEC devices and Framer/Mappers that integrate the framing and mapping functions. In FEC, we have invested heavily in algorithm, architecture and product development for both standards-based FEC and advanced FEC. FEC allows communications equipment manufacturers to increase the number of DWDM optical channels in a fiber strand and/or to increase the length of the fiber transmission system. In addition, FEC devices can be designed to support new optical networking standards.

          Our first FEC device, the MTC6130, is currently available, while a second FEC device, the MTC6131 SuperFEC^TM is shipping to customers.  Future FEC products will address higher performance, higher levels of integration, and/or higher bit rates. We have announced the MTC6134 EFEC which greatly reduces the power while increasing the functionality of high-performance FEC. Framer/Mappers that are currently in development include advanced products for 10 Gb/s systems, as well as devices targeted for Gigabit Ethernet applications in the Metro market. We have also announced the MTC 6210 framer/mapper for support of 10Gb/s systems utilizing Ethernet over SONET/SDN functionality.

Customers

          In 2002, we shipped our products to over 30 customers, including Alcatel, Ciena, Cisco,  Lucent, Marconi, Nortel, Siemens and TyCom. We sell our integrated circuits, modules and higher-level assemblies to leading and emerging communications equipment manufacturers that develop high-speed optical transport networking systems.

          TyCom, Alcatel and Lucent accounted for approximately 25%, 19% and 10% of our revenues in 2002, respectively.  During 2001, TyCom with 34% and Alcatel with 29% accounted for more than 10% of our revenues and four other customers each accounted for greater than 5% of our revenues. Lucent, Alcatel, and Cisco accounted for approximately 34%, 28% and 11% of our revenues in 2000, respectively.

Strategic Relationships

          We have established strategic relationships with both TRW (a wholly-owned subsidiary of Northrop Grumman) and IBM. We have entered into these strategic relationships with the objective of building and maintaining relationships with leading suppliers of semiconductor process technologies in order to diversify our product and technology base. We previously entered into supply agreements with TRW pursuant to which TRW supplied us with a certain number of processed GaAs and Indium Phosphide wafers annually. These agreements expired in December 2002. During May 2000, we entered into a series of agreements with IBM. Our semiconductor development agreement with IBM provides us with certain models and design kits for use in the fabrication process to develop new integrated circuits. We provide IBM with prototype designs, and IBM fabricates mask sets corresponding to our designs, schedules wafers starts and processes the wafers. Under our joint development agreement with IBM, we jointly developed integrated circuits. We are both permitted to sell the jointly created products to third parties, subject to a fixed royalty fee payable to the other party.  The joint development agreement was cancelled during the first quarter of 2002.  In addition, during July 2001, we entered into a volume purchase agreement with IBM pursuant to which IBM provides us with SiGe wafers for a fixed price per wafer.  There are no minimum purchase requirements under this agreement, which expires in May 2005. 

Sales, Marketing and Customer Support

     Sales

          We target leading and emerging communications equipment manufacturers that develop high-speed optical transport networking systems. We manage the sales process by interacting with our customers at multiple layers of our organization. Our initial contact with a potential customer generally begins with either direct contact by our management or sales force or through third-party manufacturers’ or independent sales representatives. Our strategic account managers and marketing personnel manage the customer relationship throughout the pre-and post-sales process. As needed, systems engineering personnel have detailed technical interactions with our customers during product definition. Our application engineers assist the customer in designing the solution into the customer’s systems. Close interaction further enables us to establish strategic customer programs or relationships.

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          We sell our products through our direct sales force and through independent sales representatives working under the direction of our strategic account managers. As of December 31, 2002, our direct sales force consisted of 20 direct sales professionals, application engineers, managers and administrative personnel located at our headquarters in Somerset, New Jersey and other locations in the United States, and in Germany, Italy and China.

     Marketing

          We have traditionally marketed our products in North America and Europe and have recently begun to market our products in Asia. As of December 31, 2002, our marketing staff included 5 marketing professionals and administrative personnel. Our marketing activities include:

     Customer Service and Support

          Our customer support activities are primarily managed by our applications engineering group consisting of both field applications engineers and internal applications experts. This group supports customers during their design activities to facilitate our customers’ success, and can perform experiments to validate customers’ design ideas including insertion into our fiber optic test facility. Our philosophy is to provide comprehensive customer support to facilitate the design of our complex products into our customers’ systems. Our applications engineering group is also the initial point of contact for our customers should they experience any problems with a product after purchase.

Manufacturing

          We outsource the fabrication and assembly of our semiconductor devices, modules, high-level assemblies and transceivers. We have in-house semiconductor testing capabilities that allow us to develop and perform testing for low volume production.  We also have in-house final assembly and test for our high-level assemblies and transceivers.  We expect to continue our outsource strategy and to continue to move our testing from our in-house capabilities to outside vendors.  As a fabless semiconductor company, we are able to concentrate our resources on supply chain management design, development and marketing of our products. During October 2001, we obtained our ISO 9001:2000 certification from the International Organization of Standardization.  ISO 9001:2000 refers to an international set of quality management system standards that organizations use worldwide.  ISO 9001:2000 requires that we plan and manage the process necessary for the continual improvement of our quality management system.

     Wafer Manufacturing

          We outsource our semiconductor fabrication to several foundries for high bit-rate technologies, including TRW, IBM, TriQuint Semiconductor, and Conexant.  The older generation of our mixed-signal products, which comprised a significant portion of our 2001 revenue, is based predominantly on GaAs HBT wafers supplied by TRW.  The wafers for the third and fourth generation of our mixed-signal products are based on SiGe technology supplied by IBM.  Our manufacturing strategy is to qualify and utilize leading process technology for the fabrication of high bit-rate semiconductor devices and to utilize these external foundries for a variety of different semiconductor technologies. There are certain risks associated with our dependence upon external foundries, including reduced control over delivery schedules, quality assurance, manufacturing yields and costs, the potential lack of adequate capacity during periods of excess demand, limited warranties on wafers or products supplied to us, increases in the prices and potential misappropriation of our intellectual property.  Finding alternative sources for these wafers will result in substantial delays in production and additional costs.  

     Packaging, Assembly and Testing

          The primary vendors for the packaging, assembly and testing of our integrated circuit products are Kimbell Electronics Group, ASAT Inc. and Siliconware Precision Industries Co., Ltd.  ASAT is currently building product for us in their Hong Kong facility.  The primary outsource vendor for the assembly and testing of our driver module products is Natel Engineering Co., Inc., and the majority of our surface mount technology assembly is being contracted from SMTEK International and Flextronics.

          We operate in-house module manufacturing facilities that allow rapid prototyping and development of new products and also serve to complement our outsource module manufacturing partners. We have in-house module and integrated circuits testing facilities in California,  New Jersey and Israel. We maintain comprehensive review and inspection of our outsourcing facilities to ensure compliance

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with our quality standards for manufacturing assembly and test. Our manufacturing processes and outsource vendors utilize stringent quality controls, including incoming material inspection, in-process testing and final test, and all are ISO 9001 certified.

Research and Development

          As of December 31, 2002, we had 125 employees dedicated to research and development, of whom 65 hold advanced degrees, including 19 PhDs. We have additional engineering employees dedicated to marketing, application engineering and business development. These employees are involved in advancing our core technologies and applying these core technologies to product development and activities in our targeted markets.

          We believe that the achievement of higher-levels of integration, functionality and performance and the introduction of new products in our target markets is essential. As a result, we have made and will continue to make substantial investments in research and development. Our research and development expenses, exclusive of deferred stock compensation and warrant issuances, for 2002, 2001 and 2000 were approximately $46.1 million, $54.7 million and $24.6 million, respectively.

Competition

          We compete with component suppliers for optical networking systems. We believe that the principal factors of competition for these markets are:

                    We compete with a number of major domestic and international suppliers. We compete primarily against Agere, Applied Micro Circuits, Intel, Infineon, JDS Uniphase, Maxim, MindSpeed (a Conexant company), Nortel (microelectronics division), NTT Electronics, Philips, PMC-Sierra and Vitesse. In addition to these established companies, we also compete with various start-up entities.  In certain circumstances, most notably with respect to ASICs supplied to Lucent and Nortel, our customers or potential customers have internal integrated circuit and/or manufacturing capabilities.

          In addition, suppliers may begin to offer product solutions, including both electronic and optical components. This creates the potential that suppliers of optical components, which are currently complementary to suppliers of electronic components, may become competitors as they broaden their product portfolio with electronic components, or vice versa. Companies with existing capabilities or products in both areas may benefit from significant competitive advantages.

Intellectual Property

          We rely on a combination of copyright, patent, trademark, trade secret and other intellectual property laws, nondisclosure agreements and other protective measures to protect our proprietary rights. We also utilize unpatented proprietary know-how and trade secrets and employ various methods to protect such intellectual property. To date, we have one U.S. patent issued and 14 U.S. patent applications pending.

          Although we employ a variety of intellectual property in the development and manufacturing of our products, we believe that none of such intellectual property is individually critical to our current operations.Taken as a whole, we believe, however, that our intellectual property rights are significant and that the loss of all or a substantial portion of such rights could have a material adverse effect on our results of operations. There can be no assurance that our intellectual property protection measures will be sufficient to prevent misappropriation of our technology. In addition, the laws of many foreign countries do not protect our intellectual properties to the same extent as the laws of the United States. From time to time, we may desire or be required to renew or to obtain licenses from others in order

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to further develop and market commercially viable products effectively. There can be no assurance that any necessary licenses will be available on reasonable terms.

Backlog

          Our sales are made primarily pursuant to standard purchase orders for delivery of products. Quantities of our products to be delivered and delivery schedules are frequently revised to reflect changes in customer needs. For these reasons, our backlog as of any particular date is not representative of actual sales for any succeeding period. Accordingly, our actual sales could be materially different than our recorded backlog.

Environmental Matters

          We are subject to a variety of federal, state and local governmental regulations related to the use, storage, discharge and disposal of toxic, volatile or otherwise hazardous chemicals used in our manufacturing process. Any failure to comply with present or future regulations could result in the imposition of fines on us, the suspension of production or a cessation of operations. In addition, such regulations could restrict our ability to operate or expand any of our manufacturing facilities or could require us to acquire costly equipment or incur other significant expenses to comply with environmental regulations or clean up prior discharges.

Employees

          As of December 31, 2002, we had a total of 187 employees, including 25 in sales, marketing and application engineering, 17 in manufacturing, purchasing and quality, 125 in research and development and 20 in general and administrative functions. Of these employees, approximately 147 were located in North America, 27 were located in Europe, 12 were located in Israel and one was located in Asia. None of our employees is represented by a collective bargaining agreement, nor have we experienced any work stoppages.

Company

          Our website address is www.mltc.com.  We make our filings with the Securities and Exchange Commission, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, available free of charge on our website as soon as reasonably practicable after we file these reports.

Item 2.     PROPERTY

          Our corporate headquarters facility, consisting of approximately 36,000 square feet, is located in Somerset, New Jersey. We lease our corporate headquarters facility pursuant to a sublease agreement that expires in April 2007 for approximately 12,000 square feet and pursuant to a lease agreement that expires in February 2006 for approximately 24,000 square feet. We also lease our principal design facility, consisting of approximately 31,000 square feet, in Somerset, New Jersey, pursuant to a lease agreement that expires in October 2006. Pursuant to our corporate realignment plan whereby we have consolidated facilities, we have substantially vacated the Somerset, New Jersey design facility and are attempting to sublease the entire facility for the remaining lease term.  We lease approximately 29,600 square feet of design space in Santa Monica, California pursuant to a lease agreement that expires in December 2005 and we are currently attempting to sublease approximately 5,000 square feet of this facility. We lease approximately 7,000 square feet for a design center in Allentown, Pennsylvania pursuant to a lease agreement that expires in September 2006. We are actively searching for a sub-leasee for the remainder of the Allentown, Pennsylvania lease term as we have completely vacated this facility pursuant to our realignment plan and have consolidated the functions performed at this location into our corporate headquarters location.   We also lease approximately 1,800 square feet for a sales office in Los Altos, California pursuant to a lease agreement that expires in August 2003 that we are also attempting to sublease.   We also lease approximately 6,600 square feet for a design center in Santa Clara, California pursuant to a lease agreement that expires in May 2005.

          In addition, we have lease agreements for an approximate 11,800 square feet facility in Bochum, Germany, which expires in January 2011 and an approximate 19,400 square feet facility in Munich, Germany, which expires in December 2005.  Subsequent to December 31, 2002, we have terminated our Bochum lease for less than $0.1 million in termination costs and now lease on a month-to-month basis.  We have also reduced our Munich lease square footage by approximately one-half and revised the remaining lease term to expire in December 2003 for less than $0.1 million in termination costs.

     We have lease agreements for an approximate 3,500 square feet facility in Kaunas, Lithuania, which expires in November 2004, an approximate 13,000 square feet facility in Israel, of which approximately 6,500 square feet expires in each of February 2003 and January 2004, and an approximate 2,200 square feet facility in Milan, Italy, which expires in July 2007. These facilities are used predominantly for research and development and sales activities.

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Item 3.     LEGAL PROCEEDINGS

          In the ordinary course of our business, we are the subject of, or party to, various pending or threatened legal actions. We believe that any liability arising from these actions will not have a material adverse effect on our financial position, results of operations or cash flows.

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

          No matters were submitted to a vote of security holders during the quarter ended December 31, 2002.

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PART II

Item 5.     MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Recent Market Prices

          Our Class A common stock began trading under the symbol MLTC on the NASDAQ National Market System on June 21, 2001.  Preceding June 21, 2001, there had been no public market for our common stock.  On September 6, 2002, our shareholders and board of directors approved a one-for-ten reverse stock split of our Class A and Class B common stock.  All share prices have been restated to reflect the retroactive effect of the reverse stock split.

          The markets for securities such as our common stock historically have experienced extreme price and volume fluctuations during certain periods.  These broad market fluctuations and other factors, such as new product developments and trends in our industry and the investment markets generally, as well as economic conditions and quarterly variations in our results of operations, may adversely affect the market price of our common stock.

          The high and low bid prices for our Class A common stock as reported by the NASDAQ Stock Market for the periods indicated are as follows.  Such prices are inter-dealer prices without retail markups, markdowns or commissions, and may not necessarily represent actual transactions.

          Our Class B common stock is not publicly traded. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock and is automatically converted upon sale and most other transfers.

Dividend Policy

          We have never declared or paid cash dividends on shares of our capital stock.  We currently intend to retain all of our earnings, if any, for use in our business and in acquisitions of other businesses, products or technologies. We do not anticipate paying any cash dividends in the foreseeable future.

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Equity Compensation Plan Information

          We have two classes of common stock outstanding.  Our Class A common stock has one vote per share and our Class B common stock has ten votes per share.  Only our Class A common stock is issuable under our equity plans.  The following table provides information as of December 31, 2002 with respect to our Class A common shares issuable under our equity compensation plans:

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Item 6.     SELECTED FINANCIAL DATA

          The statement of operations data set forth below for the years ended December 31, 2002, 2001, and 2000 and the balance sheet data as of December 31, 2002 and 2001 have been derived from our audited consolidated financial statements included elsewhere herein, and should be read in conjunction with those financial statements (including notes thereto).  The selected financial data as of December 31, 2000, 1999 and 1998 and for the years ended December 31, 1999 and 1998 have been derived from audited consolidated financial statements not included herein, but which were previously filed with the Securities and Exchange Commission, or SEC.